64182 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Proposed Rules 

authority of the Corporation as receiver 

to disaffirm or repudiate any personal 

service agreement in the manner 

provided for the disaffirmance or 

repudiation of any agreement under 12 

U.S.C. 5390. 

(e) Paragraph (b) of this section shall 

not apply to any personal service 

agreement with any senior executive or 

director of the covered financial 

company or covered subsidiary, nor 

shall it in any way limit or impair the 

ability of the receiver to recover 

compensation from any senior executive 

or director of a failed financial company 

under 12 U.S.C. 5390. 

§ 380.4 Provability of claims based on 

contingent obligations. 

(a) This section only applies to 

contingent obligations of the covered 

financial company consisting of a 

guarantee, letter of credit, loan 

commitment, or similar credit obligation 

that becomes due and payable upon the 

occurrence of a specified future event 

(other than the mere passage of time), 

which: 

(1) Is not under the control of either 

the covered financial company or the 

party to whom the obligation is owed; 

and 

(2) Has not occurred as of the date of 

the appointment of the receiver. 

(b) A claim based on a contingent 

obligation of the covered financial 

company may be provable against the 

receiver notwithstanding the obligation 

not having become due and payable as 

of the date of the appointment of the 

receiver. 

(c) If the receiver repudiates a 

guarantee, letter of credit, loan 

commitment, or similar credit obligation 

that is contingent as of the date of the 

receiver’s appointment, the actual direct 

compensatory damages for repudiation 

shall be no less than the estimated value 

of the claim as of the date the 

Corporation was appointed receiver of 

the covered financial company, as such 

value is measured based upon the 

likelihood that such contingent claim 

would become fixed and the probable 

magnitude thereof. 

§ 380.5 Treatment of covered financial 

companies that are subsidiaries of 

insurance companies. 

The Corporation shall distribute the 

value realized from the liquidation, 

transfer, sale or other disposition of the 

direct or indirect subsidiaries of an 

insurance company, that are not 

themselves insurance companies, solely 

in accordance with the order of 

priorities set forth in 12 U.S.C. 

5390(b)(1). 

§ 380.6 Limitation on liens on assets of 

covered financial companies that are 

insurance companies or covered 

subsidiaries of insurance companies. 

(a) In the event that the Corporation 

makes funds available to a covered 

financial company that is an insurance 

company or is a covered subsidiary or 

affiliate of an insurance company or 

enters into any other transaction with 

respect to such covered entity under 12 

U.S.C. 5384(d), the Corporation will 

exercise its right to take liens on some 

or all assets of such covered entities to 

secure repayment of any such 

transactions only when the Corporation, 

in its sole discretion, determines that: 

(1) Taking such lien is necessary for 

the orderly liquidation of the entity; and 

(2) Taking such lien will not either 

unduly impede or delay the liquidation 

or rehabilitation of such insurance 

company, or the recovery by its 

policyholders. 

(b) This section shall not be construed 

to restrict or impair the ability of the 

Corporation to take a lien on any or all 

of the assets of any covered financial 

company or covered subsidiary or 

affiliate in order to secure financing 

provided by the Corporation or the 

receiver in connection with the sale or 

transfer of the covered financial 

company or covered subsidiary or 

affiliate or any or all of the assets of 

such covered entity. 

Dated at Washington, DC, this 8th day of 

October, 2010. 

By order of the Board of Directors. 

Roberte E. Feldman, 

Executive Secretary, Federal Deposit 

Insurance Corporation. 

[FR Doc. 2010–26049 Filed 10–18–10; 8:45 am] 

BILLING CODE 6714–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 229, 230, 240, and 249 

[Release Nos. 33–9150, 34–63091; File No. 

S7–26–10] 

RIN 3235–AK76 

Issuer Review of Assets in Offerings of 

Asset-Backed Securities 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: We are proposing new 

requirements in order to implement 

Section 945 and a portion of Section 932 

of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act of 2010 

(the ‘‘Act’’). First, we are proposing a 

new rule under the Securities Act of 

1933 to require any issuer registering 

the offer and sale of an asset-backed 

security (‘‘ABS’’) to perform a review of 

the assets underlying the ABS. We also 

are proposing amendments to Item 1111 

of Regulation AB that would require an 

ABS issuer to disclose the nature of its 

review of the assets and the findings 

and conclusions of the issuer’s review of 

the assets. If the issuer has engaged a 

third party for purposes of reviewing the 

assets, we propose to require that the 

issuer disclose the third-party’s findings 

and conclusions. We also are proposing 

to require that an issuer or underwriter 

of an ABS offering file a new form to 

include certain disclosure relating to 

third-party due diligence providers, to 

implement Section 15E(s)(4)(A) of the 

Securities Exchange Act of 1934, a new 

provision added by Section 932 of the 

Act. 

DATES: Comments should be received on 

or before November 15, 2010. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/proposed.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–26–10 on the subject line; 

or 

• Use the Federal eRulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–26–10. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/ 

proposed.shtml). Comments are also 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; we do 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Proposed Rules 64183 

1 17 CFR 229.1111. 

2 17 CFR 229.1100 through 17 CFR 229.1123. 

3 17 CFR 230.193. 

4 15 U.S.C. 77a et seq. 

5 17 CFR 240.15Ga–2. 

6 17 CFR 249.ABS–15G. 

7 15 U.S.C. 78a et seq. 

8Public Law 111–203, 124 Stat. 1376 (July 21, 

2010). 

9 15 U.S.C. 77g(d). 

10 15 U.S.C. 78o–7(s)(4)(A). 

11We note that recently adopted amendments to 

a safe harbor rule by the Federal Deposit Insurance 

Corporation require, in residential mortgage-backed 

securities offerings, sponsors to disclose a thirdparty diligence report on compliance with 

origination standards and the representations and 

warranties made with respect to the assets. See 

Treatment by the Federal Deposit Insurance 

Corporation as Conservator or Receiver of Financial 

Assets Transferred by an Insured Depository 

Institution in Connection with a Securitization or 

Participation After September 30, 2010, Final Rule, 

Federal Deposit Insurance Corporation, (Sept. 27, 

2010). 

12We will propose rules to implement the rest of 

Section 15E(s)(4) at a later date. Section 15E(s)(4)(B) 

requires a provider of third-party due diligence 

services to provide a certification to any nationally 

recognized statistical rating organization (‘‘NRSRO’’) 

rating the transaction. Section 15E(s)(4)(C) requires 

the Commission to establish the form and content 

of such certification, and Section 15E(s)(4)(D) 

requires the Commission to adopt rules requiring an 

NRSRO to disclose the certification to the public. 

The Act requires that final regulations under 

Section 15E(s)(4) be adopted not later than one year 

after enactment. 

13The requirement under this proposal to 

perform a review should not be confused with, and 

is not intended to change, the due diligence defense 

against liability under Securities Act Section 11 [15 

U.S.C. 77k] or the reasonable care defense against 

liability under Securities Act Section 12(a)(2) [15 

U.S.C. 77l(a)(2)]. Our proposed rule is designed to 

require a review of the underlying assets by the 

issuer and to provide disclosure of the nature, 

findings and conclusions of such review. 

14 15 U.S.C. 77g(d)(1). 

15 15 U.S.C. 78c(a)(77). This definition was added 

by Section 941(a) of the Act. 

16See Item 1101(c)(1) of Regulation AB [17 CFR 

229.1101(c)(1)]. 

17We understand that various levels and types of 

review may be performed in a securitization. For 

example, commentators on a recent proposing 

release on asset-backed securities have identified 

that the type of review conducted by a sponsor of 

a securitization of sub-prime mortgage loans 

typically falls into three general categories. First, a 

credit review examines the sample loans to 

ascertain whether they have been originated in 

accordance with the originator’s underwriting 

guidelines. This would include a review of whether 

the loan characteristics reported by the originator 

are accurate and whether the credit profile of the 

loans is acceptable to the sponsor. A second type 

of review could be a compliance review which 

examines whether the loans have been originated in 

compliance with applicable laws, including 

predatory lending and Truth in Lending statutes. 

Third, a valuation review entails a review of the 

accuracy of the property values reported by the 

originators for the underlying collateral. This could 

include a review of each original appraisal to assess 

whether it appeared to comply with the originator’s 

appraisal guidelines, and the appropriateness of the 

comparables used in the original appraisal process. 

See comment letter from The Commonwealth of 

Massachusetts Office of the Attorney General 

(‘‘Massachusetts AG comment letter’’) on AssetBacked Securities, SEC Release No. 33–9117 (April 

7, 2010) [75 FR 23328] (the ‘‘2010 ABS Proposing 

Release’’). The comment letters are available at 

http://www.sec.gov/comments/s7-08-10/

s70810.shtml. 

18 Given the 180-day statutory deadline 

prescribed by the Act, we have not attempted to 

describe a type of review that may be appropriate 

for various different asset classes; we believe that 

devising various levels of review applicable to each 

different asset class would require a more extensive 

undertaking than is feasible in the time provided. 

FOR FURTHER INFORMATION CONTACT: 

Eduardo Aleman, Special Counsel, 

Division of Corporation Finance, at 

(202) 551–3430, U.S. Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549. 

SUPPLEMENTARY INFORMATION: We are 

proposing amendments to Item 1111 1 of 

Regulation AB2 (a subpart of Regulation 

S–K). We also are proposing to add Rule 

193 3 under the Securities Act of 1933 4

(the ‘‘Securities Act’’) and Rule 15Ga–2 5

and Form ABS–15G 6 under the 

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’).7

I. Background 

This release is one of several we are 

required to issue to implement 

provisions of the Act.8 This release 

proposes a new rule and certain 

amendments to implement Section 7(d) 

of the Securities Act,9 which was added 

by Section 945 of the Act. In addition, 

we are proposing a new rule and form 

to implement Section 15E(s)(4)(A) of the 

Exchange Act,10 which was added by 

Section 932 of the Act. 

Section 945 of the Act amends 

Section 7 of the Securities Act to require 

the Commission to issue rules relating 

to the registration statement required to 

be filed by an issuer of ABS. Pursuant 

to new Section 7(d), the Commission 

must issue rules to require that an issuer 

of an ABS perform a review of the assets 

underlying the ABS, and disclose the 

nature of such review.11 Section 7(d) 

requires that we adopt these rules not 

later than 180 days after enactment. 

Section 932 of the Act adds new 

Section 15E(s)(4)(A) of the Exchange 

Act, which also relates to the review of 

assets underlying an ABS. Section 

15E(s)(4)(A) requires an issuer or 

underwriter of any ABS to make 

publicly available the findings and 

conclusions of any third-party due 

diligence report obtained by the issuer 

or underwriter.12 Because the substance 

of new Section 7(d) of the Securities Act 

is related to new Section 15E(s)(4)(A) of 

the Exchange Act, we are considering 

both provisions added by the Act 

together. 

II. Proposed Rules 

A. Proposed Requirement That an ABS 

Issuer Perform a Review of the Assets 

We are proposing new Rule 193 under 

the Securities Act to require issuers of 

ABS to perform a review of the assets 

underlying registered ABS offerings.13

This rule would implement Securities 

Act Section 7(d)(1),14 as added by 

Section 945 of the Act. 

1. Application of the Proposed Rule 

Section 7(d)(1) relates to an assetbacked security, as defined in new 

Section 3(a)(77) of the Exchange Act.15

This new statutory definition 

(‘‘Exchange Act-ABS’’) is broader than 

the definition of ‘‘asset-backed security’’ 

in Regulation AB16 and includes 

securities typically offered and sold in 

private transactions. Nevertheless, we 

have concluded that the review 

requirements mandated by Section 

7(d)(1) apply only to registered offerings 

of ABS because Section 7(d)(1) requires 

the Commission to issue rules ‘‘relating 

to the registration statement.’’ Therefore, 

the rule we are proposing today that 

would require an ABS issuer to perform 

a review of the assets applies to issuers 

of ABS in registered offerings and not 

issuers of ABS in unregistered offerings. 

2. New Securities Act Rule 193 

Rule 193 would require an issuer to 

perform a review of the assets 

underlying an ABS in a transaction that 

will be registered under the Securities 

Act. Rule 193 would not specify the 

level or type of review an issuer is 

required to perform.17 We expect that 

the issuer’s level and type of review of 

the assets may vary depending on the 

circumstances. For example, the level or 

type of review may vary among different 

asset classes. While proposed Rule 193 

would not require a particular level or 

type of review, we note that, if adopted, 

required responsive disclosure would 

describe the level and type of review. 

We believe the disclosure requirements 

below will give investors an ability to 

evaluate the level and adequacy of the 

issuer’s review of the assets. 

Rule 193 would not specify the type 

or level of review an issuer is required 

to perform or require that a review be 

designed in any particular manner, 

although as set out below, we are 

requesting comment on whether and, if 

so, how the Commission should specify 

the nature of the review.18 We believe 

that the nature of review may vary 

depending on numerous circumstances 

and factors which could include, for 

example, the nature of the assets being 

securitized and the degree of continuing 

involvement by the sponsor. For 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
64184 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Proposed Rules 

19Our proposal for asset-level data points in our 

2010 ABS Proposing Release, which remains 

outstanding, provides examples of the kind of 

information that the issuer could undertake to 

review in order to comply with proposed Rule 193. 

For example, in the case of RMBS, the Commission 

proposed requiring, for each loan in the pool, 

standardized disclosure of, among others, credit 

score, employment status, and income of the obligor 

and how that information was verified. Some 

specific data points that were proposed include: 

The appraised value used to approve the loan, 

original property valuation type, and most recent 

appraised value, as well as the property valuation 

method, date of valuation, and valuation confidence 

scores; 

Combined and original loan-to-value ratios and 

the calculation date; 

Obligor and co-obligor’s length of employment, 

whether they are self-employed and the level of 

verification (e.g., not verified, stated and not 

verified, or direct independent verification with a 

third-party of the obligor’s current employment); 

and 

Obligor and co-obligor’s wage and other income 

and a code that describes the level of verification. 

For income of the obligor, the issuer would be 

required, if adopted, under our 2010 ABS Proposing 

Release to indicate what level of review of the 

income was conducted. One possible level of 

review would be that income was verified by 

previous W–2 forms or tax returns and year-to-date 

pay stubs, if the obligor was salaried. Another 

possibility would be that the income was verified 

for the last 24 months through W–2 forms, pay 

stubs, bank statements, and/or tax returns. As 

noted, we are not proposing specific standards for 

the review required by proposed Rule 193. While 

the Commission believes these data points may be 

relevant, they are intended to serve only as 

examples of items that we anticipate an issuer 

would consider reviewing in order to comply with 

proposed Rule 193. These proposals remain 

outstanding as we consider comments received on 

the 2010 ABS Proposing Release. 

20Some asset classes such as credit card 

receivables and stranded costs would be exempt 

from this rule; however, credit card ABS would be 

required to provide grouped account data. 

21 In addition, Section 942 of the Act adds new 

Section 7(c) to the Securities Act requiring the 

Commission to adopt regulations requiring each 

issuer of an asset-backed security to disclose, for 

each tranche or class of security, standardized 

information regarding the assets backing that 

security. 

22Under Securities Act Rule 191 (17 CFR 

230.191), the depositor for the asset-backed 

securities acting solely in its capacity as depositor 

to the issuing entity is the ‘‘issuer’’ for purposes of 

the asset-backed securities of that issuing entity. 

‘‘Depositor’’ means the depositor who receives or 

purchases and transfers or sells the pool assets to 

the issuing entity. See Item 1101 of Regulation AB. 

For asset-backed securities transactions where there 

is not an intermediate transfer of the assets from the 

sponsor to the issuing entity, the term depositor 

refers to the sponsor. For asset-backed securities 

transactions where the person transferring or selling 

the pool assets is itself a trust, the depositor of the 

issuing entity is the depositor of that trust. See id. 

23As defined in Item 1101 of Regulation AB, the 

‘‘sponsor’’ means the person who organizes and 

initiates an ABS transaction by selling or 

transferring assets, either directly or indirectly, 

including through an affiliate, to the issuing entity. 

See 17 CFR 229.1101(1). Where there is not a twostep transfer, the term ‘‘depositor’’ refers to the 

sponsor. 

24See Asset-Backed Securities, Release No. 33– 

8518 (Dec. 22, 2004) [70 FR 1506] (‘‘2004 Regulation 

AB Adopting Release’’) at Section III.B.3. The 

issuing entity is designed to be a passive entity, and 

in order to meet the definition of ABS issuer in 

Regulation AB its activities must be limited to 

passively owning or holding the pool of assets, 

issuing the ABS supported or serviced by those 

assets, and other activities reasonably incidental 

thereto. 

25 In the case of so-called aggregators, the sponsor 

acquires loans from many other unaffiliated sellers 

before securitization. 

26Section 7 of the Securities Act requires the 

consent of any person whose profession gives 

authority to a statement made by him, is named as 

having prepared or certified any part of the 

registration statement, or is named as having 

prepared or certified a report or valuation for use 

in connection with the registration statement. The 

third-party’s findings and conclusions must also be 

disclosed in a registration statement and a consent 

from the third party must be obtained in accordance 

with Section 7. 

27See Testimony of Vicki Beal, Senior Vice 

President Clayton Holdings, Before the Financial 

Crisis Inquiry Commission (Sept. 23, 2010), 

available at http://www.fcic.gov/hearings/pdfs/

2010–0923–Beal.pdf. 

28See, e.g., Vikas Bajaj and Jenny Anderson, 

Inquiry Focuses on Withholding of Data on Loans, 

N.Y. Times, January 12, 2008; E. Scott Reckard, 

Sub-prime Mortgage Watchdogs Kept on Leash; 

Loan Checkers Say Their Warnings of Risk Were 

Met with Indifference, Los Angeles Times, March 

17, 2008, at C1. 

29 In this release, we refer to third parties engaged 

for purposes of reviewing the assets also as thirdparty due diligence providers. 

example, in offerings of residential 

mortgage-backed securities (‘‘RMBS’’), 

where the asset pool consists of a large 

group of loans, it may be appropriate, 

depending on all the facts, to review a 

sample of loans large enough to be 

representative of the pool, and then 

conduct further review if the initial 

review indicates that further review is 

warranted. By contrast, for ABS where 

a significant portion of the cash flow 

will be derived from a single obligor or 

a small group of obligors, such as ABS 

backed by a small number of 

commercial loans (‘‘CMBS’’), it may be 

appropriate for the review to include 

every pool asset. Moreover, in ABS 

transactions where the asset pool 

composition turns over rapidly because 

it contains revolving assets, such as 

credit card receivables or dealer 

floorplan receivables, a different type of 

review may be warranted than in ABS 

transactions involving term receivables, 

such as mortgage or auto loans. 

While proposed Rule 193 would not 

specify a particular type or level of 

review, we note that under our 

proposal, prospectus disclosure of the 

nature of review would be required. We 

believe the disclosure requirements 

described below will give investors an 

ability to evaluate the level and 

adequacy of the issuer’s review of the 

assets. We request comment below on 

whether disclosure, without mandating 

the nature of the review to be 

conducted, is sufficient. 

While we are not proposing the nature 

of the review that would be required, we 

note that some of the data points 

proposed in the 2010 ABS Proposing 

Release describe the type of review 

items that may be relevant to the review 

that must be performed to comply with 

Rule 193.19 In our proposals requiring 

enhanced disclosure for an ABS 

offering, we proposed to require 

prospectuses for public offerings of ABS 

and ongoing Exchange Act reports to 

contain specified asset-level information 

about each of the assets in the pool.20

The asset-level information would be 

provided according to proposed 

standards and in a tagged data format.21

Proposed Rule 193 would require that 

the asset review be conducted by the 

issuer of the ABS.22 The issuer, for 

purposes of this rule, would be the 

depositor or sponsor of the 

securitization. A sponsor typically 

initiates a securitization transaction by 

selling or pledging to a specially-created 

issuing entity a group of financial assets 

that the sponsor either has originated 

itself or has purchased in the secondary 

market.23 In some instances, the transfer 

of assets is a two-step process: the 

financial assets are transferred by the 

sponsor first to an intermediate entity, 

the depositor or the issuer, and then the 

depositor transfers the assets to the 

issuing entity for the particular assetbacked transaction. The issuing entity is 

typically a statutory trust.24 In cases 

where the originator and sponsor may 

be different, including in transactions 

involving a so-called ‘‘aggregator,’’ the 

review may be performed by the 

sponsor, but we propose that a review 

performed by an unaffiliated originator 

would not satisfy proposed Rule 193. 

The originator may have different 

interests in the securitization, especially 

if the securitization involves many 

originators where each originator may 

have contributed a very small part of the 

assets in the entire pool, and may have 

differing approaches to the review.25

If an issuer engages a third party for 

purposes of reviewing the pool assets, 

then an issuer may rely on the thirdparty’s review to satisfy its obligations 

under proposed Rule 193 provided the 

third party is named in the registration 

statement and consents to being named 

as an ‘‘expert’’ in accordance with 

Section 7 of the Securities Act and Rule 

436 under the Securities Act.26 We are 

aware that, at least with respect to 

RMBS, there is a specialized industry of 

third-party due diligence firms.27 These 

firms typically are retained to review, 

for example, the accuracy of loan level 

data.28 Allowing issuers to contract with 

a third-party due diligence provider 29 is 

consistent with Section 15E(s)(4) of the 


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Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Proposed Rules 64185 

30As noted above, we will address these 

requirements in a subsequent rulemaking. 

31We note that this section is not limited to 

requiring disclosure; the section imposes an 

obligation to conduct a review and to disclose the 

nature of the review. In other contexts, we have 

previously adopted rules pursuant to a legislative 

mandate that required issuers or other parties to 

take (or not take) particular action. See e.g., 

Management’s Report on Internal Control Over 

Financial Reporting and Certification of Disclosure 

in Exchange Act Periodic Reports, Release No. 33– 

8238 (June 5, 2003) (adopting rules requiring 

management of companies subject to the Exchange 

Act’s reporting requirements to establish and 

maintain adequate internal control over financial 

reporting for the company as directed by Section 

404 of the Sarbanes-Oxley Act of 2002); See also 

Insider Trades During Pension Fund Blackout 

Periods, Release No. 34–47225 (Jan. 22, 2003) 

(adopting rules to give effect to Section 306(a) of the 

Sarbanes-Oxley Act of 2002), which prohibits 

directors or executive officers of any issuer of an 

equity security from conducting transactions in the 

issuer’s securities during a pension plan blackout 

period. The Act also imposes other substantive 

requirements, such as requiring securitizers to 

retain 5% risk. See Section 941 of the Act. 

32Thus, for example, if the prospectus disclosed 

that the loans are limited to borrowers with a 

specified minimum credit score, or certain income 

level, the review, as designed, would be required 

to provide reasonable assurance that the loans in 

the pool met this criterion. 

33See Securities Act Section 11 [15 U.S.C. 77k] 

and Securities Act Sections 12 [12 U.S.C. 77l]. See 

also Securities Act Section 17 [15 U.S.C. 77q], 

Exchange Act Section 10(b) [15 U.S.C. 78j] and Rule 

10b–5 under the Exchange Act [17 CFR 240.10b–5]. 

34See Exchange Act Rule 13a–15 [17 CFR 

240.13a–15]. 

35See Management’s Report on Internal Control 

over Financial Reporting and Certification of 

Disclosure in Exchange Act Periodic Reports, at 

Section F.4, Release No. 33–8238 (June 5, 2003). See 

also Certification of Disclosure in Companies’ 

Quarterly and Annual Reports, Release No. 34–8124 

(June 14, 2002). ABS issuers must provide in Form 

10–K an assessment by each party participating in 

the servicing function regarding its compliance 

with specified servicing criteria set forth in Item 

1122 of Regulation AB. See 17 CFR 229.1122. A 

registered public accounting firm must issue an 

attestation report on such party’s assessment of 

compliance. See id. 

36Although ABS issuers are not subject to Rule 

13a–15, ABS issuers that also issue corporate 

securities are familiar with it. We previously have 

recognized that, because the information ABS 

issuers are required to provide differs significantly 

from that provided by other issuers, and because of 

the structure of ABS issuers as typically passive 

pools of assets, the certification requirements 

should be tailored specifically for ABS issuers. See 

Certification of Disclosure in Companies’ Quarterly 

and Annual Reports, Release No. 34–8124; See also 

Revised Statement: Compliance by Asset-Backed 

Issuers with Exchange Act Rules 13a–14 and 15d– 

14, Statement by the Staff of the Division of 

Corporation Finance (Feb. 21, 2003), available at 

http://www.sec.gov/divisions/corpfin/8124cert.htm. 

37 15 U.S.C. 77k. 

38 15 U.S.C. 77l(a)(2). 

Exchange Act which, as discussed 

further below, requires the issuer or 

underwriter of an ABS to make publicly 

available the findings and conclusions 

of a third-party due diligence report and 

requires a third-party due diligence 

provider that is employed by a 

nationally recognized statistical rating 

organization (‘‘NRSRO’’), an issuer or an 

underwriter to provide a written 

certification to the NRSRO that 

produces a credit rating. Under Section 

15E(s)(4) of the Exchange Act, the 

Commission is required to establish the 

appropriate format and content for the 

certifications ‘‘to ensure that providers 

of due diligence services have 

conducted a thorough review of data, 

documentation, and other relevant 

information necessary for a nationally 

recognized statistical rating organization 

to provide an accurate rating.’’30 We 

believe that a ‘‘third party engaged for 

purposes of performing a review’’ is a 

broad category that would include any 

third party on which the issuer relies to 

review assets in the pool. We believe 

that the third party engaged by the 

issuer to perform a review of the assets 

for purposes of complying with Rule 

193 likely would be the same thirdparty due diligence providers whose 

reports must be made publicly available 

by an issuer or underwriter for purposes 

of Section 15E(s)(4)(A), although we 

seek comment on whether that is 

appropriate. 

Request for Comment 

1. Does our proposed rule to require 

the issuer of ABS in a registered 

transaction to perform a review of the 

assets adequately address Section 

7(d)(1) of the Securities Act, as added by 

Section 945 of the Act? Is this proposal, 

coupled with the proposed disclosure 

requirements described below, 

sufficient to carry out the purposes of 

Section 7(d)(1) of the Act? Can investors 

evaluate for themselves the sufficiency 

of the review undertaken by the issuer? 

Will issuers undertake a meaningful 

review absent a minimum review 

standard? 

2. Should we instead mandate a 

minimum level of review that must be 

performed on the pool of assets? Would 

requiring a minimum level of review 

better carry out the mandate of 

Securities Act Section 7(d)(1), which 

imposes a new review requirement, 

separate from the disclosure 

requirement in Section 7(d)(2)?31 If so, 

what level of review would be 

appropriate? For instance, should we 

require that the review, at a minimum, 

provide reasonable assurance that the 

disclosure in the prospectus regarding 

the assets is accurate in all material 

respects?32 We note that the federal 

securities laws currently require that 

disclosure in the prospectus not contain 

an untrue statement of a material fact or 

omit to state a material fact required to 

be stated therein or necessary to make 

the statements not misleading.33

Therefore, we would expect that issuers 

are currently performing some level of 

review in order to provide them 

sufficient comfort to believe that the 

prospectus disclosure is accurate. A 

reasonable assurance level would be 

similar to the standard that companies 

use in designing and maintaining 

disclosure controls and procedures 

required under Exchange Act Rule 13a– 

15.34 Our rules generally ‘‘require an 

issuer to maintain disclosure controls 

and procedures to provide reasonable 

assurance that the issuer is able to 

record, process, summarize and report 

the information required in the issuer’s 

Exchange Act reports’’ within 

appropriate time frames, and companies 

have been subject to these requirements 

for many years.35

• If we required that the review, at a 

minimum, provide reasonable assurance 

that the disclosure in the prospectus 

regarding the assets is accurate in all 

material respects, would issuers and 

their advisers be familiar with this 

reasonable assurance level and 

understand how that level would apply 

in the context of a review of assets 

underlying ABS?36

• Would a different level of assurance 

that the disclosure in the prospectus 

regarding the assets is accurate in all 

material respects be appropriate? If so, 

what level and why? 

• Should a minimum standard 

require that the review be not just 

designed but also effected to provide 

reasonable assurance that the disclosure 

was accurate? 

• Is there a minimum level of review 

that would be more appropriate or 

useful to investors without imposing 

impracticable burdens and costs on 

issuers? 

• How, if at all, should any such 

standard of review affect current law 

regarding antifraud liability? How, if at 

all, should any such standard of review 

affect the due diligence defense against 

liability under Securities Act Section 

11 37 and the reasonable care defense 

against liability under Securities Act 

Section 12(a)(2)? 38

• Should the rule further specify the 

types of matters—e.g., credit—that 

should be covered by the review? 

• In addition, should the rule further 

specify the level of review? For 

example, should it set out parameters to 

determine whether sampling is 

appropriate? 

3. We note that in the 2010 ABS 

Proposing Release, we proposed 

requiring that the underlying 

transaction agreement in a transaction 

relying on certain Commission safe 

harbors for an exemption from the 


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39See discussion in Section VI of the 2010 ABS 

Proposing Release. 

40See, e.g., joint comment letter from American 

Society of Appraisals, American Society of Farm 

Managers and Rural Appraisers, and National 

Association of Independent Fee Appraisers on the 

2010 ABS Proposing Release (recommending 

standards of appraisal). 

41Section 15E(s)(4)(C) of the Exchange Act. 

42Section 15E(s)(4)(A) of the Exchange Act 

requires issuers to make publicly available the 

findings and conclusions of ‘‘any third-party due 

diligence report.’’ 

43 If an issuer relies on a third party to perform 

the review of the assets, the third party would be 

an expert under Securities Act Section 11 [15 U.S.C. 

77k] and its consent must be included as an exhibit 

to the registration statement. See Section 7 of the 

Securities Act. 

44See, e.g., John Arnholz & Edward E. Gainor, 

Offerings of Asset-Backed Securities § 6.06 (2007 

Supplement). 

Securities Act contain a provision 

requiring the issuer to provide to any 

initial purchaser, security holder, and 

designated prospective purchaser the 

same information as would be required 

in a registered transaction.39 Similar to 

the approach in the 2010 ABS Proposing 

Release, should we condition the safe 

harbors for an exemption from 

registration provided in Regulation D 

and Securities Act Rule 144A on a 

requirement that the underlying 

transaction agreement for the ABS 

contain a representation that the issuer 

performed a review that complies with 

proposed Rule 193? Alternatively, if we 

adopt Rule 193 with some minimum 

standard of review, should we condition 

the safe harbors for an exemption from 

registration provided in Regulation D 

and Securities Act Rule 144A simply on 

a requirement that the issuer perform a 

review of the underlying assets? If so, 

should we also require that the issuer 

represent in the transaction agreement 

that it will certify such review or 

provide disclosure regarding the nature 

of the issuer’s review and findings and 

conclusions? 

4. Should we specify the types of 

review that should be performed? For 

example, should we require that the 

review verify the accuracy of the data 

entry of loan information into the loan 

tape, containing data about the loans in 

the pool (e.g., loan-to-value ratio, debtto-income ratio)? Should the rule 

establish a standard requiring a review 

sufficient to determine whether the 

underlying assets meet the underwriting 

criteria? Should any required review 

entail reviewing borrowers’ income 

levels to determine borrowers’ ability to 

repay the underlying loans? Should the 

rule establish a standard for reviewing 

whether the loans have been originated 

in compliance with applicable laws, 

including predatory lending and Truth 

in Lending statutes? Should we 

establish standards for a review of the 

accuracy of the property values reported 

by the originators for the underlying 

collateral? 40 Could each such type of 

review be conducted across all asset 

classes (e.g., residential mortgages, 

commercial mortgages, credit card 

receivables, resecuritizations)? What 

standards would be appropriate for each 

asset class or across all asset classes of 

asset-backed securities? 

5. Should we explore devising review 

standards for each particular asset class 

and consider proposing more detailed 

standards for the nature of review at a 

later date? If so, how? 

6. Should our rules, as proposed, 

permit issuers to rely on a third party 

that was hired by the issuer to perform 

the required review of the assets under 

Rule 193? Should we, as proposed, 

condition the ability to rely on a third 

party for this purpose on the thirdparty’s review satisfying the 

requirements of Rule 193? When we 

adopt rules in the future to establish the 

appropriate format and content for the 

certifications required pursuant to 

Exchange Act Section 15E(s)(4)(B), we 

will be required to do so in a manner 

‘‘to ensure that providers of due 

diligence services have conducted a 

thorough review of data, 

documentation, and other relevant 

information necessary for a nationally 

recognized statistical rating organization 

to provide an accurate rating.’’ 41 Should 

we condition reliance on third parties 

for purposes of Rule 193 upon 

satisfaction of that standard? How else 

could the proposal better effectuate 

Exchange Act Section 15E(s)(4)? 42

7. If an originator performs a review 

of the assets and provides the findings 

and conclusions of its review to the 

issuer and the originator is not affiliated 

with the sponsor of the securitization, 

should we allow an issuer to rely on the 

originator’s review of the assets in order 

to satisfy the issuer’s review 

requirements? If so, should the 

information relating to the originator’s 

review be treated similarly to thirdparty reviews? As described above, 

under our proposal, an issuer would be 

permitted to rely on a third party to 

conduct the Rule 193 review provided 

the review satisfied the requirements of 

Rule 193 and the third party is named 

in the registration statement and 

consents to being named as an expert in 

accordance with Section 7 of the 

Securities Act and Rule 436 under the 

Securities Act.43 If we allow such 

reviews to satisfy Rule 193, should the 

findings and conclusions of third-party 

originators who conduct Rule 193 

reviews likewise be subject to expert 

liability? 

8. Is there any other party that an 

issuer should be allowed to rely upon in 

order to satisfy the review required by 

proposed Rule 193? For example, 

should an issuer be permitted to rely 

upon the underwriter of the offering? If 

so, how should we treat the findings 

and conclusions of that party? Should 

that party’s findings and conclusions be 

subject to expert liability? If not, how 

can we ensure that such parties would 

take appropriate responsibility for any 

findings included in the issuer’s 

registration statement? 

9. We propose to permit an issuer to 

rely upon a third party that is engaged 

for purposes of performing a review of 

the assets to satisfy Rule 193. Is ‘‘third 

party engaged for purposes of 

performing a review of the pool assets’’ 

an appropriate description? If not, what 

is a more appropriate description? What 

entities should be considered a ‘‘third 

party engaged for purposes of 

performing a review’’? Should such 

third-party reviewers include 

accountants who, for example, perform 

reviews and prepare reports pursuant to 

agreed-upon procedures? Should such 

third-party reviewers include attorneys 

who, for example, provide opinions as 

to the perfection of the security interest 

in the collateral? 44 Are there policy 

reasons why a particular type of thirdparty reviewer should be excluded from 

this requirement? We note that the 

issuer would remain responsible for its 

disclosure under the federal securities 

laws, including disclosure regarding 

pool assets, even if it engages a third 

party to perform the review required by 

Rule 193. Should the proposed rule be 

revised to clarify this point? 

10. It appears that the scope of thirdparty due diligence providers is broad 

enough to include appraisers and 

engineers for purposes of Section 

15E(s)(4). Is there a basis for a different 

approach? Should this vary among 

different asset classes? For example, 

should the requirements differ 

depending on whether the asset class for 

the securities is commercial mortgages 

or residential mortgages? We are aware 

that for certain types of ABS offerings 

(e.g., CMBS offerings) an issuer may 

receive numerous reports from 

appraisers and engineers regarding the 

property underlying the loan. 

11. As discussed below, Exchange Act 

Section 15E(s)(4)(A) requires an issuer 

or underwriter of ABS to make publicly 

available the findings and conclusions 

of any third-party due diligence report 

obtained by the issuer or underwriter. 


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45See, e.g., Proposed Rules for Nationally 

Recognized Statistical Rating Organizations, 

Release No. 34–57967 (June 16, 2008) [73 FR 

36212]. 

46 17 CFR 229.1119. 

47 17 CFR 229.1111. 48 15. U.S.C. 77g(d)(2). 

49As one commentator has noted, the issuer or 

underwriter ‘‘may decide that it is easier not to 

retain such an outside firm than to have to describe 

its procedures and the information it reviewed and 

then provide a certification to the ratings agency 

* * *. In short, given the choice, issuers and 

underwriters might prefer the easier course of doing 

nothing.’’ Examining Proposals to Enhance the 

Regulation of Credit Rating Agencies: Testimony 

before the U.S. Senate Committee on Banking, 

Housing, and Urban Affairs, 111th Congress, 1st 

session, p. 6 (2009) (Testimony of John Coffee). 

How does new Exchange Act Section 

15E(s)(4)(A) impact the analysis here? 

Should the third parties whose findings 

and conclusions must be made publicly 

available under Exchange Act Section 

15E(s)(4)(A) be the same group of third 

parties that are engaged for the review 

of the assets for purposes of proposed 

Rule 193? If not, how can we 

appropriately differentiate between the 

groups of third-party due diligence 

providers? In other words, how should 

the rule describe the nature of the work 

performed by third parties subject to 

Section 15E(s)(4)(A) versus the nature of 

the work performed by third parties 

employed by an issuer whose findings 

and conclusions should be required to 

be disclosed in a registration statement 

if such parties should be different? 

12. We have previously noted the 

potential conflict of interest arising from 

the ‘‘issuer pays’’ model for NRSROs in 

which an NRSRO is paid by the arranger 

of a structured finance product to rate 

the product.45 Are third-party due 

diligence firms subject to the same type 

of potential conflicts of interest as credit 

rating agencies operating under the 

‘‘issuer pays’’ model? If so, is there a way 

to mitigate this potential conflict? 

13. Are there other potential conflicts 

relating to a third-party due diligence 

provider that we should address? How 

should we encourage the quality of 

third-party reviews? Should a third 

party be required to be independent if 

the review will be used to satisfy Rule 

193? If so, do we need to define 

‘‘independent’’? How should we define 

it? Should we require disclosure relating 

to the affiliations of the third party? 

Item 1119 of Regulation AB46 requires 

disclosure of affiliations among 

participants in the securitization. 

Should we revise Item 1119 to require 

disclosure regarding affiliations between 

a third-party due diligence provider and 

the parties listed in Item 1119? 

B. Proposed Disclosure Requirements 

1. Registered Offerings 

Item 1111 of Regulation AB47

outlines several aspects of the pool that 

the prospectus disclosure for ABS 

should cover. We are proposing 

amendments to Item 1111 to require 

disclosure regarding the nature of the 

issuer’s review of the assets under 

proposed Rule 193 and the findings and 

conclusions of the review. In addition, 

we are re-proposing amendments from 

our 2010 ABS Proposing Release to 

require disclosure regarding the 

composition of the pool as it relates to 

assets that do not meet disclosed 

underwriting standards, as we believe 

this information would promote a better 

understanding of the impact of the 

review on the composition of the pool 

assets. 

a. Nature of Review 

We are proposing new Item 1111(a)(7) 

of Regulation AB to require that an 

issuer of ABS disclose the nature of the 

review it conducts to satisfy proposed 

Rule 193. This would include whether 

the issuer has hired a third-party firm 

for the purpose of reviewing the assets. 

In either case, we expect that this would 

include a description of the scope of the 

review, such as whether the issuer or a 

third party conducted a review of a 

sample of the assets or what kind of 

sampling technique was employed (i.e., 

random or adverse). This proposed 

requirement would implement 

Securities Act Section 7(d)(2),48 as 

added by the Act. 

b. Findings and Conclusions 

In order to harmonize this provision 

with the language used in Exchange Act 

Section 15E(s)(4)(A), under proposed 

Item 1111(a)(7), the issuer would be 

required to disclose the findings and 

conclusions of any review performed by 

the issuer or by a third party engaged for 

purposes of reviewing the assets. 

Although Section 7(d) of the Securities 

Act does not require our rules to 

mandate that the issuer disclose the 

findings and conclusions of a review in 

its registration statement, we believe 

this information is important for 

investors to consider along with the 

information in the registration statement 

relating to the nature of the issuer’s 

review and the findings and conclusions 

of third-party due diligence providers, 

as required to be publicly disclosed by 

Securities Act Section 7(d) and 

Exchange Act Section 15E(s)(4)(A). We 

believe that disclosure of the findings 

and conclusions of the review would 

provide investors with a better picture 

of the assets than only the nature of the 

review and a better ability to evaluate 

the review. 

As noted above, Section 15E(s)(4)(A) 

of the Exchange Act requires an issuer 

or underwriter of any ABS to make 

publicly available the findings and 

conclusions of any third-party due 

diligence report obtained by an issuer or 

underwriter. Exchange Act Section 

15E(s)(4)(A) does not apply to an issuer 

who itself performs the review of the 

underlying assets. We believe that it is 

important to consider these two 

provisions together to minimize the 

difference in the required disclosure 

based merely on whether the issuer 

performs the review, or instead hires a 

third party to perform the review.49

Consequently, as noted above, for 

registered offerings of ABS, proposed 

Item 1111(a)(7) would require 

disclosure of the findings and 

conclusions of the issuer or a third-party 

reviewer. We believe this approach 

would avoid incentives for ‘‘regulatory 

arbitrage’’ based merely on whether the 

review of assets was performed 

internally by the issuer, or whether 

instead the issuer hired a third party to 

perform the review. We are concerned 

that the intent of Exchange Act Section 

15E(s)(4)(A) may be frustrated, and 

investor protection may not be served, 

if issuers who hired third-party loan 

review firms to perform a review of the 

assets were required to make publicly 

available the findings and conclusions 

of a review of pool assets, but issuers 

who performed the review themselves 

were not, because it could create an 

incentive for issuers to conduct the 

review themselves to avoid making 

publicly available the findings and 

conclusions of any review of the assets 

underlying the ABS. 

c. Disclosure Regarding Exception Loans 

We also are re-proposing additional 

requirements that we had previously 

proposed in the 2010 ABS Proposing 

Release. In the 2010 ABS Proposing 

Release, we proposed to detail and 

clarify the type of disclosure that is 

required to be provided for ABS 

offerings with respect to deviations from 

disclosed underwriting standards. We 

proposed to require that disclosure 

regarding the inclusion in the pool of 

assets that deviate from the disclosed 

underwriting criteria be accompanied 

by specific data about the amount and 

characteristics of those assets that did 

not meet the disclosed standards. We 

also proposed to require disclosure of 

what compensating or other factors, if 

any, were used to determine that the 

asset should be included in the pool, 

despite not having met the originator’s 

specified underwriting standards. The 


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50See, e.g., comment letters from Mortgage 

Bankers Association, Community Mortgage Banking 

Project, Realpoint, LLC, CFA Institute, and 

American Securitization Forum; but see comment 

letter from IPFS Corporation. 

51See proposed Item 1111(a)(8) of Regulation AB. 

52See Massachusetts AG comment letter. 

53We note that ‘‘underwriter’’ is a term that is 

more typically used in connection with registered 

offerings, and the parties performing similar 

functions in unregistered transactions are typically 

referred to as placement agents or initial 

purchasers. We use the term ‘‘underwriter’’ here to 

describe all those persons. 

54 In a separate release implementing Section 943 

of the Act, we are proposing new Form ABS–15G 

which would be required to be filed by any 

securitizer that offers asset-backed securities that 

would be subject to the federal securities laws. See 

Disclosure for Asset-Backed Securities Required by 

Section 943 of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act of 2010, Release No. 

33–9148 (Oct. 4, 2010) (the ‘‘Section 943 Release’’). 

The term ‘‘securitizer’’ is defined in Section 15G of 

the Exchange Act, as added by the Act. Section 

15E(s)(4)(B)–(D) also would require that when thirdparty due diligence services are employed by an 

NRSRO, an issuer or an underwriter, the person 

providing the services give a certification to any 

NRSRO that produces a rating. Section 15E(s)(4) 

also requires the Commission to issue rules 

regarding the format, content and disclosure of the 

certification. As noted above, the Commission will 

propose and adopt rules to address the other 

provisions of Section 15E(s)(4) not later than one 

year after the date of the Act’s enactment. 

55This five-day time period is intended to be 

consistent with the proposal in the 2010 ABS 

Proposing Release that would require that an ABS 

issuer using a shelf registration statement on 

proposed Form SF–3 file a preliminary prospectus 

containing transaction-specific information at least 

five business days in advance of the first sale of 

securities in the offering. Commentators’ reactions 

to the proposed five-day requirement in the 2010 

ABS Proposing Release were mixed, with some 

commentators suggesting that five days was longer 

than investors needed to consider the information 

in the prospectus (e.g., comment letters from 

American Bar Association, Bank of America), while 

other commentators were supportive of the 

proposed five-day requirement (e.g., comment letter 

from MetLife, Inc.). 

56See 15 U.S.C. 77d(2), 17 CFR 230.144A, 17 CFR 

230.501–508. 

57Filing proposed Form ABS–15G would not 

foreclose the reliance of an issuer on the private 

offering exemption in the Securities Act and the 

safe harbor for offshore transactions from the 

registration provisions in Section 5 [15 U.S.C. 77e]. 

However, the inclusion of information beyond that 

required in proposed Rule 15Ga–2, may jeopardize 

such reliance by constituting a public offering or 

conditioning the market for the ABS being offered 

under an exemption. 

commentators that submitted comments 

on these proposed requirements in the 

2010 ABS Proposing Release were 

generally supportive.50

We are re-proposing an amendment to 

Item 1111 in this release to require 

similar disclosure.51 As re-proposed, 

Item 1111(a)(8) of Regulation AB would 

require issuers to disclose how the 

assets in the pool deviate from the 

disclosed underwriting criteria and 

include data on the amount and 

characteristics of those assets that did 

not meet the disclosed standards. 

Issuers would be required to disclose 

the entity (e.g., sponsor, originator, or 

underwriter) who determined that such 

assets should be included in the pool, 

despite not having met the disclosed 

underwriting standards, and what 

factors were used to make the 

determination. For example, this could 

include compensating factors or a 

determination that the exception was 

not material. If compensating or other 

factors were used, issuers would be 

required to provide data on the amount 

of assets in the pool that are represented 

as meeting each factor and the amount 

of assets that do not meet those factors. 

As discussed in the 2010 ABS Proposing 

Release, we believe that these revisions 

would further detail and clarify the type 

of disclosure that is required to be 

provided for ABS offerings with respect 

to deviations from disclosed 

underwriting standards and help elicit 

important information in areas that 

became problematic in the recent 

financial crisis. We also believe that this 

information would help provide 

investors with a fuller understanding of 

the quality and extent of the issuer’s 

review of the assets (through hiring a 

third-party or otherwise) and how that 

relates to a determination to either 

include a loan in the pool or exclude it 

from the pool. 

The requirements proposed here are 

substantially similar to what we 

proposed in the 2010 ABS Proposing 

Release. However, we are proposing an 

additional requirement, consistent with 

one commentator’s suggestion, that the 

issuer disclose the entity (e.g., sponsor, 

originator or underwriter) who 

determined that such assets would be 

included in the pool, despite not having 

met the disclosed underwriting 

standards.52 We believe that this 

additional requirement would assist 

investors in understanding the entities 

along the securitization chain that may 

be directing decisions to include 

exception loans in the pool. 

2. Exchange Act Section 15E(s)(4)(A) 

and New Form ABS–15G 

As noted above, Section 932 of the 

Act amends Exchange Act Section 15E 

by adding, among other things, a new 

Section 15E(s)(4)(A) which sets forth the 

requirement that the issuer or 

underwriter of any ABS make publicly 

available the findings and conclusions 

of any third-party due diligence report 

obtained by the issuer or underwriter. 

Unlike Securities Act Section 7(d), 

which is expressly limited to registered 

ABS offerings, we believe that the 

requirements of Exchange Act Section 

15E(s)(4)(A) were intended to apply to 

issuers and underwriters of both 

registered and unregistered offerings of 

ABS.53 In this regard, we note that 

Section 941 of the Act amends Section 

3(a) of the Exchange Act to add a 

definition of ‘‘asset-backed security’’ and 

that this definition includes assetbacked securities typically offered and 

sold in unregistered transactions. 

Further, unlike Section 945 of the Act, 

Section 932 does not refer to Section 7 

of the Securities Act or registration 

statements filed under the Securities 

Act. 

For registered ABS offerings, this 

disclosure, with respect to reports 

obtained by issuers, would be required 

to be provided in the prospectus as 

described above. In order to implement 

the disclosure requirement for 

unregistered offerings we are proposing 

new Rule 15Ga–2 under the Exchange 

Act. Proposed Rule 15Ga–2 would 

require an issuer of Exchange Act-ABS 

to file a new Form ABS–15G to disclose 

the findings and conclusions of any 

third party engaged for purposes of 

performing a review obtained by an 

issuer with respect to unregistered 

transactions.54 Rule 15Ga–2 also would 

require an underwriter of Exchange ActABS to file Form ABS–15G with the 

same information for reports obtained 

by an underwriter in registered and 

unregistered transactions. Proposed 

Form ABS–15G would be filed with the 

Commission on EDGAR. 

We are proposing that Form ABS–15G 

be required to be filed five business 

days prior to the first sale of the 

offering. This requirement, if adopted, 

would allow investors and NRSROs 

time to consider the disclosure about a 

third-party’s findings and conclusions 

regarding its review of the pool assets.55

We recognize that public disclosure of 

information relating to an unregistered 

offering could raise concerns regarding 

an issuer’s or underwriter’s reliance on 

the private offering exemptions and safe 

harbors under the Securities Act.56 We 

intend for Form ABS–15G to be used for 

both registered and unregistered ABS 

transactions (although as we note below, 

if the information has already been 

provided in a prospectus for a registered 

transaction, it need not be provided 

again in Form ABS–15G). We are of the 

view that issuers and underwriters can 

disclose information required by Rule 

15Ga–2 without jeopardizing reliance 

on those exemptions and safe harbors, 

provided that the only information 

made publicly available is that which is 

required by the proposed rule, and the 

issuer does not otherwise use Form 

ABS–15G to offer or sell securities or in 

a manner that conditions the market for 

offers or sales of its securities.57


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58See, e.g., signature requirement for Form 10–K 

(17 CFR 249.312). It is also consistent with our 

proposed signature requirements for the registration 

statement for ABS in the 2010 ABS Proposing 

Release. 

59 In the 2010 ABS Proposing Release, we 

proposed to require that an asset-backed issuer that 

offers securities off of a shelf registration statement 

file a preliminary prospectus at least five business 

days before first sale. We anticipate that this 

information would be required to be included in 

such preliminary prospectus, should we adopt that 

proposal. 

60 17 CFR 230.424. 

61 Indeed, the International Organization of 

Securities Commissions (IOSCO) cites the recent 

crisis in the subprime markets, stemming from 

defaulted mortgage loans in the United States and 

affected by issues related to liquidity and 

transparency, as evidence of the interrelation of 

today’s global markets. See Report on the Subprime 

Crisis—Final Report, Report of the Technical 

Committee of IOSCO, May 2008, available at 

https://www.iosco.org/library/pubdocs/pdf/

IOSCOPD273.pdf. 

Under our proposal, Form ABS–15G 

would be signed by the senior officer in 

charge of securitization of the depositor, 

if the form were filed to include the 

findings and conclusions of a third 

party hired by the issuer. We believe 

that requiring the senior officer in 

charge of securitization of the depositor 

to sign the form is consistent with other 

signature requirements for filings 

relating to asset-backed securities.58 If 

the form included the findings and 

conclusions of a third party engaged by 

the underwriter, then the form would be 

signed by a duly authorized officer of 

the underwriter. We believe that 

requiring Form ABS–15G to be signed 

by a duly authorized officer of the 

underwriter would provide an incentive 

for the person who signs the form to 

review it for accuracy. 

As discussed above, because we are 

proposing that, for registered offerings, 

the findings and conclusions of the 

report of a third party that is engaged by 

the issuer for purposes of asset review 

would be required to be included in a 

prospectus that is required to be filed 

with the Commission,59 an issuer that 

has filed such information on EDGAR 

would satisfy the Exchange Act Section 

15E(s)(4)(A) requirement to make 

publicly available a third-party report 

obtained by an ABS issuer. Thus, an 

ABS issuer that has disclosed the 

findings and conclusions of a thirdparty due diligence provider in the first 

prospectus that is required to be filed 

under Rule 424 of the Securities Act 60

and filed in accordance with Rule 424 

would not be required to file a Form 

ABS–15G with the same information. 

However, any underwriter that has 

hired a third-party due diligence 

provider for the registered offering 

would still be required to file Form 

ABS–15G with the findings and 

conclusions of that third-party due 

diligence provider. 

The market for Exchange Act-ABS is 

global.61 Securitizers in the United 

States may sell ABS to offshore 

purchasers as part of a registered or 

unregistered offering. As proposed, 

these transactions would be subject to 

the requirements of proposed Rule 

15Ga–2. In addition, U.S. investors may 

participate in offerings of ABS that are 

primarily offered by foreign securitizers 

to purchasers outside the United States. 

For example, a small proportion of a 

primarily offshore offering of ABS may 

be made available to U.S. investors 

pursuant to Section 4(2) of the 

Securities Act or Rule 144A under that 

Act. 

We recognize that Exchange Act 

Section 15E(s)(4)(A) does not specify 

how its requirements apply to offshore 

transactions. As noted, consistent with 

Section 15E(s)(4)(A), proposed Rule 

15Ga–2 would require issuers and 

underwriters to disclose information 

about unregistered transactions, 

including those sold in unregistered 

transactions outside the United States. 

Securities that are sold in foreign 

markets and assets originated in foreign 

jurisdictions may be subject to different 

laws, regulations, customs and practices 

which can raise questions as to the 

appropriateness of the disclosures 

called for under Form ABS–15G. 

Although our proposed rules are 

required by the Act, and we believe the 

added protections of our rules would 

benefit investors who purchase 

securities in these offerings, we are 

mindful that the imposition of a filing 

requirement in connection with private 

placements of ABS in the United States 

may result in foreign issuers seeking to 

avoid the filing requirement by 

excluding U.S. investors from 

purchasing portions of ABS primarily 

offered outside the United States, thus 

depriving U.S. investors of 

diversification and related investment 

opportunities. 

Request for Comment 

14. Are our disclosure proposals 

appropriate? Should we provide more 

specific requirements regarding the 

information that must be provided about 

the nature and scope of the review? If 

so, what should we require? 

15. Should we consider Securities Act 

Section 7(d) and Exchange Act Section 

15E(s)(4)(A) together and require 

disclosure of the findings and 

conclusions of the issuer’s or third 

party’s review of the assets, as 

proposed? Should we, instead, 

implement Section 15E(s)(4)(A) as part 

of the later rulemaking under Section 

15E? 

16. Should we require, as proposed, 

disclosure relating to assets that deviate 

from the disclosed origination 

underwriting criteria? 

17. Should we require, as proposed, 

disclosure of the entity who determined 

that assets that did not meet the 

disclosed criteria should be included in 

the pool, despite not having met the 

disclosed underwriting criteria? Should 

issuers be required to disclose, as 

proposed, what factors were used to 

make the determination? Would this 

provide useful information for 

investors? 

18. Is requiring the filing of 

information regarding the findings and 

conclusions of the third-party due 

diligence provider’s report on proposed 

Form ABS–15G on EDGAR an 

appropriate way for issuers in 

unregistered offerings and for 

underwriters in registered and 

unregistered offerings to make this 

information publicly available? Should 

we allow Web site posting of the 

information instead? If so, how can we 

ensure the materials remain public? 

What advantages does Web site posting 

have over requiring that the information 

be filed on EDGAR? How do we ensure 

that investors and market participants 

have access to such information? What 

would be the liability implications of 

allowing the information to be posted 

on a Web site as an alternative to filing 

on EDGAR? Are there other appropriate 

means of making the findings and 

conclusions ‘‘publicly available’’? 

19. As discussed in request for 

comment number 10 above, we are 

aware that for certain types of ABS 

offerings an issuer may receive 

numerous reports from appraisers and 

engineers regarding the property 

underlying the loan. To what extent do 

the findings and conclusions of these 

reports help the issuer in performing its 

review? We are aware that CMBS issuers 

often provide the results of such reports 

to the ‘‘B-piece purchaser’’ to the extent 

that the findings of those reports differ 

from the representations and warranties 

regarding the assets in the underlying 

transaction agreements. Should we 

require that the issuer disclose all of the 

findings and conclusions provided to a 

B-piece buyer for purposes of the 

required disclosure in the registration 

statement? To what extent do the 

findings and conclusions of these 

reports assist rating agencies rating 

ABS? Should we require, for purposes 

of Section 15E(s)(4)(A), the findings and 

conclusions of such reports to be 

disclosed only to the extent that those 

findings and conclusions differ from the 


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62See Rule 201 of Regulation S–T [17 CFR 

232.201]. 

63Rules relating to NRSROs have used this 

terminology, and we have said that this refers to a 

‘‘broad category of financial instrument that 

includes, but is not limited to, asset-backed 

securities such as residential mortgage-backed 

securities and to other types of structured debt 

instruments such as collateralized debt obligations, 

including synthetic and hybrid CDOs, or 

collateralized loan obligations.’’ See, e.g., fn. 3 of 

Amendments to Rules for Nationally Recognized 

Statistical Rating Organizations, Release No. 34– 

61050 (Nov. 23, 2009)[74 FR 63832]. 

64For example, Fannie Mae and Freddie Mac are 

government sponsored enterprises (‘‘GSEs’’) that 

purchase mortgage loans and issue or guarantee 

mortgage-backed securities (‘‘MBS’’). MBS issued or 

guaranteed by these GSEs have been, and continue 

to be, exempt from registration under the Securities 

Act and reporting under the Exchange Act. These 

securities have not been, and are not currently, 

rated by a credit rating agency. 

65Exchange Act ‘‘exempted securities’’ include 

government securities and municipal securities, as 

defined under the Exchange Act. For example, MBS 

issued by the Government National Mortgage 

Association are fully modified pass-through 

securities guaranteed by the full faith and credit of 

the United States government. See http:// 

www.ginniemae.gov/. 66 17 CFR 240.3b–4. 

representations and warranties or the 

complete list of findings and 

conclusions provided to a B-piece 

buyer? 

20. Should we provide a temporary 

hardship exemption from electronic 

submission of Form ABS–15G with the 

Commission for filers who experience 

unanticipated technical difficulties that 

prevent timely preparation and 

submission of an electronic filing? Are 

there any reasons that ABS issuers and 

underwriters would not be able to 

submit Form ABS–15G on EDGAR in a 

timely fashion? If so, what would be an 

appropriate format for the filing? Would 

a paper filing be useful to investors and 

other market participants? Is timely 

availability of an electronic filing of this 

information important? If so, should we 

instead require that the information be 

posted on a Web site on the same day 

it was due to be filed on EDGAR, but 

require that the filer submit a 

confirming electronic copy of the 

information within a prescribed number 

of business days (e.g., six) of filing the 

information in paper? 62

21. Is there any reason Exchange Act 

Section 15E(s)(4)(A) should not apply to 

both registered and unregistered ABS 

transactions? If the requirement applies 

to both registered and unregistered 

transactions, should the universe of 

ABS offerings that are subject to the 

requirement be defined, as proposed, as 

an offering of asset-backed securities, as 

that term is defined in Section 3(a)(77) 

of the Exchange Act? Should the 

requirement be instead applicable to 

some other subcategory of asset-backed 

securities? For example, existing 

Exchange Act Section 15E(i) refers to a 

security or money market instrument 

issued by an asset pool or as part of any 

asset-backed or mortgage-backed 

securities transaction. Should our rule 

refer to this description of an assetbacked security instead of the proposed 

reference to Exchange Act Section 

3(a)(77)? 63

22. Should we exempt any issuers, 

underwriters or other parties from this 

requirement? Should we exempt issuers 

and underwriters of ABS that are not 

rated by an NRSRO from having to make 

publicly available the findings and 

conclusions of third-party due diligence 

reports? 64 As proposed, Rule 15Ga–2 

would apply to issuers and underwriters 

of ABS that are exempted securities as 

defined in Section 3(a)(12) of the 

Exchange Act, including government 

securities and municipal securities. 

Should such exempted securities be 

exempt from this provision? 65

23. Would the proposed requirement 

that Form ABS–15G be filed five 

business days prior to first sale provide 

investors with sufficient time to review 

the findings and conclusions contained 

therein? Would it provide NRSROs with 

sufficient time to take the included 

information into account in determining 

a rating? If not, what would be a more 

appropriate filing deadline and why? 

Are five business days also appropriate 

in unregistered offerings? Is there reason 

to require a different number of days in 

unregistered offerings? 

24. Is our proposed signature 

requirement for Form ABS–15G 

appropriate? Is it necessary? Conversely, 

are there other appropriate individuals 

that are better suited to sign the form? 

25. Should issuers of registered ABS 

offerings be required to provide notice 

on Form ABS–15G that they have 

provided information relating to the 

third-party due diligence report 

obtained by the issuer in a prospectus 

that is filed with the Commission? 

26. Where an issuer, underwriter or 

NRSRO employs a third-party due 

diligence provider, Section 15E(s)(4)(B) 

of the Exchange Act also requires that 

the person providing the due diligence 

services provide to the NRSRO a written 

certification in the format and 

containing content to be determined by 

the Commission. The Commission is 

required to prescribe this form and 

content not later than one year after 

enactment of the Act. Although we are 

not proposing to implement this 

requirement in this release, we request 

comment on the appropriate format and 

content for this certification and how 

we can appropriately coordinate the 

rules and requirements proposed in this 

release with that statutory requirement. 

27. Are there any extra or special 

considerations relating to offshore sales 

of ABS that we should take into account 

in our rules? Should our rules permit 

issuers or underwriters to exclude 

information from Form ABS–15G with 

respect to assets underlying ‘‘foreignoffered ABS,’’ and if so, should foreignoffered ABS be defined to include 

Exchange Act-ABS that were initially 

offered and sold solely in accordance 

with Regulation S, the payments to 

holders of which are in non-U.S. 

currency, that are governed by non-U.S. 

law, and have foreign assets (i.e., assets 

that are not originated in the United 

States) that comprise at least a majority 

of the value of the asset pool? For this 

purpose, should the foreign asset 

composition threshold be higher or 

lower (e.g., 40%, 60%, or 80%)? Would 

another definition be more appropriate? 

28. Should our rules require issuers 

that are foreign private issuers 66 to 

provide information on Form ABS–15G 

for those Exchange Act-ABS that are to 

be offered and sold in the United States 

pursuant to an exemption in an 

unregistered offering, as proposed? 

Instead, should our rules only require 

disclosure about Exchange Act-ABS as 

to which more than a certain percentage 

(e.g., 5%, 10% or 20%) of any class of 

such ABS is sold to U.S. persons? 

29. Should we include requirements 

tailored to revolving asset master trusts? 

For example, should we include a 

disclosure requirement in Exchange Act 

Form 8–K requiring that the issuer 

provide updated disclosure on its 

review or due diligence with respect to 

accounts or assets that are added to the 

pool after the offering transaction has 

been completed? Should this be a 

requirement for each Form 10–D or 

should it be provided on a quarterly 

basis instead? 

III. General Request for Comment 

We request comment on the specific 

issues we discuss in this release, and on 

any other approaches or issues that we 

should consider in connection with the 

proposed amendments. We seek 

comment from any interested persons, 

including investors, asset-backed 

issuers, sponsors, originators, servicers, 

trustees, disseminators of EDGAR data, 

industry analysts, EDGAR filing agents, 

and any other members of the public. 

IV. Paperwork Reduction Act 

Certain provisions of the proposed 

rule amendments contain ‘‘collection of 

information’’ requirements within the 


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Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Proposed Rules 64191 

67 44 U.S.C. 3501 et seq. 

68 44 U.S.C. 3507(d) and 5 CFR 1320.11. 

69The paperwork burden from Regulation S–K is 

imposed through the forms that are subject to the 

requirements in those regulations and is reflected 

in the analysis of those forms. To avoid a 

Paperwork Reduction Act inventory reflecting 

duplicative burdens and for administrative 

convenience, we assign a one-hour burden to 

Regulation S–K. 

70We rely on two outside sources of ABS 

issuance data. We use the ABS issuance data from 

Asset-Backed Alert on the initial terms of offerings, 

and we supplement that data with information from 

Securities Data Corporation (SDC). 

71This estimate is based on data from Securities 

Data Corporation (SDC). 

72This is based on ABS issuance data from AssetBacked Alert and information from SDC. 

73This does not reflect burdens associated with 

the review that would be required as a result of 

proposed Rule 193, which we believe does not 

impose a collection of information requirement for 

purposes of our PRA analysis. 

meaning of the Paperwork Reduction 

Act of 1995 (PRA).67 The Commission is 

submitting these proposed amendments 

and proposed rules to the Office of 

Management and Budget (OMB) for 

review in accordance with the PRA.68

An agency may not conduct or sponsor, 

and a person is not required to comply 

with, a collection of information unless 

it displays a currently valid control 

number. The titles for the collections of 

information are: 69

(1) ‘‘Form ABS–15G’’ (a proposed new 

collection of information); 

(2) ‘‘Form S–1’’ (OMB Control No. 

3235–0065); 

(3) ‘‘Form S–3’’ (OMB Control No. 

3235–0073); and 

(4) ‘‘Regulation S–K’’ (OMB Control 

No. 3235–0071). 

Compliance with the proposed 

amendments would be mandatory. 

Responses to the information collections 

would not be kept confidential and 

there would be no mandatory retention 

period for proposed collection of 

information. 

Our PRA burden estimates for the 

proposed amendments are based on 

information that we receive on entities 

assigned to Standard Industrial 

Classification Code 6189, the code used 

with respect to ABS, as well as 

information from outside sources.70

When possible, we base our estimates 

on an average of the data that we have 

available for the years 2004 through 

2009. 

1. Form ABS–15G 

Form ABS–15G is a new collection of 

information that relates to proposed 

disclosure requirements for issuers or 

underwriters of any ABS. Under the 

proposed amendments, issuers or 

underwriters would be required to make 

publicly available the findings and 

conclusions of any third party engaged 

by the issuer or underwriter for the 

purposes of performing a review of the 

underlying assets. The burden assigned 

to Form ABS–15G reflects the cost of 

preparing and filing the form on 

EDGAR. The proposed Form ABS–15G 

would be filed by issuers of unregistered 

offerings of ABS, and underwriters of 

registered and unregistered offerings of 

ABS. During 2004 through 2009, there 

was an average of 958 registered 

offerings of ABS per year. We assume 

for purposes of this PRA that third-party 

due diligence reports typically are 

obtained only in RMBS and CMBS 

transactions. This assumption is based 

on our belief that the smaller the 

average loan in the pool of assets and 

the higher the frequency with which the 

pool loans revolve the less likely it is 

that there will be a third-party due 

diligence report. We estimate that RMBS 

and CMBS comprised 54% (or 517) of 

the registered offerings during the above 

time frame.71 We assume that not all 

offerings of RMBS and CMBS will 

involve a third-party due diligence 

report. We estimate that 75% of RMBS 

and CMBS offerings would involve a 

third-party due diligence report. Thus, 

we estimate that 388 of all registered 

offerings (958 × 0.54 × 0.75) involve the 

hiring of a third-party due diligence 

provider by an underwriter. Because 

issuers would include the findings and 

conclusions of any third-party due 

diligence report in a prospectus in 

registered offerings, only underwriters 

would file a Form ABS–15G in 

registered ABS offerings. 

In addition, over the period 2004 

through 2009, the average number of 

Rule 144A ABS offerings per year was 

716.72 Because there may be additional 

ABS offerings that would have been 

subject to the requirement to file Form 

ABS–15G (e.g., offerings of asset-backed 

securities that relied upon Section 4(2) 

for an exemption from registration), we 

assume that there would be a total of 

800 offerings of asset-backed securities 

that could be subject to our proposed 

Form ABS–15G filing requirement. 

Using the same assumptions and 

percentage estimates as above, we 

estimate that 324 (800 × 0.54 × 0.75) of 

all unregistered ABS offerings involve 

the hiring of a third-party due diligence 

provider by the issuer and underwriter 

or placement agent. Therefore, we 

estimate that approximately 712 (388 + 

324) Forms ABS–15G would be filed 

annually. Our burden estimate is based 

on the assumption that the issuer’s or 

underwriter’s costs would be limited 

since Rule 15Ga–2 only requires that 

issuers or underwriters make publicly 

available the findings and conclusions 

they obtained from a third-party. We 

estimate that the burden to an issuer or 

underwriter of making the findings and 

conclusions of a third-party publicly 

available will be approximately 5 hours 

to prepare, review and file the Form 

ABS–15G. This would amount to 3,560 

burden hours (5 hours × 712 forms). We 

allocate 75%, or 2,670 (0.75 × 3,560), of 

those hours to internal burden hours 

and 25% for professional costs at $400 

per hour for total outside costs of 

$356,000 ($400 × 0.25 × 3,560). 

2. Rule 15Ga–2 

Rule 15Ga–2 contains the 

requirements for disclosure that an 

issuer must provide in Form ABS–15G 

filings described above. The collection 

of information requirements, however, 

are reflected in the burden hours 

estimated for Form ABS–15G. 

Therefore, Rule 15Ga–2 does not impose 

any separate burden. 

3. Forms S–1 and S–3 

We are proposing amendments to 

Item 1111 of Regulation AB to increase 

the disclosure that would be required in 

offerings of ABS registered on either 

Forms S–1 or S–3. The disclosure 

required under Item 1111 would 

include disclosure that otherwise would 

be required by proposed Exchange Act 

Rule 15Ga–2 (which implements 

Section 15E(s)(4)(A) of the Exchange 

Act), as well as additional information 

about issuer reviews not required by 

proposed Rule 15Ga–2. The amendment 

to Item 1111 would require issuers to 

disclose how the assets in the pool 

deviate from the disclosed underwriting 

criteria, and include data on the amount 

and characteristics of those assets that 

did not meet the disclosed standards. 

Issuers would be required to disclose 

the entity who determined that such 

assets should be included in the pool 

and what factors were used to make the 

determination. Under proposed Rule 

193, if an issuer employs a third party 

to perform the review, the third party 

must be named in the registration 

statement and consent to being named 

as an expert in accordance with 

Securities Act Rule 436. Thus, we 

anticipate that issuers will incur a 

burden in obtaining a consent from the 

third party. 

We believe that the proposed 

requirements would increase the annual 

incremental burden to issuers by 30 

hours per form.73 For registration 

statements, we estimate that 25% of the 

burden of preparation is carried by the 

company internally and that 75% of the 

burden is carried by outside 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
64192 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Proposed Rules 

74See 2004 Regulation AB Adopting Release. 75See S. Rep. No. 111–176, at 121 (2010). 

professionals retained by the registrant 

at an average cost of $400 per hour. 

From 2004 through 2009, an estimated 

average of four offerings was registered 

annually on Form S–1 by ABS issuers. 

We believe that the proposed 

requirements would result in an 

increase to the internal burden to 

prepare Form S–1 of 30 burden hours 

(0.25 × 30 × 4) and an increase in 

outside costs of $36,000 ($400 × 0.75 × 

30 × 4). During 2004 through 2009, we 

estimate an annual average of 929 

offerings of ABS registered on Form S– 

3. Therefore, we believe that the 

proposed requirements would result in 

an increase to the internal burden to 

prepare Form S–3 filings of 6,968 

burden hours (0.25 × 30 × 929) and a 

total cost of $8,361,000 (400 × 0.75 × 30 

× 929). 

Regulation S–K 

Regulation S–K includes the item 

requirements in Regulation AB and 

contains the disclosure requirements for 

filings under both the Securities Act and 

the Exchange Act. In 2004, we noted 

that the collection of information 

requirements associated with Regulation 

S–K as it applies to ABS issuers are 

included in Form S–1 and Form S–3.74

The proposed changes would revise 

Regulation S–K. The collection of 

information requirements, however, are 

reflected in the burden hours estimated 

for the various Securities Act and 

Exchange Act forms related to ABS 

issuers. The rules in Regulation S–K do 

not impose any separate burden. 

Consistent with historical practice, we 

have retained an estimate of one burden 

hour for Regulation S–K for 

administrative convenience. 

Form 

Current 

annual 

responses 

Proposed 

annual 

responses 

Current 

burden 

hours 

Increase in 

burden 

hours 

Proposed 

burden 

hours 

Current 

professional 

costs 

Increase in 

professional 

costs 

Proposed 

professional 

costs 

S–1 .............. 1,168 1,168 247,982 30 248,012 $297,578,400 $36,000 $297,614,400 

S–3 .............. 2,065 2,065 236,959 6,968 243,927 284,350,500 8,361,000 292,711,500 

Form ABS– 

15G .......... .................... 712 .................... 2,670 2,670 .......................... 356,000 356,000 

Total ..... .................... .................... .................... 9,668 .................... .......................... 8,753,000 ..........................

Request for Comment 

We request comments in order to 

evaluate (1) Whether the proposed 

collection of information is necessary 

for the proper functioning of the agency, 

including whether the information 

would have practical utility; (2) the 

accuracy of our estimate of the burden 

of the proposed collection of 

information; (3) whether there are ways 

to enhance the quality, utility, and 

clarity of the information to be 

collected; and (4) whether there are 

ways to minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of automated collection techniques 

or other forms of information 

technology. 

Any member of the public may direct 

to us any comments concerning the 

accuracy of these burden estimates and 

any suggestions for reducing these 

burdens. Persons submitting comments 

on the collection of information 

requirements should direct the 

comments to the Office of Management 

and Budget, Attention: Desk Officer for 

the Securities and Exchange 

Commission, Office of Information and 

Regulatory Affairs, Washington, DC 

20503, and should send a copy to 

Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090, with reference to File No. 

S7–26–10. Request for materials 

submitted to OMB by the Commission 

with regard to these collections of 

information should be in writing, refer 

to File No. S7–26–10, and be submitted 

to the Securities and Exchange 

Commission, Office of Investor 

Education and Advocacy, 100 F Street, 

NE., Washington, DC 20549–0213. OMB 

is required to make a decision 

concerning the collection of information 

between 30 and 60 days after 

publication of this release. 

Consequently, a comment to OMB is 

best assured of having its full effect if 

OMB receives it within 30 days of 

publication. 

V. Benefit-Cost Analysis 

The proposed amendments to our 

regulations for ABS relate to requiring 

an issuer of an ABS to perform a review 

of the assets underlying the security. We 

are proposing rules that are intended to 

implement the requirements under new 

Section 7(d) of the Securities Act. We 

also are proposing rules that are 

intended to implement part of new 

Section 15E(s)(4) of the Exchange Act. 

First, we are proposing a new Securities 

Act rule to require issuers of registered 

offerings of asset-backed securities to 

perform a review of the assets 

underlying the asset-backed securities. 

Second, we also are proposing new 

requirements in Regulation AB to 

require disclosure regarding: 

• The nature of the review of assets 

conducted by an ABS issuer; 

• The findings and conclusions of a 

review of assets conducted by an issuer 

or third party; 

• Data on assets in the pool that do 

not meet the underwriting standards; 

and 

• Disclosure regarding which entity 

determined that the assets should be 

included in the pool, despite not having 

met the underwriting standards and 

what factors were considered in making 

this determination. 

We also are proposing to require that an 

issuer or underwriter of any Exchange 

Act-ABS be required to file the findings 

and conclusions of a third-party due 

diligence report on a new form filed on 

EDGAR. 

A. Benefits 

The proposed amendments are 

designed to increase investor protection 

by implementing the requirement on 

issuers to perform a review of the 

underlying assets and disclose the 

nature of the review. This should lead 

to enhanced transparency in offerings of 

ABS, and result in an increase in 

investors’ understanding of the 

underlying pool of assets. We believe 

that the proposal to require the issuer to 

perform a review of the assets 

underlying an ABS is likely to result in 

an improvement in the quality of 

securitized loan pools to the extent that 

these reviews are able to identify noncompliant or otherwise low-quality 

assets. It also will allow the public to 

determine the adequacy and level of due 

diligence services provided by a third 

party which is consistent with the 

purposes of Section 932 of the Act.75 We 


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Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Proposed Rules 64193 

76See id. 

77See id. 

78See e.g., comment letter from Massachusetts 

AG. 

79See id. 

expect that requiring a review of the 

assets will result in loan pools of higher 

quality. 

Further, the description of the nature 

of the review and disclosure of findings 

and conclusions should encourage more 

rigorous asset reviews, whether by 

issuers or third parties engaged to 

perform the asset reviews. These 

disclosures would complement the 

requirement to perform a review by 

improving their quality. We also believe 

that the proposal to make publicly 

available on EDGAR the findings and 

conclusions of third-party due diligence 

reports in ABS offerings will allow the 

public to better assess and more easily 

determine the adequacy and level of due 

diligence services provided by a third 

party. This benefit of the proposed rule 

is consistent with the purposes of 

Section 932 of the Act as indicated in 

the legislative history of the Act which 

states that ‘‘many analysts point to the 

decline of due diligence as a factor that 

contributed to the poor performance of 

asset-backed securities during the 

crisis.’’ 76 We also note the reference in 

the Act’s legislative history to a need to 

address the lack of due diligence 

regarding information on which ratings 

are based.77 Finally, although issuers in 

registered offerings would not be 

required to use a third party to satisfy 

the review requirement, as a condition 

to such use, a third party would be 

required to consent to being named in 

the registration statement and thereby 

accept potential expert liability, which 

should increase the quality of that 

review. In registered offerings, the 

potential expert liability for the findings 

of third-party reviews provides 

accountability and creates stronger 

incentives to perform high-quality 

reviews that protect investors. The 

resulting disclosures reduce the 

information risk of investing in these 

securities. Our proposal to require 

disclosure by the issuer of the nature, 

findings and conclusions of its review 

could result in improved asset review 

practices. Moreover, this could be useful 

to investors if they prefer investing in 

securities about which there is 

disclosure indicating a more robust 

review over investing in securities about 

which the disclosure indicates a less 

robust review. 

The proposed requirement to disclose 

exception loans should provide 

important information to investors 

regarding the characteristics of the pool 

that may otherwise not be publicly 

known. For those issuers that currently 

provide asset-level information about 

the pool, an investor might be able to 

determine some information about the 

number of exception loans; however, 

even where this could be determined, 

the proposals would reduce investors’ 

cost of information production by 

reducing duplicative efforts on their 

part to gather such data on their own or 

purchase it through data intermediaries. 

We also are proposing to require more 

information about the entities that have 

determined that an asset that deviates 

from underwriting standards should, 

nonetheless, be included in the pool. 

Because third-party asset review 

providers typically work for sponsors, 

there is potentially a conflict of interest 

when a sponsor can waive or overrule 

the third-party’s conclusions that 

insufficient compensating factors exist 

to allow inclusion of an asset that does 

not meet the underwriting standards 

governing the pool.78 We expect that 

information about which entity made 

the determination to include an asset in 

the pool despite not having met the 

underwriting standards will provide 

investors with information to gauge 

whether the decision to accept such 

loans otherwise may be subject to a 

conflict of interest. We also expect this 

will reduce the cost of information 

asymmetry and could be useful 

information to investors because 

investors may be able to price a 

securitization of a pool of assets more 

accurately, and to credit rating agencies 

in assigning more informed credit 

ratings. 

Our proposal to require disclosure of 

the nature of the review, as well as the 

findings and conclusions of any such 

review, may increase investor 

confidence in the market for ABS. This 

proposal, in conjunction with the 

proposal to require that issuers perform 

a review, could allow investors to better 

understand the information about the 

asset pool and credit risk of the asset 

pool including whether the asset pool 

consists of loans to borrowers without 

the ability to repay the loans, or is 

composed of loans made to 

creditworthy borrowers. 

In addition, Section 15E(s)(4)(A) of 

the Exchange Act, as added by Section 

932 of the Act, which requires issuers 

and underwriters to make the findings 

and conclusions of third-party due 

diligence reports publicly available, is 

aimed at improving the quality of 

information received by rating agencies 

issuing ratings on asset-backed 

securities in registered and unregistered 

offerings.79 We have proposed to make 

this information publicly available on 

EDGAR. By requiring the proposed 

Form ABS–15G to be filed on EDGAR, 

the information that would be required 

would be housed in a central repository 

that would preserve continuous access 

to the information. 

B. Costs 

The proposed rule would implement 

the requirement that all issuers of 

registered ABS offerings perform a 

review of the underlying assets and that 

those issuers disclose the nature of their 

review. Although some issuers of ABS 

may currently perform a review of the 

underlying assets, ABS issuers in 

registered offerings may incur 

additional costs to perform more 

extensive reviews, whether the issuer 

performs the review itself, or hires a 

third-party to perform the review. It is 

possible that by not establishing a 

minimum level of review and leaving 

the determination of the appropriate 

level of review to each individual 

issuer, a lack of a uniform standard 

could result in investors having 

difficulty comparing the level of review 

and the disclosures about the review 

among various issuers and asset classes. 

It is possible that by not establishing 

a minimum level of review and leaving 

the determination of the appropriate 

level of review to each individual 

issuer, some issuers who otherwise may 

have performed a more thorough review 

to meet a proposed minimum level of 

review may design their reviews to 

accomplish no more than what is 

required by the rule. 

As proposed, Rule 193 permits an 

issuer to rely on a third party to perform 

the required review, provided the 

review satisfies the standard in Rule 193 

and the third party consents to be 

named in the registration statement. 

Some asset classes may not have thirdparty due diligence providers available 

to be engaged to conduct a review. In 

instances where an issuer must conduct 

the review, we believe that the costs of 

conducting these reviews will not 

exceed the costs of engaging third 

parties to conduct the reviews. Thirdparty due diligence providers are not 

registered with the Commission and 

some may not be subject to professional 

standards. Further, it is possible that 

third-party providers may lack sufficient 

capabilities to provide the review for 

which they are retained. However, our 

rules would subject third-party due 

diligence providers in registered 

transactions to potential expert liability 

for the disclosure regarding the findings 

and conclusions of their review of the 

assets. For certain firms, however, in 

particular smaller due diligence entities 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
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80 15 U.S.C. 78w(a). 

81 15 U.S.C. 77b(b). 

82 15 U.S.C. 78c(f). 

83See, e.g., David Adler, A Flat Dow for 10 Years? 

Why it Could Happen, Barrons (Dec. 28, 2009). 84Pub. L. 104–121, Title II, 110 Stat. 857 (1996). 

that may lack the financial resources to 

cover their potential liabilities, expert 

liability may not be a significant 

deterrent because these firms have less 

financial resources exposed to potential 

liability and may not be as concerned 

about losing potential claims compared 

to firms that have more financial 

resources exposed to liability. This may 

create a burden on both qualified 

providers of due diligence and the 

securitizers that hire them. 

We acknowledge that this 

requirement would impose costs on 

issuers and third-party due diligence 

providers, and they may be required to 

adjust their practices (and prices in the 

case of third parties) to account for this 

new requirement. 

Finally, for unregistered offerings, the 

disclosure of the results of an asset 

review is required only for third-party 

reviews. This may indirectly result in 

discouraging issuers and underwriters 

from obtaining third-party reviews in 

unregistered offerings. 

Our proposals requiring issuers to 

disclose the nature of the review as well 

as the findings and conclusions of such 

review will impose a disclosure burden. 

In addition, filers will make the 

information proposed to be required 

available on EDGAR, which requires 

obtaining authorization codes and 

adherence to formatting instructions. 

For purposes of the PRA, we estimate 

that the new disclosure would cause an 

increase in the total cost of preparing 

Forms S–1 and S–3 of $13,995,000. In 

addition, for purposes of the PRA, we 

estimate that the cost for including 

third-party findings in Form ABS–15G 

would be $356,000. 

Request for Comment 

We seek comments and empirical data 

on all aspects of this Benefit-Cost 

Analysis including identification and 

quantification of any additional costs 

and benefits. Specifically, we ask the 

following: 

• What would be the costs to an 

issuer of performing a review of the 

underlying assets? How would this 

compare to the cost of hiring a thirdparty provider to perform the review? 

• What would be the additional costs 

arising from the application of expert’s 

liability to third-parties performing 

reviews for issuers? 

VI. Consideration of Burden on 

Competition and Promotion of 

Efficiency, Competition and Capital 

Formation 

Section 23(a) of the Exchange Act 80

requires the Commission, when making 

rules and regulations under the 

Exchange Act, to consider the impact a 

new rule would have on competition. 

Section 23(a)(2) prohibits the 

Commission from adopting any rule that 

would impose a burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the 

Exchange Act. Section 2(b) of the 

Securities Act 81 and Section 3(f) of the 

Exchange Act 82 require the 

Commission, when engaging in 

rulemaking that requires it to consider 

whether an action is necessary or 

appropriate in the public interest, to 

consider, in addition to the protection of 

investors, whether the action would 

promote efficiency, competition, and 

capital formation. Below, we address 

these issues for each of the proposed, 

substantive changes to offerings of ABS. 

As a result of the financial crisis and 

subsequent events, the market for 

securitization has declined due, in part, 

to perceived uncertainty about the 

accuracy of information about the pools 

backing the ABS and perceived 

problems in the securitization process 

that affected investors’ willingness to 

participate in these offerings.83 Greater 

transparency of the review performed 

on the underlying assets would decrease 

the uncertainty about pool information 

and, thus, should help investors price 

these products more accurately. The 

proposed requirements are likely to 

positively affect pricing, efficiency, and 

capital allocation in ABS capital 

markets. 

Finally, the introduction of expert 

liability on the third-party review 

providers may have consequences for 

the competition in this market. The 

possibility of expert liability may 

provide an incentive for due diligence 

providers to improve the quality of their 

reviews. Thus, one possible market 

outcome is for reviewers to compete on 

the quality of their services, because 

competing on price accompanied by 

lower quality may cease to be 

economically viable given the potential 

liability. 

On the other hand, the possibility of 

expert liability may not be a significant 

deterrent for smaller due diligence 

providers that do not have the financial 

resources to cover their potential 

liabilities. This may adversely affect 

competition in both the market for the 

provision of due diligence and the 

market for ABS. Diligent providers of 

asset reviews may be pressured to 

decrease their standards, their prices or 

both. In addition, ABS with reviews 

obtained from such parties may affect 

the pricing of competing securities. 

Alternatively, the possibility of expert 

liability could be an incentive for due 

diligence providers to improve their 

capabilities. 

In summary, taken together the 

proposed amendments and regulations 

implement Congress’ mandate under the 

Act and are designed to improve 

investor protection, improve the quality 

of the assets underlying an ABS, and 

increase transparency to market 

participants. We believe that the 

proposals also would improve investors’ 

confidence in asset-backed securities 

and help recovery in the asset-backed 

securities market with attendant 

positive effects on efficiency, 

competition and capital formation. 

We request comment on our proposed 

amendments. We request comment on 

whether our proposals would promote 

efficiency, competition, and capital 

formation. Commentators are requested 

to provide empirical data and other 

factual support for their views, if 

possible. 

VII. Small Business Regulatory 

Enforcement Fairness Act 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996,84 a rule is ‘‘major’’ if it has 

resulted, or is likely to result in: 

• An annual effect on the U.S. 

economy of $100 million or more; 

• A major increase in costs or prices 

for consumers or individual industries; 

or 

• Significant adverse effects on 

competition, investment, or innovation. 

We request comment on whether our 

proposed amendments would be a 

‘‘major rule’’ for purposes of the Small 

Business Regulatory Enforcement 

Fairness Act. We solicit comment and 

empirical data on: 

• The potential effect on the U.S. 

economy on an annual basis; 

• Any potential increase in costs or 

prices for consumers or individual 

industries; and 

• Any potential effect on competition, 

investment, or innovation. 

VIII. Regulatory Flexibility Act 

Certification 

The Commission hereby certifies 

pursuant to 5 U.S.C. 605(b) that the 

proposals contained in this release, if 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities. The proposals 

relate to the registration, disclosure and 

reporting requirements for asset-backed 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
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85 17 CFR 230.157. 

86 17 CFR 240.0–10(a). 

87This is based on data from Asset-Backed Alert. 

88This is based on data from Asset-Backed Alert. 

securities under the Act, the Securities 

Act and the Exchange Act. Securities 

Act Rule 157 85 and Exchange Act Rule 

0–10(a) 86 defines an issuer, other than 

an investment company, to be a ‘‘small 

business’’ or ‘‘small organization’’ if it 

had total assets of $5 million or less on 

the last day of its most recent fiscal year. 

As the depositor and issuing entity are 

most often limited purpose entities in 

an ABS transaction, we focused on the 

sponsor in analyzing the potential 

impact of the proposals under the 

Regulatory Flexibility Act. Based on our 

data, we only found one sponsor that 

could meet the definition of a small 

broker-dealer for purposes of the 

Regulatory Flexibility Act.87 In 

addition, we do not believe that any 

underwriter of ABS would meet the 

definition of a small entity for purposes 

of the Regulatory Flexibility Act.88

Accordingly, the Commission does not 

believe that the proposals, if adopted, 

would have a significant economic 

impact on a substantial number of small 

entities. 

IX. Statutory Authority and Text of 

Proposed Rule and Form Amendments 

We are proposing the new rules and 

amendments contained in this 

document under the authority set forth 

in Sections 6, 7, 10, 19(a), and 28 of the 

Securities Act, and Sections 3(b), 15E, 

15G, 23(a), 35A and 36 of the Exchange 

Act. 

List of Subjects in 17 CFR Parts 229, 

230, 240, and 249 

Advertising, Reporting and 

recordkeeping requirements, Securities. 

For the reasons set out above, Title 17, 

Chapter II of the Code of Federal 

Regulations is proposed to be amended 

as follows: 

PART 229—STANDARD 

INSTRUCTIONS FOR FILING FORMS 

UNDER SECURITIES ACT OF 1933, 

SECURITIES EXCHANGE ACT OF 1934 

AND ENERGY POLICY AND 

CONSERVATION ACT OF 1975— 

REGULATION S–K 

1. The authority citation for part 229 

continues to read in part as follows: 

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 

77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26), 

77ddd, 77eee, 77ggg, 77hhh, 777iii, 77jjj, 

77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 

78o, 78u–5, 78w, 78ll, 78mm, 80a–8, 80a–9, 

80a–20, 80a–29, 80a–30, 80a–31(c), 80a–37, 

80a–38(a), 80a–39, 80b–11, and 7201 et seq.; 

and 18 U.S.C. 1350, unless otherwise noted. 

* * * * * 

2. Amend § 229.1111 by: 

a. Revising the introductory text to 

paragraph (a): 

b. Adding paragraphs (a)(7) and (a)(8). 

The revision and additions read as 

follows: 

§ 229.1111 (Item 1111) Pool assets. 

* * * * * 

(a) Information regarding pool asset 

types and selection criteria. Provide the 

following information: 

* * * * * 

(7)(i) The nature of a review of the 

assets performed by an issuer or sponsor 

(required by § 230.193), including 

whether the issuer of any asset-backed 

security engaged a third party for 

purposes of performing a review of the 

pool assets underlying an asset-backed 

security; and 

(ii) The findings and conclusions of 

the review of the assets by the issuer, 

sponsor, or third party described in 

paragraph (a)(7)(i) of this section. 

Instruction to Item 1111(a)(7): If the 

issuer has engaged a third party for 

purposes of performing the review of 

assets, the issuer must provide the name 

of the third-party reviewer and comply 

with the requirements of § 230.436 of 

this chapter. 

(8) If any assets in the pool deviate 

from the disclosed underwriting criteria, 

disclose how those assets deviate from 

the disclosed underwriting criteria and 

include data on the amount and 

characteristics of those assets that did 

not meet the disclosed standards. 

Disclose which entity (e.g., sponsor, 

originator, or underwriter) determined 

that those assets should be included in 

the pool, despite not having met the 

disclosed underwriting standards, and 

what factors were used to make the 

determination, such as compensating 

factors or a determination that the 

exception was not material. If 

compensating or other factors were 

used, provide data on the amount of 

assets in the pool that are represented as 

meeting each such factor and the 

amount of assets that do not meet those 

factors. 

* * * * * 

PART 230—GENERAL RULES AND 

REGULATIONS, SECURITIES ACT OF 

1933 

3. The authority citation for part 230 

continues to read in part as follows: 

Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 

77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d, 

78j, 78l, 78m, 78n, 78o, 78t, 78w, 78ll(d), 

78mm, 80a–8, 80a–24, 80a–28, 80a–29, 80a– 

30, and 80a–37, unless otherwise noted. 

* * * * * 

Section 230.193 is also issued under sec. 

943, Pub. L. 111–203, 124 Stat. 1376. 

* * * * * 

4. Add § 230.193 to read as follows: 

§ 230.193 Review of underlying assets in 

asset-backed securities transactions. 

An issuer of an ‘‘asset-backed 

security’’, as that term is defined in 

Section 3(a)(77) of the Securities 

Exchange Act of 1934 (15 U.S.C. 

78c(a)(77)), offering and selling such a 

security pursuant to a registration 

statement shall perform a review of the 

pool assets underlying the asset-backed 

security. The issuer may conduct the 

review or an issuer may employ a third 

party engaged for purposes of 

performing the review provided the 

third party is named in the registration 

statement and consents to being named 

as an expert in accordance with 

§ 230.436 of this chapter. 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

5. The authority citation for part 240 

is amended by adding authority for 

§ 240.15Ga-2 to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 

78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p, 

78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a– 

20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 

80b–11, and 7201 et seq.; and 18 U.S.C. 1350 

and 12 U.S.C. 5221(e)(3), unless otherwise 

noted. 

* * * * * 

Section 240.15Ga–2 is also issued under 

sec. 943, Pub. L. 111–203, 124 Stat. 1376. 

* * * * * 

6. Add § 240.15Ga–2 to read as 

follows: 

§ 240.15Ga–2 Findings and conclusions of 

third-party due diligence reports. 

(a) The issuer or underwriter of any 

‘‘asset-backed security’’ (as that term is 

defined in Section 3(a)(77) of the 

Securities Exchange Act of 1934 (15 

U.S.C. 78c(a)(77)) shall file Form ABS– 

15G (17 CFR 249.1400) containing the 

findings and conclusions of any report 

of a third party engaged for purposes of 

performing a review of the pool assets 

obtained by the issuer or underwriter 

five business days prior to the first sale 

in the offering. 

(b) If the issuer in a registered offering 

of asset-backed securities has included 

the information required by paragraph 

(a) of this section in the first prospectus 

that is required to be filed under 17 CFR 

230.424 for that offering and filed in 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
64196 Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Proposed Rules 

accordance with 17 CFR 230.424, then 

the issuer is not required to file Form 

ABS–15G (17 CFR 249.1400) to include 

the same information. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

7. The authority citation for part 249 

is amended by adding an authority for 

§ 249.1400 to read as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; and 18 U.S.C. 1350, unless otherwise 

noted. 

* * * * * 

Section 249.1400 is also issued under sec. 

943, Pub. L. 111–203, 124 Stat. 1376. 

* * * * * 

8. Revise Subpart O, as proposed at 75 

FR 62736, October 13, 2010, to read as 

follows: 

Subpart O—Forms for Securitizers of 

Asset-Backed Securities 

§ 249.1400 Form ABS–15G, Asset-backed 

securitizer report pursuant to Section 15G 

of the Securities Exchange Act of 1934. 

This form shall be used for reports of 

information required by Rule 15Ga–1 

(§ 240.15Ga–1 of this chapter) and Rule 

15Ga–2 (§ 240.15Ga–2 of this chapter). 

Note: The text of Form ABS–15G does not, 

and this amendment will not, appear in the 

Code of Federal Regulations. 

UNITED STATES SECURITIES AND 

EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM ABS–15G 

ASSET-BACKED SECURITIZER 

REPORT PURSUANT TO SECTION 

15G OF THE SECURITIES EXCHANGE 

ACT OF 1934 

Check the appropriate box to indicate 

the filing obligation to which this form 

is intended to satisfy: 

llll Rule 15Ga–1 under the 

Exchange Act (17 CFR 240.15Ga–1) 

llll Rule 15Ga–2 under the 

Exchange Act (17 CFR 240.15Ga–2) 

Date of Report (Date of earliest event reported) lllllllllllllll

Commission File Number of securitizer: 

lllllllllllllllllll

Central Index Key Number of 

securitizer: lllllllllllll

lllllllllllllllllll

Name and telephone number, including 

area code, of the person to contact in 

connection with this filing 

For filings under Rule 15Ga–2, also 

provide the following information: 

Central Index Key Number of depositor: 

llllllllllllllllll

Commission File Number of depositor 

(if applicable): lllllllllll

lllllllllllllllllll

(Exact name of issuing entity as 

specified in its charter) 

Central Index Key Number of issuing 

entity (if applicable): llllllll

Commission File Number of issuing entity (if applicable): lllllllll

Central Index Key Number of underwriter (if applicable): llllllll

Commission File Number of underwriter (if applicable): llllllll

GENERAL INSTRUCTIONS 

A. Rule as to Use of Form ABS–15G. 

This form shall be used to comply 

with the requirements of Rules 15Ga–1 

and 15Ga–2 under the Exchange Act (17 

CFR 240.15Ga–1 and 17 CFR 240.15Ga– 

2). 

B. Events To Be Reported and Time for 

Filing of Reports. 

1. Forms filed under Rule 15Ga–1. In 

accordance with Rule 15Ga–1, file the 

information required by Part I in 

accordance with Item 1.01, Item 1.02, or 

Item 1.03, as applicable. 

If the filing deadline for the 

information occurs on a Saturday, 

Sunday or holiday on which the 

Commission is not open for business, 

then the filing deadline shall be the first 

business day thereafter. 

2. Forms filed under Rule 15Ga–2. In 

accordance with Rule 15Ga–2, file the 

information required by Part II no later 

than five business days prior to the first 

sale of securities in the offering. 

C. Preparation of Report. 

This form is not to be used as a blank 

form to be filled in, but only as a guide 

in the preparation of the report on paper 

meeting the requirements of Rule 12b– 

12 (17 CFR 240.12b–12). The report 

shall contain the number and caption of 

the applicable item, but the text of such 

item may be omitted, provided the 

answers thereto are prepared in the 

manner specified in Rule 12b–13 (17 

CFR 240.12b–13). All items that are not 

required to be answered in a particular 

report may be omitted and no reference 

thereto need be made in the report. All 

instructions should also be omitted. 

D. Signature and Filing of Report. 

1. Forms filed under Rule 15Ga–1. 

Any form filed for the purpose of 

meeting the requirements in Rule 15Ga– 

1 must be signed by the senior officer in 

charge of securitization of the 

securitizer. 

2. Forms filed under Rule 15Ga–2. 

Any form filed for the purpose of 

meeting the requirements in Rule 15Ga– 

2 must be signed by the senior office in 

charge of securitization of the depositor 

if information required by Item 2.01 is 

required to be provided and must be 

signed by a duly authorized officer of 

the underwriter if information required 

by Item 2.02 is required to be provided. 

3. Copies of report. If paper filing is 

permitted, three complete copies of the 

report shall be filed with the 

Commission. 

INFORMATION TO BE INCLUDED IN 

THE REPORT 

PART I—REPRESENTATION AND 

WARRANTY INFORMATION 

Item 1.01 Initial Filing of Rule 15Ga– 

1 Representations and Warranties 

Disclosure 

If any securitizer (as that term is 

defined in Section 15G(a) of the 

Securities Exchange Act of 1934), issues 

an asset-backed security (as that term is 

defined in Section 3(a)(77) of the 

Securities Exchange Act of 1934), or 

organizes and initiates an asset-backed 

securities transaction by selling or 

transferring an asset, either directly or 

indirectly, including through an 

affiliate, to the issuer, provide the 

disclosures required by Rule 15Ga–1 (17 

CFR 240.15Ga–1) at the time the 

securitizer, or an affiliate commences its 

first offering of the asset-backed 

securities after [compliance or effective 

date of the final rule], if the underlying 

transaction agreements contain a 

covenant to repurchase or replace an 

underlying asset for breach of a 

representation or warranty. 

Item 1.02 Periodic Filing of Rule 

15Ga–1 Representations and 

Warranties Disclosure 

Each securitizer which was required 

to provide the information required by 

Item 1.01 of this form shall provide the 

disclosures required by Rule 15Ga–1 (17 

CFR 240.15Ga–1) as of the end of each 

calendar month, to be filed not later 

than 15 calendar days after the end of 

such calendar month. 

Item 1.03 Notice of Termination of 

Duty To File Reports Under Rule 15Ga– 

1 

If any securitizer has no asset-backed 

securities outstanding (as that term is 

defined in Section 3(a)(77) of the 

Securities Exchange Act of 1934) held 

by non-affiliates, provide the date of the 

last payment on the last asset-backed 

security outstanding that was issued by 

or issued by an affiliate of the 

securitizer. 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 201 / Tuesday, October 19, 2010 / Proposed Rules 64197 

PART II—ASSET REVIEW 

INFORMATION 

Item 2.01 Findings and Conclusions of 

a Third Party Engaged by the Issuer To 

Review Assets 

Provide the disclosures required by 

Rule 15Ga–2 (17 CFR 240.15Ga–2) for 

any report by a third party engaged by 

the issuer for the purpose of reviewing 

assets underlying an asset-backed 

security. 

Item 2.02 Findings and Conclusions of 

a Third-Party Engaged by the 

Underwriter To Review Assets 

Provide the disclosures required by 

Rule 15Ga–2 (17 CFR 240.15Ga–2) for 

any third-party engaged by the 

underwriter for the purpose of 

reviewing assets underlying an assetbacked security. 

SIGNATURES 

Pursuant to the requirements of the 

Securities Exchange Act of 1934, the 

reporting entity has duly caused this 

report to be signed on its behalf by the 

undersigned hereunto duly authorized. 

lllllllllllllllllll

(Depositor, Securitizer, or Underwriter) 

Date llllllllllllllll

lllllllllllllllllll

(Signature)* 

*Print name and title of the signing 

officer under his signature. 

By the Commission. 

Dated: October 13, 2010. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2010–26172 Filed 10–18–10; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–132554–08] 

RIN 1545–BI16 

Additional Rules Regarding Hybrid 

Retirement Plans 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

and notice of public hearing. 

SUMMARY: This document contains 

proposed regulations providing 

guidance relating to certain provisions 

of the Internal Revenue Code (Code) that 

apply to hybrid defined benefit pension 

plans. These regulations would provide 

guidance on changes made by the 

Pension Protection Act of 2006, as 

amended by the Worker, Retiree, and 

Employer Recovery Act of 2008. These 

regulations would affect sponsors, 

administrators, participants, and 

beneficiaries of hybrid defined benefit 

pension plans. This document also 

provides a notice of a public hearing on 

these proposed regulations. 

DATES: Written or electronic comments 

must be received by Wednesday, 

January 12, 2011. Outlines of topics to 

be discussed at the public hearing 

scheduled for Wednesday, January 26, 

2011, at 10 a.m. must be received by 

Friday, January 14, 2011. 

ADDRESSES: Send submissions to: 

CC:PA:LPD:PR (REG–132554–08), Room 

5203, Internal Revenue Service, PO Box 

7604, Ben Franklin Station, Washington, 

DC 20044. Submissions may be handdelivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to: CC:PA:LPD:PR (REG–132554–08), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC, or sent 

electronically, via the Federal 

eRulemaking Portal at http:// 

www.regulations.gov (IRS REG–132554– 

08). The public hearing will be held in 

the IRS Auditorium, Internal Revenue 

Building, 1111 Constitution Avenue, 

NW., Washington, DC. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the regulations, Neil S. 

Sandhu, Lauson C. Green, or Linda S.F. 

Marshall at (202) 622–6090; concerning 

submissions of comments, the hearing, 

and/or being placed on the building 

access list to attend the hearing, Regina 

Johnson, at (202) 622–7180 (not toll-free 

numbers). 

SUPPLEMENTARY INFORMATION: 

Background 

This document contains proposed 

amendments to the Income Tax 

Regulations (26 CFR part 1) under 

sections 411(a)(13), 411(b)(1), and 

411(b)(5) of the Code. Generally, a 

defined benefit pension plan must 

satisfy the minimum vesting standards 

of section 411(a) and the accrual 

requirements of section 411(b) in order 

to be qualified under section 401(a) of 

the Code. Sections 411(a)(13) and 

411(b)(5), which modify the minimum 

vesting standards of section 411(a) and 

the accrual requirements of section 

411(b), were added to the Code by 

section 701(b) of the Pension Protection 

Act of 2006, Public Law 109–280 (120 

Stat. 780 (2006)) (PPA ’06). Sections 

411(a)(13) and 411(b)(5), as well as 

certain effective date provisions related 

to these sections, were subsequently 

amended by the Worker, Retiree, and 

Employer Recovery Act of 2008, Public 

Law 110–458 (122 Stat. 5092 (2008)) 

(WRERA ’08). 

Section 411(a)(13)(A) provides that an 

applicable defined benefit plan (which 

is defined in section 411(a)(13)(C)) is 

not treated as failing to meet either (i) 

the requirements of section 411(a)(2) 

(subject to a special vesting rule in 

section 411(a)(13)(B) with respect to 

benefits derived from employer 

contributions) or (ii) the requirements of 

section 411(a)(11), 411(c), or 417(e), 

with respect to accrued benefits derived 

from employer contributions, merely 

because the present value of the accrued 

benefit (or any portion thereof) of any 

participant is, under the terms of the 

plan, equal to the amount expressed as 

the balance of a hypothetical account or 

as an accumulated percentage of the 

participant’s final average 

compensation. Section 411(a)(13)(B) 

requires an applicable defined benefit 

plan to provide that an employee who 

has completed at least 3 years of service 

has a nonforfeitable right to 100 percent 

of the employee’s accrued benefit 

derived from employer contributions. 

Under section 411(a)(13)(C)(i), an 

applicable defined benefit plan is 

defined as a defined benefit plan under 

which the accrued benefit (or any 

portion thereof) of a participant is 

calculated as the balance of a 

hypothetical account maintained for the 

participant or as an accumulated 

percentage of the participant’s final 

average compensation. Under section 

411(a)(13)(C)(ii), the Secretary of the 

Treasury is to issue regulations which 

include in the definition of an 

applicable defined benefit plan any 

defined benefit plan (or portion of such 

a plan) which has an effect similar to a 

plan described in section 

411(a)(13)(C)(i). 

Section 411(a) requires that a defined 

benefit plan satisfy the requirements of 

section 411(b)(1). Section 411(b)(1) 

provides that a defined benefit plan 

must satisfy one of the three accrual 

rules of section 411(b)(1)(A), (B), and (C) 

with respect to benefits accruing under 

the plan. The three accrual rules are the 

3 percent method of section 

411(b)(1)(A), the 1331⁄3 percent rule of 

section 411(b)(1)(B), and the fractional 

rule of section 411(b)(1)(C). 

Section 411(b)(1)(B) provides that a 

defined benefit plan satisfies the 

requirements of the 1331⁄3 percent rule 

for a particular plan year if, under the 

plan, the accrued benefit payable at the 

normal retirement age is equal to the 

normal retirement benefit, and the 

annual rate at which any individual 

who is or could be a participant can 

accrue the retirement benefits payable at 

normal retirement age under the plan 


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