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SEC issues ABS rule changes

The SEC has issued wide-ranging changes to rules governing the issuance of asset-backed securities (ABS), one of the fast-growing areas of securities lending. The main areas of reform, discussed below, aim to address current market practices that lie beyond the sphere of current SEC regulations.

The recent statement addresses four main areas:  

·         Securities Act Registration - the SEC is expanding the definition of asset-backed securitization - to address lease-backed securities, the nature of the issuing entity and synthetic securitizations - and will codify certain staff positions relating to the registration of securities.

·         Disclosure - the SEC wants to add significant disclosure requirements relating to the background and experience of the roles of the transaction parties as well as "historical performance data relating to the applicable party's portfolio and individual securitized pools", according to a report by Cadwalader, Wickersham & Taft, the international law firm.

·         Communication during the offering process - the SEC will codify the "distribution of term sheets and computational materials to investors prior to the distribution of the final prospectus," says the report, and "the publication of research reports related to asset-backed securities."

·         Reporting under the Exchange Act - the SEC will codify the current reporting system under the Exchange Act and will add "a responsible party servicing compliance assessment which may impose servicer oversight responsibility on the asset-backed security transaction sponsor."

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