The SEC has proposed a variety of revisions to its rules for offerings of asset-backed securities, commonly known as Regulation AB II. The proposed changes relate primarily to the eligibility of issuers to register asset-backed securities for the shelf on new Form SF-3. One of the mandates of the Dodd-Frank Act of 201 is to remove regulatory requirements tied to credit ratings issued by credit rating agencies.
Under existing shelf registration rules, one of the eligibility requirements for asset-backed securities is that the offered securities have an investment grade credit rating. The SEC has proposed replacing this requirement with several other requirements, including the filing at the time of each takedown of a signed certification of the chief executive officer of the depositor attesting to certain offering document disclosures and the transaction’s structure.In addition, the transaction documents would have to require that the trustee appoint a credit risk manager to review the pool assets if specific trigger events occur, and that a specified dispute resolution process be followed if requests to repurchase assets are not addressed. Distribution reports filed on Form 10-D would be required to include requests by investors to communicate with other investors, in order for these investors to enforce their rights under the transaction documents. The revised proposal would require an annual review of compliance with these new shelf registration requirements.
In addition, the SEC re-proposal would require the filing of transaction documents in substantially final form at the same time that a preliminary prospectus is required to be filed – which, as proposed, would be five business days before the first sale of securities in the offering.