U.S. Securities and Exchange Commission (SEC) Commissioner Caroline Crenshaw warned against rushing to roll back disclosure requirements for asset-backed securities (ABS), saying weak issuance levels may reflect lack of investor demand rather than regulatory barriers.
The SEC issued a concept release this week asking whether its registration and reporting framework for ABS – including residential mortgage-backed securities (RMBS) – is discouraging issuers from accessing the registered market.
Among the questions posed are whether asset-level disclosure rules are too burdensome, whether requirements to share sensitive data such as credit scores and five-digit zip codes are deterring issuers, and whether the definition of ABS is overly narrow.
Crenshaw, in a statement, questioned the premise that regulation was suppressing issuance. She said:
“We appear, for example, to presume that registered RMBS market levels are artificially depressed and that the cause is regulatory. It is possible, however, that market levels reflect the degree of investor interest in these products. In other words, the supply may reflect demand.”
She noted that the last registered private-label RMBS offering occurred in 2013, a year before the SEC adopted detailed asset-level disclosure rules.
Since 2009, only one issuer has publicly issued private-label RMBS, underscoring a long-running retreat from the market.
Crenshaw said depressed issuance could reflect persistent investor concerns, including risks exposed during the 2008 financial crisis, questions over product ratings, servicing quality, or a preference for agency-backed RMBS perceived as safer due to government support.
She also raised doubts about whether revisiting the issue is a good use of SEC resources, pointing out that a 2019 request for comment on similar questions drew only nine responses.
“This could be an indication that we are seeking a solution in search of a problem,” she said.
Crenshaw urged market participants not to embrace deregulation for its own sake.
“Be mindful of removing requirements that serve to provide transparency and consistency in aid of investor analysis and diligence,” she said, adding that transparency underpins market integrity.”
The concept release is open for public comment, with investors encouraged to weigh in on what disclosures they find most useful for evaluating ABS products.