More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
The Securities and Exchange Commission (SEC) on Wednesday issued a proposed rule to enhance disclosure to investors in the asset-backed securities (ABS) market, and adopted an interim rule that required certain swaps dealers and other parties to report any security-based swaps entered into prior to the July 21 passage of the Dodd-Frank Act.
The proposed rules regarding the ABS market, the SEC says, require issuers of asset-backed securities to perform a review of the assets underlying the securities and publicly disclose information relating to the review. The SEC proposal also requires an issuer or underwriter of ABS to make publicly available the findings and conclusions of any third-party due diligence report.
“This marks the third Commission proposal to address the ABS issues that came to light during the financial crisis,” said SEC Chairman Mary Schapiro, during her opening remarks at the open meeting on Wednesday. “This proposal will require issuers to provide investors with better information about the loans backing the asset-backed securities.”
The SEC says its proposal seeks to enhance ABS disclosure in three ways:
- Issuers of ABS that are registered with the SEC would be required to perform a review of the bundled assets that underlie the ABS.
- Proposed amendments to Regulation AB would require an ABS issuer to disclose the nature, findings and conclusions of this review of assets.
- The issuer or underwriter for both registered and unregistered ABS offerings would be required to disclose the findings and conclusions of any review performed by a third party that was hired to conduct such a review.
The interim rule requires parties to report security-based swap information to the SEC or to a registered security-based swap data repository, according to the SEC. “Parties also are required to preserve data pertaining to the terms of pre-enactment security-based swaps in support of the reporting requirements,” the SEC says.
“This interim final rule provides a means for the Commission to gain a better understanding of the security-based swap markets, including their size and scope,” said Schapiro. “Until such time as final rules are adopted, this interim rule clarifies who needs to do security-based swaps reporting, what needs to be reported, and when such reporting needs to occur.”