Call Now For a Free Consultation:
(614) 502-6165

SEC Proposes Enhanced Disclosures to Protect Investors in Asset-Backed Securities

Last week the SEC issued a proposal that would change the way issuers of asset-backed securities provide information to investors by requiring the issuers to perform and disclose a review of the products' assets, according to an Oct. 13 SEC press release. Asset-backed securities are products sold to investors in which the securities are backed by bundled loans. The underlying loans are often residential mortgage loans, commercial loans, and/or student loans. The SEC has proposed the new rules with three goals in mind: 1. To make registered issuers of asset-backed securities conduct a thorough review of the products' underlying bundled assets; 2. To require registered issuers of asset-backed securities to publicly disclose the information obtained through the required review; and 3. To require both registered and unregistered issuers and underwriters of asset-backed securities to disclose the findings and conclusions of any third-party reviewer hired to conduct a review into the products' underlying bundled assets. "This marks the third Commission proposal to address the ABS issues that came to light during the financial crisis," said SEC Chairman Mary L. Schapiro. "This proposal will require issuers to provide investors with better information about the loans backing the asset-backed securities." Issuers would also be required to disclose: if and how the underlying assets differ from the disclosure in the prospectus regarding underwriting criteria, if the underlying assets failed to meet the underwriting criteria, and information about the entity that decided to include an asset in the security that did not meet the underwriting criteria. The proposed changes are designed to meet the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act that said the SEC must "adopt rules regarding the review of assets, such as loans, underlying the securities no later than 180 days after enactment," according to the SEC's press release. Additional proposals issued over the past six months have included: requirements that ABS issuers and credit rating agencies disclose representations, warranties and enforcement mechanisms to all investors; and revisions to the current disclosure, reporting and offering process by which asset-backed securities are underwritten and issued. The SEC has requested comments from the public on the proposed rules. All comments should be received by November 15.

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

Share This Story
If you found the information provided by this article useful, consider sharing to your social media channels to help others in their search for reliable resources.
Consult with Our Legal Team
There is never a cost associated with a consultation

Columbus Office

614-224-6000
305 W. Nationwide Blvd
Columbus, OH 43215
Meyer Wilson
New Orleans Office

900 Camp Street 
Suite 337
New Orleans, LA 70130
Los Angeles Office

310-905-8688
2029 Century Park East,
Suite 400N
Los Angeles, CA 90067
Cleveland Office

216-600-1355
6140 Parkland Blvd.,
Suite 330
Mayfield Heights, OH 44124
Bloomfield Hills Office

248-817-8214
41000 Woodward Ave.,
Suite 350
Bloomfield Hills, MI 48304
Quick Links
Follow Us
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. Read More
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Read More
chevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram