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

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Dodd-Frank Timeline, Shelf Eligibility Requirements for Asset-Backed Securities
Proposal Date Comment File Reopened New Comment Deadline
August 5, 2011 February 25, 2014 March 28, 2014

On July 26, 2011, the SEC held an open meeting concerning the shelf eligibility conditions for asset-backed securities under the Dodd-Frank Act. The rules were originally proposed on April 2, 2010 but re-proposed in light of Dodd-Frank. The revised rules were re-proposed with an additional request for comment.[1]

Note: On February 25, 2014, the commission reopened the comment period "to permit interested persons to comment on an approach for the dissemination of potentially sensitive asset-level data. The comment deadline is March 28, 2014.

Proposed Rules

  • 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.

The following provisions build on the April 2010 proposal:

  • "Risk Retention: In 2010, the SEC proposed that the ABS sponsor hold five percent of each class of asset-backed securities and not hedge those holdings. Risk retention is now mandated by Section 941 of the Dodd-Frank Act, and the SEC has proposed rules under this provision jointly with the other financial regulators.
  • Confirmation of Reps and Warranties: In 2010, the SEC proposed that the ABS issuer provide a mechanism whereby the investors will be able to confirm that the assets comply with the issuer’s representations and warranties, such as representations and warranties that the loans in the ABS pool were underwritten in a manner consistent with the lenders’ underwriting standards. This is being replaced in the re-proposal with an alternative mechanism to strengthen the enforceability of representation and warranty provisions – the credit risk manager and repurchase request dispute resolution procedures – which are described above.
  • Ongoing Reporting: In 2010, the SEC proposed that the ABS issuer agree to file Exchange Act reports with the Commission on an ongoing basis (rather than stop reporting with the Commission in the first year, which at the time of the proposal the Exchange Act permitted many ABS issuers to do). This shelf eligibility condition is not being re-proposed because Congress subsequently mandated ongoing Exchange Act reporting for registered ABS offerings as part of Section 942(a) of the Dodd-Frank Act."

The proposal also requests an updated exhibit filing deadline and further comment in reaction to the revised proposed rules.

Memorandum, February 25, 2014

The memorandum, from the SEC's Division of Corporation Finance, is proposing a possible approach for submission of potentially sensitive asset-level information. This approach would require issuers to make asset-level information available to investors and potential investors through an issuer’s Web site which would enable issuers to address privacy concerns associated with such disclosures, including through restricting access to potentially sensitive information.[2]

The memo can be found below.

Related Documents: Reproposed Rule; February 2014 Memorandum


  1. SEC Re-Proposes New Shelf Eligibility Requirements for Asset-Backed Securities. SEC. Retrieved on July 26, 2011.
  2. Disclosure of Asset-Level Data. SEC. Retrieved on February 25, 2014.

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