American Securitization Forum Responds to Regulation AB Proposals
On August 2, 2010, the American Securitization Forum (“ASF”) filed two comment letters in response to the SEC’s recent proposals relating to Regulation AB. The first comment letter focused on ASF members’ views on the proposed revisions to Regulation AB, while the second comment letter focused on and set forth a specific alternative disclosure regime for asset-backed commercial paper transactions.
Reg AB, as it has come to be known, became effective on January 1, 2006, and set forth registration, disclosure and reporting requirements for asset-backed securities (“ABS”) under the Securities Act of 1933 and the Securities Exchange Act of 1934. In April 2010, the SEC, intending to improve investor protection and streamline the asset-backed market in the aftermath of the present financial crisis, proposed major revisions to Reg AB. If these proposals become effective, filing deadlines for ABS offerings would be revised, new shelf-eligibility criteria would be imposed, and prospectuses would be required to contain specified asset-level information about each of the assets in a pool.
The ASF, while concurring that additional investor protection is necessary and offering support for the new regulations, expressed a few concerns about the practicality of the SEC proposals and suggested alternative solutions. Whether the SEC is receptive to the suggestions of the ASF remains to be seen, but it seems certain that Reg AB will be amended in one fashion or another. What is also certain is that the securitization market, already on shaky ground, will be forced to adapt to these new regulations. Will these changes have a further chilling effect on the ABS market? Or will the new rules, in whatever form they are adopted, bring more investor confidence and result in a resurgence of asset-backed deals? Only time will tell, but it looks like the ABS market still has a bumpy road ahead of it.
