SPA Asks SEC to Distinguish SPs from Asset-Backeds (StructuredRetailProducts.com)

by Lori Pisani
August 1, 2008

The US Structured Products Association (SPA) has written to the US Securities and Exchange Commission requesting that the regulator make a clearer definitional and regulatory distinction between structured products, and structured finance and credit products at the heart of the US subprime crisis.

The SPA says it does not want the growing structured institutional and retail industries to become entangled in the recent regulations proposed by the SEC regarding credit rating agencies deciding and awarding credit ratings to structured credit products.

“We do not believe that the Commission intended to address… the ratings process for other securities, nor do we believe that the proposed rules… are appropriate for structured products, in light of their different structure, economics and risks,” said SPA chairman Keith Strycula in a letter dated 25 July.

He added that press citations often confuse structured products with the controversial structured credit products, which are continuing to cause turmoil for investors in the US.

“There are many… important differences between asset-backed securities and structured products, which suggest that it is important for any new rules and regulations to make a distinction between them,” said Styrcula. “If the Commission were to determine not to specifically exclude ‘structured products’ from the application of these proposed rules, the Association is concerned about the chilling effect these will have on the market.”

“It’s fair to assume that the SEC was focused on structured finance products, but in the release, the language used was pretty general and broad,” said Anna Pinedo, partner in US law firm Morrison Foerster’s and a member of the SPA committee addressing this issue. “Our intent is to have the SEC take a look at definitions.”

The SPA’s stated mission is to promote the development of the structured products market in the US, distinguish them as a separate asset class and ensure that investors understand the terms and risks of their investments.