The SEC published new final rules governing the disclosure, reporting, and offering process for publicly-offered asset-backed securities (“ABS”). Among other things, the new rules:
- Require certain asset classes to provide asset-level information in a standardized, tagged data format. The rules define each data point and delineate the scope of the information required. Although specific data requirements vary by asset class, the new asset-level disclosures generally will include information about credit quality of obligors, collateral related to each asset, and cash flows related to a particular asset, such as the terms, expected payment amounts, and whether and how payment terms change over time.
- Provide investors with more time to consider transaction-specific information. ABS issuers using a shelf registration statement will be required to file a preliminary prospectus containing transaction-specific information at least three business days in advance of the first sale of securities in the offering.
- Remove investment grade ratings for ABS shelf eligibility and instead require the CEO of the depositor to provide a certification at the time of each offering from a shelf registration statement about the disclosure contained in the prospectus and the structure of the securitization; require a provision in the transaction agreement for the review of the assets for compliance with the representations and warranties upon the occurrence of certain trigger events; require a dispute resolution provision in the underlying transaction documents; and require the disclosure of investors’ requests to communicate with other investors.
- Amend the prospectus disclosure requirements to expand disclosure about transaction parties, including disclosure about a sponsor’s retained economic interest in an ABS transaction and financial information about parties obligated to repurchase assets. The new rules also require a description of the provisions in the transaction agreements about modification of the terms of the underlying assets.
The new rules are effective 60 days after publication in the Federal Register, which is expected during the week of September 8. Registrants using Forms SF-1 and SF-3 must comply with the new rules, forms, and disclosures no later than 60 days plus one year after publication in the Federal Register. Offerings of asset-backed securities backed by residential mortgages, commercial mortgages, auto loans, auto leases, and debt securities (including resecuritizations) must comply with asset-level disclosure requirements no later than 60 days plus two years after publication in the Federal Register. Any Form 10-D or Form 10-K that is filed after 60 days plus one year after publication in the Federal Register must comply with the new rules and disclosures, except asset-level disclosures. View the adopting release and text of the new rule here.