SEC Open Meeting, July 26, 2011
|Final Rule Issue||Effective Date*||Effective Date, Form F-9|
|July 26, 2011||TBA, August 2011*||December 31, 2012|
|Effective Date||Compliance Date, "Sponsored Access"||Compliance Date, Other Bkr-Dlrs|
|October 3, 2011||November 30, 2012||May 1, 2013|
|Proposal Date||Comment File Reopened||New Comment Deadline|
|August 5, 2011||February 25, 2014||March 28, 2014|
The U.S. Securities and Exchange Commission (SEC) public meeting focused on the issuance of two final rules and one proposed rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The issues addressed:
- Final rule to remove credit ratings as eligibility criteria for companies seeking to use “short form” registration;
- Final rule to establish large trader reporting requirements; and
- Proposed rule on eligibility requirements for "shelf registration" of asset-backed securities.
All rulemakings passed by unanimous consent at the meeting.
Topics of Discussion
- Large trader reporting, including large trader identification numbers (LTIDs) and the reporting, maintaining and monitoring of transaction data.
- Removal of references to credit ratings in the Securities Exchange Act of 1933 and a new short-form test for shelf-offering eligibility of companies to be used as an alternative to dependency on ratings.
- Shelf eligibility conditions for asset-backed securities that were originally proposed on April 2, 2010, and have now been revised and re-proposed.
Large Trader Reporting
Shelf Eligibility Requirements for Asset-Backed Securities
Chairman Mary L. Schapiro; whose statements include:
- Regarding the large trader rule: "The Commission initially proposed the large trader rule in April 2010. And less than a month later, the importance of this proposal was highlighted when we experienced the “flash crash” of May 6. That day dramatically demonstrated the need to enhance the Commission’s ability to quickly and accurately analyze market events...Today’s large trader rule would establish procedures for a large trader to self-identify to the Commission, which will provide important information to the Commission even after a consolidated audit trail is fully implemented."
- Regarding the short form rule: "If a company qualifies for short-form registration, it can offer its securities “off the shelf” — which is an expedited process for offering securities. The rules being considered today would eliminate this eligibility test and replace it with four new tests."
- "Today’s actions partially re-propose a set of rules the Commission proposed in April 2010 that would significantly revise the regulatory regime for asset backed securities. Among other things, the 2010 proposals were designed to increase transparency and to improve the quality of securities that are offered through the shelf registration process."
Commissioner Luis A. Aguilar, whose statements include:
- "Poorly designed collateralized debt obligations and other asset-backed securities (“ABS”) contributed significantly to the collapse of the credit markets of 2008 and the subsequent financial crisis. These effects are still being felt by American families and businesses."
- "I would like to highlight that today’s proposals include transactional standards that I hope will better empower investors and begin to level the playing field between investors and ABS sponsors. The proposed rules would require securitization agreements to require that a credit risk manager, an independent third party, scrutinize underlying assets in certain circumstances. "
Commissioner Kathleen L. Casey, whose statements include:
- "While our experiences in regulating the conduct of brokers in their dealings with customers can and does inform our thinking in this release, we are also mindful of the limitations of importing a regime crafted largely to protect retail investors into a world made up almost exclusively of large and sophisticated actors."
- "Much, although not all, of what we are requiring in this rule is required by the statute, but I am particularly interested in how the panoply of obligations imposed by both statute and rule are altering the role and function of the CCO within the firm, and imposing duties on CCO’s that are traditionally functions for which senior management is responsible."
- "I believe the general decision to avoid serious analysis of the total costs of the rulemaking is shortsighted and actually impairs the Commission’s ability to assess the merits of the rules we may propose and ultimately adopt. It is imperative that we get a more complete understanding of the total costs, and total benefits, of the entire regulatory regime we are creating."
Commissioner Elisse B. Walter, whose statements include:
- Some have expressed reservations about the [Large Trader Reporting] rule before us, citing potential costs and the potential regulatory headache in complying with its requirements. But, I believe strongly — and Congress’ 1990 action reflects this — that regulatory agencies, like the Commission, simply cannot function or effectively carry out their missions without obtaining critical information about the activities they regulate and the people who carry out those activities. And, I believe that the new requirements in Rule 13h-1 will be a significant step toward accomplishing that.
Commissioner Troy A. Paredes, whose statements include:
- Regarding the short form rule: "The most notable aspect of this rulemaking is its potential impact on an issuer’s ability to use Form S-3. Form S-3 is a streamlined “short form” for registering a public offering of securities, and Form S-3 eligible issuers can conduct primary offerings 'off the shelf.'" In the original rule proposal, Paredes was concerned that the rule change may impede capital formation by "denying certain issuers that could have used Form S-3."