The staff of the SEC’s Division of Corporation Finance has published a new set of Compliance and Disclosure Interpretations for Regulation AB and related rules. These C&DIs replace the former Manual of Telephone Interpretations for Regulation AB.
Many of the staff’s interpretive positions were only modestly clarified or updated, including to reflect the change from the use of Form S-3 to Form SF-3 for shelf offerings of asset-backed securities pursuant to Regulation AB II. According to the staff, despite the new references to Form SF-3, the principles in these interpretations should continue to apply to offerings registered on Form S-3 until the primary Regulation AB II compliance date of November 23, 2015.
Some interpretations were deleted altogether. The staff did not state why they were deleted, although in some cases, the reasons are fairly obvious. For example, former telephone interpretation 5.01 addressed the static pool disclosure requirements in Item 1105 of Regulation AB. Much of this interpretation simply repeated what is already in the Regulation AB disclosure item, so we assume that the staff believed it was redundant. Another portion of this interpretation outlined transition provisions for the initial transition to Regulation AB, which were removed because they are no longer relevant.
In another example, the staff removed former telephone interpretation 14.01, which dealt with the need to register “special units of beneficial interest,” commonly known as “SUBIs,” and the fact that this requires no additional registration fees. This interpretation was removed because the staff’s position is being codified at Rule 190(d) as a part of Regulation AB II.
The reasons behind the staff’s removal of other interpretations is less clear. For example, former telephone interpretation 11.03 dealt with the required coverage of reports on assessment of compliance with servicing criteria required by Item 1122 of Regulation AB, where one servicer aggregates information that is then conveyed to another servicer for use in another servicing function. It is not obvious why this interpretation was removed.
In another example, former telephone interpretation 14.01 allowed the filing fee offset provisions of Rule 457(p) to be applied to “brother-sister” depositors that are wholly-owned subsidiaries of the same parent company. By its terms, Rule 457(p) only allows filing fee offsets by the original registrant, a majority-owned subsidiary of the original registrant, or a parent that owns a majority of the voting securities of the original registrant. Perhaps the staff believes that this accommodation will no longer be required when “pay as you go” registration fees are permitted under Regulation AB II, but they did not make that clear, and in any event, this portion of Regulation AB II will not come into play until November 23, 2015.
Other rules that can be used to transfer excess shelf capacity are even more restrictive. For example, Rule 415(d)(6) allows the same registrant to file a new shelf registration statement and transfer the amount of unsold securities to the new registration statement, but only to the same registrant. Therefore, if the SEC staff has had a change of heart on this issue, shelf registrants will have less flexibility in transferring excess shelf capacity to related depositors.
Watch www.RegABII.com for future developments with respect to the staff’s new interpretations, as well up-to-date news and analysis regarding other regulatory issues affecting the asset-backed securities markets, including Regulation AB II, the Dodd-Frank credit risk retention rules and the upcoming Dodd-Frank rules on securitization conflicts of interest.