BDA yesterday co-signed a letter to the SEC where we asked the Commission to exclude municipal securities from the definition of ABS under the SEC’s Regulation AB. The letter is in response to a SEC concept release that included an inquiry on amending the regulatory definition of ABS under Reg AB.
The groups told the Commission “the lack of a congressional mandate and the statutory implication that municipal securities are not Exchange Act ABS for the purposes of at least one Exchange Act ABS rule bolster our case that Congress: (i) never intended for municipal securities to be classified as Exchange Act ABS; and (ii) empowered the Commission to exclude municipal securities from the Exchange Act definition of ABS.”
We also told the SEC “broad changes in the ABS regulatory framework could pull significant portions of the municipal securities market further under the ABS umbrella, adding to regulatory uncertainty, increasing perceived liability risks, creating traps for the unwary, and potentially changing municipal investor behaviors. Requiring the municipal securities market to be subject to unnecessary ABS rules risks creating barriers to public market entry and increasing the cost of capital formation for issuers and borrowers.”
We were joined on the letter by the Education Finance Council, the Government Finance Officers Association, the National Association of Bond Lawyers, the National Association of Health and Educational Facilities Finance Authorities, the National Association of Municipal Advisors, the National Council of State Housing Agencies, the National Association of State Treasurers, SIFMA, and the American Securities Association. The joint letter is available here. Please call or write if you have any questions.