SEC Official Examines Impact of Dodd-Frank

During a recent speech, SEC Investor Advocate Rick Fleming discussed the future of financial regulation and the potential impact and legacy of the Dodd-Frank Act. Mr. Fleming asserted that the rule has been “successful in addressing some of the real causes of the financial crisis,” specifically its enhancement of regulations concerning ABS, derivatives and credit rating agencies.

Fleming noted that the SEC disclosure rules adopted under Section 942 of the Dodd-Frank Act enable investors to conduct their own due diligence in order to better assess the credit risk of ABS. Potential investors are now able to see a more complete picture of the composition, characteristics and performance of the assets in a securitized pool rather than merely “blindly relying on credit ratings.”

Fleming also stated that the risk retention rules in an ABS transaction “will discourage the creation and sale of toxic securities in the future.”

He concluded that sound financial regulation focused on “the protection of investors must serve as the first principle guiding our financial regulations…we should think of those regulations not as a burden to be repealed or picked apart haphazardly, but as the essential nutrient for flourishing capital markets.”

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