CFTC Staff Expands Existing Relief as to Securitizations

The CFTC had previously issued no-action letter 12-14 as to limited types of securitization vehicles.  (Link here to the related news item, which describes the prior letter and links to it.)  The CFTC has now issued a related no-action letter (i) expanding the scope of the securitization vehicles that are not considered to be commodity pools (and thus whose managers by definition would not be commodity pool operators required to register as such); (ii) providing conditional no-action relief to vehicles that last issued securities before October 12, 2012; and (iii) extending the registration deadline for firms not able to rely on either exemption.

1.   Not a Pool.  The interpretative relief applies to securitization vehicles (including covered bonds and ABCP) that have no greater use of derivatives than that allowed under Reg AB or Rule 3a-7 and do not use swaps to create an investment exposure.  The interpretative portion of the letter provides specific examples of securitization vehicles that would not be considered commodity pools (including certain CDOs, covered bonds and ABCP) and some that might be considered commodity pools. 

2.   Legacy No-Action Relief.  The legacy no-action relief applies to parties to legacy securitization vehicles if the following conditions are met:

i. The issuer issued fixed income securities before October 12, 2012 that are backed by and structured to be paid from payments on or proceeds received in respect of, and whose creditworthiness primarily depends upon, cash or synthetic assets owned by the issuer;

ii. No new securities have been issued after that date; and

iii. Issuers shall, upon request, provide within 5 days to the CFTC an electronic copy of certain transaction documents. If the issuer cannot deliver the documents, it must demonstrate it used commercially reasonable efforts and could not comply.

3.   Extension of Filing Deadline.  If the operator of a securitization vehicle is unable to rely on the October 11, 2012 letter linked above or the new letter, the CFTC will not take action against those failing to register as commodity pool operators until March 31, 2013.

Lofchie Comment:  Ready, fire, aim.