SEC’s Conflicts of Interest Rule Proposal Preserves Considerable SEC Discretion and Creates Market Uncertainty
Summary: The SEC’s proposed Conflicts of Interest rule for asset-backed securities is so broad that, if adopted as proposed, it would by itself provide little guidance as to its scope and would leave industry participants dependent on further SEC interpretations and proceedings to determine the types of actions that might violate the rule. Even with the benefit of the commentary in the proposing release, many questions remain unanswered, including the following:
- Will transactions specifically designed to have investors in a securitization knowingly take risk for the benefit of a sponsor or third party (e.g., synthetic securitizations or catastrophe bonds) still be possible?
- How can one design a hedging strategy which adequately protects against risk, and is a portfolio hedging strategy still permitted?
- In what cases might disclosure or information barriers be adequate to prevent a violation of the rule?
This client memorandum provides a quick summary and analysis of the potential impact of the proposed rule.
Also of Interest
- Benchmark Litigation Recognizes Kaye Scholer Practices and Partners Nationwide October 24, 2016 • Recognitions
- What’s Really Remarkable about the Appeals Court Ruling on the CFPB October 20, 2016 • Articles
- IFLR1000 Recognizes Kaye Scholer’s Global Presence, Practices and Lawyers October 19, 2016 • Recognitions
- Kaye Scholer Clients Achieve Nearly Full Recovery in Arch Coal Chapter 11 Proceeding October 14, 2016 • Client Successes
- Asghar Quoted in Airfinance Journal on Iran Aseman Airlines October 10, 2016 • Media Mentions
- Kaye Scholer Represents Investors in Volkswagen Diesel Emissions Litigation September 28, 2016 • Client Successes
- Bloomberg Business: Moriarty Returns for “Taking Stock” ETFs & Bitcoin Podcast September 22, 2016 • Media Mentions
- Axford and Williams Discuss UK Influence on EU Banking Rules in Law360 September 21, 2016 • Media Mentions
- Kaye Scholer Advises The Mortgage Lender on £250 Million Warehouse Financing September 2, 2016 • Client Successes