On August 27, 2014, the Securities and Exchange Commission adopted the long-awaited comprehensive amendments to Regulation AB and the other rules affecting the offering process for asset-backed securities, commonly known as “Regulation AB II.” These new rules will, among other things, require standardized asset-level data disclosures in public offerings of ABS backed by residential mortgages, commercial mortgages, automobile loans, automobile leases and debt securities, and in resecuritizations. In shelf offerings, an integrated preliminary prospectus will have to be filed with the SEC at least three business days before any securities are sold. The investment-grade rating requirement for shelf eligibility will be eliminated. Instead, there will be new requirements, including a certification by the chief executive officer of the depositor addressing the prospectus disclosure and the structure of the securitization and transaction document provisions requiring the appointment of an asset representations manager to review assets when certain trigger events occur.
The SEC did not adopt several controversial aspects of its proposals at this time – among other things, it did not give investors in Rule 144A offerings the right to obtain all of the same information as if the offering were SEC-registered, and did not require asset-level disclosures in securitizations of any asset classes other than residential mortgages, commercial mortgages, automobile loans, automobile leases, debt securities or resecuritizations.
The new rules will become effective 60 days after they are published in the Federal Register. All of the rules must be complied with by one year from the effective date, except for the new asset-level disclosure requirements, which must be complied with no later than two years from the effective date.