Credit Risk Retention Final Rule: Steering CMBS through the Regulatory Wake

by Dechert LLP

Introduction and Summary of CMBS Updates

After more than three and a half years since the publication by regulators of the first proposals for credit risk retention, we now have a final rule that has brought with it a myriad of reactions: dissent, relief and perplexity, among others. In the world of commercial mortgage-backed securities (“CMBS”), we have come a long way – for example, since the original proposal resulted in comments from over 10,500 parties and since we wondered how we could ever live with the premium capture cash reserve account mechanism (which was excluded in re-proposed rules last year) – but questions remain and we have work to do before the final rule goes live in about two years.

The final regulations apply to, and have varying impacts on, a wide array of securitization arenas. While the rule poses significant challenges to certain markets such as the collateralized loan obligation (“CLO”) (detailed in Dechert's related OnPoint U.S. Risk Retention Final Rule: Playing it Forward for CLOs), and automobile loan sectors, and while it provides confirmation of relief for other industries such as the residential mortgage-backed securities (“RMBS”) space, most of the smoke has cleared for CMBS as we now look at final regulations that remain largely unchanged from re-proposals a year ago. However, important CMBS updates in the final rule include:

  • elimination of the “closing date cash flow test” that was viewed as an economic non-starter by industry participants in favor of an optional eligible horizontal cash reserve account;
  • exclusion of an exemption for stand-alone (single borrower single credit) deals;
  • retention of the requirement that two “third-party purchasers” (or B-piece buyers) hold the required risk on a pari passu basis;
  • confirmation of an exemption for “qualified” commercial real estate (“QCRE”) loans but the lack of any significant expansion of the related loan parameters; and
  • revision of the maximum investor voting quorum from 5% to 20% with respect to removal of the special servicer upon the recommendation of the operating advisor.

With regard to unchanged big-picture concepts found in the 2013 re-proposal, the final regulations still include the following concepts for CMBS: (1) a sponsor may utilize up to two “third-party purchasers” (or B-piece buyers) to satisfy required risk retention; (2) the role of an operating advisor is required if a sponsor utilizes the third-party purchaser option; and (3) any initial third-party purchaser is permitted to transfer the required retention interest to subsequent purchasers (and those purchasers are permitted to make successive transfers) starting five years after the closing of a deal.

In this OnPoint, we provide a brief background of the rule process, we detail the foregoing CMBS considerations as well as the basic risk retention requirements applicable across all asset classes and we estimate where all of this is going for CMBS. In addition, more reading on this topic can be found on Dechert’s blog, Crunched Credit.

Path to the Final Rule and Revisiting Section 15G of Dodd-Frank

On October 21, 2014, the Federal Deposit Insurance Corporation (“FDIC”) approved joint final credit risk retention regulations (the “Final Rule”)1 for asset-backed securities (“ABS”) to implement the related requirements of section 15G (“Section 15G”) of the Securities Exchange Act of 1934 (the “Exchange Act”).2 The FDIC’s approval of the Final Rule was part of a joint rulemaking effort that included the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Department of Housing and Urban Development, the Federal Housing Finance Agency and the Securities and Exchange Commission (together with the FDIC, the “Agencies”). Three of the Agencies approved the Final Rule on October 21, 2014 and the remaining Agencies approved it on October 22, 2014.

In 2010, Section 941 (“Section 941”) of the Dodd-Frank Wall Street Reform and Consumer Protection Act created Section 15G of the Exchange Act and generally required the Agencies to jointly prescribe regulations that require (i) a securitizer of ABS to retain at least 5% of the credit risk of any asset that, through the issuance of ABS, is transferred to a third party and (ii) prohibit a securitizer from directly or indirectly hedging or otherwise transferring the required risk retention.3 In furtherance of Section 15G’s mandate, the Agencies originally proposed risk retention requirements in April 2011 (the “Original Proposed Rule”)4 and, after soliciting and receiving comments from the public, published re-proposed requirements in September 2013 (the “Re-Proposed Rule”).5

In the Final Rule, the Agencies adopted much of the Re-Proposed Rule with various changes including concepts included in over 150 unique comment letters. Again, with respect to CMBS, the Agencies made relatively few revisions to the Re-Proposed Rule from 2013; nevertheless, there are new and old concepts deserving of focus, as summarized in our introduction above and described in detail below. 

Effective Date

The Final Rule will apply to new-issue CMBS deals starting two years after its publication in the Federal Register.

Basic Risk Retention Requirement

5% Retention of Eligible Vertical Interest or Eligible Horizontal Residual Interest

The Final Rule requires that a sponsor6 of a securitization (or its majority-owned affiliate7) retain a 5% economic interest in the credit risk of the securitized assets. If there is more than one sponsor of the deal, each sponsor is responsible to ensure that at least one sponsor (or its majority-owned affiliate) retains the required credit risk.8 The required risk retention obligation can be satisfied by holding:

  • a single vertical security or an interest in each class of ABS issued by the securitization (in either case, an “Eligible Vertical Interest” or “EVI”);
  • an eligible horizontal residual interest (i.e., first loss, subordinate tranche) equal to 5% of the fair value of all ABS issued (an “EHRI”); or
  • any combination of an EVI and an EHRI so long as the sum of the percentage of the EVI and the fair value of the EHRI is at least equal to 5%.9

Measurement and Disclosure by Sponsor of Fair Value of Eligible Horizontal Residual Interest

With respect to the retention of an EHRI, the Final Rule requires that “the amount of the interest must equal at least 5 percent of the fair value of all ABS interests in the issuing entity issued as a part of the securitization transaction, determined using a fair value measurement framework under GAAP” (i.e., U.S. generally accepted accounting principles).10 The Final Rule deviates from the Re-Proposed Rule of 2013 by not requiring a fair value measurement for an Eligible Vertical Interest.11 In addition, the Final Rule revised the definition of “ABS Interests” to exclude residual REMIC interests from the calculation of fair value.12

The Final Rule requires written disclosure to potential investors with regard to the measurement of fair value of any EHRI (i) prior to the sale of the related ABS and (ii) after the closing of the related securitization.13 At a reasonable period of time prior to the sale of the ABS, a sponsor is required to disclose:

  • the fair value (expressed as a percentage of the fair value of all classes of ABS interests issued) and the dollar amount of the EHRI expected to be retained by the sponsor at the closing of the transaction or, if specific prices, sizes or interest rates of each tranche are not yet available, a range of fair values of the EHRI expected to be retained by the sponsor at the closing of the transaction;
  • the material terms of the EHRI;
  • the valuation methodology used to calculate the fair values or range of fair values of all classes of ABS interests, including the EHRI; and 
  • all key inputs and assumptions or a comprehensive description of key inputs and assumptions (including discount rates, default rates, loss given default, prepayment rates and other metrics) used to calculate the fair value or range or fair values of all classes of ABS interests, including the EHRI expected to be retained, which data is required to include, at a minimum, descriptions of all inputs and assumptions that could have a material impact on the fair value calculation or would be material to a prospective investor’s ability to evaluate the sponsor’s fair value calculations.14

In addition, at a reasonable time after the closing of the securitization, a sponsor is required to disclose:

  • the actual fair value (expressed as a percentage of the fair value of all classes of ABS interests issued) and the dollar amount of the EHRI retained by the sponsor based on actual pricing, tranche sizes and interest rates;
  • the fair value (expressed as a percentage of the fair value of all classes of ABS interests issued) of the EHRI that the sponsor is required to retain according to the Final Rule; and
  • any material differences between the methodologies actually used to calculate fair value at the closing of the securitization and those disclosed prior to the sale of the ABS.15

Option - Eligible Horizontal Cash Reserve Account

As an alternative to retaining all or any part of an Eligible Horizontal Residual Interest, a sponsor may establish and fund in cash, at the closing of the securitization, an eligible horizontal cash reserve account, held with a trustee for the benefit of the issuing entity, in an amount equal to the fair value of the related EHRI or any part of it.16 While the Re-Proposed Rule from 2013 called for U.S. Treasuries and comparable investments in foreign currencies, the Final Rule limits permitted investments in the reserve account to cash and cash equivalents.17 Also, in another deviation from the Re-Proposed Rule, the Final Rule allows for funds in the cash reserve account to be used not only (i) for satisfaction of payments on ABS interests if there is a shortfall with respect to amounts due on any ABS interests but also (ii) for the payment of critical deal-party expenses of the trust unrelated to credit risk but for which the issuing entity has insufficient funds so long as such expenses, in the absence of available funds on deposit in the cash reserve account, would have otherwise been paid prior to any payments to ABS interests and such expenses are not paid to any parties affiliated with the sponsor.18

Option - Allocation of Risk Retention to Originators

The Final Rule retains the option included in the Re-Proposed Rule to have eligible originators share the risk retention obligation.19 A sponsor is permitted to offset the amount of its risk retention requirements by the amount of eligible interests acquired by an originator. An originator is eligible to take a portion of the retention obligation if:

  • the originator acquires and retains at least 20% of the aggregate risk required to be retained by the sponsor; and
  • the ratio of the percentage of eligible interests retained by the originator to the percentage of the eligible interests required to be retained by the sponsor does not exceed the ratio of the balance of the assets originated by such originator to the balance of all assets in the securitization.20

The Agencies sought to “ensure that an originator retains risk in an amount significant enough to function as an actual incentive for the originator to monitor the quality of all the securitized assets (and to which it would retain some credit risk exposure).”21 Also, an eligible originator is required to acquire and retain eligible interests, with respect to risk across the entire pool of assets, in the same manner and proportion as those acquired and retained by the sponsor. Lastly, the Final Rule obliges a sponsor to disclose the nature of any originator allocation and to monitor compliance by each originator that is allocated a portion of the risk retention.22

Basic Transfer, Hedging and Financing Restrictions

The Final Rule, confirming the approach of the Re-Proposed Rule, generally prohibits a sponsor from transferring its eligible interests to any person other than to its majority-owned affiliate (and back to the sponsor), and such majority-owned affiliate is only permitted to hold the eligible interest so long as it remains a majority-owned affiliate of the sponsor.23

Other concepts tracked from the Re-Proposed Rule to the Final Rule are restrictions on hedging and financing of eligible interests. The Final Rule prohibits a retaining sponsor and its affiliates, as well as the issuing entity, from purchasing or selling a security or other financial instrument and from entering into an agreement, derivative or other position with any person if:

  • the payments are “materially related to the credit risk of one or more particular ABS interests” that the sponsor (or its majority-owned affiliate) is required to retain; or
  • the security, instrument, agreement, derivative or position “in any way reduces or limits the financial exposure” of the retaining sponsor (or its majority-owned affiliate) to the credit risk of one or more of the particular ABS interests that the sponsor (or its majority-owned affiliate) is required to retain.24

However, the Final Rule exempts certain hedging activities, including interest rate hedging, foreign exchange hedging and certain transactions that are based on an index of instruments that include ABS.25 Finally, a sponsor is generally prohibited from financing eligible interests, but a sponsor (or its affiliate) may pledge eligible interests as collateral for an obligation if such obligation is fully recourse to the sponsor (or its affiliate).26

Basic Retention Period

Similar to the Re-Proposed Rule, the Final Rule provides that a sponsor’s risk retention obligation will be satisfied upon retention until the latest of “(1) the date on which the total unpaid principal balance of the securitized assets that collateralize the securitization is reduced to 33 percent of the original unpaid principal balance (if applicable) as of the date of the cut-off date of the securitization, (2) the date on which the total unpaid principal obligations under the ABS interests issued in the securitization is reduced to 33 percent of the original unpaid principal obligations at the closing of the securitization transaction, or (3) two years after the date of the closing of the securitization transaction.”27

No Participation Interests, Companion Loans or Third-Party Credit Support

The Final Rule did not adopt an expansion of the form of risk retention to permit the use of pari passu and subordinate participation interests or companion loans. In addition, the Final Rule does not allow the use of third-party credit support (such as insurance policies, guarantees or letters of credit) or overcollateralization to satisfy the retention requirements.

Final Rule Victory – Elimination of Closing Date Cash Flow Test

The Final Rule eliminates the closing date cash flow test for Eligible Horizontal Residual Interests that was included in the Re-Proposed Rule. A derivative of the premium capture cash reserve account mechanism included in the Original Proposed Rule, the closing date cash flow test was considered by the industry to be unworkable in the CMBS space. The test would have permitted risk retention by way of an EHRI only if the sponsor calculated and certified that, for each payment date:

  • the ratio of (i) the fair value of cash flows projected as of the transaction’s closing date to be paid to the holder of the ERHI through the related payment date to (ii) the fair value of all cash flows projected as of the transaction’s closing date to be paid to the holder of an EHRI through the maturity of the EHRI would not exceed
  • the ratio of (i) the amount of principal projected as of the transaction’s closing date to be paid on all ABS interests through the related payment to (ii) the aggregate principal amount of all ABS interests issued in the transaction.28

By doing away with the test, the Final Rule offers a significant benefit to the CMBS market (and other markets) by removing what may have been a categorical bar on the ability of a CMBS sponsor to meet risk retention requirements through the acquisition of an EHRI by a traditional B-buyer (i.e., third-party purchaser).

Final Rule – Specific Updates for CMBS

Multiple Third-Party Purchasers Must Take Pari Passu Interests

Despite industry comments to the contrary, the Final Rule retains the restriction that satisfaction of a sponsor’s risk retention requirement by two third-party purchasers (or B-piece buyers) is effected only if the eligible interests of such purchasers are pari passu with each other.29 In the preamble to the Final Rule, the Agencies indicate “that allowing the third-party purchasers to satisfy the risk retention requirement through a senior-subordinated structure would significantly dilute the effectiveness of the risk retention requirement.”30

No Exemption for Stand-Alone Securitizations

The Final Rule does not create a categorical exemption from risk retention requirements for single borrower single credit (“SBSC”) deals, as the Agencies “have not concluded that SBSC transactions as a category are of sufficiently low risk to warrant a special exemption from risk retention.”31 In explaining this conclusion, the Agencies point to, among other factors, the lack of diversification across property types that characterizes SBSC deals, “which potentially concentrates and increases credit risk as compared with a diversified CMBS securitization.”32 Accordingly, a stand-alone securitization is generally required to satisfy basic risk retention requirements, subject to the availability of any benefits provided, for example, by the specific CMBS provisions or QCRE loan parameters. Given that the QCRE exemption was the subject of limited expansion in the Final Rule, as detailed below, the flexibility provided by it is probably not enough to have a meaningful impact in the real world of stand-alone securitizations. 

Not Many Changes to QCRE Loan Exemption

The Final Rule retains the Original Proposed Rule’s and the Re-Proposed Rule’s inclusion of a framework for exempting transactions, with little movement from the Re-Proposed Rule’s criteria for exemptions applicable to CMBS transactions. Like the Re-Proposed Rule, the Final Rule exempts a loan that meets the following conditions and thus qualifies as a QCRE loan: (i) the loan has a debt service coverage ratio of (a) 1.25x, if it is a qualifying multifamily loan,  (b) 1.50x, if it is qualifying leased loan or (c) 1.70x, if it is any other commercial real estate loan; (ii) the loan has an amortization term of no more than 25 years or, if it is a multifamily loan, 30 years; (iii) the loan has an LTV of no more than 65% and, if the related collateral also secures a junior lien, a combined LTV of no more than 70%; (iv) the loan has an interest rate that is fixed or is fully convertible to a fixed rate; and (v) the loan has no interest-only period.33 Representing perhaps the most significant deviation from the Re-Proposed Rule’s QCRE loan regime, the Final Rule slightly expands the scope of loans that may qualify as QCRE loans to include loans secured by improved land if the related borrower owns the fee interest in the land and the land is leased to a third party who owns all improvements on the land.34 With little expansion of the parameters for QCRE loans, we remain unconvinced that the Final Rule’s exemption for QCRE loans will offer significant relief to CMBS issuers on a pool-wide basis. We note, however, that the exemption could provide relief to a securitization of a blended pool of assets as a blended pool’s risk retention requirement is reduced by the proportion of the unpaid principal balance of the QCRE loans to the total unpaid principal balance of the pool, capped at 50%.35

Increase of Voting Quorum for Replacement of Special Servicer 

The Final Rule departs from the Re-Proposed Rule with respect to the maximum allowed voting quorum related to taking an affirmative investor vote in support of the operating advisor’s recommendation to replace the special servicer. The Re-Proposed Rule included a threshold of 5% based of the outstanding principal balance of all ABS interests in the issuing entity,36 and the Final Rule responded to industry comments by increasing this maximum to 20%.37 The Final Rule also introduces an additional restriction on the quorum’s composition, requiring that it include at least three holders of ABS interests that are not affiliated with each other.38

Final Rule – General CMBS Provisions

Third-Party Purchaser(s)

The Final Rule follows the Re-Proposed Rule by similarly containing an option specific to CMBS transactions whereby the related sponsor can satisfy risk retention requirements through or in combination with one or two third-party purchasers or B-piece buyers. Largely paralleling the market role of B-piece buyers in CMBS transactions, the Final Rule allows up to two third-party purchasers to take pari passu Eligible Horizontal Residual Interests to satisfy some or all of the sponsor’s risk retention requirements so long as certain conditions are met, including:

  • the securitization is collateralized solely by commercial real estate loans or servicing assets;
  • no third-party purchaser receives any financing, directly or indirectly, for the acquisition of its EHRI from any person that is a party (or an affiliate of any party) to the securitization, and each third-party purchaser pays cash for its EHRI;
  • each third-party purchaser conducts an independent review of the credit risk of each securitized asset prior to the sale of the ABS (including, at a minimum, a review of underwriting standards, collateral and expected cash flows); 
  • no third-party purchaser is affiliated to any party to the securitization transaction, except for investors, the special servicer and originators of assets constituting less than 10% of the cut-off date balance of the securitized assets;
  • incorporation in the related transaction documents of the role of the operating advisor (as described below); and
  • each third-party purchaser complies with specific transfer, hedging and financing restrictions (as described below).39

Operating Trust Advisor

With respect to any transaction for which a sponsor utilizes the third-party purchaser option to satisfy in whole or in part the required retention obligation, the related transaction documents must provide for:

  • the appointment of an operating advisor that is not affiliated with other parties to the transaction, does not have any financial interest in the transaction other than its fees from its function as operating advisor and is required to act in the best interest of, and for the benefit of, investors as a collective whole;
  • standards with respect to the operating advisor’s experience, expertise and financial strength to fulfill its duties under the transaction documents;
  • the terms of the operating advisor’s compensation;
  • the requirement that the special servicer consult with the operating advisor in connection with any material decision relating to its servicing of the assets once the EHRI has been reduced by principal payments, realized losses and appraisal reduction amounts to a principal balance of 25%  or less of its initial principal balance;
  • adequate and timely access by the operating advisor to information and reports necessary to fulfill its duties, including the operating advisor’s obligation to review the special servicer’s actions, all reports provided by the special servicer to the issuing entity or any holder of ABS interests and the special servicer’s calculations;
  • the operating advisor’s obligation to issue periodic reports to investors and the issuing entity describing the operating advisor’s good faith assessment of whether the special servicer is operating in compliance with any servicing standard required under the transaction documents and which standards the operating advisor believes that the special servicer has failed to observe; and
  • the operating advisor’s right to recommend that the special servicer be replaced upon the affirmative vote of investors (subject to the voting quorum requirements revised in the Final Rule, as detailed above).40

The Original Proposed Rule provided for an operating advisor role that would have direct special servicer oversight rights for the entirety of the transaction’s term.41 The Final Rule departs from this prior formulation, favoring requirements that more closely conform to market CMBS 2.0/3.0 structures.  

Five Year Retention Period for Third-Party Purchaser(s)

Departing from the requirement in the Original Proposed Rule that an eligible interest be held for the life of the transaction, the Final Rule permits a third-party purchaser or B-piece buyer to transfer its interest beginning five years after the closing of the transaction to a third-party purchaser that satisfies the conditions applicable to an initial third-party purchaser. In addition, the Final Rule permits any number of subsequent transfers of the eligible interest at any time to a transferee that also satisfies the conditions applicable to an initial third-party purchaser.42

Transfers, Hedging and Financing Permitted for CMBS upon Defeasance of All Loans

Although the basic requirements for transfers, hedging and financing of eligible interests (as described above) apply to the CMBS context and retention by any third-party purchaser (as also described above), the Final Rule includes a carveout that removes those prohibitions with respect to retention by any third-party purchaser so long as each commercial real estate loan “that serves as collateral for outstanding ABS interests has been defeased.”43 We question whether this qualification will have any meaningful impact in the CMBS space.

Disclosure by Sponsor of Risk Retention by Third-Party Purchaser(s)

Similar to the Re-Proposed Rule of 2013 and analogous to the disclosure provisions with respect to basic risk retention requirements, the Final Rule requires a sponsor to provide the following information to investors prior to the sale of ABS:

  • name and form of organization of each initial third-party purchaser acquiring an eligible interest;
  • a description of each initial third-party purchaser’s experience in investing in CMBS;
  • any other material information regarding the initial third-party purchaser in light of the circumstances;
  • the fair value (expressed as a percentage of the fair value of all classes of ABS interests issued) and the dollar amount of the EHRI expected to be retained by the third-party purchaser at the closing of the transaction as well as the purchase price to paid for the EHRI;
  • the fair value (expressed as a percentage of the fair value of all classes of ABS interests issued) and the dollar amount of the EHRI that the sponsor is required to retain according to the Final Rule;
  • a description of the material terms of the EHRI;
  • representations and warranties with respect to the assets, a schedule of any assets determined not to comply with such representations and warranties and any compensating factors; and
  • the name and form of organization of the operating advisor, a description of how the operating advisor role satisfies requirements set forth in the Final Rule and the terms of the operating advisor’s compensation.

A new disclosure requirement included in the Final Rule provides that investors must be provided with a “description of any material conflict of interest or material potential conflict of interest between the Operating Advisor and any other party to the transaction[.]”44

Duty of Sponsor to Monitor Risk Retention by Third-Party Purchaser

The Final Rule obliges a sponsor to monitor compliance by each third-party purchaser (or B-piece buyer) that is allocated a portion of the risk retention.45

Post-Adoption Interpretation and Guidance

In what might be an acknowledgment of the difficulty of fully accounting for today’s and tomorrow’s securitization landscape, especially given the volume of outstanding questions regarding final regulations that do not include specific remedial provisions but that confer broad enforcement authority, the Final Rule grants the Agencies ongoing authority to provide post-adoption interpretation and guidance and to grant exemptions to any securitization transaction as the Agencies “determine may be appropriate in the public interest and for the protection of investors.”46 Despite this provision for ongoing guidance and review, the Final Rule provides scarce detail on the terms that are to govern the Agencies’ case-by-case evaluation.

CMBS and the Final Rule

Following is our “cheat” chart detailing certain CMBS provisions/exemptions from the Final Rule and their impact on current CMBS structures: 



Final Rule

Post-Rule CMBS 3.0

Application to CMBS

Retention by B-Piece Buyer

B-piece buyer can satisfy requirement: maximum of 2 B-piece buyers, must hold eligible interests for at least 5 years and on pari passu basis. Issuer can retain vertical interest and combine with B-piece buyer’s retention to meet 5% requirement.                      

Estimated that B-piece interests will double in size due to 5% requirement (based on overall proceeds, including interest-only strips). Estimated that this may be priced into deals, including through increased borrower costs.

Closing Date Cash Flow Test (Payments to B-Piece)

Eliminates proposed cash flow test, which would have effectively prohibited monthly payments to B-piece buyer(s) from exceeding principal payments to other bondholders (even in deals with large concentrations of interest-only loans).

Test eliminated and not applicable.

Operating Advisor (OA)

OA role required if B-piece buyer is used to satisfy risk retention.

OA role already built into 2.0 structures. However, Final Rule imposes maximum voting quorum for removal of special servicer on OA’s recommendation at 20% of investors. Quorum must include 3 unaffiliated investors.

Disclosure of Retention by B-Piece Buyer

If B-piece interests satisfy risk retention, issuer must disclose information regarding B-piece buyer’s retention.

Final Rule requires expansive disclosure, including B-piece’s material terms and pricing information.


QCRE Loans

Exempts loans meeting criteria: minimum 10-year term, no interest-only period, maximum amortization term of 25 years (30 years if multifamily). Exempts up to 50% of blended pool.

Estimated that only 2% to 8% of today’s CMBS loans qualify.

Stand-Alone Securitizations

No exemption for stand-alone securitizations.

Estimated to account for approximately 25% of CMBS issuance.


1. Final Rule Implementing Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Credit Risk Retention) (Oct. 21, 2014) [hereinafter Final Rule].

2. Securities Exchange Act of 1934 § 15G, 15 U.S.C. § 78o-11.

3. See id.

4. First Notice of Proposed Rulemaking to Implement Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Credit Risk Retention), 76 Fed. Reg. 24090 (Apr. 29, 2011) [hereinafter First Notice].

5. Second Notice of Proposed Rulemaking to Implement Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Credit Risk Retention) (Aug. 28, 2013) [hereinafter Second Notice].

6. A “sponsor" is defined as an entity that “organizes and initiates a securitization transaction by selling or transferring assets, either directly or indirectly, including through an affiliate, to the issuing entity.” Final Rule, supra note 1, at 426 (Subpart A, §__.2).

7. A "majority-owned affiliate" is defined as “an entity (other than the issuing entity) that, directly or indirectly, controls a majority of, is majority controlled by or is under common majority control with, the sponsor. For purposes of this definition, majority control means ownership of more than 50% of the equity of an entity, or ownership of any other controlling financial interest in the entity, as determined under GAAP.” Id. at 424 (Subpart A, § __.2).

8. See id. at 427 (Subpart B, § __.3(b)).

9. Id. at 427-28 (Subpart B, § __.4).

10. Id. at 428.

11. See id. at 433 (Subpart B, §__.4) and Second Notice, supra note 5, at 410 (Subpart B, §__.4).

12. The definition of “ABS Interests” was revised to exclude (i) a non-economic residual interest issued by a REMIC and (ii) an uncertificated regular interest in a REMIC that is held only by another REMIC, where both REMICs are part of the same structure and a single REMIC issues ABS interests to investors. Final Rule, supra note 1, at 420 (Subpart A, §__.2).

13. Id. at 429–33 (Subpart B, § __.4(c)).

14. Id. at 429–32 (Subpart B, § __.4(c)).

15. Id. at 432–33 (Subpart B, § __.4(c)).

16. Id. at 428-29 (Subpart B, § __.4(b)).

17. Id.

18. Id.

19. An originator is a “person who, through an extension of credit or otherwise, creates an asset that collateralizes an ABS and sells the asset directly or indirectly to a securitizer or an issuing entity.” Id. at 424 (Subpart A, § __.2).

20. Id. at 427 (Subpart B, § __.3(b)).

21. Id. at 262.

22. Id. at 471–74 (Subpart C, § __. 11).

23. Id. at 474 (Subpart C, § __.12(a)).

24. Id. at 474 (Subpart C, § __.12(b)-(c)).

25. Id. at 474 (Subpart C, § __.12(d)).

26. Id. at 474 (Subpart C, § __.12(e)).

27. Id. at 474 (Subpart C, § __.12(f)).

28. Second Notice, supra note 5, at 402 (Subpart B, §__.4).

29. Final Rule, supra note 1, at 452 (Subpart B, §__.7).

30. Id. at 176.

31. Id. at 321.

32. Id.

33. Id. at 498 (Subpart D, §__.17).

34. Id. at 483 (Subpart D, §__.14).

35. Id. at 489-90 (Subpart D, §__.15).

36. Second Notice, supra note 5, at 426 (Subpart B, §__.6).

37. Final Rule, supra note 1, at 456 (Subpart B, §__.6).

38. Id.

39. Id. at 452 (Subpart B, §__.7(b)).

40. Id. at 454 (Subpart B, §__.7(b)(6)).

41. First Notice, supra note 4, at 164 (Subpart B, §__.10).

42. Final Rule, supra note 1, at 459 (Subpart B, §__.7).

43. Id. at 458 (Subpart B, §__.7).

44. Id. at 456-458 (Subpart B, §__.7).

45. Id. at 460 (Subpart B, §__.7).

46. Id. at 489-90 (Subpart D, §__.21).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

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This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.