SEC Proposes to Prohibit Conflicts of Interest in ABS Transactions

The SEC voted to propose a rule intended to prohibit certain material conflicts of interest between those who package and sell asset-backed securities (ABS) and those who invest in them.  The proposed rule would prohibit securitization participants of an ABS for a designated time period from engaging in certain transactions that would involve or result in any material conflict of interest. Two criteria to determine whether the transaction involves a material conflict of interest are set out in the rule proposal. 

The proposal, which is not intended to prohibit traditional securitization practices, implements Section 621 of the Dodd-Frank Act.