Asset-Backed Securities Regulation

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Dodd-Frank Timeline, Disclosure for Asset-Backed Securities, SEC
Final Rule Issue Effective Date Compliance Date
January 26, 2011 March 28, 2011 February 14, 2012
Dodd-Frank Timeline, Issuer Review of Assets in Asset-Backed Securities, SEC
Final Rule Issue Effective Date Compliance Date
January 25, 2011 March 28, 2011 December 31, 2011
Dodd-Frank Timeline, Interim Final Temporary Rule for SBS Data Reporting
Approval Date Comment Deadline Effective Date
October 20, 2010 December 20, 2010 January 12, 2012
Dodd-Frank Timeline, Suspension of the Duty to File Reports for Classes of Asset-Backed Securities, SEC
Comment Deadline Final Rule Issue Effective Date
February 7, 2011 August 23, 2011 September 22, 2011
Dodd-Frank Timeline, Shelf Eligibility Requirements for Asset-Backed Securities
Proposal Date Comment Deadline Final Rule Issue
August 5, 2011 October 4, 2011 TBA
Dodd-Frank Timeline, Ownership Limitations and Governance Requirements for SBS Entities, SEC
Proposal Date Comment Deadline Final Rule Issue
October 26, 2010 April 29, 2011 TBA

At an open meeting on January 20, 2011, the SEC finalized rules requiring an issuer of asset-backed securities (ABS) to "perform a review of the assets underlying the ABS and disclose information relating to the review." Rules regarding shelf eligibility conditions for asset-backed securities were re-proposed on July 26, 2011. On October 13, 2010, the SEC adopted an interim final temporary Rule 13Aa-2T concerning the reporting of security-based swap data. Also introduced at this meeting was a new proposed rule to "mitigate conflicts of interest at security-based swap clearing agencies, security-based swap execution facilities, and national security exchanges that post or make available for trading security-based swaps."

Contents

Final Rules from SEC Open Meeting, January 20, 2011

Disclosure for Asset-Backed Securities Required by Section 943 of the Dodd-Frank Wall Street Reform and Consumer Protection Act

  • ABS issuers are now required to disclose repurchase histories on new form ABS-15G, repurchase histories in prospectuses and ongoing reports, and any report accompanying a credit rating by a nationally recognized statistical ratings organization (NRSRO).

Quarterly reports should be filed by the ABS issuer and include:

  1. the "repurchase history for all outstanding ABS (regardless of whether the securities were offered in a transaction registered with the SEC) if the underlying transaction agreements include a covenant to repurchase or replace a pool asset;" and
  2. the "history of all fulfilled and unfulfilled repurchase requests, including investor demands upon a trustee and pending requests."
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Issuer Review of Assets in Offerings of Asset-Backed Securities

  • Issuers of asset-backed securities must conduct a review of the assets underlying those securities, while also providing:
  1. "Information about how the loans in the pool differ from the loan underwriting criteria disclosed in the prospectus.
  2. Information about loans that did not meet the disclosed underwriting criteria but were nonetheless included in the pool.
  3. Information about the entity that made the determination that such loans should be included in the pool, despite not having met the disclosed underwriting standards."
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Interim Final Temporary Rule from SEC Open Meeting, October 13, 2010

Reporting of Security-Based Swap Transaction Data

The interim final temporary rule concerns the reporting of SBS information to an operational SBS data repository or to the Commission, and the reporting of SBS information to the Commission upon request.[1] The final rule was added to the Federal Register on October 20, 2010.

  • Parties to SBS transactions are required to:
  1. "report certain information relating to pre-enactment security-based swaps to a registered security-based swap data repository after such registered security-based swap data repository is operational, or to the Commission;
  2. report information relating to pre-enactment security-based swaps to the Commission upon request;" and
  3. retain SBS information.
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Final Rule from August 17, 2011

Suspension of the Duty to File Reports for Classes of Asset-Backed Securities Under Section 15(d) of the Securities Exchange Act of 1934

From the release:

"We are adopting rules to provide certain thresholds for suspension of the reporting obligations for asset-backed securities issuers. We are also amending our rules relating to the Exchange Act reporting obligations of asset-backed securities issuers in light of these statutory changes."

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Proposed Rule from SEC Open Meeting, July 26, 2011

Re-proposal of Shelf Eligibility Conditions for Asset-Backed Securities and Other Additional Requests for Comment

The rules regarding shelf eligibility conditions for asset-backed securities were originally proposed on April 2, 2010. At an open meeting on July 26, 2011, the revised rules was re-proposed with additional requests for comment.[2]

The rules would require:

  • an executive officer of the ABS issuer to certify the accuracy of the disclosure and that the anticipated payments for the securities being bought and sold were legitimate;
  • a credit risk manager to conduct a review should trigger events occur;
  • documented dispute resolution procedures for the repurchase of non-compliant assets in the pool; and
  • a notice in a public filing indicating requested communication between two or more investors regarding transaction agreements.

Among other things, the proposal also requests an updated exhibit filing deadline and further comment in reaction to the revised proposed rules.

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Proposed Rule from SEC Open Meeting, October 13, 2010

Ownership Limitations and Governance Requirements for Security-Based Swap Clearing Agencies, Security-Based Swap Execution Facilities, and National Securities Exchanges With Respect to Security-Based Swaps Under Regulation MC

The proposed rules would set one of the following alternatives for SBS clearing agencies:

  • "Restrict an individual clearing agency participant from beneficially owning or voting more than 20 percent of any voting interest in the security-based swap clearing agency;
  • Restrict clearing agency participants from beneficially owning or voting more than 40 percent of any voting interest in the security-based swap clearing agency in the aggregate with any other clearing agency participants;
  • The board of directors and any committee that has authority to act on behalf of the board be composed of 35 percent of independent directors;
  • The nominating committee be composed of a majority of independent directors;"

or

  • "Restrict an individual clearing agency participant from beneficially owning or voting more than 5 percent of any voting interest in the security-based swap clearing agency;
  • The board of directors and any committee that has authority to act on behalf of the board be composed of a majority of independent directors;
  • The nominating committee be composed solely of independent directors.
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References

  1. Press Release - SEC Adopts Interim Rule to Require Reporting of Security-Based Swaps. SEC. Retrieved on October 13, 2010.
  2. SEC Re-Proposes New Shelf Eligibility Requirements for Asset-Backed Securities. SEC. Retrieved on July 26, 2011.
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