Mar. 23, 2023
March 23, 2023
The Dodd-Frank Wall Street Reform and Consumer Protection Act added Section 27B to the Securities Act of 1933. This section prohibits certain securitization participants from engaging in transactions that would involve or result in certain material conflicts of interest. The SEC is required to issue rules to implement the prohibition and related exceptions. The proposed rule would prohibit a securitization participant from entering into a conflicted transaction beginning when a person has reached, or has taken substantial steps to reach, an agreement that such person will become a securitization participant with respect to an ABS. The prohibition ends one year after the date of the first closing of the sale of the relevant ABS. Conflicted transaction is defined to include two main components. One component is whether the transaction is a short sale of the ABS, the purchase of a CDS or other credit derivative pursuant to which the securitization participant would be entitled to recei
ve payments upon the occurrence of a specified adverse event with respect to the ABS, or the purchase or sale of any financial instrument (other than the relevant ABS) or entry into a transaction through which the securitization participant would benefit from the actual, anticipated, or potential adverse performance the asset pool supporting or referenced by the ABS, loss of principal, default, or early amortization event on the ABS, or decline in the market value of the ABS. The other component relates to materiality - i.e., whether there is a substantial likelihood that a reasonable investor would consider the relevant transaction important to the investors investment decision, including a decision whether to retain the ABS. The proposed rule would provide exceptions for risk-mitigating hedging activities, bona fide market-making activities, and liquidity commitments.
This proposal should not be passed and would be a total violation of the trust of the american stock market
Sincerely,
William