SEC approves asset-backed securities disclosures
On Thursday January 20, 2011, 2:07 pm EST
By Sarah N. Lynch
WASHINGTON (Reuters) – U.S. securities regulators gave investors a closer look before they buy asset-backed securities with the adoption of two new rules on Thursday.
Both rules were required under last year’s Dodd-Frank financial reform law and respond to huge losses seen during the financial crisis by holders of securities backed by subprime mortgage loans.
The first rule, approved unanimously by the Securities and Exchange Commission, aims to give investors a way to review the track record of asset-backed issuers such as Bank of America.
Specifically, it would let investors see how often the issuers were asked to buy back assets because they failed to meet the underwriting criteria laid out in the prospectus. Issuers would also need to disclose how often they fulfilled the repurchase requests from investors.
The second rule would require issuers of asset-backed securities to conduct a review of the loans underlying the securities and disclose it to investors.
That rule was approved in a 3-2 vote, with both Republican commissioners dissenting.