SEC Proposes New Rules for Issuance of Asset-Backed Securities
On April 7, 2010, the U.S. Securities and Exchange Commission (SEC) proposed new rules that would revise the disclosure, reporting and offering process for the issuance of asset-backed securities (ABS) in the United States. According to the related press release issued by the SEC:
“The proposed rules are intended to provide investors with more detailed and current information about ABS and more time to make their investment decisions. The proposed rules also seek to better align the interests of issuers and investors by creating a retention or “skin in the game” requirement for certain public offerings of ABS.”
There is a 90 day window in which to provide comments on the proposal to the SEC.
The proposals being considered include, among other things:
- new disclosure requirements for issuers to provide specific data for each loan in an ABS asset pool at the time of securitization of the assets and on an ongoing basis (there may be an exemption from “loan-level” disclosure for credit card securitizations, though more detailed information would be required);
- the filing of a computer program that would show the effect of the cash flow payments, or “waterfall”, in a proposed securitization transaction;
- revised filing deadlines to provide potential investors with more time to review information about the transaction;
- new shelf eligibility criteria for ABS which would include:
- a repeal of the requirement for an investment grade credit rating, and
- require the ABS sponsor to retain a portion of each tranche of the ABS issued.
