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Suspending an Asset-Backed Securities Issuers’ Duty to File Ongoing Securities Exchange Act Reports

August 18, 2011

On August 17th, the SEC published new final rules suspending the duty of an issuer of asset-backed securities (“ABS”) to file ongoing reports as required by Section 15(d) of the Securities Exchange Act.

Background. Before the enactment of the Dodd-Frank Act, Section 15(d) provided for automatic suspension of the duty to file ongoing Exchange Act reports (other than with respect to the fiscal year in which the registration statement became effective) if the securities of each relevant class of ABS were held of record by fewer than 300 persons. Section 942(a) of the Dodd-Frank Act amended Section 15(d) of the Exchange Act to eliminate the automatic suspension rules and directed the SEC to suspend or terminate Section 15(d) reporting requirements for any class of ABS as the Commission deemed appropriate.

Photo by redjar. Some rights reserved.

The New Rule. As adopted, Exchange Act Rule 15d-22(b) provides that the duty to file annual and other reports under Section 15(d) is suspended:

  • As to any semi-annual fiscal period, if, at the beginning of the semi-annual fiscal period, other than a period in the fiscal year within which the registration statement became effective or, for shelf offerings, the takedown occurred, there are no ABS of such class that were sold in a registered transaction held by non-affiliates of the depositor and a certification on Form 15 has been filed; or
  • When there are no ABS of such class that were sold in a registered transaction still outstanding, immediately upon the filing with the Commission of a certification on Form 15 if the issuer has filed all required reports for the most recent three fiscal years.

The new final rule also amends Form 15 to add a checkbox for ABS issuers to indicate that they are relying on Exchange Act Rule 15d-22(b) to suspend their reporting obligation and adds two Notes to paragraph (b). Note 1 indicates that securities held of record by a broker, dealer, bank or nominee shall be considered as held by the separate accounts for which the securities are held. Note 2 includes an anti-avoidance provision.

Notable Changes. Three differences between the proposed rule and the new final rule bear mentioning. First, whether the duty to file can be suspended must be tested at the beginning of the semi-annual fiscal period. Second, the testing must occur semi-annually, not annually as originally proposed. Third, the final rule makes clear that an issuer may immediately suspend reporting when the securities have been retired or fully paid.

The new final rule is effective 30 days after publication in the Federal Register, which is expected during the week of August 22. View the new final rule here.

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