Often it is important that the SPE is not owned by the entity on whose behalf the SPE is being set up (the sponsor).For example, in the context of a loan securitization, if the SPE securitisation vehicle were owned or controlled by the bank whose loans were to be secured, the SPE would be consolidated with the rest of the bank's group for regulatory, accounting, and bankruptcy purposes, which would defeat the point of the securitisation.Current accounting standards require an enterprise to include subsidiaries in which it has a controlling financial interest in its consolidated financial statements.
The reason is that existing consolidation guidance focuses primarily on parent-subsidiary relationships established through voting ownership interests, and the relationship between a business enterprise and an SPE is established through other means.
The FASB believes that if a business enterprise has a controlling financial interest in an SPE, the assets, liabilities and results of the activities of the SPE should be included in consolidated financial statements with those of the business enterprise, which is referred to as the primary beneficiary of the SPE.
The assets or activities are distanced from the parent company, hence the performance of the new entity will not be affected by the ups and downs of the originating entity.
The SPE will be subject to fewer risks and thus provide greater comfort to the lenders.
Therefore, many SPEs are set up as 'orphan' companies with their shares settled on charitable trust and with professional directors provided by an administration company to ensure that there is no connection with the sponsor.