[Federal Register Volume 76, Number 17 (Wednesday, January 26, 2011)]
[Rules and Regulations]
[Pages 4489-4515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1504]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 76, No. 17 / Wednesday, January 26, 2011 /
Rules and Regulations
[[Page 4489]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 229, 232, 240 and 249
[Release Nos. 33-9175; 34-63741; File No. S7-24-10]
RIN 3235-AK75
Disclosure for Asset-Backed Securities Required by Section 943 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: Pursuant to Section 943 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act,\1\ we are adopting new rules related to
representations and warranties in asset-backed securities offerings.
The final rules require securitizers of asset-backed securities to
disclose fulfilled and unfulfilled repurchase requests. Our rules also
require nationally recognized statistical rating organizations to
include information regarding the representations, warranties and
enforcement mechanisms available to investors in an asset-backed
securities offering in any report accompanying a credit rating issued
in connection with such offering, including a preliminary credit
rating.
---------------------------------------------------------------------------
\1\ Pub. L. 111-203 (July 21, 2010).
DATES: Effective Date: March 28, 2011.
Compliance Dates:
Rule 15Ga-1: The initial filing required by Rule 15Ga-1(c)(1) for
the three years ended December 31, 2011 is required to be filed on
February 14, 2012, except that a securitizer that is any State or
Territory of the United States, the District of Columbia, any political
subdivision of any State, Territory or the District of Columbia, or any
public instrumentality of one or more States, Territories or the
District of Columbia, shall provide the initial filing required by Rule
15Ga-1(c)(1) for the three years ended December 31, 2014 and file on
February 14, 2015.
Regulation AB: Any registered offering of asset-backed securities
commencing with an initial bona fide offer on or after February 14,
2012 must comply with the information requirements of new Item 1104(e)
of Regulation AB. For any such offering that relies on Securities Act
Rule 415(a)(1)(x), a Securities Act registration statement filed after
December 31, 2011 relating to such offering must be pre-effectively or
post-effectively amended, as applicable, to make the prospectus
included in Part I of the registration statement compliant. The
information required by Item of 1121 of Regulation AB is required for
all Form 10-Ds required to be filed after December 31, 2011.
Rule 17g-7: NRSROs will be required to provide the information
required by the rule to be included in a report accompanying a credit
rating for an offering of asset-backed securities for any such report
issued on or after September 26, 2011.
FOR FURTHER INFORMATION CONTACT: Rolaine Bancroft, Attorney-Advisor, in
the Office of Rulemaking, at (202) 551-3430, Division of Corporation
Finance, U.S. Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-3628 or, with respect to Rule 17g-7, Joseph I.
Levinson, Special Counsel, at (202) 551-5598, Division of Trading and
Markets, U.S. Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-3628.
SUPPLEMENTARY INFORMATION: We are adopting amendments to Items 1104 and
1121 \2\ of Regulation AB \3\ (a subpart of Regulation S-K) under the
Securities Act of 1933 (``Securities Act'') \4\ and Rules 101 and 314
\5\ of Regulation S-T.\6\ We also are adding Rules 15Ga-1 \7\ and 17g-7
\8\ and Form ABS-15G \9\ under the Securities Exchange Act of 1934
(``Exchange Act'') \10\ and the Act.
---------------------------------------------------------------------------
\2\ 17 CFR 229.1104 and 17 CFR 229.1121.
\3\ 17 CFR 229.1100 through 17 CFR 229.1123.
\4\ 15 U.S.C. 77a et seq.
\5\ 17 CFR 232.101 and 17 CFR 232.314.
\6\ 17 CFR 232.10 et seq.
\7\ 17 CFR 240.15Ga-1.
\8\ 17 CFR 240.17g-7.
\9\ 17 CFR 249.1400.
\10\ 15 U.S.C. 78a et seq.
---------------------------------------------------------------------------
Table of Contents
I. Background
II. Discussion of Amendments
A. Disclosure Requirements for Securitizers
1. Definition of Exchange Act-ABS for Purposes of Rule 15Ga-1
2. Definition of Securitizer for Purposes of Rule 15Ga-1
3. Application to Municipal Securitizers
4. Disclosures Required by Rule 15Ga-1
(a) Proposed New Rule 15Ga-1
(b) Comments on the Proposed Rule
(c) Final Rule
5. Form ABS-15G
(a) Proposed Form ABS-15G
(b) Comments on the Proposed Rule
(c) Final Form ABS-15G
B. Disclosure Requirements in Regulation AB Transactions
1. Proposed Amendments to Regulation AB
2. Comments on the Proposed Amendments
3. Final Rule
C. Disclosure Requirements for NRSROs
1. Proposed New Rule 17g-7
2. Comments on the Proposed Rule
3. Final Rule
III. Transition Period
IV. Paperwork Reduction Act
A. Background
B. Summary of the Final Rules
C. Summary of Comment Letters on the PRA Analysis and Revisions
to Proposals
D. PRA Reporting and Cost Burden Estimates
1. Form ABS-15G
2. Forms S-1, S-3 and 10-D
3. Regulation S-K
4. Rule 17g-7
5. Summary of Changes to Annual Burden Compliance in Collection
of Information
V. Benefit-Cost Analysis
A. Benefits
B. Costs
VI. Consideration of Burden on Competition and Promotion of
Efficiency, Competition and Capital Formation
VII. Regulatory Flexibility Act Certification
VIII. Statutory Authority and Text of Rule and Form Amendments
I. Background
On October 4, 2010, we proposed rules to implement Section 943 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
``Act'') related to asset-backed securities (``ABS'').\11\ Section 943
of the Act requires the Commission to prescribe regulations on the use
of representations
[[Page 4490]]
and warranties in the market for asset-backed securities:
---------------------------------------------------------------------------
\11\ See Release No. 33-9148 (Oct. 4, 2010) [75 FR 6278] (the
``Proposing Release'').
---------------------------------------------------------------------------
(1) To require any securitizer to disclose fulfilled and
unfulfilled repurchase requests across all trusts aggregated by
securitizer, so that investors may identify asset originators with
clear underwriting deficiencies; and
(2) to require each nationally recognized statistical rating
organization (``NRSRO'') to include, in any report accompanying a
credit rating for an asset-backed securities offering, a description of
(A) the representations, warranties and enforcement mechanisms
available to investors; and (B) how they differ from the
representations, warranties and enforcement mechanisms in issuances of
similar securities.\12\
---------------------------------------------------------------------------
\12\ See Section 943 of the Act.
---------------------------------------------------------------------------
In addition to the rules required by the Act, we also re-proposed
disclosure requirements in Regulation AB in order to conform
disclosures about repurchase request activity to those required by
Section 943 of the Act.\13\
---------------------------------------------------------------------------
\13\ In April of 2010, we proposed rules that would revise the
disclosure, reporting and offering process for asset-backed
securities. See Asset Backed Securities, SEC Release No. 33-9117
(April 7, 2010) [75 FR 23328] (the ``2010 ABS Proposing Release'').
Among other things, the 2010 ABS Proposing Release proposed new
disclosure requirements with respect to repurchase requests.
Specifically, we proposed that issuers disclose in prospectuses the
repurchase demand and repurchase and replacement activity for the
last three years of sponsors of asset-backed transactions or
originators of underlying pool assets if they are obligated to
repurchase assets pursuant to the transaction agreements. We also
proposed that issuers disclose the repurchase demand and repurchase
and replacement activity concerning the asset pool on an ongoing
basis in periodic reports.
---------------------------------------------------------------------------
As we discussed in the Proposing Release, in the underlying
transaction agreements for an asset securitization, sponsors or
originators typically make representations and warranties relating to
the pool assets and their origination, including about the quality of
the pool assets. For instance, in the case of residential mortgage-
backed securities, one typical representation and warranty is that each
of the loans has complied with applicable federal, state and local
laws, including truth-in-lending, consumer credit protection, predatory
and abusive laws and disclosure laws. Another representation that may
be included is that no fraud has taken place in connection with the
origination of the assets on the part of the originator or any party
involved in the origination of the assets. Upon discovery that a pool
asset does not comply with the representation or warranty, under
transaction covenants, an obligated party, typically the sponsor, must
repurchase the asset or substitute a different asset that complies with
the representations and warranties for the non-compliant asset. The
effectiveness of the contractual provisions related to representations
and warranties has been questioned and lack of responsiveness by
sponsors to potential breaches of the representations and warranties
relating to the pool assets has been the subject of investor
complaint.\14\
---------------------------------------------------------------------------
\14\ As we noted in the Proposing Release and the 2010 ABS
Proposing Release, transaction agreements typically have not
included specific mechanisms to identify breaches of representations
and warranties or to resolve a question as to whether a breach of
the representations and warranties has occurred. Thus, these
contractual agreements have frequently been ineffective because,
without access to documents relating to each pool asset, it can be
difficult for the trustee, which typically notifies the sponsor of
an alleged breach, to determine whether or not a representation or
warranty relating to a pool asset has been breached. In the 2010 ABS
Proposing Release, the Commission proposed a condition to shelf
eligibility that would require a provision in the pooling and
servicing agreement that would require the party obligated to
repurchase the assets for breach of representations and warranties
to periodically furnish an opinion of an independent third party
regarding whether the obligated party acted consistently with the
terms of the pooling and servicing agreement with respect to any
loans that the trustee put back to the obligated party for violation
of representations and warranties and which were not repurchased.
See Section II.A.3.b. of the 2010 ABS Proposing Release. See also
the Committee on Capital Markets Regulation, The Global Financial
Crisis: A Plan for Regulatory Reform, May 2009, at 135 (noting that
contractual provisions have proven to be of little practical value
to investors during the crisis); see also Investors Proceeding with
Countrywide Lawsuit, Mortgage Servicing News, Feb. 1, 2009
(describing class action investor suit against Countrywide in which
investors claim that language in the pooling and servicing
agreements requires the seller/servicer to repurchase loans that
were originated with ``predatory'' or abusive lending practices) and
American Securitization Forum, ASF Releases Model Representations
and Warranties to Bolster Risk Retention and Transparency in
Mortgage Securitizations, (Dec. 15, 2009), available at http://www.americansecuritization.com. It has been reported that only large
ABS investors, such as Fannie Mae and Freddie Mac, have been able to
effectively exercise repurchase demands. See Aparajita Saha-Bubna,
``Repurchased Loans Putting Banks in Hole,'' Wall Street Journal
(Mar. 8, 2010) (noting that most mortgages put back to lenders are
coming from Fannie Mae and Freddie Mac). See also Joe Adler,
``Regulators See Growing Threat from Put-Backs,'' American Banker
(Dec. 6, 2010) (noting that investor put-back cases face procedural
hurdles and that investors are trying to unionize around
repurchasing). However, recent articles report that banks have begun
settlement efforts. See e.g., Dawn Kopecki and Hugh Son, ``Bank of
America Deal on Loan-Repurchase Demands Sets `Template' for Banks,''
Bloomberg (Jan. 4, 2011) available at http://www.bloomberg.com/news/2011-01-03/banks-stocks-rise-after-bank-of-america-settles-mortgage-putback-claims.html (noting recent settlements of repurchase
claims).
---------------------------------------------------------------------------
As discussed in more detail below, we have taken into consideration
the comments received on the proposed rules and are adopting new Rules
15Ga-1 and 17g-7, new Form ABS-15G and amendments to Regulation AB. The
rules and form that we are adopting today implement the requirements of
Section 943 of the Act, and also conform disclosure requirements for
prospectuses and ongoing reports for ABS sold in registered
transactions. We received over forty comment letters in response to the
proposed rules. These letters came from investors, securitizers,
corporations, credit rating agencies, professional and trade
associations, law firms, municipal entities, and other interested
parties.\15\ In general, commentators supported the manner in which we
proposed to implement Section 943 of the Act. Some commentators opposed
some aspects of the proposed rules and suggested modifications to the
proposals.
---------------------------------------------------------------------------
\15\ The public comments we received are available on our Web
site at http://sec.gov/comments/s7-24-10/s72410.shtml.
---------------------------------------------------------------------------
The adopted rules reflect changes made in response to many of these
comments. We discuss our revisions with respect to each proposed rule
in more detail throughout this release. The rules we are adopting
require:
ABS securitizers to disclose demand, repurchase and
replacement history in a tabular format for an initial three-year look
back period ending December 31, 2011;
ABS securitizers to disclose, subsequent to that date,
demand, repurchase and replacement activity in a tabular format on a
quarterly basis;
ABS issuers to disclose demand, repurchase and replacement
history for a three-year look back period, in the same tabular format
as new Rule 15Ga-1, in the body of the prospectus;
ABS issuers to disclose demand, repurchase and replacement
activity for a specific ABS, in the same tabular format, in periodic
reports filed on Form 10-D; and
NRSROs to disclose, in any report accompanying a credit
rating for an ABS transaction, the representations, warranties and
enforcement mechanisms available to investors and how they differ from
the representations, warranties and enforcement mechanisms in issuances
of similar securities.
II. Discussion of Amendments
A. Disclosure Requirements for Securitizers
We proposed and are adopting new Rule 15Ga-1 to implement Section
943(2) of the Act. This new rule would require any securitizer of
asset-backed securities to disclose fulfilled and unfulfilled
repurchase requests across all trusts aggregated by securitizer, so
[[Page 4491]]
that investors may identify asset originators with clear underwriting
deficiencies. Under the new rule, a securitizer would provide the
disclosure by filing new Form ABS-15G.\16\
---------------------------------------------------------------------------
\16\ See also Section II.B. for discussion of disclosures in
prospectuses and periodic reports.
---------------------------------------------------------------------------
1. Definition of Exchange Act-ABS for Purposes of Rule 15Ga-1
As we discussed in the Proposing Release, the Act amended the
Exchange Act to include a definition of an ``asset-backed security''
and Section 943 of the Act references that definition.\17\ The
statutory definition of an asset-backed security (``Exchange Act-ABS'')
is much broader than the definition of an asset-backed security in
Regulation AB (``Reg AB-ABS'').\18\ The definition of an Exchange Act-
ABS includes securities that are typically sold in transactions that
are exempt from registration under the Securities Act, such as
collateralized debt obligations (``CDOs''), as well as securities
issued or guaranteed by a government sponsored entity (``GSE''), such
as Fannie Mae and Freddie Mac and municipal securities that otherwise
come within the definition.\19\ Since Section 943 uses the broader
Exchange Act-ABS definition, our new Rule 15Ga-1 would require a
securitizer to provide disclosures relating to all asset-backed
securities that fall within the statutory definition, whether or not
sold in Securities Act registered transactions. However, as we discuss
further below, even if a security meets the definition of an Exchange
Act-ABS, the new disclosure requirement would only be triggered if the
underlying transaction agreements contain a covenant to repurchase or
replace an asset.
---------------------------------------------------------------------------
\17\ Section 3(a)(77) of the Exchange Act, as amended by the
Act, provides that the term ``asset-backed security'' means a fixed-
income or other security collateralized by any type of self-
liquidating financial asset (including a loan, a lease, a mortgage,
or a secured or unsecured receivable) that allows the holder of the
security to receive payments that depend primarily on cash flow from
the asset, including: A collateralized mortgage obligation; a
collateralized debt obligation; a collateralized bond obligation; a
collateralized debt obligation of asset-backed securities; a
collateralized debt obligation of collateralized debt obligations;
and a security that the Commission, by rule, determines to be an
asset-backed security for purposes of this section; and does not
include a security issued by a finance subsidiary held by the parent
company or a company controlled by the parent company, if none of
the securities issued by the finance subsidiary are held by an
entity that is not controlled by the parent company.
\18\ In 2004, we adopted the definition of ``asset-backed
security'' in Regulation AB. The definition and our interpretations
of it are intended to establish parameters for the types of
securities that are appropriate for the alternate disclosure and
regulatory regime provided in Regulation AB and the related rules
for Form S-3 registration of ABS. The definition does not mean that
public offerings of securities outside of these parameters, such as
synthetic securitizations, may not be registered with the
Commission, but only that the alternate regulatory regime is not
designed for those securities. The definition does mean that such
securities must rely on non-ABS form eligibility for registration,
including shelf registration. See Section III.A.2 of Asset-Backed
Securities, SEC Release no. 33-8518 (January 7, 2005) [70 FR 1506]
(the ``2004 ABS Adopting Release'') and Item 1101(c) of Regulation
AB [17 CFR 1101(c)].
\19\ Government sponsored enterprises (GSEs) such as Fannie Mae
and Freddie Mac purchase mortgage loans and issue or guarantee
mortgage-backed securities (MBS). MBS issued or guaranteed by these
GSEs have been and continue to be exempt from registration under the
Securities Act and reporting under the Exchange Act. For more
information regarding GSEs, see Task Force on Mortgage-Backed
Securities Disclosure, ``Staff Report: Enhancing Disclosure in the
Mortgage-Backed Securities Markets'' (Jan. 2003) available at http://www.sec.gov/news/studies/mortgagebacked.htm.
---------------------------------------------------------------------------
2. Definition of Securitizer for Purposes of Rule 15Ga-1
Section 943 and new Rule 15Ga-1 impose the disclosure obligation on
a ``securitizer'' as defined in the Exchange Act. The Act amended the
Exchange Act to include the definition of a ``securitizer.'' Under the
Exchange Act, a securitizer is either:
(A) An issuer of an asset-backed security; or
(B) A person who organizes and initiates an asset-backed securities
transaction by selling or transferring assets, either directly or
indirectly, including through an affiliate, to the issuer.\20\
---------------------------------------------------------------------------
\20\ See Section 15G(a)(3) of the Exchange Act, as amended by
the Act.
---------------------------------------------------------------------------
The definition of securitizer is not specifically limited to
entities that undertake transactions that are registered under the
Securities Act or conducted in reliance upon any particular
exemption.\21\ Consequently, it applies to any entity or person that
issues or organizes an Exchange Act-ABS as specified in Section
15G(a)(3) of the Exchange Act. Further, as noted above, Section 943 and
Section 15G(a)(3) do not distinguish between securitizers of Exchange
Act-ABS in registered or unregistered transactions, and our new Rule
15Ga-1 would apply equally to securitizers offering ABS in registered
and unregistered transactions.
---------------------------------------------------------------------------
\21\ We received comment letters on the application of proposed
Rule 15Ga-1 to ABS offered outside the United States and to ABS sold
in the United States by foreign securitizers. See e.g., letters from
American Bar Association (ABA), Association for Financial Markets in
Europe (AFME), Center for Responsible Lending (CFRL), U.S. Senator
Carl Levin (Levin), Metropolitan Life Insurance Company (Metlife)
and Securities Industry and Financial Markets Association (SIFMA).
Section 943 of the Act does not expressly provide for Commission
exemption for particular classes of securitizers from the
requirements. If securitizers of Exchange Act-ABS are subject to our
jurisdiction, then securitizers are required to provide the
disclosures required by Rule 15Ga-1.
---------------------------------------------------------------------------
With respect to registered transactions and the definitions of
transaction parties in Regulation AB, sponsors and depositors \22\ both
fall within the statutory definition of securitizer. A sponsor
typically initiates a securitization transaction by selling or pledging
to a specially created issuing entity a group of financial assets that
the sponsor either has originated itself or has purchased in the
secondary market.\23\ In some instances, the transfer of assets is a
two-step process: The financial assets are transferred by the sponsor
first to an intermediate entity, often a limited purpose entity created
by the sponsor for a securitization program and commonly called a
depositor, and then the depositor will transfer the assets to the
issuing entity for the particular asset-backed transaction.\24\ Because
both sponsors and depositors fit within the statutory definition of
securitizers, both entities would have the disclosure responsibilities
under new Rule 15Ga-1. However, if a sponsor filed all disclosures
required under new Rule 15Ga-1, which would include disclosures of the
activity of affiliated depositors, as described below, consistent with
the proposal final Rule 15Ga-1 provides that those depositors
affiliated with the sponsors would not have to separately provide and
file the same disclosures. We believe this is appropriate for
affiliated securitizers because otherwise such disclosure would be
duplicative and would not provide any additional useful information,
since as noted above, the depositor usually serves as an
[[Page 4492]]
intermediate entity of a transaction initiated by a sponsor.\25\ In
addition, investors would be able to find information ``aggregated by
securitizer'' as required by Section 943 in this case because the table
would be aggregated either by affiliated depositors or the sponsor the
ABS.
---------------------------------------------------------------------------
\22\ We interpret the term ``issuer'' in Section 15G(a)(3)(A) to
refer to the depositor of an asset-backed security. This treatment
is consistent with our historical regulatory approach to that term,
including the Securities Act and the rules promulgated under the
Securities Act and the Exchange Act. See, e.g., Securities Act Rule
191 (17 CFR 230.191) and Exchange Act Rule 3b-19 (17 CFR 240.3b-19).
\23\ A sponsor, as defined in Regulation AB, is the person who
organizes and initiates an asset-backed securities transaction by
selling or transferring assets, either directly or indirectly,
including through an affiliate, to the issuing entity. See Item
1101(l) of Regulation AB [17 CFR 229.1101(l)]. Sponsors of asset-
backed securities often include banks, mortgage companies, finance
companies, investment banks and other entities that originate or
acquire and package financial assets for resale as ABS. See Section
II. of the 2004 ABS Adopting Release.
\24\ A depositor receives or purchases and transfers or sells
the pool assets to the issuing entity. See Item 1101(e) of
Regulation AB [17 CFR 229.1101(e)]. For asset-backed securities
transactions where there is not an intermediate transfer of assets
from the sponsor to the issuing entity, the term depositor refers to
the sponsor. For asset-backed securities transactions where the
person transferring or selling the pool assets is itself a trust,
the depositor of the issuing entity is the depositor of that trust.
\25\ There may be other situations where multiple affiliated
securitizers would have individual reporting obligations under Rule
15Ga-1 with respect to a particular transaction. Under our final
rule, if one securitizer has filed all the disclosures required in
order to meet the obligations under Rule 15Ga-1, which would include
disclosures of the activity of affiliated securitizers, those
securitizers would not be required to separately provide and file
the same disclosures. Several commentators also requested that a
securitizer be permitted to file separate reports for different
asset classes, instead of including the activity for all asset
classes in which the securitizer has issued ABS in a single report.
See discussion below in Section II.A.4.b. and fn. 82.
---------------------------------------------------------------------------
We received two comment letters that urged us to consider two other
situations related to a securitizer's filing requirement. One requested
that either the Exchange Act reporting party or the party that
contractually assumes a reporting duty would have the obligation to
disclose repurchase request information and file Form ABS-15G, but not
both.\26\ The other requested we allow securitizers to reference and
rely on originator disclosures to satisfy a securitizer's requirements
if they have made contractual arrangements to do so.\27\ Both of these
commentators requested filing accommodations that related to
unaffiliated parties, and we are concerned that the requested approach
could make it more difficult for investors to locate the information
``aggregated by securitizer'' as is required by Section 943 because the
relationship between unaffiliated transaction parties may not be
readily understood. Therefore, we are requiring that all securitizers
in a transaction file Form ABS-15G, unless they are affiliated
securitizers as discussed above.
---------------------------------------------------------------------------
\26\ See letter from SIFMA (noting, ``for example, in a `rent-a-
shelf' transaction, both the renter and the registrant could be
deemed securitizers'').
\27\ See letter from ABA (noting that the Commission has
previously allowed ABS issuers to incorporate by reference
information filed by third parties, such as credit enhancement
providers or significant obligors).
---------------------------------------------------------------------------
One commentator explained that requiring disclosure of assets
``originated and sold,'' as proposed, could be construed to require the
securitizer to report demand and repurchase activity on loans
originated and sold by it but securitized by other securitizers which
might lead to inconsistent and duplicative reporting.\28\ In the case
of Exchange Act-ABS issued by the GSE's, we received several comment
letters noting that the term securitizer, for purposes of Rule 15Ga-1
should be applied solely to Fannie Mae or Freddie Mac and not the
financial institution transferring loans for securitization by Fannie
Mae or Freddie Mac.\29\ We agree with commentators observations that
``originated and sold'' may be read to require disclosure about
transfers of assets that were not securitized, and thus as discussed
further below, we have revised the rule to require disclosure
concerning assets ``securitized'' by securitizers.
---------------------------------------------------------------------------
\28\ See letter from American Securitization Forum (ASF).
\29\ See e.g., letters from ASF, Bank of America (BOA), Fannie
Mae and Freddie Mac (GSEs), Mortgage Bankers Association (MBA), and
SIFMA.
---------------------------------------------------------------------------
3. Application to Municipal Securitizers
As stated earlier, Section 943 and the new rule apply to Exchange
Act-ABS whether or not offered and sold in Securities Act registered
transactions. In addition, Section 943 and the new rule impose the
disclosure obligation on any securitizer, as defined in the Exchange
Act. Thus, the new rule will apply to a municipal entity that is a
securitizer of Exchange Act-ABS (``municipal securitizer''). We sought
comment in the Proposing Release on whether we should provide further
guidance regarding the application of proposed Rule 15Ga-1 to
securities issued by municipal entities that would fall within the
definition of Exchange-Act ABS. We also asked whether the types of
municipal securities about which proposed Rule 15Ga-1 would require a
municipal securitizer to provide representation and warranty repurchase
disclosure was clear. Several commentators provided examples of
municipal securities that could fall within the definition of Exchange-
Act ABS such as student loan bonds, housing and mortgage bonds, bond-
bank issuances, and revolving fund bonds.\30\
---------------------------------------------------------------------------
\30\ See e.g., letters from Federated Investors, Inc.,
Investment Company Institute (ICI), National Association of Bond
Lawyers (NABL), Kutak Rock (Kutak) and Moody's Investors Service
(Moody's). We also received some comment letters that questioned
whether municipal securities fall within the definition of Exchange
Act-ABS. In particular, a few letters questioned whether a municipal
security would meet the Exchange-Act ABS criteria of payments
depending ``primarily on the cash flow from the asset'' if the
security also is secured by a general obligation of the municipal
issuer. See e.g., letters from Kutak, Education Finance Council
(EFC) and Minnesota Housing Finance Agency (MHFA).
---------------------------------------------------------------------------
With respect to proposed Rule 15Ga-1, a few commentators noted that
it would not likely apply to most municipal securities because the
underlying transaction documents typically would not contain a covenant
to repurchase or replace an asset if it does not comply with
representation and warranty provisions, if any.\31\ Commentators also
noted various reasons why proposed Rule 15Ga-1 should not apply to
municipal securitizers, such as a belief that they have an express
statutory exemption \32\ or that there is a requirement under the Act
to first make a rule determination about the status of the
securities.\33\ In addition, several commentators argued that the
Commission has authority to exempt municipal securitizers from
Rule15Ga-1, citing the overall structure of the Act's amendments and
legislative history. These commentators questioned whether Congress
intended to require Section 943 disclosures with respect to municipal
securities at all.\34\
---------------------------------------------------------------------------
\31\ See e.g., letters from NABL and Connecticut Housing Finance
Authority (CHFA).
\32\ Several commentators noted that the Tower Amendment
(Section 15B(d)(1) of the Exchange Act [15 U.S.C. 78o-4]) expressly
prohibits the Securities and Exchange Commission and the Municipal
Securities Rulemaking Board (``MSRB'') from requiring an issuer of
municipal bonds (including housing bonds) to make any specific
disclosure filing with the SEC or MSRB prior to the sale of these
securities to investors. See e.g., letters from Kutak, Group of 14
Municipal Organizations (Muni Group), NABL, National Association of
Local Housing Finance Agencies (NALHFA), Treasurer of the State of
Connecticut (Nappier), National Council of State Housing Agencies
(NCHSA) and Robert W. Scott (Scott).
\33\ Commentators cited to the phrase ``a security that the
Commission, by rule, determines to be an asset-backed security''
that appears after the description of examples of Exchange Act-ABS.
See Section 3(a)(77) of the Exchange Act, as amended by the Act. See
e.g., letters received from NABL, Muni Group, and Scott.
\34\ In particular, one commentator noted that despite the broad
definition of ``asset-backed security,'' it believes the SEC has the
authority to exempt municipal securities from this rule, and doing
so is necessary and appropriate in light of Section 3(a)(2) of the
Securities Act and Section 3(a)(12) of the Exchange Act, which both
treat municipal securities as exempted securities. See letter from
NCHSA. Other commentators argued that the Commission has the
authority to exempt municipal securities from risk retention in
Section 941of the Act (Credit Risk Retention), and those same
exemptions should apply to Section 943. See e.g., letters from ICI,
NABL, NALHFA, NCSHA, Muni Group, and Scott. Specifically, four
commentators cited to language in the Joint Explanatory Statement of
the Conference Committee suggesting the Commission has authority to
grant total or partial exemptions from risk-retention and disclosure
requirements for municipal securities. See e.g., letters from ICI,
NCSHA, Muni Group, and Scott. But see letter from Nappier (noting
concerns from Senate staff that future transactions might be created
and structured through municipal issuers specifically to avoid the
asset-backed securities provisions).
---------------------------------------------------------------------------
Other commentators suggested that the Commission wait for the
results of the municipal disclosure study required by Subtitle H of the
Act \35\ before
[[Page 4493]]
requiring compliance with the proposals \36\ as well as for the results
of the Commission's municipal field hearings, discussed below.\37\ One
investor group was concerned that a piecemeal approach to municipal
securities disclosure would have the unintended effect of creating
confusion for investors and issuers alike because different asset
classes of municipal securities would be subject to different
disclosure requirements.\38\
---------------------------------------------------------------------------
\35\ Section 976 of the Act requires the Comptroller General of
the United States to submit a report to Congress on the results of a
study and review of the disclosure required to be made by issuers of
municipal securities, including recommendations for how to improve
disclosure by issuers of municipal securities no later than 24
months after the date of enactment of the Act. In addition, pursuant
to Section 977 of the Act, the Comptroller General of the United
States is also required to conduct a study of the municipal
securities markets and report no later than 18 months after the date
of enactment of the Act.
\36\ See e.g., letters from CHFA, ICI, Muni Group, NABL, NALHFA,
Nappier, and NCHSA.
\37\ See e.g., letters from ICI, Muni Group and Scott.
\38\ See letter from ICI.
---------------------------------------------------------------------------
Moreover, many commentators argued that certain municipal ABS, such
as housing bonds, only include assets originated under strict
underwriting standards and are subject to legal and program
requirements in order to obtain and maintain guarantees and tax-exempt
status \39\ and noted that issues regarding underwriting deficiencies
and unfulfilled repurchase requests that the Act intends to address
have not been an issue in the municipal securities market.\40\
Furthermore, according to a few commentators, any repurchase
obligations that do exist for municipal ABS have been enforced by the
relevant municipal issuer in order to ensure the continual tax-exempt
status of the municipal ABS.\41\
---------------------------------------------------------------------------
\39\ See e.g., letters from Connecticut Higher Education
Supplemental Loan Authority (CHESLA), CHFA, Hawkins, Delafield and
Wood (Hawkins), Kutak, MHFA, NABL, and NCSHA.
\40\ See generally letters from CHESLA CHFA, EFC, Hawkins,
Kutak, MHFA, Muni Group, NABL, NCSHA, and City of New York (NYC)
(noting generally that the policy concerns that led to adoption of
the Act are not present in the case of municipal securities and the
municipal securities markets did not experience the failures or
defaults that led to the Act). See also Moody's Investors Service,
Inc., Special Report: U.S. Municipal Bond Defaults and Recoveries,
1970-2009, February, 2010 (noting that municipal issuers have a very
limited default experience with only 54 defaults over the period
1970-2009). See also letter from NYC (noting that tax lien
securitizations arise out of operation of law and are not originated
pursuant to underwriting standards).
\41\ See e.g., letters from CHESLA, CHFA and NABL.
---------------------------------------------------------------------------
Commentators also noted that a significant difference between
municipal ABS and more typical Exchange Act-ABS is that the Municipal
Securities Rulemaking Board (MSRB) \42\ collects and publicly
disseminates market information and information about municipal
securities issuers and offerings on its centralized public database,
EMMA.\43\ Thus, even though most municipal securities are sold in
unregistered transactions in reliance on exemptions from registration,
as commentators noted,\44\ as a result of the applicability of Exchange
Act Rule 15c2-12 to municipal securities offerings by underwriters,
municipal issuers issuing municipal securities subject to that rule
already provide disclosures in offering documents and disclosures to
the secondary market pursuant to continuing disclosure agreements
entered into for the benefit of bondholders. Under Rule 15c2-12,
specified annual and event notices are required to be submitted to the
MSRB's EMMA system.\45\ However, Rule 15c2-12 does not specifically
require representation and warranty repurchase disclosure.
---------------------------------------------------------------------------
\42\ The MSRB, a self-regulatory organization subject to
oversight by the Commission, regulates securities firms and banks
that underwrite, trade and sell municipal securities. The Act
broadened the mission of the MSRB to include the protection of state
and local governments and other municipal entities, in addition to
investors and the public interest. The MSRB also regulates municipal
advisors. See Section 975 of the Act.
\43\ See e.g., letters from EFC, Kutak, MHFA, NABL and NCSHA.
The Web site address for EMMA is http://www.emma.msrb.org.
\44\ See e.g., letters from EFC, Kutak, MHFA, NABL and NCSHA.
\45\ Pursuant to Exchange Act Rule 15c2-12 [17 CFR 240.15c2-12],
municipal underwriters must submit final official statements, for
municipal securities offerings subject to the rule, on EMMA, which
must include, at a minimum, information on the terms of the
securities, financial information or operating data concerning the
issuer and other entities, enterprises, funds, accounts or other
persons material to an evaluation of the offering, and a description
of the continuing disclosure undertaking made in connection with the
offering (including any indication of any failures to comply with
such undertaking during the past five years). Official statements
typically also include information regarding the purposes of the
issuance, how the securities will be repaid, and the financial and
economic characteristics of the obligor with respect to the offered
securities. Several commentators stated that, if the final rules
applied the Section 943 disclosure requirements to municipal
securitizers, then these disclosures should be made on EMMA rather
than on EDGAR because they argued that filing such disclosures on
EDGAR would be confusing to issuers and to investors who have become
accustomed to using EMMA as the repository of municipal-related
disclosures. See e.g., letters from EFC, Kutak, NABL and NCSHA.
---------------------------------------------------------------------------
Commentators noted other factors that distinguish securitizers of
municipal ABS from other Exchange Act-ABS securitizers. For instance,
commentators noted that municipal securitizers generally are state or
local government entities and exist to serve a public purpose.\46\ In
addition, commentators also noted that municipal ABS in some cases are
secured by a pledge of assets or are secured by a general obligation of
the municipal issuer.\47\ Finally, commentators stated that market
participants do not identify or consider municipal securities as
substantially similar to ABS.\48\
---------------------------------------------------------------------------
\46\ See e.g., letters from CHESLA and CHFA (public purpose is
to alleviate the shortage of quality affordable housing) and NALHFA
(public purpose is to provide mortgage assistance to first-time home
buyers, and multi-family below-market financing for the acquisition,
construction and preservation of rental housing for lower-income
households).
\47\ See e.g., letters from EFC, Kutak, MHFA, and NABL.
\48\ See e.g., letters from Muni Group and Scott.
---------------------------------------------------------------------------
Despite the distinguishing factors discussed above, we have
determined that the final rules should apply to municipal securitizers.
Section 943(2) of the Act requires the Commission to adopt rules
mandating that ``any securitizer'' of an Exchange Act-ABS, including
municipal ABS, provide the disclosures specified therein. The statute
does not expressly provide the Commission the authority to provide
exemptions for particular classes of securitizers, including municipal
securitizers. We note that Section 943 is a stand-alone provision and
is not included as an amendment to the Exchange Act or the Securities
Act. As a result, our final rule applies to municipal ABS if they
otherwise come within the definition of Exchange Act-ABS. Nonetheless,
we recognize that municipal securitizers may have had less experience
with developing and providing the types of information required by
Section 943(2) and the new rule, and thus may have less developed
infrastructures for providing the required disclosures.\49\ We believe
that a delayed compliance date for municipal securitizers should allow
those securitizers to observe how the rule operates for other
securitizers and to better prepare for implementation of the rules. We
also believe that delayed compliance for municipal securitizers will
allow us to evaluate the implementation of Rule 15Ga-1 by other
securitizers and provide us with the opportunity to consider whether
adjustments to the rule would be appropriate for municipal securitizers
before the rule becomes applicable to them. As commentators also noted,
we are currently undergoing a review of the municipal securities
market, and as part of that review, we recently began a
[[Page 4494]]
series of field hearings to examine the municipal securities markets,
including disclosure and transparency within the municipal securities
markets.\50\ At the conclusion of this process, the staff of the
Commission expects to prepare a report containing information learned
and any recommendations for regulatory changes, industry ``best
practices,'' or legislative changes.\51\ The results of our review and
the studies required by the Act \52\ could lead us to conclude that
changes to the requirements of Rule 15Ga-1 would be appropriate for
municipal securitizers.
---------------------------------------------------------------------------
\49\ See e.g., letters from CHESLA (noting that it operates with
a staff of two and a part-time Executive Director); Kutak (noting
that many municipal issuers rely on paper files and do not have the
technology or staff to produce historical information); and NABL
(noting that certain state agencies will need to obtain the
necessary funds to meet the filing requirements, and certain state
agencies determine their budgets on a biannual cycle).
\50\ See SEC Press Release 2010-64, SEC Sets Field Hearings on
State of Municipal Markets, Sept. 7, 2010 available on the
``Spotlight on the State of the Municipal Securities Market'' page
of our Web site at http://www.sec.gov/spotlight/municipalsecurities.shtml.
\51\ Id.
\52\ See fn. 35.
---------------------------------------------------------------------------
Therefore, we are delaying compliance for new Rule 15Ga-1 for
municipal securitizers for a period of three years after the date
applicable to securitizers other than municipal securitizers.\53\ For
purposes of the delayed compliance only, a municipal securitizer would
be any securitizer that is a State or Territory of the United States,
the District of Columbia, any political subdivision of any State,
Territory or the District of Columbia, or any public instrumentality of
one or more States, Territories or the District of Columbia.
---------------------------------------------------------------------------
\53\ See discussion below regarding transition period in Section
III.
---------------------------------------------------------------------------
In addition, as discussed below, in an effort to limit the cost and
burden on municipal securitizers subject to the new rule, as well as
provide the disclosures for investors in the same location as other
disclosures regarding municipal securities, we will permit municipal
securitizers to satisfy the rule's filing obligation by filing the
information on EMMA.\54\
---------------------------------------------------------------------------
\54\ Id.
---------------------------------------------------------------------------
4. Disclosures Required by Rule 15Ga-1
In accordance with Section 943 of the Act, we are adopting new Rule
15Ga-1 \55\ to require any securitizer of an Exchange Act-ABS to
provide tabular disclosure of fulfilled and unfulfilled repurchase
requests, so that investors may identify asset originators with clear
underwriting deficiencies.
---------------------------------------------------------------------------
\55\ We are adopting this rule as an Exchange Act rule because
of the relationship with other requirements under the Exchange Act
and other statutory requirements we are implementing.
---------------------------------------------------------------------------
(a) Proposed New Rule 15Ga-1
We proposed that if the underlying transaction agreements include a
covenant to repurchase or replace an underlying asset for breach of a
representation or warranty, then a securitizer would be required to
provide the information described below for all assets originated or
sold by the securitizer that were the subject of a demand for
repurchase or replacement with respect to all outstanding Exchange Act-
ABS of the securitizer held by non-affiliates of the securitizer. As
discussed further below, we proposed that a securitizer provide the
repurchase history for the last five years by filing Form ABS-15G at
the time a securitizer first offers an Exchange Act-ABS or organizes
and initiates an offering of Exchange Act-ABS, registered or
unregistered, after the effective date of the new rules, as adopted. In
addition, we proposed that going forward, a securitizer would provide
the disclosures for all outstanding Exchange Act-ABS on a monthly basis
by filing Form ABS-15G.
Section 943(2) requires disclosure of fulfilled and unfulfilled
repurchase requests. Therefore, we proposed to require tabular
disclosure of assets subject to any and all demands for repurchase or
replacement of the underlying pool assets as long as the transaction
agreements provide a covenant to repurchase or replace an underlying
asset, which would include demands that did not result in a repurchase
under the transaction agreements and demands that were made by the
investors upon the trustee. We also proposed that securitizers be
permitted to footnote the table to provide additional explanatory
disclosures to describe the data disclosed.
In the Proposing Release, we expressed concern that initially a
securitizer may not be able to obtain complete information from a
trustee about demands made by investors because it may not have tracked
these demands. Because securitizers may not have access to historical
information about investor demands made upon the trustee, (as opposed
to trustee demands upon the securitizer, which presumably, would be
known to the securitizer) prior to the effective date of the new rules,
we proposed an instruction that a securitizer may disclose in a
footnote, if true, that a securitizer requested and was able to obtain
only partial information or was unable to obtain any information with
respect to investor demands to a trustee that occurred prior to the
effective date of the proposed rules and state that the disclosures do
not contain all investor demands made to the trustee prior to the
effective date.
In the Proposing Release, we acknowledged that a single securitizer
(i.e., sponsor) may have several securitization programs to securitize
different types of asset classes. Because the Act requires information
``aggregated by securitizer,'' we proposed that a securitizer list the
names of all the issuing entities \56\ of Exchange Act-ABS outstanding,
in order of the date of formation of the issuing entity, so that
investors may identify the securities that contain the assets subject
to the demands for repurchase and when the issuing entity was formed.
We also proposed to require disclosure of the asset class and grouping
of the information in the table by asset class. Additionally, if any of
the Exchange Act-ABS of the issuing entity were registered under the
Securities Act, we proposed that the Central Index Key (``CIK'') number
of the issuing entity be disclosed and that the securitizer indicate by
check mark whether any Exchange Act-ABS were registered. We noted that
these items would provide important information that would enable an
investor to locate additional publicly available disclosure for
registered transactions, if applicable. Because the Act provided that
disclosure is required ``so that investors may identify asset
originators with clear underwriting deficiencies,'' \57\ we proposed
that securitizers further break out the information by originator of
the underlying assets.
---------------------------------------------------------------------------
\56\ Issuing entity is defined in Item 1101(f) of Regulation AB
[17 CFR 229.1101(f)] as the trust or other entity created at the
direction of the sponsor or depositor that owns or holds the pool
assets and in whose name the asset-backed securities supported or
serviced by the pool assets are issued.
\57\ See Section 943(2) of the Act.
---------------------------------------------------------------------------
We also proposed that the table provide information about the
assets that were subject of a demand; the assets that were repurchased
or replaced; the assets that were not repurchased or replaced; and the
assets that are pending repurchase or replacement.\58\ Additionally, we
proposed an instruction to include footnote
[[Page 4495]]
disclosure about the reasons why repurchase or replacement is
pending.\59\ Lastly, we proposed that the table include totals by asset
class for columns that require numbers of assets and principal
amounts.\60\
---------------------------------------------------------------------------
\58\ We noted that if the ABS were offered in a registered
transaction, an investor may be able to locate additional detailed
information. For instance, in the 2010 ABS Proposing Release, we
proposed that issuers be required to provide loan-level disclosure
of repurchase requests on an ongoing basis. If the proposal is
adopted, then an issuer would be required to indicate whether a
particular asset has been repurchased from the pool with each
periodic report on a Form 10-D. If the asset has been repurchased,
then the registrant would have to indicate whether a notice of
repurchase has been received, the date the asset was repurchased,
the name of the repurchaser and the reason for the repurchase. That
proposal remains outstanding. See previously proposed Item 1(i) of
Schedule L-D [Item 1121A of Regulation AB] in the 2010 ABS Proposing
Release.
\59\ For example, the securitizer would indicate by footnote if
pursuant to the terms of a transaction agreement, assets have not
been repurchased or replaced pending the expiration of a cure
period.
\60\ See letter from Association of Mortgage Investors on the
2010 ABS Proposing Release (requesting that disclosure of
information regarding claims made and satisfied under representation
and warranties provisions of the transaction documents be broken
down by securitization and then aggregated).
---------------------------------------------------------------------------
(b) Comments on the Proposed Rule
Comments on this aspect of the proposal were mixed. We received
several comments on the form and the content of the table. Four
commentators expressed general support that the proposed rule would
implement the statutory requirements.\61\ Some commentators suggested
that we only require reporting where the repurchase obligation is tied
to representations and warranties regarding the underwriting
criteria.\62\ Another commentator remarked that while repurchase
requests occur for many reasons, they serve as a useful benchmark to
identify loans with potential problems, such as early payment defaults,
incorrect loan information, fraud problems, impermissible adverse
selection procedures, or paperwork deficiencies.\63\
---------------------------------------------------------------------------
\61\ See letters from ICI, Levin, Metlife, and SIFMA (investor
members).
\62\ See e.g., letters from ASF, BOA, GSEs, Kutak, NABL, MHFA,
and NCHSA.
\63\ See letter from Levin.
---------------------------------------------------------------------------
Several commentators also requested that demands be limited to
those that comport with the procedures specified in the transaction
documents.\64\ One commentator noted that its investor members believe
that existing transaction agreements include overly restrictive
thresholds for recognizing bona fide repurchase demands, and noted that
even where the data may be incomplete, demands that were not made in
accordance with the relevant transaction documents would provide
directional information as to the responsiveness of securitizers and
originators of assets as well as identify originators with a history of
underwriting deficiencies.\65\
---------------------------------------------------------------------------
\64\ See e.g., letters from ABA, American Bankers Association
and ABA Securities Association (ABASA), American Financial Services
Association (AFSA), ASF, BOA, Commercial Real Estate Finance Council
(CREFC), Financial Services Roundtable (Roundtable), SIFMA and Wells
Fargo Bank (Wells) (effectively excluding investor demands upon a
trustee if not provided for in the transaction agreements). See also
fn. 14.
\65\ See letter from SIFMA.
---------------------------------------------------------------------------
Comments regarding the proposal to provide repurchase history for
an initial five-year look back period were mixed. Several commentators
were generally supportive of an initial look back period.\66\ Two
commentators noted that the requirement should apply regardless of
whether the ABS is outstanding at the end of the reporting period.\67\
Several others did not support an initial look back period and
requested prospective application only.\68\ Several commentators noted
issues with historical information, such as lack of systems to capture
the data, the change in underwriting standards since the housing
crisis, misperceptions that may arise from analyzing fragmented data,
and the ability to obtain the data from other transaction parties
including that certain transaction parties may no longer exist.\69\ We
also received comment letters suggesting that a three- or five-year
look back period would be appropriate for ongoing periodic
disclosures.\70\
---------------------------------------------------------------------------
\66\ See e.g., letters from Association of Financial Guaranty
Insurers (AFGI), CFRL, Metlife, MBIA Inc. (MBIA), and SIFMA.
\67\ See letters from Metlife and SIFMA.
\68\ See e.g., letters from ABA, ABASA, AFSA, ASF, BOA,
Community Mortgage Banking Project (CMBP), CREFC, GSEs, Kutak, MBA,
NABL, Roundtable, and Wells. In addition, three commentators
suggested that the statute did not clearly require historical
information. See letters from ABA, ABASA and GSEs.
\69\ See e.g., letters from ABA, ABASA, BOA, CREFC, GSEs, Kutak,
MBA, Roundtable and Wells.
\70\ See e.g., letters from AFSA, ASF, Metlife and SIFMA.
---------------------------------------------------------------------------
Several commentators requested that a securitizer should report
activity for different asset classes in separate reports, instead of
including the activity for all asset classes in which the securitizer
has issued ABS in a single report, as proposed.\71\ One commentator
acknowledged that the result of this suggested change would be that
some securitizers may be required to file more than one report, but its
members believed reports by asset class would produce more consistent
reports that are more useful to investors in evaluating particular
offerings.\72\
---------------------------------------------------------------------------
\71\ See e.g., letters from ABA, ABASA, AFSA, ASF, BOA, CREFC,
Roundtable, and SIFMA.
\72\ See letter from SIFMA.
---------------------------------------------------------------------------
Most commentators generally supported disclosure of the name of the
asset originator.\73\ A few commentators suggested that disclosure
should only be required if the number of assets or amounts related to a
particular originator exceeds a certain de minimis amount of the asset
pool.\74\ Another commentator requested that instead of listing all
issuing entities, it be allowed to aggregate the data by seller of the
loan and noted that the GSEs have hundreds of thousands of individual
GSE securities outstanding; therefore, a listing by individual issuing
entity would likely result in extremely unwieldy and disjointed
disclosures.\75\
---------------------------------------------------------------------------
\73\ See e.g., letters from AFGI, CFRL, CMBP, MBIA and Metlife.
\74\ See e.g., letters from GSEs, Kutak, and SIFMA. In addition,
SIFMA noted that to the extent that an originator is no longer in
existence, the securitizer should have the option of not providing
the information related to such originator.
\75\ See letter from GSEs.
---------------------------------------------------------------------------
We also received several comments regarding revisions to the
columns in the table in order to provide more standardized disclosures.
Generally, commentators requested more standardization regarding
demands that were pending and not repurchased or replaced.\76\ One
commentator also strongly recommended that whether, and to what extent
detail is provided, should be left to the judgment of each individual
securitizer, rather than mandated.\77\ Other commentators requested we
specifically require more narrative disclosure about the information
presented in the table.\78\
---------------------------------------------------------------------------
\76\ See e.g., letters from ASF, CMBP, Metlife and SIFMA
(suggesting that additional columns should be added to the table to
make clear which demand requests have not been resolved and are
subject of arbitration, litigation or negotiation). See also letters
from ABA, BOA and Roundtable (suggesting that standardized
categories of information would better reflect the repurchase
request and resolution process so that investors may more easily
compare information presented in the table than if it were presented
in footnotes only).
\77\ See letter from CREFC.
\78\ See e.g., letters from CFRL and Metlife.
---------------------------------------------------------------------------
(c) Final Rule
After considering the comments, we are adopting the table
substantially as proposed, with some modifications to the format of the
table. We are also adopting modifications to the filing requirement for
the initial disclosures and to the filing requirements for periodic
disclosures. We continue to believe that Section 943(2) requires
historical disclosures about a securitizer's repurchase history, in
order to give investors a clearer sense of potential problems with
originators' underwriting practices, but as we recognized in the
Proposing Release, and as commentators stated, securitizers may not
have all of the information readily available. Therefore, we have
tailored the final amendments to address many of the concerns expressed
by the commentators that we believe are consistent with the purposes of
Section 943.
[[Page 4496]]
As proposed, we are requiring disclosure in the table with respect
to any Exchange Act-ABS where the underlying transaction agreements
contain a covenant to repurchase or replace an underlying asset for
breach of a representation or warranty. We are not limiting the
disclosure requirement to representations and warranties concerning
underwriting standards, as suggested by some commentators \79\ because
as discussed above, covenants may require repurchase if the underlying
asset does not meet other types of representations and warranties, such
as applicable laws or fraud, which could also be indicative of
underwriting deficiencies.\80\ We are also revising the text of the
regulation to refer to assets ``securitized'' by a securitizer instead
of ``originated and transferred'' as proposed to address commentators
concerns as described above.\81\
---------------------------------------------------------------------------
\79\ See e.g., letters from ABA, ABASA, AFSA, ASF, BOA, CREFC,
Roundtable, SIFMA and Wells.
\80\ See Section I. See also letter from Levin (noting
repurchase requests may occur for early payment defaults, incorrect
loan information, fraud, impermissible adverse selection procedures
and paperwork deficiencies).
\81\ See e.g., letters from ASF, BOA, GSEs, MBA and SIFMA
(generally noting that the requirement should apply solely to Fannie
Mae or Freddie Mac and not the institution transferring loans for
securitization by Fannie Mae or Freddie Mac. See also Section
II.A.2. regarding the definition of securitizer for purposes of Rule
15Ga-1.
---------------------------------------------------------------------------
After considering the comments received, we are adopting additions
to the table in order to provide better disclosures about the demand,
repurchase and replacement history so that investors may identify asset
originators with clear underwriting deficiencies.
BILLING CODE 8011-01-P
[[Page 4497]]
[GRAPHIC] [TIFF OMITTED] TR26JA11.004
BILLING CODE 8011-01-C
[[Page 4498]]
First, the final rule requires, as proposed, that a securitizer
disclose the asset class and group the information in the table by
asset class (column (a)).\82\
---------------------------------------------------------------------------
\82\ Rule 15Ga-1(a)(1)(i). As noted earlier, some commentators
requested that a securitizer should report activity for different
asset classes in separate reports, instead of including the activity
for all asset classes in a single report. See e.g., letters from
ABA, ASF, BOA, CMBP, Metlife, Roundtable and SIFMA. As discussed in
Section II.A.2., both sponsor and depositors fall within the
definition of securitizer and thus are obligated under Section 943
and the new rule to provide the disclosures. The final rule
addresses commentators' requests because sponsors typically
securitize assets of different classes through separate affiliated
depositors for each asset class. For example, if a sponsor has two
different affiliated depositors, one that securitizes auto loans and
the other credit cards, the sponsor's reporting obligation would be
satisfied if each of the depositors filed the required disclosures
with respect to all of their respective trusts. Thus, a sponsor
would not have to separately provide and file the same disclosures,
if they were filed by an affiliated depositor of the same
transaction. We expect users will find reports disclosing the
information by asset class useful in making comparisons regarding
originators of the same asset class.
---------------------------------------------------------------------------
Second, the final rule requires, as proposed, that the securitizer
disclose the names of the issuing entities \83\ of the ABS and list the
issuing entities in order of the date of formation (column (a)).\84\ In
addition, we are adding an instruction to clarify that the activity
should include all issuing entities that had securities outstanding
during the reporting period in order to provide investors with complete
and comparable disclosure for the entire reporting period.\85\
---------------------------------------------------------------------------
\83\ 17 CFR 229.1101(f).
\84\ Rule 15Ga-1(a)(1)(ii). In a stand-alone trust structure,
usually backed by a pool of amortizing loans, a separate issuing
entity is created for each issuance of ABS backed by a specific pool
of assets. The date of formation of the issuing entity would most
likely be at the same time of the issuance of the ABS. In a
securitization using a master trust structure, the ABS transaction
contemplates future issuances of ABS by the same issuing entity,
backed by the same, but expanded, asset pool. Master trusts would
organize the data using the date the issuing entity was formed,
which would most likely be earlier than the date of the most recent
issuance of securities.
\85\ See e.g., letters from Metlife and SIFMA (suggesting that
disclosure should include any deals that were outstanding at any
point in time during a reporting period).
---------------------------------------------------------------------------
Third, the final rule requires, as proposed, that the securitizer
indicate by check mark whether the transaction was registered under the
Securities Act of 1933 (column (b)) and provide the CIK number of the
issuing entity (column (a)).\86\
---------------------------------------------------------------------------
\86\ Rule 15Ga-1(a)(1)(iii).
---------------------------------------------------------------------------
Fourth, the final rule requires, as proposed, that securitizers
disclose the name of the originator of the underlying assets. In
addition, we are adopting an instruction to clarify that all
originators must be disclosed.\87\ As noted earlier, some commentators
requested that we require only disclosure of originators that
originated more than a de minimis amount of the assets within an
issuing entity, or that were responsible for more than a de minimis
number of repurchase requests.\88\ We, however, believe that in order
for the disclosures to meet the purpose of the statute to ``identify
asset originators with clear underwriting deficiencies,'' it must be
comparable, and even de minimis amounts may in the aggregate over time
create information gaps about an originators' repurchase history. In
addition, originators with no repurchase request activity should be
listed in the table also to provide comparable disclosures.
---------------------------------------------------------------------------
\87\ Rule 15Ga-S1(a)(1)(iv). We are adding the instruction to
clarify that all originators are required to be included. See
generally, letters from AFGI, CFRL, CMBP, MBIA and Metlife (noting
that without the disclosure requirement of the originator, it may be
more difficult for investors to make fair comparisons regarding the
repurchase history, including which originators are most likely to
be subject to repurchase or replacement requests and which are most
likely to honor such requests when made).
\88\ See e.g., letters from Kutak, GSEs and SIFMA.
---------------------------------------------------------------------------
Fifth, the final rule requires new columns to disclose the number,
outstanding principal balance and percentage by principal balance of
the assets originated by each originator in the pool at the time of
securitization for each issuing entity (columns (d) through (f)).\89\
We were persuaded by one commentator's suggestion that the columns
should be added in order to assist investors in placing the information
on repurchase demands in the proper context.\90\ This way, investors
may be able to determine the concentration of each originators' assets
in each securitized asset pool.
---------------------------------------------------------------------------
\89\ Rule 15Ga-1(a)(1)(v).
\90\ See letter from CMBP.
---------------------------------------------------------------------------
Sixth, we are adopting, as proposed, a requirement to disclose the
number, outstanding principal balance and percentage by principal
balance of assets that were subject of a demand to repurchase or
replace for breach of representations and warranties (columns (g)
through (i)), including investor demands upon a trustee.\91\ As stated
earlier, Section 943(2) requires disclosure of fulfilled and
unfulfilled repurchase requests. We continue to believe that disclosure
should not be limited to only those demands, repurchases and
replacements made pursuant to the transaction agreement alone.
Investors have demanded that trustees enforce repurchase covenants
because transaction agreements do not typically contain a provision for
an investor to directly make a repurchase demand.\92\ Since Section
943(2) does not limit the required disclosures to those demands
successfully made by the trustee, under our final rule, investor
demands upon a trustee are required to be included in the table,
irrespective of the trustee's determination to make a repurchase demand
on a securitizer based on the investor request. As we discussed above,
we recognize that initially a securitizer may not be able to obtain
complete information from a trustee because it may not have established
systems to track investor demands. To address this concern, we are
adopting, substantially as proposed, a provision in Rule 15Ga-1 that a
securitizer may include a footnote if the securitizer was unable to
obtain all information with respect to investor demands upon a trustee
that occurred prior to July 22, 2010 (the effective date of the Act)
and state that the disclosure does not contain investor demands upon a
trustee made prior to July 22, 2010.\93\
---------------------------------------------------------------------------
\91\ Rule 15Ga-1(a)(1)(vi).
\92\ See Jody Shenn, ``BNY Won't Investigate Countrywide
Mortgage Securities,'' Bloomberg Business Week (Sep. 13, 2010)
available at http://www.businessweek.com/news/2010-09-13/bny-won-t-investigate-countrywide-mortgage-securities.html (noting the
difficulties that investors are facing to enforce contracts with
respect to repurchase demands) and Al Yoon, ``NY Fed joins other
investors on loan repurchase bid,'' Reuters (Aug. 4, 2010) available
at http://www.reuters.com/article/idUSTRE6736DZ20100804 (noting that
investors have been frustrated with trustees and servicers and are
banding together to force trustees to act on repurchase requests).
See also Kevin J. Buckley, ``Securitization Trustee Issues,'' The
Journal of Structured Finance (Summer 2010) (discussing investors
demands upon trustees to enforce sellers' repurchase obligations).
\93\ Rule 15Ga-1(a)(2). See also Section 4 of the Act.
---------------------------------------------------------------------------
The Act does not specify when the disclosure should first be
provided, or the frequency with which it should be updated. We are
adopting a three-year look back period for the initial disclosures,
instead of a five-year look back period, as proposed. We believe a
three-year look back period for the initial disclosures strikes the
right balance between the disclosure benefits to investors,
availability of historical information and compliance costs to
securitizers.\94\ Commentators suggested that periods from three to
five years would provide a sufficient period of data for investors to
make comparisons in order to identify underwriting deficiencies.\95\
However, we also recognize other commentators' suggestions that the
rule apply only prospectively because of concerns regarding the
availability and
[[Page 4499]]
comparability of historical information relating to repurchase demands
(including investor demands upon a trustee).\96\ In particular, older
data may be very hard or impossible for securitizers to obtain if they
have not had systems in place to track the data required for the
required disclosures, which may lead to less comparable data. In order
to balance the goals of the Act with commentators' concerns that all
securitizers may not be able to provide complete information, we are
also adopting a provision in Rule 15Ga-1 \97\ to permit a securitizer
to omit information that is unknown or not reasonably available to the
securitizer without unreasonable effort or expense similar to Exchange
Act Rule 12b-21.\98\ Under the final rule, a securitizer must provide
the information it possesses or it can acquire without unreasonable
effort or expense, and the securitizer must include a statement
describing why unreasonable effort or expense would be involved in
obtaining the omitted information.
---------------------------------------------------------------------------
\94\ See also discussion in Section II.A.5.c.
\95\ See e.g., letters from AFSA, ASF, Metlife and SIFMA.
\96\ See e.g., letters from ABA, ABASA, AFSA, ASF, BOA, CMBP,
CREFC, GSEs, Kutak, MBA, NABL, Roundtable, and Wells.
\97\ Rule 15Ga-1(a)(2). See e.g., letters from AFSA, ASF, BOA,
CREFC, Roundtable, and SIFMA.
\98\ 17 CFR 240.12b-21.
---------------------------------------------------------------------------
Seventh, we are adopting, as proposed, a requirement to disclose
the number, outstanding principal balance and percentage by principal
balance of assets that were repurchased or replaced for breach of
representation and warranties (columns (j) through (l)).\99\
---------------------------------------------------------------------------
\99\ Rule 15Ga-1(a)(1)(vii).
---------------------------------------------------------------------------
Eighth, we are persuaded by commentators' suggestions that we
should clarify our proposal for disclosures related to pending purchase
requests in order to better reflect the repurchase request and
resolution process in a comparable format, as opposed to if the
information were presented in footnotes.\100\ As a result, we are
adopting requirements to present more specific information about the
pending nature of the demand. We are requiring disclosure of the
number, outstanding principal balance and percentage by principal
balance of assets that are pending repurchase or replacement
specifically due to the expiration of a cure period (columns (m)
through (o))\101\ and where the demand is currently in dispute (columns
(p) through (r)).\102\ If the cure period has expired, and the demand
is not in dispute, the asset should be reflected in the ``demand
rejected'' columns described below.\103\
---------------------------------------------------------------------------
\100\ See e.g., letters from ABA, ASF, BOA, CMBP, Metlife,
Roundtable, and SIFMA.
\101\ Rule 15Ga-1(a)(1)(viii). See e.g., letters from BOA,
Roundtable, and SIFMA.
\102\ Rule 15Ga-1(a)(1)(ix). See e.g., letters from ASF, CMBP,
Metlife, and SIFMA.
\103\ See e.g., letter from SIFMA.
---------------------------------------------------------------------------
Ninth, we are also persuaded by commentator's suggestions that we
should clarify our proposal for disclosures related to unfulfilled
repurchase requests.\104\ As a result, we are adopting requirements to
present the number, outstanding principal balance and percentage by
principal balance of assets that were not repurchased or replaced
because the demand was withdrawn (columns (s) through (u)) \105\ and
because the demand was rejected (columns (v) through(x)).\106\
---------------------------------------------------------------------------
\104\ See fn. 100.
\105\ Rule 15Ga-1(a)(1)(x). See e.g., letters from CMBP,
Roundtable and SIFMA.
\106\ Rule 15Ga-1(a)(1)(xi). See e.g., letters from BOA,
Roundtable and SIFMA.
---------------------------------------------------------------------------
Tenth, we are addressing commentators' requests \107\ that we
clarify the disclosures required for the amount of outstanding
principal balance and percentage by principal balance by adopting an
instruction to specify that outstanding principal balance shall be the
principal balance as of the reporting period end date and the
percentage by principal balance shall be the outstanding principal
balance of the asset(s) subject to the repurchase request(s) divided by
the outstanding principal balance of the asset pool as of the reporting
period end date.
---------------------------------------------------------------------------
\107\ See e.g., letters from AFSA (suggesting that a method of
calculation should be prescribed or disclosed in order to provide
comparable data) and Roundtable (noting that the percentage by
principal balance is not straightforward, given that the pool size
will vary over time).
---------------------------------------------------------------------------
Eleventh, we are adopting, with slight modification from our
proposal, a requirement that the securitizer provide totals by each
issuing entity reported, and for all issuing entities for columns that
require number of assets and principal balance amounts.\108\
---------------------------------------------------------------------------
\108\ Rule 15Ga-1(a)(1)(xii). We had proposed to require totals
by asset class only.
---------------------------------------------------------------------------
Finally, the rule requires securitizers to include narrative
disclosure in order to further explain the information presented in the
table, if applicable. We are revising the proposed instruction to
clarify that securitizers should indicate by footnote and provide
narrative disclosure in order to further explain information presented
in all columns of the table, as appropriate.\109\ As noted above, we
received several comments requesting that we expressly require certain
disclosures to be provided by footnote or accompanying narrative
disclosure.\110\ Some commentators also requested confirmation that
providing narrative information would not jeopardize an issuer's
reliance upon a private offering exemptions or safe harbors.\111\ As we
noted in the Proposing Release, filing proposed Form ABS-15G would not
foreclose the reliance of an issuer on the private offering exemption
in the Securities Act of 1933 and the safe harbor for offshore
transactions from the registration provisions in Section 5.\112\
---------------------------------------------------------------------------
\109\ We had urged footnote disclosure for the entire table;
however, we had specifically proposed an instruction with respect to
repurchase requests that were pending.
\110\ See e.g., letters from SIFMA (requesting disclosure of the
party responsible for the breach, exclusion of originator no longer
in existence, and notation of assets subject to multiple repurchase
requests); Metlife (requesting disclosure of specific violations of
representations and warranties, status of the claims and the reason
for denial); and ABA (requesting disclosure of whether a demand was
resolved through an indemnity payment or purchase price adjustment
but not a repurchase).
\111\ See e.g., letters from ABA, ASF, BOA and SIFMA.
\112\ 15 U.S.C. 77e.
---------------------------------------------------------------------------
5. Form ABS-15G
(a) Proposed Form ABS-15G
As we discussed in the Proposing Release, the disclosures required
by Rule 15Ga-1 do not fit neatly within the framework of existing
Securities Act and Exchange Act Forms because those forms relate to
registered ABS transactions, and unregistered ABS transactions are not
required to file those forms.\113\ Therefore, we proposed new Form ABS-
15G to be filed on EDGAR so that parties obligated to make disclosures
related to Exchange Act-ABS under Rule 15Ga-1 could file the
disclosures on EDGAR. We proposed that a securitizer provide the
repurchase history for the last five years by filing Form ABS-15G at
the time a securitizer first offers an Exchange Act-ABS or organizes
and initiates an offering of Exchange Act-ABS, registered or
unregistered, after the effective date of the new rules, as adopted. In
addition, we proposed that going forward, a securitizer would provide
the disclosures for all outstanding Exchange Act-ABS on a monthly basis
by filing Form ABS-15G within 15 calendar days after the end of each
calendar month. We proposed continued periodic reporting through and
until the last payment on the last Exchange Act-ABS outstanding held by
a non-affiliate that was issued by the securitizer or an affiliate. We
also proposed that securitizers file Form ABS-15G to provide a notice
to terminate the reporting obligation and disclose the
[[Page 4500]]
date the last payment was made. Consistent with current filing
practices for other ABS forms,\114\ for purposes of making the
disclosures required by Rule 15Ga-1, we proposed that Form ABS-15G be
signed by the senior officer of the securitizer in charge of the
securitization.
---------------------------------------------------------------------------
\113\ However, a portion of the information required by Rule
15Ga-1 would be required in a registration statement and in periodic
reports as we discuss further below.
\114\ The Form 10-K report for ABS issuers must be signed either
on behalf of the depositor by the senior officer in charge of
securitization of the depositor, or on behalf of the issuing entity
by the senior officer in charge of the servicing. See General
Instruction J.3. of Form 10-K [17 CFR 249.310]. In addition, the
certifications for ABS issuers that are required under Section 302
of the Sarbanes-Oxley Act of 2002 [15 U.S.C. 7241] must be signed
either on behalf of the depositor by the senior officer in charge of
securitization of the depositor if the depositor is signing the Form
10-K report, or on behalf of the issuing entity by the senior
officer in charge of the servicing function of the servicer if the
servicer is signing the Form 10-K report. In our 2010 ABS Proposing
Release, we also proposed to require that the senior officer in
charge of securitization of the depositor sign the registration
statement (either on Form SF-1 or Form SF-3) for ABS issuers. See
Section II.F. of the 2010 ABS Proposing Release.
---------------------------------------------------------------------------
(b) Comments on the Proposed Rule
Comments received on new Form ABS-15G were mixed. Two commentators
requested that disclosures be provided on currently available forms
because Section 943 does not expressly require, nor create an
obligation to file on a new form.\115\ One commentator suggested that
the disclosure requirements apply only to an initial offering of an
Exchange Act-ABS, and not to ongoing reporting because they believe
that ongoing information regarding repurchase activity will provide
little benefit to investors who have already made the decision to
purchase a particular ABS.\116\ However, another commentator stated
that filing Form ABS-15G on EDGAR would make the disclosures readily
available to all investors and the public and would ensure that the
data is maintained, easy to find, and cost free for investors as well
as regulators and policymakers.\117\
---------------------------------------------------------------------------
\115\ See letters from AFSA (suggesting that securitizers be
given a choice of providing the information either on new Form ABS-
15G or by presenting the disclosure in related offering documents)
and ASF (noting that disclosure would be more useful to investors in
an offering document).
\116\ See letter from AFSA (but also noting that frequent
securitizers who sponsor multiple asset classes would find it easier
to make a single filing on Form ABS-15G rather than in a series of
prospectuses).
\117\ See letter from Levin.
---------------------------------------------------------------------------
Several commentators suggested that the trigger for the initial
filing not be tied to when a securitizer completes its first offering
after the effective date of the new rule.\118\ Of those, two
commentators suggested that the Form ABS-15G filings be required on a
certain date after the effective date of the new rules.\119\ In support
of the proposed trigger, one commentator noted that the prospect of a
new issuance by many securitizers may be delayed for a long period
following the effective date of the final rules. As a result, investors
and insurers of outstanding ABS would be deprived of the information at
a time when representation and warranty repurchase claims and disputes
related to residential mortgages, in particular, are increasing.\120\
Several commentators requested a long implementation period in order to
set up systems and gather historical data.\121\ Three commentators
proposed alternative filing rules suggesting we require securitizers to
file a single Form ABS-15G if no demands are received.\122\ Three
suggested that, thereafter, an annual confirmation could be filed to
confirm that no demands have occurred since the filing of the previous
Form ABS-15G.\123\
---------------------------------------------------------------------------
\118\ See e.g., letters from AFGI, AFSA, ASF, MBIA, Metlife and
SIFMA.
\119\ See Metlife (suggesting 90 days after effective date), and
ASF (suggesting no earlier than one year after effective date).
\120\ See letter from AFGI. Metlife also requested that sponsors
with significant outstanding securitizations should file Form ABS-
15G in order to enable fair comparisons for investors.
\121\ See e.g., letters from ASF, BOA, GSEs, MBA and SIFMA. See
further discussion about the transition period below in Section III.
\122\ See letters from ABA, ASF and SIFMA. In addition, two
other commentators suggested that only a statement or checkbox be
provided to confirm no activity to report if periodic reporting
would still be required. See letters from AFSA and NABL.
\123\ See letters from ABA, ASF and SIFMA.
---------------------------------------------------------------------------
Comments received on reporting frequency of ongoing reporting were
mixed, with some supporting monthly,\124\ quarterly,\125\ and annual
\126\ ongoing reporting. Several commentators suggested that reporting
should only be required if any repurchase activity has occurred.\127\
The preferred due date of the filing ranged from 30 days to 90 days
after the end of the period.\128\ In addition, some commentators
requested that the table be presented in periodic intervals rather than
on a cumulative basis.\129\
---------------------------------------------------------------------------
\124\ See letters from AFGI and ICI (generally supporting
monthly reporting), and Metlife (noting that monthly reporting would
be adequate and that a frequency longer than quarterly would fail to
provide investors with information about underwriting
deterioration).
\125\ Some commentators noted that the repurchase process may
move slowly, and monthly reporting may not be a useful interval for
investors. In particular, residential mortgage ABS typically provide
for cure periods of 60-90 days. Further, commentators argued that
monthly reporting of no change in activity would be burdensome. See
e.g., letters from ABA, ABASA, ASF, CREFC, Roundtable and SIFMA.
Other commentators generally supported a quarterly reporting
interval. See letters from BOA, CMBP, GSEs, MBA and NYC.
\126\ See letters from AFSA, GSEs, Kutak, NABL and NYC
(generally supporting an annual reporting interval).
\127\ See e.g., letters from ABA, AFSA, BOA, NABL, Roundtable
and SIFMA.
\128\ See letters from ABA and NABL (suggesting the Form ABS-15G
be required 45 days after period end). See also letters from AFSA,
CREFC, NYC and SIFMA.
\129\ See letter from Metlife (noting that repurchase activity
in more recent windows of time would provide useful information on
trends in asset quality). See also letter from ABA (noting that
cumulative reporting may make the information unwieldy and that
information about earlier periods would be available on the SEC Web
site).
---------------------------------------------------------------------------
(c) Final Form ABS-15G
We are adopting new Form ABS-15G so that securitizers may provide
the disclosures required by new Rule 15Ga-1. As noted above, the Act
does not specify when the disclosure should first be provided, or the
frequency with which it should be updated. As discussed above in
Section III.A.4.c., we are adopting a requirement to file initial
disclosures required by new Rule 15Ga-1 for the last three years.
However, we were persuaded by commentators' concerns that our proposal
to trigger the filing requirement of Form ABS-15G at the time a
securitizer first offers an Exchange Act-ABS or organizes and initiates
an offering of Exchange Act-ABS, registered or unregistered, after the
effective date of the new rules could deny market participants of
information about demand, repurchase and replacement activity.\130\
Further, delaying the required disclosure of information about
originators could impair investors' ability to compare issuing entities
and the originators of the underlying pools. Therefore, we are adopting
a requirement that any securitizer that issued an Exchange Act-ABS
during the three-year period ended December 31, 2011, that includes a
covenant to repurchase or replace an underlying asset for breach of a
representation or warranty, would be required to file on new Form ABS-
15G the disclosures required by new Rule 15Ga-1, if the securitizer has
Exchange Act-ABS that had such a covenant to repurchase or replace
outstanding held by non-affiliates as of December 31, 2011.\131\ If a
securitizer has no activity to report for the three-year period, then
it may indicate that by checking the appropriate box on Form ABS-15G.
The initial Form ABS-15G will be required to be filed no later than 45
days after the end of the three-year period, or on February 14, 2012.
---------------------------------------------------------------------------
\130\ See e.g., letters from AFGI, MBIA, Metlife and SIFMA.
\131\ Rule 15Ga-1(c).
---------------------------------------------------------------------------
[[Page 4501]]
As we discussed in the Proposing Release, while we believe that
Congress intended to provide investors with historical information
about repurchase activity so that investors may identify asset
originators with clear underwriting deficiencies, we also recognized
that securitizers may not have historically collected the information
required under the new rules. We are requiring that the initial
disclosures be limited to the last three years of activity, rather than
five years as proposed, in order to balance the requirements of Section
943 and the burden on securitizers to provide the historical
disclosures. As we note above, we are also adopting certain provisions
in new Rule 15Ga-1 in order to address commentators' concerns regarding
the production of historical information.\132\ On balance, we believe
that the new rule addresses the Act's requirement and investors' need
for historical disclosures in order to identify asset originators with
clear underwriting deficiencies, while also addressing securitizers'
concerns with the challenges of producing historical information and
related liability.
---------------------------------------------------------------------------
\132\ See Section II.A.4.c., Rule 15Ga-1(c)(1) and Item 1.01 of
Form ABS-15G.
---------------------------------------------------------------------------
We are also persuaded by commentators' views regarding the
frequency of reporting and, therefore, we are adopting a requirement
for securitizers to provide periodic disclosures of demand, repurchase
and replacement history on a quarterly basis \133\ by filing Form ABS-
15G on EDGAR within 45 days of the end of the calendar quarter.\134\ In
the Proposing Release, we noted that most transaction agreements
provide for monthly distributions, and also provide for reporting on a
monthly basis. We were persuaded, however, by commentators' suggestions
that demand, repurchase and replacement history could be presented in
less frequent intervals while still providing meaningful disclosure.
For instance, as commentators noted, the repurchase process may move
slowly, and monthly reporting may not be a useful interval for
investors if no activity typically occurs during such periods.\135\ We
also had proposed that ongoing disclosures be presented on a cumulative
basis, for each issuing entity. Instead, we are adopting, as suggested
by commentators, a requirement for securitizers to present only the
information for the quarter in their quarterly filing because
cumulative data may be cumbersome to manipulate and not be as useful to
identify recent trends as information presented on a quarter by quarter
basis.\136\ In addition, as noted in the Proposing Release, we
recognize that demands may have been made prior to the beginning of the
initial look back period and that resolution may have occurred after
that date. We are also adopting two instructions to clarify that a
securitizer would need to disclose activity during the reporting
period, even if it relates to assets that were subject to demands made
prior to the beginning of the reporting period,\137\ including if they
were made prior to the beginning of the three-year look back period.
Securitizers should include footnote disclosure to clarify, if
applicable.
---------------------------------------------------------------------------
\133\ See e.g., letters from ABA, ABASA, ASF, BOA, CMBP, CREFC,
GSEs, MBA, Metlife, NYC, Roundtable and SIFMA.
\134\ See Rule 15Ga-1(c)(2) and Item 1.02 of Form ABS-15G. See
e.g., letters from ABA and NABL.
\135\ See fn. 125. Also, as we discuss further below, we are
adopting amendments to Regulation AB that would require disclosure
of demand, repurchase and replacement history with respect to a
particular issuing entity to be provided in distribution reports,
which may occur more frequently than quarterly. For example, if a
Form 10-D is due to be filed monthly for a particular issuing
entity, then demand, repurchase and replacement history of that
particular ABS would have to be reported monthly. See e.g., letter
from SIFMA.
\136\ Rule 15Ga-1(c)(2). See letters from ABA (suggesting that
only updated information be provided) and Metlife (noting that
repurchase activity in more recent windows of time would provide
useful information on trends in asset quality). In addition,
investors may locate information about prior periods on our website
and as we discuss below in Section II.B.3., we are amending
Regulation AB to require cumulative repurchase history for a three-
year look back period in prospectuses. We also highlight the
instruction to Rule 15Ga-1(a)(1)(ii) which specifies that the table
should include all issuing entities with activity during the
quarterly reporting period, including those that are no longer
outstanding at the end of the calendar quarter.
\137\ See instructions to paragraph (a)(1) and (c)(1) of Rule
15Ga-1.
---------------------------------------------------------------------------
Further, to address commentators' concerns that certain issuers who
include a covenant to repurchase or replace pool assets in their
transaction agreements, but who are never presented with a repurchase
demand would be required to make disclosure, we are adopting a
provision, suggested by commentators,\138\ that in lieu of providing
the table, a securitizer may check a box indicating that it had no
demands during the quarter.\139\ Thereafter, a securitizer would have
suspended its obligation to report on a quarterly basis, until the time
when a demand occurs during the quarterly reporting period.\140\
However, the securitizer would be required to file an annual Form ABS-
15G to confirm that no demands were made during the entire year.\141\
If demands were made during a calendar quarter, the securitizer would
have to report that activity for the calendar quarter by filing Form
ABS-15G within 45 days of the end of the calendar quarter. The new rule
would also apply to new securitizers where the new securitizer would
have to file Form ABS-15G for the calendar quarter in which it issued
Exchange Act-ABS.\142\ If no demand activity occurred, it could check
the box indicating that no activity occurred and thereafter, would not
have to file Form ABS-15G on a quarterly basis until it had demand
history to report. A new securitizer would still be required to file an
annual Form ABS-15G to indicate it had no demand activity if true.
---------------------------------------------------------------------------
\138\ See e.g., letters from ABA and ASF.
\139\ Rule 15Ga-1(c)(2)(i).
\140\ If a securitizer had no activity during the initial three-
year period, and indicated that by checking the box on the initial
filing, then its obligation to file periodic filings would be
suspended. See Rule 15Ga-1(c)(2)(i).
\141\ Rule 15Ga-1(c)(2)(ii).
\142\ Rule 15Ga-1(c)(2)(i). We had proposed that the disclosure
requirements would be triggered with an offering of Exchange Act-
ABS. Under the final rule, a new securitizer would not be required
to make the initial three-year look back filing because it would not
have any Exchange Act-ABS outstanding as of December 31, 2011 and
thus, would not have any historical repurchase activity to report.
Thus, a new securitizer is only required to provide information on a
prospective basis.
---------------------------------------------------------------------------
We are also adopting, as proposed, the ability to terminate the
reporting obligation. The new rule allows a securitizer to terminate
its reporting obligation when the last payment is made on the last
Exchange Act-ABS outstanding held by a non-affiliate that was issued by
the securitizer or an affiliate.
Lastly, as discussed above, in an effort to limit the cost and
burden on municipal securitizers subject to the new rule as well as
allow issuers to provide the Rule 15Ga-1 disclosures for investors in
the same location as other disclosures regarding municipal securities,
we will permit municipal securitizers to satisfy the filing obligation
by filing the information required by new Rule 15Ga-1 on EMMA.\143\
---------------------------------------------------------------------------
\143\ Rule 314 of Regulation S-T.
---------------------------------------------------------------------------
B. Disclosure Requirements in Regulation AB Transactions
1. Proposed Amendments to Regulation AB
We re-proposed some of our 2010 ABS proposals for Regulation AB
with respect to disclosures regarding sponsors in prospectuses and with
respect to disclosures about the asset pool in periodic reports, so
that issuers would be required to include the disclosures in the same
format as
[[Page 4502]]
required by proposed Rule 15Ga-1(a).\144\ We proposed that issuers of
Reg AB-ABS provide disclosures in the same format as proposed Rule
15Ga-1(a) within a prospectus and within ongoing reports on Form 10-D.
For prospectuses, we proposed that if the underlying transaction
agreements provide a covenant to repurchase or replace an underlying
asset for breach of a representation or warranty, then issuers would be
required to provide in the body of the prospectus disclosure of a
sponsor's repurchase demand and repurchase and replacement history for
the last three years, pursuant to the format proscribed in Rule 15Ga-
1(a). In addition, we proposed to limit the disclosure required in the
prospectus to repurchase history for the same asset class as the
securities being registered. Our proposal did not include a materiality
threshold, as Section 943 includes no such standard. We proposed that a
reference be included in the prospectus to the Form ABS-15G filings
made by the securitizer (i.e., sponsor) of the transaction and disclose
the CIK number of the securitizer so that investors may easily locate
Form ABS-15G filings on EDGAR.
---------------------------------------------------------------------------
\144\ In the 2010 ABS Proposing Release, we also proposed to
amend Item 1110(c) of Regulation AB to require originators (of
greater than 20% of the assets underlying the pool) to disclose the
amount, if material, of publicly securitized assets originated or
sold by the sponsor that were the subject of a demand to repurchase
or replace for breach of the representations and warranties
concerning the pool assets that has been made in the prior three
years pursuant to the transaction agreements on a pool by pool basis
as well as the percentage of that amount that were not then
repurchased or replaced by the sponsor. That proposal remains
outstanding.
---------------------------------------------------------------------------
We also proposed to amend Item 1121 of Regulation AB so that
issuers would be required to disclose the demand, repurchase and
replacement history regarding the assets in the pool in the format
prescribed by new Rule 15Ga-1(a) in Form 10-D. In order to conform the
requirements to proposed Rule 15Ga-1, we also did not include a
materiality threshold. We proposed that the Form 10-D include a
reference to the Form ABS-15G filings made by the securitizer of the
transaction and disclose the CIK number of the securitizer so that
investors may easily locate Form ABS-15G filings on EDGAR. As we noted
in the Proposing Release, providing repurchase history disclosure in
prospectuses and in Form 10-D would be independent from and would not
alleviate a securitizer's obligation to disclose ongoing information
for all of their transactions as required by new Rule 15Ga-1.
2. Comments Received on the Proposal
Commentators generally supported our proposal to have Regulation AB
disclosures in the same format as required under proposed Rule 15Ga-1
to lessen the burden on securitizers and permit investors to more
readily review and compare the data.\145\ However, we also received
three comment letters suggesting that Regulation AB should be subject
to a materiality threshold.\146\
---------------------------------------------------------------------------
\145\ See letters from Metlife and SIFMA.
\146\ See letters from ASF, BOA and SIFMA.
---------------------------------------------------------------------------
One commentator suggested that the information presented in the
prospectus should be presented as of a date not later than 135 days
prior to the date of first use of the prospectus.\147\ We received one
comment letter which stated that monthly reporting is appropriate at
the issuing entity level where most ABS are making distributions to
investors on a monthly basis and monthly reporting is tied directly to
that schedule.\148\
---------------------------------------------------------------------------
\147\ See letter from BOA.
\148\ See letter from SIFMA.
---------------------------------------------------------------------------
Five commentators supported a different liability standard for
historical data \149\ and some suggested that we adopt implementation
in a fashion similar as we had provided for static pool
implementation.\150\
---------------------------------------------------------------------------
\149\ See letters from AFSA, ASF, BOA, Roundtable and SIFMA.
\150\ See letters from AFSA, ABA, BOA and SIFMA (suggesting that
information related to periods prior to the effective date or ABS
issued prior to the effective date not be considered part of the
prospectus or registration statement). See also Section III.B.4. of
the 2004 ABS Adopting Release.
---------------------------------------------------------------------------
3. Final Rule
We are adopting the amendment to Item 1104 substantially as
proposed with a few modifications in response to comments
received.\151\ We are revising the text of the regulation to refer to
assets ``securitized'' by a securitizer instead of ``originated and
transferred'', as proposed, to address commentators concerns and to
conform to Rule 15Ga-1 as described above in Section II.A.2. Also, as
proposed, tabular disclosure is required in prospectuses in the format
required by new Rule 15Ga-1 for the last three years.\152\ We are also
adopting, as proposed, a requirement that issuers include a reference
to the CIK number of the securitizer. In addition, and as suggested by
a commentator,\153\ we are adopting a requirement that the information
presented in the prospectus shall not be more than 135 days old.\154\
This provision should reduce the burdens on securitizers because it is
consistent with the disclosure conventions for static pool and interim
financial information as well as the quarterly filing deadlines we are
adopting today for Form ABS-15G.\155\ It also should not diminish the
quality of the information provided to investors because, as we discuss
above, commentators stated that the repurchase process is typically
slow and quarterly reporting is an appropriate interval to provide
useful information about demand and repurchase activity.\156\ In
addition, information subsequent to the last quarterly reporting period
may be available for a particular Exchange Act-ABS if it is required to
report on Form 10-D on a more frequent basis than quarterly, such as
monthly.
---------------------------------------------------------------------------
\151\ Item 1104(e) of Regulation AB.
\152\ Item 1104(e)(1) of Regulation AB. As we noted in the
Proposing Release, we proposed that prospectuses include disclosure
about the same asset class for a three-year look back period because
information about other asset classes and information older than
three years may make the size of the prospectus unwieldy and
investors should have ready access to more current information. See
fn. 57 of the Proposing Release.
\153\ See letter from BOA.
\154\ Item 1104(e)(3). For example, a prospectus dated May 12,
2012 could include information as of December 31, 2011 (the
information would be 133 days old); however, because a quarterly
report on Form ABS-15G for the period ending March 31, 2012, would
be due on May 15, 2012 (45 days after quarter end), then a
prospectus dated May 17, 2012 would need to provide disclosures as
of March 31, 2012.
\155\ See, e.g., Item 1105 of Regulation AB (17 CFR 229.1105),
Rule 3-01 of Regulation S-X (17 CFR 210.3-01) and Rule 3-12 of
Regulation S-X (17 CFR 210.3-12).
\156\ See fn. 125 and 135.
---------------------------------------------------------------------------
Finally, as we discuss above, commentators expressed significant
concern about the ability to produce historical data to meet the
requirements of Item 1104 and requested specific relief from liability
for historical information.\157\ We recognize that issuers may not have
been collecting the necessary data for periods before the compliance
date of the new rules and even if they had been collecting the
necessary information, the information may not have been collected
under processes and controls with a view toward disclosure in a
prospectus. However, we believe that concerns regarding the
availability of data on a going forward basis will not be applicable.
Therefore, we are addressing commentators' concerns by phasing in the
disclosure requirement. A prospectus filed in the first year after the
compliance date, will be permitted to include a one-year look back
period, and in the second year after the compliance date, a two-year
look back period.\158\ Prospectuses filed in the third
[[Page 4503]]
year after the compliance date and thereafter must include the full
three-year look back period.
---------------------------------------------------------------------------
\157\ See e.g. letters from AFSA, ASF, BOA, Roundtable and
SIFMA.
\158\ Therefore, prospectuses filed between February 14, 2012
and February 13, 2013 would be permitted to include only one year of
repurchase activity; prospectuses filed between February 14, 2013
and February 13, 2014 would be permitted to include only two years
of repurchase activity. All prospectuses filed on or after February
14, 2014 would be required to include three years of repurchase
activity. Investors may locate information for prior periods on Form
ABS-15G.
---------------------------------------------------------------------------
We are also adopting the amendment to Item 1121, as proposed, so
that investors will receive disclosures with their reports on Form 10-D
about the demand, repurchase and replacement history with respect to a
particular issuing entity.
C. Disclosure Requirements for NRSROs
1. Proposed New Rule 17g-7
We proposed to add new Exchange Act Rule 17g-7, which would
implement Section 943(1) of the Act by requiring an NRSRO to make
certain disclosures in any report accompanying a credit rating relating
to an asset-backed security.\159\ Specifically, in accordance with
Section 943(1), Rule 17g-7 as proposed would require an NRSRO \160\ to
include, in such reports, a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations, warranties and
enforcement mechanisms in issuances of similar securities.\161\ As
discussed above, the Act also amended the Exchange Act to include the
definition of an ``asset-backed security'' and Section 943 of the Act
references that definition.\162\ Therefore, we proposed that under Rule
17g-7 an NRSRO must provide the disclosures with respect to any
Exchange Act-ABS, whether or not the security is offered in a
transaction registered with the Commission.
---------------------------------------------------------------------------
\159\ In June 2008, we proposed a new Rule 17g-7 that would have
required an NRSRO to publish a report containing certain information
each time the NRSRO published a credit rating for a structured
finance product or, as an alternative, use ratings symbols for
structured finance products that differentiated them from the credit
ratings for other types of debt securities. See Exchange Act Release
No. 57967 (June 16, 2008), [73 FR 36212]. In November 2009, we
announced that we were deferring consideration of action on that
proposal and separately proposed a new Rule 17g-7 to require annual
disclosure by NRSROs of certain information. See Proposed Rules for
Nationally Recognized Statistical Rating Organizations, SEC Release
34-61051 (November 23, 2009), [74 FR 63866]. Although we are
adopting a new rule with the same rule number, that proposal remains
outstanding.
\160\ Current Item 1111(e) of Regulation AB [17 CFR 1111(e)]
already requires issuers to disclose the representations and
warranties related to the transaction in prospectuses. Additionally,
in the 2010 ABS Proposing Release, the Commission proposed changes
to this item to require a description of any representation and
warranty relating to fraud in the origination of the assets, and a
statement if there is no such representation or warranty.
\161\ As discussed in the Proposing Release, we anticipate that
one way an NRSRO could fulfill the requirement to describe how
representations, warranties and enforcement mechanisms differ from
those provided in similar securities would be to review previous
issuances both on an initial and an ongoing basis in order to
establish ``benchmarks'' for various types of securities and revise
them as appropriate.
\162\ See Section 3(a)(77) of the Exchange Act, as amended by
the Act.
---------------------------------------------------------------------------
In the Proposing Release we noted that Section 943, by its terms,
applies to any report accompanying a credit rating for an ABS
transaction, regardless of when or in what context such reports and
credit ratings are issued. Proposed Rule 17g-7 was intended to reflect
the broad scope of this congressional mandate. In addition, we proposed
a note to the new rule which would clarify that for the purposes of the
proposed rule, a ``credit rating'' would include any expected or
preliminary credit rating issued by an NRSRO.\163\ We noted in the
Proposing Release that in ABS transactions, pre-sale reports are
typically issued by an NRSRO at the time the issuer commences the
offering and typically include an expected or preliminary credit rating
and a summary of the important features of a transaction. We also noted
that disclosure at the time pre-sale reports are issued is particularly
important to investors, since such reports provide them with important
information prior to the point at which they make an investment
decision.\164\
---------------------------------------------------------------------------
\163\ As explained in the Proposing Release, we intend the term
``preliminary credit rating'' to include any rating, any range of
ratings, or any other indications of a rating used prior to the
assignment of an initial credit rating for a new issuance. See
generally Credit Ratings Disclosure, SEC Release No. 33-9070
(October 7, 2009) [74 FR 53086].
\164\ We further noted that Section 932 of the Act amends
Section 15E of the Exchange Act to require the Commission to adopt
rules requiring NRSROs to prescribe and use a form to accompany the
publication of each credit rating that discloses certain
information. See Section 932 of the Act. For the purposes of Section
943 and new Rule 17g-7, such a form would clearly be a ``report''
and, as such, if published in connection with a rating relating to
an asset-backed security, would therefore require the necessary
disclosures regarding the representations, warranties and
enforcement mechanisms available to investors and how they differ
from the representations, warranties and enforcement mechanisms in
issuances of similar securities.
---------------------------------------------------------------------------
2. Comments Received on Proposed Rule
We received two comment letters expressing general support for the
enhanced disclosure that the proposed Rule 17g-7 would require.\165\
One commentator noted that it should facilitate an investor's
understanding of available remedies for a breach and that the
additional requirement for NRSROs to produce information regarding the
representations, warranties and enforcement mechanisms available to
investors in issuances of similar securities would further enhance the
value of this information for investors by allowing them to readily
compare various transactions involving the same asset class or similar
asset class.\166\
---------------------------------------------------------------------------
\165\ See letters from ICI and Levin.
\166\ See letter from ICI.
---------------------------------------------------------------------------
Two commentators requested that the rule text be revised to refer
exclusively to representations and warranties regarding the pool
assets.\167\ One commentator expressed its belief that Congress
intended Section 943(1) to include those representations and warranties
that an issuer makes about the underlying assets, not those concerning
other aspects of the transaction, e.g., corporate or governance
representations.\168\
---------------------------------------------------------------------------
\167\ See letters from ABA and Moody's.
\168\ See letter from Moody's.
---------------------------------------------------------------------------
We received several comments regarding the term ``similar
securities.'' Several commentators requested that we clarify or
expressly define the term,\169\ while one commentator suggested that we
require all NRSROs (in collaboration with investors and other market
participants) to agree on concepts of ``similar securities.'' \170\ On
the other hand, one commentator argued that deciding whether one
security is similar to another, and therefore deciding whether their
terms are comparable, is ultimately a question of analytic judgment
that should be left in the hands of the NRSRO.\171\
---------------------------------------------------------------------------
\169\ See e.g., letters from ASF, CREFC, Fitch, Levin, MBA,
Realpoint and SIFMA.
\170\ See letter from Metlife.
\171\ See letter from S&P.
---------------------------------------------------------------------------
Some commentators urged us to allow NRSROs to provide the required
disclosures by reference to a transaction's offering documents or other
materials disclosed by the issuer or underwriter, primarily due to the
anticipated length of the disclosures.\172\ One commentator suggested
as an alternative limiting the disclosure requirement to a summary of
the provisions.\173\ However, another commentator opposed allowing
NRSROs to satisfy the proposed disclosure requirement by referring to
prospectus disclosure, noting the enhanced utility to investors that
would arise from placing the relevant disclosure in a ratings report
alongside information about the representations,
[[Page 4504]]
warranties and enforcement mechanisms available to investors in
issuances of similar securities.\174\
---------------------------------------------------------------------------
\172\ See letters from ASF, Moody's, Realpoint and S&P.
\173\ See letter from ASF.
\174\ See letter from ICI.
---------------------------------------------------------------------------
Commentators were also divided on the issue of utilizing, for the
purpose of the required disclosure, industry standards for the
representations, warranties and enforcement mechanisms available to
investors. Several commentators voiced support for allowing comparisons
to industry standards for the representations, warranties and
enforcement mechanisms available to investors as an alternative to
comparisons to the representations, warranties and enforcement
mechanisms available to investors in issuances of similar
securities,\175\ while others suggested that the rule should eliminate
the comparison to standard securities altogether and replace it with a
requirement to provide comparisons to industry standards.\176\ One
commentator suggested instead that the rule itself establish or
reference mechanisms ``to encourage the development and standardization
of effective ABS representations and warranties to increase the ability
to make meaningful comparisons among ABS securities and to strengthen
investor confidence that promises made to investors can be enforced.''
\177\ Other commentators, however, opposed the use of industry
standards for comparative purposes.\178\ Finally, some commentators
suggested that the rule should expressly state that comparisons to
either an NRSRO's internal benchmarks for representations, warranties
and enforcement mechanisms or to any applicable industry standards
would meet the requirement.\179\
---------------------------------------------------------------------------
\175\ See letters from ASF, CREFC, Moody's and S&P.
\176\ See letters from Realpoint and Metlife. The latter
commentator suggested comparisons to industry standards as an
alternative to its preferred basis of comparison, a uniform set of
representations, warranties and enforcement mechanisms within each
underlying asset class agreed upon by all NRSROs in collaboration
with investors and other market participants.
\177\ See letter from Levin.
\178\ See letters from MBA and SIFMA.
\179\ See letters from ASF and S&P. The ASF noted that its NRSRO
members have broad-based internal measures for representations and
warranties in ABS transactions, and believe that these measures
could act as benchmarks, or as a starting point for developing
benchmarks, to meet the required comparison.
---------------------------------------------------------------------------
We received two comment letters expressing conditional support for
the note to the proposed rule clarifying that for the purposes of the
proposed rule, a ``credit rating'' would include any expected or
preliminary credit rating issued by an NRSRO.\180\ One of these
commentators expressed its belief that the required disclosure should
be limited only to pre-sale reports,\181\ while the second stated that
its support was contingent on our allowing all required disclosure
under the rule to be done by reference to issuer or underwriter
materials.\182\ Another commentator, noting that under existing market
practice, the timing of pre-sale reports is often unpredictable and
there may have been instances where rating agencies have not provided
pre-sale reports for rated transactions, expressed its belief that the
required disclosure should be part of the offering memorandum.\183\
---------------------------------------------------------------------------
\180\ See letters from Realpoint and S&P.
\181\ See letter from Realpoint (also arguing for the exclusion
of surveillance reports from the rule's scope).
\182\ See letter from S&P.
\183\ See letter from Metlife.
---------------------------------------------------------------------------
Two commentators expressed their belief that the rule's
requirements should apply to issuer paid ratings only.\184\ Another
commentator, however, argued against exempting non-issuer paid ratings
from the scope of the rule, noting that Section 943(1) does not
discriminate between NRSRO business models.\185\ Finally, one
commentator argued that the rule should not apply to ratings of ABS
issuances by foreign issuers that are not issuing securities into the
U.S. market.\186\
---------------------------------------------------------------------------
\184\ See letters from ABA and Realpoint.
\185\ See letter from S&P.
\186\ See letter from Moody's.
---------------------------------------------------------------------------
3. Final Rule
We are adopting new Rule 17g-7 as proposed, including the proposed
note to the rule indicating that for the purposes of the rule's
requirement, a ``credit rating'' includes any expected or preliminary
credit rating issued by an NRSRO. As explained in the Proposing
Release, we intend the term ``preliminary credit rating'' to include
any rating, any range of ratings, or any other indications of a rating
used prior to the assignment of an initial credit rating for a new
issuance.
We acknowledge commentators' concerns about the interpretation of
the term ``similar securities,'' as well as some commentators' requests
that NRSROs be allowed to utilize comparisons to industry standards as
an alternative to, or instead of, comparisons to the representations,
warranties and enforcement mechanisms available to investors in
issuances of similar securities. While we recognize these views, we are
concerned that defining similar securities or allowing reliance
exclusively on industry standards for the purpose of the required
comparisons could create unintentional gaps in disclosure. We expect,
however, that in making its own determinations as to what constitutes a
``similar security'' for the purposes of the required comparisons, an
NRSRO would draw upon its knowledge of industry standards, along with
its own experience with previously rated deals and its knowledge of the
market in general. As discussed in the Proposing Release, we anticipate
that one way an NRSRO could fulfill the requirement to describe how
representations, warranties and enforcement mechanisms differ from
those provided in similar securities would be to review previous
issuances both on an initial and an ongoing basis in order to
establish, and periodically revise as appropriate, ``benchmarks'' for
various types of securities.
As noted above, several commentators suggested we allow NRSROs to
satisfy the requirements of new Rule 17g-7 by incorporating the
required disclosures by reference to the transaction's offering
documents. We were not persuaded, however, by these comments and
believe that Congress intended, by including clear and specific
language in Section 943(1), that investors receive the disclosures
within the ratings report itself. Similarly, in response to
commentators' suggestions that the rule should apply only to
representations and warranties regarding the pool assets, as well as to
the suggestion that the rule should not apply to foreign issuers that
are not issuing securities into the U.S. market, we note that nothing
in the text of Section 943(1) would support drawing any such
distinctions in connection with reports issued by NRSROs subject to
Commission oversight.
We also acknowledge commentators' concerns regarding the
application of the rule to unsolicited ratings. We note that this
concern can be addressed directly by NRSROs themselves through
disclosure in their reports accompanying credit ratings. For example,
an NRSRO could disclose whether it was hired by the arranger and
therefore received information on the representations, warranties and
enforcement mechanisms directly; was issuing an unsolicited rating
using access to arranger information provided under Rule 17g-
5(a)(3),\187\ in which case
[[Page 4505]]
it obtained that information indirectly; or was issuing an unsolicited
rating without relying on Rule 17g-5(a)(3), in which case it may not
have had access to the information at all. The rule as adopted does not
include any limitation on the application of the disclosure requirement
to ``any report accompanying a credit rating.'' As such, the
requirements of the rule will apply to reports issued in conjunction
with both solicited and unsolicited ratings.
---------------------------------------------------------------------------
\187\ 17 CFR 240.17g-5(a)(3). This provision requires an NRSRO
that is hired by an arranger to determine an initial credit rating
for a structured finance product to take certain steps designed to
allow an NRSRO that is not hired by the arranger to nonetheless
determine an initial credit rating--and subsequently monitor that
credit rating--for the structured finance product. See Amendments to
Rules for Nationally Recognized Statistical Rating Organizations,
SEC Release No. 34-61050 (November 23, 2009) [74 FR 63832].
---------------------------------------------------------------------------
III. Transition Period
The new rules will be effective 60 days after publication in the
Federal Register; however, securitizers, issuers and NRSROs will be
required to comply with the new rules as described below.
With regard to Rule 15Ga-1, we received several comments suggesting
a compliance date of six months,\188\ one year,\189\ 18 months \190\
and two years \191\ from the effective date of the new rule. Some
commentators noted that securitizers need a longer time to implement
the systems for tracking and recording repurchase requests necessary to
comply with the rule.\192\ However, other commentators believed that
many securitization sponsors and servicers have systems in place and
have collected the information.\193\
---------------------------------------------------------------------------
\188\ See letter from Roundtable (but noting a six month period
would only be appropriate if the final rule would only require
prospective information).
\189\ See letter from ASF (suggesting a compliance date of no
earlier than one year from the date of publication of the final rule
if the rule would only require prospective information).
\190\ See letters from BOA and SIFMA.
\191\ See letter from GSEs. See also letter from Roundtable
suggesting an alternative of 24 months if securitizers are required
to re-create data that was not maintained.
\192\ See letters from BOA, MBA and SIFMA.
\193\ See letters from AFGI and Metlife.
---------------------------------------------------------------------------
We have considered the comments and as noted earlier, for those
securitizers other than municipal securitizers, who have issued ABS
during the three-year period ended December 31, 2011, the rule will
require that the initial filing pursuant to new Rule 15Ga-1 be filed on
EDGAR by February 14, 2012. We are providing this transition period so
that securitizers and other transaction participants may set up systems
and gather historical data and to track the data.
In addition, as discussed above, we are delaying compliance for a
period of three years for municipal securitizers. Therefore, municipal
securitizers will be required to make the initial filing required by
Rule 15Ga-1(c)(1) for the three years ended December 31, 2014 and file
on February 14, 2015. Also, as discussed above, we will permit
municipal securitizers to satisfy the rule's filing obligation by
filing the information on EMMA.
We are also providing the same transition period with respect to
demand, repurchase and replacement history disclosure in registration
statements and prospectuses in accordance with Regulation AB;
therefore, Item 1104 disclosures would be required with the first bona
fide offering of registered ABS on or after February, 14, 2012. The
information in prospectuses should be as of date no older than 135
days. However, as we describe above, we are phasing in the look back
period in the first two years of compliance.\194\
---------------------------------------------------------------------------
\194\ In the first year after the compliance date issuers may
limit the disclosures to the prior year of activity and in the
second year after the compliance date, disclosures may be limited to
the prior two years of activity.
---------------------------------------------------------------------------
With respect to Form 10-Ds, the information should be provided with
respect to the particular ABS that is required to report on Form 10-D
after December 31, 2011. Securitizers will already be obligated to
report information with respect to transactions issued prior to
December 31, 2011 on Form ABS-15G on a quarterly basis; therefore, the
information required by new Item 1121(c) of Regulation AB should be
readily available to report on Form 10-D for a particular Reg AB-ABS
(including for Reg AB-ABS issued prior to December 31, 2011).
With respect to Rule 17g-7, we received two comments about the
transition period, one requesting six months \195\ and the other one
year,\196\ in each case primarily to be able to comply with the
requirement to perform a comparison to similar securities. We are
providing a period of six months from the effective date of the new
rule for NRSROs to comply with new Rule 17g-7. We believe this is
sufficient time to allow NRSROs to set up the systems to collect,
maintain and analyze previous issuances to establish benchmarks.
---------------------------------------------------------------------------
\195\ See letter from Moody's.
\196\ See letter from Fitch.
---------------------------------------------------------------------------
IV. Paperwork Reduction Act
A. Background
Certain provisions of the rule amendments contain ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (PRA).\197\ We published notice requesting
comment on the collection of information requirements in the Proposing
Release, and we submitted these requirements to the Office of
Management and Budget (OMB) for review in accordance with the PRA.\198\
---------------------------------------------------------------------------
\197\ 44 U.S.C. 3501 et seq.
\198\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------
An agency may not conduct or sponsor, and a person is not required
to comply with, a collection of information unless it displays a
currently valid control number. The titles for the collections of
information are:
(1) ``Form ABS-15G'' (a new collection of information);
(2) ``Regulation S-K'' (OMB Control No. 3235-0071); \199\ and
---------------------------------------------------------------------------
\199\ The paperwork burden from Regulation S-K is imposed
through the forms that are subject to the requirements in those
regulations and is reflected in the analysis of those forms. To
avoid a Paperwork Reduction Act inventory reflecting duplicative
burdens and for administrative convenience, we assign a one-hour
burden to Regulation S-K.
---------------------------------------------------------------------------
(3) ``Rule 17g-7'' (a new collection of information).
The regulation listed in No. 2 was adopted under the Securities Act
and the Exchange Act and sets forth the disclosure requirements for
registration statements and periodic and current reports filed with
respect to asset-backed securities and other types of securities to
inform investors.
The regulations and form listed in Nos. 1 and 3 are new collections
of information under the Act. Rule 15Ga-1 would require securitizers to
provide disclosure regarding fulfilled and unfulfilled repurchase
requests with respect to Exchange Act-ABS pursuant to the Act. Form
ABS-15G is a new form type that will contain Rule 15Ga-1 disclosures
and be filed with the Commission. Rule 17g-7 will require NRSROs to
provide disclosure regarding representations, warranties, and
enforcement mechanisms available to investors in any report
accompanying a credit rating issued by an NRSRO in connection with an
Exchange Act-ABS transaction.
Compliance with the amendments is mandatory. Responses to the
information collections will not be kept confidential and there is no
mandatory retention period for the collections of information.
B. Summary of the Final Rules
As discussed in more detail above, the new rules and amendments we
are adopting will require:
ABS securitizers to disclose demand, repurchase and
replacement history in a tabular format for an initial three-year look
back period ending December 31, 2011;
ABS securitizers to disclose, subsequent to that date,
demand,
[[Page 4506]]
repurchase and replacement activity in a tabular format on a quarterly
basis;
ABS issuers to disclose demand, repurchase and replacement
history for a three-year look back period, in the same tabular format
as new Rule 15Ga-1, in the body of the prospectus;
ABS issuers to disclose demand, repurchase and replacement
activity for a specific ABS, in the same tabular format, in periodic
reports filed on Form 10-D; and
NRSROs to disclose, in any report accompanying a credit
rating for an ABS transaction, the representations, warranties and
enforcement mechanisms available to investors and how they differ from
the representations, warranties and enforcement mechanisms in issuances
of similar securities.
The new rules implement Section 943 of the Act as well as conform
disclosure in prospectuses and ongoing reports for ABS sold in
registered transactions.
C. Summary of Comment Letters on the PRA Analysis and Revisions to
Proposals
In the Proposing Release, we requested comment on the PRA analysis.
We have made several changes in response to comments on the substance
of the proposals that are designed to avoid potential unintended
consequences and reduce possible additional costs or burdens pointed
out by commentators. For example, in response to comment letters
regarding the burdens of monthly reporting pursuant to Rule 15Ga-1, we
have made responsive revisions to change to a quarterly periodic
reporting requirement. We are also permitting a securitizer to suspend
its reporting obligation as long as it has no repurchase activity for
the reporting period; however, a securitizer would still have to
provide an annual confirmation that no disclosure is required under
Rule 15Ga-1 by checking a box on new Form ABS-15G.
We received one comment letter addressing our PRA burden estimates
for Rule 17g-7, as proposed. The commentator argued that our PRA
estimate of 10 hours underestimated the time that NRSROs would need to
gather all of the information to conduct the comparisons required by
the rule and requested an adequate transition period in order to
prepare to comply with the rule.\200\ The comment letter, however, did
not acknowledge the additional burden estimates that we provided for in
the Proposing Release. In addition to the estimated 10 hours per
transaction to compare the terms of the current transaction to the
benchmarks, cited by the commentator, we also estimated an initial
burden of 3,000 hours to set up systems to establish benchmarks and an
additional 3,000 hours per year to revise the various benchmarks.
Because we believe these estimates adequately estimate the burden
imposed by Rule 17g-7, we are not revising our estimates with respect
to Rule 17g-7.
---------------------------------------------------------------------------
\200\ See letter from Fitch.
---------------------------------------------------------------------------
D. PRA Reporting and Cost Burden Estimates
Our PRA burden estimates for the rule amendments are based on
information that we receive on entities assigned to Standard Industrial
Classification Code 6189, the code used with respect to asset-backed
securities, as well as information from outside data sources.\201\ When
possible, we base our estimates on an average of the data that we have
available for years 2004, 2005, 2006, 2007, 2008, and 2009.
---------------------------------------------------------------------------
\201\ We rely on two outside sources of ABS issuance data. We
use the ABS issuance data from Asset-Backed Alert on the initial
terms of offerings, and we supplement that data with information
from Securities Data Corporation (SDC).
---------------------------------------------------------------------------
In adopting rules under the Credit Rating Agency Reform Act of 2006
(``the Rating Agency Act''),\202\ as well as proposing additional rules
in November 2009, we previously estimated that approximately 30 credit
rating agencies would be registered as NRSROs.\203\
---------------------------------------------------------------------------
\202\ Pub. L. No. 109-291 (2006).
\203\ See e.g., Section VIII of Proposed Rules for Nationally
Recognized Statistical Rating Organizations, SEC Release No. 34-
61051 (Dec. 4, 2009) [74 FR 63866].
---------------------------------------------------------------------------
1. Form ABS-15G
This new collection of information relates to new disclosure
requirements for securitizers that offer Exchange Act-ABS. Under the
new rules, such securitizers are required to disclose demand,
repurchase and replacement history with respect to pool assets across
all trusts aggregated by securitizer. We had proposed that the new
information be required at the time a securitizer offers Exchange Act-
ABS after the implementation of the new rule, and then monthly, on an
ongoing basis as long as the securitizer has Exchange Act-ABS
outstanding held by non-affiliates. Instead, we are adopting that the
new information be required for all securitizers that offered Exchange
Act-ABS during the three-year period ending December 31, 2011, and that
have Exchange Act-ABS outstanding that are held by non-affiliates.
Going forward, periodic disclosures will be required on a quarterly
basis. We are also permitting securitizers to suspend quarterly
reporting so long as they have no activity for the quarterly period;
however a securitizer is required, annually, to confirm that they had
no activity for the year. The disclosures are required to be filed on
EDGAR on new Form ABS-15G, except that municipal securitizers may
satisfy their reporting obligations by filing their disclosures on
EMMA. As discussed in the Proposing Release, we believe that the costs
of implementation would include costs of collecting the historical
information, software costs, costs of maintaining the required
information, and costs of preparing and filing the form. Although the
new requirements apply to securitizers, which by definition include
both sponsors and issuers, we base our estimates on the number of
unique ABS sponsors because we are also providing under the final rule,
that issuers affiliated with a sponsor would not have to file a
separate Form ABS-15G to provide the same Rule 15Ga-1 disclosures.
Our estimates in the Proposing Release were based on the number of
unique ABS securitizers (i.e., sponsors) over 2004-2009, which was 540,
for an average of 90 unique securitizers per year.\204\ We base our
burden estimates for this collection of information on the assumption
that most of the costs of implementation would be incurred before the
securitizer files its first Form ABS-15G. Because ABS issuers currently
have access to systems that track the performance of the assets in a
pool we believe that securitizers should also have access to
information regarding whether an asset had been repurchased or
replaced. However, securitizers may not have historically collected the
information and systems may not currently be in place to track when a
demand has been made, and in particular, systems may not be in place to
track those demands made by investors upon trustees. Therefore,
securitizers would incur a one-time cost to compile historical
information in systems. Furthermore, the burden to collect and compile
the historical information may vary significantly between securitizers,
due to the number of asset classes and number of ABS issued by a
securitizer.
---------------------------------------------------------------------------
\204\ We base the number of unique sponsors on data from SDC.
---------------------------------------------------------------------------
For the initial filing, we estimate that 270 unique securitizers
would be required to file Form ABS-15G.\205\ We
[[Page 4507]]
estimate that a securitizer would incur a one-time setup cost for the
initial filing of 852 hours to collect and compile historical
information and adjust its existing systems to collect and provide the
required information going forward.\206\ Therefore, we estimate that it
would take a total of 230,040 hours for a securitizer to set up the
mechanisms to file the initial Rule 15Ga-1 disclosures.\207\ We
allocate 75% of these hours (172,530 hours) to internal burden for all
securitizers. For the remaining 25% of these hours (57,510 hours), we
use an estimate of $400 per hour for external costs for retaining
outside professionals totaling $23,004,000.
---------------------------------------------------------------------------
\205\ We estimate 270 securitizers for the three-year period
from January 1, 2009-December 31, 2011, the look back period for the
initial disclosures, (90 unique securitizers x 3 years). Also, as
noted above, municipal securitizers will not be subject to Rule
15Ga-1 until three years after the implementation date for other
securitizers. For purposes of the PRA, however, we have calculated
the burden estimates as if the rule was fully phased in for all
companies.
\206\ The value of 852 hours for setup costs is based on staff
experience. In the Proposing Release, we estimated that 672 of those
hours will be to set up systems to track the information and is
calculated using an estimate of two computer programmers for two
months, which equals 21 days per month times two employees times two
months times eight hours per day.
\207\ 852 hours to adjust existing systems per securitizer x 270
average number of unique securitizers.
---------------------------------------------------------------------------
After a securitizer has made the necessary adjustments to its
systems in connection with the new rule and, after an initial filing of
Form ABS-15G disclosures has been made, securitizers will have to file
Form ABS-15G on a quarterly basis, unless it suspends its reporting
obligation. We estimate that each subsequent quarterly filing of Form
ABS-15G to disclose ongoing information by a securitizer will take
approximately 30 hours to prepare, review and file. We estimate, for
PRA purposes, that the average number of quarterly Form ABS-15G filings
per year will be 720.\208\
---------------------------------------------------------------------------
\208\ The Form ABS-15G is required to be filed on a quarterly
basis; however, based on comments received that securitizers of
certain asset classes would be able to immediately suspend the
quarterly reporting requirement because they have not received
demands for repurchase (See letters from ABA and ASF) and data
available, we are estimating that 90 securitizers would be able to
suspend their quarterly reporting requirement after filing the
initial filing. Therefore, we estimate that 180 securitizers would
be subject to the quarterly reporting requirement (270-90). As a
result, we expect 720 quarterly filings of Form ABS-15G per year
(180 x 4 quarterly filings per year). We assume that the number of
quarterly filings will remain the same in the second and third years
after implementation because we estimate that the average number of
new securitizers that will trigger the reporting obligation each
year will be 90, but we also use the same estimate of 90
securitizers that would be able to suspend its quarterly reporting
requirement, resulting in no increase in the number of securitizers
or quarterly filings.
---------------------------------------------------------------------------
Therefore, after the initial filing is made, we estimate the total
annual burden hours for preparing and filing the disclosure will be
21,600 hours.\209\ We allocate 75% of those hours (16,200 hours) to
internal burden hours for all securitizers and 25% of those hours
(5,400 hours) for professional costs totaling $400 per hour of external
costs of retaining outside professionals totaling $2,160,000.
---------------------------------------------------------------------------
\209\ 30 hours x 720 filings.
---------------------------------------------------------------------------
In addition, securitizers that have suspended their quarterly
reporting obligation are required to file one annual confirmation that
no repurchase activity has occurred for the calendar year. We estimate
an average of 90 confirmation filings per year.\210\ We estimate that
each annual filing to confirm that no activity occurred on Form ABS-15G
will take approximately 5 hours to prepare, review and file, therefore
we estimate the total annual burden hours to be 450.\211\ We allocate
75% of those hours (338 hours) to internal burden hours for all
securitizers and 25% of those hours (113 hours) for professional costs
totaling $400 per hour of external costs of retaining outside
professionals totaling $45,000.
---------------------------------------------------------------------------
\210\ Because the first annual confirmation filing would not be
due until February 2013, we estimate no annual filings in the first
year of implementation. In the second year of implementation we
estimate 90 securitizers will file the annual confirmation. In the
third year, we estimate that 180 securitizers will file the annual
confirmation. The total number of annual confirmations filed would
be 270 over three years, therefore we estimate for PRA purposes, an
annual average of 90 filings.
\211\ 5 hours x 90 filings.
---------------------------------------------------------------------------
Therefore, the total internal burden hours are 189,068 \212\ and
the total external costs are $25,209,000.\213\ The increase from our
original burden estimate in the Proposing Release is primarily due to
the change in the trigger for the initial filing requirement. However,
we have significantly reduced the burden estimate on a going forward
basis by requiring quarterly, instead of monthly filings, as proposed,
as well as permitting securitizers to suspend the quarterly reporting
obligation.
---------------------------------------------------------------------------
\212\ 172,530 hours + 16,200 hours + 338 hours.
\213\ $23,004,000 + $2,160,000 + $45,000.
---------------------------------------------------------------------------
2. Forms S-1, S-3 and 10-D
We are requiring that asset-backed securities offered on Forms S-1
and S-3 include the required Rule 15Ga-1 disclosures for the same asset
class in registration statements. We are also requiring that issuers of
registered ABS include the new Rule 15Ga-1 disclosures for only the
pool assets on Form 10-D, which contains periodic distribution and pool
performance information. The burden for the collection of information
is reflected in the burden hours for Form ABS-15G filed by a
securitizer; however, Forms S-1, S-3 and 10-D are filed by asset-backed
issuers, and issuers may include a portion of the information in the
prospectus and in periodic reports. Therefore, we have not included
additional burdens for Forms S-1, S-3 and 10-D.
3. Regulation S-K
Regulation S-K, which includes the item requirements in Regulation
AB, contains the requirements for disclosure that an issuer must
provide in filings under both the Securities Act and the Exchange Act.
In 2004, we noted that the collection of information requirements
associated with Regulation S-K as it applies to ABS issuers are
included in Form S-1, Form S-3, Form 10-K and Form 8-K.\214\
---------------------------------------------------------------------------
\214\ See the 2004 ABS Adopting Release.
---------------------------------------------------------------------------
The amendments would make revisions to Regulation S-K. The
collection of information requirements, however, are reflected in the
burden hours estimated for the various Securities Act and Exchange Act
forms related to ABS issuers. The rules in Regulation S-K do not impose
any separate burden. Consistent with historical practice, we have
retained an estimate of one burden hour to Regulation S-K for
administrative convenience.
4. Rule 17g-7
This new collection of information relates to new disclosure
requirements for NRSROs. Under new Rule 17g-7, an NRSRO is required to
disclose in any report accompanying a credit rating in an asset-backed
securities offering the representations, warranties and enforcement
mechanisms available to investors and describe how they differ from
those in issuances of similar securities. The following summarizes the
burden estimates for Rule 17g-7 that we provided in the Proposing
Release. We estimated it would take 1 hour per ABS transaction to
review the relevant disclosures prepared by an issuer, which an NRSRO
would presumably have reviewed as part of the rating process, and
convert those disclosures into a format suitable for inclusion in any
report to be issued by an NRSRO. We noted our expectation that an NRSRO
would incur an initial setup cost to collect, maintain and analyze
previous issuances to establish benchmarks as well as an ongoing cost
to review the benchmarks to ensure that they remain appropriate. We
estimated that the initial review and set up system cost will take 100
hours and that NRSROs will spend an additional 100 hours per year
revising the various benchmarks. Therefore, we estimated it
[[Page 4508]]
would take a total of 3,000 hours \215\ for NRSROs to set up systems
and an additional 3,000 hours per year revising various
benchmarks.\216\
---------------------------------------------------------------------------
\215\ 100 hours x 30 NRSROs.
\216\ 100 hours x 30 NRSROs.
---------------------------------------------------------------------------
On a deal-by-deal basis, we estimated it would take NRSRO 10 hours
per ABS transaction to compare the terms of the current deal to those
of similar securities. Because NRSROs would need to provide the
disclosures in connection with the issuance of a credit rating on a
particular offering of ABS, we based our estimates on an annual average
of 2,067 ABS offerings.\217\ We also assigned four to the number of
credit ratings per issuance of ABS, based on an average of two NRSROs
preparing two reports (pre-sale and final) for each transaction.
Therefore, we estimated that it would take a total of 90,948 hours,
annually, for NRSROs to provide the new Rule 17g-7 disclosures.\218\ As
noted above, we received one comment letter regarding our PRA estimate
for Rule 17g-7,\219\ and as we discuss above, we are not adjusting our
PRA estimates with respect to Rule 17g-7.
---------------------------------------------------------------------------
\217\ The annual average number of registered offerings was 958
and the annual average number of Rule 144A ABS offerings was 716 for
an estimated annual average of 1,674 over the period 2004-2009. See
Section X. of the 2010 ABS Proposing Release. We also add 393 to
estimate for offerings under other exemptions that were not within
the scope of the 2010 ABS Proposing Release. Thus, in total we use
an estimated annual average number of 2,067 ABS offerings for the
basis of our PRA burden estimates.
\218\ 4 reports x 2,067 ABS offerings x 11 hours (1 hour to
review disclosures + 10 hours to compare and prepare).
\219\ See letter from Fitch.
---------------------------------------------------------------------------
5. Summary of Changes to Annual Burden Compliance in Collection of
Information
Table 1 illustrates the annual compliance burden of the collection
of information in hours and costs for the new disclosure requirements
for securitizers and NRSROs. Below, the new Rule 15Ga-1 requirement for
securitizers is noted as ``Form ABS-15G'' and the new requirement for
NRSROs is noted as ``17g-7.''
--------------------------------------------------------------------------------------------------------------------------------------------------------
Decrease or Decrease or
Current Proposed Current increase in Proposed Current increase in Proposed
Form annual annual burden burden burden professional professional professional
responses responses hours hours hours costs costs costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Form ABS-15G................................. ........... 810 ........... 189,068 189,068 ............ 25,209,000 25,209,000
17g-7........................................ ........... 8,268 ........... 96,948 96,948 ............ ............ ............
--------------------------------------------------------------------------------------------------------------------------------------------------------
V. Benefit-Cost Analysis
Section 943 of the Act requires the Commission to prescribe rules
relating to disclosure of demand, repurchase and replacement history by
securitizers and disclosure of representations, warranties, and
enforcement mechanisms by NRSROs. In response to the requirements of
Section 943, the Commission is adopting new rules and form amendments
that would require securitizers and NRSROs to make the required
disclosures.
First, Section 943(2) requires any securitizer to disclose
fulfilled and unfulfilled repurchase requests across all trusts
aggregated by the securitizer, so that investors may identify asset
originators with clear underwriting deficiencies. As the Act requires,
our rules will apply to ``any securitizer'' of Exchange Act-ABS,
including unregistered Exchange Act-ABS. The Act requires disclosure of
``fulfilled and unfulfilled repurchase requests'' and our new rules
require disclosure of all repurchase requests, not just those limited
to the transaction agreements. Further, the Act requires disclosure
``across all trusts aggregated by the securitizer.'' The new rule seeks
to account for the potential limited availability and usefulness of
older information by requiring securitizers to provide demand and
repurchase history, initially for a three-year look back period and
then quarterly on an ongoing basis for all outstanding Exchange Act-ABS
held by non-affiliates during the reporting period. In order to
implement the disclosure requirement, we are requiring that
securitizers provide the disclosures in a tabular format and file them
on EDGAR on new Form ABS-15G. As we discuss above, the new rules
provide that if an affiliate securitizer has filed the same
disclosures, then other affiliated securitizers would not have to also
file the disclosures in order to avoid duplicate disclosures. In
addition, a securitizer may suspend its quarterly reporting obligation
if it has no reportable activity and makes an annual filing to confirm
that it has had no activity for the prior year. We are also providing
approximately a one-year transition period so that securitizers may set
up systems and gather the data to make the required disclosures. For
municipal securitizers, we are providing approximately a four-year
transition period and permitting municipal securitizers to satisfy the
filing obligation by filing on EMMA.
Second, we are also adopting disclosure requirements with respect
to repurchase requests in Regulation AB in order to conform disclosures
in prospectuses and in periodic reports to those required by Section
943 of the Act.
Third, Section 943(1) of the Act requires that each NRSRO include
in any report accompanying a credit rating, a description of the
representations, warranties and enforcement mechanisms available to
investors. Our new Rule 17g-7 includes an instruction to clarify that
for purposes of the requirement, a ``credit rating'' includes any
expected or preliminary credit rating issued by an NRSRO.
We are sensitive to benefits and costs imposed by the new rules,
form and amendments. The discussion below focuses on the benefits and
costs of the amendments made by the Commission to implement the Act
within its permitted discretion, rather than the overall benefits and
costs of the changes mandated by the Act.
A. Benefits
In new Rule 15Ga-1 we choose to require that the disclosure
mandated by the Act be presented in a tabular format with standardized
headings. We believe that this data formatting requirement will benefit
investors by providing them with demand, repurchase and replacement
information that is easy to use and easy to compare across
securitizers.
We are limiting the scope of the disclosures to outstanding
Exchange Act-ABS, and in the initial filing to the last three years of
demand, repurchase and replacement history. We believe that a three-
year look back period strikes the right balance between compliance
costs to securitizers and disclosure benefits to investors, since three
years of data should be sufficient for investors to identify
originators with underwriting deficiencies.
After the initial filing, securitizers are required to file Form
ABS-15G,
[[Page 4509]]
periodically, on a quarterly basis with information about activity that
occurred during the quarter, so that consistent with the purpose of
Section 943 of the Act, an investor may monitor the demand, repurchase
and replacement activity across all Exchange Act-ABS issued by a
securitizer. We have chosen to require that the quarterly report
include information for the current quarter, instead of cumulative
data. This will benefit investors by allowing them the flexibility to
track activity over periods of their choosing because it is more user-
friendly and less unwieldy than cumulative data. Depending on their
needs, they can analyze the current-quarter data alone or aggregate it
with data from prior filings in order to identify trends. In addition,
aggregated data for the same asset class would be provided in
prospectuses.
Several provisions in the adopted rules are designed to limit
filing costs to securitizers without diminishing the usefulness of the
disclosure available to investors. We are permitting a securitizer to
suspend its quarterly obligation if it has no reportable activity,
though such a securitizer would still be required to file an annual
confirmation that it had no reportable demand or repurchase activity by
checking a box on Form ABS-15G. In addition, if an affiliate
securitizer has filed the same disclosures with respect to a particular
ABS transaction, then other affiliated securitizers would not have to
also file the disclosures. We are also requiring that the disclosures
be filed on EDGAR on new Form ABS-15G and permitting municipal
securitizers to satisfy the reporting obligation by filing on EMMA. By
requiring the new Form ABS-15G to be filed on EDGAR, the required
information for most securitizers would be housed in a central
repository that would preserve continuous access to the information to
the benefit of investors. Municipal securitizers can file the
information in a central repository for municipal market information,
EMMA. Although it is likely that most, if not all municipal
securitizers will file on EMMA, they are not required to. However, we
believe that filing on EMMA will facilitate use by investors, since the
demand, repurchase and replacement disclosures will generally be
available in the same repository where investors are most likely to
look for other municipal ABS disclosures.
The one-year transition period will provide securitizers time to
set up systems and gather the data to make the required disclosures.
For municipal securitizers, we are providing an additional three-year
transition period so that they may develop the infrastructures and
observe how the rule operates for other securitizers, so that they may
better prepare to comply with the new rules.
To facilitate investors' use of demand, repurchase and replacement
information, we are amending Regulation AB to require disclosures in
the prospectus and periodic reports in a format similar to that
required by Rule 15Ga-1. The information in the prospectus must be
presented for a three-year look-back period, so that an investor in a
particular offering receives and may review cumulative information in
one place. Furthermore, an investor would receive disclosure about a
demand, repurchase and replacement activity related to a particular ABS
in periodic reports, which may be required to be filed at a more
frequent interval than Form ABS-15G, such as monthly.
If an Exchange Act-ABS is rated, new Rule 17g-7 would require
disclosures by NRSROs about the representations, warranties and
enforcement mechanisms available to investors, and how they differ from
those of other similar securities in a report accompanying a credit
rating. We interpret a ``credit rating'' to include any expected or
preliminary credit rating issued by an NRSRO because pre-sale reports
typically accompany an expected or preliminary rating. We believe that
this interpretation will benefit investors by allowing them access to
information on representations, warranties and enforcement mechanisms
prior to the point at which they make an investment decision. As a
result, these disclosures will possibly expand the information
available to investors and improve transparency regarding the use of
representations and warranties in ABS transactions.
B. Costs
With respect to Rule 15Ga-1, the requirement to file on EDGAR
initially and then on a quarterly basis will result in costs related to
preparation of such filings. Filing on EDGAR would require a
securitizer to obtain authorization codes and to adhere to formatting
instructions. While our revision from monthly to a quarterly reporting
requirement will reduce the filing burden on securitizers, an annual
filing would still be required to confirm by check box that no demand,
repurchase or replacement activity has occurred.\220\
---------------------------------------------------------------------------
\220\ See discussion in Section II.A.5.
---------------------------------------------------------------------------
In addition, we are providing approximately a one-year transition
period (and an additional three years for municipal securitizers),
which will delay the availability of current information on
representations and warranties repurchase activity to investors;
however, we believe that a transition period of this length is
necessary for securitizers to set up systems and gather historical data
needed to comply with the new rules. Further, investors would not
receive information about repurchase activity for periods prior to the
initial three-year period; however, it is not clear that older data
would provide useful information about underwriting deficiencies,
because many loan origination and underwriting standards have changed
post-crisis. In addition, older data may be very hard or impossible for
securitizers to obtain if they have not had systems in place to track
the data required for the required disclosures.
The new rules implement the Act's requirement on securitizers to
disclose the repurchase and replacement demands resulting from breaches
of representations and warranties in past ABS transactions initially,
for the last three years and then updated disclosures going forward on
a quarterly basis. We understand that some of the data collection may
be costly. In some cases, it may be very difficult to obtain repurchase
or replacement records from the distant past.\221\ The final rule,
however, permits a securitizer under certain conditions to omit
information unknown and not available to the securitizer without
unreasonable effort or expense.
---------------------------------------------------------------------------
\221\ See discussion in Section II.A.3.
---------------------------------------------------------------------------
As noted above, we have chosen to require that ongoing quarterly
reports include information for the current quarter, instead of
cumulative data. Therefore, users who would find cumulative data more
helpful will need to make additional efforts to compile the information
for periods; although cumulative information related to the same asset
class would be available in a prospectus for a three-year look back
period.
In order to minimize duplicate disclosures, the new rules would not
require a securitizer to report if an affiliated securitizer in the
same transaction files the required disclosures. As discussed above, we
believe this accommodation is appropriate because otherwise such
disclosure would be duplicative and would not provide any additional
useful information, since as noted above, the depositor usually serves
as an intermediate entity of a transaction initiated by a sponsor.
However, in
[[Page 4510]]
some cases, users who would find information about affiliated
transactions useful will need to compile information about affiliated
transactions themselves.\222\
---------------------------------------------------------------------------
\222\ Rule 15Ga-1 requires a securitizer to indicate if the ABS
transaction was registered and disclose the CIK number of the
issuing entity of the ABS transaction, so that users may locate
other information available on EDGAR.
---------------------------------------------------------------------------
The new rules, pursuant to the Act, would also require NRSROs to
disclose in any report accompanying a credit rating for an ABS
transaction the representations, warranties and enforcement mechanisms
available to investors and how they differ from those of other similar
securities. A note to new Rule 17g-7 clarifies the statutory
requirements by explaining that for the purposes of the rule's
requirements, a ``credit rating'' includes any expected or preliminary
credit rating issued by an NRSRO. This clarification is designed to
ensure that the disclosure requirements of the rule will apply to pre-
sale reports issued by NRSROs in ABS transactions. We recognize that
this could result in some additional incremental costs to NRSROs;
however, we believe that any such additional costs would be more than
offset by the benefits to investors that will arise from the inclusion
of the required disclosures in NRSRO pre-sale reports, thus providing
them with additional information prior to the point at which they make
an investment decision.
VI. Consideration of Burden on Competition and Promotion of Efficiency,
Competition and Capital Formation
Section 23(a) of the Exchange Act \223\ requires the Commission,
when making rules and regulations under the Exchange Act, to consider
the impact a new rule would have on competition. Section 23(a)(2)
prohibits the Commission from adopting any rule that would impose a
burden on competition not necessary or appropriate in furtherance of
the purposes of the Exchange Act. Section 2(b) of the Securities Act
\224\ and Section 3(f) of the Exchange Act \225\ require the
Commission, when engaging in rulemaking that requires it to consider
whether an action is necessary or appropriate in the public interest,
to consider, in addition to the protection of investors, whether the
action would promote efficiency, competition, and capital formation.
---------------------------------------------------------------------------
\223\ 15 U.S.C. 78w(a).
\224\ 15 U.S.C. 77b(b).
\225\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
The new rules implement Section 943 of the Act and amend Regulation
AB in order to conform disclosures in prospectuses and periodic reports
to those required by Section 943. New Rule 15Ga-1 implements Section
943(2) by requiring disclosures of the repurchase history of
securitized assets be filed on EDGAR (or in the case of municipal
securitizers, may be filed in the alternative on EMMA). Filing on these
centralized databases preserves access to information, thereby
enhancing transparency regarding the use of representations and
warranties in asset-backed securities transactions, and an investor's
ability to consider historical information when making an investment
decision. Requiring that information be presented in a standardized
tabular format will further enable investors to more easily understand
the disclosed information, compare originators, and identify those with
better underwriting criteria or practices. Our amendments to Regulation
AB, which require conforming disclosures in the prospectus and periodic
reports to the disclosures required by Rule 15Ga-1, should promote
comparison of repurchase history information. Furthermore, if investors
pull funds away from ABS with consistent underwriting deficiencies or
purchase such ABS at a significant discount, securitizers would find it
in their interest to avoid acquiring pool assets from originators with
a record of poor loan underwriting. As a result, such originators would
have an additional incentive to improve their loan origination and
underwriting processes. The ultimate effect would be that of better
allocative efficiency and improved capital formation.
New Rule 15Ga-1 also includes provisions designed to limit the
filing costs to securitizers without compromising the disclosure
available to investors, thereby improving efficiency in the ABS market.
First, if an affiliate securitizer has filed the same disclosures
required by new Rule 15Ga-1, then other affiliated securitizers in the
same ABS transaction would not have to also file the same disclosures.
Second, a securitizer may suspend its ongoing quarterly reporting
obligation if it has no reportable activity, although it would still be
required to file an annual confirmation that it had no reportable
activity.
Because the rules generally apply equally to all securitizers, and
ABS transactions, we do not believe the rules will have an impact on
competition. However, we are providing a delayed compliance date for
securitizers of ABS that are municipal entities in order to provide
those securitizers with more time to better prepare for implementation
of the Rule 15Ga-1. Therefore, the costs of compliance may also be
delayed for municipal securitizers, which could provide municipal
securitizers with a competitive cost advantage over other securitizers
for a period of time. Based on our research, however, the dollar volume
of ABS issued by municipal securitizers has typically been
significantly less than other securitizers.
New Rule 17g-7 implements Section 943(1) of the Act by requiring
NRSROs to describe in any report accompanying a credit rating, in an
asset-backed securities offering, how the representations, warranties
and enforcement mechanisms of the rated ABS differ from the
representations, warranties and enforcement mechanisms in issuances of
similar securities. The rule applies to any expected or preliminary
credit rating issued by an NRSRO and will therefore require that this
information be presented in pre-sale reports issued by NRSROs in
connection with asset-backed securities offerings. As such, the rule
will provide information to investors at an earlier point in time,
which may promote allocative efficiency and capital formation.
We requested comment on whether the proposed rule, if adopted,
would promote efficiency, competition, and capital formation. We did
not receive any comments directly responding to this request.\226\
---------------------------------------------------------------------------
\226\ One commentator did note, however, that if the proposed
rules did not provide an adequate transition period, some
securitizers would have to remain out of the securitization markets
until they can complete the transition, with potential adverse
effects on capital formation. It also expressed concern that
requiring that reports be compiled for all asset classes in a single
filing may amplify the issue. See letter from Roundtable. As we note
above, we have considered the comments received and we note that we
have provided a long transition period and the initial filing
requirement is not triggered by the timing of new offerings.
---------------------------------------------------------------------------
VII. Regulatory Flexibility Act Certification
In Part IX of the Proposing Release, the Commission certified
pursuant to 5 U.S.C. 605(b) that the new rules contained in this
release would not have a significant economic impact on a substantial
number of small entities. While the Commission encouraged written
comments regarding this certification, no commentators responded to
this request or indicated that the rules, as adopted would have a
significant economic impact on a substantial number of small entities.
[[Page 4511]]
VIII. Statutory Authority and Text of Rule and Form Amendments
We are adopting the new rules, forms and amendments contained in
this document under the authority set forth in Section 943 of the Act,
Sections 5, 6, 7, 10, 19(a), and 28 of the Securities Act and Sections
3(b), 12, 13, 15, 15E, 17, 23(a), 35A and 36 of the Exchange Act.
List of Subjects in 17 CFR Parts 229, 232, 240 and 249
Reporting and recordkeeping requirements, Securities.
For the reasons set out above, Title 17, Chapter II of the Code of
Federal Regulations is amended as follows:
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K
0
1. The authority citation for part 229 continues to read in part as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 777iii,
77jjj, 77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w,
78ll, 78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c), 80a-37,
80a-38(a), 80a-39, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
* * * * *
0
2. Amend Sec. 229.1104 by adding paragraph (e) to read as follows:
Sec. 229.1104 (Item 1104) Sponsors.
* * * * *
(e) Repurchases and replacements. (1) If the underlying transaction
agreements provide a covenant to repurchase or replace an underlying
asset for breach of a representation or warranty, provide in the body
of the prospectus for the prior three years, the information required
by Rule 15Ga-1(a) (17 CFR 240.15Ga-1(a)) concerning all assets
securitized by the sponsor that were the subject of a demand to
repurchase or replace for breach of the representations and warranties
concerning the pool assets for all asset-backed securities (as that
term is defined in Section 3(a)(77) of the Securities Exchange Act of
1934) where the underlying transaction agreements included a covenant
to repurchase or replace an underlying asset of the same asset class
held by non-affiliates of the sponsor, except that:
(i) For prospectuses to be filed pursuant to Sec. 230.424 of this
chapter prior to February 14, 2013, information may be limited to the
prior year; and
(ii) For prospectuses to be filed pursuant to Sec. 230.424 of this
chapter on or after February 14, 2013 but prior to February 14, 2014,
information may be limited to the prior two years.
(2) Include a reference to the most recent Form ABS-15G filed by
the securitizer (as that term is defined in Section 15G(a) of the
Securities Exchange Act of 1934) and disclose the CIK number of the
securitizer.
(3) For prospectuses to be filed pursuant to Sec. 230.424 of this
chapter, the information presented shall not be more than 135 days old.
0
3. Amend Sec. 229.1121 by adding paragraph (c) to read as follows:
Sec. 229.1121 (Item 1121) Distribution and pool performance
information.
* * * * *
(c) Repurchases and replacements. (1) Provide the information
required by Rule 15Ga-1(a) (17 CFR 240.15Ga-1(a)) concerning all assets
of the pool that were subject of a demand to repurchase or replace for
breach of the representations and warranties.
(2) Include a reference to the most recent Form ABS-15G (17.CFR
249.1400) filed by the securitizer (as that term is defined in Section
15G(a) of the Securities Exchange Act of 1934) and disclose the CIK
number of the securitizer.
PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS
0
4. The general authority citation for Part 232 is revised to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77z-3,
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c),
80a-8, 80a-29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *
0
5. Amend Sec. 232.101 by adding and reserving paragraphs (a)(1)(xiv)
and (xv), and adding paragraph (a)(1)(xvi) to read as follows:
Sec. 232.101 Mandated electronic submissions and exceptions.
(a) * * *
(1) * * *
(xiv) [Reserved]
(xv) [Reserved]
(xvi) Form ABS-15G (as defined in Sec. 249.1400 of this chapter).
* * * * *
0
6. Add Sec. 232.314 to read as follows:
Sec. 232.314 Accommodation for certain securitizers of asset-backed
securities.
The information required in response to Rule 15Ga-1 (Sec.
240.15Ga-1 of this chapter) by a municipal securitizer will be deemed
to satisfy the electronic submission requirements of Rule 101 (Sec.
232.101 of this chapter) under the following conditions:
(a) For purposes of this section, a municipal securitizer is a
securitizer (as that term is defined in Section 15G(a) of the
Securities Exchange Act of 1934) that is any State or Territory of the
United States, the District of Columbia, any political subdivision of
any State, Territory or the District of Columbia, or any public
instrumentality of one or more States, Territories or the District of
Columbia; and
(b) The information required by Rule 15Ga-1 is provided to the
Municipal Securities Rulemaking Board in an electronic format available
to the public on the Municipal Securities Rulemaking Board's Internet
Web site.
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
0
7. The authority citation for part 240 is amended by adding authorities
for Sec. 240.15Ga-1 and Sec. 240.17g-7 to read as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5,
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4,
80b-11, and 7201 et seq.; and 18 U.S.C. 1350 and 12 U.S.C.
5221(e)(3), unless otherwise noted.
* * * * *
Section 240.15Ga-1 is also issued under sec. 943, Pub. L. 111-
203, 124 Stat. 1376.
* * * * *
Section 240.17g-7 is also issued under sec. 943, Pub. L. 111-
203, 124 Stat. 1376.
* * * * *
0
8. Add Sec. 240.15Ga-1 to read as follows:
Sec. 240.15Ga-1 Repurchases and replacements relating to asset-backed
securities.
(a) General. With respect to any asset-backed security (as that
term is defined in Section 3(a)(77) of the Securities Exchange Act of
1934) for which the underlying transaction agreements contain a
covenant to repurchase or replace an underlying asset for breach of a
representation or warranty, a securitizer (as that term is defined in
Section 15G(a) of the Securities Exchange Act of 1934) shall disclose
fulfilled and unfulfilled repurchase requests across all trusts by
providing the information required in paragraph (a)(1) of this section
concerning all assets securitized by the securitizer that were the
subject of a demand to
[[Page 4512]]
repurchase or replace for breach of the representations and warranties
concerning the pool assets for all asset-backed securities held by non-
affiliates of the securitizer during the reporting period.
BILLING CODE 8011-01-P
[[Page 4513]]
[GRAPHIC] [TIFF OMITTED] TR26JA11.005
BILLING CODE 8011-01-C
[[Page 4514]]
(1) The table shall:
(i) Disclose the asset class and group the issuing entities by
asset class (column (a)).
(ii) Disclose the name of the issuing entity (as that term is
defined in Item 1101(f) of Regulation AB (17 CFR 229.1101(f)) of the
asset-backed securities. List the issuing entities in order of the date
of formation (column (a)).
Instruction to paragraph (a)(1)(ii): Include all issuing entities
with outstanding asset-backed securities during the reporting period.
(iii) For each named issuing entity, indicate by check mark whether
the transaction was registered under the Securities Act of 1933 (column
(b)) and disclose the CIK number of the issuing entity (column (a)).
(iv) Disclose the name of the originator of the underlying assets
(column (c)).
Instruction to paragraph (a)(1)(iv): Include all originators that
originated assets in the asset pool for each issuing entity.
(v) Disclose the number, outstanding principal balance and
percentage by principal balance of assets at the time of securitization
(columns (d) through (f)).
(vi) Disclose the number, outstanding principal balance and
percentage by principal balance of assets that were subject of a demand
to repurchase or replace for breach of representations and warranties
(columns (g) through (i)).
(vii) Disclose the number, outstanding principal balance and
percentage by principal balance of assets that were repurchased or
replaced for breach of representations and warranties (columns (j)
through (l)).
(viii) Disclose the number, outstanding principal balance and
percentage by principal balance of assets that are pending repurchase
or replacement for breach of representations and warranties due to the
expiration of a cure period (columns (m) through (o)).
(ix) Disclose the number, outstanding principal balance and
percentage by principal balance of assets that are pending repurchase
or replacement for breach of representations and warranties because the
demand is currently in dispute (columns (p) through (r)).
(x) Disclose the number, outstanding principal balance and
percentage by principal balance of assets that were not repurchased or
replaced because the demand was withdrawn (columns (s) through (u)).
(xi) Disclose the number, outstanding principal balance and
percentage by principal balance of assets that were not repurchased or
replaced because the demand was rejected (columns (v) through (x)).
Instruction to paragraphs (a)(1)(vii) through (xi): For purposes of
these paragraphs (a)(1)(vii) through (xi) the outstanding principal
balance shall be the principal balance as of the reporting period end
date and the percentage by principal balance shall be the outstanding
principal balance of an asset divided by the outstanding principal
balance of the asset pool as of the reporting period end date.
(xii) Provide totals by asset class, issuing entity and for all
issuing entities for columns that require number of assets and
principal amounts (columns (d), (e), (g), (h), (j), (k), (m), (n) (p),
(q), (s), (t), (v) and (w)).
Instruction 1 to paragraph (a)(1): The table should include any
activity during the reporting period, including activity related to
assets subject to demands made prior to the beginning of the reporting
period.
Instruction 2 to paragraph (a)(1): Indicate by footnote and provide
narrative disclosure in order to further explain the information
presented in the table, as appropriate.
(2) If any of the information required by this paragraph (a) is
unknown and not available to the securitizer without unreasonable
effort or expense, such information may be omitted, provided the
securitizer provides the information it possesses or can acquire
without unreasonable effort or expense, and the securitizer includes a
statement showing that unreasonable effort or expense would be involved
in obtaining the omitted information. Further, if a securitizer
requested and was unable to obtain all information with respect to
investor demands upon a trustee that occurred prior to July 22, 2010,
so state by footnote. In this case, also state that the disclosures do
not contain investor demands upon a trustee made prior to July 22,
2010.
(b) In the case of multiple affiliated securitizers for a single
asset-backed securities transaction, if one securitizer has filed all
the disclosures required in order to meet the obligations under
paragraph (a) of this section, other affiliated securitizers shall not
be required to separately provide and file the same disclosures related
to the same asset-backed security.
(c) The disclosures in paragraph (a) of this section shall be
provided by a securitizer:
(1) For the three year period ended December 31, 2011, by any
securitizer that issued an asset-backed security during the period, or
organized and initiated an asset-backed securities transaction during
the period, by securitizing an asset, either directly or indirectly,
including through an affiliate, in each case, if the underlying
transaction agreements provide a covenant to repurchase or replace an
underlying asset for breach of a representation or warranty and the
securitizer has asset-backed securities, containing such a covenant,
outstanding and held by non-affiliates as of the end of the three year
period. If a securitizer has no activity to report, it shall indicate
by checking the appropriate box on Form ABS-15G (17 CFR 249.1400). The
requirement of this paragraph (c)(1) applies to all issuances of asset-
backed securities whether or not publicly registered under the
provisions of the Securities Act of 1933. The disclosures required by
this paragraph (c)(1) shall be filed no later than February 14, 2012.
Instruction to paragraph (c)(1): For demands made prior to January
1, 2009, the disclosure should include any related activity subsequent
to January 1, 2009 associated with such demand.
(2) For each calendar quarter, by any securitizer that issued an
asset-backed security during the period, or organized and initiated an
asset-backed securities transaction by securitizing an asset, either
directly or indirectly, including through an affiliate, or had
outstanding asset-backed securities held by non-affiliates during the
period, in each case, if the underlying transaction agreements provide
a covenant to repurchase or replace an underlying asset for breach of a
representation or warranty. The disclosures required by this paragraph
(c)(2) shall be filed no later than 45 calendar days after the end of
such calendar quarter:
(i) Except that, a securitizer may suspend its duty to provide
periodic quarterly disclosures if no activity occurred during the
initial filing period in paragraph (c)(1) of this section or during a
calendar quarter that is required to be reported under paragraph (a) of
this section. A securitizer shall indicate that it has no activity to
report by checking the appropriate box on Form ABS-15G (17 CFR
249.1400). Thereafter, a periodic quarterly report required by this
paragraph (c)(2) will only be required if a change in the demand,
repurchase or replacement activity occurs that is required to be
reported under paragraph (a) of this section during a calendar quarter;
and
(ii) Except that, annually, any securitizer that has suspended its
duty to provide quarterly disclosures pursuant to paragraph (c)(2)(i)
of this section must confirm that no activity occurred during the
previous calendar year by checking the appropriate box on Form ABS-15G
(17 CFR 249.1400). The
[[Page 4515]]
confirmation required by this paragraph (c)(2)(ii) shall be filed no
later than 45 days after each calendar year.
(3) Except that, if a securitizer has no asset-backed securities
outstanding held by non-affiliates, the duty under paragraph (c)(2) of
this section to file periodically the disclosures required by paragraph
(a) of this section shall be terminated immediately upon filing a
notice on Form ABS-15G (17 CFR 249.1400).
0
9. Add Sec. 240.17g-7 to read as follows:
Sec. 240.17g-7 Report of representations and warranties.
Each nationally recognized statistical rating organization shall
include in any report accompanying a credit rating with respect to an
asset-backed security (as that term is defined in Section 3(a)(77) of
the Securities Exchange Act of 1934) a description of--
(a) The representations, warranties and enforcement mechanisms
available to investors; and
(b) How they differ from the representations, warranties and
enforcement mechanisms in issuances of similar securities.
Note to Sec. 240.17g-7: For the purposes of this requirement, a
``credit rating'' includes any expected or preliminary credit rating
issued by a nationally recognized statistical rating organization.
PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934
0
10. The authority citation for part 249 is amended by adding an
authority for Sec. 249.1400 to read as follows:
Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18
U.S.C. 1350, unless otherwise noted.
* * * * *
Section 249.1400 is also issued under sec. 943, Pub. L. 111-203,
124 Stat. 1376.
0
11. Add Subpart O (consisting of Sec. 249.1400) to Part 249 to read as
follows:
Subpart O--Forms for Securitizers of Asset-Backed Securities
Sec. 249.1400 Form ABS-15G, Asset-backed securitizer report pursuant
to Section 15G of the Securities Exchange Act of 1934.
This form shall be used for reports of information required by Rule
15Ga-1 (Sec. 240.15Ga-1 of this chapter).
Note: The text of Form ABS-15G does not, and this amendment
will not, appear in the Code of Federal Regulations.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form ABS-15G
Asset-Backed Securitizer
Report Pursuant to Section 15G of
The Securities Exchange Act of 1934
Check the appropriate box to indicate the filing obligation to
which this form is intended to satisfy:
------ Rule 15Ga-1 under the Exchange Act (17 CFR 240.15Ga-1) for
the reporting period ---------------- to ----------------
Date of Report (Date of earliest event reported)----------------
Commission File Number of securitizer: ----------------
Central Index Key Number of securitizer: ----------------
-----------------------------------------------------------------------
Name and telephone number, including area code, of the person to
contact in connection with this filing
Indicate by check mark whether the securitizer has no activity to
report for the initial period pursuant to Rule 15Ga-1(c)(1) [ ]
Indicate by check mark whether the securitizer has no activity to
report for the quarterly period pursuant to Rule 15Ga-1(c)(2)(i) [ ]
Indicate by check mark whether the securitizer has no activity to
report for the annual period pursuant to Rule 15Ga-1(c)(2)(ii) [ ]
GENERAL INSTRUCTIONS
A. Rule as to Use of Form ABS-15G
This form shall be used to comply with the requirements of Rule
15Ga-1 under the Exchange Act (17 CFR 240.15Ga-1).
B. Events To Be Reported and Time for Filing of Reports
Forms filed under Rule 15Ga-1. In accordance with Rule 15Ga-1, file
the information required by Part I in accordance with Item 1.01, Item
1.02, or Item 1.03, as applicable. If the filing deadline for the
information occurs on a Saturday, Sunday or holiday on which the
Commission is not open for business, then the filing deadline shall be
the first business day thereafter.
C. Preparation of Report
This form is not to be used as a blank form to be filled in, but
only as a guide in the preparation of the report on paper meeting the
requirements of Rule 12b-12 (17 CFR 240.12b-12). The report shall
contain the number and caption of the applicable item, but the text of
such item may be omitted, provided the answers thereto are prepared in
the manner specified in Rule 12b-13 (17 CFR 240.12b-13). All items that
are not required to be answered in a particular report may be omitted
and no reference thereto need be made in the report. All instructions
should also be omitted.
D. Signature and Filing of Report
1. Forms filed under Rule 15Ga-1. Any form filed for the purpose of
meeting the requirements in Rule 15Ga-1 must be signed by the senior
officer in charge of securitization of the securitizer.
2. Copies of report. If paper filing is permitted, three complete
copies of the report shall be filed with the Commission.
INFORMATION TO BE INCLUDED IN THE REPORT
REPRESENTATION AND WARRANTY INFORMATION
Item 1.01 Initial Filing of Rule 15Ga-1 Representations and Warranties
Disclosure
Provide the disclosures required by Rule 15Ga-1 (17 CFR 240.15Ga-1)
according to the filing requirements of Rule 15Ga-1(c)(1).
Item 1.02 Periodic Filing of Rule 15Ga-1 Representations and Warranties
Disclosure
Provide the disclosures required by Rule 15Ga-1 (17 CFR 240.15Ga-1)
according to the filing requirements of Rule 15Ga-1(c)(2).
Item 1.03 Notice of Termination of Duty to File Reports Under Rule
15Ga-1
If a securitizer terminates its reporting obligation pursuant to
Rule 15Ga-1(c)(3), provide the date of the last payment on the last
asset-backed security outstanding that was issued by or issued by an
affiliate of the securitizer.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the reporting entity has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
(Securitizer)----------------------------------------------------------
Date-------------------------------------------------------------------
(Signature) *----------------------------------------------------------
* Print name and title of the signing officer under his
signature.
* * * * *
Dated: January 20, 2011.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-1504 Filed 1-25-11; 8:45 am]
BILLING CODE 8011-01-P