Ally Financial Inc. disclosed on Oct. 31 that it is being investigated by the Securities and Exchange with regard to “subprime automotive finance and related securitization activities.”
Ally spokesperson Gina Proia confirmed that the disclosure was new. It was made in Ally’s regularly scheduled quarterly report filed with SEC, which is available to investors and analysts.
“Ally has been requested to provide data and records relating to our auto finance activities and will respond accordingly to the SEC,” she told Automotive News in an email.
Santander Consumer USA and GM Financial previously disclosed they had received subpoenas in connection with subprime auto loans and securitization from the U.S. Department of Justice. Those subpoenas used language similar to the SEC’s language in its data request to Ally. What appears to be new to the Ally probe is the SEC’s involvement.
An SEC spokesman declined to comment.
On the agenda
It was already clear the SEC had securitization on its agenda. The commission unveiled new rules governing securitization in August. The commission’s website also notes that it sometimes pursues civil cases in parallel with other federal regulators, although no specific companies are named.
In securitization, lenders bundle loans and sell them to investors to raise money to fund new loans. The sale of so-called asset-backed securities is common among auto lenders, especially in the subprime segment.
Recent press reports have suggested that the growing spate of securities backed by subprime auto loans echoes the boom in subprime mortgage-backed securities that preceded the Great Recession.
Mortgages, auto loans
The SEC’s new rules for asset-backed securities primarily target mortgages but also cover asset-backed securities backed by auto loans. The rules also apply to rating agencies.
The SEC said the revised rules are aimed at creating more transparency for investors with regard to potential risks.