static pool information was filed. We believe that this accommodation
would allow more flexibility for issuers to provide static pool
information and would allow users to easily search and locate static
pool disclosure on EDGAR. Such information would be filed with the Form
8-K on the same date that the form of prospectus is required to be
filed under proposed new Rule 424(h) and incorporated by reference into
the prospectus. We are proposing to amend Form 8-K and Item 601 to add
a new item requirement that would identify filings made to include
static pool information.

Request for Comment

     Would our proposal to allow static pool data to be filed
in PDF on EDGAR accommodate the interests of market participants? Would
another format be more appropriate? What should we consider in adopting
a format? What

should we do in the interim? What format would provide the easiest way
for users to search and find static pool data on EDGAR?
     Could PDF documents be prepared in a way that would
facilitate conversion of data into a useable format? We solicit comment
as to whether some other format would be an appropriate method to file
static pool data on EDGAR for all market participants. Would the data
need to be tagged? If so, what would be the appropriate tagging?
     Are there any other changes we should consider making to
Rule 312 of Regulation S-T?
     We are proposing to allow, but not require, registrants to
file static pool information on Form 8-K and incorporate it by
reference into the prospectus, in lieu of filing it in the prospectus.
Is this accommodation appropriate? Should we instead require that all
static pool disclosure be filed in the prospectus?

F. Exhibit Filing Requirements

    In the 2004 ABS Adopting Release, we stated that, consistent with
Item 601 of Regulation S-K, governing documents and material agreements
for an ABS offering such as the pooling and servicing agreement,\397\
the indenture and related documents must be filed as an exhibit.\398\
Item 1100(f) of Regulation AB allows ABS issuers to file agreements or
other documents as exhibits on Form 8-K and, in the case of offerings
on Form S-3, incorporate the exhibits by reference instead of filing a
post-effective amendment. In the staff's experience with the filing of
these documents, ABS issuers have delayed filing such material
agreements with the Commission until several days or even weeks after
the offering of securities off of a shelf registration statement.
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    \397\ We stated that the management or administration agreement
for the issuing entity also must be filed in addition to describing
their material terms in the prospectus. See Section III.B.3.c of the
2004 ABS Adopting Release.
    \398\ See Sections III.A.3.b, III.B.3.c. and III.B.3.d of the
2004 ABS Adopting Release. Also, issuers are reminded that any
attachments or schedules to an exhibit which is required to be filed
pursuant to Item 601 of Regulation S-K must also be filed with the
Commission.
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    These transaction agreements and other documents provide important
information on the terms of the transactions, representations and
warranties about the assets, servicing terms, and many other rights
that would be material to an investor. As noted above, investors have
expressed concerns regarding the timeliness of information in ABS
offerings, and we believe that the information in the exhibits is an
important part of the overall information package to investors. We are
proposing to revise Item 1100(f) of Regulation AB to explicitly state
that the exhibits filed with respect to an ABS offering registered on
Form SF-3 must be on file and made part of the registration statement
at the latest by the date the final prospectus is required to be filed
pursuant to Rule 424.\399\ ABS shelf offerings were designed to mirror
non-shelf offerings in terms of filing exhibits and final prospectuses.
All exhibits to Form S-1 must be filed by the time of effectiveness.
Consistent with these requirements, under our proposed amendments,
exhibits must be on file by the date of filing the final prospectus,
upon which a new effective date for the registration statement is
triggered.\400\
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    \399\ Finalized agreements at the time of the offering may be
filed in preliminary form as provided by Instruction 1 to Item 601
of Regulation S-K. The filing requirement for an exhibit (other than
opinions and consents) may be satisfied by filing the final form of
the document to be used; the final form must be complete, except
that prices, signatures and similar matters may be omitted. Such
exhibits may not be incorporated by reference into any subsequent
filing made with the Commission. See Elimination of Certain Pricing
Amendments and Revision of Prospectus Filing Procedures, Release No.
33-6714 (June 5, 1987) [52 FR 21252].
    \400\ We note that this filing date will be after the time of
sale of the security for purposes of Rule 159 and Securities Act
Section 12(a)(2). The documents should be fully described in the
prospectus because information conveyed to the investor after the
time of sale will not be taken into account for purposes of Section
12(a)(2) of the Securities Act. See Rule 159.
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Request for Comment

     Is our proposed amendment to Item 1100(f) appropriate? Is
there any reason that exhibits to the registration statement could not
be filed by the time the final prospectus is required to be filed under
Rule 424?
     Do investors need the complete exhibits sooner? Is it
appropriate instead to require filing at the time of filing the Rule
424(h) filing? Could issuers satisfy such a requirement? Should a draft
of each material agreement be required to be filed at that time if the
final agreement is not available then?

G. Other Disclosure Requirements That Rely on Credit Ratings

    Items 1112 and 1114 of Regulation AB require the disclosure of
certain financial information regarding significant obligors of an
asset pool and significant credit enhancement providers relating to a
class of asset-backed securities. An instruction to Item 1112(b)
provides that no financial information regarding a significant obligor,
however, is required if the obligations of the significant obligor, as
they relate to the pool assets, are backed by the full faith and credit
of a foreign government and the pool assets are securities that are
rated investment grade by an NRSRO.\401\ Item 1114 of Regulation AB
contains a similar instruction that relieves an issuer of the
obligation to provide financial information when the obligations of the
credit enhancement provider are backed by a foreign government and the
enhancement provider has an investment grade rating.\402\ Under both
Items 1112 and 1114, to the extent that pool assets are not investment
grade securities, information required by paragraph (5) of Schedule B
of the Securities Act may be provided in lieu of the required financial
information.\403\
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    \401\ Instruction 2 to Item 1112(b) of Regulation AB [17 CFR
229.1112(b)].
    \402\ Instruction 3 to Item 1114 [17 CFR 230.1114].
    \403\ Paragraph 5 of Schedule B requires disclosure of three
years of the issuer's receipts and expenditures classified by
purpose in such detail and form as the Commission prescribes.
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    In the 2008 Proposing Release, we proposed to revise Item 1112 and
Item 1114 of Regulation AB to remove references to credit ratings.\404\
We proposed to revise the instructions to these items so that
exceptions based on investment grade ratings to the requirements of
Items 1112 and 1114 of Regulation AB would no longer apply, and
information required by paragraph (5) of Schedule B would be required
in all situations when the obligations of a significant obligor are
backed by the full faith and credit of a foreign government. We
received one comment on the proposed change that supported the
amendments, although the commenter noted its general opposition to the
2008 shelf eligibility proposals for ABS offerings.\405\
---------------------------------------------------------------------------

    \404\ See Section II.B.4.c of the 2008 Proposing Release.
    \405\ See comment letter from ASF.
---------------------------------------------------------------------------

    We are proposing again to eliminate the exceptions based on
investment grade ratings. We are not aware of any benchmark comparable
to an investment grade rating here, and we continue to believe the
information would be readily available and therefore the proposed
change would not impose substantial costs or burdens to an ABS issuer.
We believe that these changes are consistent with our revisions to
eliminate ratings from the shelf eligibility criteria for asset-backed
issuers.

Request for Comment

     Is it appropriate to require the information about foreign
government issuers, even if their securities are rated

investment grade, as proposed? Is there a different way to replace
investment grade ratings in Items 1112 and 1114 of Regulation AB?
     Would the proposed change impose undue burdens on issuers?
     Would the disclosure be useful to investors?

IV. Definition of an Asset-Backed Security

    As part of our effort to provide more timely and detailed
disclosure regarding the pool assets to investors, we are proposing
revisions to the Regulation AB definition of an asset-backed security.
Currently, a security must meet the definition of an ``asset-backed
security'' under Regulation AB \406\ in order to utilize the disclosure
requirements of Regulation AB and be eligible for shelf registration on
Form S-3.\407\ Prior to 2004, an ``asset-backed security'' was defined
only for purposes of Form S-3 eligibility. In 2004, the Commission
incorporated the basic definition of an ``asset-backed security'' from
Form S-3 into Regulation AB. This definition requires, among other
things, that the security be primarily serviced by the cash flows of a
discrete pool of assets.\408\
---------------------------------------------------------------------------

    \406\ See Item 1101(c) of Regulation AB.
    \407\ See General Instruction I.B.5 of Form S-3 and Item 1100 of
Regulation AB.
    \408\ See Item 1101(c).
---------------------------------------------------------------------------

    In the 2004 ABS Adopting Release, we noted that the definition of
``asset-backed security'' outlines the parameters for the types of
securities that are appropriate for the alternate disclosure and
regulatory regime provided by Regulation AB.\409\ We also noted that
the further a security deviates from the core purpose of the
definition, the more acute the concerns, which include concerns
regarding the sufficiency of disclosure to investors, are that the
security should not be treated in the same way as other securities that
meet the definition.\410\ If a security does not meet the definition
under Regulation AB, the offering may still be registered with the
Commission on Form S-1. As noted in the 2004 ABS Adopting Release, the
staff has worked with issuers offering structured securities outside
the Regulation AB definition of an asset-backed security to develop
appropriate disclosures under our regulations for such securities.\411\
---------------------------------------------------------------------------

    \409\ See Section III.A.2.a of the 2004 ABS Adopting Release.
    \410\ See id.
    \411\ See Section III.A.2.a of the 2004 ABS Adopting Release.
---------------------------------------------------------------------------

    A core principle of the Regulation AB definition of an asset-backed
security is that the security is backed by a discrete pool of assets
that by their terms convert into cash, with a general absence of active
pool management. However, in response to commenters and previous staff
interpretation, we adopted certain exceptions to the ``discrete pool''
requirement in the definition of asset-backed security to accommodate
master trusts, prefunding periods, and revolving periods.\412\ Based on
our experience with the definition, we are concerned that pools that
are not sufficiently developed at the time of an offering to fit within
the ABS disclosure regime may, nonetheless, qualify for ABS treatment,
which may result in investors not receiving appropriate information
about the securities being offered.\413\ Consequently, we are proposing
amendments to these exceptions to address these concerns. We believe
that our proposals would restrict deviations from the discrete pool of
assets requirements without substantially changing market
practice.\414\
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    \412\ See Item 1101(c)(3).
    \413\ Issuers will also need to consider Rule 3a-7 under the
Investment Company Act or other applicable exclusions under the Act.
The changes we propose today to the definition of ABS in Regulation
AB would not in and of themselves change the analysis under the
Investment Company Act. As such, securities that would not meet the
Regulation AB definition of ABS may be registered on Form S-1.
    \414\ See fn. 418, 420 and 423 below.
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    First, we are proposing to carve back the availability of the
exceptions to the discrete pool requirement. We are proposing to amend
the master trust exception for securities that are not backed by assets
that arise out of revolving accounts.\415\ Under the existing
requirement, securitizations that are not backed by such revolving
account assets--for example, mortgages--qualify for an exception from
the discrete pool requirement of the definition of an asset-backed
security. As a result, additional assets that are non-revolving can be
added to the pool of assets backing all the securities issued by the
master trust in connection with subsequent offerings of securities.
While we do not believe that it is important to repeal the
accommodations for revolving assets under Regulation AB, we also do not
believe that there is a similar need to accommodate an exception to the
discrete pool requirement for offerings backed by non-revolving assets.
In light of concerns, which we have noted above, about sufficient
disclosure about the pool assets, we are proposing to revise the
definition of an asset-backed security to restrict the use of
Regulation AB for master trust issuers backed by non-revolving assets.
Under our proposed revision, if the master trust is not supported by
assets arising out of revolving accounts, the securitization would no
longer qualify for the exception.\416\ We believe that it is
appropriate to carve back on the expansion of the definition of an
asset-backed security that was provided in 2004 \417\ so that investors
have sufficient information relating to the pool assets.\418\
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    \415\ See discussion of issuers that utilize master trust
structures in Section II.C. above.
    \416\ Some stranded cost securitizations are set up as a series
trust or a master trust. As explained in the 2004 ABS Adopting
Release, series trusts do not meet the definition of an asset-backed
security under Item 1101(c) of Regulation AB. Under our proposed
change to the master trust exception, a stranded cost securitization
set up as master trust would not be able to issue securities using
registration statements filed on Forms SF-1 or SF-3. However, if a
stranded cost securitization is structured as a stand alone trust,
then such securitization structure should meet the definition of an
asset-backed security.
    \417\ See 2004 ABS Adopting Release.
    \418\ We are aware of only four issuers backed by non-revolving
assets that utilize the master trust structure. Some issuers of ABS
backed by mortgages originated in the United Kingdom structured as
master trusts would not qualify for the exception from the
definition of ABS, because the underlying mortgages would not be
revolving in nature. Under our proposal, such structures would still
be able to register transactions on Form S-1. Such sponsors would
also be able to structure their ABS as stand-alone trusts. See Fitch
Ratings Report ``Masters of the House--A Review of UK RMBS Master
Trusts'', June 8, 2005 (noting that large prime mortgage lenders
have preferred the master trust structure over the pass-through
mechanism used by other UK RMBS issuers in, for example, buy-to-let
and non-conforming markets, as the master trust structure allows for
larger transactions)]. See Jennifer Hughes, MBS Market Reopens in
Old Style, Financial Times, October 28, 2009 (noting that because
new loans are added to the existing collateral pool when new bonds
are issued, the performance statistics of the older loans are
diluted by the new loans). See also Jennifer Hughes, Concern Over
Mortgage Master Trusts, Financial Times, October 28, 2009 (noting
difficulties with analyzing master trusts because the pool of loans
backing the bonds is constantly changing).
---------------------------------------------------------------------------

    Second, we are proposing to limit further the number of years for
revolving periods of non-revolving assets. The current provision allows
the offering to contemplate a revolving period where cash flows from
the pool assets may be used to acquire additional pool assets,
provided, that for securities backed by non-revolving assets, the
revolving period does not extend for more than three years from the
date of issuance of the securities and the additional pool assets are
of the same general character as the original pool assets.\419\ We are
proposing to reduce the permissible duration of the revolving period
from three years to one year.\420\ While we have not experienced

problems with the use of this feature to date, we believe that a one-
year revolving period limit would help to better ensure that investors
have sufficient information about their securities by limiting the
amount of time that assets may be added to the pool.
---------------------------------------------------------------------------

    \419\ See Item 1101(c)(3)(iii).
    \420\ We believe that currently the revolving period exception
to the discrete pool requirement is not widely used in standalone
amortizing trust structures. Based on staff review, we believe only
a few issuers which have registered with the Commission have used a
revolving period of more than one year.
---------------------------------------------------------------------------

    Third, we are proposing to decrease the limit on the amount of
prefunding permitted by the prefunding exception to the discrete pool
requirement. During prefunding periods, pool assets may be added within
a specified period of time after the issuance of the asset-backed
securities using a portion of the offering proceeds. Under the existing
requirement, the amount of prefunding may not exceed 50% of the
offering proceeds, or, in the case of master trusts, 50% of the
aggregate principal balance of the total asset pool whose cash flows
support the asset-backed securities.\421\ We propose to lower this
ceiling to 10% of the offering proceeds or, for master trusts, 10% of
the aggregate principal balance of the total asset pool whose cash
flows support the asset-backed securities.\422\ We believe that the
combination of shortening the revolving period and lowering the ceiling
of prefunding, as proposed, should better align the offerings that use
these features with our goal of maintaining the integrity of the
discrete pool requirement in offerings that use these features,
consistent with investor demand for more meaningful asset-level
data.\423\
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    \421\ Item 1101(c)(3)(ii).
    \422\ A current report on Form 8-K would be required to be filed
when additions to the pool are made, even if contemplated in the
registration statement, as proposed.
    \423\ Based on staff review, we believe that use of prefunding
accounts is generally limited to select sponsors, approximately 25%
or less of the principal balance or proceeds are set aside for
prefunding and the prefunding period generally extends for
approximately one year.
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Requests for Comment

     Is the proposed revision relating to master trusts not
backed by revolving account assets appropriate? Are there any asset
classes or types of ABS issuers that would be excluded from the revised
definition of an asset-backed security that should not be?
     Is it appropriate for ABS structured as master trusts that
are backed by non-revolving accounts to register on S-1? How would
existing and prospective investors be able to analyze the pool if it is
constantly changing? Please be specific in your response.
     Is 10% the appropriate ceiling for the amount of
permissible prefunding? Should that amount be higher (e.g., 20%, 30%,
40%), lower (e.g., five percent), or disallowed altogether under the
definition of an asset-backed security? Under the existing definition,
the duration of the prefunding period is limited to one year from the
date of issuance of the asset-backed securities. Should the one-year
limitation be shortened?
     Is the one-year permissible length of the revolving period
for non-revolving assets, as proposed, the appropriate amount of time?
Should the permissible length be a different amount of time (e.g., two
years)? Should any other amendments be made to the allowance for
revolving periods?

V. Exchange Act Reporting Proposals

A. Distribution Reports on Form 10-D

    We are proposing to revise General Instruction C.3. of Exchange Act
Form 10-D. The instruction provides that if information required by an
Item has been previously reported, the Form 10-D does not need to
repeat the information.\424\ Because information that is previously
reported may relate to a different issuer from the issuer to which the
report relates, such information may be difficult to locate, and
therefore, we believe a clear reference to the location of the
previously reported information should be provided in the Form 10-
D.\425\ We are proposing to amend Form 10-D to require disclosure of a
reference to the Central Index Key number, file number and date of the
previously reported information.
---------------------------------------------------------------------------

    \424\ The term ``previously reported'' is defined in Exchange
Act Rule 12b-2 (17 CFR 240.12b-2).
    \425\ For instance, in the case of master trusts, Item 3 of Form
10-D requires disclosure of information related to the sales of
securities backed by the same pool or issuing entity during the
reporting period, regardless of whether the transaction is
registered. Because the information regarding registered offerings
of securities backed by the same pool would have been previously
reported by the filing of a prospectus pursuant to Rule 424, no
additional report regarding the issuances would be required on Form
10-D. The staff has observed, however, that because the information
has been previously reported, no disclosure appears under this item.
Thus, it was unclear whether no disclosure was provided because no
issuances occurred, or because the information had been previously
reported, and also it may not be clear to investors or other market
participants how to locate the information.
---------------------------------------------------------------------------

    We also are proposing to add a new requirement to Item 1121 of
Regulation AB to address concerns about the activities of parties
obligated to repurchase assets for breach of a representation or
warranty in declining trustee or investor demands to repurchase assets
from the pool for a possible breach of a representation or
warranty.\426\ Under this proposed new item requirement, for the assets
in the pool backing securities covered by the distribution report, the
report would be required to contain disclosure relating to the amount
of repurchase demands made of the obligated party during the period
covered by this report for the assets in the pool of securities covered
by this report.\427\ This new item requirement would require disclosure
of any demands made of the obligated party in the period covered by the
report to repurchase the assets in the pool backing the securities due
to a breach in the representations and warranties concerning the pool
assets as provided in the transaction agreements. This disclosure would
include the percentage of that amount that was not then repurchased or
replaced by the originator. Of those assets that were not then
repurchased or replaced, we would require disclosure whether an opinion
of a third party not affiliated with the obligated party had been
furnished to the trustee that confirms that the assets did not violate
a representation or warranty.
---------------------------------------------------------------------------

    \426\ See proposed Item 6A in Part II of Form 10-D.
    \427\ See Section II.B.3.b. above.
---------------------------------------------------------------------------

    In addition, we are proposing to reverse our position for
delinquency presentation in periodic reports. In the 2004 ABS Adopting
Release, we stated that delinquency and loss information for the Form
10-D reporting period, like the other listed items in Item 1121(a) of
Regulation AB, is based on materiality, and not on Item 1100(b) of
Regulation AB.\428\ Item 1100(b) outlines the minimum requirements for
presenting historical delinquency and loss information, such as
requiring delinquency experience be presented in 30 or 31 day
increments, through the point that assets are written-off or charged-
off as uncollectible.\429\ Therefore, consistent with our efforts to
standardize the disclosure across all ABS, we are proposing to add an
instruction to Item 1121(a)(9) to provide pool-level disclosure in
periodic reports in accordance with Item 1100(b) of Regulation AB.
---------------------------------------------------------------------------

    \428\ See fn. 477 of the 2004 ABS Adopting Release.
    \429\ See Item 1100(b)(1) of Regulation AB.
---------------------------------------------------------------------------

    Further, we are proposing to revise the cover page of the Form 10-D
to include the name and phone number of the person to contact in
connection with the filing. This information would assist the staff in
its review of asset-backed filings.\430\
---------------------------------------------------------------------------

    \430\ Issuers are also encouraged to provide the name and phone
number of the outside attorney or other contact in accompanying
correspondence to their reports on Form 10-K.

---------------------------------------------------------------------------

Request for Comment

     Should we amend, as proposed, Form 10-D to require
disclosure of a reference to the Central Index Key number, file number
and date of the previously reported information?
     Should we amend, as proposed, Item 1121 to require
disclosure regarding the amount of repurchase demands made of the
obligated party during the period covered by the report for the assets
in the pool of securities covered by the report? Should we require, as
proposed, disclosure regarding the percentage of those assets that were
subject to a repurchase demand that were not repurchased? Should we
also require, as proposed, disclosure whether an opinion of a third
party not affiliated with the obligated party had been furnished to the
trustee that confirms that the assets that were not repurchased or
replaced did not violate a representation or warranty.
     Should we add, as proposed, an instruction to Item
1121(a)(9) to provide pool-level disclosure in periodic reports in
accordance with Item 1100(b) of Regulation AB?
     Should we specify the format for reports on Form 10-D?
Should we specify line items that issuers must disclose in order to
meet the requirements in current Item 1121 of Regulation AB (e.g.,
disclosure of sources and uses of monthly cash flows, changes in asset
pool balance from the beginning to the end of the reporting period)?
For instance, in the case of a credit card master trust, should we
specify line item disclosure for changes in the assets of the trust
(e.g., beginning balance, amount of account additions, amount of
accounts withdrawn, amounts collected, gross charge-offs, and ending
balance)? \431\
---------------------------------------------------------------------------

    \431\ See e.g., Appendix A, Attachment III. of the MetLife FDIC
Letter.
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B. Servicer's Assessment of Compliance With Servicing Criteria

    The Form 10-K report of an asset-backed issuer is required to
contain, among other things, an assessment of compliance with servicing
criteria that is set forth in Item 1122 of Regulation AB \432\ by each
party participating in the servicing function.\433\ The servicer's
assessment is filed as an exhibit to the report, and the body of the
Form 10-K report must also contain disclosure regarding material
instances of non-compliance with servicing criteria.\434\ In order to
provide enhanced information regarding instances of non-compliance with
servicing criteria with respect to the offering to which the report
relates, including information on steps taken to address non-
compliance, we are proposing to expand the disclosure required to be
contained in the body of the Form 10-K. We are also proposing to codify
certain staff positions with respect to the servicer's assessment, as
we believe codifying these positions will make them more transparent
and readily available to the public.
---------------------------------------------------------------------------

    \432\ 17 CFR 229.1122.
    \433\ Exchange Act Rules 13a-18(b) and 15d-18(b) [17 CFR
240.13a-18(b) and 17 CFR 240.15d-18(b)] and Item 1122 of Regulation
AB. Item 1122 of Regulation AB defines ``a party participating in
the servicing function'' as any entity (e.g., master servicer,
primary servicers, trustees) that is performing activities that
address the criteria in paragraph (d) of this section, unless such
entity's activities relate only to 5% or less of the pool assets.
See Instruction 2 to Item 1122. For purposes of this discussion, we
refer to the party that is required to provide a servicer's
assessment as the ``servicer.''
    \434\ See Item 1122(c) of Regulation AB. Item 1122 requires an
assessment of compliance with servicing criteria exactly as set
forth in Item 1122(d); the criteria cannot be modified. If the
servicer's process differs from one or more of the criteria, then
the servicer must disclose that it is not in compliance with those
criteria.
---------------------------------------------------------------------------

    A particular servicer may provide servicing for several asset-
backed issuers that may not be related. As discussed in the 2004 ABS
Adopting Release and in an instruction to Item 1122, the servicer's
assessment is required to be made at the platform level,\435\ which
means the servicer's assessment should be made with respect to all
asset-backed securities transactions involving the asserting party that
are backed by assets of the type backing the asset-backed securities
covered by the Form 10-K report.\436\ Typically, one servicer's
assessment relating to several issuers backed by the same type of
assets will be filed as an exhibit to each of the issuers' Forms 10-K.
Therefore, it may not be clear whether the asset-backed securities
covered in the Form 10-K report may have been impacted by the material
instance of non-compliance.
---------------------------------------------------------------------------

    \435\ See Section III.D.7.c of the 2004 ABS Adopting Release. In
contrast, the servicer's compliance statement under Item 1123 of
Regulation AB which must be included in a Form 10-K report relates
to the specific asset pool for the securitization that is covered by
the Form 10-K. Thus, an instance of non-compliance that is not
material to the servicer's platform would still need to be disclosed
in the servicer's compliance statement under Item 1123 if the
instance of non-compliance is material to the servicing of the
specific asset pool covered by the report. Further, the issuer is
required to disclose a known instance of noncompliance that is
material to the asset pool in its Exchange Act reports. See the
Division of Corporation Finance's Manual of Publicly Available
Interpretations on Regulation AB and Related Rules, Interpretation
17.05.
    \436\ See also Instruction 1 to Item 1122 (stating that if
certain servicing criteria are not applicable to the asserting party
based on the activities it performs with respect to asset-backed
securities transactions taken as a whole involving such party and
that are backed by the same asset type backing the class of asset-
backed securities, the inapplicability of the criteria must be
disclosed in that asserting party's and the related registered
public accounting firm's reports).
---------------------------------------------------------------------------

    In order to elicit disclosure regarding the material instances of
non-compliance with respect to the particular securities to which the
Form 10-K report relates, we are proposing to require that, along with
disclosure of material instances of noncompliance with servicing
criteria, the body of the annual report also disclose whether the
identified instance of noncompliance involved the servicing of the
assets backing the asset-backed securities covered in the particular
Form 10-K report.\437\
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    \437\ While some information about instances of non-compliance
may also be required by Item 1123 of Regulation AB to be provided,
because of the differences in the definition of servicer between
Item 1122 and Item 1123, we believe that Item 1123 does not cover
the same information that our proposed revision to Item 1122 would
cover.
---------------------------------------------------------------------------

    We are also proposing to require that the body of the annual report
discuss any steps taken to remedy a material instance of noncompliance
previously identified by an asserting party for its activities made on
a platform level. This disclosure would be required whether or not the
instance of non-compliance involved the servicing of assets backing the
securities covered in the particular Form 10-K. We believe that if a
material instance of non-compliance exists at the platform level,
investors should know whether any steps have been taken to remedy the
material instance of non-compliance.
    We also are proposing to codify certain staff positions issued by
the Division of Corporation Finance relating to the servicer's
assessment requirement, with some modification. First, we are proposing
to codify a staff interpretation relating to aggregation and conveyance
of information between a servicer and another party (who may also be a
servicer for purposes of the servicer's assessment requirement). In the
fulfillment of its duties as set forth in transaction agreements, a
servicer will often provide information to another party. Such
information conveyed is generated by a servicing activity that falls
under a particular criterion in Item 1122(d). Likewise, the second
servicer may use the information in a servicing activity that falls
under a particular criterion in Item 1122(d). While the conveyance of
information to another party is not explicitly contained in any of the
criterion in Item 1122(d), the staff in the Division of Corporation
Finance has taken the position that the accurate conveyance of the
information is part of the same servicing criterion

under which the activity that generated the information is
assessed.\438\
---------------------------------------------------------------------------

    \438\ See the Division of Corporation Finance's Manual of
Publicly Available Interpretations on Regulation AB and Related
Rules, Interpretation 11.03. According to the interpretation, the
following example demonstrates how the position should be applied:
    For example, if Servicer A is responsible for administering the
assets of the pool and passing along the aggregated information
about the assets in the pool to Servicer B, and Servicer B is
responsible for calculating the waterfall or preparing and filing
the Exchange Act reports with that information, Servicer A's
activity is assessed under Item 1122(d)(4). In addition to assessing
Servicer A's maintenance of the records and other activities, this
Item requires assessment of Servicer A's aggregation and conveyance
of such information to Servicer B. If instead of aggregating the
individual asset information, Servicer A conveys it un-aggregated,
then Servicer B must include its own aggregation of the individual
asset data in Servicer B's assessment of calculating the waterfall
or preparing and filing Exchange Act reports.
---------------------------------------------------------------------------

    We are now proposing to codify the staff's interpretation; however,
unlike the staff's position that the conveyance of the information is
part of the same servicing criterion under which the activity that
generated the information is assessed, we are proposing to add a new
servicing criterion to Item 1122. This new criterion, as proposed,\439\
would state that if information obtained in the course of duty is
required by any party or parties in the transaction in order to
complete their duties under the transaction agreements, the aggregation
of such information, as applicable, is mathematically accurate and the
information conveyed accurately reflects the information that was
obtained. Any servicer that is responsible for either aggregation or
conveyance of information should assess whether there are any instances
of noncompliance with respect to such activities that should be
reported under the proposed criteria. We are proposing a new criterion
because we believe that a separate criterion for the accurate
aggregation and conveyance of information to other parties would better
elicit disclosure regarding a servicer's compliance with its duties.
---------------------------------------------------------------------------

    \439\ See proposed Item 1122(d)(1)(v) of Regulation AB.
---------------------------------------------------------------------------

    In a publicly available telephone interpretation,\440\ the staff
explained that the platform for reporting purposes should not be
artificially designed, but rather, it should mirror the actual
servicing practices of the servicer. However, the staff also noted that
if in the conduct of servicing the transactions, the servicer has made
divisions in its servicing function by geographic locations or among
separate computer systems, the servicer may take these factors into
account in determining the platform for reporting purposes. Absent
changes in circumstances such as a merger between services, we expect
that the groupings of transactions included in a platform would remain
constant from period to period. Also, if the servicer includes in its
platform less than all of the transactions backed by the same asset
type that it services, we expect a description of the scope of the
platform would be included in a servicer's report submitted pursuant to
Item 1122.
---------------------------------------------------------------------------

    \440\ See the Division of Corporation Finance's Manual of
Publicly Available Interpretations on Regulation AB and Related
Rules, Interpretation 17.03.
---------------------------------------------------------------------------

    We are proposing to codify these interpretations relating to the
scope of the Item 1122 servicer's assessment in an instruction to Item
1122. The proposed instruction also states that the servicer's
assessment should cover, except if disclosure is provided as required
below, all asset-backed securities transactions involving such party
and that are backed by the same asset type backing the class of asset-
backed securities which are the subject of the Commission filing. The
proposed instruction states that the servicer may take into account
divisions among transactions that are consistent with the servicer's
actual practices. However, if the servicer includes in its platform
less than all of the transactions backed by the same asset type that it
services, the proposed instruction provides that a description of the
scope of the platform should be included in the servicer's assessment.

Request for Comment

     Would additional disclosure in the body of the Form 10-K
as to whether the identified instance of noncompliance involved the
servicing of the assets backing the asset-backed securities covered in
the particular Form 10-K report, as we are proposing to require,
provide investors with meaningful additional disclosure that is not
already covered by the existing requirements? Would the proposed
requirement to disclose any steps taken to remedy the previously
identified instances of noncompliance provide helpful information to
investors?
     Should we, as proposed, add a separate criterion
addressing the accurate aggregation and conveyance of information by
one servicer to another party who must use the information in the
performance of its duties? Would it be better not to add the criterion
but instead revise Item 1122 to provide, similar to the staff's
position, that accurate conveyance of the information is part of the
same servicing criterion under which the activity that generated the
information is assessed? Should timeliness of conveyance of this
information also be included as part of the proposed servicing
criterion?
     Should we codify prior staff interpretations relating to
the scope of Item 1122 by adding the proposed instruction? Does the
proposed instruction to Item 1122 reflect current servicer's practices?
Do servicers conduct servicing in any ways different from what is
contemplated in the proposed instruction?

C. Form 8-K

1. Item 6.05
    Item 6.05 of Form 8-K \441\ applies to asset-backed securities
offerings registered on Form S-3 and, if our proposed amendments are
adopted, will apply to offerings registered on Form SF-3. Under the
existing item requirement, if any material pool characteristic of the
actual asset pool at the time of issuance of the securities differs by
five percent or more (other than as a result of the pool assets
converting to cash in accordance with their terms) from the description
of the asset pool in the prospectus filed for the offering pursuant to
Securities Act Rule 424, the issuer must provide certain disclosure
regarding the actual asset pool, such as that required by Item 1111 and
1112 of Regulation AB.
---------------------------------------------------------------------------

    \441\ 17 CFR 249.308.
---------------------------------------------------------------------------

    In light of the new requirements regarding asset-level disclosure,
which reflect the significance of the composition of the assets, we are
proposing to revise Item 6.05 of Form 8-K to require that the issuer
file a current report with disclosure pursuant to Item 1111 and Item
1112 if any material pool characteristic of the actual asset pool at
the time of issuance of the asset-backed securities differs by one
percent or more from the description of the asset pool in the
prospectus filed for the offering pursuant to Securities Act Rule 424
(other than as a result of the pool assets converting into cash in
accordance with their terms). We believe that changes below one percent
are likely de minimis changes. We believe that except for the assets
acquired through prefunding, the assets of the pool underlying the
securities should be set and described in the prospectus. For shelf
offerings, much of this information would already be provided by means
of the Rule 424(h) filing. We remind issuers that information about
significant changes in pool asset composition provided to an investor
after the sale may not have been adequately conveyed at the time of

sale for the purpose of Securities Act Rule 159.\442\
---------------------------------------------------------------------------

    \442\ See fn. 87 above.
---------------------------------------------------------------------------

    The item, as proposed to be revised, also requires a description of
the changes that were made to the asset pool, including the number of
assets substituted or added to the asset pool.\443\ In some
transactions, the pooling and servicing agreement may provide for
investments of cash collections and reserve funds in ``eligible'' or
``permitted'' investments.\444\ However, even though investments of
cash collections are contemplated at the time of the offering, the
investment of cash collections and reserve funds may be a material
change to the asset pool. Consequently, disclosure of the change would
be required under Item 6.05 of Form 8-K.
---------------------------------------------------------------------------

    \443\ In addition, we are proposing to require that asset data
files be included as an exhibit on the same date of the filing of an
Item 6.05 Form 8-K. See proposed Item 6.06 of Form 8-K.
    \444\ If those instruments are securities, they must be
registered or exempt from registration as provided in Securities Act
Rule 190. See Section III.a.1.e.v. and fn. 277 above.
---------------------------------------------------------------------------

Request for Comment

     Should we revise Item 6.05 of Form 8-K as proposed? Is 1%
an appropriate threshold to trigger disclosure on Form 8-K? Should it
be higher or lower such as 0.5% or 2%?
     Is the language for the proposed item appropriate?
     Should we also require, as proposed, a description of the
changes to the asset pool?
     Should we provide by rule that changes in pool assets of
more than 10% (or some other amount) from the description of the asset
pool in the prospectus filed pursuant to Rule 424 must be conveyed to
investors for purposes of Rule 159?
     How often would ABS issuers cross the 1% threshold? We
propose, above, to eliminate the current exception to the shelf
eligibility condition that requires timely filing of an Item 6.05 Form
8-K. Is there a risk that pool assets may change by more than 1%
without the sponsor being aware soon enough that an issuing entity has
crossed this threshold in order to be able to comply with the shelf
eligibility criteria, as proposed to be revised? If so, how should we
address that risk while still providing incentive for timely
compliance?
2. Change in Sponsor's Interest in the Securities
    We are proposing to add a new item to require the filing of a Form
8-K to describe any material change in the sponsor's interest in the
securities. Under this Item, a Form 8-K would be required to be filed
if there is a material change in the sponsor's interest in the
securities. We believe that such disclosure would assist an investor in
monitoring the sponsor's interest in the securities, including its
retention of risk in connection with the proposed shelf eligibility
requirements discussed above. Under the proposal, the report on Form 8-
K would be required to include disclosure of the amount of change in
interest and a description of the sponsor's resulting interest in the
transaction.

Request for Comment

     Should we require, as proposed, the issuer to file a Form
8-K if there is a material change in the sponsor's interest in the
securities? Should we provide a quantitative measure for the trigger
for disclosure on Form 8-K? For example, should we require the filing
of a Form 8-K if the sponsor's interest has changed by 1%, 5% or 10%?
     Is the proposed disclosure that would be required to be
provided on Form 8-K appropriate? Would other types of disclosure
provide more useful information for investors?
     Should we also require the issuer to file a Form 8-K if an
originator's interest in the securities has changed? If such a
requirement were adopted, what would be the costs of monitoring an
originator's interest?
     Should we instead require that the issuer file a report
each fiscal quarter that discloses the scope of the sponsor's interest
in the securities as of a particular date? If so, what date should that
be?

D. Central Index Key Numbers for Depositor, Sponsor and Issuing Entity

    We are proposing amendments to make it easier for interested
parties to locate the depositor's registration statement and periodic
reports associated with a particular offering and information related
to the sponsor of the offering. Currently, ABS offerings with a
particular file number may be associated with a registration statement
with a different file number. Further, Forms 8-K for ABS offerings may
be filed under the depositor file number, making it difficult to track
material for the related offering with only the information provided in
the Form 8-K. In order to facilitate the ability of investors to find
information that is filed on EDGAR relating to the depositor, the
issuing entity and the sponsor more easily, we are proposing to require
that the cover pages of registration statements on Form SF-1 and Form
SF-3 include the CIK number of the depositor, and if applicable, the
CIK number of the sponsor.\445\ We are also proposing to require that
the cover pages of the Form 10-D, Form 10-K, and Form 8-K for ABS
issuers include the CIK number of the depositor and of the issuing
entity, and if applicable, the CIK number of the sponsor.
---------------------------------------------------------------------------

    \445\ See proposed revision to Item 1102(a) of Regulation AB.
---------------------------------------------------------------------------

Request for Comment

     Should we require, as proposed, CIK numbers for the
depositor, the issuing entity, and the sponsor (if applicable) on the
cover pages of Forms 10-K, 10-D and 8-K for ABS issuers? Should we
require, as proposed, CIK numbers for the depositor and the sponsor (if
applicable) on the cover pages of proposed Forms SF-1 and SF-3?
     Are there any other changes we should make to the forms to
make it easier to locate materials related to an ABS offering or ABS
issuer?

VI. Privately-Issued Structured Finance Products

    We are proposing significant revisions to the safe harbors for
exempt offerings and resales of asset-backed securities. In the U.S.,
all CDO issuances have taken place in the private exempt markets. An
offering of CDOs in the private market typically is a two-step process
involving an exempt private sale by the issuer to one or more initial
purchaser or purchasers \446\ under Section 4(2) of the Securities Act
\447\ immediately followed by a private resale by the initial purchaser
or purchasers to eligible investors made in reliance on the Securities
Act Rule 144A safe harbor.\448\ In addition, while it may not be
typically used in the private market for structured finance products,
Rule 506 \449\ of Regulation D \450\ provides any issuer, regardless of
the type of security it issues, a safe harbor for the Section 4(2)
private offering exemption from Securities Act registration.
---------------------------------------------------------------------------

    \446\ The initial purchaser is typically a registered broker-
dealer.
    \447\ 15 U.S.C. 77d(2). Section 4(2) provides an exemption from
registration for transactions by an issuer not involving any public
offering.
    \448\ See Guy Lander, U.S. Securities Law for International
Financial Transactions and Capital Markets, Second Edition, (Eliot
J. Katz et al. eds., 2nd ed., Thomson West 2005)(noting that
``[t]ogether, Section 4(2) and Rule 144A, in effect, permit
`underwritten' private placements'').
    \449\ 17 CFR 230.506.
    \450\ 17 CFR 230.501 through 230.508.
---------------------------------------------------------------------------

    Securitization in the private, unregistered market played a
significant role in the financial crisis. In particular, the CDO market
has been cited as

central to the crisis.\451\ While the CDO market comprised a large part
of the capital market at the time of the financial crisis,\452\ many
have asserted that the lack of information about CDOs and other
structured securities in the private market exacerbated the harm to
investors and the markets as a whole during the financial crisis.\453\
In addition, other market participants and regulators did not have
access to important information about this significant component of the
capital markets.\454\ Further, the costs of information asymmetry for
ABS issuances can differ significantly from those incurred in the
issuances of most other securities. Asset-backed securities are issued
by single purpose issuers whose only business purpose is holding
financial assets and may involve numerous parties that participate in
the chain of securitization (i.e., originator, sponsor, servicer,
etc.). Thus, unlike the securities of other companies where information
needed to value the securities might be able to be gleaned from a
review of basic summary information and discussions with management,
information about the assets and the parties in the securitization
chain facilitates an understanding of the valuation of asset-backed
securities. To address these concerns, we are proposing revisions
relating to Rule 144A offerings of structured finance products and Rule
506 of Regulation D to provide for specific disclosures for private
offerings of structured finance products, as well as additional public
information about private structured finance products offerings
conducted in reliance upon these safe harbors.
---------------------------------------------------------------------------

    \451\ See the 2008 CRMPG III Report (noting that many of these
securities were high-risk complex financial instruments that were
not understood by investors), at 53, and Gillian Tett, Fools Gold
(2009). See also the PWG March 2008 Report, at 9 (discussing
subprime mortgages and the write-down of AAA-rated and super-senior
tranches of CDOs as contributing factors to the financial crisis).
    \452\ In 2005, worldwide CDO issuance exceeded $250 billion.
See, e.g., Securities Industry and Financial Markets Association,
``Global CDO Issuance Data,'' available at http://www.sifma.org/
research/research.aspx?ID=10806. According to information that the
staff has compiled from AB Alert, available at www.ABAlert.com, and
SDC, U.S. issued Rule 144A offerings of asset-backed securities
totaled approximately $200 billion in 2005 and $160 billion in 2006.
    \453\ See the 2008 CRMPG III Report, at 53 (noting that lack of
comprehension of CDOs by market participants resulted in the display
of price depreciation and volatility far in excess of levels
previously associated with comparably rated securities, causing both
a collapse of confidence in a very broad range of structured product
ratings and a collapse in liquidity for such products). See also the
Turner Review, at 16 (describing CDOs and CDO squared as opaque).
    \454\ See testimony of Joseph Mason, ``Hearing on the Role of
Credit Rating Agencies In the Structured Finance Market,'' Before
the Subcommittee on Capital Markets, Insurance, and Government
Sponsored Enterprises, Committee on Financial Services United States
House of Representatives (Sept. 27, 2007) (proposing a resolution to
information asymmetry for structured finance investments, including
CDOs, by changing the manner in which information is gathered by
accountants and regulators and disseminated to market participants
by ratings agencies and markets). See also Anna Katherine Barnett-
Hart, The Story of the CDO Market Meltdown: An Empirical Analysis,
(Mar. 19, 2009) (discussing mis-rating of CDOs and failure of all
market participants, from investment banks to hedge funds, to
understand risk of CDOs) at 3, 40.
---------------------------------------------------------------------------

    We acknowledge that the steps we are proposing to take in the
private placement market are significant. We recognize that structured
finance products issuers may conduct offerings in reliance on a
statutory exemption under the Securities Act without seeking the safe
harbor provided by Rule 506 of Regulation D or without representing
that the securities are eligible for sale under Rule 144A.\455\ As a
result, our proposed amendments to the safe harbors would not apply to
these offerings, and as such, may not fully address the concerns we
seek to address in all securitization transactions.
---------------------------------------------------------------------------

    \455\ For example, we understand that asset-backed commercial
paper is often sold in reliance on the private placement statutory
exemption and the so-called Section ``4(1-\1/2\)'' exemption for
private resales rather than the safe harbors provided under Rule 506
of Regulation D or Rule 144A.
---------------------------------------------------------------------------

A. Rule 144A and Regulation D

    We adopted Securities Act Rule 144A \456\ in 1990.\457\ The rule
provides a safe harbor for a reseller of securities from being deemed
an underwriter within the meaning of Sections 2(a)(11) and 4(1) of the
Securities Act for the offer and sale of non-exchange listed securities
to ``qualified institutional buyers'' (QIBs), as defined in Rule 144A.
The Rule 144A safe harbor can be claimed only by persons other than the
issuer. The safe harbor has been utilized to develop a private market
for collateralized debt obligations and other asset-backed securities
\458\ that may not meet the definition of an asset-backed security
under Regulation AB, and, therefore, are not eligible for the
particularized regulation regime of Regulation AB.\459\
---------------------------------------------------------------------------

    \456\ 17 CFR 230.144A.
    \457\ See the Rule 144A Adopting Release.
    \458\ For example, a vast majority of resecuritizations of real
estate mortgage conduits, known as ``Re-Remics,'' are offered
through resales made in reliance on Rule 144A safe harbor. See
Deloitte's Speaking of Securitization, ``The Re-Remic Phenomenon''
(June 2009), at 2.
    \459\ Many CDOs do not meet the ``discrete pool of assets''
component of the Regulation AB definition of an asset-backed
security because CDOs permit the active management of the assets for
a period of time (e.g., five years), a component which is
inconsistent with the principle set forth in Item 1101(c). Also,
other structured products like synthetic securities do not meet the
definition of an asset-backed security under Regulation AB. See
Section III.A.2.a. of the 2004 ABS Adopting Release. In addition,
actively-managed CDOs and issuers that offer synthetic securities
generally do not meet the requirements of Rule 3a-7 under the
Investment Company Act and typically rely on one of the private
investment company exclusions under that Act. See fn. 39 above.
---------------------------------------------------------------------------

    One condition of the Rule 144A safe harbor requires the issuer to
provide the security holder or a prospective purchaser designated by
the security holder, certain information relating to the issuer, which
is required to be reasonably current in relation to the date of resale
under the rule.\460\ To satisfy the rule, the information must be
provided upon the security holder's request, or the prospective
purchaser must have received such information at or prior to the time
of sale, upon the prospective purchaser's request to the security
holder or issuer. In the original adopting release for Rule 144A, we
noted that this condition had been proposed in response to commenters'
concerns regarding the lack of available information about issuers in
the exempted transaction.\461\
---------------------------------------------------------------------------

    \460\ 17 CFR 230.144A(d)(4).
    \461\ See Section II.D. of the Rule 144A Adopting Release.
---------------------------------------------------------------------------

    This information requirement in Rule 144A delineates the type of
information that should be provided by corporate issuers.\462\ However,
there is no discussion in the text of the rule regarding the type of
information that is required for ABS offerings. In the original
adopting release for Rule 144A, we stated that the information
requirements in Rule 144A with respect to asset-backed issuers require,
``basic, material information concerning the structure of the
securities and distributions thereon, the nature, performance and
servicing of the assets supporting the securities, and any credit
mechanism associated with the securities.'' \463\ Under these
requirements, purchasers of asset-backed securities in Rule 144A
transactions may receive only a minimal

amount of information about their investment.
---------------------------------------------------------------------------

    \462\ In particular, the holder or prospective purchaser should
be provided with: a statement of the nature of the issuer's business
and the products and services that it offers, the issuer's most
recent balance sheet and profit and loss and retained earnings
statements, and similar financial statements for the part of the two
preceding fiscal years as the issuer has been in operation. See 17
CFR 230.144A(d)(4)(i). The rule also explains how the issuer's
financial statements and other information could be presumed to be
``reasonably current.'' See 17 CFR 230.144A(d)(4)(ii).
    \463\ See Section II.D. of the Rule 144A Adopting Release.
---------------------------------------------------------------------------

    Under the existing provisions in Regulation D, when the issuer
sells securities in reliance on Rule 506 to a purchaser that is not an
``accredited investor,'' as defined in Regulation D, an issuer must
furnish information akin to what is required in a registration
statement on Form S-1.\464\ The prescribed information, however, need
not be provided to a purchaser that is an accredited investor. Except
for a few types of ABS, we believe that investors in privately issued
asset-backed securities typically would qualify as accredited
investors, and therefore, issuers would not be required to provide the
prescribed information to them in order rely on Rule 506 of Regulation
D for the sale of the securities. Thus, if an ABS issuer were to rely
on Rule 506 of Regulation D for the sale of its securities, purchasers
in the offering may receive only a minimal amount of information
regarding the securities, though they may request the information that
they desire.
---------------------------------------------------------------------------

    \464\ See Rule 502(b)(2) of Regulation D.
---------------------------------------------------------------------------

B. Proposed Information Requirements for Structured Finance Products

1. General
    In order to address concerns about the lack of information
available to investors in the private markets for structured finance
products, we are proposing amendments to our safe harbors and new
related rules regarding the information that must be made available to
investors in privately-issued asset-backed securities. In summary, we
are proposing to:
     Require that, in order for a reseller of a ``structured
finance product'' to sell a security in reliance on Rule 144A, or in
order for an issuer of a ``structured finance product'' to sell a
security in reliance on Rule 506 of Regulation D:
    [cir] The underlying transaction agreement for the securities must
grant to purchasers, holders of the securities (or prospective
purchasers designated by the holder) the right to obtain from the
issuer of such securities the information, upon request, that would be
required if the transaction were registered under the Securities Act
and such ongoing information as would be required by Section 15(d) of
the Exchange Act if the issuer were required to file reports under that
section; and
    [cir] The issuer must represent that it will provide such
information.
     Conform the informational requirement of Securities Act
Rule 144 \465\ to the above revisions; and
---------------------------------------------------------------------------

    \465\ 17 CFR 230.144.
---------------------------------------------------------------------------

     Add a new Securities Act rule that would require a
structured finance product issuer that had represented and covenanted
to provide information as proposed to be required by Rule 144, Rule
144A and Rule 506 of Regulation D to provide such information, upon
request.
2. Application of Proposals
    Our proposals would apply to a ``structured finance product,''
which would be more broadly defined than the Regulation AB Item 1101(c)
definition of ``asset-backed security'' in order to reflect the wide
range of securitization products that are sold in the private markets.
In addition to traditional ``asset-backed securities,'' the proposed
definition of ``structured finance product'' would cover:
     A synthetic asset-backed security; or
     A fixed-income or other security collateralized by any
pool of self-liquidating financial assets, such as loans, leases,
mortgages, and secured or unsecured receivables that entitles its
holder to receive payments that depend on the cash flow from the
assets--including:
    [cir] An asset-backed security as used in Item 1101(c) of
Regulation AB (Sec.  229.1101(c));
    [cir] A collateralized mortgage obligation;
    [cir] A collateralized debt obligation;
    [cir] A collateralized bond obligation;
    [cir] A collateralized debt obligation of asset-backed securities;
    [cir] A collateralized debt obligation of collateralized debt
obligations; or
    [cir] A security that at the time of the offering is commonly known
as an asset-backed security or a structured finance product.\466\
---------------------------------------------------------------------------

    \466\ This proposed definition is based in part, on the
definition of asset-backed security used in the Financial Industry
Regulatory Authority (FINRA's) proposal to designate asset-backed
securities as eligible for Trade Reporting and Compliance Engine,
the vehicle developed by FINRA to facilitate the mandatory reporting
of over the counter secondary market transactions. See Notice of
Filing of Amendment No. 1 and Order Granting Accelerated Approval of
a Proposed Rule Change, as modified by Amendment No. 1 Thereto, to
Require the Reporting of Transactions in Asset-Backed Securities to
TRACE, Release No. 34-61566 (Feb. 22, 2010)(release approving the
rule change that would require the reporting of trading in asset-
backed securities to TRACE). Our proposed definition provides some
more specificity on the defining characteristics of a structured
finance product and, unlike the FINRA proposed definition, includes
a security that is commonly known at the time of the offering as an
asset-backed security or a structured finance product.
---------------------------------------------------------------------------

    We believe that the enumerated characteristics in our proposed
definition generally distinguish structured finance products from other
types of securities. This proposed definition of structured finance
product would encompass certain managed asset-backed securities (where
a manager is appointed and paid fees to make changes to the collateral
or a referenced portfolio). In this proposed definition, there would be
no requirement of a discrete pool of assets so as to include CDOs,
which are typically managed for some period of time.\467\
---------------------------------------------------------------------------

    \467\ We also believe that any residual tranche of the
instrument would be included in the proposed definition. Asset-
backed commercial paper is also covered in this definition.
---------------------------------------------------------------------------

3. Information Requirements
    We are proposing to condition the safe harbors of Rule 144A and
Rule 506 of Regulation D on a requirement that, if the securities
offered or sold are structured finance products, an underlying
transaction agreement (such as an indenture or servicing agreement)
must contain a provision requiring the issuer to provide specified
information to any purchaser (and also, in the case of Rule 144A, any
security holder or prospective purchaser designated by the security
holder).\468\ Also, the issuer must represent that it will provide such
information upon request. For securities to be eligible for resale
under Rule 144A, we would require that an underlying transaction
agreement grant any initial purchaser, any security holder or any
prospective purchaser designated by a security holder the right to
obtain from the issuer promptly, upon the request of the purchaser or
security holder, information as would be required if the offering were
registered on Form S-1 or Form SF-1 under the Securities Act and any
ongoing information regarding the

securities that would be required by Section 15(d) of the Exchange Act
if the issuer were required to file reports under that section. For an
offering made in reliance on Rule 506 of Regulation D, we would require
that an underlying transaction agreement contain a provision granting
any purchaser in the Rule 506 offering the right to obtain from the
issuer promptly, upon the purchaser's request, information that would
be required if the offering were registered on Form S-1 or Form SF-1
under the Securities Act.
---------------------------------------------------------------------------

    \468\ In the original adopting release for Rule 144A, we stated
that with respect to mortgage- or other asset-backed securities,
since the servicer or trustee, on behalf of the trust or other legal
entity, has title to the assets of the trust, they would be deemed
to be the ``issuer'' for purposes of the information requirement in
Rule 144A. In a no-action letter, the staff later explained that
this language ``was not intended in any way to cause the analysis of
issuer status under the federal securities laws to be any different
for privately placed mortgage-backed or asset-backed securities than
public offerings of such securities'' but ``intended only to
identify the party from whom the holder and a prospective purchaser
designated by the holder must have the right to obtain the
information about the securities and underlying asset pools of the
limited purpose financial entity.'' See letter from the Division of
Corporation Finance to Kutak Rock & Campbell (Nov. 29, 1990). While
we recognize that the servicer or trustee would typically be the
party that delivers information to security holders (or prospective
purchasers), we intend for our proposed amendment to apply to an
issuer of structured finance products (i.e., the depositor as it
relates to the issuing entity), consistent with the definition of
issuer in Securities Act Rule 191 for ABS purposes.
---------------------------------------------------------------------------

    The specific disclosure that would need to be provided to satisfy
this condition would vary depending on the type of security offered.
For an offering of structured finance products where the securities
meet the Regulation AB definition of an asset-backed security, the
disclosure requirements of Form SF-1 would apply. For offerings of
structured finance products where the securities fall outside the
Regulation AB definition, the requirements of Form S-1 would apply. In
the latter case, the issuer would be required to provide information
required under Regulation AB regarding the assets and parties as well
as additional information required under Regulation S-K.\469\ For a
managed CDO offering, we would expect disclosure regarding the asset
and collateral managers, including fees and related party transaction
information, their objectives and strategies, any interest that they
have retained in the transaction or underlying assets, and
substitution, reinvestment and management parameters. For a synthetic
CDO offering, we would expect, among other things, disclosure of the
differences between the spreads on synthetic assets and the market
prices for the assets, the process for obtaining the credit default
swap or other synthetic assets, and the internal rate of return to
equity if that was a consideration in the structuring of the
transaction.
---------------------------------------------------------------------------

    \469\ See Section III.A.2.a of the 2004 ABS Adopting Release
(discussing structured securities that do not meet the Regulation AB
definition of an asset-backed security and noting ``[d]epending on
the structure of the transaction and the terms of the securities,
some disclosure aspects of Regulation AB may be applicable, but
aspects from the traditional disclosure regime also may be
applicable. In some instances, a third approach might be more
appropriate''). Material information that is required by Regulation
S-K would be required but not all of the item requirements in
Regulation S-K may be applicable to the issuer.
---------------------------------------------------------------------------

4. Proposed Rule 144 Revisions
    In addition, we are proposing to revise Securities Act Rule 144.
Rule 144 creates a safe harbor for the sale of securities under the
exemption set forth in Section 4(1) of the Securities Act. One of the
conditions of Rule 144 requires the availability of adequate current
public information with respect to the issuer of the securities (``the
current public information requirement''). This current public
information requirement is only at issue if the seller who is relying
on Rule 144 is an affiliate of the issuer.\470\ Under Rule 144,
affiliates of non-reporting companies may resell securities in reliance
on the rule only after the securities have been held for at least one
year after purchase and if certain conditions are met, including the
current public information requirement.
---------------------------------------------------------------------------

    \470\ See Revisions to Rule 144 and Rule 145 to Shorten Holding
Period for Affiliates and Non-Affiliates, Release No. 33-8813 (June
20, 1997)[72 FR 36822](adopting release shortening holding period
and amending other Rule 144 conditions). Prior to 2007, non-
affiliates of the issuer relying on the rule for the resale of
securities were subject to the current public information
requirement after holding the securities for one year. Since 2007,
non-affiliates of a non-reporting issuer who satisfy a one-year
holding period requirement are no longer required to comply as a
condition to reliance on Rule 144 with the current public
information requirement.
---------------------------------------------------------------------------

    We are proposing to revise the current public information
requirement in Rule 144 for non-reporting issuers of structured finance
products. If the securities are structured finance products, and the
issuer of the securities is not subject to the reporting requirements
of Section 13 or 15(d) of Exchange Act, then in order to satisfy the
current public information requirement, two conditions must be
satisfied. First, the underlying transaction agreement of the issuer
must grant any purchaser, any security holder and any prospective
purchaser of the securities designated by the holder the right to
obtain, upon request of the purchaser or security holder, information
that would be required if the offering were registered on Form S-1 or
Form SF-1 under the Securities Act and any ongoing information
regarding the securities that would be required by Section 15(d) of the
Exchange Act, if the issuer were required to file reports under that
section. Second, the issuer must have represented that it would provide
such information to the purchaser, security holder, or prospective
purchaser, upon request of the purchaser or security holder.
5. New Rule 192 of the Securities Act
    We are proposing new Rule 192 to require an issuer of privately-
issued structured finance products to provide, upon the investors'
request, information as would be required if the transaction were
registered (or ongoing information). If an issuer of structured finance
products has represented and covenanted to provide such offering
information in order to rely on Rule 506 of Regulation D or has
represented and covenanted to provide both offering or ongoing
information pursuant to the proposed new provision of Rule 144A or Rule
144, then the issuer must provide such information, upon request of the
purchaser or security holder. Recent events have shown the importance
of structured finance product issuers complying with a representation
to provide initial and ongoing information to security holders and
prospective purchasers.\471\ In making investment decisions, ABS
investors should be able to rely on the continued availability of
information to themselves and prospective purchasers as a prophylactic
measure against the possibility of fraud. Indeed, failure to provide
such information upon request may constitute a fraud in the offer of
securities.\472\ Thus, the Commission could bring an enforcement action
under this rule against an issuer that failed to provide the required
information.
---------------------------------------------------------------------------

    \471\ See Gary Gorton, Slapped in the Face by the Invisible
Hand: Banking and the Panic of 2007, May 9, 2009, prepared for the
Federal Reserve Bank of Atlanta's 2009 Financial Markets Conference:
Financial Innovation and Crisis (noting that at a crucial point in
the financial crisis, lack of information regarding some securities
greatly exacerbated the situation).
    \472\ Securities Act Section 17(a) contains the general
antifraud prohibitions applicable in the offer or sale of
securities. In particular, Section 17(a)(3) (15 U.S.C. 77q(a)(3))
states that it shall be unlawful for any person in the offer or sale
of any securities or any security-based swap agreement by the use of
any means or instruments of transportation or communication in
interstate commerce or by use of the mails, directly or indirectly
to engage in any transaction, practice, or course of business which
operates or would operate as a fraud or deceit upon the purchaser.
The Supreme Court has held that Section 17(a)(3) does not require a
finding of scienter. Aaron v. SEC, 446 U.S. 680 (1980).
---------------------------------------------------------------------------

    The obligation to provide information under proposed new Rule 192
would not be a condition of the Rule 144, Rule 144A, or Regulation D
safe harbors. As proposed new conditions of the safe harbors for
structured finance products, the underlying transaction agreements must
contain the specified representations and covenants to provide
information. If the issuer does not include the representation and
covenant, it would have failed to satisfy the safe harbor and may not
be entitled to the exemption under Sections 4(1) or 4(2), as
applicable. If, on the other hand, the transaction agreements contain
the representation and covenant but the issuer fails to provide, for
example,

some of the information to a security holder or prospective purchaser,
upon their request, that failure, in and of itself, would not mean the
conditions of the safe harbor would not have been met. We have concerns
that a potential claim arising under Section 5 of the Securities Act
may not be the appropriate remedy under these circumstances but believe
it appropriate that there be regulatory consequences. Investors should
nevertheless be able to take appropriate action under those transaction
agreements regarding the provision of information and the Commission
could bring an action for violation of Rule 192.

Request for Comment

     We recognize that our proposals would impose significant
changes to the existing requirements in the safe harbors for private
offers, sales and resales of structured finance products, and we
request comment on all aspects of our proposed approach. This will be
the first time, for example, that we would require an undertaking to
provide information to accredited investors as a condition to the safe
harbor in Rule 506 of Regulation D, and the first time we would require
an undertaking to provide such specific information to QIBs in Rule
144A transactions. While we recognize that the proposals may impose
substantial additional requirements on ABS issuers in the private
market, we believe that, if adopted, these proposals would help to
provide needed transparency in the private markets for structured
finance products. As a practical matter, how feasible will an exempt
private offering be in light of the requirements? Is the rationale
offered for distinguishing ABS from other securities for purposes of
our proposal appropriate?
     We request comment on the proposed definition of
``structured finance products'' for purposes of our proposed revisions
to Rule 144A, Regulation D and other rules. Is the proposed definition
appropriate? Should other types of securities be included that are not
included? Should any types of included securities not be?
     Is it appropriate to require, as proposed, that as a
condition of Rule 144A, the transaction agreements contain a provision
that would require an issuer of structured finance products to provide
to investors promptly, upon investors' request, such information that
would be required if the offering were registered on Forms S-1 or SF-1
and any ongoing information regarding the securities as would be
required by Section 15(d) of the Exchange Act if the issuer were
required to file reports under that section? Is it appropriate to
require, as proposed, the same requirement as a condition of Rule 506
of Regulation D for sales to accredited investors?
     Should we require instead that, as a condition of Rule
144A, issuers make the required information (both offering and ongoing
information) available at all times, rather than only upon investor's
request? Could an issuer, for example, be required to post the
information on a password-protected Web site?
     Is new Rule 192 appropriate? Should we require, as a
matter of federal securities law, that an issuer of structured finance
products that has represented and covenanted to provide information
pursuant to the safe harbors under Rule 144A, Regulation D, or Rule 144
provide such information?
     Should we provide more specificity in the rules covering
what disclosure would be required to be provided? If so, what types of
disclosure should we specifically require? Should the required
disclosures differ by type of security? If so, in what way?
     Are our proposals with respect to ongoing information
regarding the securities appropriate? Is there any reason that we
should not require structured finance product issuers that utilize the
safe harbors to comply with the proposed requirements for ongoing
information?
     Is our proposed approach of requiring the transaction
agreements to contain a provision requiring the issuer to provide
information upon request appropriate? Should we instead condition the
availability of the safe harbors of Rule 144A and Regulation D on the
actual provision of the information if the securities sold are
structured finance products? Would that approach have a chilling effect
on the private markets if not providing some of the information
required under our revised rule might raise the possibility of a
Section 5 violation, with the resultant rescission right under Section
12(a)(1)? If so, should we address that potential concern by providing
that no failure to provide information as required solely under such a
provision of Rule 144A would result in a loss of the safe harbor for
purposes of Section 12(a)(1) liability as long as the other conditions
of Rule 144A are satisfied and basic material information concerning
the securities is provided, including information regarding the
structure of the securities, distributions on the securities, nature,
performance and servicing of the assets, and any credit enhancements?
Such an approach would be designed to enable the Commission to bring an
action, if appropriate, based on Section 5 if the required information
were not provided while limiting litigation by a purchaser seeking to
rescind the transaction to situations where there was a significant
failure to provide basic information. By contrast, is it necessary or
appropriate to rely on the possibility of a rescission right to foster
compliance with the proposed information requirements?
     Are our proposed amendments to Rule 506 of Regulation D
appropriate? Should we require, as proposed, that information regarding
structured finance products be provided to any purchaser, regardless of
whether the purchaser meets the definition of an accredited investor?
     Should our proposed conditions apply to offerings made
pursuant to Rule 505, which are made under the Securities Act Section
3(b) exemption from registration rather than Section 4(2)? How likely
would it be for issuers of structured finance products to conduct Rule
505 offerings?
     Instead of amending Rule 506, should we adopt a new
Regulation D safe harbor just for structured finance products? Since it
appears that issuers of structured finance products have relied on the
statutory private placement exemption rather than Regulation D, would
such a safe harbor be used?
     Even if there was not extensive use of Regulation D for
private offerings of structured finance products, is it necessary or
appropriate for us to amend Rule 506 of Regulation D, as proposed, in
order to forestall potential future problems in the private markets for
structured finance products?
     Is our proposed amendment to Rule 144 appropriate?
     As proposed, the revisions to Rule 144A, Regulation D and
Rule 144 require that the underlying transaction agreement include a
provision that the issuer provide information to investors upon
request. Should we revise the requirement to provide that the servicer,
collateral administrator or some other party provides the information?
     The proposed revisions to Rule 144A, Regulation D, and
Rule 144 also require that the issuer represent that prescribed
information would be provided to investors. Is the proposal
appropriate?
     Would the proposed rule revisions provide investors and
market participants with sufficient transparency regarding private
sales of structured finance products? Would additional or other
requirements promote greater transparency? For example, should we make
the safe harbors, such as Rule 144A, unavailable

for offerings of structured finance products? Would this result in
structured finance products being offered and sold in registered
transactions, or in private transactions without the benefit of the
safe harbor? Would a new safe harbor for private ABS offerings designed
to make information available to investors and the market (e.g., a
limited public offering exemption) be a more appropriate approach?
     The proposed amendments would have the effect of treating
offers and sales in reliance on safe harbors substantially similar to
public ones in terms of the relevant disclosure requirements. Is this
appropriate? Why or why not? To what extent and in what way should our
regulatory regime account for the nature of the investors (e.g.,
accredited investors and QIBs) who participate in private offerings?
What would the impact be on the securitization market if offerings of
ABS in reliance on the safe harbors were subject to the disclosure
requirements that we propose?
     Should we address private resales of ABS outside of our
safe harbors by interpreting the definition of ``underwriter'' for
purposes of the statutory exemptions to include any sales of asset-
backed securities where information that would be required in the
registered context is not provided? Why or why not? Would doing so
prevent issuers from engaging in transactions that are not subject to
the proposed requirements by using a statutory exemption (and not the
safe harbors) for the unregistered sale of asset-backed securities?
     To the extent we adopt the proposed changes to Rule 144A
or Regulation D, we request comment on whether issuers of structured
finance products would be more likely to sell such products outside the
United States in reliance on the safe harbor provided by Regulation S
\473\ under the Securities Act. Should we adopt similar changes under
Regulation S as we are proposing for Rule 144A and Regulation D to
cover sales of structured finance products outside the United States?
Are there any extra or special considerations relating to offshore
sales of structured finance products that are different from
considerations under Rule 144A and Regulation D that we should take
into account in considering adopting similar changes under Regulation
S?
---------------------------------------------------------------------------

    \473\ 17 CFR 230.901 et seq.
---------------------------------------------------------------------------

     In order to facilitate unsolicited ratings in unregistered
transactions, should we require that the issuer also provide
information to an NRSRO if the rating agency intends to rate the
security?
     Are there other disclosure approaches that would better
satisfy the objectives we have identified? For example, should we
require more targeted disclosures in private placements? Should we give
issuers or investors other options for addressing issues in the ABS
private market? If so, how? Should all asset classes be treated the
same?

C. Notice of Initial Placement of Securities Eligible for Sale Under
Rule 144A and Revisions to Form D

    In light of the role that privately-issued structured finance
products play in our capital markets and concerns raised by the lack of
transparency in the private market, we also believe it is important to
implement rules that will provide information to us and to the markets
at large about sales of structured finance products in the private
markets. Consequently, we are proposing to require that a notice of an
initial placement of structured finance products be filed with the
Commission.
    Form D \474\ is the official notice of an offering of securities
made without registration under the Securities Act in reliance on an
exemption provided by Regulation D.\475\ While Form D is not a
condition to the availability of the Regulation D exemption, Rule 507
\476\ of Regulation D disqualifies an issuer from using a Regulation D
exemption in the future if it has been enjoined by the court for
violating the Regulation D provision that requires the filing of Form
D. Form D serves an important data collection objective, among other
things.\477\ On February 27, 2008, we adopted changes to mandate the
electronic filing of the form and to revise the form.\478\ Currently,
there is no such notice filing requirement for offerings made in
reliance on Rule 144A.
---------------------------------------------------------------------------

    \474\ 17 CFR 239.500.
    \475\ See Rule 503 of Regulation D [17 CFR 230.503].
    \476\ 17 CFR 230.507.
    \477\ In Electronic Filing and Revision of Form D, Release No.
33-8891 (Feb. 6, 2008) [73 FR 10592], we noted that previous
statements on Form D have suggested that, at the federal regulatory
level, Form D filings serve both to collect data for use in the
Commission's rulemaking efforts and for the enforcement of the
federal securities laws, including enforcement of the exemptions in
Regulation D. See Section I.A of Release No. 33-8891.
    \478\ See id.
---------------------------------------------------------------------------

    We are proposing to require a notice of the offering to be filed
with the Commission for the initial placement of structured finance
products that are represented as eligible for resale under Rule 144A.
The notice would include information regarding major participants in
the securitization, the date of the offering and initial sale, the type
of securities being offered, the basic structure of the securitization,
the assets in the underlying pool, and the principal amount of the
securities being offered. Like Form D, the notice would be required to
be filed in XML tagged format.\479\
---------------------------------------------------------------------------

    \479\ Similarly, filers submit Form D online through the
Commission's EDGAR system, which stores the information in tagged
format.
---------------------------------------------------------------------------

    The notice would also provide that in submitting the notice, the
issuer is undertaking to furnish the offering materials relating to the
securities to the Commission upon written request. We also are
proposing to add an amendment to Rule 30-1 of the Commission's Rules of
General Organization to provide delegated authority to the Director of
the Division of Corporation Finance to request information that the
issuer would be required to undertake to provide to the Commission upon
request. This proposed amendment to Rule 30-1 would also apply to the
existing undertaking in Form D and provide the Director of the Division
of Corporation Finance the authority to request information from
issuers of structured finance products that file Form D.
    This notice, which we are proposing to call Form 144A-SF,\480\
would be signed by the issuer and filed with the Commission no later
than 15 calendar days after the first sale of securities in the
offering, unless the end of that period falls on a Saturday, Sunday or
holiday, in which case the due date would be the first business day
following such period. This timeframe is based on the current timeframe
for filing a Form D. Similar to Form D, the Form 144A-SF notice
requirement is not proposed to be a condition of the availability of
the Rule 144A safe harbor. However, in light of the importance of this
information, we are proposing to provide that if an issuer has failed
to file Form 144A-SF, then Rule 144A will not be available for
subsequent resales of newly issued structured finance products of the
issuer or affiliates of the issuer.
---------------------------------------------------------------------------

    \480\ See proposed 17 CFR 239.144A.
---------------------------------------------------------------------------

    Also similar to Form D, hardship exemptions in Regulation S-T would
be unavailable to Form 144A-SF.\481\ We believe that issuers should
have access to the Internet and be able to file this notice within 15
calendar days after the first sale of securities in the offering (i.e.

the initial placement of securities), as proposed. We also believe
hardship exemptions should not be available for Form 144A-SF because of
the relative ease of filing, the limited value of paper filings and the
utility of a uniform, comprehensive database.
---------------------------------------------------------------------------

    \481\ We are proposing to amend Rules 201 and 202 of Regulation
S-T to make the hardship exemptions unavailable to proposed Form
144A-SF.
---------------------------------------------------------------------------

    We also are proposing to amend Form D to collect the same
information that we are proposing to require to be provided in proposed
Form 144A-SF. Further, we are proposing to add a checkbox to Form D
that would indicate if the issuer is offering or selling structured
finance products.\482\
---------------------------------------------------------------------------

    \482\ In order to better organize the information in Form D in
light of these changes, we also are proposing to re-order the items
in Form D.
---------------------------------------------------------------------------

Request for Comment

     Is our proposal to require a notice of the initial
placement of structured finance products that may be resold in reliance
on Rule 144A appropriate?
     Instead of, or in addition to, a notice, should we require
that the offering circular be filed? If we require that the offering
circular be filed, should the filing be with the Commission on a non-
public basis? Should it be made available to the public? If so, when
should it be made public (e.g., immediately or after some period of
time)? If it were made public, would there be any general solicitation
concerns? If so, how should we address them?
     Should proposed Form 144A-SF be required to be filed, as
proposed, in XML tagged format? Similar to Form D, should we provide a
Web site page where issuers can submit directly to EDGAR the
information required by Form 144A-SF, which would automatically tag the
information that is delivered? Would issuers of structured finance
products benefit from such a webpage?
     Are the items of information that are proposed to be
required in proposed Form 144A-SF appropriate? Are there other items
that are useful and should be required to be provided on proposed Form
144A-SF? Are there particular ways that these items should be required
to be tagged?
     Should the Rule 144A safe harbor be conditioned on the
filing of this notice, or is it better to require the notice separate
from the conditions of the Rule 144A safe harbor, as proposed? Is our
proposal relating to the consequences for failure to file the notice
appropriate?
     Should we require the filing of proposed Form 144A-SF
sooner than proposed (e.g., three or four business days from the date
of first sale) or should we provide issuers with more time for filing
the notice (e.g., 20 calendar days from the date of first sale)? Should
we provide a hardship exemption for filing proposed Form 144A-SF, or is
our proposal to make the hardship exemptions unavailable appropriate?
     Should we revise Form D, as proposed? Are the proposed
revisions to Form D appropriate?
     Should we also adopt changes under Regulation S to require
a notice of sales of ABS that are to be sold in reliance on that safe
harbor, similar to the proposed requirement under Rule 144A? Are there
any extra or special considerations relating to offshore sales of
structured finance products that are different from considerations
under Rule 144A that we should take into account in considering
adopting a similar filing requirement under Regulation S?

VII. Codification of Staff Interpretations Relating to Securities Act
Registration

    We also are proposing to codify certain staff positions relating to
the registration of asset-backed securities. These codifications should
simplify our rules by making these positions more transparent and
readily available to the public.

A. Fee Requirements for Collateral Certificates or Special Units of
Beneficial Interest

    In some ABS transactions backed by auto leases, the auto leases and
car titles are originated in the name of a separate trust to avoid the
administrative expenses of retitling the physical property underlying
the leases.\483\ The separate trust will issue to the issuing entity
for the asset-backed security a collateral certificate, often called a
``special unit of beneficial interest'' (SUBI). The issuing entity will
then issue the asset-backed securities backed by the SUBI certificate.
---------------------------------------------------------------------------

    \483\ See also discussion of these types of transactions in
Section III.A.2.c of the 2004 ABS Adopting Release and John Arnholz
and Edward E. Gainor, Offerings of Asset-Backed Securities, Aspen
Publishers (2008 Supplement), at Sec.  2.03[B].
---------------------------------------------------------------------------

    Rule 190 governs the registration requirements for underlying
securities of an asset securitization. Rule 190(c) provides that if the
asset pool for the asset-backed securities includes a pool asset
representing an interest in or the right to the payments or cash flows
of another asset pool, then that pool asset is not considered an
``underlying security'' that must be registered in accordance with the
other provisions in Rule 190 if certain conditions are met. These
conditions are:
     Both the issuing entity for the asset-backed securities
and the entity issuing the pool asset were established under the
direction of the same sponsor and depositor;
     The pool asset is created solely to satisfy legal
requirements or otherwise facilitate the structuring of the asset-
backed securities transaction;
     The pool asset is not part of a scheme to evade
registration or the requirements of Rule 190; and
     The pool asset is held by the issuing entity and is a part
of the asset pool for the asset-backed securities.\484\
---------------------------------------------------------------------------

    \484\ See 17 CFR 230.190(c). Rule 190(c) provides for the
conditions in which an asset-backed issuer is not required to
register a pool asset representing an interest in or the right to
the payments or cash flows of another asset.
---------------------------------------------------------------------------

    In a publicly available telephone interpretation, the staff has
advised that the offer and sale of the collateral certificate or SUBI
involved in asset-backed transactions must also be registered (along
with the securities themselves).\485\ However, the staff has advised
that, if the collateral certificate or SUBI meets the requirements of
Rule 190(c) of the Securities Act, no additional registration fee for
the offering of the collateral certificates or SUBIs should be
required.\486\ We are proposing to codify the staff's positions in this
respect in Rule 190 and Rule 457 under the Securities Act,\487\ which
relates to the computation of Securities Act registration fees. Under
the proposed amendment to Rule 190, notwithstanding other provisions,
if the pool assets for the asset-backed securities are collateral
certificates or SUBIs, those collateral certificates or SUBIs must be
registered concurrently with the registration of the asset-backed
securities.\488\ Pursuant to the proposed revision to Rule 457, where
the securities to be offered are collateral certificates or SUBIs
underlying asset-backed securities which are being registered
concurrently, no separate fee for the certificates or SUBIs will be
payable.\489\
---------------------------------------------------------------------------

    \485\ See Interpretation 13.01 of the Division's Manual of
Publicly Available Interpretations on Regulation AB and Related
Rules.
    \486\ See id.
    \487\ 17 CFR 230.457.
    \488\ See proposed revision to Rule 190(c).
    \489\ See proposed paragraph (s) to Rule 457.
---------------------------------------------------------------------------

B. Incorporating by Reference Subsequently Filed Periodic Reports

    Currently, the prospectus for an offering of securities registered
on Form S-3 is required to incorporate by reference all subsequently
filed periodic and other reports filed under Exchange

Act Sections 13(a) and 15(d) \490\ prior to the termination of the
offering.\491\ For corporate issuers, information regarding the issuer
that is allowed to be omitted from the registration statement is made
available through the Exchange Act reports.
---------------------------------------------------------------------------

    \490\ 15 U.S.C. 78m and 15 U.S.C. 28o.
    \491\ See Item 12(b) of Form S-3.
---------------------------------------------------------------------------

    With respect to asset-backed issuers, information filed with a
current report on Form 8-K \492\ prior to the termination of the
offering would often be important to incorporate into the prospectus.
For example, disclosure under Item 6.05 of Form 8-K may provide
information regarding a change in the composition of the pool assets.
However, the staff has previously noted that asset-backed issuers
should not be required to incorporate information filed with their Form
10-D or Form 10-K \493\ reports into the prospectus.\494\
---------------------------------------------------------------------------

    \492\ 17 CFR 249.308.
    \493\ 17 CFR 249.312 and 17 CFR 249.310.
    \494\ See Interpretation 15.02 of the Division's Manual of
Publicly Available Interpretations on Regulation AB and Related
Rules. The staff noted that the 2004 ABS Adopting Release noted that
asset-backed issuers are required to incorporate by reference its
Exchange Act reports only if the requirement is applicable. See
chart in Section III.A.3.a of the Adopting Release.
---------------------------------------------------------------------------

    We are proposing to codify in proposed Form SF-3 the staff's
position regarding incorporation by reference of subsequently filed
Exchange Act reports for offerings of asset-backed securities. Because,
except for issuers that utilize master trust structures, the Form 10-D
and Form 10-K that is filed prior to the termination of the offering is
generally for a different ABS issuer than the ABS issuer that has filed
the prospectus (even though the issuers are affiliated), Form 10-D and
Form 10-K reports may not be relevant to asset-backed offering that is
the subject of the prospectus. Thus, under the proposed codification,
rather than state that all reports subsequently filed by the registrant
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
prior to the termination of the offering shall be deemed to be
incorporated by reference into the prospectus, the registration
statement may, alternatively, state that all current reports on Form 8-
K filed by the registrant pursuant to 13(a), 13(c), 14 or 15(d) of the
Exchange Act, prior to the termination of the offering shall be deemed
to be incorporated by reference into the prospectus.\495\
---------------------------------------------------------------------------

    \495\ See proposed Item 11(b) of proposed Form SF-3.
---------------------------------------------------------------------------

Request for Comment

     Should we codify the above staff positions?
     Should we make any changes to the staff positions? For
example, should we require master trust issuers to state that all
Exchange Act reports subsequently filed by the registrant shall be
deemed to be incorporated by reference into the prospectus rather allow
them to incorporate by reference only Form 8-K?
     Should we revise any of the positions we are proposing to
be codified? Does the proposed language in any of the codifications
modify, or create an ambiguity that we should revise?

VIII. Transition Period

    We are considering the appropriate timing for implementation of the
proposals, if adopted. Because sponsors of asset securitizations
typically are large issuers,\496\ we preliminarily believe that a
tiered approach to implementation based on size of the sponsor would
not be appropriate for asset-backed issuers. We believe that some of
our proposed amendments, including asset-level and data tagging
requirements, may initially impose significant burdens on sponsors and
originators as they adjust to the new requirements. This could include
changes to how information relating to the pool assets is collected and
disseminated to various parties along the chain of securitization.
While we believe that compliance dates should not extend past a year
after adoption of the new rules, we request that commenters provide
input about feasible dates for implementation of the proposed
amendments. We currently anticipate that, if adopted, the new and
amended rules, including the proposed asset-level information
requirements and the changes with respect to privately-issued asset-
backed securities, would apply to asset-backed securities that are
issued after the implementation date of the new requirements.\497\
---------------------------------------------------------------------------

    \496\ See Section XIV below.
    \497\ Thus, resecuritizations after the implementation date
would be subject to the new requirements, regardless of whether
issuance of underlying securities predates the implementation date.
---------------------------------------------------------------------------

Request for Comment

     Should implementation of any proposals be phased-in? If
so, explain why and provide a reasonable timeframe for a phase-in
(e.g., six months, one or two years)?
     Should implementation be based on a tiered approach that
relates to a characteristic other than the size of the sponsor? Is
there any reason to structure implementation around asset class of the
securities?

IX. General Request for Comments

    We request comment on the specific issues we discuss in this
release, and on any other approaches or issues that we should consider
in connection with the proposed amendments. We seek comment from any
interested persons, including investors, asset-backed issuers,
sponsors, originators, servicers, trustees, disseminators of EDGAR
data, industry analysts, EDGAR filing agents, and any other members of
the public.

X. Paperwork Reduction Act

A. Background

    Certain provisions of the proposed rule amendments contain
``collection of information'' requirements within the meaning of the
Paperwork Reduction Act of 1995 (PRA).\498\ The Commission is
submitting these proposed amendments and proposed rules to the Office
of Management and Budget (OMB) for review in accordance with the
PRA.\499\ An agency may not conduct or sponsor, and a person is not
required to comply with, a collection of information unless it displays
a currently valid control number. The titles for the collections of
information are: \500\
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    \498\ 44 U.S.C. 3501 et seq.
    \499\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
    \500\ The paperwork burden from Regulation S-K is imposed
through the forms that are subject to the requirements in those
regulations and is reflected in the analysis of those forms. To
avoid a Paperwork Reduction Act inventory reflecting duplicative
burdens and for administrative convenience, we assign a one-hour
burden to Regulation S-K.
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    (1) ``Form S-1'' (OMB Control No. 3235-0065);
    (2) ``Form S-3'' (OMB Control No. 3235-0073);
    (3) ``Form 10-K'' (OMB Control No. 3235-0063);
    (4) ``Form 10-D'' (OMB Control No. 3235-0604);
    (5) ``Form 8-K'' (OMB Control No. 3235-0288);
    (6) ``Regulation S-K'' (OMB Control No. 3235-0071);
    (7) ``Regulation S-T'' (OMB Control No. 3235-0424);
    (8) ``Form D'' (OMB Control No. 3235-0076);
    (9) ``Form SF-1 (a proposed new collection of information);
    (10) ``Form SF-3 (a proposed new collection of information);
    (11) ``Asset Data File'' (a proposed new collection of
information);
    (12) ``Waterfall Computer Program'' (a proposed new collection of
information).
    (13) ``Form 144A-SF'' (a proposed new collection of information);
and
    (14) ``Privately-Issued Structured Finance Product Disclosure'' (a

proposed new collection of information).
    The regulations and forms listed in Nos. 1 through 8 were adopted
under the Securities Act and the Exchange Act and set forth the
disclosure requirements for registration statements and periodic and
current reports filed with respect to asset-backed securities and other
types of securities to inform investors. Regulation S-T specifies the
requirements that govern the submission of electronic documents. Form D
is filed by issuers as a notice of sales without registration under the
Securities Act based on the claim of an exemption under Regulation D of
the Securities Act.
    The regulations and forms listed in Nos. 9 through 14 are newly
proposed collections of information under the Securities Act and
Exchange Act. Form SF-1 and Form SF-3, if adopted, would represent the
new registration forms for offerings of asset-backed securities, as
defined in Item 1101(c) of Regulation AB. Form SF-3 would represent the
registration form for offerings that meet certain shelf eligibility
conditions and can be offered on a delayed basis under Rule 415. Form
SF-1 would represent the registration forms for other asset-backed
offerings. Asset Data File and Waterfall Computer Program are proposed
new collections of information that would relate to the regulations and
proposed new forms for asset-backed issuers under the Securities Act
and Exchange Act that set forth certain disclosure requirements for
registration statements and periodic and current reports for asset-
backed issuers. Under the requirements, an asset-backed issuer would be
required to submit to the Commission specified, tagged information on
assets in the pool underlying the securities and a computer program
that gives effect to the flow of funds or ``waterfall'' provisions of
the transaction agreements. Form 144A-SF would represent a new notice
requirement for certain offerings made in connection with the safe
harbor provided in Rule 144A. Finally, Privately-Issued Structured
Finance Product Disclosure is the disclosure that issuers would be
required to agree to provide to investors when an ABS issuer sells
securities that are eligible for resale under the Rule 144A safe harbor
or when an ABS issuer sells securities in reliance on the Regulation D
safe harbor.
    Compliance with the proposed amendments would be mandatory except
that the amendments that would impose collection of information
requirements on privately-issued structured finance products would only
be required if the issuer is relying on the safe harbors to which those
collection of information requirements relate. Responses to the
information collections would not be kept confidential and there would
be no mandatory retention period for proposed collections of
information.

B. Revisions to PRA Reporting and Cost Burden Estimates

    Our PRA burden estimates for each of the existing collections of
information, except for Form 10-D, are based on an average of the time
and cost incurred by all types of public companies, not just ABS
issuers, to prepare a particular collection of information. Form 10-D
is a form that is only prepared and filed by ABS issuers. In 2004, we
codified requirements for ABS issuers in these regulations and forms,
recognizing that the information relevant to asset-backed securities
differs substantially from that relevant to other securities.
    Our PRA burden estimates for the proposed amendments are based on
information that we receive on entities assigned to Standard Industrial
Classification Code 6189, the code used with respect to asset-backed
securities, as well as information from outside data sources.\501\ When
possible, we base our estimates on an average of the data that we have
available for years 2004, 2005, 2006, 2007, 2008, and 2009. In some
cases, our estimates for the number of asset-backed issuers that file
Form 10-D with the Commission are based on an average of the number of
ABS offerings in 2006, 2007, 2008, and 2009.\502\
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    \501\ We rely on two outside sources of ABS issuance data. We
use the ABS issuance data from Asset-Backed Alert on the initial
terms of offerings, and we supplement that data with information
from Securities Data Corporation (SDC).
    \502\ Form 10-D was not implemented until 2006. Before
implementation of Form 10-D, asset-backed issuers often filed their
distribution reports under cover of Form 8-K.
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1. Form S-3 and Form SF-3
    Our current PRA burden estimate for Form S-3 is 236,959 annual
burden hours. This estimate is based on the assumption that most
disclosures required of the issuer are incorporated by reference from
separately filed Exchange Act reports. However, because an Exchange Act
reporting history is not a condition for Form S-3 eligibility for ABS,
ABS issuers using Form S-3 often must present all of the relevant
disclosure in the registration statement rather than incorporate
relevant disclosure by reference. Thus, our current burden estimate for
ABS issuers using Form S-3 under existing requirements is similar to
our current burden estimate for ABS issuers using Form S-1. During 2004
through 2009, we received an average of 99 Form S-3 filings annually
related to asset-backed securities.
    We are proposing to move the requirements for asset-backed issuers
into new forms that would be solely for the registration by offerings
of asset-backed securities. Under our proposal, proposed Form SF-3
would be the ABS shelf equivalent form of existing Form S-3. For
purposes of our calculations, we estimate that the proposals relating
to shelf eligibility and new shelf procedures would cause a 10%
movement in the number of filers (i.e., a decrease of ten registration
statements) out of the shelf system due to the new requirements of risk
retention and ongoing reporting for shelf registration
eligibility.\503\ On the other hand, we estimate the number of shelf
registration statements for ABS issuers would increase by five as a
result of the proposed elimination of base and supplement prospectuses
for these issuers.\504\ Thus, we estimate that the number of shelf
registration statements will decrease by five altogether. Accordingly,
we estimate that the proposals would cause a decrease of 99 ABS filings
on Form S-3 and a corresponding number of 94 Form SF-3s filed
annually.\505\
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    \503\ We calculated the decrease of ten Form SF-3s by
multiplying the average number of Form S-3s filed (99) by 10
percent.
    \504\ Based on staff reviews, we believe it is very unusual to
see ABS registration statements with multiple unrelated collateral
types such as auto loans and student loans. There are occasionally
multiple related collateral types such as HELOCs, subprime mortgages
and Alt A mortgages in ABS registration statements.
    \505\ This is based on the number of registration statements for
ABS issuers filed on Form S-3 and the two changes due to our rule
proposal.
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    In 2004, we estimated that an ABS issuer, under the 2004
amendments, would take an average of 1,250 hours to prepare a Form S-3
to register ABS.\506\ For registration statements, we estimate that 25%
of the burden of preparation is carried by the company internally and
that 75% of the burden is carried by outside professionals retained by
the registrant at an average cost of $400 per hour.\507\ In this
release, we are proposing new and revised disclosure requirements for
ABS issuers that if adopted, would be a cost to filing on Form SF-3.
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    \506\ See 2004 ABS Adopting Release and 2004 ABS Proposing
Release.
    \507\ See, e.g., Credit Ratings Disclosure, Release No. 33-9070
(Oct. 7, 2009) [74 FR 53086].
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    We are proposing a significant new disclosure requirement that the
issuer provide asset-level information for each of the assets in the
underlying pool.

Credit card ABS issuers would be required to provide grouped asset
data. Another new disclosure requirement would be the filing of a
waterfall computer program that gives effect to the waterfall
provisions of the transaction. For purposes of the PRA, we are
including the costs relating to providing this disclosure on the assets
in the estimate for our newly proposed collection of information
entitled ``Asset Data File.'' We are also including the costs related
to the filing of the waterfall computer program as a separate
collection of information, as discussed in the section below entitled
``Waterfall Computer Program.'' We are also proposing some additional
disclosure requirements that may impose some additional costs to ABS
issuers with respect to registration statements.
    If the proposals are adopted, we estimate that the incremental
burden for ABS issuers to complete the disclosure requirements in Form
SF-3, prepare the information, and file it with the Commission would be
100 burden hours per response on Form SF-3. As a result, we estimate
that each Form SF-3 would take approximately 1,350 hours to complete
and file.\508\ We estimate the total internal burden for Form SF-3 to
be 31,725 hours and the total related professional costs to be
$38,070,000.\509\ This would result in a corresponding decrease in Form
S-3 burden hours of 30,937.5 and $37,125,000 in professional
costs.\510\
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    \508\ The total burden hours to file Form SF-3 are calculated by
adding the existing burden hours of 1,250 that we estimate for Form
S-3 and the incremental burden of 100 hours imposed by our proposals
for a total of 1,350 total burden hours.
    \509\ To calculate these values, we first multiply the total
burden hours per Form SF-3 (1,350) by the number of Form SF-3s
expected under the proposal (94), resulting in 126,900 total burden
hours. Then, we allocate 25 percent of these hours to internal
burden, resulting in 31,725 hours. We allocate the remaining 75
percent of the total burden hours to related professional costs and
use a rate of $400 per hour to calculate the external professional
costs of $38,070,000.
    \510\ To calculate these values, we first multiply the total
burden hours per Form S-3 (1,250) by the average number of Form S-3s
over the period 2004-2009 (99), resulting in 123,750 total burden
hours. Then, we allocate 25 percent of these hours to internal
burden, resulting in 30,937.5 hours. We allocate the remaining 75
percent of the total burden hours to related professional costs and
use a rate of $400 per hour to calculate the external professional
costs of $37,125,000.
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2. Form S-1 and Form SF-1
    We are proposing to move the requirements for asset-backed issuers
into new forms that would be solely for the registration of asset-
backed issuers. Proposed Form SF-1 would be the non-shelf equivalent
form of existing Form S-1 under our proposal. As noted above, for
purposes of our calculation, we estimate that the new proposals for
shelf eligibility and new shelf procedures would cause small movement
in the number of filers from the shelf system to the non-shelf system.
For purposes of the PRA, we estimate three ABS issuers will move from
the shelf system to the non-shelf system of proposed Form SF-1.\511\
From 2004 through 2009, an average of four Form S-1s were filed
annually by ABS issuers. Correspondingly, we estimate that the number
of filings on Form SF-1 will be seven, which is the sum of the four
average filings per year and the estimated incremental three filings
from shelf to Form SF-1.
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    \511\ We estimate in the section above that the proposals
relating to shelf eligibility and new shelf procedures would cause a
ten percent movement in the number of filers out of the shelf
system. We assume, for the purposes of our PRA estimates, that the
other filers that do not move to Form SF-1 would utilize the private
markets or offshore offerings for offerings of ABS.
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    For ABS filings on Form S-1, we have used the same estimate of
burden per response that we used for Form S-3, because the disclosures
in both filings are similar.\512\ Even under the proposals, the
disclosures would continue to be similar for shelf registration
statements and non-shelf registration statements. The burden for the
proposed requirements for the asset data file and the waterfall
computer program to be filed as exhibits to Form SF-1 are included in
the newly proposed collections of information discussed below rather
than in this section for Form SF-1. Thus, we estimate that an ABS Form
SF-1 filing will impose an incremental burden of 100 hours per
response, which is equal to the incremental burden to file Form SF-3.
We estimate the total number of hours to prepare and file each Form SF-
1 at 1,350, the total annual burden for the issuer at 2,362.5 hours and
added costs for professional expenses at $2,835,000.\513\ This would
result in a corresponding decrease in Form S-1 burden hours of 1,250
and $1,500,000 in professional costs.\514\
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    \512\ See Section IV.B.2 of the 2004 ABS Proposing Release.
    \513\ The total burden hours to file Form SF-1 are calculated by
adding the existing burden hours of 1,250 and the incremental burden
of 100 hours imposed by our proposals for a total of 1,350 hours. To
calculate the annual internal and external costs, we first multiply