Mar. 23, 2023
March 23, 2023
I am writing to express my opposition to the proposed SEC rule S7-01-23. While I appreciate the intent behind the rule to increase transparency and accountability in securitization markets, I believe that there are several potential loopholes in the proposed rule that could be exploited by securitizers.
One such loophole is the exception for risk-mitigating hedging activities. While this exception is intended to allow securitizers to reduce their risk exposure related to the securitization, it could also be exploited to engage in conflicted practices. For example, a securitizer could engage in hedging activities that benefit their own interests at the expense of investors in the securitization.
Another potential loophole is the exception for bona fide market making. This exception would allow securitizers to make a market in the securities being securitized, which could be used to ensure liquidity and pricing stability in the market. However, it could also be used as a loophole to engage in conflicted practices. For example, a securitizer could artificially manipulate the market to benefit their own interests.
Finally, there is also concern about certain liquidity commitments. This exception would allow securitizers to make certain commitments to provide liquidity in the event of market disruptions or other contingencies. While this is intended to ensure stability of the securitization market, it could also be used as a loophole to engage in conflicted practices. For example, a securitizer could use this exception to avoid losses at the expense of investors in the securitization.