CFA Level I · CFA Level I Exam · Asset-Backed Security (ABS) Instrument and Market Features
In an asset-backed securities transaction, the legal entity that purchases the receivables from the seller and issues the securities to investors is best described as the:
The special purpose entity is the legal entity that buys the receivables from the seller (the originator) and issues the ABS to investors. The servicer collects payments and the trustee safeguards investor interests, but neither one purchases the assets or issues the securities.
- Aservicer
- Btrustee
- Cspecial purpose entityCorrect
Explanation
The special purpose entity (SPE, also called a special purpose vehicle) buys the assets from the seller and issues the ABS. The servicer only collects payments and administers the pool, and the trustee protects investor interests. Neither of these two is the buyer and issuer.
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