SEC Shelves Plan for Private Asset-Backed Bond Disclosure
The U.S. Securities and Exchange Commission, while expanding disclosure requirements for one set of asset-backed securities, has stepped back from a plan to shed more light on a major part of the market.
The five SEC commissioners unanimously approved a rule yesterday to offer investors more details on bonds backed by assets such as mortgages and car financing, including specific data on individual loans, and new practices such as a cooling-off period to review documents before certain bond sales.
Dropped from the rules: a requirement that issuers of private securities be ready to furnish to buyers the same type of information that’s available for publicly registered debt. The SEC said in a Federal Register posting proposing the rule in 2010 that such a step would bring “transparency to formerly opaque” markets.
The SEC may revive the requirement for private securities, according to Keith Higgins, director of the SEC’s division of corporation finance.
“The Dodd-Frank Act mandated that the commission put in place rules for asset-level disclosure in registration statements.”
The 2010 Dodd-Frank Financial Regulatory Reform Bill, named after Senator Christopher J. Dodd and U.S. Representative Barney Frank, increased government oversight of financial transactions to try to avoid the conditions that led to the 2008 crisis.
“The financial crisis has called into question the ability of our rules, as they relate to the private market for asset-backed securities, to ensure that investors had access to, and had sufficient time and incentives to adequately consider, appropriate information,” the agency said in its 2010 proposal.
The SEC’s decision is “a pretty big reversal from what I expected,” said Ned Myers, a senior vice president at Waltham, Massachusetts-based Lewtan Technologies Inc., which runs the ABSNet information and analytics service.
Source: bloomberg
