The Securities and Exchange Commission (SEC) today voted (4-0 today) unanimously to propose a rule intended to prohibit certain material conflicts of interest between ABS sellers and investors.

ASR reported on the meeting about this topic in a story earlier today.

The proposal, which is not meant to stop traditional securitization practices, implements Section 621 of the Dodd-Frank Act. The public comment period on the proposal will last 90 days.

For a designated period of time, this proposed rule would stop participants in an ABS from engaging in certain deals that would involve or result in any material conflict of interests. Two criteria to determine whether the transaction involves a material conflict of interest are set out in the proposed rule.

“This proposed rule is designed to ensure that those who create and sell asset-backed securities cannot profit by betting against those same securities at the expense of those who buy them,” said SEC Chairman Mary Schapiro at the meeting earlier today. “At the same time, the proposed rule is not intended to interfere with traditional securitization practices in which loans are originated, packaged into asset-backed securities, and offered to investors in different structures.”

For the full text of Schapiro's comments, please click here.

 

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