The Washington DC Court of Appeals has ruled that managers
of open market collateralised loan obligations (CLOs) are not
subject to the risk retention rules. The decision lifts a
financial burden imposed by section 941 of the Dodd-Frank
court withheld the case brought by the Loan Syndications
and Trading Association (LSTA) against the Securities and
Exchange Commission (SEC) and the Federal Reserve System,
reversing a decision it made in 2016 which gave the agencies
the authority to apply the rules to CLOs.
The court of last resort for the District of ColumbiaThe
argument hinged on whether the term securitiser applies to
those parties that initiate securitisations through the
movement of assets to vehicles, and to CLO managers who acquire
assets on behalf of investors. Section 941 requires initiators
of CLOs to keep at least five percent of the value of the asset
they sell to others, a...