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An SEC no-action letter requested by Kidder, Peabody & Co. has thrown sand in the gears of the mortgage-backed securities industry.
The no-action letter, which was issued by the Securities and Exchange Commission on May 17, addressed procedures in the so-called "pre-marketing" phase of MBS new issues. It essentially laid down new guidelines for what kind of information can pass between broker and client before a prospectus is finalized. Those new guidelines, MBS pros say, are onerous and confusing, burdening the already slow new issue business.
Neither Kidder nor the SEC would comment on the no-action letter, but other MBS players were angry about it. "There's no doubt that the SEC's no-action letter has made it much more difficult to process deals in the current market," confided a source at one major bank issuer of mortgage-backed securities. "It has led to a certain sense of uncertainty and concern over the additional liabilities this letter has imposed on issuers."
Ironically, Kidder's...