On November 24, 2014, the LSTA issued an announcement of a lawsuit it has filed against the Federal Reserve (Fed) and the SEC seeking relief for CLOs from the final risk retention rules for asset-backed securities (ABS) issued under Section 941 of the Dodd-Frank Act (see Practice Note, ABS Risk Retention under Dodd-Frank).

On October 21-22, 2014, federal regulators, including the Fed and SEC, adopted the final rules, which require that securitizers, including CLO asset managers, retain 5% of the credit risk of securitized asset pools backing non-exempt ABS. The LSTA claims that the final rules are "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law" and that they "disproportionately punish an industry that was not involved in the financial crisis" by extending the requirement to hold 5% of their deals to CLO managers.

The first documents in the LSTA lawsuit were filed on November 10, 2014 in the US Court of Appeals for the District of Columbia. The LSTA has until December to file legal briefs.