As part of its recently finalized reforms to the securities offering process, the Securities & Exchange Commission has interpreted a rule under the Securities Act of 1933 that will leave ABS underwriters liable for all deal information provided to investors up until an investment decision is made.

At the heart of the issue is a type of liability faced by underwriters under Section 12(a)(2) of the 1933 act, which states that any person who offers or sells a security by the use of information, such as a prospectus, which includes an untrue statement of material fact or an omission of material fact, shall be liable for damages to the buyer. The interpretation came in the form of a clarification of how 12(a)(2) liability would apply to ABS underwriters under Rule 159.

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