SIFMA and the Financial Services Roundtable on Friday submitted comments to the Securities and Exchange Commission (SEC) that express significant concerns with its February 25, 2014 staff memorandum that suggests the framework under which securitization issuers would disseminate asset-level and other offering information to investors and potential investors, as required under the Commission’s proposed offering, disclosure, and reporting requirements for asset-backed securities (ABS) commonly referred to as Reg AB2. The Associations' letter reflects the views of its issuer, dealer and sponsor members. The comment letter is available here: http://www.sifma.org/issues/item.aspx?id=8589948242.
SIFMA and FSR commend the Commission for its continuing efforts to promote more efficient and transparent ABS markets and for facilitating dialogue on its regulatory proposals. However, we urge the Commission to abandon the flawed approach to the disclosure of asset-level information outlined in the Memorandum, which would expose both consumers and issuers to unwarranted risks and liabilities. Instead, the Commission should re-propose the ABS Releases in order to accommodate a more detailed and comprehensive reconsideration of the difficult technical, legal, and public policy concerns raised by asset-level disclosure.
“Securitization is a vital financing tool that drives economic growth by expanding the availability of credit for consumers across the country. Issuers and sponsors, in particular, are concerned that the SEC’s proposed disclosure framework presents a host of unanswered - but critical - questions related to privacy laws and reputational risk, would discourage issuer participation in the ABS market, and would thereby curtail credit availability and hamper economic growth and job creation” said Chris Killian, managing director and head of SIFMA’s Securitization Group.
“We are concerned that disclosures on websites of individual consumers’ credit scores, income and data amounts—rather than coded ranges—would make it easier to reverse engineer and misuse consumers’ personal financial information,” added Richard Foster, FSR vice president & senior counsel for regulatory and legal affairs.
Any breach in the security of consumers’ personal information, let alone any misuse of such information, could have severe consequences for consumers and issuers as we have seen recently. Such potentially sensitive information must be disseminated in a manner that is consistent with issuers’ legal and regulatory obligations, and subject to strict controls to prevent inappropriate use or disclosure. The Associations note that the asset level data fields which relate to this framework have not yet been finalized.
SIFMA and FSR strongly believe that developing an appropriate asset-level disclosure mechanism requires more extensive consideration of the fundamental legal and public policy issues raised by the disclosure of asset-level information, particularly with respect to: (i) the identification of which data fields may merit enhanced protection; (ii) the extent to which alternatives to asset-level disclosure would be consistent with statutory mandates and useful to investors; and (iii) how issuers might disclose sensitive asset-level information in a manner that both is consistent with their legal obligations and protects consumers’ legitimate privacy interests.
We urge the Commission to re-propose the ABS Releases. Any re-proposal should provide definitive, coordinated federal guidance as to whether an issuer’s compliance with the Commission’s requirements fully satisfies the other federal laws that may be implicated by the disclosure of such asset-level information.
