More than a decade after its initial proposal,1 the US Securities and Exchange Commission (SEC) has at long last adopted a final rule2 under the Securities Act of 1933, as amended (the Securities Act), prohibiting material conflicts of interest in asset-backed securities (ABS) transactions, as required by Section 621 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act).
The final rule, denominated as Rule 192 under the Securities Act, prohibits an underwriter, placement agent, initial purchaser, or sponsor of any ABS (including synthetic ABS), and certain affiliates and subsidiaries of such entities, from engaging in any transaction that would involve or result in a material conflict of interest as defined by the SEC. The new rule provides for a number of exceptions, including for certain risk-mitigating hedging activities, liquidity commitments, and bona fide market-making activities.
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