On July 14, 2023, SFA, along with five other trade associations, submitted a comment letter to the National Association of Insurance Commissioners (NAIC), regarding proposed changes to their Practices and Procedures Manual.
On June 29, 2023, SFA signed a joint trade letter to the National Association of Insurance Commissioners (NAIC), responding to the NAIC’s request for comment on an exposure draft amending Subscript S of the Purposes and Procedures Manual.
In November 2022, the SEC issued a revised No-Action Letter (New NAL) in relation to amended Rule 15c2-11 and its application to fixed income securities and the 144A market.
It may surprise policymakers and regulators, as well as even some market participants, to know that it is currently very difficult – and sometimes impossible – for bondholders to communicate with the companies that issued the securities they own or for bondholders who own the same security to communicate with one another.
The current system is so unreliable that when evaluating potential solutions for the transition away from LIBOR, one of our financial markets’ most serious risk today, market participants view the option of soliciting bondholder consent for an amendment as largely unfeasible.
“Market participants are keenly focused on and have rightfully questioned how – well into the digital age – the significant limitations of the current communication system remain.” – Kristi Leo, SFA, President
Market participants have rightfully questioned how – well into the digital age and long since record keeping transitioned from physical certificates to an electronic platform – the significant limitations of the current communication system remain. While there is certainly a complex chain of intermediaries that often separates the record-owner from the beneficial owner with only the final custodian retaining the record of the actual investor’s identity, today’s technology – including blockchain – provides viable solutions.
SFA is leading an effort within the structured finance market to identify the requirements for a robust and effective bondholder communication framework that could apply to all new bond issuance, if fully adopted.
Our Bondholder Communication Task Force has commenced a review of the current bondholder communication frameworks to identify operational, legal, economic and regulatory issues pertaining to those frameworks and drafted a specification document for an improved bondholder communication platform to address those issues. This project specification document will serve as the backbone for potential industry service providers to evaluate their ability to develop a platform meeting the industry’s needs at a cost point acceptable to the industry.
The Credit Ratings Subcommittee of the Fixed Income Market Structure Advisory Committee (FIMSAC), an advisory group to the SEC, is considering the role of NRSRO credit ratings in various financial markets, including the exploration of potential conflicts of interest in industry payment models. After soliciting feedback from industry participants on this topic, the FIMSAC subcommittee set forth recommendations aimed at improving both transparency and potential outcomes for investors.
“Strong governance is a key pillar of a sustainable securitization market, but we can’t fully have strong governance without a mechanism for transaction parties to communicate with each other in a timely fashion when the circumstances so require. I’m very optimistic that with the Structured Finance Association’s leadership and the commitment of industry participants we will finally be able to overcome what has been a persistent obstacle to better governance in our industry for many years.”
- Francisco Paez, MetLife Investments