In removing about 134 tranches of future flow deals from its structured finance bucket, Moody’s Investors Service will no longer apply regulatory rule 17g-5 to them, said a spokesman for the agency.

The shift may help business in this emerging market asset class.

“This means they have joined the position taken by Standard & Poor’s and Fitch Ratings from the beginning,” said Emil Arca, a partner at Hogan Lovells. “Market participants had avoided Moody’s ratings for this product while they took their former position.”

Earlier today, Moody's published an update on which types of deals count as structured finance, which included dropping future flow deals that met certain criteria from the category. The criteria - that there be full linkage between the originator’s credit rating, the assets and the senior notes in addition to no tranches subordinated to the originator’s note - characterize the vast majority of future flow deals.

Rule 17g-5 was adopted as part of the Credit Rating Agency Reform Act of 2006. It compels SEC-registered credit rating agencies or nationally recognized statistical rating organizations (NRSROs) to comply with certain limitations and procedures. These requirements were implemented to mitigate perceived conflicts of interest.

This particular ruling requires NRSROs paid to rate a structured finance product to get from the deal's arranger - in this case, the issuer, sponsor or underwriter-an agreement to post to a password-protected Web site all information provided in connection with the product's rating or any subsequent surveillance.

The data should be made accessible to the other NRSROs that were not hired to rate the security. The SEC put off the application of this rule for deals issued by non-U.S. persons that did not target U.S. investors until December 2 of last year.

The future flow deals affected can be found on the third sheet of the attached XL file.

An ASR story last May explored how emerging market issuers were navigating the new global regulatory landscape.

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