The Securities and Exchange Commission (“SEC”) has issued proposed Rule 192 pursuant to Section 27B of the Securities Act of 1933. Section 27B requires the SEC to issue rules for the purpose of implementing that section’s prohibition against a securitization participant’s entering into a transaction that would involve or result in a material conflict of interest with any investor.

  • General Rule. Proposed Rule 192 prohibits a “securitization participant” from directly or indirectly engaging in any transaction that would involve or result in a “material conflict of interest” between the securitization participant and an investor.
  • Exceptions. Rule 192 contains exceptions for (1) risk-mitigating hedging activities, (2) liquidity commitments and (3) bona-fide market making activities.
  • Scope. Rule 192 applies to “asset-backed securities” as defined by section 3(a)(79) of the Securities Exchange Act of 1934 and also includes synthetic and hybrid cash and synthetic ABS (neither of which terms are defined in Proposed Rule 192 or elsewhere under applicable securities laws).
  • Anti-Circumvention. Proposed Rule 192 includes a broad “anti-circumvention” provision that prohibits a securitization participant from engaging in any other transaction that circumvents the prohibition on transactions that create a material conflict of interest.
  • Deadline for Comments. Comments are due by March 27, 2023, or 30 days following publication of the proposing release in the Federal Register, whichever period is longer.
  • Compliance Date. The proposing release does not specify a compliance date. Unless the adopting release provides otherwise, Rule 192 will become effective upon the issuance of the final rule.

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