SEC Shelves Rules for Private Securities

New disclosure requirements for public asset-backed bonds exclude private securities; critics see it as 'a massive hole' in the rules.

The U.S. Securities and Exchange Commission (SEC), while expanding disclosure requirements for one set of asset-backed securities, has stepped back from a plan to shed more light on a major part of the market.

On Wednesday, the five SEC commissioners unanimously approved a rule to offer investors more details on bonds backed by assets such as mortgages and car financing, including specific data on individual loans, and new practices such as a cooling-off period to review documents before certain bond sales.

Marcus Stanley, policy director at Americans for Financial Reform, a coalition working for stronger regulations, said that he was disappointed that the private-bond market wasn’t covered.

“A lot of the biggest abuses were in precisely that area,” he said, citing mortgage-backed notes that were repackaged into other instruments. “It just leaves a huge gap in the coverage of this rule not to mandate proper disclosures for those privately issued securities.”

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