SEC Introduces Rule 192 to Eliminate Conflicts of Interest in Asset-Backed Securities Sales
The SEC has implemented a new regulation, Rule 192, to prevent conflicts of interest in the sale of asset-backed securities. The rule prohibits securitization participants from engaging in transactions that could create a significant conflict of interest with ABS investors, including short selling and buying derivatives linked to the ABS. However, the SEC has also recognized the importance of certain activities for market fluidity and risk management, such as risk-mitigating hedging and market-making activities, and has exempted them from the rule. This development is aimed at rebuilding trust in the financial markets and is expected to impact how securitization participants approach transactions and manage investor relationships.
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