Despite applauding the Securities and Exchange Commission for its efforts in developing standardized rules for ABS issuers, The Bond Market Association believes that further concessions are needed, the industry spokes group announced today. Certain aspects of the proposed rules, especially those on how static pool reporting relates to shelf registration, "need modification and clarification, as there are provisions that may be unduly burdensome, have unforeseen risks and consequences, or that may be unworkable," said TBMA Vice President and Assistant General Counsel, Nadine Cancell. To view the full document, click
The SEC stipulates that issuers who are found non-compliant in reporting of static pool data would be forced to wait one year before filing a new shelf, even if the violations are corrected or waived.
TBMA argues that static pool reporting should be more general, given pool-by-pool variances. "Because diverse pools are not comparable, disclosure should only be required when the available data is relevant to the pool being securitized," the TBMA said. "Moreover, the rules should only require summary information of pool characteristics at formation, which provides investors with useful data without imposing an enormous administrative burden on the information provider."
The SEC's mandate that the ABS issuer be responsible for pool data is unreasonable, TBMA added. TBMA requests that the involved party in a securitization with the most appropriate pool data be reported, rather than "mandate which party's data is disclosed."
Additionally, TBMA petitions that synthetic and derivative transactions be included within the realm of ABS. "No clear rationale is given for [a synthetic transaction's] exclusion, and market participants need clear guidance to distinguish between what does and does not qualify as an ABS transaction," TBMA argues.
The final request TBMA makes to the SEC is to clarify rules on securitization repackagings. Under the current proposal, repackagings would be terminated in the event of an underlying issuer falling out of reporting compliance, or if the issuer's registration expires. "The SEC should outline which provisions of the proposed rules would and would not apply to repackagings, as some of the rules are not applicable to this type of transaction."
Without tweaking the proposed rules allowing for re-registration, TBMA believes the rules will have a noticeably negative impact on the public term ABS market. "There is a possibility the regulations could substantially reduce the amount of public ABS issuance if they go into effect as currently written," TBMA sums.
