For those that believe disclosure is the best disinfectant, the Securities and Exchange Commission's freshly minted asset-backed securities regulation, dubbed Reg AB, will be a welcome addition to the ABS marketplace. The rule is a mixed blessing for investors, who will likely see increased price tags on ABS while getting a more detailed look into those deals. For now, the rule has left issuers and servicers with a lot of new disclosures and liability to swallow.
"The burden of improved disclosure practices is real but the SEC has given a long transition period for the rule," said Mark Adelson, head of ABS research for Nomura Securities. "Just like consumers pay for having air-bags in cars, investors ultimately pay for having better disclosure in their ABS deals," he said. Adelson said although servicing fees could go up by as much as one-third as a result of the rule, it is not likely to hurt the market, but rather will attract new investors by making the deals more transparent.