28 July, 2011:
The Securities Exchange Commission, U.S on 26th July, 2011 decided to re-propose some of the shelf registration rules for public comment to bring about greater accountability and enhanced quality around asset backed securities.
These rules were first proposed in April, 2010 (see our comments here), however in light of the Dodd Frank Act and comments received from public, SEC decided to re-evaluate its proposals.
In 2010, the SEC proposed new ABS shelf eligibility criteria to enhance the type of securities that are being offered and enhance the accountability of participants in securitization. Some of the re-proposed conditions for shelf eligibility include:
- The executive officer of the ABS issue would be required to certify the accuracy of disclosure and that the securitization is designed to produce cash flows at times and in amounts sufficient to service expected payments on the asset-backed securities
- Appointing a credit risk manager to review assets upon the occurrence of certain trigger events.
- Setting forth dispute resolution procedures that outline the way in which pending or disputed requests to repurchase potentially non-compliant assets in the pool can be resolved.
- Issuer to provide a notice in a public filing that an investor requests to communicate with other investors.
SEC has also requested comments on outstanding proposals for asset level data.
Under the existing rules, ABS is not eligible for expedited shelf offering, unless securities are rated investment grade by credit rating agency. While ratings would continue to be allowed for ABS offerings, the proposed rules would eliminate the need for ratings from shelf eligibility test.
See the text of the proposal here.
[Reported by: Nidhi Bothra]