I am pleased that the Commission has re-opened the comment period for our proposal to amend the disclosure and registration requirements applicable to asset-backed securities (ABS). The ABS market is a critical source of capital, providing funding for home loans, automobiles, credit cards, and many other purposes. Yet, as shown during the recent financial crisis, investors may abandon the ABS market if they do not believe they possess sufficient information to evaluate and price such a security.
Our ABS proposal was originally issued in
As amended by the Dodd-Frank Act, Section 7(c) of the Securities Act requires issuers of asset-backed securities to disclose asset-level or loan-level data, if such data are necessary for investors to independently perform due diligence. Early on, the
One way to limit the potential loss of privacy is to simply follow the statute and require disclosure of asset-level data only if such data is necessary for investors to independently perform due diligence. Empirical evidence since the financial crisis suggests that the individual markets for specific ABS types have reacted differently. Registered offerings by private label residential mortgage-backed securities (MBS) remain almost non-existent, with only a single sponsor making such an offering in 2013. In contrast, the market for ABS backed by automobile loans and leases (Auto ABS) has rebounded and steadily increased since the financial crisis.
As discussed in the current staff guidance on economic analysis in
During the re-opened comment period, it would be helpful to receive comments on whether asset-level data is necessary for investors to independently perform due diligence on Auto ABS and other types of non-MBS offerings. In other words, do grouped account disclosures or grouped account and pool-level disclosures provide sufficient information to investors for these types of securities? If these types of disclosures are not sufficient, or if the markets for Auto ABS and other non-MBS offerings can be further improved with asset-level disclosures, I would be interested in commenters describing any associated quantitative or qualitative benefits and costs to the markets as they exist today.
I also look forward to reviewing the comments on our staff's memo and whether market participants understand their obligations under the described approach to handle sensitive asset-level data. For instance, is there sufficient guidance to distinguish between potential investors and the general public? Are there concerns as to whether third-party investment advisers, broker-dealers, and consultants will be able to access asset-level data in order to provide advice to their clients or customers? Are the restrictions, conditions, and agreements that an ABS issuer might place on access to asset-level data (e.g., a liquidated damages provision) compatible with a requirement that such data be available free of charge? If not all investors and potential investors agree to the privacy conditions in order to access the asset-level data, will that result in an unfair secondary market for investors in that security? What should be the consequences to an issuer that mistakenly identifies a person as not an investor or potential investor and denies that person access to the asset-level data?
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