The three-judge panel of the D.C. Circuit for the Court of Appeals unanimously ruled on Friday that collateralized loan obligations are not subject to the risk retention rules mandated by the Dodd-Frank Act.

The ruling was in response to a lawsuit brought by the Loan Syndications and Trading Association against the Federal Reserve Board of Governors and the Securities and Exchange Commission, the two federal agencies that placed CLOs among covered asset classes required to keep "skin in the game" of securitizations that they sponsor.

The original lawsuit was filed in October 2014, shortly after the Fed and the SEC adopted the rules and set an enforcement date of December 2016. CLO managers have retained 5% of the notional value of the $130 billion of new CLOs issued since, either on their own books or through an affiliated capitalized entity.

Read more in American Banker.