• Comments

Joint Response to ABS Conflicts of Interests Proposal

Comments submitted by a NABL-led coalition in response to the SEC’s request for comments on its proposed rule “Prohibition Against Conflicts of Interest in Certain Securitizations.”

Government Finance Officers Association (GFOA)
National Association of State Treasurers (NAST)
Bond Dealers of America (BDA)
Education Finance Council (EFC)
National Association of Bond Lawyers (NABL)
National Association of Municipal Advisors (NAMA)
National Association of Health and Educational Facilities Finance Authorities (NAHEFFA)
National Council of State Housing Authorities (NCSHA)
Securities Industry and Financial Markets Association (SIFMA)

March 27, 2023

Vanessa A. Countryman
Securities and Exchange Commission (SEC)
100 F Street, NE
Washington, DC 20549-1090

RE:      Prohibition Against Conflicts of Interest in Certain Securitizations
[Release No. 33-11151; File No. S7-01-23]

Ms. Countryman,

On behalf of issuers of municipal securities and other market participants our organizations collectively represent, we write to you in response to the U.S. Securities and Exchange Commission’s (“SEC’s”) supplemental proposed rule on Prohibition Against Conflicts of Interest in Certain Securitizations (Release No. 33-11151), dated January 25, 2023. Members of our organizations represent nearly all aspects of the municipal securities market, including municipal securities issuers (“issuers”), broker-dealers, municipal advisors, and legal counsel.

We appreciate the SEC’s continued work to implement provisions of the Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and ensure the municipal securities market remains transparent and resilient through financial turmoil. We do not, however, understand the need for the broad inclusion of municipal securities and their issuers in the proposed rule now before the SEC. We are particularly concerned about the proposal’s impact on issuers— state and local governmental entities— which mostly access the municipal market to finance critical infrastructure and community resources. These issuers may now face unnecessary liability, cost, and compliance burdens if the proposal is enacted as drafted. As such, we maintain our position, previously outlined in prior rulemaking processes, that municipal securities should be broadly excluded from the definition of asset-backed securities (“ABS”), and that issuers should be excluded from this proposal’s definition of “securitization participants” and “ABS sponsors.” [1] [2]

We seek to answer some of the specific questions included in the proposal release (see Appendix A) but wish to start by making a few broad points in support of our position:

The beneficiaries of municipal securities transactions are the constituents of the issuer who benefit from their state’s or community’s access to lower borrowing costs. Conduit financings, in particular, benefit millions of constituents through lower student loan borrowing costs, increased access to affordable housing, lower-cost financing for higher education, health care facilities, clean drinking water systems, and greater infrastructure cost savings through economies of scales offered in pooled municipal financings. Any chilling effect to these markets posed by this proposal would ultimately be felt by these constituents in the form of higher borrowing rates or decreased investment in public infrastructure.

Given the uncertainty this proposal risks injecting into the critical municipal securities market and the unknown full extent of its potential negative consequences, we reiterate that municipal securities and their issuers should be broadly exempted from this proposed rule. At a minimum, the SEC should consider halting the proposal until these impacts can be better examined and understood.

We thank you for your time and attention on this important matter. We would welcome the opportunity to have issuers and other market participants meet with appropriate SEC staff to discuss the impacts the proposal could have on the municipal securities market and, most importantly, to state and local governments. Please do not hesitate to reach out to the respective contacts, details listed below, at each of our organizations.



[1] See letter from Government Finance Officers Association (GFOA) et. al. to the SEC on “File Numbers S7-24-10 and S7-26-10,” dated November 15, 2010. Web access: https://www.sec.gov/comments/s7-24-10/s72410-37.pdf

[2] See letter from National Association of Bond Lawyers (NABL) to the SEC on “File Nos. S7-24-10 and S7-26-10.” Web access: https://www.nabl.org/resources/response-sec-proposals-abs-2010/

[3] Total issues in the municipal market totaled $483 billion in calendar year 2021 according to SIFMA. Web access: https://www.sifma.org/resources/research/fixed-income-chart/

Appendix A

Answers to Specific Proposal Questions

Read Full Comments

See Also

  • Comments

Response to SEC Proposals Regarding Asset-Backed Securities (ABSs)

Response to the Securities and Exchange Commission (“SEC”) solicitation of comments related to several releases (33-9148, 34-63029, 33-9150, and 34-63091) regarding regulation of asset-backed securities post-Dodd-Frank.