July 29, 2011
Concerning the inclusion of non-voting common shares as assets used as collateral within SEC-regulated ABS.
Non-voting common shares of companies (et al) traded in the USA and abroad must be disallowed (i.e. excluded) as collateral in SEC-regulated ABS products. Common shares which are issued by companies that have super-voting rights, such as Class-A and Class-B (etc.) shares, should also be disallowed as collateral in SEC-regulated ABS products.
- Non-voting common share owners have agreed by purchasing the shares in question that they do not want nor require input or feedback to the company via voting, because of their actions in purchasing (or owning) these shares. These shares will likely have liquidity differences (when compared with one vote shares) which are difficult to gauge prior to market upheavals which occur from time-to-time.
- Common shares from companies which offer Class-A and Class-B (super voting, etc.) common shares with differing voting rights should also be excluded from SEC-regulated ABS products. These shares will likely have liquidity differences (when compared with one vote shares) which are difficult to gauge prior to market upheavals which occur from time-to-time.
Excluding both non-voting and multiple class common types of shares will likely enhance liquidity of ABS at times of crisis.
Excluding non-voting shares and shares from companies with multiple common share classes from SEC-regulated ABS will ensure that only the highest-quality most liquid voting common share assets be included into ABS vehicles.