The Securities and Exchange Commission is asking for input on synthetic asset-backed securities, ahead of considering issuing guidelines for the registration of the instruments. Comments are due by the end of February and lawyers say there is a lot of interest from banking clients, who see public issuance as a way of selling these instruments to a wider range of investors. Richard Schetman, partner at Cadwalader, Wickersham & Taft in New York, predicted, "We will see [registered synthetic] credit products soon."
The consultation follows guidelines on cash ABS published in December, which the SEC separated from synthetic credit products. The agency's proposed consultation signals a desire to bring credit-linked products, which are mostly only private deals, into the public domain, according to lawyers. Schetman thinks the SEC will be concerned about disclosure and the leverage of synthetic structures. The first products will likely be simple credit-linked notes referenced to one entity that is already registered with the SEC, according to Schetman.
