CLO Risk Retention Questions Mounting
Questions continue to mount as CLO market participants seek to address issues under the Risk Retention rules. However, U.S. regulators are remaining silent, according to a recent Reuters article.

CLO investors and managers have asked for language to be included in the documents of new funds to allow new managers to purchase existing risk-retention securities at a fair market value after a sale, according to Reuters.

Market participants are also lobbying for clarity on questions and potential discrepancies in application of the regulation. While the U.S. Securities and Exchange Commission (SEC) has given some informal guidance to CLO market participants, it has not issued formal or public responses such as an interpretive letter or no-action letter since the rule took effect in December 2016, Reuters explains.

Market participants would like the SEC to release a frequently asked questions document to address multiple questions simultaneously, similar to the one the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued after the 2013 implementation of updated U.S. leveraged lending guidance.

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