SEC flexes ABS stress test


THE U.S. Securities & Exchange Commission has revised Asset Backed Securities (ABS) stress tests to protect investors from dud investment products.
The new disclosure, reporting and offer rules will help investors decide if they want to risk their money in a security which includes high risk sub-prime loans granted to questionable borrowers.
To improve transparency, the SEC now requires attestation from Chief Executive Officers of those issuer firms offering ABS products.
The SEC's new ABS offer disclosure forms (SF-1 and SF-3), require increased disclosure about the transaction parties.
ABS issuers must include three key pieces of data: credit quality of borrower; collateral related to each asset; and cash flows related to a particular asset, including terms, expected payment amounts, and whether and how payment terms change over time.
Todd Cipperman adds: 'The CEO certification should trigger a move to enhanced due diligence of the underlying asset pool including the implementation of a compliance infrastructure'.
Securities & Exchange Commission newsroom
Cipperman blog