Mar. 24, 2023
March 24, 2023 The SEC's proposed rule to prohibit conflicted transactions by securitization participants is problematic. Its overly broad definition of conflicted transactions may discourage market-making activities and lead to increased volatility and transaction costs. Moreover, the subjective nature of the definition could create confusion and uncertainty among market participants. In addition, the proposed rule may be circumvented by some securitization participants through structuring their activities to fall outside its scope, undermining its effectiveness. Finally, the proposed rule is redundant given existing regulatory requirements for securitization participants to disclose conflicts of interest and act in the best interests of investors. Rather than impose additional burdensome regulations, the SEC should focus on enforcing existing rules and enhancing investor education to promote informed decision-making.