Six federal agencies have finalized long-anticipated joint rules imposing risk retention, or “skin-in-the-game,” requirements for securitizations. The new rules, when they become effective over the next two years, will impose significant new costs and obligations on a wide range of securitization structures. The risk retention rules come on the heels of a number of other Dodd-Frank reforms that have hit the securitization markets in recent months, including the Volcker Rule, Regulation AB II, and Dodd-Frank derivatives reforms.
The risk retention rules are required by Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which added Section 15G of the Securities Exchange Act of 1934. The joint regulations were adopted by the US Securities and Exchange Commission (“SEC”), Office of the Comptroller of the Currency (“OCC”), Board of Governors of the Federal Reserve System (“Fed”), Federal Deposit Insurance Corporation (“FDIC”), Department of Housing and Urban Development (“HUD”) and the Federal Housing Finance Agency (“FHFA”), together, the “Agencies.”
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