Regulation of Asset-backed Securities: SEC Approves New Rules

• Date: January 27, 2011
• Source: Admin

The Securities & Exchange Commission (SEC) voted on Jan 20, 2011 to adopt two sets of new rules. The said rules are meant to help revive the important asset-backed securities (ABS) market by encouraging better disclosure for investors. The first set of rules requires issuers of asset-backed securities to disclose the history of the requests they received and the repurchases they made related to their outstanding asset-backed securities. The second set of rules requires issuers of asset-backed securities to conduct a review of the assets underlying those securities.  

Disclosure for Asset-Backed Securities Related to Representations, Warranties and Repurchase

Section 943 of the Dodd-Frank Act requires the SEC to prescribe regulations on the use of representa-tions and warranties in the market for asset-backed securities. The final rules approved on Jan 20, 2011, and proposed in October 2010, implement Section 943.

Requirements of the Final Rules (adopted new rules)

The final rules require:

• Disclosure of Repurchase History on New Form ABS-15G
• Disclosure of Repurchase History in Prospectuses and Ongoing Reports
• Disclosure in Any Report Accompanying a Credit Rating by an NRSRO

Issuer Review of Assets Underlying Asset-Backed Securities

Section 945 of the Dodd-Frank Act requires the Commission to adopt rules regarding the review of as-sets, such as loans, underlying asset-backed securities. The final rules approved today, which were proposed in October 2010, implement Section 945.

Requirements of the Final Rules (adopted new rules)

The final rules require:

• Issuers of ABS in Registered Offerings to Perform a Review of the Assets
• Issuers of ABS to Disclose Information about their Reviews

Any registered offering of ABS commencing with an initial offer after Dec. 31, 2011, must comply with the new rules if they're adopted by the Commission.

  Source:

http://www.sec.gov/news/press/2011/2011-18.htm