Asset-Backed Securities: New Disclosure Rules Under Dodd-Frank
On January 20th, the SEC published the adopting release and text of new final rules implementing Section 943 of the Dodd-Frank Act, which requires securitizers of asset-backed securities (ABS) to disclose fulfilled and unfulfilled repurchase requests. The new rules also require nationally recognized statistical rating organizations (NRSROs) to include information regarding the representations, warranties, and enforcement mechanisms available to investors in an ABS offering in any report accompanying a credit rating issued in connection with such offering.
The rules require:
- ABS securitizers to disclose demand, repurchase, and replacement history in a tabular format for an initial three-year look-back period ending December 31, 2011, and on a quarterly basis thereafter;
- ABS issuers to disclose demand, repurchase, and replacement history for a three-year look-back period, in the same tabular format as new Rule 15Ga-1, in the body of the prospectus;
- ABS issuers to disclose demand, repurchase, and replacement activity for a specific ABS, in the same tabular format, in periodic reports filed on Form 10-D; and
- NRSROs to disclose, in any report accompanying a credit rating for an ABS transaction, the representations, warranties, and enforcement mechanisms available to investors and how they differ from the representations, warranties, and enforcement mechanisms in issuances of similar securities.
The broad language of Section 943 draws many forms of securitizations into its orbit, including securities typically exempt from Securities Act registration requirements, such as collateralized debt obligations, securities issued or guaranteed by Fannie Mae and Freddie Mac, and municipal securities. Addressing the latter, the adopting release specifically states that the rules apply to municipal securitizers. It does provide one small concession: a three-year delayed compliance. The release additionally notes that even if a security falls within Section 943, the new disclosure requirement would only be triggered if the underlying transaction agreements contain a covenant to repurchase or replace an asset.
Effective Date: March 28, 2011; Compliance Date: See Release. View adopting release and text here.