-- Daniel O’Leary
The Securities and Exchange Commission’s proposed new regulations for the U.S. structured finance market will severely disadvantage European and global deals, according to market officials. The Association for Financial Markets in Europe/ European Securitization Forum has lashed out at the recent SEC reforms, saying Regulation AB will stymie global competitiveness.
Rick Watson, managing director at AFME, said deals are done on a global level. “It is critical to create a level playing field for U.S. and non-U.S. issuers,” he said. “Prior to the financial crisis, up to 25% of total issuance of European originated securitizations was eligible to be offered in the U.S. and we urge the SEC to take account of the global nature of securitization distribution.”
The U.S. investor base has become more important since the European securitization markets reopened last year. A number of European issuers have actively sought exposure to the more liquid U.S. market, road-showing deals stateside before coming back to Europe to close (TS, 30/04/10).
But AFME/ ESF said the new SEC rules will exclude non-U.S. structures, as they only focus on American deals. This will deter the global distribution of deals, the organisation said.
The SEC issued plans to revise the offering, disclosure and reporting regimes for structured finance in May (TS, 10/05/10). Among other requirements are additional SEC filings for issuers and their retention of 5% of deal they originate. The regulation’s consultation period ends this month.
AFME said European issuers will struggle to comply with the rules, especially having to report their deals regularly to the commission. The cost of compliance will soar and legal problems regarding disclosure and privacy laws in different jurisdictions could arise. “The SEC’s definition of ‘structured finance product’ does not differentiate between covered bonds and asset-backed securities,” AFME said. “Covered bonds are different products and should not be subject to the new....