Issuers of asset-backed securities—banks and other financial firms whose ABS offerings keep the flow of capital coursing through the public markets—find themselves on the horns of a disclosure dilemma these days.
It’s a dilemma that has equally snarled the Securities and Exchange Commission. The heart of the problem is how to implement various sections of the Dodd-Frank Act that try to divorce ABS offerings from their reliance on stamps of approval from credit rating agencies. To do that, issuers would need to calculate and disclose a battalion of risks in those ABS offerings, which they’ve never done before to this extent. Worse, the SEC is finding that new rules to outline those obligations aren’t easy to pin down either.
