ERISA Exemption for CMBS, ABS Proposed

Pension funds would have greater flexibility to invest in subordinated mortgage-backed securities and asset-backed securities under a long-awaited proposal issued Wednesday by the Department of Labor. The Bond Market Association, along with others, has been seeking a relaxation of the conflict-of-interest rules that currently inhibit pension fund managers' purchases of commercial MBS and ABS backed by residential mortgages and home equity loans. The proposed "underwriter exemptions" to the Employee Retirement Income Security Act would allow private employee benefit plans to purchase a broader range of MBS and ABS instruments, "significantly enhancing marketability and liquidity," TBMA said. The comment period runs for 45 days, but the effective date for the proposal (once it is finalized) is expected to be retroactive to Aug. 23.