WASHINGTON (CN) – Issuers of asset backed securities must disclose repurchase demands and underlying assets repurchased so investors can check the quality of the securities, according to new requirements adopted by the Securities and Exchange Commission.
The rules also require national agencies that provide credit ratings for asset-backed securities offerings to disclose all the representations, warranties and enforcement mechanisms available to potential investors and how these compare regarding other available securities.
A buyer of asset backed securities may request that the issuer buy back, or repurchase, underlying assets that do not comply with applicable laws. When this happens, the security issuer usually is required to buy back the asset or substitute a new one.
Requiring issuers to disclose the history of repurchase demands and actual repurchases will allow investors to better understand the risk of an asset-backed security they intend to purchase, according to the SEC.
Click the document icon for this regulation and others.