The U.S. risk retention rules for asset-backed securities (ABS) issuances that were promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") were adopted in October 2014 and published in the Federal Register in December 2014. The effective date for CLOs and CMBS is Dec. 24, 2016. As this implementation date approaches, compliance plans for issuers/managers in collateralized loan obligation (CLO) transactions have become more clear, while more questions than answers persist for commercial mortgage backed securities (CMBS) transactions. For CLOs or CMBS that price after the effective date, the risk retention rules require the manager to retain 5% of the fair market value (as defined by accounting standards) of the entire issue. The manager can retain a
