In December 2014, the credit risk retention rule, 79 Fed. Reg. 77,601 (the credit risk retention rule), was adopted pursuant to Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The credit risk retention rule requires any “securitizer” of asset-backed securities (or other related parties) to acquire and retain either (i) 5 percent of the face amount of each class of notes issued by the collateralized loan obligation (CLO), (ii) notes of the most subordinated class issued by the CLO representing 5 percent of the fair value of all CLO notes, or (iii) a combination of (i) and (ii) representing 5 percent of the fair value of all CLO notes. The rule was designed to align the interests of the managers and investors in a CLO deal.

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Foreign securities class actions have been on the rise since the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank, Ltd., which held that federal securities laws apply only to securities purchased on domestic exchanges. 561 U.S. 247 (2010). Investors are increasingly turning to foreign forums to recoup losses associated with securities purchased or sold outside of the U.S. In addition to differences in substantive and procedural law, certain foreign jurisdictions have laws on how litigation is funded, which make for significant practical distinctions as compared with U.S. class action participation.

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