Regulation AB automation

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6 October 2014

The US Securities and Exchange Commission (SEC) recently announced the adoption of revisions to Regulation AB detailing the offering process, disclosure, and reporting for asset-backed securities (ABS). In doing so, they also noted the significance of a related issue as a contributing factor to the global financial crisis:

The aftermath of the financial crisis has demonstrated that investors have also encountered difficulty in locating other investors in order to enforce rights collectively under the terms of the ABS transaction, especially those related to repurchase demands due to breaches of the representations and warranties.  Without an effective means for investors to communicate with each other, investors have told us that they are unable to utilize the contractual rights provided in the underlying transaction agreements. (SEC Draft Release)

Dave Jefferds, co-founder and COO of DealVector, maintains that strengthening the ability of investors to communicate with one another is both the easiest and the most important step needed to return the RMBS market to health, and also to improve the resilience of the ABS markets as a whole to unexpected shocks in the future.  Since the next crisis is unlikely to look exactly like the last one, Jefferds argues that “fault tolerance” is as important a goal as “fault elimination,” and that promoting robust communication networks should play an important role.

To discuss the developments to increase transparency in the ABS markets, plus to learn more about the platform DealVector has built to open communications between ABS investors, collateral holders and issuers, please reply to this email or contact me at the number below.

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