Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The CFTC issued a no-action letter to Ford Motor Credit to clarify that a securitization special purpose vehicle, or SPV, that is wholly-owned by, and consolidated with, a captive finance company (as described in Section 2(h)(7)(C)(iii) of the Commodity Exchange Act, or CEA) qualifies as a captive finance company and, therefore, is eligible to elect the end-user exception from a clearing requirement determination issued by the CFTC under Section 2(h) of the CEA.

In order to qualify as a captive finance company an entity must, amongst other requirements, be in the primary business of providing financing.  SPVs often are not in the business of providing financing but most often just facilitate a financing activity.  The CFTC found it is appropriate to consider the business of an SPV to be part of the business of Ford Motor Credit because:

  • Ford Motor Credit’s securitization SPVs are wholly-owned by Ford Motor Credit, which is a captive finance company;
  • the SPVs’ financial statements are consolidated with Ford Motor Credit’s; and
  • the SPVs’ sole activity is facilitating financing undertaken by Ford Motor Credit.

The CFTC interpreted Section 2(h)(7)(C)(iii) of the CEA to cover not only Ford Motor Credit’s securitization SPVs, but also any similarly situated securitization SPV that is wholly-owned by, and consolidated with, a captive finance company. Consequently, such an SPV may elect the end-user exception like its captive finance company parent.


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