reasonable balance between standardizing the disclosures and tailoring
them to specific rating actions. With respect to the comments on
isolating the assumptions and the co-dependencies between assumptions,
the Commission understands that certain assumptions may be co-
dependent. The NRSRO should provide an explanation of this co-
dependency in the disclosure of the assumptions to the extent it is
relevant to understanding how they would impact the credit rating.
    Paragraph (a)(1)(ii)(N). Paragraph (a)(1)(ii)(N) of Rule 17g-7, as
proposed, would contain the disclosure requirements in paragraphs (a)
and (b) of Rule 17g-7 before today's amendments.\1312\ Specifically,
this paragraph would provide that if the credit rating is issued with
respect to an asset-backed security, as that term is defined in section
3(a)(79) of the Exchange Act, the NRSRO must include in the form a
description of: (1) The representations, warranties, and enforcement
mechanisms available to investors; and (2) how they differ from the
representations, warranties, and enforcement mechanisms in issuances of
similar securities, each time there was a rating action with respect to
an asset-backed security.\1313\ The Commission is adopting paragraph
(a)(1)(ii)(N) of Rule 17g-7 with modifications in response to
comments.\1314\
---------------------------------------------------------------------------

    \1312\ See paragraph (a)(1)(ii)(N) of Rule 17g-7, as proposed;
Nationally Recognized Statistical Rating Organizations, 76 FR at
33463, 33541; 17 CFR 240.17g-7.
    \1313\ See paragraph (a)(1)(ii)(N) of Rule 17g-7, as proposed.
    \1314\ See paragraph (a)(1)(ii)(N) of Rule 17g-7.
---------------------------------------------------------------------------

    Several commenters addressed paragraph (a)(1)(ii)(N) of Rule 17g-7,
as proposed.\1315\ Two NRSROs objected to the frequency of the required
disclosures under the proposed paragraph.\1316\ One NRSRO stated that,
while the disclosures are relevant at the time an initial credit rating
is published, the disclosures may not be relevant at later times
because the representations, warranties, and enforcement mechanisms
likely will not change in the course of a rated security's
existence.\1317\ Another NRSRO stated that requiring the disclosures
with each rating action ``unacceptably'' expands the disclosure
requirement in Rule 17g-7 before today's amendments, which required the
disclosures when a rating report is published, noting that some rating
actions ``would not necessarily be accompanied by the issuance of a
credit rating report.'' \1318\
---------------------------------------------------------------------------

    \1315\ See Mills Letter; DBRS II Letter; Kroll Letter; S&P
Letter.
    \1316\ See Kroll Letter; S&P Letter.
    \1317\ See Kroll Letter.
    \1318\ See S&P Letter.
---------------------------------------------------------------------------

    One NRSRO stated that the disclosures required by Rule 17g-7 before
today's amendments are ``enormously costly to the NRSROs'' and are ``of
very little value to investors'' according to feedback from
institutional clients and an analysis of the NRSRO's Internet Web site
usage data.\1319\ This NRSRO suggested that the rule be modified to
require disclosures that ``relate to the asset pool underlying the ABS
transaction'' and which ``the issuer has disclosed in the prospectus,
private placement memorandum or other offering document for that
transaction.'' \1320\ Similarly, one commenter stated that the required
disclosures should be limited to representations, warranties, and
enforcement mechanisms that ``appear in the prospectus or other
offering document for [the applicable] security'' because otherwise the
information

would not be material to an investor's ability to make an informed
decision.\1321\ Finally, an NRSRO suggested that the benchmarks for the
representations, warranties, and enforcement mechanisms should be
displayed in ``a dedicated area of the NRSROs' Web sites'' instead of
in the form.\1322\
---------------------------------------------------------------------------

    \1319\ See DBRS II Letter. See also DBRS PRA Letter; Kroll PRA
Letter; Moody's PRA Letter.
    \1320\ See DBRS II Letter. In support of its suggestion, the
NRSRO cited the Senate Committee on Banking, Housing, and Urban
Affairs, Committee Report No. 111-176, April 30, 2010 (``Senate
Banking Committee Report''), stating that the deficiencies in the
securitization process that the applicable provision of the Dodd-
Frank Act was designed to address ``included the fact that
`investors in asset-backed securities could not assess the risks of
the underlying assets, particularly when those assets were
resecuritized into complex instruments like collateralized debt
obligations.''' DBRS II Letter (quoting Senate Banking Committee
Report at 35-37).
    \1321\ See Mills Letter.
    \1322\ See DBRS II Letter.
---------------------------------------------------------------------------

    The Commission has modified the final amendments in response to
some of these comments and consistent with the Commission's objective
of making the information in the form disclosed with a credit rating
helpful to investors and other users of credit ratings in understanding
how the credit rating was determined. The first significant
modification is to narrow the disclosure requirement so that it
addresses the representations, warranties, and enforcement mechanisms
available to investors which were disclosed in the prospectus, private
placement memorandum, or other offering documents for the asset-backed
security and that relate to the asset pool underlying the asset-backed
security. The Commission agrees with commenters that this is highly
relevant information for investors. Therefore, focusing the disclosure
requirement in this way may make the required disclosure more relevant
and useful to investors and other users of credit ratings than the
disclosures required under Rule 17g-7 before today's amendments.
Specifically, paragraph (a)(1)(ii)(N) of Rule 17g-7 requires an NRSRO,
if the credit rating is assigned to an asset-backed security as defined
in section 3(a)(79) of the Exchange Act, to disclose in the form
information on: (1) The representations, warranties, and enforcement
mechanisms available to investors which were disclosed in the
prospectus, private placement memorandum, or other offering documents
for the asset-backed security and that relate to the asset pool
underlying the asset-backed security; and (2) how they differ from the
representations, warranties, and enforcement mechanisms in issuances of
similar securities.\1323\
---------------------------------------------------------------------------

    \1323\ See paragraph (a)(1)(ii)(N)(1) of Rule 17g-7. As noted
above, one NRSRO suggested that the benchmarks for the
representations, warranties, and enforcement mechanisms should be
displayed in ``a dedicated area of the NRSROs' Web sites'' instead
of in the form. See DBRS II Letter. In response, the Commission
notes that the final amendments require the NRSRO disclose in the
form information on the representations, warranties, and enforcement
mechanisms available to investors which were disclosed in the
prospectus, private placement memorandum, or other offering
documents for the asset-backed security and that relate to the asset
pool underlying the asset-backed security, and how they differ from
the representations, warranties, and enforcement mechanisms in
issuances of similar securities. The Commission does not intend the
rule to preclude including an Internet address where the benchmarks
can be found on the NRSRO's Web site, provided the disclosure in the
form meets the requirement in the rule. Moreover, to the extent the
benchmarks are lengthy, this approach could make the form easier to
use.
---------------------------------------------------------------------------

    The second significant modification is to reduce the frequency of
the disclosure. As commenters stated, the proposal--by incorporating
the requirements of Rule 17g-7 before today's amendments into the new
form disclosure requirements--would increase the number of times an
NRSRO would need to disclose the information about representations,
warranties, and enforcement mechanisms. The Commission believes that
the critical time for disclosing this information is when investors are
making investment decisions about a new issuance, which would have no
performance history. The Commission also believes the disclosure would
be useful if there is a material change in the representations,
warranties, or enforcement mechanisms after issuance because the change
could be relevant to investment decisions made in the secondary market
for the security. Finally, because Rule 17g-7 became effective on
September 26, 2011, the final amendments provide that the requirement
to make the disclosure after a material change is triggered only if the
rating action involves an asset-backed security that was initially
rated by the NRSRO on or after September 26, 2011. This will further
limit the burden associated with the rule. It also will address the
practical issue of an NRSRO having to make a disclosure involving
historical information that it may not have collected and retained
because it was not required to make the disclosure about the
representations, warranties, or enforcement mechanisms when it
initially rated the asset-backed security. For these reasons, the final
amendments require the information to be disclosed if the rating action
is a preliminary credit rating or an initial credit rating or if the
rating action is the first one taken after a material change in the
representations, warranties, or enforcement mechanisms and the rating
action involves an asset-backed security that was initially rated by
the NRSRO on or after September 26, 2011.\1324\
---------------------------------------------------------------------------

    \1324\ See paragraph (a)(1)(ii)(N)(2) of Rule 17g-7.
---------------------------------------------------------------------------

4. Paragraph (a)(1)(iii) of Rule 17g-7--Attestation
    Section 15E(q)(2)(F) of the Exchange Act provides that the
Commission's rules must require an NRSRO to include an attestation with
any credit rating it issues affirming that no part of the rating was
influenced by any other business activities, that the rating was based
solely on the merits of the instruments being rated, and that such
rating was an independent evaluation of the risks and merits of the
instrument.\1325\ While section 15E(q) relates to the disclosure of
information about the performance of credit ratings, the Commission
proposed that this attestation provision would more appropriately be
implemented with respect to all disclosures that must be made when a
specific rating action is published.\1326\ Accordingly, the Commission
proposed that the attestation be included in the form accompanying a
credit rating.\1327\
---------------------------------------------------------------------------

    \1325\ See 15 U.S.C. 78o-7(q)(2)(F).
    \1326\ See paragraph (a)(1)(iii) of Rule 17g-7, as proposed;
Nationally Recognized Statistical Rating Organizations, 76 FR 33464-
33465, 33541.
    \1327\ See 15 U.S.C. 78o-7(s); 15 U.S.C. 78o-7(q).
---------------------------------------------------------------------------

    As proposed, an NRSRO would be required to attach to the form with
each rating action a signed statement by a person within the NRSRO
stating that the person has responsibility for the credit rating and,
to the best knowledge of the person: (1) No part of the credit rating
was influenced by any other business activities; (2) the credit rating
was based solely upon the merits of the obligor, security, or money
market instrument being rated; and (3) the credit rating was an
independent evaluation of the risks and merits of the obligor,
security, or money market instrument.\1328\ Thus, the proposed rule
text mirrored the statutory text in terms of the representations that
would be included in the attestation.\1329\
---------------------------------------------------------------------------

    \1328\ See paragraphs (a)(1)(iii)(A) through (C) of Rule 17g-7,
as proposed; Nationally Recognized Statistical Rating Organizations,
76 FR at 33541.
    \1329\ See 15 U.S.C. 78o-7(q)(2)(F).
---------------------------------------------------------------------------

    The Commission received several comments that addressed the
proposal.\1330\ One commenter stated that the ``strong'' attestation
requirement is a ``valuable enhancement'' because it promotes increased
accountability and ``more meaningful disclosures.'' \1331\ One NRSRO
endorsed the attestation requirement substantially as proposed.\1332\
Two NRSROs were concerned that the attestation requirement would result
in an employee or officer being personally liable for a rating
action.\1333\ One

NRSRO stated that a ratings committee already attests to the rating's
independence by signing its internal rating forms and stated ``[t]hus,
such an attestation is already part and parcel of the ratings package
that is . . . available to Commission staff during their annual exams,
or at any other time.'' \1334\ One NRSRO suggested that rather than an
attestation, the NRSRO should be required to disclose the name of the
chair of the rating committee because doing so is an implicit
attestation that the credit rating was determined in accordance with
the NRSRO's rating procedures and methodologies.\1335\
---------------------------------------------------------------------------

    \1330\ See A.M. Best Letter; Better Markets Letter; DBRS Letter;
Moody's Letter; Morningstar Letter; S&P Letter.
    \1331\ See Better Markets Letter.
    \1332\ See DBRS Letter.
    \1333\ See A.M. Best Letter; Morningstar Letter. While the
Commission understands the commenters' concerns about potential
liability, the Commission believes the attestation requirement is an
important provision that will promote analytic independence. The
Commission does not believe it would be necessary or appropriate in
the public interest, or consistent with the protection of investors,
to refrain from implementing section 15E(q)(2)(F) of the Exchange
Act, which, as discussed above, requires rulemaking establishing an
attestation requirement. See 15 U.S.C. 78mm. Further, the Commission
notes that, consistent with all other provisions of the Exchange Act
and rules that impose an obligation on an entity, there is a
potential for secondary liability for an individual that aids and
abets, or causes, a violation.
    \1334\ See A.M. Best Letter.
    \1335\ See S&P Letter.
---------------------------------------------------------------------------

    The Commission is adopting paragraph (a)(1)(iii) of Rule 17g-7 with
one modification in response to comments. Specifically, one NRSRO
suggested that the wording of the proposed attestation--because it used
the phrase ``risks and merits''--could inadvertently lead users of
credit ratings to believe that credit ratings address other types of
risk, such as liquidity risk, market value risk, or price
volatility.\1336\ The commenter suggested the phrase ``credit risk'' be
used instead.
---------------------------------------------------------------------------

    \1336\ See Moody's Letter.
---------------------------------------------------------------------------

    The Commission agrees. Credit ratings are assessments of
creditworthiness.\1337\ Consequently, the attestation should reference
credit risk so as not to be misleading. In addition, the NRSRO should
have the flexibility to designate the individual who will execute the
certification, as more than one individual within the NRSRO may have
responsibility for the rating action.\1338\ For these reasons, the
final amendments provide that the NRSRO must attach to the form a
signed statement by a person within the NRSRO stating that the person
has responsibility for the rating action and, to the best knowledge of
the person: (1) No part of the credit rating was influenced by any
other business activities; (2) the credit rating was based solely upon
the merits of the obligor, security, or money market instrument being
rated; and (3) the credit rating was an independent evaluation of the
credit risk of the obligor, security, or money market instrument.\1339\
---------------------------------------------------------------------------

    \1337\ See 15 U.S.C. 78o-7(c)(60) (defining a credit rating to
mean ``an assessment of the creditworthiness of an obligor as an
entity or with respect to specific securities or money market
instruments'').
    \1338\ For example, if the rating action was determined through
a rating committee, each of the individuals on the committee could
be designated by the NRSRO as having responsibility for the rating
action.
    \1339\ See paragraph (a)(1)(iii) of Rule 17g-7 (emphasis added
to highlight the modification).
---------------------------------------------------------------------------

    The Commission does not believe the alternatives suggested by
commenters--relying on internal records or disclosure of the identity
of the rating committee chair--would adequately implement the statute.
As discussed above, section 15E(q)(2)(F) of the Exchange Act provides
that the Commission's rules must require an NRSRO to include an
attestation with any credit rating it issues affirming that no part of
the rating was influenced by any other business activities, that the
rating was based solely on the merits of the instruments being rated,
and that such rating was an independent evaluation of the risks and
merits of the instrument.\1340\ Consequently, the attestation must be
included with the credit rating the NRSRO issues rather than being
documented in an internal record. Further, the Commission believes that
having an individual attest to the information disclosed in the form
will promote analytical independence. In particular, the individual
executing the attestation will want to ensure that it contains no
untrue or inaccurate statements. Consequently, the individual will have
an incentive to take steps to verify that the credit rating was not
influenced by any other business activities, was based solely on the
merits of the instruments being rated, and was an independent
evaluation of the risks and merits of the instrument. Moreover, if the
individual does not believe such an attestation can be truthfully made,
the individual will have a reason to refuse to make the attestation.
This could prevent the NRSRO from taking a rating action that, for
example, was inappropriately influenced by conflicts of interest
arising from business considerations.
---------------------------------------------------------------------------

    \1340\ See 15 U.S.C. 78o-7(q)(2)(F).
---------------------------------------------------------------------------

    The Commission is not persuaded that disclosing the name of the
rating chair would provide an implicit attestation that that no part of
the credit rating was influenced by any other business activities, that
the rating was based solely on the merits of the instruments being
rated, and that such rating was an independent evaluation of the risks
and merits of the instrument. Moreover, as discussed above, having an
individual execute the attestation will promote analytical
independence. Accordingly, the final amendments (as was proposed)
require that the form include an attestation executed by an individual
responsible for the rating action.
    Finally, one NRSRO stated that every NRSRO should be able to
determine who within the NRSRO should be responsible for making the
proposed attestation.\1341\ The Commission agrees with the commenter
that the NRSRO has flexibility to select the appropriate person within
the NRSRO to execute the attestation, provided the person has
responsibility for the credit rating. For example, the analyst or
another member of the rating committee could execute the attestation.
---------------------------------------------------------------------------

    \1341\ See DBRS Letter.
---------------------------------------------------------------------------

5. Paragraph (a)(2) of Rule 17g-7--Third-Party Due Diligence
Certification
    As discussed in more detail below in section II.H. of this release,
section 15E(s)(4)(B) of the Exchange Act requires a third party
providing due diligence services to an NRSRO, issuer, or underwriter
with respect to an Exchange Act-ABS to provide a written certification
to any NRSRO that produces a credit rating to which the due diligence
services relate.\1342\ Section 15E(s)(4)(D) of the Exchange Act
provides that the Commission shall adopt a rule requiring an NRSRO that
receives a certification from a provider of third-party due diligence
services to disclose the certification to the public in a manner that
allows the public to determine the adequacy and level of the due
diligence services provided by the third party.\1343\ The Commission
proposed to implement section 15E(s)(4)(D) through paragraph (a)(2) of
Rule 17g-7, as proposed.\1344\ As proposed, paragraph (a)(2) identified
the second item of information an NRSRO would need to publish with a
credit rating when taking a rating action: Any written certification
related to the credit rating received from a third-party provider of
due diligence services pursuant to section 15E(s)(4)(B) of the Exchange
Act.\1345\ The proposed approach was intended to provide disclosure of
the certification to the public in a manner that allows the

public to determine the adequacy and level of the due diligence
services provided.\1346\
---------------------------------------------------------------------------

    \1342\ See 15 U.S.C. 78o-7(s)(4)(B). As stated above in section
I.B.1. of this release, the term Exchange Act-ABS as used throughout
this release refers to an asset-backed security as defined in
section 3(a)(79) of the Exchange Act. 15 U.S.C. 78c(a)(79).
    \1343\ See 15 U.S.C. 78o-7(s)(4)(D).
    \1344\ See paragraph (a)(2) of Rule 17g-7, as proposed;
Nationally Recognized Statistical Rating Organizations, 76 FR at
33465, 33541.
    \1345\ See paragraph (a)(2) of Rule 17g-7, as proposed.
    \1346\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33465.
---------------------------------------------------------------------------

    The Commission received a number of comment letters regarding
proposed paragraph (a)(2) of Rule 17g-7.\1347\ An NRSRO stated that
requiring the NRSRO to deliver ``information and commentary generated
by other market participants'' may lead to confusion about ``the
appropriate role of NRSROs,'' \1348\ and another NRSRO stated that the
proposed requirements may cause NRSROs to ``include in their rating
disclosure form information that they believe is not from a reliable
source and that they did not use in their rating analysis.'' \1349\ The
second NRSRO also stated that ``NRSROs do not typically engage third-
party due diligence providers'' and ``obtaining and disclosing this
certification should be the obligation of the issuer.''\1350\ On the
other hand, two commenters expressed their support for requiring NRSROs
to disclose information related to third-party due diligence
reviews.\1351\ Another commenter stated that only the NRSRO is in a
position to know which reports it used in issuing a credit
rating.\1352\ A fourth commenter stated that the due diligence
providers have a ``limited role'' in the transaction and that ``the
onus for making the certification publicly available should rest solely
with the NRSRO.'' \1353\
---------------------------------------------------------------------------

    \1347\ See ASF Letter; CII Letter; Clayton Letter; Levin Letter;
Moody's Letter; Morningstar Letter; S&P Letter.
    \1348\ See Moody's Letter.
    \1349\ See S&P Letter.
    \1350\ Id.
    \1351\ See CII Letter; Levin Letter.
    \1352\ See ASF Letter.
    \1353\ See Clayton Letter.
---------------------------------------------------------------------------

    The Commission is adopting paragraph (a)(2) of Rule 17g-7 with
modifications designed to address comments made in the context of
proposed Rule 17g-10.\1354\ Specifically, the final amendments are
modified to explicitly reference Form ABS Due Diligence-15E.\1355\ In
addition, the final amendments are modified to correspond to
modifications to Rule 17g-10 (discussed below) to provide that an NRSRO
must publish with a rating action any executed Form ABS Due Diligence-
15E containing information about the security or money market
instrument subject to the rating action that is received by the NRSRO
or obtained by the NRSRO through an Internet Web site maintained by the
issuer, sponsor, or underwriter of the security or money market
instrument pursuant to paragraph (a)(3) of Rule 17g-5. As discussed
below in section II.H.2.c. of this release, the Commission is modifying
Rule 17g-10 from the proposal to provide that a person employed to
provide third-party due diligence services can meet its statutory
obligation to provide the written certification relating to those
services to any NRSRO that produces a credit rating to which such
services relate by promptly responding to a written request from an
NRSRO for the executed Form ABS Due Diligence-15E and promptly
delivering the Form ABS Due Diligence-15E to the issuer, sponsor, or
underwriter of the security or money market instrument that maintains
the relevant Internet Web site pursuant to Rule 17g-5.\1356\ Further,
the Commission is amending Rule 17g-5 to provide for the issuer,
sponsor, or underwriter to represent that it will promptly post the
Form ABS Due Diligence-15E to the Internet Web site it maintains under
paragraph (a)(3) of Rule 17g-5.\1357\
---------------------------------------------------------------------------

    \1354\ See paragraph (a)(2) of Rule 17g-7. See also section
II.H.2. of this release (discussing the ``safe harbor'' provision
that incorporates the use of the Internet Web site maintained by the
issuer, sponsor, or underwriter of the security or money market
instrument pursuant to paragraph (a)(3) of Rule 17g-5).
    \1355\ See paragraph (a)(2) of Rule 17g-7. As proposed, the
paragraph referred to ``any certification.''
    \1356\ See paragraph (c) of Rule 17g-10.
    \1357\ See paragraph (a)(3)(iii)(E) of Rule 17g-5.
---------------------------------------------------------------------------

    As discussed above, two NRSROs raised concerns about requiring the
NRSRO to disclose the due diligence certifications.\1358\ The
Commission notes that section 15E(s)(4)(D) of the Exchange Act provides
that the Commission shall adopt a rule requiring an NRSRO that receives
a certification from a provider of third-party due diligence services
to disclose the certification to the public in a manner that allows the
public to determine the adequacy and level of the due diligence
services provided by the third party.\1359\ Moreover, the Commission
believes that the information contained in Form ABS Due Diligence-15E
will be useful to investors and to other users of the NRSRO's credit
ratings. Therefore, disclosing the information in the form that will
accompany the credit rating will associate the information with the
credit rating. This will make it easier for investors and other users
of credit ratings to locate the information and it will promote their
use of the information in evaluating the credit rating and asset-backed
security that is the subject of the rating action. For these reasons,
the Commission does not believe it would be necessary or appropriate in
the public interest, or consistent with the protection of investors to
exempt NRSROs from the requirement to include the due diligence
certifications with their forms.\1360\
---------------------------------------------------------------------------

    \1358\ See Moody's Letter; S&P Letter.
    \1359\ 15 U.S.C. 15E(s)(4)(D).
    \1360\ See 15 U.S.C. 78mm (providing the Commission with
exemptive authority).
---------------------------------------------------------------------------

6. Economic Analysis
    This section builds on the economic analysis in section I.B. of
this release by presenting a focused analysis of the potential economic
effects that may derive from the specific amendments relating to the
forms and certifications that an NRSRO must publish when taking certain
rating actions.\1361\ The baseline that existed before today's
amendments was one in which NRSROs were not required by Commission
rules to publish specified information when taking a rating action.
However, today's amendments contain requirements for the disclosure of
certain types of information with the publication of certain rating
actions that an applicant or NRSRO was required, before these
amendments, to report generally with respect to all of its credit
ratings on Form NRSRO. For example, before today's amendments, the
instructions for Exhibit 2 to Form NRSRO required the disclosure of a
general description of the procedures and methodologies used by the
NRSRO to determine credit ratings. This description must address, among
other items, the quantitative and qualitative models and metrics and
the public and non-public sources of information, including data and
analysis provided by third-party vendors, used to determine credit
ratings. This information was not, however, required to be disclosed at
the level of individual rating actions, so users of credit ratings
interested in a particular rating action may not have known, for
example, the ``version of the procedure or methodology used'' or the
``types of data . . . that were relied on'' to determine the credit
rating in question, as required to be disclosed with the publication of
certain credit rating actions under the amendments.
---------------------------------------------------------------------------

    \1361\ The economic analysis in section I.B. of this release
discusses the primary economic impacts that may derive from the
amendments and new rules being adopted today. The economic effects
related to the certification of third-party due diligence providers
are discussed below in more detail in section II.H.4. of this
release.
---------------------------------------------------------------------------

    Before today's amendments, some NRSROs provided, but were not
required by the Commission to provide, additional disclosures on their
public Web sites with respect to all of their credit ratings, such as a
description of

the intended informational content of their credit ratings and a
general discussion of the uncertainty and risk factors to which their
credit ratings are subject. Also, in some public press releases and
reports to subscribers issued in connection with rating actions, NRSROs
have discussed certain risk factors specific to a given rating action
or provided information or Web addresses directing interested persons
to the descriptions of methodologies that are relevant for that
particular rating action, though such disclosures were not required.
    Relative to this baseline, the amendments being adopted today may
benefit users of credit ratings because the forms may provide new
information specific to a given rating action or may clearly direct
users of credit ratings to information that may already have been
available. Specifically, as discussed above, the information provided
in the forms will include, among other things: (1) Information about
the content of the credit rating; (2) the main assumptions and
principles and the version of the methodology used to determine the
credit rating; (3) a description of the types of data that were relied
on and whether due diligence services and servicer or remittance
reports were used for the purpose of determining the credit rating; (4)
information relating to potential conflicts of interest; and (5)
information about the potential limitations, uncertainty, sensitivity
to assumptions, and potential volatility of the credit rating.\1362\
---------------------------------------------------------------------------

    \1362\ See paragraph (a)(1)(ii) of Rule 17g-7 (prescribing the
information that must be disclosed in the form).
---------------------------------------------------------------------------

    The disclosure of this information and the other required content
of the forms may benefit users of credit ratings by allowing them to
better understand how credit ratings are produced and the information
content of credit ratings, including how these factors vary across
NRSROs. Also, the information disclosed in the form--particularly
information about the potential limitations, uncertainty and potential
volatility of the credit rating, the sensitivity of the credit rating
to assumptions made by the NRSRO, and information regarding the due
diligence services used in rating Exchange Act-ABS--may discourage
undue reliance on credit ratings by investors and other users of credit
ratings in making investment and other credit-based decisions. The
disclosures, and particularly the attestation requirement, also may
encourage enhanced integrity in the production of credit ratings.
    If the forms increase the ability of users of credit ratings to
compare the assumptions, data, and due diligence relied on by different
NRSROs, the adopted rules and amendments may have beneficial
competitive effects by enhancing the reputation of NRSROs that users of
credit ratings view as being more thorough or as providing more
informative credit ratings on the basis of these reviews. Also, to the
extent that the forms allow investors to more accurately interpret the
information conveyed by credit ratings, they may result in more
efficient investment decisions and higher overall market
efficiency.\1363\ However, the benefits of the forms may be limited to
the extent that standardized language and a high level of narrative in
the forms limit the amount of useful information that can readily be
acquired from the disclosures or the extent to which the information
may be easily compared across NRSROs.
---------------------------------------------------------------------------

    \1363\ See section I.B.3. of this release (providing a broader
discussion of the potential impacts of the amendments and new rules
on efficiency, competition, and capital formation).
---------------------------------------------------------------------------

    The amendments will result in compliance costs to NRSROs. The
Commission believes that NRSROs will be able to develop disclosures
that are standardized to some degree for particular types of credit
ratings and, when they publish individual rating actions, to tailor
those disclosures appropriately to each such rating action. NRSROs will
therefore bear one-time costs to develop a template for the form and to
produce any disclosures that can be standardized across and within
various credit rating classes, asset classes, and types of rating
actions. As part of this process, NRSROs will likely identify the
required disclosure items that, based on their individual credit rating
methodologies and procedures, may share common elements across these
various subgroups. For example, some or all of the disclosure required
by paragraph (a)(1)(ii)(C) of Rule 17g-7 (with respect to the main
assumptions and principles used in constructing the procedures and
methodologies used to determine the credit rating) can likely be
standardized across credit ratings generated using the same procedures
and methodologies. NRSROs may then have to draft, review, and finalize
any such common components of these disclosures.
    NRSROs will bear additional one-time costs to establish systems,
protocols, and procedures for generating and publishing the form,
attestation, and certifications when required. These systems,
protocols, and procedures may include processes by which the latest
versions of any standardized components of the disclosures will be
stored, retrieved, and input into the form when required. NRSROs may
also have to consider how the other newly required information will be
generated, including how analyses constructed in the process of
applying their credit rating procedures and methodologies can be
translated into some of the required disclosure and whether additional
analyses may be required, as well as at what stage and by which staff
the generation of this information will be undertaken. NRSROs also will
need to establish systems, protocols, and procedures to ensure that the
form is populated with the required information (including that any
certifications received from a provider of third-party due diligence
services are attached to the form) and that the form, attestation, and
certifications are published with the associated credit rating.
    The amendments also will result in ongoing costs to NRSROs. At the
time of any rating action that triggers the requirement, an NRSRO must
produce disclosures for the particular rating action and compile these
into the form. This process may include retrieving any applicable
standardized components of the disclosure, revising this content if
necessary to tailor it to the particular rating action, and generating
and including any additional tailored content that is specific to the
particular rating action. Some of the tailored components of the
disclosure may be relatively straightforward because they are primarily
factual in nature, such as the assigned credit rating, the identity of
the obligor, security, or instrument, the version of the procedure or
methodology used to determine the credit rating, and the required
information relating to conflicts of interest. Other tailored
components of the disclosure may require more consideration and the
application of analysis that was produced in the course of producing
the credit rating or the completion of additional analysis. Examples of
required disclosure items that may require more consideration or
analysis include the explanation or measure of the potential volatility
of the credit rating and the information on the sensitivity of the
credit rating to assumptions made by the NRSRO required by paragraphs
(a)(1)(ii)(K) and (a)(1)(ii)(M) of Rule 17g-7.
    NRSROs also will bear ongoing costs to review the form, include any
relevant hyperlinks, attach applicable attestations and certifications
to the form, and to publish the form as required. Also, NRSROs will
periodically need to update the

standardized components of the disclosures (for example, when
methodologies are revised). The Commission's estimates of the total
costs of these compliance efforts--which are based on analyses for
purposes of the PRA--are provided below.
    The Commission received comments identifying costs and burdens,
including significant administrative, recordkeeping, technological, and
compliance costs, including costs associated with time spent by rating
analysts and other NRSRO employees in complying with the proposed
amendments.\1364\ Commenters also expressed concerns about the
potential for the publication of confidential or proprietary
information.\1365\ As stated above, the Commission is sensitive to the
costs resulting from its rules. In this regard, the Commission has
modified the amendments from the proposal in a number of ways to
mitigate burdens. The Commission narrowed the scope of rating actions
that will trigger the disclosure requirement and provided an exemption
for certain rating actions involving foreign obligors or foreign-issued
securities or money market instruments. The Commission also
significantly reduced the reporting requirements relating to
representations, warranties, and enforcement mechanisms. All of these
modifications were made in response to concerns about burdens raised by
commenters. The Commission also has clarified the type of information
that is required to be included in the form, which may address concerns
about burdens as well as concerns about the disclosure of confidential
information raised by commenters.
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    \1364\ See Kroll Letter; Morningstar Letter; S&P Letter.
    \1365\ See Barnard Letter; Siff Letter.
---------------------------------------------------------------------------

    One NRSRO commented that the Commission, in the proposing release,
had underestimated the burden associated with the form because the
proposed disclosure items would not be able to be standardized across
rating actions or asset class types and would require an individual
analysis of the rated transaction.\1366\ While the Commission
encourages NRSROs to make the disclosures as specific to the particular
rating action and as relevant to investors as possible, it also
believes, as discussed above, that NRSROs will be able to develop
disclosures that are standardized to some degree for particular types
of credit ratings and, when they publish individual rating actions, to
tailor those disclosures appropriately to each such rating action.
---------------------------------------------------------------------------

    \1366\ See Morningstar Letter.
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    Compliance costs should vary across NRSROs due to differences in
the number of sectors (such as asset classes, industries, and
geographies) rated--which may affect the number of standardized
disclosures that will be created--and the number of rating actions each
year subject to the requirements, as well as the frequency with which
the NRSROs change their approaches to producing credit ratings or the
sectors for which they produce credit ratings, and any differences in
the complexity of rating procedures and methodologies that may impact
the complexity of the forms. However, based on analysis for purposes of
the PRA, the Commission estimates that the amendments to paragraph (a)
of Rule 17g-7 will result in total industry-wide one-time costs to
NRSROs of approximately $15,613,000 and total industry-wide annual
costs to NRSROs of approximately $196,783,000.\1367\
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    \1367\ See section V.H. of this release (discussing
implementation and annual compliance considerations). The one-time
and annual costs are determined by monetizing internal hour burdens
and adding external costs identified in the PRA analysis in section
IV.D.6. of this release.
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    Given that some of the compliance costs associated with creating
and revising standardized disclosures may not scale proportionately
with size, and that costs should also vary across NRSROs for the other
reasons listed above, these amendments may negatively affect
competition through the disproportionate burden on small NRSROs and,
for example, NRSROs with procedures and methodologies that would result
in more complex disclosure.\1368\ The amendments also may result in
other costs. The Commission received comments from NRSROs expressing
concerns about potential delays in the issuance of ratings.\1369\ The
Commission is sensitive to concerns that, in some instances, the need
to draft and review these additional disclosures may delay NRSROs in
publishing preliminary and initial credit ratings, may result in NRSROs
taking fewer rating actions, may result in NRSROs taking more time to
take rating actions in response to changing conditions, and may
particularly extend the amount of time required for NRSROs to take
steps which would require the NRSRO to revise the standardized language
prepared for the disclosures for certain asset classes or other
sectors, such as making appropriate changes to credit rating
methodologies. Commenters also predicted a decline in the transparency
of credit ratings over time due to the increased standardization of
disclosure, and raised concerns that very extensive disclosures could
overwhelm users of credit ratings or obfuscate key points.\1370\ As
mentioned above, though section 15E(s)(3) identifies specific
qualitative and quantitative information that must be included in the
form, the Commission has modified the amendments from the proposals in
a number of ways to mitigate burdens, which may reduce the likelihood
or extent of such impacts. However, any such effects may reduce the
information readily available to users of credit ratings and thus
reduce the efficiency of their investment decisions and potentially the
efficiency of the overall market.\1371\
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    \1368\ See section IV.D.6. of this release for the Commission's
estimates of the different components of the compliance burden and a
further discussion of how they may vary across NRSROs. See also
section I.B.3. of this release (providing a broader discussion of
the potential impacts of the amendments and new rules on efficiency,
competition, and capital formation).
    \1369\ See S&P Letter; DBRS Letter.
    \1370\ See A.M. Best Letter; DBRS Letter; Kroll Letter;
Morningstar Letter.
    \1371\ See section I.B.3. of this release (providing a broader
discussion of the potential impacts of the amendments and new rules
on efficiency, competition, and capital formation).
---------------------------------------------------------------------------

    The Commission considered the costs and benefits of reasonable
alternatives to the amendments. Section 15E(s)(3) of the Exchange Act
identifies a significant amount of information that the Commission's
rule must require to be disclosed in the form. Because the statute is
specific about the type of information to be included in the form, and
the information thus detailed by the statute is quite comprehensive,
the rule text prescribing the required contents of the form largely
mirrors the statutory text. However, the Commission has applied some
discretion with respect to the format of the form and which rating
actions must be accompanied by the forms and certifications. One
alternative to the approach in the amendments would be to prescribe a
specific form in which NRSROs would input the information required by
the amendments. Requiring NRSROs to use a standardized form could
assist users of the form in locating and analyzing items of information
disclosed. On the other hand, a standardized form with line items and
fields to input information could cause NRSROs to provide disclosures
that are less thorough or tailored to their individual approaches,
which could reduce transparency. The Commission believes the approach
it has taken in requiring that the content of the forms be disclosed in
numbered items that are presented in a consistent

order across NRSROs, without, for example, requiring that a prescribed
form be filled out, strikes an appropriate balance in implementing
section 15E(s)(2) of the Exchange Act between the comparability of the
information provided and the flexibility to allow for meaningful
disclosure.
    Other alternatives would be, as the Commission proposed, to require
the forms to be disclosed even with affirmations or withdrawals that
are not based on the NRSRO applying its procedures and methodologies
for determining credit ratings or, as the Commission proposed, to
require broader disclosures of representations, warranties, and
enforcement mechanisms. However, the additional information that these
alternatives would make available to users of credit ratings would
likely not be significant, while, as raised by several
commenters,\1372\ the burden to create these additional disclosures
could be substantial.
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    \1372\ As discussed above, commenters raised concerns regarding
the rating actions that would trigger the disclosure requirement.
See A.M. Best Letter; ASF Letter; DBRS Letter; Deloitte Letter; FSR
Letter; Moody's Letter; S&P Letter. Commenters also raised concerns
regarding the disclosures of representations, warranties and
enforcement mechanisms. See DBRS II Letter. See also DBRS PRA
Letter; Kroll PRA Letter; Moody's PRA Letter.
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H. Third-Party Due Diligence for Asset-Backed Securities

    Section 932(a)(8) of the Dodd-Frank Act amended section 15E of the
Exchange Act to add paragraph (s)(4), ``Due diligence services for
asset-backed securities,'' which contains four provisions regarding due
diligence services relating to an Exchange Act-ABS.\1373\ Specifically,
section 15E(s)(4)(A) requires the issuer or underwriter of any asset-
backed security to make publicly available the findings and conclusions
of any third-party due diligence report obtained by the issuer or
underwriter.\1374\ Section 15E(s)(4)(B) requires that in any case in
which third-party due diligence services are employed by an NRSRO,
issuer, or underwriter, the person providing the due diligence services
shall provide written certification in a format provided in section
15E(s)(4)(C) to any NRSRO that produces a rating to which such services
relate.\1375\ Section 15E(s)(4)(C) requires the Commission to establish
the appropriate format and content for the written certifications
required under section 15E(s)(4)(B) to ensure that providers of due
diligence services have conducted a thorough review of data,
documentation, and other relevant information necessary for an NRSRO to
provide an accurate credit rating.\1376\ Finally, as discussed above in
section II.G.5. of this release, section 15E(s)(4)(D) of the Exchange
Act directs the Commission to adopt rules requiring an NRSRO, at the
time at which it produces a credit rating, to disclose the
certification required by section 15E(s)(4)(B) to the public in a
manner that allows the public to determine the adequacy and level of
due diligence services provided by a third party.\1377\
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    \1373\ See Public Law 111-203, 932(a)(8); 15 U.S.C. 78o-7(s)(4).
As stated above in section I.B.1. of this release, the term Exchange
Act-ABS as used throughout this release refers to an asset-backed
security as defined in section 3(a)(79) of the Exchange Act. 15
U.S.C. 78c(a)(79).
    \1374\ See 15 U.S.C. 78o-7(s)(4)(A).
    \1375\ See 15 U.S.C. 78o-7(s)(4)(B).
    \1376\ See 15 U.S.C. 78o-7(s)(4)(C).
    \1377\ See 15 U.S.C. 78o-7(s)(4)(D).
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    The Commission proposed amendments to Rule 314 of Regulation S-T
and Form ABS-15G, and proposed Rule 15Ga-2 to implement section
15E(s)(4)(A) of the Exchange Act.\1378\ The Commission proposed
amendments to Rule 17g-7 and proposed Rule 17g-10 and related Form ABS
Due Diligence-15E to implement sections 15E(s)(4)(B), (C), and (D) of
the Exchange Act.\1379\ The proposals, comments received on the
proposals, and final rules are discussed below.
---------------------------------------------------------------------------

    \1378\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33466-33471.
    \1379\ See id. at 33465, 33471-33476.
---------------------------------------------------------------------------

1. New Rule 15Ga-2 and Amendments to Form ABS-15G
    The Commission re-proposed rules to implement section 15E(s)(4)(A)
of the Exchange Act, which requires that an issuer or underwriter of
any Exchange Act-ABS make publicly available the findings and
conclusions of any third-party due diligence report obtained by the
issuer or underwriter.\1380\ In October 2010, the Commission proposed
to implement section 15E(s)(4)(A) of the Exchange Act as part of a set
of rules proposed to implement section 945 of the Dodd-Frank Act.\1381\
After reviewing the comments to that proposal regarding issuer review
of assets in offerings of asset-backed securities,\1382\ the Commission
was persuaded that section 15E(s)(4)(A) of the Exchange Act, when
considered in the context of sections 15E(s)(4)(B), (C), and (D),\1383\
should be interpreted more narrowly than in the proposal.\1384\
Therefore, the Commission re-proposed Rule 15Ga-2 to require an issuer
or underwriter of any Exchange Act-ABS that is to be rated by an NRSRO
to furnish a Form ABS-15G \1385\ containing the findings and
conclusions of any third-party due diligence report obtained by the
issuer or underwriter.\1386\ The Commission also proposed that if Form
ABS-15G was furnished by the issuer, it must be signed by the senior
officer of the depositor in charge of securitization, and if Form ABS-
15G was furnished by the underwriter, then it must be signed by a duly
authorized officer of the underwriter.\1387\
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    \1380\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33466-33471.
    \1381\ See Issuer Review of Assets in Offerings of Asset-Backed
Securities, Securities Act Release No. 9150 (Oct. 13, 2010), 75 FR
64182 (Oct. 19, 2010).
    \1382\ See, e.g., comment letters from the American Bar
Association (stating that ``[section] 15E(s)(4)(A) was not intended
to be applied to all manner of third-party due diligence reports
that may be obtained by an issuer or underwriter, but instead was
intended to be applied more narrowly, to any third-party due
diligence report prepared for an ABS issuer or underwriter
specifically for the purpose of sharing it with a given NRSRO'') and
the National Association of Bond Lawyers. The comment letters are
available at http://www.sec.gov/comments/s7-26-10/s72610.shtml.
    \1383\ See 15 U.S.C 78o-7(s)(4)(A) through (D), which relate to
due diligence performed by third parties with respect to Exchange
Act-ABS.
    \1384\ See Issuer Review of Assets in Offerings of Asset-Backed
Securities, Securities Act Release No. 9176 (Jan. 20, 2011), 76 FR
4231 (Jan. 25, 2011).
    \1385\ As discussed below, Form ABS-15G is being amended today
to incorporate Rule 15Ga-2. Form ABS-15G was originally adopted for
the purpose of providing disclosures required by the new disclosure
requirements of Rule 15Ga-1 (17 CFR 240.15Ga-1). See Disclosure for
Asset-Backed Securities Required by Section 943 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, 76 FR at 4499-4501.
    \1386\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33466-33470, 33538. The Commission stated in
the proposing release that the term issuer would mean the depositor
or sponsor that participates in the issuance of Exchange Act-ABS,
which was consistent with proposed Rule 17g-10, but did not include
a definition of issuer within proposed Rule 15Ga-2. The Commission
proposed to define the term third-party due diligence report to mean
any report containing findings and conclusions relating to due
diligence services as defined in paragraph (c)(1) of Rule 17g-10, as
proposed. See id. at 33467, n.532.
    \1387\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33466-33470.
---------------------------------------------------------------------------

    In addition, the Commission proposed that an issuer or underwriter
would not need to furnish Form ABS-15G if it obtains a representation
from an NRSRO engaged to produce a credit rating for the Exchange Act-
ABS that the NRSRO will publicly disclose the findings and conclusions
of the third-party due diligence report obtained by the issuer or
underwriter.\1388\ As proposed, the NRSRO's representation must state
that it will make the disclosure with the publication of the credit
rating five business days prior to the first sale in the offering in
the form generated pursuant to proposed paragraph (a)(1) of Rule 17g-
7.\1389\ In this context, the Commission stated in the proposing
release that the term publicly disclose

means to make the findings and conclusions readily available to any
users of credit ratings.\1390\ Consequently, an NRSRO that agreed to
make the findings and conclusions available only to its subscribers or
prospective investors in the Exchange Act-ABS would not satisfy this
proposed requirement. The Commission recognized, however, that there
may be instances where, notwithstanding an issuer's or underwriter's
reasonable reliance on a representation by an NRSRO, the NRSRO fails to
make the required information publicly available in the form pursuant
to proposed paragraph (a)(1) of Rule 17g-7 five business days prior to
the first sale in the offering.\1391\ Therefore, the Commission
proposed to require that if the NRSRO failed to make the information
publicly available, an issuer or underwriter must furnish, two business
days prior to the first sale in the offering, Form ABS-15G with the
information required by proposed Rule 15Ga-2.\1392\
---------------------------------------------------------------------------

    \1388\ See id. at 33466-33470, 33538.
    \1389\ See id.
    \1390\ See id. at 33468, n.534.
    \1391\ See id. at 33468. Under the proposal, an NRSRO's failure
to disclose the certification would be a violation of the
requirement in proposed paragraph (a)(2) of Rule 17g-7. See id. at
33540-33541.
    \1392\ See id. at 33468, 33538.
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    The Commission did not propose to require that disclosure about a
third-party due diligence report for registered Exchange Act-ABS
transactions required by proposed Rule 15Ga-2 be provided in the
prospectus because such information only pertains to the findings and
conclusions of a third-party due diligence report relevant to the
determination of a credit rating.\1393\ Under Rule 193,\1394\ on the
other hand, if an issuer were to use the third-party due diligence
report in connection with its review of disclosure in the prospectus
about the pool assets as required under Rule 193, it would be required
to include the findings and conclusions in the prospectus \1395\ and,
if the issuer attributed the findings and conclusions to the third
party, that third party's consent to be named as an expert in the
registration statement would need to be obtained.\1396\
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    \1393\ See id. at 33469.
    \1394\ See 17 CFR 230.193. Rule 193 implemented section 945 of
the Dodd-Frank Act by requiring that any issuer registering the
offer and sale of an Exchange Act-ABS perform a review of the assets
underlying the asset-backed security.
    \1395\ See 17 CFR 229.1111.
    \1396\ See Issuer Review of Assets in Offerings of Asset-Backed
Securities, 76 FR 4238.
---------------------------------------------------------------------------

    The Commission also proposed that Rule 15Ga-2 would apply to
issuers and underwriters of both registered and unregistered offerings
of Exchange Act-ABS.\1397\ Accordingly, if a municipal entity that
sponsors or issues Exchange Act-ABS (``municipal Exchange Act-ABS'') or
an underwriter of municipal Exchange Act-ABS obtained a third-party due
diligence report, as defined by the proposed rule, and the municipal
Exchange Act-ABS is to be rated by an NRSRO, the proposal noted that
Rule 15Ga-2 would apply.\1398\ The Commission proposed to permit
municipal securitizers of Exchange Act-ABS, or underwriters in the
offering, to provide the information required by Form ABS-15G on the
Electronic Municipal Market Access system (``EMMA'').\1399\
---------------------------------------------------------------------------

    \1397\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33469.
    \1398\ See id. at 33469.
    \1399\ See id. at 33469, 33538.
---------------------------------------------------------------------------

    Commenters generally supported the overarching principle of
proposed Rule 15Ga-2 but were mixed about the specifics of how the rule
should be implemented.\1400\ As a result, the Commission is adopting
Rule 15Ga-2 and revised Form ABS-15G with some revisions to address
comments and to make clarifying changes.\1401\ Commenters generally
agreed that Rule 15Ga-2 should only apply to an Exchange Act-ABS that
is to be rated by an NRSRO.\1402\ The Commission continues to believe
for the reasons stated in the proposing release that section
15E(s)(4)(A) of the Exchange Act should be interpreted to relate only
to Exchange Act-ABS that are rated.\1403\ Therefore, the Commission is
adopting, generally as proposed, the requirement that an issuer or
underwriter of any Exchange Act-ABS that is to be rated by an NRSRO
must furnish a Form ABS-15G containing the findings and conclusions of
any third-party due diligence report obtained by the issuer or
underwriter, with modifications to provide limited exclusions for
issuers and underwriters of Exchange Act-ABS in certain offshore
transactions and municipal issuer offerings, as discussed further
below.\1404\ Rule 15Ga-2 applies to Exchange Act-ABS transactions that
are rated by an NRSRO regardless of who pays for the credit rating, and
regardless of whether the Exchange Act-ABS is sold in a registered or
unregistered transaction, as described in more detail below. Several
commenters suggested that the issuer's or underwriter's requirement
under Rule 15Ga-2 should apply only to third-party due diligence
reports that were provided to an NRSRO.\1405\ The Commission is not,
however, limiting the applicability of Rule 15Ga-2 as these commenters
suggest. The Commission does not believe it is appropriate to limit the
applicability of Rule 15Ga-2 in this manner because most, if not all,
third-party due diligence reports will be made available to NRSROs
pursuant to Rule 17g-10.\1406\ In the instance a third-party due
diligence report that is obtained by the issuer or underwriter is not
provided to an NRSRO under Rule 17g-10, the

Commission believes it is important for these reports to be made
publicly available by the issuer or underwriter in accordance with Rule
15Ga-2 in order for users of credit ratings to evaluate the level of
due diligence obtained by the issuer or underwriter as compared to the
due diligence services used by an NRSRO rating the securities.
Similarly, the Commission is not persuaded to adopt the more
restrictive interpretation suggested by some commenters that Rule 15Ga-
2 should only apply when a third-party due diligence report is both
provided to an NRSRO and used by that NRSRO in its credit rating
determination. The Commission understands there may be instances when
the NRSRO may not actually use that third-party due diligence report in
determining a credit rating; however, it is not clear that an issuer or
underwriter would be able to determine whether a third-party due
diligence report was actually used by the NRSRO.\1407\ Moreover, by not
limiting Rule 15Ga-2 in this way, users of credit ratings will be able
to determine if there are differences between the information provided
to NRSROs, as disclosed under Rules 17g-7 and 17g-10, and the
information obtained by the issuer or underwriter, as disclosed in
accordance with Rule 15Ga-2, and evaluate the significance, if any, of
those differences.
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    \1400\ See, e.g., CRE Letter (stating that it ``does not oppose
the concept of third-party asset review and disclosure'' but stated
that the proposed rule and form needed ``certain clarifications and
modifications regarding disclosure requirements and logistics'');
Deloitte Letter (stating that it ``support[s] the goals of
transparency and accountability underlying Section 932, but
[believes] it is essential that the Commission clarify certain
aspects of the proposed rule'').
    \1401\ The modifications to proposed Form ABS-15G are technical
rather than substantive and include: (1) Re-ordering the information
supplied on the cover page to reflect the differences between Rule
15Ga-1 filings and Rule 15Ga-2 furnishings; (2) changing ``file'' to
``furnish'' wherever it relates to Rule 15Ga-2 requirements; (3)
removing references to the proposed NRSRO representation allowance
that is not being adopted; (4) revising the language in Item 2.02 to
reflect that Rule 15Ga-2 refers to third-party due diligence reports
obtained by the underwriter rather than third parties managed by the
underwriter; and (5) adding ``Depositor'' as an option to the
signature block. See Form ABS-15G.
    \1402\ See, e.g., ABA Letter; ASF Letter; CRE Letter; DBRS
Letter; Deloitte Letter.
    \1403\ As explained in the proposing release, the Commission
continues to believe that section 15E(s)(4)(A) should be interpreted
in the context of the accompanying provisions of section 15E(s)(4)
to relate to a particular type of report that is relevant to the
determination of a credit rating by an NRSRO. See Nationally
Recognized Statistical Rating Organizations, 76 FR at 33467-33469.
This is in contrast with the October 2010 proposal, where Rule 15Ga-
2 was not limited to transactions rated by NRSROs. See Issuer Review
of Assets in Offerings of Asset-Backed Securities, 75 FR at 64183.
    \1404\ As discussed below in section II.H.2. of this release,
the term issuer as defined for purposes of Rule 17g-10, includes the
sponsor or depositor that participates in the issuance of Exchange
Act-ABS. See paragraph (d)(2) of Rule 17g-10.
    \1405\ See, e.g., Deloitte Letter; DBRS Letter. Some commenters
further suggested that Rule 15Ga-2 should only apply if the third-
party due diligence report is actually used by the NRSRO. See ABA
Letter (suggesting an additional recommendation that ``Rule 15Ga-2
should not apply to an Exchange Act-ABS transaction in which the
only rating that is issued is a rating that is paid for by a party
other than the issuer, sponsor or underwriter''); ASF Letter; CRE
Letter (stating that the third-party due diligence report should be
material to the credit rating of the ABS in order for Rule 15Ga-2 to
apply).
    \1406\ As discussed below in sections II.H.2. and II.H.3. of
this release, Rule 17g-10 (which defines terms such as due diligence
services) requires third-party due diligence providers to use new
Form ABS Due Diligence-15E to make the written certification to be
provided to the NRSRO under section 15E(s)(4)(B) of the Exchange
Act. The form elicits information about the due diligence performed
including a description of the work performed, a summary of the
findings and conclusions of the third party, and the identification
of any relevant NRSRO due diligence criteria that the third party
intended to meet in performing the due diligence.
    \1407\ See, e.g., ASF Letter (stating that the ``issuer or
underwriter would not or may not know whether: (a) An engaged NRSRO
elected to disregard a report provided to it, (b) an engaged NRSRO
accessed and considered a report provided to a different engaged
NRSRO via its Rule 17g-5 Web site, (c) an engaged NRSRO directly
retained a [third-party due diligence services] [p]rovider, or (d) a
non-engaged NRSRO accessed and considered a report provided to an
engaged NRSRO via its Rule 17g-5 Web site.'').
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    A few commenters suggested that section 15E(s)(4)(A) should not
apply to privately offered, unregistered Exchange Act-ABS,\1408\ while
one commenter suggested that the findings and conclusions of third-
party due diligence providers should not be made publicly available on
EDGAR for private or confidential transactions.\1409\ After considering
these comments, the Commission continues to believe that section
15E(s)(4)(A) of the Exchange Act should be interpreted to apply to
issuers and underwriters of both registered and unregistered offerings
of Exchange Act-ABS. The Commission is not persuaded that Congress' use
of the term underwriters was meant to limit the applicability of
section 15E(s)(4)(A) to registered offerings, as the definition of
underwriter in the Exchange Act is not explicitly limited to registered
offerings.\1410\ Moreover, section 15E(s)(4)(A) uses the Exchange Act
definition of asset-backed securities, which is much broader than the
definition of asset-backed security in Regulation AB.\1411\ The
definition of asset-backed security in section 3(a)(79) of the Exchange
Act expressly includes securities that are almost exclusively offered
in unregistered offerings, such as CDOs.\1412\ In other contexts where
the Commission has adopted or proposed rules that apply to Exchange
Act-ABS, those rules have been applied to both registered and
unregistered offerings of asset-backed securities.\1413\ Moreover, the
Commission believes there are sound policy reasons why both registered
and unregistered Exchange Act-ABS offerings should be covered by
section 15(E)(s)(4)(A) of the Exchange Act. The Commission believes
that the benefits of making the findings and conclusions of third-party
due diligence reports publicly available, which would include providing
more information about the contents of these reports,\1414\ equally
apply to registered or unregistered offerings since both types of
offerings can be the subject of a credit rating.\1415\ The Commission
continues to believe that, since section 15E(s)(4) relates to oversight
of NRSROs and the ratings process and such oversight is not limited to
registered offerings, it is not appropriate to exempt any particular
issuers or underwriters who offer securities to U.S. investors if they
receive a credit rating for the securities.\1416\
---------------------------------------------------------------------------

    \1408\ See ABA Letter (commenting that the use of the terms
underwriter and publicly available in section 932 of the Dodd-Frank
Act makes the requirement fundamentally inconsistent with private
placements). See also ASF Letter (suggesting that (1) Congress may
have intended to exclude unregistered offerings by the use of the
term underwriter and (2) ``[i]n the unregistered context, the timing
related rationale for the issuer and underwriter's disclosure duty
under Rule 15Ga-2 is entirely inapplicable'').
    \1409\ See S&P Letter. This commenter does not indicate if
``private or confidential transactions'' means something other than
unregistered offerings.
    \1410\ See section 3(c)(20) of the Exchange Act (15 USC
78c(a)(20)) which refers to the definition of underwriter set forth
in the Investment Advisers Act of 1940. See also section 202(a)(20)
of the Investment Advisers Act of 1940 (15 USC 80b-2(a)(20)).
    \1411\ See Item 1101(c) of Regulation AB.
    \1412\ See 15 U.S.C. 78c(a)(79).
    \1413\ See, e.g., Disclosure for Asset-Backed Securities
Required by Section 943 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, 76 FR 4489.
    \1414\ As discussed below, the Commission believes this
information would necessarily include the criteria against which the
loans were evaluated, and how the evaluated loans compared to those
criteria along with the basis for including any loans not meeting
those criteria. See instruction to paragraph (a) of Rule 15Ga-2.
    \1415\ As noted above, one commenter suggested the rule should
not apply to ``private or confidential transactions.'' To the extent
such transactions are rated, the Commission believes the disclosures
required by Rule 15Ga-2 would be equally beneficial to an assessment
of the resulting credit ratings.
    \1416\ As discussed below, issuers and underwriters of municipal
Exchange Act-ABS are being excluded from the requirements of Rule
15Ga-2 but will continue to be subject to the statutory obligation
under section 15E(s)(4)(A) to make the findings and conclusions of
any third-party due diligence reports they obtain publicly
available.
---------------------------------------------------------------------------

    Commenters were also concerned that requiring issuers and
underwriters to make information available for private placements would
violate rules prohibiting general solicitation.\1417\ The Commission
continues to believe, as explained in the proposing release,\1418\ that
issuers and underwriters can disclose information required by Rule
15Ga-2 without jeopardizing their reliance on private offering
exemptions and safe harbors under the Securities Act, provided the only
information made publicly available on Form ABS-15G is required by the
rule, and the issuer does not otherwise use Form ABS-15G to offer or
sell securities in a manner that conditions the market for offers or
sales of its securities. Moreover, issuers are now permitted to engage
in general solicitation or general advertising if they are offering and
selling securities pursuant to Rule 506(c) or Rule 144A under the
Securities Act, provided that all purchasers of the securities are
accredited investors and the issuer has taken reasonable steps to
verify that such purchasers are accredited investors, for Rule 506(c)
offerings, or qualified institutional buyers, for Rule 144A
offerings.\1419\
---------------------------------------------------------------------------

    \1417\ See, e.g., ABA Letter.
    \1418\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33469.
    \1419\ See Eliminating the Prohibition Against General
Solicitation and General Advertising in Rule 506 and Rule 144A
Offerings, Securities Act Release No. 9415 (July 10, 2013), 78 FR
44771 (July 24, 2013).
---------------------------------------------------------------------------

    Commenters suggested that Rule 15Ga-2 should exclude offshore
transactions.\1420\ The Commission agrees that, in light of the
practical and legal considerations raised by commenters, certain
offshore transactions should be exempted and is adopting revisions to
provide that Rule 15Ga-2 as well as section 15E(s)(4)(A) will not apply
to certain offshore offerings of Exchange Act-ABS,\1421\ consistent
with revisions being adopted

in Rule 17g-7.\1422\ Under this exemption, the requirements of Rule
15Ga-2 and section 15E(s)(4)(A) will not apply to an offering of
Exchange Act-ABS if: (1) The offering is not required to be, and is
not, registered under the Securities Act; (2) the issuer of the rated
security is not a U.S. person (as defined under Securities Act Rule
902(k)); \1423\ and (3) the security issued by the issuer will be
offered and sold upon issuance, and that any underwriter or arranger
linked to the security will effect transactions of the security after
issuance, only in transactions that occur outside the United
States.\1424\
---------------------------------------------------------------------------

    \1420\ See ABA Letter (indicating that the application of Rule
15Ga-2 to offshore transactions invokes the same issues identified
in connection with the extra-territorial application of paragraph
(a)(3) of Rule 17g-5 and may conflict with foreign securities laws,
stock exchange rules, and other applicable laws, rules, and
regulations); DBRS Letter.
    \1421\ See paragraph (e) of Rule 15Ga-2.
    \1422\ As discussed above in section II.G.1. of this release,
paragraph (a)(3) of Rule 17g-7 provides an exemption from the
requirement that NRSROs publish a form and any required third-party
due diligence certifications when taking a rating action if the
rated obligor or issuer of the rated security is not a U.S. person
and if the NRSRO has a reasonable basis to conclude that the
security will be offered and sold upon issuance and that any
underwriter or arranger linked to the security will effect
transactions in the security after issuance only in transactions
outside the United States. See paragraph (a)(3) of Rule 17g-7. While
one commenter requested that the Commission adopt an exemption for
foreign transactions in Rule 15Ga-2 similar to that proposed in the
credit risk retention rules, the Commission believes it is more
appropriate for this exemption to be aligned with the exemption in
Rule 17g-7 so that there is a consistent approach to determining
when the Commission's NRSRO rules apply to offshore transactions.
See ABA Letter.
    \1423\ 17 CFR 230.902(k).
    \1424\ See paragraph (a)(3) of Rule 17g-7.
---------------------------------------------------------------------------

    Several commenters provided views on the proposed timeframe for
furnishing Form ABS-15G. One commenter noted that the proposed five
business day timeframe parallels a requirement in the proposed
revisions to asset-backed securities regulations (``Regulation AB II'')
\1425\ and suggested that, in the event the timeframe is shortened in
the adopted Regulation AB II rules, then a corresponding change under
Rule 15Ga-2 should be made.\1426\ This commenter also suggested that
Rule 15Ga-2 should not impose a deadline for furnishing Form ABS-15G in
an unregistered offering that differs from the time an NRSRO is
required to publish its report under Rule 17g-7.\1427\ Another
commenter stated that the proposed five business day delay prior to the
first sale in an offering under Regulation AB II would be unnecessarily
long in many circumstances.\1428\ Another commenter, however, stated
that the proposed five business day timeframe prior to a first sale
would not be sufficient time for an NRSRO to review most issuances of
asset-backed securities,\1429\ while one commenter supported the
proposed five business day timeframe.\1430\ After considering the
comments, the Commission has decided to adopt, as proposed, the
requirement that an issuer or underwriter must furnish Form ABS-15G at
least five business days prior to the first sale in the offering.\1431\
The Commission believes that the proposed five business day time period
strikes an appropriate balance between issuers' and underwriters'
timing concerns and allows users of credit ratings, including
investors, NRSROs, and other market participants, in combination with
the disclosure mandated by Rules 17g-7 and 17g-10, adequate time to
evaluate the extent to which the rating process has incorporated the
findings and conclusions of third-party due diligence reports obtained
and disclosed by the issuer and underwriter.\1432\ The Commission
believes that adopting a deadline to furnish Form ABS-15G that matches
the deadlines for an NRSRO to publish its reports under Rule 17g-7 or
Rule 17g-10 would not provide enough certainty about how far in advance
of sale a user of a credit rating could expect the information, because
NRSROs are required to make this information available when they take a
rating action, which could vary among NRSROs and Exchange Act-ABS
issuances. The Commission also believes that the timeframe for Rule
15Ga-2 should not be tied to the timeframe under Regulation AB II, as
they serve different purposes.\1433\ Finally, for the same reasons
noted above, the Commission does not believe it is appropriate to
differentiate between registered and unregistered offerings under this
rule, so the Commission is adopting the five business-day requirement
regardless of whether the transaction is registered or exempt.
---------------------------------------------------------------------------

    \1425\ See Asset-Backed Securities, Securities Act Release No.
9117 (Apr. 7, 2010), 75 FR 23328 (May 3, 2010) (proposing release);
Re-Proposal of Shelf Eligibility Conditions for Asset-Backed
Securities, Securities Act Release No. 9244 (July 26, 2011), 76 FR
47948 (Aug. 5, 2011).
    \1426\ See ASF Letter (noting that the timeframes for Rule 15Ga-
2 and Regulation AB II should match because they both directly
relate to the timing of finalizing the composition of the asset
pool).
    \1427\ See id. As noted above, this commenter also suggested
that Rule 15Ga-2 should not apply to unregistered offerings.
    \1428\ See FSR Letter (also stating that tying the disclosure of
third-party due diligence information in the forms to accompany a
credit rating prior to the first sale in an offering may not be
practical and may create an impediment to prompt market access for
many issuers).
    \1429\ See S&P Letter.
    \1430\ See CFA/AFR Letter.
    \1431\ See paragraph (a) of Rule 15Ga-2. One commenter requested
that the meaning of the term first sale in the offering be clarified
in the final rule. See ABA Letter. As with other regulations adopted
by the Commission, the date of first sale in the offering is the
date at which the purchaser makes an investment decision and commits
to purchase the securities offered. See, e.g., Electronic Filing and
Revision of Form D, Securities Act Release No. 8891 (Feb. 6, 2008),
73 FR 10599 (Feb. 27, 2008). See also instruction to paragraph (a)
of Rule 15Ga-2.
    \1432\ As stated above, the findings and conclusions that are
made public under Rule 15Ga-2 include all third-party due diligence
reports that are obtained by the issuer or underwriter, which is
more than what an NRSRO may receive under Rule 17g-10 or may use and
disclose under Rule 17g-7. Users of credit ratings would have five
business days before the first sale to compare the totality of
third-party due diligence information with what was provided to, and
used by, an NRSRO, as disclosed under Rules 17g-7 and 17g-10.
    \1433\ As discussed in this section, the disclosure made under
Rule 15Ga-2 is for the benefit of the users of credit ratings
including investors looking to make an investment decision.
Accordingly, the timing of the publication of third-party due
diligence report findings and conclusions, which may be available
far in advance of the first sale in the offering, serves a different
purpose than delivery of preliminary offering materials under
Regulation AB II.
---------------------------------------------------------------------------

    The Commission is adopting, as proposed, the requirement that a
Form ABS-15G furnished by the issuer must be signed by the senior
officer of the depositor in charge of securitization, and a Form ABS-
15G furnished by the underwriter must be signed by a duly authorized
officer of the underwriter. The Commission agrees with the commenter
that suggested \1434\ that a single Form ABS-15G may be furnished when
the issuer and/or one or more underwriters have obtained the same
third-party due diligence report and has revised the final rule to
clarify this point.\1435\ For example, if the issuer and an underwriter
obtain the same third-party due diligence report related to a
particular asset-backed security and the issuer timely furnishes a Form
ABS-15G for that report, the underwriter has no obligation to furnish a
Form ABS-15G for the same third-party due diligence report. Similarly,
if a transaction has more than one underwriter, and two or more of
those underwriters obtain the same third-party due diligence report
related to a particular asset-backed security, only one of those
underwriters must timely furnish Form ABS-15G for that report.
Commenters also requested clarification that a requirement to provide
the findings and conclusions of third-party due diligence reports would
apply only to the initial credit rating and not to any subsequent
upgrades, downgrades, or other rating actions.\1436\ The Commission
agrees that once the information has been disclosed in connection with
an initial credit rating, it does not need to be furnished again in
connection with any subsequent rating actions. Accordingly, as
clarified

in the instructions to the final rule, Form ABS-15G does not need to be
furnished for any subsequent updates to a credit rating issued by an
NRSRO.
---------------------------------------------------------------------------

    \1434\ See ABA Letter.
    \1435\ See paragraph (b) of Rule 15Ga-2.
    \1436\ See ABA Letter; DBRS Letter.
---------------------------------------------------------------------------

    While one commenter supported the Commission's proposed approach of
defining the third-party due diligence reports covered by the
rule,\1437\ a number of other commenters wanted the definitions of
third-party due diligence report and due diligence services (defined in
proposed Rule 17g-10,\1438\ which is the basis for the term third-party
due diligence report in Rule 15Ga-2) to be narrowed in a variety of
ways. After considering these comments, the Commission is adopting, as
proposed, the definition of third-party due diligence report to mean
any report containing findings and conclusions of any due diligence
services (as defined in Rule 17g-10) performed by a third party.\1439\
One commenter suggested that, in the definition of third-party due
diligence report, the phrase ``final report'' replace the phrase ``any
report.'' \1440\ The Commission is not, however, replacing the phrase
``any report'' with the phrase ``final report,'' as suggested by some
commenters, in part because ``any report'' was specified by Congress in
the Dodd-Frank Act. Moreover, the Commission believes all third-party
due diligence reports obtained by the issuer or underwriter, including
interim reports, related to an offering of asset-backed securities
should be made publicly available in order for users of credit ratings
to more thoroughly evaluate the level of due diligence obtained by the
issuer or underwriter as compared to the due diligence services used by
an NRSRO rating the Exchange Act-ABS. One commenter requested that the
Commission revise the phrase ``containing the findings and
conclusions'' to ``containing a summary of the findings and
conclusions,'' noting that providing a summary is more appropriate than
providing the findings and conclusions themselves, and that there is no
reason why the summary would not be substantially similar in each
context.\1441\ The Commission is not adopting this alternative for
several reasons. First, the Commission notes that Congress specified in
the Dodd-Frank Act that ``the findings and conclusions'' must be made
publicly available, which the Commission believes would be most
appropriately interpreted as precluding a summary. Moreover, the
Commission believes it is important for the third-party due diligence
provider's findings and conclusions themselves to be made public rather
than an issuer or underwriter's summary of those findings and
conclusions because a summary runs the risk of excluding information
that could be important to a user of credit ratings.\1442\
Specifically, the Commission believes that disclosure of the findings
and conclusions necessarily requires disclosure of the criteria against
which the loans were evaluated, and how the evaluated loans compared to
those criteria along with the basis for including any loans not meeting
those criteria.\1443\ The Commission is also revising the rule to
clarify that the term issuer is defined in Rule 17g-10.\1444\
---------------------------------------------------------------------------

    \1437\ See CFA/AFR Letter (stating that they ``share the view,
cited by the Commission, that the variation for reviews of different
types of offerings is likely to be significant and that this area
therefore is better served by principles-based standards than by
prescriptive rules''). However, this commenter did object to the
Commission's decision to withdraw the approach proposed in the
October 2010 proposal, where issuers and underwriters of registered
Exchange Act-ABS would have been required to make third-party due
diligence disclosures in the prospectus. The commenter suggested
that the revised approach is unnecessarily complex and should be
simplified.
    \1438\ A summary of comments addressing the definition of due
diligence services is provided in section II.H.2. of this release.
    \1439\ See paragraph (d) of Rule 15Ga-2; see also paragraph
(d)(1) of Rule 17g-10 (defining the term due diligence services).
Although the Commission is not modifying the definition of third-
party due diligence report, it is making some changes to, and
providing guidance on some aspects of, the definition of due
diligence services in Rule 17g-10. For example, as discussed below
in section II.H.2. of this release, the Commission is: (1) Modifying
the first prong of the definition of due diligence services by
replacing the phrase ``quality and integrity'' of the data with the
word ``accuracy;'' (2) providing guidance that the ``catchall''
provision of the definition of due diligence services relates to
reviews of the assets underlying the Exchange Act-ABS (as opposed to
the reviews of the Exchange Act-ABS itself); and (3) providing
guidance that it would not object to the inclusion of the
description of the requirements and limitations resulting from
relevant professional standards generally described within the
reports being included in the disclosure.
    \1440\ See Clayton Letter.
    \1441\ See ABA Letter.
    \1442\ As noted above, the Commission believes users of credit
ratings should be able to compare the totality of third-party due
diligence information with what was provided to, and used by, an
NRSRO, as disclosed under Rules 17g-7 and 17g-10.
    \1443\ See instruction to paragraph (a) of Rule 15Ga-2. This is
the same disclosure standard for findings and conclusions that is
required under Item 1111(a)(7)(ii) of Regulation AB. See Issuer
Review of Assets in Offerings of Asset-Backed Securities, 76 FR
4238.
    \1444\ See paragraph (d) of Rule 15Ga-2 and paragraph (d)(2) of
Rule 17g-10. As explained above, the proposing release did not
include a definition of issuer in Rule 15Ga-2 but indicated that the
term would be interpreted in a manner consistent with the definition
in Rule 17g-10. For clarity and consistency, the Commission has
revised the rule text to expressly refer to the definition in Rule
17g-10.
---------------------------------------------------------------------------

    Several commenters objected to the proposal that an issuer or
underwriter would not be required to furnish Form ABS-15G if it
reasonably relies upon the representation from an NRSRO rating the
transaction that the NRSRO will publicly disclose the required
information five business days prior to the first sale in the
offering.\1445\ One commenter supported this part of the proposal,
noting that it could reduce duplicative disclosures.\1446\ After
considering these comments, the Commission is not adopting this part of
the proposal. While the Commission would like to avoid duplicative
disclosure wherever possible, it has determined that the representation
may be difficult to implement in practice. NRSROs generally opposed
this proposal,\1447\ and a number of NRSROs, as well as a trade
organization with NRSRO members, noted that it is unlikely that any
NRSRO would make such a representation,\1448\ making it unlikely that
much duplicative disclosure would actually be avoided. One commenter
thought that there could be a potential for discrepancies in the
representations made by NRSROs that operate under the subscriber-pay
business model and the issuer-pay model. This commenter noted that
these NRSROs could be in compliance with Rule 17g-7, as proposed to be
amended, without actually making the findings and conclusions of a
third-party due diligence report publicly available.\1449\ As explained
in the proposing release, an NRSRO that operates under the

subscriber-pay model (rather than the issuer-pay model) and only makes
the third-party due diligence findings and conclusions available to its
subscribers would not be able to make a representation to an issuer or
underwriter that it is making the required information publicly
available.\1450\ Consequently, this may give issuer-paid NRSROs a
competitive advantage over subscriber-paid NRSROs. Further, the
disclosure of the findings and conclusions in the third-party due
diligence report made by an NRSRO would need to be as comprehensive as
what is required for issuers and underwriters under Rule 15Ga-2 in
order to make such a representation. Because Rule 17g-7 only requires
that an NRSRO disclose a description of the findings and conclusions,
NRSROs, issuers, and underwriters would have to make judgments as to
whether the disclosure made in accordance with Rule 17g-7 meets the
standard for disclosure of the findings and conclusions under Rule
15Ga-2, as set forth in the instruction to paragraph (a) of Rule 15Ga-
2, before an NRSRO could make, or an issuer or underwriter could rely,
on such a representation. In addition, if issuers and underwriters were
allowed to rely on such a representation in order to not furnish Form
ABS-15G, there would be no central location where users of credit
ratings could obtain the findings and conclusions of all third-party
due diligence reports on Exchange Act-ABS. Finally, allowing issuers
and underwriters to rely on a representation may have resulted in gaps
in the information that is disclosed on Form ABS-15G.\1451\ These
results would impair the intended benefits of the rule. Based on the
totality of comments and the implications of allowing issuers and
underwriters to rely on a representation from an NRSRO in lieu of
furnishing Form ABS-15G, the Commission has determined that the
potential benefit of eliminating redundant disclosure by allowing the
representation does not justify the uncertainty and costs that it may
create.
---------------------------------------------------------------------------

    \1445\ See CRE Letter; DBRS Letter; Moody's Letter; Morningstar
Letter; S&P Letter.
    \1446\ See Deloitte Letter.
    \1447\ See, e.g., Moody's Letter (strongly opposing the
exemption because the commenter believes: (1) It is contrary to the
express intent of Congress to promote greater transparency and
accountability among Exchange Act-ABS issuers; (2) it is contrary to
the efforts of Congress, the Commission and others to clarify the
limited role of credit rating agencies in the financial markets; (3)
it is unlikely to reduce the potential for multiple, inconsistent
disclosures about the due diligence services; and (4) it will create
incentives for issuers and underwriters to select NRSROs who are
willing to make these representations). See also S&P Letter (stating
that issuers and underwriters should bear this obligation because
NRSRO disclosure of the required information could confuse investors
regarding who is providing the required information).
    \1448\ See CRE Letter (suggesting that the rule allow NRSROs and
underwriters to rely on disclosure made by issuers); Morningstar
Letter; S&P Letter.
    \1449\ See ASF Letter. As discussed above in section II.G.1. of
this release, Rule 17g-7, as proposed to be amended, required, in
part, that NRSROs must, when taking a rating action, publish and
make available to the same persons who can receive or access the
credit rating that is the result or the subject of the rating
action, a form and any written certification received by the NRSRO
from a provider of third-party due diligence services under section
15E(s)(4)(B) of the Exchange Act. The form would include, among
other things, a description of the findings or conclusions of any
third-party due diligence services used by the NRSRO.
    \1450\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33468, n.534.
    \1451\ See, e.g., Moody's Letter; S&P Letter.
---------------------------------------------------------------------------

    As stated above, the Commission continues to believe that there is
no need to separately require that disclosure provided in connection
with Rule 15Ga-2 about any third-party due diligence report be provided
in the prospectus for a registered offering.\1452\ The Commission
considered one commenter's suggestion that a separate database be
created where all third-party due diligence report findings and
conclusions could be centralized.\1453\ The Commission, however,
believes that the EDGAR system is the more appropriate place for
issuers and underwriters to make this information publicly available.
When information is electronically filed with the Commission on the
EDGAR system, investors, market participants, and Commission staff can
access the information from a single, permanent, and centralized
location. Creating a new system may be duplicative and may result in
additional costs for issuers and underwriters beyond those that would
be incurred by using the EDGAR system without providing a significant
improvement in making the information available to users of credit
ratings. The additional costs incurred by issuers and underwriters of
registered Exchange Act-ABS offerings by having to furnish Form ABS-15G
on the EDGAR system should be incremental,\1454\ as they are already
required to file other forms and documents on EDGAR. Issuers and
underwriters of unregistered Exchange Act-ABS offerings, however, may
incur higher costs compared to those conducting registered offerings if
they need to adjust their systems or engage outside counsel to prepare
and furnish Form ABS-15G on EDGAR.\1455\
---------------------------------------------------------------------------

    \1452\ Whether the findings and conclusions of a third-party are
part of the Rule 193 review and, therefore, included in the
prospectus disclosure is dictated by the requirements of Rule 193
and Item 1111 of Regulation AB. See 17 CFR 230.193; 17 CFR 229.1111.
    \1453\ See CFA/AFR Letter.
    \1454\ See section IV.D.10. of this release (discussing the PRA
burden resulting from this requirement).
    \1455\ The Commission notes, however, that issuers and
underwriters of unregistered Exchange Act-ABS offerings who already
file Form ABS-15G on EDGAR in accordance with Rule 15Ga-1 should not
incur these additional costs.
---------------------------------------------------------------------------

    Commenters noted that issuers of registered offerings may
incorporate third-party reviews into their registration statement
disclosure in order to comply with the review of the underlying assets
required by Rule 193. One of these commenters suggested that when
disclosures under both Rule 193 and Rule 15Ga-2 might otherwise be
required, the Rule 193 disclosures should suffice for both
purposes.\1456\ Another commenter encouraged the Commission to enhance
the efficiency of this new regulatory framework by including an
exception that where disclosures about third-party due diligence
services comply with Rule 193, those same services would not be subject
to Rule 15Ga-2.\1457\ After considering these comments, the Commission
has revised Rule 15Ga-2 to reflect that if the disclosure required by
Rule 15Ga-2 has been made in the prospectus (including an attribution
to the third party that provided the due diligence report),\1458\ and
the prospectus is publicly available at the time Form ABS-15G is
furnished by the issuer or underwriter, the issuer or underwriter may
refer to that section of the prospectus in Form ABS-15G rather than
providing the findings and conclusions directly in Form ABS-15G.\1459\
This does not, however, exempt an issuer or underwriter from the
requirements of Rule 15Ga-2, including its duty to furnish Form ABS-
15G. The Commission continues to believe that, in addition to
disclosures made by the NRSROs, Form ABS-15G is the most appropriate
place to find information about a particular type of report that is
relevant to the determination of a credit rating by an NRSRO.
---------------------------------------------------------------------------

    \1456\ See CRE Letter.
    \1457\ See Deloitte Letter (noting that when issuers hire third
parties to conduct the Rule 193 due diligence review, the
disclosures required under Rule 193 will be substantially similar to
the disclosures made about the same findings and conclusions in the
context of the rules adopted under section 932).
    \1458\ The Commission does not intend for all third parties from
whom the issuer obtains a third-party due diligence report, as
defined in Rule 15Ga-2, to be named in the registration statement
and consent to being named as an expert solely because an issuer
furnishes Form ABS-15G. If the issuer's prospectus disclosure
attributes the findings and conclusions of the Rule 193 review to
the third party from whom it obtains a third-party due diligence
report, however, the third-party would be required to be named in
the registration statement and consent to being named as an expert
in accordance with Rule 436 under the Securities Act. See Issuer
Review of Assets in Offerings of Asset-Backed Securities, 76 FR
4231.
    \1459\ See paragraph (c) of Rule 15Ga-2.
---------------------------------------------------------------------------

    Two comments submitted in response to the proposing release related
to the impact on municipal issuers and underwriters. One commenter
cautioned the Commission against imposing the new Exchange Act-ABS
disclosure requirements on the municipal securities market until the
completion of the reports on municipal securities mandated by the Dodd-
Frank Act.\1460\ The Commission notes that the reports required by
sections 976 and 977 of the Dodd-Frank Act have been completed by the
GAO and have not resulted in any legislative changes to disclosure
requirements applicable to municipal issuers at this time.\1461\ This
commenter

recommended that the Commission exempt municipal securities from the
proposed disclosure requirements to avoid creating confusion for
investors and issuers in case different classes of municipal securities
are subject to different requirements in the future.\1462\ Another
commenter supported the proposal to allow municipal securitizers or
underwriters of municipal Exchange Act-ABS to provide the required
information on EMMA.\1463\
---------------------------------------------------------------------------

    \1460\ See ICI Letter.
    \1461\ See http://www.gao.gov/assets/590/587714.pdf. The
Commission also issued a comprehensive report on the municipal
securities market in July 2012. See Commission Report on the
Municipal Securities Market, available at http://www.sec.gov/news/studies/2012/munireport073112.pdf (``2012 Report on the Municipal
Securities Market'').
    \1462\ See ICI Letter.
    \1463\ See DBRS Letter.
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    The Commission also has considered the comments objecting to
requiring municipal issuers and underwriters to comply with Rule 15Ga-
2, which were submitted in response to the October 2010 proposal.\1464\
A number of these commenters expressed the view that sections 15B(d)(1)
and 15B(d)(2) of the Exchange Act, known collectively as the ``Tower
Amendment,'' \1465\ expressly prohibit the Commission and the Municipal
Securities Rulemaking Board (``MSRB'') from requiring an issuer of
municipal securities to make any specific disclosure filing with the
Commission or MSRB prior to the sale of these securities to
investors.\1466\ After considering these comments, the Commission has
determined that issuers and underwriters of municipal Exchange Act-ABS
should be excluded from the requirements of Rule 15Ga-2. The Commission
notes that, in reaching this determination, it does not find it
necessary to determine whether the Tower Amendment applies in this
situation and no inference should be drawn from this determination
regarding the Commission's analysis of the Tower Amendment. In light of
the fact that municipal issuers and underwriters will remain subject to
the statutory requirement in section 15E(s)(4)(A) of the Exchange Act
to make the findings and conclusions of any third-party due diligence
reports publicly available, and given the Commission's historical
approach of not requiring municipal issuers to file disclosures with
the Commission in connection with the issuance of securities, the
Commission is persuaded that, as a policy matter, it is unnecessary to
apply Rule 15Ga-2 to municipal issuers and underwriters.\1467\
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    \1464\ Issuer Review of Assets in Offerings of Asset-Backed
Securities, 75 FR 64182.
    \1465\ 15 USC 78o-4. See also 2012 Report on the Municipal
Securities Market, at 27-28.
    \1466\ See, e.g., letter from Group of 14 Municipal
Organizations dated Nov. 15, 2010, National Association of Bond
Lawyers dated Nov. 19, 2010; letter from National Association of
Local Housing Finance Agencies dated Nov. 15, 2010; letter from
Treasurer of the State of Connecticut dated Nov. 15, 2010; letter
from National Council of State Housing Agencies dated Nov. 15, 2010;
and letter from Robert W. Scott dated Nov. 19, 2010 (each letter
submitted in response to the October 2010 proposal).
    \1467\ Municipal securitizers continue to be subject to Rule
15Ga-1. As the Commission noted at the time Rule 15Ga-1 was adopted,
section 943 of the Dodd-Frank Act, pursuant to which Rule 15Ga-1 was
adopted, is a stand-alone statutory provision that does not
expressly provide the Commission with authority to provide
exemptions for particular classes of securitizers, including
municipal securitizers. See Disclosure for Asset-Backed Securities
Required by Section 943 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, 76 FR at 4493.
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    Under the exclusion, the requirements of Rule 15Ga-2 will not apply
to issuers and underwriters of an offering of Exchange Act-ABS if: (1)
The issuer of the rated security is a municipal issuer; and (2) the
offering is not required to be registered under the Securities Act. A
municipal issuer is defined as an issuer (as that term is defined in
paragraph (d)(2) of Rule 17g-10) that is any State or Territory of the
United States, the District of Columbia, any political subdivision of
any State, Territory, or the District of Columbia, or any public
instrumentality of one or more States, Territories, or the District of
Columbia. The exclusion further provides, as discussed below, that
issuers and underwriters of municipal Exchange Act-ABS remain subject
to the requirements of section 15E(s)(4)(A) of the Exchange Act.\1468\
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    \1468\ See paragraph (f) of Rule 15Ga-2.
---------------------------------------------------------------------------

    Although the Commission is excluding issuers and underwriters of
municipal Exchange Act-ABS from the application of Rule 15Ga-2, the
Commission continues to believe that section 15E(s)(4)(A) of the
Exchange Act should be interpreted to apply to such entities. By its
terms, section 15E(s)(4)(A) applies to issuers and underwriters of
``any asset-backed security,'' and the Commission believes the intended
benefits of greater transparency with respect to the credit rating
process apply equally to credit ratings of municipal Exchange Act-
ABS.\1469\ The Commission also notes that section 15E(s)(4)(A) requires
issuers and underwriters to make the specified information publicly
available and does not mandate filing with the Commission, which was
the specific concern the Tower Amendment sought to address.
Consequently, although municipal issuers and underwriters will not be
required to furnish Form ABS-15G pursuant to Rule 15Ga-2, they are
subject to the statutory requirement under section 15E(s)(4)(A) to make
publicly available the findings and conclusions of any third-party due
diligence report they obtain. Municipal issuers and underwriters may
make such information available through any means reasonably accessible
to the public, including, for example, by posting the information on an
issuer or underwriter sponsored Internet Web site, by voluntarily
furnishing Form ABS-15G on EDGAR, or by voluntarily submitting a Form
ABS-15G on EMMA.
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    \1469\ As discussed above, the Commission believes that section
15E(s)(4)(A) of the Exchange Act should be interpreted to apply to
issuers and underwriters of both registered and unregistered
offerings of Exchange Act-ABS.
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    Since the Commission is excluding issuers and underwriters of
municipal Exchange Act-ABS from the application of Rule 15Ga-2, it is
not adopting the proposed revisions to Rule 314, which would have
permitted municipal issuers of Exchange Act-ABS, or underwriters in the
offering, to provide the information required by Form ABS-15G on EMMA,
as proposed. Notwithstanding the foregoing, as noted above, an issuer
or underwriter of municipal Exchange Act-ABS could choose to satisfy
its obligation to make publicly available the findings and conclusions
of any third-party due diligence report obtained by the issuer or
underwriter, as required by section 15E(s)(4)(A) of the Exchange Act,
by voluntarily submitting a Form ABS-15G on EMMA.\1470\
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    \1470\ The Commission adopted Rule 314 to permit municipal
securitizers to satisfy the obligation to furnish the information
required by Rule 15Ga-1 by filing the information on EMMA. See
Disclosure for Asset-Backed Securities Required by Section 943 of
the Dodd-Frank Wall Street Reform and Consumer Protection Act, 76 FR
4489. Accordingly, EMMA will be prepared to accept Form ABS-15G in
connection with this requirement.
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2. New Rule 17g-10
    As stated above, section 15E(s)(4)(A) of the Exchange Act requires
the issuer or underwriter of any asset-backed security to make publicly
available the findings and conclusions of any third-party due diligence
report obtained by the issuer or underwriter.\1471\ Section
15E(s)(4)(B) of the Exchange Act requires that in any case in which
third-party due diligence services are employed by an NRSRO, issuer, or
underwriter, the person providing the due diligence services shall
provide, to any NRSRO that produces a credit rating to which such
services relate, written certification, in a format as provided in
section 15E(s)(4)(C).\1472\ Section 15E(s)(4)(C) of the Exchange Act
provides that the Commission shall establish the appropriate format and
content for the written certifications required under section
15E(s)(4)(B) to ensure that providers of due diligence services have
conducted a thorough

review of data, documentation, and other relevant information necessary
for an NRSRO to provide an accurate rating.\1473\ The Commission
proposed to implement these sections through Rule 17g-10 and Form ABS
Due Diligence-15E.\1474\ As proposed, Rule 17g-10 would require a
provider of third-party due diligence services to provide the written
certification required by section 15E(s)(4)(B) of Exchange Act on Form
ABS Due Diligence-15E.
---------------------------------------------------------------------------

    \1471\ See 15 U.S.C. 78o-7(s)(4)(A).
    \1472\ See 15 U.S.C. 78o-7(s)(4)(B).
    \1473\ See 15 U.S.C. 78o-7(s)(4)(C).
    \1474\ See Nationally Recognized Statistical Rating
Organizations, 76 FR 33471-33476. Form ABS Due Diligence-15E is
discussed below in section II.H.3. of this release.
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    The Commission is adopting Rule 17g-10 with modifications from the
proposal in response to comments.\1475\ As discussed below, the
modifications add a ``safe harbor'' for the third-party due diligence
provider in order to satisfy its obligations under section 15E(s)(4)(B)
of the Exchange Act, clarify the proposed definition of due diligence
services, and make certain technical modifications.\1476\
---------------------------------------------------------------------------

    \1475\ See Rule 17g-10.
    \1476\ See id.
---------------------------------------------------------------------------

    As proposed, paragraph (a) of Rule 17g-10 provided that the written
certification that a person employed to provide third-party due
diligence services is required to provide to an NRSRO pursuant to
section 15E(s)(4)(B) of the Exchange Act must be made on Form ABS Due
Diligence-15E.\1477\ The Commission did not receive comments on
paragraph (a) as proposed and is adopting the paragraph with one
technical modification.\1478\ As adopted, the paragraph provides that
the written certification that a person employed to provide third-party
due diligence services is required to provide to an NRSRO pursuant to
section 15E(s)(4)(B) must be on Form ABS Due Diligence-15E.\1479\
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    \1477\ See paragraph (a) of Rule 17g-10, as proposed; Nationally
Recognized Statistical Rating Organizations, 76 FR at 33544.
    \1478\ See paragraph (a) of Rule 17g-10. The modification
corrects an incorrect reference to Form ABS Due Diligence-15E in the
proposal by replacing the phrase ``(Sec.  240b.400 of this
chapter)'' with the phrase ``(Sec.  249b.500 of this chapter)''.
    \1479\ See paragraph (a) of Rule 17g-10. Form ABS Due Diligence-
15E is discussed below in section II.H.3. of this release.
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    Paragraph (b) of Rule 17g-10, as proposed, provided that the
written certification must be signed by an individual who is duly
authorized by the person providing the third-party due diligence
services to make such a certification.\1480\ The proposed requirement
was designed to ensure that the person executing the certification on
behalf of the provider of third-party due diligence services has
responsibilities that will make the person aware of the basis of the
information being provided in the form.\1481\ The Commission did not
receive comments on paragraph (b) and is adopting the paragraph as
proposed.\1482\
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    \1480\ See paragraph (b) of Rule 17g-10, as proposed; Nationally
Recognized Statistical Rating Organizations, 76 FR at 33544.
    \1481\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33471.
    \1482\ See paragraph (b) of Rule 17g-10.
---------------------------------------------------------------------------

    As discussed above, the Commission did not receive comments
specifically addressing paragraphs (a) and (b) of Rule 17g-10, as
proposed.\1483\ However, the Commission did receive comments raising
concerns about how a third-party due diligence provider can meet the
requirement in section 15E(s)(4)(B) of the Exchange Act, which--as
discussed above--provides that in any case in which third-party due
diligence services are employed by an NRSRO, issuer, or underwriter,
the person providing the due diligence services shall provide, to any
NRSRO that produces a rating to which such services relate, written
certification in a format as provided in section 15E(s)(4)(C) of the
Exchange Act.\1484\
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    \1483\ As discussed below in section II.H.3. of this release,
the Commission did receive comments in response to the proposed
format of the Form ABS Due Diligence-15E. Those comments and the
Commission's response to the commenters are discussed in section
II.H.3. of this release.
    \1484\ See 15 U.S.C. 78o-7(s)(4)(B).
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    Commenters stated that the third-party due diligence provider or
NRSRO may not know the identities of the NRSROs producing credit
ratings to which the due diligence services relate.\1485\ One of these
commenters stated that the proposed requirements ``unfairly place a
heavy burden on the third-party due diligence provider to determine
which NRSRO is rating the transaction'' because this information ``lies
with the issuer.'' \1486\
---------------------------------------------------------------------------

    \1485\ See Clayton Letter; Deloitte Letter; S&P Letter.
    \1486\ See Clayton Letter.
---------------------------------------------------------------------------

    The Commission anticipated this concern and, consequently, in the
proposing release the Commission asked a number of questions regarding
how a third-party due diligence provider could comply with section
15E(s)(4)(B) of Exchange Act and whether the Commission should take
steps to implement the statutory requirement.\1487\ One of the
potential approaches identified by the Commission in the proposing
release was to use the Web site referred to in paragraph (a)(3)(iii) of
Rule 17g-5 maintained by issuers, sponsors, or underwriters of
structured finance products (``Rule 17g-5 Web site''), as the mechanism
for providing the written certification to all NRSROs producing a
credit rating to which the due diligence services relate.\1488\
---------------------------------------------------------------------------

    \1487\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33466.
    \1488\ See id. See also 17 CFR 240.17g-5(a)(3). Among other
things, paragraph (a)(3) of Rule 17g-5 requires an NRSRO, among
other things, to maintain on a password-protected Internet Web site
a list of each structured finance product for which it currently is
in the process of determining an initial credit rating, and to
provide free and unlimited access to any NRSRO that, among other
things, certifies it will access the Web site solely for the purpose
of determining and monitoring credit ratings. Paragraph (a)(3)(iii)
of Rule 17g-5 requires an NRSRO to obtain from the issuer, sponsor,
or underwriter of the structured product a written representation
that can reasonably be relied upon that the arranger will, among
other things, maintain on a password-protected Internet Web site the
information it provides to the NRSRO and will provide access to the
Web site to an NRSRO that, among other things, certifies it will
access the Web site solely for the purpose of determining and
monitoring credit ratings.
---------------------------------------------------------------------------

    Commenters responded that the Rule 17g-5 Web site would be an
appropriate mechanism to provide the certification to the NRSROs.\1489\
One of these commenters stated that using the Rule 17g-5 Web site would
be ``the most efficient way'' to provide the certification and that it
would be a better approach than applying a ``reasonableness test'' in
terms of assessing whether the third-party due diligence provider
submitted the certification to all NRSROs that are required to receive
the certification.\1490\ Another commenter stated that the proposed
requirements should ``accommodate situations'' in which an NRSRO
obtains the written certification indirectly from, for example, a Rule
17g-5 Web site.\1491\ An NRSRO stated that using the Rule 17g-5 Web
sites as a ``delivery mechanism for the Rule 17g-10 certification''
would ensure that ``certifications are supplied to all affected NRSROs
at roughly the same time.'' \1492\
---------------------------------------------------------------------------

    \1489\ See ASF Letter; Clayton Letter; DBRS Letter.
    \1490\ See Clayton Letter.
    \1491\ See ASF Letter.
    \1492\ See DBRS Letter.
---------------------------------------------------------------------------

    Another alternative suggested by the Commission was to establish a
centralized database administered by the Commission (such as the
Commission's EDGAR system) or by market participants to be used for the
purpose of providing the written certifications in accordance with
section 15E(s)(4)(B) of the Exchange Act.\1493\ An NRSRO and another
commenter stated that creating a new centralized database or similar
alternative for distributing the

due diligence certification would be costly.\1494\
---------------------------------------------------------------------------

    \1493\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33466.
    \1494\ See Clayton Letter (``[W]e do not believe that it is
cost-effective for the Commission or the ABS community to have the
industry adopt a new system for distributing the Form ABS Due
Diligence-15E information nor do we believe it is cost-effective for
such parties to have to utilize a for-profit centralized database
service for such purposes, especially in light of the amount of time
and resources that have already been directed to the development of
the Rule 17g-5 system of distribution. And as we described above,
the Rule 17g-5 system more fairly allocates responsibility for
dissemination of the information among the issuer, underwriter and
NRSRO.''); DBRS Letter (``Mandating the creation of a new
centralized database or any other costly alternative is not
warranted under the circumstances.'').
---------------------------------------------------------------------------

    Commenters suggested other alternatives.\1495\ One commenter stated
that the due diligence provider should be required to deliver the
certification ``promptly upon receipt of a written request from an
NRSRO'' for use by the NRSRO ``in preparing its published report under
Rule 17g-7.'' \1496\ Another commenter stated that the party engaging
the due diligence provider should be required to obtain the
certification from the service provider and that the service provider
should ``be able to rely on the engaging party to transmit the form''
to the required NRSROs.\1497\
---------------------------------------------------------------------------

    \1495\ See ASF Letter; Deliotte Letter.
    \1496\ See ASF Letter.
    \1497\ See Deloitte Letter.
---------------------------------------------------------------------------

    In the proposing release, the Commission sought comment on how soon
after it completes its review the provider of third-party due diligence
services should provide the written certification to all NRSROs
required to receive the certification, and the Commission provided
examples of potential timeframes (within twenty-four hours, two
business days, or ten business days).\1498\ One commenter stated that
the due diligence provider should be required to deliver the
certification ``promptly upon receipt of a written request from an
NRSRO.'' \1499\ Another commenter suggested that the certification be
provided five business days after the service provider finishes
reviewing the data in connection with its due diligence report.\1500\
One NRSRO stated that the certification should be provided ``within two
business days following completion of the due diligence review'' and
added that ``all required NRSROs should be in receipt of the
certification at the same time.'' \1501\ Another NRSRO stated that the
certification should be provided ``within one business day after the
service provider completes its review.'' \1502\
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    \1498\ See Nationally Recognized Statistical Rating
Organizations, 76 FR at 33466.
    \1499\ See ASF Letter.
    \1500\ See Clayton Letter.
    \1501\ See S&P Letter.
    \1502\ See DBRS Letter.
---------------------------------------------------------------------------

    The Commission is persuaded that the final rule should provide a
means for providers of third-party due diligence services to be certain
that they have met their obligation under section 15E(s)(4)(B) of the
Exchange Act to provide Form ABS Due Diligence-15E to any NRSRO that
produces a credit rating to which the due diligence services
relate.\1503\ The Commission also is persuaded that the most efficient
means of providing certainty to the providers of third-party due
diligence services that they have met their obligations under section
15E(s)(4)(B) is to require the third party to provide Form ABS Due
Diligence-15E to any NRSRO that specifically requests the form and to
post the form on the Rule 17g-5 Web site maintained by the issuer,
sponsor, or underwriter of the Exchange Act-ABS.\1504\
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    \1503\ See 15 U.S.C. 78o-7(s)(4)(B).
    \1504\ See, e.g., DBRS Letter (``DBRS believes that the most
efficient and cost-effective approach is to utilize existing
regulations as much as possible. As it stands today, issuers and
underwriters who hire an NRSRO to rate a structured finance product
such as an Exchange Act-ABS are required to make available to other
NRSROs all information the issuer or underwriter `contracts with a
third party to provide to' the hired NRSRO. Thus, if the issuer or
underwriter contracts with a third-party service provider to supply
a hired NRSRO with a due diligence report, a copy of that report
would already be made available to other NRSROs pursuant to Rule
17g-5(a)(3).'').
---------------------------------------------------------------------------

    This will provide access to the form to an NRSRO that is producing
a credit rating for the Exchange Act-ABS but is unaware that the third
party is conducting the due diligence services because, for example,
the NRSRO is using the Rule 17g-5 Web site to determine an unsolicited
credit rating. In addition, the third party will not be burdened with
the task of trying to identify every NRSRO that is producing a credit
rating to which the due diligence services relate. For these reasons,
the Commission believes it is appropriate to modify Rule 17g-10 from
the proposal to add a ``safe harbor'' provision that incorporates the
Rule 17g-5 Web sites.
    Further, as discussed above, commenters suggested relatively short
timeframes for providing the written certification to the NRSROs
producing a credit rating to which the due diligence services relate.
The Commission agrees that the written certification should be provided
soon after the provider of third-party due diligence services completes
its review. As discussed below, the certification will provide
information that can be used by the NRSRO in determining a credit