The US Securities and Exchange Commission has released a massive rulemaking proposal relating to asset-backed securities (ABS). The broad categories of changes proposed include:
- Changes to the forms that may be used to register ABS for public offerings (proposing new forms SF-1 and SF-3 specifically for ABS);
- Changes to the eligibility requirements and process for shelf registration of ABS, including elimination of the minimum rating requirements, which would be replaced by risk retention and other requirements (unlike a prior proposal, sales of registered ABS would not be subject to large minimum denominations or limited to large, sophisticated investors);
- Substantial new disclosure requirements, including initial and ongoing asset-level disclosures for most ABS (though credit card ABS issuers could provide “grouped account data”) and a requirement to file a “waterfall computer program” in connection with offerings;
- Changes to the definition of “asset-backed security” (primarily to tighten up the “discrete pool” requirement, especially for non-revolving assets);
- Changes in periodic reporting requirements relating to outstanding ABS (including a requirement to continue reporting throughout the life of a transaction, without the current option to discontinue if the ABS are not widely held);
- New requirements that investors in ABS and other “structured finance products” issued in reliance on the safe harbors in Rule 144A and Regulation D be entitled to obtain disclosure similar to what would be required in a registered offering, both at the time of sale and periodically thereafter (which would apparently apply even to asset-backed commercial paper if sold in reliance on the safe harbors, though the Commission acknowledged that this paper is often placed in reliance on statutory exemptions, without relying on the safe harbors); and
- Codification of some existing staff interpretations relating to registration of ABS offerings.
Comments on these proposals will be due 90 days after they are published in the Federal Register, which is expected soon. The proposal contemplates a transition period of up to one year after final rules are adopted, but the Commission has requested comments on feasible implementation dates.