ABA Dodd-Frank Tracker

Friday Federal Register Update: Securities Holding Company Oversight

2011-09-02T11:39:00.001-04:00

The Federal Register published an Federal Reserve Board proposed rule on consolidated supervision of nonbank companies that hold at least one securities broker or dealer.
Comments are due October 11.

Read more.

The Federal Register published an CFTC final rule on registration requirements, statutory duties, core principles and certain compliance obligations for registered swap data repositories.
Effective date is October 31, 2011.

The Federal Register published a technical correction to an SEC final rule on disclosure requirements for asset-backed securities. The publication corrects a paragraph reference in an instruction to Rule 15Ga-1.

See ABA's guide for writing effective comment letters.

Dodd-Frank Review of SEC Highlights Major Restructuring Need

2011-03-10T14:36:00.001-05:00

An independent, Dodd-Frank mandated study of the SEC's organization and structure was released today and contains numerous recommendations including:

Reprioritizing regulatory activities and reallocating resources to areas in need of improvement.
Reshaping the organization including roles, accountability, and staff. The study instructs the SEC to seek flexibility on Dodd-Frank mandated offices to avoid unnecessary duplication.
Investing in infrastructure, including key systems, technologies, human resource needs, and performance management systems.
Enhancing the self-regulatory organization model.

The report highlights misallocation and a shortage of resources in the SEC. For example, the report found that the SEC is short 125 full-time employees in one department, while a department in the same division was overstaffed by 65 external contractors.

On a related note, SEC Chairman Schapiro said today that an additional 35 employees are needed to implement the municipal advisor provision of the Dodd-Frank Act.

Some details of the report were covered in a previous post.

Read the full report.

Independent Review: SEC Understaffed by 400

2011-03-07T16:05:00.001-05:00

An independent review of the SEC by the Boston Consulting Group, a study mandated by Dodd-Frank, found that Commission is understaffed by 400 employees in managing its current workload.

The report supported Chairman Schapiro’s concerns that the SEC is underfunded and unable to carry out all of its Dodd-Frank rulemakings. The report stated, “Without sufficient human resources, the agency will be unable to complete the requirements of Dodd-Frank while maintaining its current activities.”

Chairman Schapiro has said that the SEC will eventually need 800 more workers to fulfill Dodd-Frank. The report highlighted labor constrictions due to unions and poor communications with self-regulatory organizations, specifically FINRA.

Highlights of the study were reported in a Bloomberg article which can be accessed through a link in the Twitter window on the right sidebar of the Tracker.

The full study is due March 14.

SEC Issues Final Rule on Asset-Backed Securities Disclosures

2011-01-20T14:30:00.000-05:00

The SEC adopted new rules that require securitizers of asset-backed securities to disclose fulfilled and unfulfilled repurchase requests.

Additionally, the rules require nationally recognized statistical rating organizations to include information regarding the representations, warranties and enforcement mechanisms available to investors in an offering in any report accompanying a credit rating issued in connection with the offering.

The final rule becomes effective 60 days after publication in the Federal Register.

See the final rule.

SEC Issues Rule Requiring Review of Underlying ABS Assets

2011-01-20T14:28:00.000-05:00

The SEC adopted a rule requiring any issuer registering the offer and sale of an asset-backed security (ABS) to perform a review of the assets underlying the ABS. The rule requires an ABS issuer to disclose the nature of its review of the assets and the findings and conclusions of the issuer’s review.

The rule is effective 60 days after publication in the Federal Register.
ABS offers after December 31, 2011 must comply with the rule.

Read the rule.

ABA, ABASA and 9 Others Request Thoughtful Consideration From SEC and CFTC on Dodd-Frank Proposals

2010-12-10T15:34:00.001-05:00

The ABA and its securities affiliate, ABASA, along with nine other trade groups, filed a joint letter urging the SEC and CFTC to consider the order and details of proposed rules, and provide reasonable windows of opportunity for impacted institutions to weigh and respond to the Commissions’ proposals.

…[I]t is important that the Securities and Exchange Commission, Commodity Futures Trading Commission, and other agencies writing the new regulatory rules develop those rules through a process that is deliberative, gives all affected parties a reasonable opportunity to comment (and have their comments be given thoughtful consideration), and implements those rules in a manner that gives market participants sufficient time to do the work necessary to comply with new requirements being imposed on them.

The letter specifically requests that the Commissions define key terms – such as “swap dealer” and “major swap participant” – in order for impacted parties to effectively consider and comment on outstanding proposals.

If the process does not have these attributes, the result will be rules that not only do not reflect full participation in the comment process, but actually undermine regulatory certainty, with the effect of unnecessarily interfering with the functioning of markets and the usefulness of important financial tools.

Read the full letter:

Bair Delivers Wide-Ranging Speech on Reg-Reform

2010-11-18T10:02:00.001-05:00

FDIC Chairman Sheila Bair delivered wide-ranging remarks in New York about the implementation of the Dodd-Frank Act and other financial regulatory reforms.
On Dodd-Frank, Bair stressed:

The most fundamental reform is the new resolution authority for large bank holding companies and systemically important non-bank financial companies. This new authority directly addresses the dilemma we faced in the fall of 2008, when a number of these companies ran into serious trouble. We all saw the result of the Lehman bankruptcy, which threw global financial markets into chaos.

Bair reiterated her opposition to FASB's accounting proposal that would require banks to measure substantially all of their financial instruments at fair value on the balance sheet.
Bair stated:

While we understand that the objective of the rule is to make financial statements more transparent, we believe that its effect could be to undermine financial stability by making bank performance more procyclical. In short, we do not believe that a bank – whose business strategy is to hold loans and deposit liabilities for the long term – should be required to measure them at fair value on the balance sheet.

Bair reiterated her support for increased capital standards and the work of BASEL III, as well as remarked on loan loss reserves, risk retention, and securitization.

Read Bair’s full speech here.

ABA Comments to SEC on Repurchase Disclosures of Assets in ABS

2010-11-18T08:00:00.014-05:00

The American Bankers Association (ABA) and the ABA Securities Association (ABASA) filed comments to the Securities and Exchange Commission regarding a proposal that requires securitizers of asset-backed securities (ABS) issuances to disclose demands for repurchase of assets across all trusts aggregated by the securitizer and whether such assets were, in fact, repurchased, so that investors may identify asset originators with clear underwriting deficiencies.

This provision of the Dodd-Frank Act was enacted in response to a perceived lack of effectiveness of the buy-back covenants in ABS transaction documents where breaches of underlying asset-level representations and warranties were alleged.

ABA generally supports the need for appropriate disclosure with respect to repurchase requests, and we suggest modifications, which we believe will provide investors with more useful information about such requests.

See our full comment:

See all of ABA's comment letters here.

ABASA Comments on SEC's Proposal: Issuer Review of Asset-Backed Securities

2010-11-17T13:05:00.001-05:00

The ABA Securities Association (ABASA) filed comments to Securities and Exchange Commission regarding a proposal on issuer review of assets in offerings of asset-backed securities.

The SEC proposal would implement multiple provisions of the Dodd-Frank Act that would require issuers of publicly offered asset-backed securities "to perform a review of the assets underlying the asset-backed security; and to disclose the nature of the review," as well as require an issuer or underwriter of any asset-backed securities to make publicly available the finding and conclusions of any third-party due diligence report obtained by the issuer or underwriter.

ABASA generally supports the need for appropriate disclosure with respect to due diligence reports, and suggested numerous modifications, which we believe will provide investors with more useful information about such reports while complying with the Dodd-Frank provisions.

See ABASA's full comment:

See all of ABA's comment letters here.

ABA Issues White Paper on Trustee’s Role in Asset-Backed Securities

2010-11-10T16:15:00.002-05:00

ABA yesterday responded to a number of recent, incorrect media accounts by issuing a white paper that explains the role of trustees in asset-backed securities and, in particular, residential mortgage-backed securities. The paper specifically addresses the incorrect assertion that trustees are responsible for overseeing mortgage servicers, and mediating between them and investors in securitization deals.

Read the full paper here:

Fed Report: Regulators Should Craft Rules Tailored to Securitized Asset Types

2010-10-21T09:07:00.004-04:00

Regulators should craft new risk-retention rules that are tailored for each class of securitized assets to avoid reducing the credit supply, the Federal Reserve said in a study released late Tuesday. The report -- mandated by the Dodd-Frank Act -- stressed that market practices and performance are significantly different among the nine asset categories it examined.

“[S]imple credit risk-retention rules, applied uniformly across assets of all types, are unlikely to achieve the stated objective of the act -- namely to improve the asset-backed securitization process and protect investors from losses associated with poorly underwritten loans,” the study said.

The report also included several factors regulators should consider when crafting risk-retention rules, including their potential effect on the capacity of smaller market participants to remain active in the securitization market.
Read the report.