September 7, 2011
I am commenting upon the following quoted matter:
"The SEC held an open meeting on August 31 in which, the commissioners of the SEC voted to issue a concept release on interpretive issues related to the status under the Investment Company Act of 1940 of companies, including mortgage REITs, that are engaged in the business of acquiring mortgages and mortgage-related instruments and that rely on the exclusion from the definition of investment company in Section 3(c)(5)(C) of the Act. The SEC is soliciting comments on a wide range of issues, including the interpretation of Section 3(c)(5)(C), and the operation of these companies under the rule."
Currently, Mortgage REITS such as Annaly Mtg or Capstead Mortgage Trust and the like are effectively exempt from classification as Investment Companies. This is important for a number of reasons, not the least is that non-classification as an investment company allows REITS to effectively use leverage, in a manner not dissimilar to banks and thrifts witgh respect to business model and risk. I see no reason to change this treatment, as the REIT industry has performed well and under standing SEC reporting guidance and FASB accounting rules does an outstanding job in reporting balance sheet, income and cash flow structure and risks. To effectively restrict this industry would do a disservice to the commercial and residential mortgage markets under any economic circumstances, and certainly would be harmful in today's troubled economy. Investors would also be harmed by any movement to define REITS as Investment Companies.
In performing the review, any resonable new reporting requirements that would provide investors further insight into the operations and risks inherent in the REIT industry or a particular REIT would be welcome, provided that the cost benefits are clearly favorable in imposing such new reporting requirements.
thank you for considering the points raised herein.