Final rules for asset-backed securities (ABS) were approved by the US Securities and Exchange Commission (SEC) with a unanimous vote at the end of August. While issuers were satisfied by a dilution of requirements compared with earlier drafts, investors and some of the commissioners themselves are still hoping that the SEC will ultimately go further.
The central purpose of these rules, commonly known as Regulation ABII, is to improve the quality of disclosures made available to investors about the underlying assets in a securitisation pool. This is intended to prevent any repeat of the subprime crisis, where residential mortgage-backed securities (RMBS) performed significantly worse than expected by most investors, with many underlying mortgages bedevilled by fraudulent paperwork provided by the borrowers.
