Publications
On the CLO Horizon — Regulations Expected to Impact CLOs
May 2011
In July 2010 the U.S. Congress passed, and President Obama signed into law, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") in order to address, among other things, perceived abuses in the securitisation markets occurring during the years preceding the financial crisis of 2008. Although as of the date of this writing most of the regulations required by the Dodd-Frank Act have not been issued as final rules, the Dodd-Frank Act will have a significant effect on offerings of collateralised loan obligations ("CLOs"). Other changes in U.S. laws will also affect CLOs, such as the addition of Section 457A to the U.S. Internal Revenue Code (the "IRC") in 2008 which affects taxation of fees that may be charged by CLO managers, and the so-called "FATCA" provisions of the U.S. Hiring Incentives to Restore Employment Act (the "HIRE Act"), which impose significant withholding, documentation and reporting requirements on certain payments made to non-U.S. entities, including most CLOs. These changes, along with other changes proposed both in the U.S. and internationally, will, if and when implemented, significantly affect the CLO landscape.
This chapter appeared in the 2011 edition of The International Comparative Legal Guide to: Securitisation; published by Global Legal Group Ltd, London.
Practices
Attachments
Related Insights
Alerts
On Aug. 19, 2024, the US Securities and Exchange Commission (the “SEC”) charged Obra Capital Management, LLC (“Obra Capital”) with violations of Rule 206(4)-5 under the Investment Advisers Act of 1940, otherwise known as the “Pay-to-Play Rule” (the “Rule”), arising out of a $7,150 campaign contribution made by an individual prior to joining Obra Capital.[1] This campaign contribution was made to a government official in Michigan who had influence over hiring investment advisers for the Michigan Public Employees’ Retirement Fund (the “Michigan Pension Fund”), which was an investor in a fund managed by Obra Capital (the “Obra Fund”). Notably, the Michigan Pension Fund had been an investor in the Obra Fund for several years prior to the hiring of the individual who made the contribution. And perhaps even more notably, this campaign contribution was made several months prior to the individual becoming a “Covered Associate” (as defined by the Rule[2]) of Obra Capital. By virtue of Obra Capital continuing to provide investment advisory services for compensation to the Obra Fund in which the Michigan Pension Fund was invested after hiring the individual, Obra Capital violated the Rule and agreed to pay a $95,000 fine to settle the charges.
Alerts
On Sept. 12, 2024, the Commodity Futures Trading Commission (“CFTC”) adopted amendments (“Final Rule”)[1] to CFTC Rule 4.7, which is the primary disclosure, reporting and recordkeeping relief relied upon by CFTC-registered commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”). The Final Rule only partially adopted the proposals advanced by the CFTC nearly a year ago (“Proposal”). Importantly, the CFTC has elected to double the financial thresholds required for investors to be Qualified Eligible Persons (“QEPs”) suitable to invest in a Rule 4.7 pool or fund. However, the CFTC decided not to adopt the time-consuming and detailed disclosure requirements included in the Proposal. Operators of Section 3(c)(1) pools and funds that rely on Rule 4.7 will need to adjust their documents to accommodate the new QEP financial thresholds. We do not anticipate any substantive impact on operators of Section 3(c)(7) pools and funds.
Alerts
On Aug. 19, 2024, the US Securities and Exchange Commission (the “SEC”) charged Obra Capital Management, LLC (“Obra Capital”) with violations of Rule 206(4)-5 under the Investment Advisers Act of 1940, otherwise known as the “Pay-to-Play Rule” (the “Rule”), arising out of a $7,150 campaign contribution made by an individual prior to joining Obra Capital.[1] This campaign contribution was made to a government official in Michigan who had influence over hiring investment advisers for the Michigan Public Employees’ Retirement Fund (the “Michigan Pension Fund”), which was an investor in a fund managed by Obra Capital (the “Obra Fund”). Notably, the Michigan Pension Fund had been an investor in the Obra Fund for several years prior to the hiring of the individual who made the contribution. And perhaps even more notably, this campaign contribution was made several months prior to the individual becoming a “Covered Associate” (as defined by the Rule[2]) of Obra Capital. By virtue of Obra Capital continuing to provide investment advisory services for compensation to the Obra Fund in which the Michigan Pension Fund was invested after hiring the individual, Obra Capital violated the Rule and agreed to pay a $95,000 fine to settle the charges.
Alerts
On Sept. 12, 2024, the Commodity Futures Trading Commission (“CFTC”) adopted amendments (“Final Rule”)[1] to CFTC Rule 4.7, which is the primary disclosure, reporting and recordkeeping relief relied upon by CFTC-registered commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”). The Final Rule only partially adopted the proposals advanced by the CFTC nearly a year ago (“Proposal”). Importantly, the CFTC has elected to double the financial thresholds required for investors to be Qualified Eligible Persons (“QEPs”) suitable to invest in a Rule 4.7 pool or fund. However, the CFTC decided not to adopt the time-consuming and detailed disclosure requirements included in the Proposal. Operators of Section 3(c)(1) pools and funds that rely on Rule 4.7 will need to adjust their documents to accommodate the new QEP financial thresholds. We do not anticipate any substantive impact on operators of Section 3(c)(7) pools and funds.
Alerts
On Aug. 19, 2024, the US Securities and Exchange Commission (the “SEC”) charged Obra Capital Management, LLC (“Obra Capital”) with violations of Rule 206(4)-5 under the Investment Advisers Act of 1940, otherwise known as the “Pay-to-Play Rule” (the “Rule”), arising out of a $7,150 campaign contribution made by an individual prior to joining Obra Capital.[1] This campaign contribution was made to a government official in Michigan who had influence over hiring investment advisers for the Michigan Public Employees’ Retirement Fund (the “Michigan Pension Fund”), which was an investor in a fund managed by Obra Capital (the “Obra Fund”). Notably, the Michigan Pension Fund had been an investor in the Obra Fund for several years prior to the hiring of the individual who made the contribution. And perhaps even more notably, this campaign contribution was made several months prior to the individual becoming a “Covered Associate” (as defined by the Rule[2]) of Obra Capital. By virtue of Obra Capital continuing to provide investment advisory services for compensation to the Obra Fund in which the Michigan Pension Fund was invested after hiring the individual, Obra Capital violated the Rule and agreed to pay a $95,000 fine to settle the charges.