Source: https://www.sec.gov/rules/proposed/s73098/liftin1.htm
Timestamp: 2019-04-26 13:48:11+00:00

Document:
The Committee on Federal Regulation of Securities of the Section of Business Law of the American Bar Association submits this letter in response to the Securities and Exchange Commission's request for comments on The Regulation of Securities Offerings, Release No. 33-7606 (November 3, 1998), as amended by Release No. 33-7606A (November 13, 1998), which we refer to as the "Proposing Release."1 This letter only addresses the Proposing Release as it relates to asset-backed securities.
Given the scope and importance of the Proposing Release, we augmented our typical comment letter procedures. A drafting committee consisting of members of various subcommittees of the Committee prepared this letter. The drafting committee circulated a draft of this letter for comment among the Chairs and Vice-Chairs of the subcommittees and task forces of the Committee, the members of the Advisory Committee of the Committee and officers of the Section. We also sponsored a panel on the draft comment letter at the Committee's Spring Meeting on April 16, 1999. A substantial majority of those who reviewed the letter in draft form have indicated their general agreement with the views expressed. However, this letter does not represent the official view of the American Bar Association, the Section or the Committee, nor does it necessarily represent the views of all members who drafted or reviewed it.
In 1992, the Commission extended the benefits of Form S-3 and delayed shelf registration to investment-grade ABS "to provide issuers greater flexibility and efficiency in accessing the public securities markets."5 In the six and a half years since the Commission adopted those rules, billions of dollars of ABS have been issued pursuant to Form S-3, and, to our knowledge, none of these ABS issuers has defaulted in its obligation to make full and timely payment of interest or principal. During this period, those entities that require prompt access to the ABS markets as an essential source of liquidity for their businesses have relied on the certainty afforded by the shelf registration system-the knowledge that, once their registration statement has become effective, their access to the public markets depends only on the availability of liquidity in the markets, and not on the timing and scope of staff review of their registration statement. In a global financial market characterized by volatility, certainty of timing of an offering is critical.
ABS (and their precursor, mortgage-backed securities) developed as a result of innovation in US capital markets. The typical disclosure prescribed under the integrated disclosure system is irrelevant to investors in these complex financing structures. Over the years, the Commission has modified its disclosure requirements to better conform to this reality. For example, it extended the availability of Form S-3 to ABS issuers without requiring them to have a reporting history because "a reporting history would be of little practical use for investors."8 As a result, the manner and nature of disclosure for ABS offerings and Exchange Act reports have been developed through staff no-action positions, the Division's selective review program, negotiations with investors and investment bankers, discussions with legal counsel, and over time, review of established industry precedent.
Although we believe that the current system has been reasonably effective, and we appreciate the efforts of the Commission and the staff to meet the needs of ABS issuers and investors within the current system, we believe the time has come to establish a flexible system of formal rules and regulations that apply specifically to ABS. Consistent with many pronouncements of the Commission, we also believe that strengthening the secondary market for ABS will also enhance capital formation.
A proposal for prescribed reporting requirements under the Exchange Act that codifies the fundamental features of the no-action relief that has been generally made available to ABS issuers.
II. The form for registering ABS offerings should reflect unique characteristics of these transactions.
A. Issuers should be able to control the timing of their offerings of investment-grade ABS to the same extent as currently available with shelf registration. The investment-grade ratings of most ABS reflect a level of scrutiny by a sophisticated third party, and a relative level of safety, that causes us to believe that a flexible registration system for them is consistent with the protection of investors. We recognize that credit quality ratings by a nationally recognized statistical rating organization ("rating agency")10 do not address adequacy of disclosure. However, the liability provisions of the Securities Act, the anti-fraud provisions of the Securities Act and the Exchange Act, and customary due diligence conducted by the underwriters, will provide adequate incentive for issuers to continue to disclose material information in the registration statement. Accordingly, if shelf registration will no longer be available in a meaningful way, we believe that ABS issuers of investment-grade securities should be permitted to designate the effective dates of their registration statements, thereby preserving prompt access to capital markets that is so critical to their businesses.
Although the protection of rating agency review would not be available to QIBs and institutional accredited investors acquiring noninvestment-grade ABS, these investors have a level of sophistication that will enable them to conduct their own analysis effectively. Furthermore, the issuer can be expected to pay a premium for the risk assumed by these investors. We note that ABS investors in general play a much more active role than other investors in negotiating the terms of the securities that they purchase. Moreover, these securities are issued currently only in the private markets.
If the Commission permitted issuers to designate the effective dates of their registration statements, they may be more inclined to issue these securities pursuant to registration statements under the Securities Act, and investors would have the benefit afforded by the strict liability provisions of Section 11 of the Securities Act. However, we believe that issuers should not be able to designate the effective date for registration statements for noninvestment-grade ABS unless they are offered solely to QIBs and institutional accredited investors, because of the risks of these securities and the complexities of these offerings.
conform the requirements for ABS in Form S-3.
Similarly, an Exchange Act reporting history does not have significance for most ABS issuers. These reports generally provide only statistical data on the performance of a discrete pool of assets. Moreover, a single, well-established ABS program may use a new trust, depositor or other special purpose entity for each new offering. Thus, identifying an entity with a reporting history may be difficult (if not impossible) in these structured finance programs.
In the context of an ABS offering, an investment-grade rating is an effective substitute for the other indicia of the issuer's eligibility for shelf registration on Form S-3. The rating reflects the rating agency's evaluation of the relative quality of the assets, the structure of the transaction, legal protections, the tax treatment, the servicer's capabilities and experience, and the credit enhancement (if any) for the transaction. A credit quality rating indicates that the risks associated with the transaction have been fully analyzed by a sophisticated entity that specializes in this type of analysis. These ratings, together with the extremely limited discretion afforded to issuers after the securities have been issued, are characteristics of "ideal" transactions in which the Commission could reasonably afford ABS issuers more control over the public offering process.
the effective date of its last registration statement reviewed by the staff.
We believe that retaining these rights to review filings would afford the staff the opportunity to monitor disclosure practices in the industry. We do not believe more frequent review would be necessary for the protection of investors.
D. The staff should not use restrictive interpretations of the term "asset-backed security" to govern the choice of registration form. In our Model Form ABS and Regulation S-K disclosure items, we have revised the current definitions of "asset-backed security"14 and "eligible assets"15 to reflect the broader scope of securities that we believe constitute "asset-backed securities." Asset-backed security would be defined as "a security that is primarily serviced by the cashflows of a discrete pool of eligible assets." Under our proposals, eligible asset would be comprised of "cash and financial assets, either fixed or revolving, whether current or delinquent, that by their terms convert into cash within a finite time period (and, with respect to leases and with respect to financial assets that have foreclosure rights, the property underlying such leases and financial assets) plus any rights or other assets designed to assure the servicing or timely distribution of proceeds to the securityholders." Moreover, our definition expressly states that the "status of an asset as an `Eligible Asset' shall not be affected by delinquencies or losses on such asset."16 We also believe our definitions will permit the short-form registration of offerings that resecuritize pools of ABS.
Since Form S-3 eligibility was extended to registrants of asset-backed securities, the staff has repeatedly reinterpreted the language to exclude offerings, notwithstanding the Commission's statement that "a broad standard has been adopted in order to provide sufficient flexibility and to accommodate future developments in the asset-backed marketplace."17 For example, the staff has taken the position that delinquent assets do not "by their terms convert into cash in a finite period of time" and that securitizations that include more than 20% delinquent assets (raised from an initial staff position of 5%) should not qualify as asset-backed securities.18 These positions apparently reflect a level of discomfort by Staff in affording shelf registration privileges to these offerings, rather than a conclusion that the securities were not, in fact, asset-backed securities. We do not believe that this type of interpretation (typically arising during the staff review process) should be used to retroactively restrict eligibility to use short-form registration.
Whether the Commission adopts Form ABS, includes ABS on proposed Forms A and B, or revises Form S-3 to specifically accommodate offerings of ABS, we believe the Commission should revise the definition of ABS as we have proposed. To the extent the Commission wishes to regulate certain categories of ABS differently from other categories of ABS, it should do so explicitly in a formal rulemaking proceeding, with an opportunity for public comment.
E. Staff monitoring of, and communication with, the ABS industry should be uniform. Although there are numerous ABS issuers, ABS securities and the disclosure that accompanies an ABS offering (unlike disclosure in offerings by operating companies) tends to be fairly consistent among all issuers of ABS supported by the same asset class. Because this disclosure has developed over time without a system of formalized disclosure rules, many ABS industry participants believe that the staff has attempted to address structural or disclosure concerns that it now has with respect to the industry in the context of staff review of a single issuer's registration statement. Although we appreciate the need for this approach during the period that ABS was a new sector of the market, our view is that the market has now matured beyond this point.
Accordingly, we hope that the Commission will, in accordance with our recommendation, adopt formalized disclosure rules for ABS offerings and discontinue this ad hoc development. To the extent that ABS disclosure continues to evolve, we strongly recommend that the staff eliminate the practice of raising industry concerns in an issuer-specific context and as a precondition to use of a registration statement, and instead communicate these concerns to all ABS issuers through a formal release or interpretation.
The disclosure utilized in registration statements for ABS offerings and in Exchange Act reports developed through the participation of issuers, underwriters, investors, rating agencies, lawyers and the staff. As with the integrated disclosure system generally, we believe this evolutionary approach to disclosure regulation has been appropriate and fruitful. Both the market and the process have matured since the early 1980s, and particularly since the Commission extended Form S-3 shelf registration to investment-grade ABS. With that maturation, we believe the time has come to recognize in a formal manner the idiosyncrasies of ABS transactions in the line item disclosure requirements of Regulation S-K. Attached as Exhibit B is Model Item 1000 et seq., prescribing disclosure applicable to Securities Act registration statements and Exchange Act reports, which we believe would be appropriate for inclusion in Regulation S-K.
The Model contemplates that three major categories of disclosure would be applicable to each ABS transaction: (a) the financial assets being securitized (Item 1004); (b) the securities being offered (Item 1005); and (c) the securitization transaction (Item 1006). We believe the ABS market will continue to evolve and that appropriate disclosure will vary from transaction to transaction; accordingly, we hesitate (and we believe the Commission should hesitate) to dictate with great particularity what should and should not be disclosed. For that reason, the Model incorporates the general materiality standard under federal securities law. In this regard, we have also offered guidance to issuers who ultimately must make those materiality determinations, and who bear liability for their decisions.
The matters that we identified for disclosure (or disclosure consideration) are based on the disclosure that is currently being made in ABS offerings. We are not aware that current disclosure in any ABS transaction has proved to be inadequate in any significant respect. The disclosure that has evolved has been very much influenced not only by the caution of ABS transaction participants, but also by what investors want to know about investment-grade ABS. Thus, we see no need to make any significant change to current disclosure practices; we do, however, see a need to provide certainty to market participants by codifying these practices.
IV. Proposals for communications with investors would not improve quality or timeliness of disclosure to ABS investors.
The Proposing Release attempts to ease many existing restrictions on communications during the offering process.19 In a series of no-action letters, the staff has already eased these restrictions for the offering of ABS. These letters generally permit issuers and underwriters to use term sheets and computational materials.20 The Commission proposes to broaden the range of permitted communications beyond those contemplated by the ABS no-actions letters, while at the same time changing the liability standards. The Committee supports codifying (with certain modifications) the staff's current positions; however, we do not believe the proposals for communications with investors in the Proposing Release will improve the quality or timeliness of disclosures to ABS investors.
Structural term sheets that are distributed after a final prospectus is available, but before the potential investor has been sent or received a final prospectus, must be filed as soon as possible, and in any event within two business days of first use.
An initial collateral term sheet provided to a potential investor must be filed within two business days of first use, and any subsequent collateral term sheet that reflects a substantive change in information previously presented must also be filed within two business days of first use.
A series term sheet must be filed pursuant to the requirements for both a structural term sheet and a collateral term sheet, which is usually within two business days of first use.
If an issuer must file a term sheet, the underwriter may not send written confirmations until the term sheet has been filed.
A term sheet relating to an offering pursuant to a registration statement on Form S-3 must be filed as a Current Report on Form 8-K, and incorporated by reference into the registration statement. Additionally, collateral term sheets and series term sheets must bear a legend stating that the information contained in the term sheet will be superseded by the prospectus supplement and that the information supersedes any prior collateral or series term sheets. As a result of incorporating the terms sheets into the registration statement by reference, issuers, underwriters, and other persons incur strict liability under Section 11 of the Securities Act for information contained in term sheets to the same extent as they are liable for other information in the registration statement.
As proposed, ABS term sheets would be deemed "offering information" and form part of the registration statement, thereby creating strict liability under Section 11. By their very nature, term sheets are summary disclosure and do not purport to fully describe all material aspects of the offering. Term sheets are intended to summarize what the prospectus (or prospectus supplement) will fully disclose about the securities and the offering.
Thus, when considering the question of full and accurate disclosure regarding a securities offering, term sheets should not be considered in isolation, but should be read as either supplementing or as being part of the statutory prospectus and registration statement, as articulated in the relevant no-action letters. As a practical matter, the disclosure of material terms of the offering set forth in the prospectus will supersede the term sheet. In accordance with the provisions of the Securities Act, Section 11 liability is based exclusively on the prospectus included in an effective registration statement. Therefore, we believe that ABS term sheets should not be deemed part of the registration statement, but may be more appropriately treated as free writing under proposed Rule 425.
Finally, the Committee is concerned that, unlike the current situation, the Proposing Release might require ABS issuers to file term sheets for abandoned structures. It is not unusual for an issuer or underwriter to circulate a term sheet to test investor interest, which would be revised based upon investor response. We are concerned that a requirement to file all term sheets could lead to substantial confusion rather than providing clear information to investors.
B. Computational materials should not be filed. Underwriters and issuers may provide "computational materials," often at the request of investors, which generally include data relating to the yield, average life, duration, prepayment speeds, expected maturity, interest rate sensitivity and cash flow characteristics of a class or classes included in a proposed offering of ABS. Computational materials analyze the potential performance of securities under a variety of possible scenarios, based on assumptions or a series of assumptions about potential prepayment speeds, prevailing interest rates or default assumptions. The investors frequently provide proprietary models or assumptions that the underwriter is required to use to prepare computational materials.23 As a result, the underlying assumptions and resulting analysis will not necessarily reflect the beliefs of the issuer or underwriters as to how the security should be evaluated, and may not reflect assumptions relevant to any other investor.24 Because of the manner in which these computational materials are prepared, they do not provide concrete "facts" that should be disclosed to all investors (and indeed, may not be relevant for any investor other than the one for whom they were prepared).
These concerns are exacerbated by attaching liability under Section 12(a)(2) to computational materials filed with the Commission. Obviously, underwriters and issuers will be less willing to prepare this information for, or at the request of, investors during the filing period if these materials increase their exposure to liability. Moreover, all underwriters could potentially be liable for the computational materials prepared by any of the managing underwriters. This potential liability could cause the underwriters in the underwriting group to restrict the use of computational materials until they had been fully vetted with the group, which would slow down and limit information available to investors. Instead of enhancing the free flow of information, the proposed filing rules will likely have a limiting effect on communications with investors. The Committee believes that investors are fully protected by the anti-fraud provisions of Rule 10b-5 under the Exchange Act, under which liability would still attach in appropriate circumstances for material misstatements or omissions in computational materials.
We recommend that the Commission exclude computational materials from the categories of "offering materials" and free writing because of the limitations inherent in them. Moreover, we recommend that the Commission not adopt any rule imposing a filing obligation for computational materials. The Committee is cognizant that this position would be a departure from the current requirements regarding the filing of computational materials set forth in the ABS no-action letters; however, it is justified given the nature of computational materials. In this regard, we note that computational materials can be prepared and used only to test investor interest before the terms of an actual offering are determined. The ABS no-action letters currently do not require the filing of computational materials prepared in connection with abandoned structures. Thus, even if the Commission were to continue a filing requirement for some computational materials, we believe that it is important to preserve an exemption for abandoned structures.
We note the Commission's concern that investors are being asked to make investment decisions without adequate information. We note, however, that the ABS market has been extremely proactive in formulating term sheet delivery and other approaches that provide investors with material offering information in a concise and timely fashion without impeding an issuer's ability to access the market quickly. The Committee is very concerned that the proposed time within which ABS issuers would be required to file full transactional disclosure in a registration statement, will severely impair the ability of ABS issuers to adapt their offerings to existing market conditions.
V. Exchange Act reports should be revised to prescribe disclosure items unique to ABS.
annual reports on Form 10-K provide some meaningful information to ABS investors, but only with respect to a few of the required line items.
whether the credit enhancement for the ABS has been reduced or increased during the applicable period.
We recommend that ABS issuers be required to file a Current Report on Form 8-K within 15 days with respect to Item 2 (Acquisition or Disposition of Assets), Item 3 (Bankruptcy or Receivership), Item 4 (Changes in Registrant's Certifying Accountant), and Item 8 (Change in Fiscal Year). In addition, ABS issuers should be required to report under Item 5 of Form 8-K any default (of which the issuer is aware) under transaction agreements that might have an adverse impact on security holders, and other events that occurred during the prior month that would have been required to be disclosed on Form 10-Q under Item 1 (Legal Proceedings), Item 2(a) and (b) (Changes in Securities), and Item 4 (Submission of Matters to a Vote of Security Holders) of Part II of Form 10-Q. Finally, the Committee recommends that all other reporting requirements for ABS issuers be eliminated.
The members of the Committee look forward to the development of specific provisions for the registration of ABS offerings. We would be pleased to meet with the members of the staff to discuss our recommendations in this letter.
If you are using this Form to register concurrently under Section 12(b) or 12 (g) of the Exchange Act any class of securities that are the subject of the offering you are registering under the Securities Act, check the appropriate box and provide the information indicated below.
This Section 12(b) registration will become effective upon the later of (1) effectiveness of this Form ABS; or (2) receipt by the Commission of certification from the national securities exchange listed above.
Section 12(g) registration statements become effective automatically 60 days after filing. You may check box 1 or 2, below, to shorten this time period. Also, you may check box 3, below, to preserve your option to shorten this time period. If you check box 3 and do not file a later amendment, the registration of the class of securities listed above will become effective 60 days after filing of this Form ABS.
1. [ ] upon filing with the Commission. By checking this box, the undersigned are certifying compliance with the delivery requirements of Securities Act Rule 172(a) in connection with the offering. In addition, in checking this box, any underwriter in connection with the offering also is requesting that the registration statement become effective upon filing.
2. [ ] on������(date)������at������(time). By checking this box, the undersigned are certifying compliance with the delivery requirements of Securities Act Rule 172(a) in connection with the offering. In addition, in checking this box, any underwriter in connection with the offering also is requesting that the registration statement become effective upon the date and time designated.
3. [ ] as specified in a later amendment to this Form.
1. Set forth any explanatory details relating to the fee table in footnotes to the table.
2. If the basis for calculating the fee is not evident from the information presented in this table, refer to the applicable provisions of Securities Act Rule 457 in a footnote.
3. If the fee is calculated under Rule 457(o), the "Amount to be registered" and the "Proposed maximum offering price per unit" need not appear in this table.
4. If any of the securities registered are not sold in connection with this offering, the registrant (or a qualifying wholly-owned subsidiary) may use the dollar amount of the fee paid with respect to the unsold securities to offset the total fee due on its subsequent registration statement. See Rule 457(p). When offsetting any part of the fee under Rule 457(p), the registrant must state the dollar amount being offset in a footnote to the fee table and must identify the file number of the registration statement and the amount and class of securities in connection with which the offsetting fee was previously paid. Use of Rule 457(p) to offset any fee automatically deregisters the securities in connection with which the fee was previously paid.
5. Where two or more classes of securities are being registered pursuant to Securities Act Rule 415(a)(1)(vii) and Rule 457(o) or on a delayed or continuous basis pursuant to Securities Act Rule 415(a)(1)(x) and Rule 457(o), the registrant need only specify the "Proposed maximum aggregate offering price" and the "Amount of registration fee" for all classes listed in the fee table as a group, not for each individual class. The registrant must, however, list each of the classes of securities under the "Title of each class of securities to be registered" section of the fee table.
I Eligibility Requirements for Form ABS. A. General Requirement.
1. This Form shall be used for the registration under the Securities Act of 1933 ("Securities Act") of any offering of asset-backed securities.
2. For purposes of this Form, "asset-backed security" means a security that is primarily serviced by the cashflows of a discrete pool of eligible assets. "Eligible asset" means cash and financial assets, either fixed or revolving, whether current or delinquent, that by their terms convert into cash within a finite time period (and, with respect to leases and with respect to financial assets that have foreclosure rights, the property underlying such leases and financial assets) plus any rights or other assets designed to assure the servicing or timely distribution of proceeds to the securityholders. The status of an asset as an "eligible asset" shall not be affected by delinquencies or losses on such asset.
II Securities Act Rules and Regulations.
A. You should read Securities Act Rule 172. That rule describes prospectus delivery obligations that may apply to offerings registered on this Form.
B. You should read the other rules and regulations under the Securities Act (Part 230 of Title 17 of the Code of Federal Regulations), particularly Regulation C and Regulation S-K. Regulation C contains general requirements regarding the preparation and filing of registration statements. Regulation S-K contains non-financial statement disclosure applicable to registration statements.
C. You should read Rules 101, 201 and 202 of Regulation S-T. Those rules require registrants subject to the electronic filing requirements to make all applicable filings through the Commission's EDGAR system. Those rules also provide that failure to submit a required electronic filing will result in ineligibility to use this Form and restrictions on use of incorporation by reference until the required electronic filing has been made.
A. You should read Securities Act Rule 166. That rule permits an eligible registrant to make offers prior to filing a Form ABS registration statement if the offering satisfies the eligibility requirements of General Instruction IV.A.1. of this Form. If you use a prospectus to make offers in reliance on that rule in the offering period, you must file that prospectus when required to do so by Securities Act Rule 425. B. You should read Securities Act Rule 165. That rule permits a Form ABS registrant and those acting on its behalf to use "free writing" offering materials that do not meet the requirements of Section 10 of the Securities Act. If you use a prospectus in reliance on that Rule, you must file it when required to do so by Securities Act Rule 425.
IV Effectiveness of Registration Statement and Post-Effective Amendments.
(ii) The securities offered are offered and sold only to persons that the seller, and any person acting on behalf of the seller, reasonably believes to be (a) qualified institutional buyers or (b) institutional accredited investors.
For purposes of this Form, a security is "investment grade" if, at the time of sale it is rated by at least one nationally recognized statistical rating organization ("NRSRO") as that term is used in Exchange Act Rule 15c3-1(c)(2)(vi)(F) in one of the generic rating categories that signifies investment grade.
For purposes of this Instruction, "qualified institutional buyer" shall have the meaning set forth in Securities Act Rule 144A(a)(1) except that it shall not include dealers as defined in Section 2(a)(12) of the Act or investment advisers as defined in Section 202(a)(11) of the Investment Advisers Act of 1940. "Institutional accredited investor" shall mean an investor of the type described in Securities Act Rule 501(a)(1),(2),(3),(4),(7) or (8) except that it shall not include dealers defined in Section 2(a)(12) of the Act or investments advisers as defined in Section 202(a)(11) of the Investment Advisers Act. Rules 144A(a)(2)-(a)(5) shall apply to this Instruction. In determining whether an investor is a qualified institutional buyer, the registrant and any other person acting on behalf of the registrant may rely on the non-exclusive methods set forth in Rule 144A(d)(1)(i)-(iv).
(iii) as specified in a later amendment to this Form.
3. Before filing this form in reliance on Rule 462(f)([ ]), registrants must obtain the concurrence of the underwriter of the designated effective date.
4. Registration statements on this Form filed in reliance on Rule 462(f)([ ]) become effective upon filing and are not reviewed by the Commission staff prior to the effective date designated by the issuer. Confidential treatment requests with respect to information that the registrant is required to file in this Form may, however, be reviewed by the staff. As a result, when the issuer plans to have the Form become effective upon filing or fewer than 20 days thereafter, it must furnish to the staff in advance of filing any request it wishes to make for confidential treatment of information relating to the Form. See Securities Act Rule 406. The Commission must act on the confidential treatment request before this Form becomes effective.
B. Any post-effective amendment filed on this Form by a registrant eligible to designate an effective date as described in General Instruction IV.A.1. also shall become effective as designated by the registrant. See General Instruction IV.A.1. and Securities Act Rule 464.
2. effectiveness of this registration statement.
B. Registration on this Form of a class of securities under Exchange Act Section 12(g) shall become effective automatically upon the earlier of (1) 60 days after the initial filing of this registration statement; or (2) the effectiveness of this registration statement.
C. If the registrant is required to file an annual report under Exchange Act Section 15(d) for its last fiscal year, it must file that annual report within the time period specified in the appropriate annual report form even if the Exchange Act registration becomes effective before the annual report is due.
D. The registrant must file at least one complete, signed copy of the registration statement with each exchange or market identified on the cover of this Form.
(13) information regarding the identity of any counsel who will provide material legal opinions in connection with the securities offering.
2. Incorporation of Previously Filed Information.
3. Incorporation of Subsequently Filed Information.
State that all documents you and any credit enhancer or co-registrant subsequently file pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act during the offering period are deemed to be incorporated by reference into the prospectus that is part of the effective registration statement as of the date you file those documents.
In addition to the offering information filed in the prospectus that is part of the effective registration statement, the registrant, any underwriter, any participating dealer or anyone acting on behalf of any of them may use free writing materials. "Free writing" materials for purposes of this Form consist of all information disclosed by or on behalf of the issuer during the offering period, other than offering information, factual business communications as defined in Securities Act Rule 169 or information disclosed orally. You must file free writing materials by the time of first sale. Securities Act Rule 425 describes the procedures for filing those offering materials with the Commission.
(d) that the name, address, and telephone number to which the request for that information must be made is: [ fill in information ].
(1) This undertaking covers all documents incorporated by reference through the date of responding to the request.
(2) If you send any of the information that is incorporated by reference in the prospectus to investors, you must also send any exhibits that are specifically incorporated by reference in that information.
6. Aftermarket Delivery. Include the legend required by Item 502(b) of Regulation S-K.
1. Exhibits. Provide the exhibits required by Item 601 of Regulation S-K.
(a) Include the undertakings required by Item 512 of Regulation S-K.
(b) Aftermarket delivery period. If not contained in the prospectus that is part of the effective registration statement, undertake that you will file a post-effective amendment to insert the date the aftermarket delivery period ends in the legend required by Item 502(b) of Regulation S-K.
The registrant hereby certifies that it meets all of the requirements for filing on Form ABS. The registrant also certifies that it has duly caused and authorized the undersigned to sign this registration statement on its behalf. The undersigned certifies that he/she has read this registration statement and to his/her knowledge the registration statement does 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 therein not misleading.
The following persons certify that they have read this registration statement and to their knowledge the registration statement does 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 therein not misleading. The following persons also certify that they are signing below on behalf of the registrant and in the capacities and on the dates indicated.
(e) at least the majority of its board of directors.
2. Where the registrant is a foreign issuer, its authorized representative in the United States also must sign the registration statement.
3. Where the registrant is a limited partnership, its general partner must sign. Where the general partner is a corporation, the majority of the board of directors of the corporate general partner must sign the registration statement.
4. Type or print the name and title of each person who signs the registration statement beneath the person's signature. Any person who occupies more than one of the specified positions must indicate each capacity in which that person signs the registration statement. See Securities Act Rule 402 concerning manual signatures and Item 601 of Regulation S-K concerning signatures pursuant to powers of attorney.
5. Rule 415(a)(1)(vii) and (a)(1)(x) offerings.
(iii) the post-effective amendment does not provide otherwise.
(b) If, at the time of filing a post-effective amendment, any person who signed the effective registration statement no longer acts in the capacity in which he or she signed it, the person who currently acts in that capacity must sign the post-effective amendment.
Model Items 1000 et seq.
Preliminary Note: The following rules provide a framework for disclosure relating to asset-backed securities. Disclosure concerning asset-backed securities will vary depending on the nature of the eligible assets and how the characteristics of the eligible assets affect the payments to be made on the offered securities. You need not disclose information that would not be material to a decision whether to invest in the offered securities, even if a line item in these rules suggests that it would be required.
Moreover, as contemplated in Rule 409 of Securities Act, Regulation C, it is necessary to include only information that is known or reasonably available to the registrant. If any required information is unknown or not reasonably available to the registrant, either because obtaining it would require unreasonable effort or expense, or because it rests peculiarly within the knowledge of a person that is not affiliated with the registrant, the registrant may omit that information, but must give the information that it does have or can acquire without unreasonable expense or effort, together with the sources of that information. In addition, in that event, the registrant either must disclose that any additional information either cannot be obtained without unreasonable effort or expense, or must indicate the absence of affiliation with the person within whose knowledge the information rests and state the result of a request made to the person for that information.
(i) "Asset-backed security" means a security that is primarily serviced by the cashflows of a discrete pool of eligible assets.
(ii) "Eligible asset" means cash and financial assets, either fixed or revolving, whether current or delinquent, that by their terms convert into cash within a finite time period (and, with respect to leases and with respect to financial assets that have foreclosure rights, the property underlying such leases and financial assets) plus any rights or other assets designed to assure the servicing or timely distribution of proceeds to the securityholders. The status of an asset as an "Eligible Asset" shall not be affected by delinquencies or losses on such asset.
(iii) "Investment grade rated" means rated at the time of sale by at least one nationally-recognized statistical rating organization ("NRSRO") as that term is used in Exchange Act Rule 15c3-1(c)(2)(vi)(F) in one of the generic rating categories that signifies investment grade.
(iv) "Obligor" means any person whose credit materially supports the cash-generating capacity of one or more of the eligible assets.
Item 1002. Forepart of Registration Statement and Outside Front Cover of the Prospectus.
The registrant must furnish the following information in plain English. See Rule 421(d) of Securities Act Regulation C. (a) Front Cover Page of the Registration Statement. Where appropriate, include the delaying amendment legend from Rule 473 of Securities Act Regulation C. (b) Outside Front Cover Page of the Prospectus. Limit the outside cover page to one page. If the following information applies to your offering, disclose it on the outside cover page of the prospectus.
(1) Name. The registrant's name. A foreign registrant must give the English translation of its name.
Instruction to paragraph 1001(b)(1): If your name is the same as that of a company that is well known, include information to eliminate any possible confusion with the other company.
(A) State the title of the securities, including the series number, if applicable. If there is more than one class offered (or more than one class in the series), state the class designations of the securities offered.
(B) State the aggregate principal balance of all securities offered, and the principal balance, if any, of each class of securities offered. If a class has no principal balance, disclose that fact, and, if desired, state the notional balance, clearly identifying that the balance is a notional one. If the balances are approximate, disclose that fact. If the underwriter has any arrangement with the issuer, such as an over-allotment option, under which the underwriter may purchase additional securities in connection with the offering, indicate that this arrangement exists and state the amount of additional securities that the underwriter may purchase under the arrangement.
(C) Indicate the interest rate of each class of security offered. If a class of securities does not bear interest, disclose that fact. If the rate is expressed as a formula, you may either provide the formula on the cover, or you may indicate that the rate is variable and, if desired, indicate the index upon which the rate is based. To the extent that the interest rate is not described in full on the cover, a full description should be disclosed in the transaction summary of the prospectus.
(3) Offering Price of the Securities. If you offer securities for cash, give the price to the public of each class of the securities, the underwriter's discounts and commissions, and the net proceeds you receive. If applicable, show this information on both a unit basis and for the total amount of the offering. You may present the information in a table, term sheet format, or other clear presentation. In the alternative, if applicable, state that the price to the public will be determined in negotiated transactions or otherwise at varying prices, and disclose the aggregate proceeds to the issuer of the sale of all classes offered by the prospectus.
(4) Market for the Securities. State whether any national securities exchange or other Nasdaq Stock Market lists the securities offered, naming the particular market(s), and identifying the trading symbol(s) for those securities.
(5) Risk Factors. Provide a cross-reference to the risk factors section, including the page number where it appears in the prospectus. Highlight this cross-reference by prominent type or in another manner.
Example A: Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Example B: Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Example: Best efforts offering. The underwriters are not required to sell any specific number or dollar amount of securities but will use their best efforts to sell the securities offered.
Example: Best efforts, minimum-maximum offering. The underwriters must sell the minimum number of securities offered (insert number) if any are sold. The underwriters are required to use only their best efforts to sell the maximum number of securities offered (insert number).
(9) Delivery of Securities. Disclose the expected date of delivery of the securities, and indicate whether they will be delivered in physical form or book-entry form.
The information in this prospectus is not complete and may be changed. Before you purchase any securities offered by this prospectus, you may obtain a copy of the final version of this prospectus from our web site at ____________, or by calling us at (___) ___-____. In addition, the final prospectus will be available on the SEC's web site at www.sec.gov.
The registrant must furnish this information in plain English. See Rule 421(d) of Securities Act Regulation C.
(1) Identify the participants in the transaction and their respective roles. Describe those roles briefly if the obligations of the participant are not apparent from the title of the role.
(2) Briefly describe the material eligible assets you are securitizing.
(3) Indicate whether the eligible assets are a fixed pool or a revolving pool. If additional assets can be added, briefly describe any limit on the ability to add assets and the parameters for selection of those assets. If eligible assets can be removed, briefly describe how and when they may be removed.
(A) Identify the classes offered by the prospectus and any classes issued in the same transaction or residual or equity interests in the transaction that are not being offered by the prospectus.
(B) Disclose the interest rate on each class of securities offered, to the extent that the interest rates on any class of securities was not disclosed in full on the cover page of the prospectus.
(C) Disclose the dates on which principal and interest are payable on the securities, if known, and if those dates depend on asset performance, how those dates will be determined.
(D) Summarize the payment priorities and allocations among the classes of securities offered, the classes of securities that are not offered and fees for services provided, to the extent necessary to understand the payment characteristics of the classes that are offered by the prospectus.
(E) Identify any credit enhancement, such as security insurance, letters of credit, cash collateral accounts and subordinated securities and briefly describe what protection is provided by the credit enhancement.
(F) Describe how losses not covered by credit enhancement will be allocated to the securities offered by the prospectus.
(5) Briefly summarize the federal income tax issues material to investors in each class of the securities offered.
(6) Disclose whether the issuance or sale of any class of offered securities is conditioned on the assignment of a rating by one or more rating agencies, If so, identify each rating agency and the rating that must be assigned by it.
(7) If employee benefit plans or accounts are prohibited from purchasing any class of securities, disclose that prohibition.
Instruction to paragraph 1003(a). Your summary should provide a short, easy-to-read overview of the transaction. Your summary should describe the transaction and not the prospectus. You should not discuss risk factors in the summary. Consider formatting the summary as a term sheet, using bullets to set forth the material terms of the transaction. You may use diagrams to illustrate the relationships among the parties, the structure of the securities offered (including, for example, any subordination features or payment priorities), and any other material aspects of the transaction. Your diagrams may omit detail contained elsewhere in the prospectus.
(b) Address for more information. Include the name, address and telephone number of the entity that can provide additional information about the securities. Consider providing fax numbers, e-mail addresses and web sites where further information can be obtained.
Instruction to paragraph 1003(b). The contact person need not be the registrant, but it should be someone who is obligated to provide information to securityholders, such as a trustee or securities administrator.
(6) legal considerations relating to the structure of the issuance or otherwise affecting the securities being offered.
(1) a brief description of the primary type or types of eligible asset the transaction.
(2) a description of the characteristics of the pool, if the transaction involves an established pool of assets. Consider including tables setting forth relevant terms of the eligible assets, such as size, geographic distribution, remaining term to maturity, loan to value ratio, and interest rates, to the extent material.
(3) a description of any recent performance problems, such as delinquencies, bankruptcies and recoveries, with respect to the eligible assets.
(4) a description of each originator of eligible assets and the historical performance of assets originated by it in the most recent three years.
Instruction to paragraph 1005(a)(4): Consider the following factors, and any other material factors, in deciding whether information is material for Paragraph 1005(a)(4): (a) whether the originator originated 20% or more of the eligible assets supporting the offered securities, (b) whether a description of the originator's personnel and procedures is necessary for an investor to understand the characteristics of the eligible assets, (c) whether the originator services assets it originates, and (d) whether a description of the originator's past experience with defaults and delinquencies of the financial assets, or similar financial assets is necessary for an investor to understand the likelihood of defaults and delinquencies with respect to the eligible assets supporting the offered securities. In determining whether the information is available and relevant, consider, for example, whether the originator is an active participant in the transaction, and whether the originator has been operating long enough for the historical data to be meaningful.
(5) a general description of the credit-granting procedures used to originate the eligible assets and the method by which the eligible assets were selected for the securitization transaction.
Instruction to paragraph 1005(a)(5). You do not need to disclose any specific credit scores or other proprietary business information.
(6) to the extent that the transaction involves a pre-funding account, a description of the pre-funding account, the selection of criteria for additional assets the parties will purchase with the pre-funding account, any other restrictions on use of the pre-funding account and the circumstances under which the parties will return the funds to investors.
(7) a brief summary of the representations and warranties made concerning the eligible assets, to the extent that those representations and warranties would benefit the security holders, and a brief description of the remedies available if those representations and warranties are breached.
(b) Description of Underlying Obligors. If the credit of any single obligor or eligible asset (or related group of obligors or eligible assets) is material to an assessment of whether the offered securities will pay in accordance with their terms, provide relevant historical information with respect to the obligor or eligible asset.
Instruction to paragraph 1005(b). Although it is only necessary to provide information that is known or readily available to the registrant, the registrant will be considered to have access to information about any person who directly participates in the transaction. You should assume that if any obligor or eligible asset supports (i) more than 20% of the payments to be made on the offered securities, then the financial information that would be required if the obligor or eligible asset were the single source of repayment on the offered securities is relevant and (ii) more than 10% of the payments to be made on the offered securities, then summary financial information about the obligor or eligible asset is relevant. You should provide information reasonably available to the registrant if that information would be material to a decision whether to purchase the offered securities. For example, detailed information about the obligors may be less relevant in transactions in which a highly rated insurer provides insurance for the benefit of the holders of the offered securities.
(c) Payment Risks of the Eligible Assets. Describe the material risks that the assets will not pay in accordance with their terms. To the extent that state law provisions may affect whether the eligible assets pay in accordance with their terms, identify those state law provisions briefly in general terms. It is not necessary, however, to provide the details of the law in each jurisdiction, but disclose that these state law issues may vary from jurisdiction to jurisdiction.
Item 1006. Structure of the Security.
(1) how the parties will pay interest, including the interest rate, dates from which interest accrues, the date on which payment of interest begins, the payment dates for interest payments and the record date for those payments. If the interest rate accrues at a variable rate based on an index, explain how the rate will be determined and how frequently it will be reset.
(2) how the parties will pay principal, including maturity dates, redemption dates, liquidation or amortization provisions, and other factors that will affect the timing or amount of principal payments for each class of securities.
(3) how the parties will use cash collections in the interim between collection from the obligor and payment on the securities, and any material risks from the delay between collection and payment.
(4) the method of payments on the securities (such as by check or wire or otherwise).
(5) whether the securities are issued as global securities (book-entry securities) through a clearing agency, and if so, the identity of the clearing agency and whether and how physical certificates can be obtained by securityholders.
(7) the payment allocations, rights and priorities of each class of security holders with respect to cash collections, cash collateral accounts and credit enhancement and any other structural features designed to enhance credit, facilitate the timely payment of monies due on the underlying assets or owing to security holders, or preserve monies that will or might be distributed pursuant to the offering structure.
(8) voting rights, including any provisions specifying the vote required by security holders to take action, and the allocation of those rights among holders of different classes. If control over any participant in the transaction results other than through voting power, you should describe those other sources of control.
(6) Describe any "internal credit enhancement"-that is, any structural provisions designed to assure that the securities will pay in accordance with their terms (such as subordination provisions or spread accounts).
(c) Ratings on the Securities. Disclose whether the issuance or sale of any class of offered securities is conditioned on the assignment of a rating by one or more rating agencies. If so, identify each rating agency and the rating that must be assigned by it. Describe what each rating means, according to the rating agency, and include any disclosure of the rating agency explaining any limitations on what the rating means.
(d) Prepayment, Maturity and Yield Considerations.
(1) Identify the factors that will affect the timing and rate of cash flow.
(2) Describe any models, including the related assumptions and limitations, used as a means to identify cash flow patterns with respect to the eligible asset.
(3) Describe the degree to which each class of securities is sensitive to changes in the rate of payment on the eligible assets, and describe the specific consequences of such changing rate of payment. Show the effect of prepayments on yield and weighted average life.
(4) Describe any special allocations of prepayment risks among the classes of securities, and whether any class protects other classes from the effects of the uncertain timing of cash flow.
Item 1007. The Transaction Parties and Agreements.
(a) The special purpose entity. Describe the sale or pledge of the eligible assets from the originator to the issuer. Describe the provisions designed to assure that the eligible assets will not become subject to the bankruptcy control of a third party. To the extent that special purpose entities were used in the structure, describe those entities and their role in the transaction briefly.
(1) Describe the servicer briefly, including a description of the servicer's primary business and the servicer's experience in performing the services it will perform in the transaction. To the extent material, describe the personnel of the servicer.
(2) Disclose the experience of the servicer with respect to delinquencies, defaults and losses on assets comparable to the eligible assets. To the extent that the servicer has limited experience servicing assets such as the eligible assets, disclose the limits of its experience. If the servicer's experience with similar assets is limited, consider describing the servicer's experience with assets that are dissimilar to the eligible assets, unless that disclosure would be misleading. In any event, if experience with dissimilar assets is disclosed, indicate how the assets are dissimilar to the eligible assets.
(3) Describe in general terms the obligations of the servicer. Describe the servicer's customary procedures in servicing assets similar to the eligible assets.
(4) Identify the circumstances in which the servicer may be removed and who has the power to remove the servicer. Identify the circumstances, if any, in which the servicer may resign or transfer its obligations to another person. Describe any requirements (such as financial requirements) that must be met by a successor servicer. Describe any arrangements in which another person has agreed to service the eligible assets if the servicer resigns or is removed.
(5) Describe any legal proceedings pending or known to be threatened against the servicer, to the extent that such proceedings, if decided adversely, would be expected to materially affect the investors.
(6) Describe the fees and other compensation payable to the servicer.
(c) The trustee. Describe the trustee and its duties.
(2) Describe the duties of the trustee and any limitation on liability of the trustee. To the extent that the trustee is entitled to be indemnified from the cash flow that otherwise would be used to pay securities, describe those indemnification provisions.
(3) Describe the fees and any other compensation payable to the trustee.
(d) Other parties. Identify any other parties to the transaction, to the extent that they provide services or otherwise have any influence on the eligible assets or the securities. Describe any legal proceedings pending or known to be threatened against those parties to the extent that such proceedings, if decided adversely, would be expected to have a material effect on the investors. To the extent that their fees are payable from the cash flow of the eligible assets, disclose those fees. If desired, fees of several parties to the transaction can be aggregated, as long as the investor can determine what fees are being taken from cash flow.
Note to Item 1006 (b), (c) and (d). To the extent that any party to the transaction (including the servicer or the trustee) is a reporting company under the Exchange Act, you may incorporating by reference applicable portions of that party's Exchange Act reports.
(e) Reports and Additional Information. Describe any reports that the trustee or other parties must provide to investors, and explain the schedule for distribution of the reports. Describe how investors can receive the reports. Indicate whether and how investors can request copies of current and past reports. If applicable, indicate a web site from which investors can download this information.
Item 1008. Legal Investment Considerations.
(a) Regulated Entities. To the extent that the transaction has been structured with a view toward eligibility of the securities for investment by regulated investors, identify the material structural components and applicable statutes or regulations. It is not necessary to describe the applicable statutes or regulations in full detail. You may urge regulated investors to consult with their own legal advisers before investing in the securities.
(b) ERISA. Describe the eligibility of the securities offered for purchase by investors subject to ERISA. It is permissible to urge such investors to consult with their own legal advisers before investing in the securities.
(c) Restrictions on Ownership or Transfer. Describe any restrictions on ownership or transfer of the securities.
Item 1009. Federal Income Tax Considerations.
(a) Briefly describe the tax structure of the transaction.
(b) Briefly describe the federal income tax consequences of owning the securities.
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., prospectus dated December 24, 1980).
A. Rule as to Use of Form 10-K.
This form shall be used for annual reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Act") for registrants of asset-backed securities (as defined in Item 1001 of Regulation S-K). This form also shall be used for transition reports filed pursuant to Section 13 or 15(d). Annual reports on this form shall be filed within 90 days after the end of the fiscal year covered by the report. Transition reports on this form shall be filed in accordance with the requirements set forth in Rule 13a-10 or 15d-10 applicable when the registrant changes its fiscal year end.
B. Application of General Rules and Regulations.
(1) The General Rules and Regulations under the Act contain certain general requirements which are applicable to reports on any form. These general requirements should be carefully read and observed in the preparation and filing of reports on this form.
(1) 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. Except as provided in General Instruction G, the answers to the items shall be prepared in the manner specified in Rule 12b-13.
(2) Except where information is required to be given for the fiscal year or as of a specified date, it shall be given as of the latest practicable date.
(3) Attention is directed to Rule 12b-20, which states: "In addition to the information expressly required to be included in a statement or report, there shall be added such further material information, if any, as may be necessary to make the required statements, in the light of the circumstance sunder which they are made, not misleading."
(1) Three complete copies of the report, including financial statements, financial statement schedules, exhibits, and all other papers and documents filed as a part thereof, and five additional copies which need not include exhibits, shall be filed with the Commission. At least one complete copy of the report, including exhibits, and all other papers and documents filed as a part thereof, shall be filed with each exchange on which any class of securities of the registrant is registered. At least one complete copy of the report filed with the Commission and one such copy filed with each exchange shall be manually signed. Copies not manually signed shall bear typed or printed signatures.
E. Information to be Incorporated by Reference.
(1) Attention is directed to Rule 12b-23 which provides for the incorporation by reference of information contained in certain documents in answer or partial answer to any item of a report.
(2) No item numbers or captions of items need be contained in the material incorporated by reference into the report. However, the registrant's attention is directed to Rule 12b-23 regarding the specific disclosure required in the report concerning information incorporated by reference.
(a) Furnish the information required by Item 103 of Regulation S-K.
(b) As to any proceeding that was terminated during the fiscal year covered by this report, furnish information similar to that required by Item 103 of Regulation S-K, including the date of termination and a description of the disposition thereof with respect to the registrant.
Item 2. Submission of Matters to a Vote of Security Holders.
(a) The date of the meeting and whether it was an annual or special meeting.
(b) A brief description of each matter voted upon at the meeting and state the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each such matter, including a separate tabulation with respect to each nominee for office.
Instructions. 1. If any matter has been submitted to a vote of security holders otherwise than at a meeting of such security holders, corresponding information with respect to such submission shall be furnished. The solicitation of any authorization or consent with respect to any matter shall be deemed a submission of such matter to a vote of security holders within the meaning of this item.
2. Paragraph (a) need be answered only if paragraph (b) is required to be answered.
3. Paragraph (b) must be answered for all matters voted upon at the meeting.
4. If the registrant has published a report containing all of the information called for by this item, the item may be answered by a reference to the information contained in such report.
Item 3. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Furnish the information required by Item 304 of Regulation S-K.
Item 4. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) List the exhibits required by Item 601 of Regulation S-K and by paragraphs (c) and (d) below.
(b) State whether any reports on Form 8-K have been filed during the last quarter of the period covered by this report, listing the items reported, any financial statements filed and the dates of any such reports.
(c) Registrants shall file, as exhibits to this form, the exhibits required by Item 601 of Regulation S-K.
(d) Registrants shall file a report of the registrant's or the servicer's independent public accountants stating whether the accountants are of the opinion that the system of internal accounting controls of the registrant or the servicer, as applicable, in effect on the date of the report was sufficient to prevent and detect errors and irregularities that would be material to the assets of the registrant.
-- The Commission's staff has informally christened the release as the "Aircraft Carrier."
-- Unless otherwise noted, references in this letter to "ABS" include mortgage-backed securities and "asset-backed securities" as defined in General Instruction I.B.5 to Form S-3.
-- Many of the proposals in the Proposing Release raise significant issues regarding the public securities markets generally. We believe those concerns also apply to the ABS market, and our views on the regulatory framework for ABS are subject to those concerns. We will be addressing those concerns in a separate letter comprehensively addressing the Proposing Release.
-- The Commission noted that neither proposed Form A nor proposed Form B is currently designated for use to register offerings of asset-backed securities. In addition, the Commission is proposing, among other things, to eliminate Forms S-1 and S-3 and to revise paragraph (a)(1)(x) of Rule 415 to replace references to Form S-3 (and Form F-3) with references to Form B. As proposed, there would not be a Securities Act registration form authorized or prescribed for offerings of ABS. In addition, many of the Commission's proposals depend on whether a registrant would be eligible to use Form A or Form B, compounding the uncertainties with respect to ABS offerings under the proposed regulatory regime.
-- Simplification of Registration Procedures for Primary Securities Offerings. Securities Act Release No. 6964 at "Summary" (October 22, 1992) ("Release 6964").
-- Congress has specifically recognized the importance of this market access. For example, it enacted the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA") to amend the Exchange Act and afford favorable treatment in certain circumstances to home mortgage ABS. In 1994, Congress extended this treatment to commercial mortgage ABS and certain types of securities backed by loans to small businesses. See Community Development and Regulatory Improvement Act of 1994, Sec. 347(a), Pub. Law 103-325, 108 Stat. 2160 (1994). These actions were based on a number of policy considerations, including in particular the availability of home mortgage financing and, more recently, the stabilization of the commercial real estate market.
-- For example, "[d]ifferences between the ABS market and other markets include: (i) a principal focus in the ABS market on the structure of a class of securities and the nature of the collateral for those particular securities rather than on the financial prospects of an issuer with a ongoing business; (ii) the importance of evaluating the impact of alternative potential future cash flows in making a meaningful assessment of a security's yield; and (iii) the interaction between brokers-dealers and investors in tailoring offering structures and collateral pools to meet investor needs." See Public Securities Association (revised as of March 7, 1995).
-- Release 6964 at "Section I.A.3.c.(ii)."
-- Paragraph (a)(1) of Rule 501 of Regulation D under the Securities Act, 17 C.F.R. § 230.501(a).
-- Paragraph (c)(2)(vi)(F) of Rule 15c3-1 under the Exchange Act, 17 C.F.R. § 249.15c3-1(c)(2)(vi)(F).
-- Although Model Form ABS is based on the Commission's proposed Form B, a new Form ABS could just as easily be based on existing Form S-3. The most significant aspect of Model Form ABS-the line item disclosure requirements relevant to ABS offerings and issuers-could be included in any form the Commission amends or adopts. See also Model Item 1000 et seq. of Regulation S-K.
-- Although research analysts cover ABS, "the information contained in research reports typically deals with the characteristics of a general sector of the ABS market." See PSA The Bond Market Trade Association (January 29, 1997) (regarding dissemination of research materials relating to ABS).
-- To most closely duplicate the current shelf registration system, the staff would also have to have the right to review the first registration statement by a new registrant. For issuers offering investment-grade securities backed by established asset classes, we do not believe this adds significantly to investor protection.
-- See General Instruction I.B.5. to Form S-3 ("a security that is primarily serviced by the cashflows of a discrete pool of receivables or other financial assets, either fixed or revolving, that by their terms convert into cash within a finite time period plus any rights or other assets designed to assure the servicing or timely distribution of proceeds to the securityholders").
-- See paragraph (b)(1) of Rule 3a-7 under the Investment Company Act of 1940 [15 USC. § 80a-1 et seq.], 17 C.F.R. § 270.3a-7(b)(1) ("financial assets, either fixed or revolving, that by their terms convert into cash in a finite time period plus any rights or other assets designed to assure the servicing or timely distribution of proceeds to security holders").
-- See Model Item 1001 of Regulation S-K.
-- See Release 6964 at "Section II.a.3.c.(iii)."
-- Pursuant to the release, Form B issuers would be free to make oral and written communications at any time during the offering process. Written information would be classified as either "offering information" or "free writing" materials. "Offering information" generally would include information about the securities offered, risk factors and recent material changes in the issuer's affairs. "Free writing" would include sales literature and documents containing forward looking information. Offering information would become part of the effective registration statement and be subject to liability under Section 11 of the Securities Act. Free writing materials would not be considered part of the registration statement, unless they contained "offering information" not filed as part of the registration statement. Free writing materials must be filed with the SEC if they are disclosed during the 15-day period before the first offer is made or after the registration statement is filed and any such free writing materials filed would be subject to civil liability under Section 12(a)(2).
-- See Kidder Peabody Acceptance Corporation I (available May 20, 1994); Public Securities Association (available May 27, 1994); Public Securities Association (available February 17, 1995); Public Securities Association (available March 9, 1995); and Greenwood Trust Company, Discover Card Master Trust I (available April 5, 1996).
-- Currently, there is no requirement to file term sheets and computational materials relating to abandoned structures, nor is there a filing requirement for term sheets provided to prospective investors who have not indicated an interest in purchasing the related securities before the final terms of the transaction are established.
-- 17 C.F.R. § 230.424(b).
-- The public filing of computational materials may even be viewed as "giving away" investors' proprietary analytical models or assumptions, to the investors' detriment.
-- If the issuer files these materials, however, it may appear to be espousing the assumptions in the materials. We believe that this is misleading. Although computational materials might be viewed as "forwarding-looking" and therefore free writing material, the information in them does not reflect the issuer's or the underwriter's assumptions or views of the future performance of the securities; rather, it is a mathematical calculation based on assumptions made by a single investor to evaluate its own risk in purchasing the securities.
-- Notwithstanding the promulgation of Rule 15c6-1 under the Exchange Act, 17 C.F.R. § 240.15c6-1, which shortened the settlement cycle to three business days after the trade date, most ABS issuers continue to "opt out" of the rule and to close their offerings five or more business days after the date of pricing.
-- See, e.g., Banc One Auto Trust 1995-A (available August 16, 1995); Banc One Student Loan Trust (available March 1, 1995); Bear Stearns Mortgage Securities, Inc. (available March 25, 1993); Prime Credit Card Master Trust (available January 29, 1993); and Discover Card Master Trust I (available April 8, 1994). The staff has taken similar no-action positions in response to numerous other letters.
-- Rule 12b-11 contains no reference to signatures pursuant to power of attorney. This is covered in Item 601(b)(25) of Regulation S-K.
-- Print the name and title of each signing officer under his signature.

References: V. 
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