February 9, 2018 - This morning, the Court of Appeals for the DC Circuit ruled in favor of the LSTA in its lawsuit against the SEC and the Federal Reserve Board, concluding that managers of collateralized loan obligations (CLOs) are not subject to the credit risk retention rules mandated under the Dodd-Frank Act.

“The LSTA is delighted with this result, which vindicates our analysis of the clear statutory language and reflects the reality that CLOs have performed very well for more than 20 years, including through the financial crisis,” General Counsel Elliot Ganz said. “We believe that this ruling will allow that market to continue to prosper.”

This ruling concludes years of work by the LSTA, which initially filed its lawsuit in October 2014. After losing the first round of the case in the Federal District Court, the LSTA appealed to the DC Court of Appeals.

“We feel deeply gratified that our perseverance on this issue paid off,” Ganz said. “We knew how important this issue would be to the industry and the market and we were determined to reach a better solution.”

Executive Director Lee Shaiman added, “Moving forward with the lawsuit was a difficult decision, particularly at a time when our membership and the entire financial industry was under pressure in the aftermath of the financial crisis.”

CLOs are a stable, long-term source of credit, lending nearly $500 billion to thousands of American companies and providing the capital to create jobs and expand the economy.

Richard Klingler, Peter Keisler and Jennie Clark of Sidley Austin represented the LSTA in this litigation.

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