Loan Syndication and Trading Association v. SEC, et al.

Case Updates

The U.S. District Court for the District of Columbia upheld the risk retention rule.

The U.S. Chamber filed an amicus brief in support of a petition for review filed in the D.C. Circuit by the Loan Syndication and Trading Association to challenge the so-called “risk-retention rule” promulgated by the Securities and Exchange Commission (SEC), the Federal Reserve Board (FRB), and other federal banking agencies. The risk-retention rule would require managers of collateralized loan obligations (CLOs) to retain five percent of the economic value of a CLO’s assets. CLOs are investment vehicles made by securitizing large commercial loans generally originated by large banks, and they provide a critical source of financing for thousands of U.S. companies.

The D.C. Circuit transferred the petition for review of the rule to the U.S. District Court for the District of Columbia, holding that the Court of Appeals lacks jurisdiction to directly review challenges to a joint rule. The D.C. Circuit’s opinion explains that neither the Securities Act of 1933 or the Exchange Act, nor the Bank Holding Company Act of 1956, provides for direct review of a joint rule.

After the case was transferred to the U.S. District Court for the District of Columbia, the Chamber again filed an amicus brief in the new forum. The Chamber’s brief argues that the agencies acted arbitrarily and capriciously in considering the implications of the risk-retention rule on efficiency, competition, and capital formation, particularly with respect to the costs incurred by thousands of U.S. companies.

Carl J. Nichols and Stephen V. Carey of Wilmer, Cutler, Pickering, Hale, and Dorr LLP represented the U.S. Chamber of Commerce as co-counsel to the U.S. Chamber Litigation Center in this case.