SEC Issues Final Rule on Asset-Backed Security Issuer Continuing Reporting Requirements under Section 15(d) of the Exchange Act
August 18, 2011
On August 17, 2011, the SEC adopted a final rule requiring reporting requirements in relation to registered asset-backed securities (“ABS”) essentially for the life of an ABS transaction. The final rule, which follows a proposal released on January 6, 2011, creates a narrow carve-out under which the reporting requirements set forth under Section 15(d) of the Exchange Act will only be suspended for ABS issuers under the following two scenarios going forward:
- All outstanding ABS for the class of securities in question, as measured semi-annually, are held by affiliates of the depositor, and the issuer has filed a certification stating such (except in the fiscal year when the registration statement became effective or the shelf “takedown” occurred, when suspensions are not effective); or
- No ABS for the class of securities in question are still outstanding, the issuer has filed a certification stating such, and the issuer has filed all required reports for the preceding three fiscal years.
Prior to enactment of the Dodd-Frank Act, automatic suspension under Section 15(d) of the Exchange Act had applied in the year following the year within which the ABS registration statement became effective if there were fewer than 300 holders of record. The Dodd-Frank Act granted the SEC authority to issue rules providing for suspension or termination of the Section 15(d) reporting requirements under certain specific circumstances. The final rule largely implements the narrow scope of relief envisioned by the SEC’s original proposal. One change in the final rule requires ABS issuers to perform affiliate-testing semi-annually, rather than annually, for continued relief from the Section 15(d) continuing reporting requirements. Additionally, the final rule includes the following clarifications:
- No reporting obligations will be suspended in the same fiscal year as a shelf takedown occurs;
- Reporting obligations will be suspended immediately upon certification by an ABS issuer that all securities sold in a registered transaction have been retired or repaid; and
- Any securities held by a broker, dealer, bank or nominee for a customer’s account are considered to be held in a separate account – precluding the issuer from certifying that all ABS are held by affiliates.
Publication in the Federal Register is expected shortly.
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