US SEC Exempts Canadian Mortgage-Backed Bonds from Strict Disclosure Rules
The US Securities and Exchange Commission (SEC) has granted a no-action exemption to Canadian mortgage-backed bonds, allowing them to be marketed to American investors without strict loan-level disclosure requirements.
This decision marks a significant shift in how the SEC treats foreign regulation, effectively accepting summary-level disclosure under Canada's framework instead of granular transparency required domestically.
The change also broadens the potential investor base beyond institutions to retail and fixed-income funds, opening the door to more capital for Canadian lenders.
However, this move has raised concerns about systemic risk in Canada's mortgage market, particularly given recent warnings from the Bank of Canada about concentrated foreign investment in government bonds.
The Canadian bank regulator, OSFI, had previously criticized Canadian lenders for using inflated appraisals to secure mortgages, which could leave them with properties worth less than the loans they secured.