SEC Seeks Public Comment on Asset-Backed Issuers and Mortgage-Related Pools Under Investment Company Act

SEC Seeks Public Comment on Asset-Backed Issuers and Mortgage-Related Pools Under Investment Company Act

FOR IMMEDIATE RELEASE
2011-176

Washington, D.C. – The Securities and Exchange Commission today voted unanimously to request public comment on the treatment of asset-backed issuers as well as real estate investment trusts (REITs) and other mortgage-related pools under the Investment Company Act.

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Text of
Chairman’s statement

Through an advance notice of proposed rulemaking, the SEC is seeking public input on possible amendments the agency might consider proposing to Rule 3a-7, which excludes certain issuers of asset-backed securities from having to comply with the requirements of the Investment Company Act. An advance notice of proposed rulemaking provides the public the opportunity to weigh in even before the SEC develops a formal rule proposal.

Through a separate concept release, the SEC is seeking public comment on interpretations of a provision in the Investment Company Act – Section 3(c)(5)(C) – that may be used by some companies engaged in the business of acquiring mortgages and mortgage-related instruments such as some REITs. A concept release is a Commission-approved document that poses an idea or ideas to the public to get their views.

“We are inviting public comment in light of the significant developments in the asset-backed and mortgage markets. We want to assure that our regulatory approach is updated to reflect the current market environment while still meeting our investor protection goals,” said SEC Chairman Mary L. Schapiro.

Public comments should be received within 60 days from the date of publication in the Federal Register.

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FACT SHEET

Asset-Backed Issuers and Mortgage-Related Pools Under the Investment Company Act

Background

Asset-backed securities are created by buying and bundling loans or interests in loans – such as residential mortgage loans, commercial loans, or student loans – and creating securities backed by those assets that are then sold to investors.

Under the Investment Company Act, entities that issue asset-backed securities typically meet the definition of “investment company,” thereby requiring them to comply with the provisions of the Act. In 1992, however, the Commission adopted Rule 3a-7 under the Investment Company Act, which specifically excludes some asset-backed issuers from the definition of “investment company” provided they meet certain specified conditions.

One of the conditions is that the asset-backed securities generally be rated by a nationally recognized statistical ratings organization (NRSRO) – but the condition was not primarily intended as a measure of credit-worthiness of the issuer. Instead, the Commission included the credit rating condition because it believed that as part of the ratings process, the rating agencies assessed the issuer’s investor protection measures.

In the aftermath of the recent financial crisis, the Commission has engaged in various regulatory initiatives to address concerns raised by credit rating procedures and methodologies.

Advance Notice of Proposed Rulemaking

The Advance Notice of Proposed Rulemaking would solicit public comment on possible amendments to Rule 3a-7 including the role, if any, that credit ratings should continue to play in the rule.

The Advance Notice asks about:

  • Revising the Conditions in the Rule: To be able to use Rule 3a-7, an issuer must meet the rule’s conditions including the existing rating condition. The Advance Notice seeks public input about possibly removing the rating condition and replacing it with new conditions. Rather than rely on rating agencies to assess the issuer’s structure and operations, such new conditions could address the structure and operations of asset-backed issuers. Possible new conditions also could require the issuer to undergo an independent review to protect investors in the asset-backed securities from self-dealing and overreaching by insiders. Additional possible conditions could help ensure that the issuer preserves and safeguards its assets and cash flow.
  • How the Rule is Used: Rule 3a-7 excludes from the definition of “investment company” any asset-backed issuer that holds specified assets and meets the rule’s conditions, so that the issuer does not have to comply with the requirements of the Investment Company Act. The Advance Notice asks whether Rule 3a-7 issuers should still be considered “investment companies” for the limited purpose of determining whether an entity investing in Rule 3a-7 issuers is itself an “investment company” that should comply with the requirements of the Investment Company Act.
  • Availability of Section 3(c)(5) to Asset-Backed Issuers: The Investment Company Act contains a provision – Section 3(c)(5) – that may be used instead of Rule 3a-7 by some asset-backed issuers, including certain issuers of mortgage-backed securities. This provision was not specifically intended to be used by asset-backed issuers. The Advance Notice asks whether Section 3(c)(5) should be amended to limit the ability of asset-backed issuers to rely on that section, or whether the Commission should use its rulemaking authority to define the relevant terms in that provision so as to limit its availability to those companies that are intended to be encompassed by that section.

Mortgage-Related Pools

Background

Companies that are engaged in the business of acquiring mortgages and mortgage-related instruments have been relying on a provision, Section 3(c)(5)(C) to be excluded from the definition of “investment company” and consequently from the requirements of the Investment Company Act.

Section 3(c)(5)(C) was enacted to exclude from the definition of “investment company” companies that were engaged in the mortgage banking business and were not considered to be in the investment company business. Since Section 3(c)(5)(C) was enacted in 1940, the mortgage markets have evolved and expanded, and the provision has been used by a wide variety of types of pooled vehicles and other companies unforeseen at the time of enactment. These issuers include certain mortgage-backed securities issuers and certain REITs.

The SEC is concerned that mortgage-related pools potentially are making judgments about their status under the Investment Company Act without sufficient SEC guidance on the interpretive issues that arise under that provision. The SEC also is concerned that certain mortgage-related pools today appear to resemble investment companies such as closed-end funds and may not be the kinds of companies that were intended to be excluded under this section.

Concept Release

The companion Concept Release solicits comment on the interpretive issues relating to some REITs and other mortgage-related pools that rely on the Section 3(c)(5)(C) exclusion.

The Concept Release provides an overview of mortgage-related pools and requests data and comment on their management styles, corporate governance, and similarities to traditional investment companies. It also discusses the legislative, administrative and interpretive background of Section 3(c)(5)(C).

The Concept Release asks, for example, whether a test could be devised to differentiate companies that are primarily engaged in the real estate and mortgage banking business from those companies that look like traditional investment companies, and what factors should the Commission consider in such a test.

What’s Next?

Both releases will be published in the Federal Register and commenters will have 60 days from the date of publication to submit their comments.

http://www.sec.gov/news/press/2011/2011-176.htm

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4closureFraud.org

Comments
4 Responses to “SEC Seeks Public Comment on Asset-Backed Issuers and Mortgage-Related Pools Under Investment Company Act”
  1. lies is all they tell says:

    what the most fustrating thing is , is how these banks have been able to foreclose on america. they take all of our jobs over seas. if you can not find a job how do you pay your bills. in real estate + equity days you sold your home. i had to in 2006. my husband lost his job and was unemployed for 1 year we had to sell and move. now in 2009, 2008, and now 2011 we have the same issues. yet now we caN NOT SELL THE HOMES. doesnt anyONE see anything wrong with this picture. we all ar4 not deadbeats that bought more house. the only way any of us bought more house was if the mortgage broker learned how to lie about incone on hourly rate employees. my paycheck was different everyweek depending if i worked more less, got cancel. nurse are professional but our hourly rate hurts us when fraud is involved easy to mess with our income.

    but no one see’s anything wrong with no jobs = unable to pay bills. am i the only onee that sees this.
    foreclsoures need to stop until we have positive equity and people can sell again.

    • lvent says:

      lies, THE JESUITS ARE FORECLOSING ON US…..The judges and the attorneys on the defendants side are working for the Jesuits….The banks are coming to court and the JESUIT JUDGES ARE ALLOWING THEIR FRAUD BECA– USE THEY ARE WORKING FOR THE JESUITS..WE CANNOT FIND AN ATTORNEY TO REPRESENT WE THE PEOPLE BECA– USE THE JESUITS OWN THEM TOO…THE U.S. GOVERNMENT IS ALLOWING IT BECA– USE THEY DO NOT WANT TO GET THEIR HEADS BLOWN OFF. ITS NOT THE BANKS THAT WANT OUR HO– USES IT IS THE JESUITS…..THE SMOM/ VATICAN /JESUITS “THINK” THEY OWN THIS COUNTRY AND THE ENTIRE WORLD…..ITS ALL A SHAM AND A FRAUD. THEY ARE ROBBING THE WORLD OF ITS WEALTH..INCLUDING AMERICA,,,,,,,
      THERE IS A WAR GOING ON BETWEEN THE JESUITS AND THE AMERICAN SIDE OF JEWISH BANKING IN THE COURTROOMS……..THE AMERICAN SIDE OF THE BANKS DO NOT WANT TO FRAUDCLOSE AND KNOW THEY COMMITTED MASSIVE FRAUD AND THEY DO NOT OWN OUR HOMES….THEY KNOW THEY DID NOT LEND US ANY MONEY…. THE AMERICAN SIDE OF JEWISH BANKING AND WALL STREET MADE ALOT OF MONEY FOR THEIR OWNERS, THE JESUITS VIA THEIR WALL STREET PERPS, RANG AMERICA UP WITH 40 TRILLION DOLLARS IN COLLATERAL FRAUD…THIS WAS A HITLER PLAN BY THE JESUITS, JUST LIKE THE LAST GREAT DEPRESSION AND WEIMAR GERMANY, HITLER, ALL OF THAT WAS A JESUIT PLAN AS IS FORECLOSUREGATE…….AT THE END OF THE DAY, THIS IS ALL ABOUT JESUIT GREED, MASSIVE THEFT FROM THE PEOPLE,THREATENS OUR NATIONAL SOVEREIGNTY BECA– USE THE JESUITS WANT WORLD DOMINATION…….A NEW WORLD ORDER….A.. GLOBAL… FASCIST.. DICTATORSHIP..A GLOBAL TYRANNY…..THIS IS THE DEVILS WORK……

      THE MOST SACRED PRINCIPLE OF THE UNITED STATES CONSTITUTION IS:
      “THE EQUALITY OF EVERY CITIZEN BEFORE THE LAW…….”

      THE AMERICAN PEOPLE ARE CAUGHT IN THE CROSSFIRE…….NONE OF THESE ENTITIES OWN OUR HOMES AND HAVE NO RIGHT TO TAKE OUR HOMES FOR AN UNSECURED DEBT……THIS IS WAR AGAINST THE AMERICAN PEOPLE BY THE JESUITS WHO WANT TO DO AS THEY HAVE DONE THROUGHOUT WORLD HISTORY….STEAL EVERYTHING FROM THE PEOPLE AND BLAME THE JEWS, THEIR PERPS………………..

      THE U.S. GOVERNMENT IS A BUNCH OF CORRUPT SPINELESS COWARDS WHO WON’T DEFEND THE RIGHTS OR LAWS OF THEIR OWN COUNTRYMEN…..THROW THEM OUT AMERICA!!!!!!!

      • lvent says:

        The JESUITS want a nation of renters……I will not ever pay these criminals another effing dime…they are despicable underminers of freedom, national sovereignty and democracy!!!!!! THIS IS BEING LEFT UP TO THE AMERICAN PEOPLE TO BURN THIS MOTHER DOWN….BECA– USE THE U.S. GOVERNMENT IS ACTING LIKE A BUNCH OF TREASONIST TRAITOR COWARDS…AND NOT DEFENDING ITS NATION OR ITS PEOPLE……THEY ARE ALL DESPICABLE…..EXPOSE THEM, ROUT THEM OUT AND REMOVE THEM AMERICA!!!! STOP PAYING THESE CROOKS!!!!! THIS IS AMERICAS LAST STAND…IF THE JESUITS GET AWAY WITH THIS, WE ARE DONE AS A SOVEREIGN NATION AND TYRANNY WINS…..!!!!

        Here is an excellent you tube video about the biggest criminal enterprise on the planet who uses massive lies and deceit to STEAL EVERYTHING FROM THE WORLD VIA MANY PROXIES….THEY ARE THE SMOM/VATICAN JESUITS-THE NEW WORLD ORDER!!!!
        If the this video does not post you can you tube search the words: The Black Nobility &Jesuit New World Order (Full Length)
        http://www.youtube.com/watch?v=peOyNUuNTyc

        WE ARE THE LAND OF THE FREE AND THE HOME OF THE BRAVE FOR A REASON..BRING OUR SOLDIERS HOME…..THE REAL WAR IS AT HOME…..AND IT STARTED …ON U.S. SOIL AND IT WAS STARTED BY THE SMOM/ VATICAN/JESUITS AND ORDERED BY THE BLACK POPE, JUST LIKE THE ASSASSINATION OF JFK… DO YOUR HOMEWORK AMERICA!!!!!! OUR NATIONAL SOVEREIGNTY DEPENDS ON ALL OF US, INDIVISIBLE…..FOR LIBERTY AND JUSTICE FOR ALL……..!!!!!

  2. Mad as Hell in Maryland says:

    ABOUT TIME! If the response is huge, it will increase the pressure on lawmakers and ‘supposed’ public servants to do the right thing.

    If the note was not deposited properly, it is NOT an asset of the trust. Therefore, it becomes an ‘ unsecured’ debt.

    Can you say negotiating power.

    I am not saying everyone should get a free home. I am saying that those entitites who did NOT properly deposit, should NOT have rights to take action against the asset.

    Fight the good fight. Question everything. Good luck to all! Be well!

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