SIFMA and ASF Submit Comments to the CFTC Requesting Relief for Legacy Structured Finance Transactions (with Lofchie Comment)
SIFMA and the American Securitization Forum (ASF) submitted the comments to the CFTC requesting relief to address "legacy" structured finance transactions. The groups stated that there are factors that distinguish these financings from those done on a prospective basis, which would therefore lessen the CFTC's regulatory interests and justify regulatory relief on a broader basis. A draft exemptive order was submitted for purposes of discussion (included in the letter).
The structures to which the relief would apply are as below:
"Legacy Entity" means an entity, regardless of its legal form, formed prior to October 12, 2012, that has entered and may in the future enter into swap transactions, whether or not for hedging purposes, and satisfies the following criteria:
(i) it is a limited purpose entity that has issued securities to finance the acquisition and holding of financial assets, in cash or synthetic form;(ii) it has not issued and will not issue additional securities after October 11, 2012 (securities issued to effect the transfer or exchange of previously issued securities, or the replacement of lost or mutilated securities, are not considered to be additional securities for this purpose);(iii) it has not acquired or entered into and will not acquire or enter into commodity interests other than swaps;(iv) at closing, or at the time of its most recent issuance, its securities issued to third parties (that is, excluding interests retained by or issued to its sponsor and/or affiliates of its sponsor), consists primarily of fixed-income securities, as defined in Rule 3a-7(b)(2) under the Investment Company Act.
(The CFTC has previously issued exemptive letters for certain REITS and a limited number of securitization vehicles; the links to the relevant Cabinet news items, which link to the letters, are in the box below.)
Lofchie Comment: Ultimately, I feel about this request for relief as I do about the FX relief. It is a little hard to understand why it should be difficult to grant and why it should not be promptly done. Where is the benefit of imposing requirements retrospectively on vehicles that, even assuming they come within the intended scope of the regulation (which seems at least open to debate), have no good way to comply with the requirements? What good could possibly come of declaring that these vehicles are now existing in violation of a newly minted rule? For more information on the letter, please contact your regular Cadwalader attorney or Richard Schetman.
Click hereto view letter in full (links externally to SIFMA website).Clickhere to view the letter linking to the news item as to REITs not being pools. Clickhere to view the letter linking to the news item as to certain securitization vehicles not being pools.