- Gary Gensler, Chairperson of the U.S. SEC, states he supports the re-proposed rule.
- The re-proposed rule is designed to address conflicts of interest arising with market participants taking positions against investors’ interest.
- “The changes, taken together, would benefit investors and our markets,” says Gensler.
Gary Gensler, Chairperson, U.S. Securities and Exchange Commission (SEC), states he supports the re-proposed rule. He writes in a tweet, “It fulfills Congress’s mandate to address conflicts of interests in the securitization market, which contributed to the 2008 financial crisis.”
On Thursday, Gensler posted a tweet where he shared the Statement on Prohibiting Conflicts of Interest in Securitizations, issued by the SEC. In the aforementioned statement, he cites the report by Senator Carl Levin, who investigated conflicts of interest and other abuses in the securitization market.
Gensler states, “The Levin Report found that a conflict of interest arose when investment banks and other market participants sold securitized assets to investors while simultaneously taking large positions against those assets.”
Furthermore, Gensler adds that the report mentions these market participants from time to time may have put their own interests ahead of investors’ interests and profited at investors’ expense.
An amendment to address such conflicts in the securitizations market through Section 621 in the Dodd-Frank Act was proposed by Senators Levin and Jeff Merkley in response to this study.
Gensler claims, “The re-proposed rule would prohibit so-called securitization participants– those who sell or facilitate the sale of an asset-backed security, from engaging in a transaction that would involve or result in a material conflict of interest with investors in that ABS.” Moreover, he adds that the prohibition would last for a year after the ABS’s first sale.
The Chairperson of the SEC continues that this re-proposed rule is designed to address conflicts of interest arising with market participants taking positions against investors’ interest.
Elaborating more on the viability of the re-proposed rule, Gensler states, “Further, as required by Section 621 on Dodd-Frank, the re-proposed rule provides exceptions for risk-mitigating hedging activities, bona fide market making and certain liquidity commitments.”
The Chairperson urges the public to come up with their feedback as well as developments since then in the ABS market. He also assures them that these changes, taken together, would benefit investors and their markets.