Clifford Chance

U.S. Person Restrictions in the U.S. Risk Retention Regulation Foreign Transaction Safe Harbor raise practical problems for non-U.S. securitizations

10 February 2017

With effect from December 24, 2016, the sponsor of a securitization transaction is required to comply with the U.S. credit risk retention requirements set out in Section 15G of the Securities Exchange Act of 1934, as amended and the related implementing regulations unless an exemption applies. The Regulations contain a safe-harbor for foreign transactions that meet specific conditions. One of those conditions is a limit on the offer and sale of the securitization securities to U.S. Persons. Unfortunately, the definition of U.S. Person in the Regulations is different from the familiar Regulation S definition. Sponsors and issuers should take care to ensure that their offering complies with the Regulations.

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