Asset-Backed Securities Regulation - Comment Letter - SIFMA - November 15, 2010

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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

Issuer Review of Assets in Offerings of Asset-Backed Securities
November 15, 2010

A summary of the comment letter:

  • "It would not be feasible or prudent to propose the minimum types of review that should be completed for the various types of asset classes covered by the proposed rules.
  • Rule 193 due diligence should relate to the underwriting of the assets as opposed to merely verifying the accuracy of the disclosure in the prospectus.
  • Rule 193 should only apply to issuers of Exchange Act-ABS that are issued in registered public offerings.
  • The proposed rule should not be applicable to any securitizations in which all of the securities issued are fully guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
  • Firms that conduct due diligence on securitized assets are not “experts” as contemplated under the securities laws.
  • For assets on which a due diligence review was conducted prior to the effective date of the final rule, the disclosure of such review should satisfy Rule 193 and Rule 15Ga-2 and no separate diligence review should be required to be conducted or disclosed by the issuer or underwriter. In addition, to the extent the Commission requires third party due diligence providers to consent to Section 11 expert liability, third party due diligence providers should be exempt from Section 11 expert liability with respect to any asset review conducted prior to the effective date of the final rule.
  • The final rule should expressly provide that a review of assets may consist of a sampling and should not require a review of 100% of the assets in a pool.
  • The Commission should modify the requirements of Item 1111(a)(8) of Regulation AB such that disclosure of deviations from underwriting criteria, without any materiality threshold, is not required and information with respect to who made the decision to include deviating assets as part of the pool and on what criteria should be excluded.
  • The Commission should clarify that the issuer may rely on the diligence performed by an affiliated originator even in those cases where the affiliated originator is not the sponsor of the securitization.
  • CMBS issuers should be able to rely on the diligence conducted by unaffiliated originators who are not sponsors in the securitization.
  • Due diligence conducted by an underwriter for purposes of establishing its due diligence defense in connection with an offering of securities should be excluded from the requirements of the proposed Rule 15Ga-2.
  • The scope of the rule should exclude any “foreign-offered ABS” that were initially offered and sold in accordance with Regulation S and that have foreign assets that comprise a majority of the value of the asset pool.
  • The phase-in period for the final rule should be at least 18 months from the date of publication."



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