More than a decade after its initial proposal, the US Securities and Exchange Commission (SEC) has re-proposed a new rule under the Securities Act of 1933, as amended (the Securities Act), prohibiting material conflicts of interest in asset-backed securities (ABS) transactions, as required by Section 621 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act).
Newly proposed Rule 192 would prohibit an underwriter, placement agent, initial purchaser, or sponsor of any ABS (including a synthetic ABS), or any affiliate or subsidiary of any such entity, from engaging in any transaction that would involve or result in certain material conflicts of interest. The term “sponsor” in particular would be specifically (and broadly) defined for the purposes of the re-proposed rule, potentially encompassing securitization participants that are not commonly considered to be sponsors. The re-proposed rule would provide exceptions for certain risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities.
The comment period on the new proposal remains open for 60 days following publication of the Re-Proposing Release on the SEC’s website on January 25, 2023, or 30 days following publication of the Re-Proposing Release in the Federal Register, whichever period is longer.