opinion.\1117\ These commenters explained that the 2010 ABS Proposal
for a third-party review opinion would limit costs on the issuers where
repurchases have not presented the same difficulties as they have in
RMBS.\1118\ However, in response to the 2010 ABS Proposal, some
commenters stated that the third-party opinion provision would not
provide investors with the protection they would need in the event
issues arise with the enforcement of representations and warranties
provisions because, in general, transaction agreements have not
included mechanisms to identify potential breaches of representations
and warranties.\1119\ The rule we are adopting is designed to protect
against potential risks even where they have not surfaced in the past.
As noted above, a group of investors commented that despite the
additional costs, increased investor protections will produce net
economic benefits to investors.\1120\ In light of these considerations,
rather than permitting a third-party opinion as an alternative
requirement for shelf eligibility, we have revised the review process
to address the costs concerns.
---------------------------------------------------------------------------

    \1117\ See letters from ASF III, BoA II, and VABSS III. See also
footnote 1054.
    \1118\ See letters from ASF III, BoA II, and VABSS III.
    \1119\ See letters from ABAASA I, ASF I, BoA I, J.P. Morgan I,
Metlife I, Prudential I, SIFMA I, VABSS I, Vanguard, and Wells Fargo
I.
    \1120\ See letter from SIFMA II-investors.
---------------------------------------------------------------------------

(3) Dispute Resolution Provision
(a) Proposed Rule
    In the 2011 ABS Re-Proposal, along with the credit risk manager
proposal, we proposed to require that underlying transaction documents
include repurchase request dispute resolution procedures. As we have
noted elsewhere, not only have investors lacked a mechanism to identify
potential breaches of the representations and warranties, they have
also lacked a mechanism to require sponsors to address their repurchase
requests in a timely manner.\1121\ Under the proposal, the transaction
agreements would be required to provide that if an asset subject to a
repurchase request pursuant to the terms of the transaction agreements
is not repurchased by the end of the 180-day period beginning when
notice is received, then the party submitting such repurchase request
will have the right to refer the matter, at its discretion, to either
mediation or third-party arbitration, and the party obligated to
repurchase must agree to the selected resolution method. As noted
above, the dispute resolution provision, along with the other new shelf
transaction requirements, should encourage ABS issuers to design and
prepare ABS offerings with greater oversight and care. We believe that
the dispute resolution provision will enhance the enforceability of the
transaction terms and should incentivize issuers to provide investors
with accurate and complete information at the time of the offering. We
believe that these requirements are appropriate for asset-backed
securities transactions to be offered to the public off a shelf
registration statement.
---------------------------------------------------------------------------

    \1121\ See the 2011 ABS Re-Proposal at 47956-57. See also the
Section 943 Adopting Release at 4489-90.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    Commenters generally supported a dispute resolution process.\1122\
Several commenters recommended that we require that binding arbitration
be the sole process.\1123\ We received a significant number of comments
stating that 180 days is an appropriate time period for the obligated
party to review repurchase requests.\1124\ One commenter stated that
180 days may not be long enough for RMBS.\1125\ Another commenter noted
that transactions backed by assets that have shorter maturity dates
should have a shorter timeframe.\1126\ Although the proposed rule did
not specifically address payment of the costs of the dispute resolution
process, several commenters made recommendations for which party should
pay.\1127\ We also received comments that we specify that a repurchase
is not the only way a repurchase request can be satisfied.\1128\
---------------------------------------------------------------------------

    \1122\ See letters from ASF III, BoA II, J.P. Morgan II, MBA
III, Metlife II, Prudential II, SIFMA III-dealers and sponsors, and
Wells Fargo II.
    \1123\ See letters from BoA II, J.P. Morgan II, Prudential II,
SIFMA II-investors, SIFMA III-dealers and sponsors, and Wells Fargo
II (all noting that binding arbitration would be the best form of
dispute resolution).
    \1124\ See letters from ASF III, J.P. Morgan II, Metlife II, and
Prudential II.
    \1125\ See letter from MBA III (stating that due to rebuttals it
may take longer than 180 days to resolve a dispute).
    \1126\ See letter from Metlife II (stating that 180 days may be
too long for shorter term transactions since some investors may hold
classes that pay off sooner).
    \1127\ Nine commenters suggested that the party that loses the
dispute should pay for all legal fees incurred by the prevailing
party. See letters from ABASA II, BoA II, J.P. Morgan II, MBA III,
Metlife II, SIFMA II-investors, SIFMA III-dealers and sponsors, and
Sallie Mae II. One commenter recommended that the arbitrator should
be responsible for determining who pays. See letter from Prudential
II. Another suggested that the transaction documents specify who
pays for the resolution. See letter from Wells Fargo II.
    \1128\ See letters from ASF III (stating that the requirement,
as written, may have the unintended effect of restricting the
resolution of a repurchase request to only repurchasing the asset),
MBA III (stating ``given the potential for non-repurchase resolution
of a breach, MBA recommends changing the focus of the Re-proposal
from `repurchases' not completed in 180 days to `resolutions' not
completed within 180 days''), and SIFMA II-investors and SIFMA III-
dealers and sponsors (noting that remedies for a breach would be
``cure of the breach, repurchase of the affected pool asset for the
purchase price specified in the transaction documents, or, if
applicable and if provided in the transaction documents,
substitution of a pool asset having substantially similar
characteristics as the defective pool asset'').
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Dispute Resolution Shelf
Requirement
    As a third transaction requirement for shelf registration, we are
requiring, as proposed but with slight modification, that the
underlying transaction documents include dispute resolution procedures
for repurchase requests.\1129\ We note that our original proposal for
the dispute resolution requirement appeared in the same subsection of
Form SF-3 as our credit risk manager proposal, even though we intended
them to operate separately from each other. Thus, while we believed
that our asset review shelf requirement would help investors evaluate
whether a repurchase request should be made, we structured the dispute
resolution provision so that investors could utilize the dispute
resolution provision for any repurchase request, regardless of whether
investors direct a review of the assets. We believe that organizing the
dispute resolution requirement as a separate subsection in the shelf
eligibility requirements will help to

clarify the scope of the dispute resolution provision.
---------------------------------------------------------------------------

    \1129\ Disclosure regarding the dispute resolution procedures is
required in the prospectus under Item 1111(e) of Regulation AB.
---------------------------------------------------------------------------

    As we have discussed above, the shelf eligibility conditions that
we are adopting are intended to help ensure that ABS shelf offerings
have transactional safeguards and features that make securities
appropriate to be issued off a shelf. We believe that the dispute
resolution provision will provide a key procedural safeguard for
investors to resolve disputes over repurchase requests in an effective
and timely manner. We expect that the dispute resolution provision
should generate efficiencies in the repurchase request process. We
believe that, as a result of the asset review provision and the dispute
provision, sponsors may have an increased incentive to carefully
consider the characteristics of the assets underlying the
securitization and to accurately disclose these characteristics at the
time of the offering. We also believe that investors should benefit
from reduced losses associated with nonperforming assets since, as a
result of this new shelf requirement, sponsors will have less of an
incentive to include nonperforming assets in the pool.
    Under the new rule, the transaction agreements must provide that if
an asset subject to a repurchase request pursuant to the terms of the
transaction agreements is not resolved by the end of the 180-day period
beginning when notice is received, then the party submitting such
repurchase request will have the right to refer the matter, at its
discretion, to either mediation or third-party arbitration, and the
party obligated to repurchase or replace must agree to the selected
resolution method.\1130\ In response to comments, the final rule
applies to those assets subject to a repurchase request that has not
been resolved. We agree with several commenters that indicated that the
term ``resolved'' is more appropriate than ``repurchased,'' which was
proposed, since ``repurchased'' could have the unintended effect of
restricting resolution of a repurchase request only to repurchasing the
asset.\1131\ We also believe that investors should be able to utilize
the dispute resolution provision not only in connection with those
requests in which the sponsor has failed to respond in a timely manner
but also for those requests in which investors believe that the
resolution offered by the sponsor does not make them whole.
---------------------------------------------------------------------------

    \1130\ Several commenters asked us to clarify that a repurchase
is not the only way a repurchase request can be satisfied. See
letters from ASF III, MBA III, SIFMA II-investors, and SIFMA III-
dealers and sponsors.
    \1131\ See letters from ASF III, MBA III, SIFMA II-investors,
and SIFMA III-dealers and sponsors. We made a similar change in an
asset-level data point capturing repurchase requests in order to use
consistent terminology and to help ensure accurate tracking of the
status of repurchase requests. See footnote 225.
---------------------------------------------------------------------------

    We realize there are possible costs associated with setting the
waiting period at 180 days before the party submitting the request has
the right to refer the matter to mediation or arbitration. On the one
hand, we recognize that there is the possibility that 180 days may not
be long enough to come to a resolution due to numerous rebuttals in
some situations, as noted by one commenter.\1132\ This commenter
recommended that the 180 days serve as a timeframe for due diligence
and discussion and that the transaction parties be permitted to specify
in the transaction agreements how much additional time beyond the 180
days the responsible party should be provided before the requesting
party has the right to refer the dispute to mediation or arbitration.
We believe that such an approach, however, may result in investors
having to wait too long before being able to proceed to mediation or
arbitration. On the other hand, we also recognize that the 180-day
period may be too long for shorter term transactions since some
investors may hold classes of assets that pay off sooner than 180 days.
Although commenters generally supported the 180-day waiting period, one
commenter recommended, for shorter term transactions, that the
timeframe be reduced to 90 days before investors could proceed to
mediation or arbitration.\1133\ While we appreciate the timing issues
raised by shorter term transactions, it is not clear that 90 days
provides the responsible party with enough time to complete due
diligence and engage in discussions with the requesting party. For
these reasons, we believe 180 days, in general, fairly balances the
need of investors for quick resolution with the desire of issuers for
time to address the request.
---------------------------------------------------------------------------

    \1132\ See letter from MBA III.
    \1133\ See letter from MetLife II.
---------------------------------------------------------------------------

    In addition, some commenters recommended that we require binding
arbitration as the single form of dispute resolution. Because we
believe that investors should have access to all options available to
resolve a dispute, we are not requiring a specific form or process to
resolve disputes. The final rule permits a demanding party to determine
what form of dispute resolution is appropriate.
    Finally, after considering the comments received, we are requiring
that the transaction documents specify that if arbitration occurs, the
arbitrator will determine the party responsible for paying the dispute
resolution fees and in the case of mediation, the parties, with the
assistance of the mediator, will mutually agree on the allocation of
the expenses incurred. While some commenters recommended that the
losing party should pay the expenses, we believe that letting the
arbitrator or the parties in mediation determine who pays balances
competing concerns. On the one hand, some commenters expressed concern
about the possibility of investors using the dispute resolution process
for frivolous disputes and therefore recommended that we require the
transaction documents to specify that the losing party pays.\1134\ On
the other hand, there may be instances where the requesting party uses
the dispute resolution process for a legitimate claim and the
arbitrator rules against the claim but believes that the requesting
party should not be required to bear all the expenses associated with
the dispute resolution.\1135\ By giving the arbitrator the discretion
to make this determination based on the facts and circumstances of the
repurchase claim at issue, we believe investors will not be discouraged
from using the dispute resolution process for valid claims while also
curbing potentially frivolous claims, given the possibility of having
to pay the fees associated with the dispute resolution.
---------------------------------------------------------------------------

    \1134\ See, e.g., letters from BoA II, J.P. Morgan II, and MBA
III.
    \1135\ See letter from Prudential II.
---------------------------------------------------------------------------

    We recognize that the dispute resolution provision could result in
increased costs for ABS issuers and investors. We believe that these
costs will likely be similar to other securities industry dispute
resolution costs, which typically include filing fees, hearing session
fees, and other miscellaneous arbitrator or mediator expenses.
According to FINRA, arbitration and mediation filing fees depend on the
size of the claim and can be up to $500 for an amount in controversy
over $100,000.\1136\ In addition, the dispute parties will incur the
costs of arbitrator/mediator compensation, which depends on the length
of the hearing and the complexity of the case. A typical arbitration
hearing of three days can cost from $2,700 to $6,750 for an amount in
controversy in the $100,000 to $500,000 range.\1137\ A typical

mediation hearing of one day can cost between $1,000 and $6,400.\1138\
The parties will also incur attorneys' fees with arbitration or
mediation hearings, which will depend upon the length of the hearing,
the number of attorneys involved, and the amount of preparation
required.
---------------------------------------------------------------------------

    \1136\ For more information about securities-related arbitration
and mediation, including typical costs, see FINRA's Dispute
Resolution Web site, http://www.finra.org/ArbitrationAndMediation/FINRADisputeResolution/.
    \1137\ See FINRA Manual, Section 12902, Hearing Session Fees,
and Other Costs and Expenses, available at http://
finra.complinet.com/en/display/
displaymain.html?rbid=2403&elementid=4190. See
also Seth Lipner, Is Arbitration Really Cheaper?, Forbes, July 14,
2009, available at http://www.forbes.com/2009/07/14/lipner-arbitration-litigation-intelligent-investing-cost.html (stating that
the average arbitration requires three days of hearings).
    \1138\ See FINRA's Mediation Web site, http://www.finra.org/ArbitrationAndMediation/Mediation/Process/MediationSessions/index.htm (stating that mediations usually take one day). We used
mediation hourly rates provided by the American Arbitration
Association for cost estimates for mediation since FINRA does not
provide information on mediator's hourly rates. For more information
about the costs of mediation, see the American Arbitration
Association's Web site, www.adr.org.
---------------------------------------------------------------------------

    Because the dispute resolution provision is not limited strictly to
repurchase requests connected with a review pursuant to the asset
review provision, there is a possibility that frivolous repurchase
requests could be made and thus subject to the dispute resolution
process. As discussed above, under the final rule the requesting party
could be responsible for paying the dispute resolution expenses based
on a determination by the arbitrator (or if the parties mutually agree
that the requesting party should incur these expenses in the case of
mediation). This is intended to limit the number of potentially
frivolous claims.
(4) Investor Communication
(a) Proposed Rule
    In the 2011 ABS Re-Proposing Release, we proposed, as a shelf
eligibility requirement, a method for facilitating investor
communication with other investors related to their rights under the
terms of the ABS. In particular, the proposed rule would require that
the transaction agreements contain a provision requiring the party
responsible for filing the Form 10-D to include in ongoing distribution
reports on Form 10-D any request received from an investor to
communicate with other investors related to investors exercising their
rights under the terms of the asset-backed security. The request to
communicate would be required to include: the name of the investor
making the request, the date the request was received, and a
description of the method by which other investors may contact the
requesting investor. As we discussed in the 2011 ABS Re-Proposing
Release, investors have raised concerns about the inability to locate
other investors in order to enforce rights contained in the transaction
documents, such as those relating to the repurchase of underlying
assets for breach of representations and warranties.\1139\ Frequently,
in order to act, the transaction agreements require a minimum
percentage of investors acting together. Additionally, as one investor
noted, since most ABS are held by custodians or brokers in ``street
name'' through the Depository Trust Company (DTC), investors face
further difficulties in trying to locate one another to communicate
about exercising their investor rights.\1140\
---------------------------------------------------------------------------

    \1139\ See the 2011 ABS Re-Proposing Release at 47959. See also
Alex Ulam, Investors Try to Use Trustees as Wedge in Mortgage Put-
Back Fight, American Banker (June 24, 2011) (noting that many
attempted put-backs have ``flamed out after investor coalitions
failed to get the 25% bondholder votes that pooling and servicing
agreements require for a trustee to be forced to take action against
a mortgage servicer''); Tom Hals & Al Yoon, Mortgage Investors
Zeroing in on Subprime Lender, Thomson Reuters (May 9, 2011) (noting
that gathering the requisite number of investors needed to demand
accountability for faulty loans pooled into investments is a
laborious task).
    \1140\ See letter from MetLife I. DTC is a securities depository
and a clearing agency registered with the Commission and provides
settlement services, including immobilizing securities and making
book-entry changes to ownership of securities deposited by its
participants, in order to facilitate the end-of-day net settlement
in multiple markets. For a more detailed description of DTC's
services see The Depository Trust Company Assessment of Compliance
with the CPSS/IOSCO Recommendations for Securities Settlement
Systems (Dec. 12, 2011), http://dtcc.com/en/legal/policy-and-compliance.aspx.
---------------------------------------------------------------------------

    While we did not propose specific procedural requirements for
verifying that the person requesting to communicate is a beneficial
owner of the particular ABS, we proposed to include an instruction to
limit investor verification requirements, if the underlying transaction
agreements contain such procedures, to no more than the following: (1)
If the investor is a record holder of the securities at the time of a
request to communicate, then the investor would not have to provide
verification of ownership because the person obligated to make the
disclosure will have access to a list of record holders; and (2) if the
investor is not the record holder of the securities at the time of the
request to communicate, the person obligated to make the disclosure
must receive a written statement from the record holder verifying that,
at the time the request is submitted, the investor beneficially held
the securities.
(b) Comments on Proposed Rule
    Many commenters were generally supportive of the concept to allow
for mechanisms for investors to contact and communicate with each
other.\1141\ Some commenters generally supported the proposal that
investors' requests to communicate be reported on Form 10-D.\1142\
Other commenters suggested that the Commission allow for alternative
methods of communication and recommended that the Commission permit the
use of investor registries and trustee Web site processes currently in
practice for many recent CMBS transactions.\1143\ Some of these
commenters noted that it would be quicker for investors to communicate
with each other on a Web site compared to requiring the issuer to
include the notice on Form 10-D and would be less costly.\1144\ One of
these commenters also recommended a Web site approach because it would
provide investors with more privacy, which investors may want in
certain situations.\1145\ The other commenter noted that a Web site
approach could provide investors with an open and instant dialogue with
other investors.\1146\
---------------------------------------------------------------------------

    \1141\ See letters from ABA II, ABAASA II, ASF III, BoA II,
CREFC II, ICI II, MBA III, Metlife II, Prudential II, VABSS III, and
Wells Fargo II.
    \1142\ See letters from ASF III, BoA II, ICI II, Metlife II, and
VABSS III.
    \1143\ See letters from ABA II, ABAASA II, ASF III, BoA II,
CREFC II, Metlife II, MBA III, Prudential II, VABSS III, and Wells
Fargo II.
    \1144\ See letters from CREFC II and Wells Fargo II.
    \1145\ See letter from CREFC II.
    \1146\ See letter from Wells Fargo II.
---------------------------------------------------------------------------

    Commenters suggested other methods to simplify the verification
process. One commenter opposed the proposed instruction on how an
investor's ownership of the securities is verified because most
certificates are held through DTC, which may make it difficult and
costly to determine who the ultimate holders are.\1147\ Several
commenters suggested requiring investors to complete a certification
regarding their ownership.\1148\ Another commenter suggested a written
certification plus one or more items to verify interest.\1149\ One
commenter suggested that the right to communicate be limited to current
investors and that the nature of communication be limited to a
``factual statement that the investor wishes to communicate with other
investors with respect to exercising a right under the transaction
documents.'' \1150\ This commenter explained that limiting the nature
of the

communication would eliminate any need for the filing party to monitor
or edit the communication and also would address any liability concerns
associated with the inclusion of references to a specific party to the
transaction or as to what contractual standard may have been violated.
Responding to a request for comment in the 2011 ABS Re-Proposing
Release,\1151\ some commenters stated the disclosure should include a
reason for the communication that would be specified in a pre-set
list.\1152\ One commenter, however, opposed requiring the issuer to
disclose the type or category of matter that the investor wishes to
discuss with other investors.\1153\
---------------------------------------------------------------------------

    \1147\ See letter from CREFC II.
    \1148\ See letters from MBA III and Wells Fargo II.
    \1149\ See letter from ABA II (stating ``in circumstances in
which rapid verification of investor status has been required,
trustees have accepted screen shots from DTC, letters from
registered broker-dealers affirming the identity of the beneficial
owner on whose behalf they hold a position, and copies of trade
confirmations'').
    \1150\ See letter from MBA III.
    \1151\ See Request for Comment No. 43 in the 2011 ABS Re-
Proposing Release (requesting comment as to whether a pre-set list
of reasons for communication should be required--the pre-set list
would include the following categories: Servicing, trustee,
representations and warranties, voting matters, pool assets, and
other).
    \1152\ See letters from ABAASA II and BoA II.
    \1153\ See letter from ABA II (noting its belief that ``such
information is more appropriately conveyed directly by the investor
itself and should not be given an imprimatur of the issuer (or
trustee) involved in facilitating the request'').
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Investor Communication
Shelf Requirement
    We are adopting, as proposed, a shelf eligibility requirement that
an underlying transaction agreement include a provision to require the
party responsible for making periodic filings on Form 10-D to include
in the Form 10-D any request from an investor to communicate with other
investors related to an investor's rights under the terms of the ABS
that was received during the reporting period by the party responsible
for making the Form 10-D filings.\1154\ Without an effective means for
investors to communicate with each other, investors may be unable to
utilize the contractual rights provided in the underlying transaction
agreements.\1155\ Therefore, we are requiring that the investor
communication provision be included in an underlying transaction
agreement so that the party responsible for making Form 10-D filings
will be contractually obligated to disclose an investor's desire to
communicate.\1156\ We continue to believe that this is an appropriate
requirement for ABS shelf eligibility because facilitating
communications among investors enables them to more effectively
exercise the rights included in the underlying transaction agreements,
which we believe will enhance the enforceability of representations and
warranties regarding the pool assets. As noted above, the new shelf
transaction requirements should encourage ABS issuers to design and
prepare ABS offerings with greater oversight and care. We believe that
stronger enforcement mechanisms should incentivize issuers to provide
investors with accurate and complete information at the time of the
offering. This shelf eligibility requirement, for example, will assist
investors in exercising their rights related to the new asset review
provision required for shelf eligibility. Those rights would include
the right to direct a review of underlying assets to determine whether
the assets comply with the representations and warranties.
Consequently, we believe that these new shelf requirements aimed at
helping investors exercise their contractual rights will assist in
increasing investors' participation in the ABS markets and thereby
foster greater capital formation.
---------------------------------------------------------------------------

    \1154\ Most ABS issuers report and distribute payments to
investors on a monthly basis. The Form 10-D is required to be filed
within fifteen days after a required distribution date, and a
distribution date is typically two weeks after the end of a
reporting period. For example, under our final rule, for the month
of June, a request from an investor would have to be received prior
to the close of the reporting period on June 30, a distribution
would be due to investors by July 15, and the Form 10-D filing due
date would be July 30.
    \1155\ See Paul A. Burke & Michael C. Morcom, Improving Issuer-
Investor Communication in U.S. Securitization Transactions, J.
Structured Fin., Summer 2013, at 27-31 (discussing the problems
associated with the current communication process between issuers
and investors and arguing that ``[a] critical piece of an effective
bondholder communication system is [the] initial `push' of
information out to the investor'').
    \1156\ See also new Item 1121(e) (requiring disclosure of
investors' request to communicate on Form 10-D).
---------------------------------------------------------------------------

    In previous releases, we have recognized that in certain
circumstances the Internet can present a cost-effective alternative or
supplement to traditional disclosure methods. We considered whether a
Web site or investor registry would be a more effective approach to
facilitate investor communication, including consideration of the
comments received supporting a Web site approach. While we appreciate
some of the potential benefits that may be afforded by a Web site
approach, such as faster dissemination of the notices and more robust
communication capabilities as noted by some commenters,\1157\ we
believe that requiring that the investor communication notices be filed
with the Form 10-D is the best way to ensure that these requests reach
investors. This approach is consistent with our efforts to facilitate
the distribution of all investor information regarding the ABS in one
place at an expected time--that is, through distribution reports that
are attached as exhibits to the Form 10-D. We also believe that this
approach is a cost-effective means for issuers to provide investors
with communication notices since we are using an existing periodic
report. Additionally, by requiring issuers to file the notices with the
Commission, as opposed to posting the notices on a Web site, we will be
able to more effectively monitor compliance with this shelf requirement
and provide investors with reliable access to the notices through
EDGAR, even at times when the markets are in distress and issuers' Web
sites are not accessible. Finally, we note that while our shelf
requirement is intended to provide investors with at least one method
to contact other investors, the final rule does not preclude issuers
from utilizing Web sites to provide investors with more robust
communications capabilities and we encourage issuers to do so.
---------------------------------------------------------------------------

    \1157\ See, e.g., letters from CREFC II and Wells Fargo II.
---------------------------------------------------------------------------

    We acknowledged in the 2011 ABS Re-Proposing Release that
transaction parties might want to specify procedures in the underlying
transaction agreements for verifying the identity of a beneficial owner
in a particular ABS prior to including a notice in a Form 10-D. While
we did not propose specific procedural requirements to be added to the
agreements, we did propose to limit the extent of the verification
procedures that the transaction parties could impose to verify investor
ownership. As summarized above, several commenters consisting of
issuers, investors, trustees, and trade associations suggested that the
investor verification procedures should be easy and quick to perform
and provided various recommendations for the Commission to
consider.\1158\ Taking into account suggestions from commenters, we are
modifying part of the proposed instruction to specify that, if the
investor is not the record holder of the securities, an issuer may
require no more than a written certification from the investor that it
is a beneficial owner and another form of documentation such as a trade
confirmation, an account statement, a letter from the broker or dealer,
or other similar document verifying ownership.\1159\ We are making this

change since ownership of most ABS is held in book-entry form through
DTC.\1160\ We are also adopting, as proposed, the other part of the
instruction that states that if the investor is the record holder of
the securities, an investor will not have to provide verification of
ownership because the person obligated to make the disclosure will have
access to a list of record holders.
---------------------------------------------------------------------------

    \1158\ See letters from ABA II, BoA II, CREFC II, and MBA III.
    \1159\ We note that these ownership verification procedures are
less prescriptive than the ownership eligibility requirements to
submit a proposal under Exchange Act Rule 14a-8; however, we believe
that this flexibility is appropriate because the provision is more
limited in its scope to only providing notification to other
investors of their interest to communicate.
    \1160\ See letter from CREFC II (explaining that although the
trustee can request a list of beneficial owners from DTC, the
process can be costly and can take days or weeks to complete).
---------------------------------------------------------------------------

    Under the final rule, the disclosure in Form 10-D is required to
include no more than the name of the investor making the request, the
date the request was received, a statement to the effect that the party
responsible for filing the Form 10-D has received a request from such
investor, stating that such investor is interested in communicating
with other investors about the possible exercise of rights under the
transaction agreements, and a description of the method by which other
investors may contact the requesting investor.\1161\ While we requested
comment on whether we should prescribe a pre-set list of objective
categories from which an investor could choose for the purpose of
indicating why it is requesting communication with other investors, we
are not requiring that the investor specify the substance of the
communication due to concerns raised by commenters. As summarized
above, some commenters opposed imposing any obligation on the party
responsible for filing the Form 10-D to monitor or edit the
communications.\1162\ We also agree with one commenter that the
substance of the communication is more appropriately conveyed directly
by the investor and should not be given an imprimatur of the party
involved in facilitating the communication request.\1163\ Thus, the
purpose of this communication requirement is not to communicate
specific issues or concerns of an investor but rather is intended to be
a method for investors to notify other investors of their interest to
communicate.
---------------------------------------------------------------------------

    \1161\ See Item 1121(e) and Item 1.B. of Form 10-D.
    \1162\ See letters from ABA II and MBA III.
    \1163\ See letter from ABA II.
---------------------------------------------------------------------------

    As proposed, we are also including an instruction to Item 1121(e)
of Regulation AB to define the type of notices that are required to be
on Form 10-D. The party responsible for filing the Form 10-D will be
required to include disclosure of only those notices of an investor's
desire to communicate where the communication relates to the investor
exercising its rights under the terms of the ABS. Thus, the party
responsible for filing is not required to disclose an investor's desire
to communicate for other purposes, such as identifying potential
customers or marketing efforts.\1164\
---------------------------------------------------------------------------

    \1164\ To the extent an investor wishes to communicate with
other investors about other matters, the investor must consider
independently the potential applicability of other regulatory
provisions under the federal securities laws. For example, an
investor proposing to commence a tender offer for securities in the
ABS class must evaluate whether such a communication is subject to
Exchange Act Sections 14(d) and 14(e) and Regulations 14D and 14E
thereunder.
---------------------------------------------------------------------------

    While we acknowledge that issuers will incur some cost to implement
this provision, we believe, taken together with the new asset review
provision, that the disclosure will benefit investors by helping them
establish communication and overcome collective action problems. As a
result, this requirement should help investors exercise their rights
under the transaction agreements, including those that are required to
be included in the transaction documents to comply with shelf
eligibility requirements. We acknowledge that the rule will minimally
increase the costs for the party responsible for making the periodic
filings on Form 10-D since it will need to modify its existing
information systems to receive investors' requests to communicate.
However, this is a very low cost method to help distinguish shelf
appropriate ABS offerings. The Form 10-D is an existing periodic report
that provides investors with, among other things, distribution
information and pool performance information for the distribution
period. Given the nature and frequency of the Form 10-D, we believe
that adding the investor communication request requirement to the Form
10-D is appropriate and beneficial to investors because it will
facilitate the distribution of all investor information regarding the
ABS in one place, at an expected time. Using an existing form will also
limit the cost for issuers because a separate reporting mechanism will
not be necessary. While we have sought to limit costs by using Form 10-
D, we recognize for those issuers that currently offer investor
registries or Web sites and decide to continue to offer those methods
of communication that there will be additional costs.
(b) Shelf Eligibility--Registrant Requirements
    In the 2010 ABS Proposing Release, we proposed new registrant
requirements related to compliance with the proposed transaction
requirements for shelf eligibility (i.e., risk retention, a third-party
opinion provision in transaction agreements, an officer certification,
and an undertaking to file ongoing Exchange Act reports).\1165\ We
proposed that prior to filing a registration statement on proposed Form
SF-3 to the extent the depositor, any issuing entity that was
previously established by the depositor, or an affiliate of the
depositor is or was at any time during the previous twelve months
required to comply with the proposed transaction requirements of Form
SF-3 with respect to a previous offering of asset-backed securities
involving the same asset class, such depositor, each such issuing
entity, and any affiliate of the depositor must have filed all material
required to be filed during the twelve months (or shorter period that
the entity was required to have filed such materials). Also, such
material, other than certain specified reports on Form 8-K, must have
been filed in a timely manner.\1166\ Finally, we proposed a separate
registrant requirement that there be disclosure in the registration
statement stating that the proposed registrant requirements have been
complied with.
---------------------------------------------------------------------------

    \1165\ For a list of existing shelf eligibility conditions that
we are including in new Form SF-3, see footnote 874.
    \1166\ See General Instruction I.A.2 to Form SF-3.
---------------------------------------------------------------------------

    In light of the changes to proposed amendments to the transaction
requirements for shelf eligibility, we revised the proposed registrant
requirements to make conforming changes in the 2011 ABS Re-Proposal. We
re-proposed that to the extent the depositor, any issuing entity that
was previously established by the depositor, or any affiliate of the
depositor is or was at any time during the twelve month look-back
period required to comply with the proposed transaction requirements of
Form SF-3 with respect to a previous offering of asset-backed
securities involving the same asset class then the registrant must meet
certain registrant requirements at the time of filing the shelf
registration statement. The re-proposed registrant requirements would
require that such depositor, each such issuing entity, and any
affiliate of the depositor must have timely filed all required
certifications and all transaction agreements that contain the required
provisions relating to the credit

risk manager, repurchase request disputes, and investor communication.
    In addition, we re-proposed to make the proposed separate
registrant requirement that would have required the registrant to
include disclosure in the registration statement stating the depositor
has complied with the registrant requirements an instruction rather
than a shelf eligibility registrant requirement.
    Because we did not receive any comments on the revised registrant
requirements for shelf eligibility, we are adopting the revised
registrant requirements largely as re-proposed. Under the final rule,
we are retaining the registrant requirement that was previously in Form
S-3 relating to delinquent filings of the depositor or an affiliate of
the depositor for purposes of new Form SF-3. Since registrants are
already required to comply with this particular existing shelf
registrant requirement, registrants should not incur additional
compliance costs.
    The final rule also requires that to the extent the depositor or
any issuing entity that was previously established by the depositor, or
any affiliate of the depositor is or was at any time during the twelve
month look-back period required to comply with the transaction
requirements of Form SF-3 with respect to a previous offering of asset-
backed securities involving the same asset class, then such depositor,
each such issuing entity, and any affiliate of the depositor, must have
timely filed all required certifications and all transaction agreements
that contain the required provisions relating to the asset review
provision, dispute resolution, and investor communication.
    We believe that connecting the registrant requirements to the
transaction requirements of prior offerings by the depositor, or
affiliates of the depositor, will incentivize the depositor to timely
file all required transaction documents with the required provisions
and the required certifications.
    In addition, as proposed, we are including an instruction stating
that the registrant must disclose in a prospectus that it has met the
registrant requirements. We believe disclosure of compliance with the
registrant requirements will provide a means for market participants
(as well as the Commission and its staff) to better gauge compliance
with the shelf eligibility conditions of Form SF-3.
(c) Annual Evaluation of Form SF-3 Eligibility in Lieu of Section
10(a)(3) Update
(1) Annual Compliance Check Related to Timely Exchange Act Reporting
(a) Proposed Rule
    As we noted in the 2010 ABS Proposing Release, Form S-3 eligibility
is determined at the time of filing the registration statement and
again at the time of updating the registration statement under
Securities Act Section 10(a)(3) by filing audited financial
statements.\1167\ We explained that, because ABS registration
statements do not contain financial statements of the issuer, we
believe a different periodic determination of continued shelf
eligibility must be established. We believed that such an evaluation
would provide us and the staff with a better means to oversee
compliance of the new Form SF-3 eligibility conditions that would
replace the investment-grade ratings requirement. Therefore, in lieu of
the Section 10(a)(3) updating, we proposed to revise Securities Act
Rule 401 to require, as a condition to conducting an offering off an
effective shelf registration statement, an annual evaluation of whether
the Exchange Act reporting registrant requirements have been satisfied.
An ABS issuer wishing to conduct a takedown off an effective shelf
registration statement would be required to evaluate whether the
depositor, any issuing entity previously established by the depositor
or any affiliate of the depositor that was required to report under
Sections 13(a) and 15(d) of the Exchange Act during the previous twelve
months for asset-backed securities involving the same asset class, have
filed such reports on a timely basis, as of 90 days after the end of
the depositor's fiscal year end.\1168\ Under this proposal the related
registration statement could not be utilized for subsequent offerings
for at least one year from the date the depositor or the affiliated
issuing entity that had failed to file Exchange Act reports then became
current in its Exchange Act reports (and the other requirements had
been met).
---------------------------------------------------------------------------

    \1167\ 15 U.S.C. 77j(a)(3).
    \1168\ See the 2004 ABS Adopting Release at 1525 (noting our
belief that given past deficiencies in Exchange Act reporting
compliance in the ABS sector that issuers that fail to comply with
their responsibilities under the Exchange Act for prior transactions
should not continue to receive the benefits of shelf registration
and, further, that issuers should not be able to create a new
special purpose depositor to avoid the consequences of Exchange Act
reporting noncompliance).
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    We received only a few comments on our proposal. One commenter
expressed concern that it is not possible for ABS issuers to fully
verify compliance with the Exchange Act reporting registrant
requirements as of 90 days after the end of the depositor's fiscal year
end because there could be an unknown defect, latent or otherwise, in
one or another of the relevant issuing entities' reports or reporting
history.\1169\ Another commenter suggested that the loss of shelf
eligibility should not be automatic.\1170\ This commenter suggested
allowing for an explanation and any resulting penalty should be at the
staff's discretion.\1171\
---------------------------------------------------------------------------

    \1169\ See letter from ASF III.
    \1170\ See letter from SIFMA III-dealers and sponsors.
    \1171\ Id.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
    Under the new rule, an ABS issuer with an effective shelf
registration statement will be required to evaluate whether the
depositor, any issuing entity previously established by the depositor
or any affiliate of the depositor was required to report under Sections
13(a) or 15(d) of the Exchange Act during the previous twelve months
for asset-backed securities involving the same asset class, have filed
such reports on a timely basis. As noted above, one commenter expressed
concern that ABS issuers would be unable to fully verify compliance
with the Exchange Act reporting registrant requirements as of 90 days
after fiscal year end due to an unknown defect in one or another of the
relevant issuing entities' periodic reports or reporting history.\1172\
We note that this annual compliance check is the same evaluation
undertaken today by registrants at the time of filing the registration
statement and at the time of filing Form 10-K; therefore, we expect
that issuers would use the same procedures that are used to verify
compliance at the time of filing the registration statement. As a
result, this rule conforms the ABS process to the corporate issuers'
process. Additionally, we believe that the costs will be minimal and
limited to ABS issuers performing the same procedures they perform at
the time of filing a registration statement. We believe that

this annual shelf eligibility compliance check will benefit investors
because it will encourage issuers to file their Exchange Act reports in
connection with prior offerings at the required time and therefore
enhance informed investment decisions. We acknowledge, however, that
there will be costs to those issuers that determine, as a result of
their annual evaluation, that they did not timely file their Exchange
Act reports and lose shelf access since they will be required to use
Form SF-1. These costs are related to market timing given the
possibility of additional staff review that may occur with a Form SF-1
compared to Form SF-3. We believe that this new provision simply
ensures that the shelf process for ABS includes a mechanism to check
whether the shelf issuer is current and timely with its Exchange Act
reporting obligations as is currently required for corporate shelf
issuers.
---------------------------------------------------------------------------

    \1172\ See letter from ASF III (also suggesting that we follow
Rule 401(g) and deem the registration statement to be filed on the
proper registration form unless and until the Commission notifies
the issuer of its objection). We note that Rule 401(g) applies to
automatically effective registration statements, and those are not
the type of registration statements in question here.
---------------------------------------------------------------------------

(2) Annual Compliance Check Related to the Fulfillment of the
Transaction Requirements in Previous ABS Offerings
(a) Proposed Rule
    In the 2010 ABS Proposing Release, we also proposed to require
that, for continued shelf eligibility, an ABS issuer would be required
to conduct an evaluation at the end of the fiscal quarter prior to the
takedown of whether the ABS issuer was in compliance with the proposed
transaction requirements relating to risk retention, third-party
opinions, the officer certification, and the undertaking to file
ongoing reports. If the ABS issuer was not in compliance with the
transaction requirements, then it could not utilize the registration
statement or file a new registration statement on Form SF-3 until one
year after the required filings were filed.
    In the 2011 ABS Re-Proposal, we re-proposed this registrant
requirement to require an annual evaluation of compliance with the
transaction requirements of shelf registration rather than an
evaluation on a quarterly basis as we had originally proposed.
Therefore, notwithstanding that the registration statement may have
been previously declared effective, in order for the registrant to
conduct a takedown off an effective registration statement, an ABS
issuer would be required to evaluate, as of 90 days after the end of
the depositor's fiscal year end, whether it meets the registrant
requirements. Under the 2011 ABS Re-Proposal, to the extent that the
depositor or any issuing entity previously established by the depositor
or any affiliate of the depositor, is or was at any time during the
previous twelve months, required to comply with the proposed new
transaction requirements related to the certification, credit risk
manager and repurchase dispute resolution provisions, and investor
communication provision, with respect to a previous offering of ABS
involving the same asset class, such depositor and each issuing entity
must have filed on a timely basis, at the required time for each
takedown, all transaction agreements containing the provisions that are
required by the proposed transaction requirements as well as all
certifications.
    In response to commenters' concerns that the one-year penalty for
non-compliance with the transaction requirements was too extreme, we
revised and re-proposed to allow depositors and issuing entities to
cure any failure to file the required certification or transaction
agreements with the required shelf provisions. Under the proposed cure
mechanism, the depositor or any issuing entity would be deemed to have
met the registrant requirements, for purposes of Form SF-3, 90 days
after the date all required filings were made.
(b) Comments on Proposed Rule
    Commenters recommended that we reduce the waiting period after
curing the deficiency. Some commenters requested that the waiting
period after curing the deficiency be reduced to 30 days.\1173\ Another
commenter recommended changing the period to 30 or 45 days.\1174\
---------------------------------------------------------------------------

    \1173\ See letters from CREFC II and Kutak.
    \1174\ See letter from MBA III.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
    The final rule includes a registrant requirement that requires an
annual evaluation of compliance with the transaction requirements of
shelf registration, as re-proposed in the 2011 ABS Re-Proposing
Release. Under the final rule, notwithstanding that the registration
statement may have been previously declared effective, in order to
conduct a takedown off an effective shelf registration statement, an
ABS issuer would be required to evaluate, as of 90 days after the end
of the depositor's fiscal year end, whether it meets the registrant
requirements, which is the same look-back period for the ABS issuer as
the compliance evaluation for Exchange Act reporting described above.
    Under the final rule, a depositor and issuing entity may cure the
deficiency if it subsequently files the information that was required.
After a waiting period, it will be permitted to continue to use its
shelf registration statement.\1175\ Under the cure mechanism, the
depositor and issuing entity will be deemed to have met the registrant
requirements, for purposes of Form SF-3, 90 days after the date all
required filings are filed.
---------------------------------------------------------------------------

    \1175\ Curing the deficiency also allows the depositor, or its
affiliates, to file a new registration statement if it also meets
the other registrant requirements. See General Instruction I.A.1. of
Form SF-3. As we emphasized in the 2011 ABS Re-Proposing Release,
failure to file the information required (i.e., the required
certification and transaction agreements with required provisions)
will be a violation of our rules, and subject to liability
accordingly. Furthermore, failing to provide disclosure at the
required time periods may raise serious questions about whether all
required disclosure was provided to investors prior to investing in
the securities.
---------------------------------------------------------------------------

    Because the issuer can cure the deficiency while it continues to
use the shelf and before the required annual evaluation, the issuer can
avoid being out of the market. For example, a depositor with a December
31 fiscal year end has an effective shelf registration statement and on
March 30 of Year 1, it evaluates compliance with all registrant
requirements under new Rule 401(g) (90 days after the last fiscal year
end) and determines that it is in compliance. The depositor then offers
ABS but does not timely file the required transaction agreements that
should have been filed on June 20 of Year 1. The depositor would be
able to continue to use its existing shelf until it is required to
perform the annual evaluation required by new Rule 401(g), on March 30
of Year 2. After March 30 of Year 2 and until June 20 of Year 2 (one
year after the agreements should have been filed), the depositor would
not be able to offer ABS off of the shelf registration statement, and
would not be permitted to file a new shelf registration statement.
However, if the depositor had cured the deficiency by filing the
agreements on July 1 of Year 1, under the final rule, a new
registration statement could be filed 90 days after July 1 of Year 1
(or September 29 of Year 1), instead of waiting until June 20 of Year 2
(when it otherwise would meet the twelve month timely filing
requirement). In that case, at the time of the next annual evaluation
for the registration statement on March 30 of Year 2, the depositor
would be deemed to have met the registrant requirements because it
would have cured the deficiency more than 90 days earlier on July 1 of
Year 1, and thus the depositor could continue to use its existing shelf
registration statement.\1176\
---------------------------------------------------------------------------

    \1176\ Using the example above, if the failure occurs in the
first 90 days of the year before the March 30 annual compliance
evaluation, but the issuer corrects the deficiency by filing the
required information before providing the evaluation on March 30,
the issuer will still be deemed to satisfy the registrant
requirements for purposes of continued shelf eligibility and thus
not be required to wait until March 30 of the next year to use the
existing shelf registration statement or file a new one. The issuer,
however, must still wait 90 days after filing the required
information before using the existing effective shelf registration
statement or filing a new shelf registration statement. We have
revised the requirement to make this clear.

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

    Our approach is designed to strike a balance between encouraging
issuers' compliance with the shelf transaction requirements and
commenters' concerns that the one-year time out period in the 2010 ABS
Proposals was too long. Also, as discussed above, we received comments
that 90 days was still too long and that a 30 or 45 day waiting period
would be more appropriate.\1177\ We continue to be concerned that 30 or
45 days would not adequately incentivize issuers to comply with the
transaction requirements. Based on staff observations of shelf
offerings since the crisis, registrants typically conduct between two
and three offerings during the course of a year. Under such conditions,
a short waiting period such as 30 or 45 days would provide minimal, if
any, incentive to comply with transaction requirements.
---------------------------------------------------------------------------

    \1177\ See letters from MBA III and SIFMA III-dealers and
sponsors.
---------------------------------------------------------------------------

    We are not adopting another commenter's suggestion that the loss of
shelf eligibility not be automatic and that issuers should instead be
allowed to explain and be penalized at the staff's discretion.\1178\
The eligibility requirement is an incentive for issuers to comply with
the shelf transaction requirements--providing the market with
information about the issuer and thus an appropriate eligibility
criterion to offer securities off the shelf. Furthermore, an ad hoc
review of justifications for delays or missing filings would be
inefficient use of the Commission's resources and would not incentivize
issuers to monitor compliance.
---------------------------------------------------------------------------

    \1178\ See letter from SIFMA III-dealers and sponsors.
---------------------------------------------------------------------------

    We believe that the annual shelf eligibility compliance check will
benefit investors because it will encourage issuers to file their
transaction documents in connection with prior offerings at the
required time and therefore enhance informed investment decisions. We
acknowledge that the annual evaluations of compliance with the
transaction requirements will impose additional costs on ABS issuers in
the form of systems needed to examine compliance with the filing
requirements. However, we believe that these costs should be minimal
because issuers should already have, in most instances, systems
designed to ensure that the transaction agreements are being filed
timely in accordance with rules under the Securities Act.
4. Continuous Offerings
(a) Proposed Rule
    In the 2010 ABS Proposing Release, we had proposed to amend Rule
415 to limit the registration of continuous offerings for ABS offerings
to ``all or none'' offerings. In an ``all or none'' offering, the
transaction is completed only if all of the securities are sold. In
contrast, in a ``best-efforts'' or ``mini-max'' offering, a variable
amount of securities may be sold by the issuer. In those latter cases,
because the size of the offering would be unknown, investors would not
have the transaction-specific information and, in particular, would not
know the specific assets to be included in the transaction. Thus,
information about the asset pool required by Item 1111 of Regulation
AB, either in its existing form or as amended today, could not be
complied with.\1179\ As noted in the 2010 ABS Proposing Release, we
believe that our proposed restriction would help ensure that ABS
investors receive sufficient information relating to the pool assets,
if an issuer registered an ABS offering to be conducted as a continuous
offering.\1180\
---------------------------------------------------------------------------

    \1179\ The staff has advised us that they believe that neither
``best efforts'' offerings nor any continuous offerings have been
utilized in the past for public offerings of asset-backed
securities.
    \1180\ See the 2010 ABS Proposing Release at 23350.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    Only one commenter commented on the proposal to limit the use of
continuous offerings on shelf to ``all or none'' offerings.\1181\ This
commenter agreed that ``in a continuous offering where the ultimate
size of the offering is unknown, investors would not necessarily know
the specific assets to be included in the transaction'' and the
proposal properly eliminates this issue. However, this commenter
suggested more guidance on what constitutes an ``all or none''
offering.\1182\
---------------------------------------------------------------------------

    \1181\ See letter from ASF I.
    \1182\ See letter from ASF I (suggesting that there are
offerings that should not be included in the ``mini-max''
definition).
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
    We are adopting the rule as proposed. The new rule will provide ABS
investors in continuous ABS offerings with information about all
relevant pool assets and would close a potential gap in our regulations
for ABS offerings. Under the final rule, the continuous offering must
be commenced promptly and must be made on the condition that all of the
consideration paid for such security will be promptly refunded to the
purchaser unless (A) all of the securities being offered are sold at a
specified price within a specified time, and (B) the total amount due
to the seller is received by the seller by a specified date.\1183\
---------------------------------------------------------------------------

    \1183\ All or none offerings are described in Exchange Act Rules
10b-9 [17 CFR 240.10b-9] and 15c2-4 [17 CFR 240.15c2-4] in the same
manner.
---------------------------------------------------------------------------

    As one commenter noted, in some ABS offerings, all or a portion of
one or more classes of ABS that are offered for sale to investors
through one or more underwriters may initially be retained by the
depositor or sold to one or more of its affiliates.\1184\ In these
cases, the offerings may be conducted as a firm commitment underwritten
offering or as a best efforts offering. The commenter believed that
such offering would not be a ``mini-max'' offering because the total
size of the offering is known and disclosed in the prospectus. We agree
with the commenter that these offerings would not be a ``mini-max''
offering if the prospectus includes all transaction-specific
information, including information about the specific assets included
in the pool.
---------------------------------------------------------------------------

    \1184\ See letter from ASF I (noting that this typically arises
when the offered securities have a lower return or carry a lower
spread relative to market demand and confirming that any subsequent
sale of the securities by the depositor or its affiliates would be
undertaken in accordance with the registration provisions under the
Securities Act).
---------------------------------------------------------------------------

    This rule will be beneficial to investors in continuous offerings
by ensuring that the information they receive is about all pool assets
underlying the asset-backed securities they purchase. While ABS
offerings are typically not conducted as a continuous offering, we
believe that it is important for us to close a potential gap in our
regulations for ABS offerings so that ABS investors receive this
material information when making an investment decision--irrespective
of the type of public offering. We acknowledge that restricting
continuous offerings to ``all or none'' limits issuers' choice and may
potentially impose costs on those issuers that would have preferred to
conduct the offering on a best efforts basis. However, we also note
that the staff is not aware of any prior public offering of ABS that
was conducted on a continuous offering--either as ``all or none'' or
best efforts--and therefore we expect these costs to be minimal. For
similar reasons, we do not believe that the amended rule will have an
impact

on competition, efficiency, or capital formation.
5. Mortgage Related Securities
(a) Proposed Rule
    In the 2010 ABS Proposing Release, we proposed to require that
offerings of mortgage related securities be eligible for shelf
registration on a delayed basis only if, like other asset-backed
securities, they meet the registrant and transaction requirements for
shelf registration. Under the proposal, delayed shelf offerings of
mortgage related securities could be registered only on new Form SF-3,
and accordingly, must meet the eligibility requirements of Form SF-3.
We proposed eliminating the provision in Rule 415 that permits the
registration of ``mortgage related securities,'' as that term is
defined in Section 3(a)(41) of the Exchange Act, for shelf offerings
without regard to form eligibility requirements. This was a provision
that was added to Rule 415 contemporaneous with the enactment of
SMMEA.\1185\ Therefore, under the provision, an offering of mortgage
related securities did not have to meet the requirements of Form S-3
and could have been registered on a delayed basis on Form S-1.\1186\ As
we stated in the 2010 ABS Proposing Release, we proposed this
requirement based on our belief that mortgage related securities should
be required to meet all the requirements that we proposed for shelf
eligibility in order to be eligible for registration on a delayed basis
since these securities present the same complexities and concerns as
other ABS.\1187\
---------------------------------------------------------------------------

    \1185\ See Section V.A. Background and Economic Discussion.
    \1186\ See footnote 61 of the 2004 ABS Adopting Release.
    \1187\ See the 2010 ABS Proposing Release at 23350.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    One commenter agreed that mortgage related securities should be
held to the same standards as other asset-backed securities.\1188\
Another commenter believed that both proposed Forms SF-1 and SF-3
should be available for delayed offerings of mortgage related
securities ``to accommodate issuers or transactions that may not have a
need for an SF-3 registration or assets that are unique and better
suited for an SF-1 filing,'' but the commenter did not provide specific
examples or further explanation.\1189\
---------------------------------------------------------------------------

    \1188\ See letter from CFA I.
    \1189\ See letter from MBA I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
    We are revising Rule 415 as proposed. The change requires that
mortgage related securities meet all criteria for eligibility for shelf
registration on new Form SF-3. We believe that mortgage related
securities should meet all the requirements we are adopting in order to
be eligible for shelf registration on a delayed basis since these
securities present the same complexities and concerns as other asset-
backed securities. If we continue to allow issuers of mortgage related
securities to offer securities on a delayed basis off the shelf without
regard to the shelf eligibility requirements, we would effectively
allow mortgage related securities issuers to circumvent the
requirements we are adopting.
    We believe that the amendment to Rule 415 adopted today will result
in consistent and fair treatment of all asset-backed securities,
regardless of the nature of the underlying pool assets. We believe that
the impact of this rule on competition and capital formation will be
minimal since most, if not all, issuers of mortgage related securities
have met the shelf eligibility requirements and conducted offerings off
shelf registration statements.

C. Exchange Act Rule 15c2-8(b)

1. Proposed Rule
    Except for securities issued under master trust structures, shelf-
eligible ABS issuers generally are not reporting issuers at the time of
issuance. Under Exchange Act Rule 15c2-8(b),\1190\ with respect to an
issue of securities where the issuer has not been previously required
to file reports pursuant to Sections 13(a) or 15(d) of the Exchange
Act, unless the issuer has been exempted from the requirement to file
reports thereunder pursuant to Section 12(h) of the Exchange Act, a
broker or dealer is required to deliver a copy of the preliminary
prospectus to any person who is expected to receive a confirmation of
sale at least 48 hours prior to the sending of such confirmation (``48-
hour preliminary prospectus delivery requirement''). The rule contains
an exception to the 48-hour preliminary prospectus delivery requirement
for offerings of asset-backed securities eligible for registration on
Form S-3. An exception to the 48-hour preliminary prospectus delivery
requirement was first provided in 1995 by staff no-action
position.\1191\ This staff position was later codified in 2004.\1192\
---------------------------------------------------------------------------

    \1190\ 17 CFR 240.15c2-8(b).
    \1191\ See footnote 163 of the 2004 ABS Adopting Release and
accompanying text (discussing staff no-action letters providing
relief to ABS issuers from Rule 15c2-8(b)).
    \1192\ In the 2004 ABS Adopting Release, we noted some concerns
that investors did not have sufficient time to consider ABS offering
information. However, as we were considering other proposals at that
time that sought to address information disparity in the offering
process, we decided to codify the staff position.
---------------------------------------------------------------------------

    In light of recent economic events and to make this rule consistent
with our other proposed revisions, in the 2010 ABS Proposing Release,
we proposed to eliminate this exception so that a broker or dealer
would be required to deliver a preliminary prospectus at least 48 hours
before sending a confirmation of sale for all offerings of asset-backed
securities, including those involving master trusts. Because each pool
of assets in an ABS offering is unique, we believe that an ABS offering
is akin to an IPO, and therefore we believe the 48-hour preliminary
prospectus delivery requirement in Rule 15c2-8(b) should apply. Even
with subsequent offerings of a master trust, the offerings are more
similar to an IPO given that the mix of assets changes and is different
for each offering. Additionally, requiring that a broker or dealer
provide an investor with a preliminary prospectus at least 48 hours
before sending a confirmation of sale should be feasible and made
easier to implement as a result of our proposal that a form of
preliminary prospectus be filed with the Commission at least three
business days in advance of the first sale in a shelf offering.
2. Comments on Proposed Rule
    Commenters generally supported the proposal.\1193\ Several trade
associations agreed that investors should have sufficient time to
review an offering.\1194\ One trade association supported the proposal,
but suggested an ``access equals delivery'' model akin to final
prospectuses to satisfy the requirements.\1195\ One individual
commenter supported the proposal but suggested that ABS structured as
master trusts be treated differently so as not to require information
delivered previously to be delivered again.\1196\
---------------------------------------------------------------------------

    \1193\ See letters from ASF I, A. Zonca, BoA I, MBA I, Sallie
Mae I, and SIFMA I.
    \1194\ See letters from ASF I, MBA I, and SIFMA I.
    \1195\ See letter from ASF. See also letters from MBA I and
SIFMA I (focusing their comments in this area on the waiting period
that would be required by proposed Rules 424(h) and 430D).
    \1196\ See letter from A. Zonca (also suggesting that ABS master
trusts not be required to deliver the information if any changes to
previously delivered information relates to new account additions
with balances representing less than five percent of the master
trust).

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

3. Final Rule and Economic Analysis of the Final Rule
    We are eliminating the exception in Rule 15c2-8(b) for shelf-
eligible asset-backed securities from the 48-hour preliminary
prospectus delivery requirement as proposed.\1197\ Under the final
rule, a broker or dealer is required to comply with the 48-hour
preliminary prospectus delivery requirement with respect to the sale of
securities by each ABS issuer, regardless of whether the issuer has
previously been required to file reports pursuant to Sections 13(a) or
15(d) of the Exchange Act.\1198\ In addition, the 48-hour preliminary
prospectus delivery requirement also applies to ABS issuers utilizing
master trust structures that are exempt from the reporting requirements
pursuant to Section 12(h) of the Exchange Act. This requirement is
necessary because assets in a master trust routinely change, whether or
not they are exempt from or subject to Section 13(a) or 15(d) reporting
requirements. In a master trust securitization, assets may be added to
the pool in connection with future issuances of the securities backed
by the pool.\1199\ Although ABS issuers utilizing master trust
structures may be reporting under the Exchange Act at the time of a
``follow-on'' or subsequent offering of securities, additional assets
are added to the entire pool backing the trust in connection with a
subsequent offering of securities.
---------------------------------------------------------------------------

    \1197\ Because of the other changes we are adopting, we are also
repealing Securities Act Rule 190(b)(7). Rule 190(b)(7) provides
that if securities in the underlying asset pool of asset-backed
securities are being registered, and the offering of the asset-
backed securities and the underlying securities is not made on a
firm commitment basis, the issuing entity must distribute a
preliminary prospectus for both the underlying securities and the
expected amount of the issuer's securities that is to be included in
the asset pool to any person who is expected to receive a
confirmation of sale of the asset-backed securities at least 48
hours prior to sending such confirmation. Rule 190(b)(7) effectively
overrules the exclusion in Rule 15c2-8 for ABS issuers from the 48-
hour preliminary prospectus delivery requirement for particular
types of ABS offerings. Because we are repealing the Rule 15c2-8
exclusion for ABS issuers, and because our disclosure requirements
regarding the underlying securities for resecuritizations requires
significantly more information than what is required in Rule
190(b)(7) to be provided in the preliminary prospectus, we are
deleting Rule 190(b)(7).
    \1198\ See definition of issuer in relation to asset-backed
securities in Exchange Act Rule 3b-19.
    \1199\ The typical master trust securitization is backed by
assets arising out of revolving accounts such as credit card
receivables or dealer floorplan financings.
---------------------------------------------------------------------------

    The adoption of today's amendment will benefit investors by
allowing them more time to consider the characteristics of the
offering. We recognize that this benefit may be lower for investors in
ABS structured as master trusts, because such offerings are issued from
an existing issuing entity, which would have previously disclosed much
of the information to be provided in the 48-hour preliminary
prospectus. Nonetheless, such investors should benefit from having
additional time to consider information about the new assets that is
not provided in Exchange Act reports. The cost of today's amendment
will be borne by issuers, who will have to prepare and provide to
investors the preliminary prospectus. These costs will likely be small
as a result of our other new rule requiring that a preliminary
prospectus be filed with the Commission at least five days in advance
of the first sale.\1200\
---------------------------------------------------------------------------

    \1200\ See Section V.B.1 New Shelf Registration Procedures.
---------------------------------------------------------------------------

    We considered one commenter's suggestion to provide for an ``access
equals delivery'' model akin to final prospectuses.\1201\ Access equals
delivery is only permitted for a final prospectus and not a preliminary
prospectus. The rule is the same for prospectuses of both corporate
securities as well as ABS. The commenter did not address why ABS should
be different from corporate securities in the context of delivery of a
preliminary prospectus under Rule 15c2-8(b).\1202\
---------------------------------------------------------------------------

    \1201\ See letter from ASF I. See also the Securities Offering
Reform Release at 44783.
    \1202\ However, as is the case today, delivery of a preliminary
prospectus may be made electronically as permitted under our current
rules. See Use of Electronic Media for Delivery Purposes, Release
No. 33-7233 (Oct. 6, 1995) [60 FR 53458] (the 1995 Release).
---------------------------------------------------------------------------

    We are also adopting, as proposed, a correcting amendment to Rule
15c2-8(j). Paragraph (j) states that the terms ``preliminary
prospectus'' and ``final prospectus'' include terms that are defined in
Rule 434.\1203\ In 1995, at the same time we adopted Rule 434, we added
paragraph (j) to expand the use of the terms ``preliminary prospectus''
and ``final prospectus'' to reflect the terminology used in Rule
434.\1204\ Rule 434, however, was later repealed in 2005.\1205\
Accordingly, we are deleting paragraph (j), which is no longer
applicable.
---------------------------------------------------------------------------

    \1203\ 17 CFR 230.434. Securities Act Rule 434 allowed issuers
and other offering participants to meet their prospectus delivery
requirement by delivering a preliminary prospectus and a term sheet
or abbreviated term sheet before or at the time of sale. The
information contained in the preliminary prospectus, confirmation
and term sheet or abbreviated term sheet must, in the aggregate,
meet the informational requirements of Securities Act Section 10(a).
    \1204\ See Section II.B.4.a of Prospectus Delivery; Securities
Transactions Settlement, Release No. 33-7168 (May 11, 1995) [60 FR
26604].
    \1205\ Rule 434 was repealed in the Securities Offering Reform
Release.
---------------------------------------------------------------------------

D. Including Information in the Form of Prospectus in the Registration
Statement

1. Presentation of Disclosure in Prospectuses
(a) Proposed Rule
    We proposed to eliminate the current practice in shelf ABS
offerings of providing a base prospectus and prospectus supplement by
requiring the filing of a form of prospectus at the time of
effectiveness of the Form SF-3 and a single prospectus for each
takedown. As we noted in the 2010 ABS Proposing Release, we are
concerned that the base and supplement format has resulted in unwieldy
documents with excessive and inapplicable disclosure that is not useful
to investors.\1206\ To address this concern, we proposed to add a
provision in proposed Rule 430D and an instruction to proposed Form SF-
3 that would require ABS issuers to file a form of prospectus at the
time of effectiveness of the proposed Form SF-3 and to file a single
prospectus for each takedown, which would include all of the
information required by Regulation AB. We also proposed to require each
depositor to file a separate registration statement for each form of
prospectus. Under this proposal, each registration statement would
cover offerings by depositors securitizing only one asset class.
---------------------------------------------------------------------------

    \1206\ See the 2010 ABS Proposing Release at 23352.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    Several commenters supported \1207\ our proposal requiring the
filing of one integrated prospectus rather than a base prospectus and
prospectus supplement for each takedown, and one commenter
opposed.\1208\ One commenter, in support of the proposed rules,
believed that our proposal will provide investors with clearer
information relating to the assets that are the subject of the takedown
by not being encumbered with information that may not relate to that
particular transaction.\1209\ Another commenter, opposing the proposal,
argued that our concern that the base and supplement format has
resulted in unwieldy documents with excessive and inapplicable
disclosure that is not useful to investors is unwarranted.\1210\
---------------------------------------------------------------------------

    \1207\ See letters from BoA I, CFA I, and MBA I.
    \1208\ See letter from ASF I.
    \1209\ See letter from CFA I.
    \1210\ See letter from ASF I (expressed views of issuers only).
ASF investor members offered mixed views on the proposal.
---------------------------------------------------------------------------

    With respect to our proposal to limit each shelf registration
statement to one

asset class, one commenter asserted its belief that this proposal had
no bearing on the nature and quality of disclosure for any particular
shelf offering.\1211\ This commenter also noted that our proposed
limitation would not permit securitization platforms where more than
one depositor transfers or sells pool assets into the same issuing
entity to conduct shelf offerings. The commenter, although opposing the
proposal, recommended that the Commission clarify the scope of any
limitation so that multiple depositors who transfer or sell pool assets
into the same issuing entity would be permitted under the final rule.
---------------------------------------------------------------------------

    \1211\ See letter from ASF I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
    After considering the comments provided, we are adopting the rule
regarding presentation of disclosure in prospectuses as proposed so
that issuers must file a form of prospectus at the time of
effectiveness of Form SF-3 and file a single prospectus for each
takedown.\1212\ We continue to believe that the current format has the
unintended effect of encouraging ABS issuers to draft disclosure
documents that build in maximum flexibility for as many differing
transactions as possible with the investor bearing the burden of
determining which disclosures are relevant to a particular transaction.
Given that the registration statement is primarily for the benefit of
investors, we believe that we should facilitate investor understanding
and access to prospectuses for ABS and eliminate unnecessary
disclosures given to investors.\1213\ A single form of prospectus at
the time of effectiveness and a single prospectus for each takedown
should provide investors with clearer and more focused information
relating to the assets that are the subject of the takedown by not
encumbering investors with information that may not relate to that
particular transaction. Additionally, because we believe that this rule
will enhance investor understanding of the offering materials and the
transaction, the rule will, in turn, promote more efficient capital
formation. While we note one commenter's view that the existing
practice did not result in unwieldy documents,\1214\ we remain
concerned about the usefulness of the prospectus supplement format for
investors, especially in light of other commenters' support for our
proposal and the staff's experience in reviewing prospectuses in
registration statements and in takedowns.\1215\
---------------------------------------------------------------------------

    \1212\ See General Instruction IV of Form SF-3.
    \1213\ See the 2010 ABS Proposing Release at 23352.
    \1214\ See letter from ASF I.
    \1215\ See letters from BoA I, CFA I, and MBA I.
---------------------------------------------------------------------------

    We are also adopting our proposed limitation of one asset class per
registration statement with one clarification in response to
comments.\1216\ We continue to note the practice of some issuers to
include multiple depositors, multiple base prospectuses and multiple
prospectus supplements all in one registration statement.\1217\ We
believe that this practice has made the disclosure difficult for
investors to understand and difficult for market participants to locate
and obtain offering documents. Although one commenter stated that
limiting each shelf registration statement to one asset class has no
bearing on the quality or nature of the disclosure for any particular
shelf offering, we disagree.\1218\ The cumulative effect of including
multiple depositors, multiple base prospectuses and multiple prospectus
supplements in one registration statement is an unwieldy registration
statement for investors to navigate in determining what information
they should review before making their investment decision and
difficult for market participants to follow which registration
statement relates to which takedown. By limiting a registration
statement to one asset class, the quality and nature of the disclosure
should be enhanced as the disclosure would be presented in a more
accessible and useful format for investors. While the revisions to both
presentation of disclosure as well as the limitation of one asset class
per registration statement could place additional costs on issuers that
need to file additional registration statements, we believe that these
additional costs are reasonable in light of the expected improved
transparency benefits for investors.\1219\ Furthermore, we believe that
our pay-as-you-go amendment that we are also adopting should offset
some of the costs that issuers could incur with additional registration
statements.
---------------------------------------------------------------------------

    \1216\ See General Instruction IV of Form SF-3. We note existing
market practice in the case of some master trust structures, such as
credit card ABS involving a single platform, in which multiple
affiliated depositors transfer credit card receivables into the
issuing entity. We would view, in these limited instances, such
master trust structure with a single securitization platform as one
transaction (that is, one program), with multiple registrants.
    \1217\ See the 2010 ABS Proposing Release at 23352.
    \1218\ See letter from ASF I.
    \1219\ See Section X Paperwork Reduction Act (estimating this
requirement will result in approximately four new registration
statements to be filed annually by shelf ABS issuers).
---------------------------------------------------------------------------

2. Adding New Structural Features or Credit Enhancements
(a) Proposed Rule
    We proposed to restrict the ability of ABS issuers to add
information about new structural features or credit enhancements by
filing a prospectus under Rule 424(b).\1220\ It has been our
longstanding position, as articulated in the 2004 ABS Adopting Release,
that structural features or credit enhancements must be fully described
in the registration statement at the time of effectiveness.\1221\ As
part of this position, we have stated that a takedown off a shelf that
involves new structural features or credit enhancements that were not
described as contemplated in the base prospectus will usually require a
post-effective amendment rather than describing them in the final
prospectus filed with the Commission pursuant to Securities Act Rule
424.\1222\ In that regard, we proposed to codify our position that when
an issuer desires to add information that relates to new structural
features or credit enhancements, the issuer must file that information
by a post-effective amendment to the registration statement. By
requiring the issuer to file a post-effective amendment, the
Commission's staff would have an opportunity to review the disclosure
regarding these new structural features and credit enhancements that
would be contemplated for future takedowns from the shelf registration
statement.
---------------------------------------------------------------------------

    \1220\ See the 2010 ABS Proposing Release at 23353.
    \1221\ See the 2004 ABS Adopting Release at 1524.
    \1222\ See id. See also the 2010 ABS Proposing Release at 23353
(noting that although Rule 430B provides all issuers on Form S-3
with the ability to include information previously omitted in a
prospectus filed pursuant to Securities Act Rule 424(b), the staff
has continued to apply our position articulated in the 2004 ABS
Adopting Release).
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    Commenters were generally supportive of our proposal to codify the
requirement of a post-effective amendment for new structural features
or credit enhancements.\1223\ One commenter believed that all market
participants would benefit from the enhanced understanding of a
transaction that would result from the proposed rule.\1224\ One
commenter noted that the proposed rule would provide the staff with
time to focus on new structural features or credit

enhancements.\1225\ Another commenter noted that the proposed rule
would allow the Commission to control the purpose of shelf filing and
allow for more targeted review.\1226\ One commenter noted that the term
``structural features'' is too vague and suggested that the Commission
provide more specificity.\1227\
---------------------------------------------------------------------------

    \1223\ See letters from BoA I, CFA I, MBA I, Prudential I, and
Wells Fargo I.
    \1224\ See letter from Prudential I.
    \1225\ See letter from CFA I.
    \1226\ See letter from Wells Fargo I.
    \1227\ See letter from BoA I.
---------------------------------------------------------------------------

(c) Final Rule and Economic Analysis of the Final Rule
    After considering the comments, we are adopting, as proposed, new
Securities Act Rule 430D(d)(2), which codifies a longstanding position
of the Commission that an ABS issuer must file a post-effective
amendment to the registration statement when it wants to add
information about new structural features or credit enhancements that
were not described as contemplated in the base prospectus of an
effective registration statement. As noted above, one commenter stated
that the term ``structural features'' was too vague to use as a trigger
for a post-effective amendment and was concerned that the term could be
interpreted to trigger a post-effective amendment for minor structural
adjustments that would not have required a post-effective amendment
under the existing standard.\1228\ Because our new rule merely codifies
the Commission's longstanding position, the final rule does not change
when such requirement is triggered.\1229\
---------------------------------------------------------------------------

    \1228\ See letter from BoA I.
    \1229\ See the 2004 ABS Adopting Release at 1524 (``A takedown
off of a shelf that involves assets, structural features, credit
enhancement or other features that were not described as
contemplated in the base prospectus will usually require either a
new registration statement (e.g., to include additional assets) or a
post-effective amendment (e.g., to include new structural features
or credit enhancement) rather than simply describing them in the
final prospectus filed with the Commission pursuant to Securities
Act Rule 424.'').
---------------------------------------------------------------------------

    We believe that codification of our existing position will provide
issuers with clarity about how the rules work. It will also help to
ensure that the staff has the opportunity to review these new
structural features or credit enhancements that would be contemplated
for future offerings. Because this rule is simply a codification of our
existing position, we believe that the new rule will result in no
material increase in costs and will be neutral in terms of its impact
on competition, efficiency, and capital formation.

E. Pay-as-You-Go Registration Fees

1. Proposed Rule
    To alleviate some of the burden of managing multiple registration
statements among ABS issuers, we proposed to allow, but not require,
ABS issuers eligible to use Form SF-3 to pay filing fees as securities
are offered off a shelf registration statement, commonly known as
``pay-as-you-go.'' \1230\ Under the proposal, the triggering event for
a fee payment would be the filing of a preliminary prospectus.
---------------------------------------------------------------------------

    \1230\ In 2005, we first adopted pay-as-you-go rules to allow
well-known seasoned issuers using automatic shelf registration
statements to pay filing fees at the time of a securities offering.
See Section V.B.2.b.(D) of the Securities Offering Reform Release.
Under the current pay-as-you-go procedure for WKSIs, an issuer can
pay any filing fee, in whole or in part, in advance of takedown or
at the time of takedown, providing flexibility in the timing of the
fee payment. Issuers using pay-as-you-go can still deposit monies in
an account for payment of filing fees when due. The fee rules
applicable to the use of such account, also referred to as the
``lockbox account,'' apply. The amount of the fee is calculated
based on the fee schedule in effect when the money is withdrawn from
the lockbox account. This flexibility had been provided so issuers
may determine the fee payment approach most appropriate for them.
See footnote 529 of the Securities Offering Reform Release. See
Securities Act Rules 456(b) [17 CFR 230.456(b)] and 457(r) [17 CFR
230.457(r)].
---------------------------------------------------------------------------

2. Comments on Proposed Rule
    Several trade associations agreed that the proposal would be a
helpful change.\1231\ Some commenters noted that they would like the
Commission to clarify that, under existing Rule 457(p), if an ABS
offering is not completed, or the size of the offering is reduced,
after the fee is paid, the unused portion of the fee can be applied to
future takedowns off the same or a replacement registration statement
by the depositor or an affiliate of such depositor.\1232\ One issuer
requested that the timing of the fee payment be changed from the filing
of the preliminary prospectus to the filing of the final prospectus in
order to alleviate any risk that the issuer did not pay sufficient
registration fees to cover any upsizing of the offering as well as to
alleviate the possibility of overpayment of the registration fees if
the offering is downsized.\1233\
---------------------------------------------------------------------------

    \1231\ See letters from ABA I, ASF I, MBA I, and SIFMA I.
    \1232\ See letters from ASF I, BoA I, MBA I, and Sallie Mae I.
    \1233\ See letter from Sallie Mae I.
---------------------------------------------------------------------------

3. Final Rule and Economic Analysis of the Final Rule
    We are adopting, as proposed, revisions to our rules to permit ABS
issuers to pay registration fees as securities are offered off a
registration statement as opposed to paying all registration fees
upfront at the time of filing a registration statement on Form SF-3. As
proposed, under the new rule, a dollar amount or a specific number of
securities is not required to be included in the calculation of the
registration fee table in the registration statement, unless a fee
based on an amount of securities is paid at the time of filing.\1234\
As proposed, the fee table on the cover of the registration statement
must list the securities or class of securities registered and must
indicate if the filing fee will be paid on a pay-as-you-go basis.\1235\
---------------------------------------------------------------------------

    \1234\ See new Securities Act Rule 457(s).
    \1235\ In the case of ABS, the fee table on the registration
statement typically lists the offering of certificates and notes as
separate classes of securities. Each class (or tranche) of those
certificates and notes offered would not need to be separately
listed on the fee table. However, if the ABS is a resecuritization,
where registration of the underlying securities would be required
under Rule 190 and the underlying security was not listed on the fee
table of the Form SF-3 registration statement, the underlying
securities would need to be registered on a different new
registration statement. Likewise, if a servicer or trustee invests
cash collections in other instruments which may be securities under
the Securities Act, such as guarantees or debt instruments of an
affiliate, under Rule 190 those underlying securities also may need
to be registered concurrently with the asset-backed offering. If
those underlying securities were not listed on the fee table of the
registration statement, a new registration statement would be
required.
---------------------------------------------------------------------------

    Under the final rule, as proposed, the triggering event for a fee
payment will be the filing of an initial preliminary prospectus.\1236\
At the time of filing an initial preliminary prospectus,\1237\ the ABS
issuer is required to include a calculation of registration fee table
on the cover page of the prospectus and to pay the appropriate fee
calculated in accordance with Securities Act Rule 457. In light of one
commenter's concern about the possibility of overpaying the
registration fee by requiring it to be paid in connection with the
preliminary prospectus, we note ABS issuers opting to pay the required
registration fees with each takedown could rely upon Rule 457(p) to
apply a portion of the fee associated

with the unsold securities under a previously-filed registration
statement as an offset against the filing fee due at the time of the
preliminary prospectus filing by the same depositor or affiliates of
the depositor across asset classes. Similarly, such registrants could
apply unused fees paid in connection with a preliminary prospectus
filing toward a future takedown off the same registration statement. We
believe that this amendment will alleviate some of the burden ABS
issuers incur with managing multiple registration statements.
Additionally, it should offset some of the additional costs that
issuers will incur with our new rule, discussed earlier, requiring a
separate registration statement for each form of prospectus. We also
believe that our pay-as-you-go rule should produce some efficiencies in
the shelf offering process by providing shelf issuers with greater
payment flexibility.
---------------------------------------------------------------------------

    \1236\ See new Securities Act Rule 456(c). Unlike the pay-as-
you-go rules for WKSIs, we do not believe that a cure period is
necessary for ABS issuers because we are requiring ABS issuers to
pay the required fee at the time the preliminary prospectus is
filed. The timing of the fee payment for ABS would not give rise to
the same effective date and registration concerns that arise with
WKSIs. See Section V.B.2.b.(D) of the Securities Offering Reform
Release.
    \1237\ If, after the initial preliminary prospectus, an issuer
files a subsequent preliminary prospectus or prospectus supplement
solely to update the fee table and pay additional fees, the
subsequent preliminary prospectus will not trigger a new waiting
period. See discussion in Section V.B.1 New Shelf Registration
Procedures related to preliminary prospectuses and related waiting
periods.
---------------------------------------------------------------------------

F. Codification of Staff Interpretations Relating to Securities Act
Registration
    We proposed to codify several staff positions relating to the
registration of asset-backed securities.\1238\ In proposing these
codifications, we sought to simplify our rules by making our staff's
positions more transparent and readily available to the public.
---------------------------------------------------------------------------

    \1238\ See Section VII.A. of the 2010 ABS Proposing Release.
---------------------------------------------------------------------------

1. Fee Requirements for Collateral Certificates or Special Units of
Beneficial Interest
    We proposed to amend Rule 190 \1239\ of the Securities Act to
clarify the existing requirement that if the pool assets for the asset-
backed securities are collateral certificates or special units of
beneficial interest (SUBIs),\1240\ then the offer and sale of those
collateral certificates or SUBIs must be registered concurrently with
the registration of the asset-backed securities. While the offer and
sale of the certificates or SUBIs must be concurrently registered, we
proposed to codify the staff position that no separate registration fee
for the collateral certificates or SUBIs is required to be paid,
provided that the certificates or SUBIs meet the requirements of Rule
190(c).\1241\ Additionally, we proposed to amend Rule 457 \1242\ of the
Securities Act, governing the computation of registration fees, to
reflect the staff's position that where the securities to be offered
are collateral certificates or SUBIs underlying asset-backed securities
which are being concurrently registered, no separate fee for the
certificates or SUBIs will be payable.
---------------------------------------------------------------------------

    \1239\ 17 CFR 230.190. Rule 190 governs the registration
requirements for the underlying securities of an asset
securitization.
    \1240\ In some ABS transactions backed by auto leases, the
leases and car titles are originated in the name of a separate trust
to avoid the administrative expenses of re-titling the physical
property underlying the leases. The separate trust, commonly
referred to as the ``origination trust'' or ``titling trust,'' will
issue a collateral certificate, often called a ``special unit of
beneficial interest,'' to the issuing entity for the asset-backed
security. The issuing entity will then issue the asset-backed
securities backed by the collateral certificate or SUBI.
    \1241\ Rule 190(c) provides for the conditions in which an
asset-backed issuer is not required to register a pool asset
representing an interest in or the right to the payments or cash
flows of another asset.
    \1242\ 17 CFR 230.457.
---------------------------------------------------------------------------

    Several commenters supported the proposal to codify the staff's
position in Rule 190 and Rule 457 under the Securities Act.\1243\ One
commenter noted generally that codifying the staff's interpretations is
a benefit for all market participants,\1244\ and another commenter
indicated that it concurred with the Commission's rationale.\1245\ No
commenter opposed the proposal. After considering the comments, we are
adopting the amendments to Rule 190 and Rule 457 of the Securities Act
as proposed.\1246\
---------------------------------------------------------------------------

    \1243\ See letters from BoA I, Prudential I, and SIFMA I.
    \1244\ See letter from Prudential I.
    \1245\ See letter from BoA I.
    \1246\ See 17 CFR 230.190(d) and 457(t).
---------------------------------------------------------------------------

2. Incorporating by Reference Subsequently Filed Exchange Act Reports
(a) Proposed Rule
    Item 12(b) of Form S-3 requires that the registrant incorporate by
reference all subsequently filed Exchange Act reports prior to the
termination of the offering. In the 2004 ABS Adopting Release, we
explained that Item 12(b) of Form S-3 is required for asset-backed
issuers only ``if applicable.'' \1247\ The staff has provided
interpretive guidance to issuers as to which periodic reports and other
Exchange Act reports the issuer may be required to incorporate by
reference into the registration statement.\1248\ The staff has noted
that information filed with a current report on Form 8-K prior to the
termination of the offering would often be required to be incorporated
into the registration statement.\1249\ In contrast, the staff has
explained that Form 10-D or Form 10-K reports may not necessarily
contain information that is required to be, or that the issuer desires
to be, incorporated by reference into the registration statement.\1250\
---------------------------------------------------------------------------

    \1247\ See Section III.A.3 of the 2004 ABS Adopting Release.
    \1248\ See Interpretation 15.02 of the Division's Manual of
Publicly Available Interpretations on Regulation AB and Related
Rules.
    \1249\ Examples of circumstances when an asset-backed issuer may
be required to incorporate by reference its current reports on Form
8-K into the registration statement include filing required
exhibits, such as legal and tax opinions, or to provide disclosure
under Item 6.05 of Form 8-K regarding changes in the composition of
the pool assets.
    \1250\ We explained in the 2010 ABS Proposing Release that
because the Form 10-Ds and Form 10-Ks that are filed prior to the
termination of the offering are generally for a different ABS issuer
than the ABS issuer that has filed the prospectus, the Form 10-D and
Form 10-K reports may not be relevant to the asset-backed offering
that is the subject of the prospectus. See Section VII.B of the 2010
ABS Proposing Release.
---------------------------------------------------------------------------

    To simplify our rules, we proposed to codify the staff's position
that an issuer of asset-backed securities may modify the incorporation
by reference language included in the registration statement to provide
that only the current reports on Form 8-K subsequently filed by the
registrant prior to the termination of the offering shall be deemed to
be incorporated by reference into the registration statement.\1251\
---------------------------------------------------------------------------

    \1251\ See Section VII.B of the 2010 ABS Proposing Release.
---------------------------------------------------------------------------

(b) Comments on Proposed Rule
    Several commenters supported the proposal, and no commenters
opposed it.\1252\ One commenter believed that the proposed rule struck
the right balance by permitting issuers to incorporate by reference
only Form 8-K filings rather than requiring issuers to incorporate all
subsequently filed Exchange Act reports.\1253\ Some commenters
indicated that the proposed rule is consistent with current practice of
issuers.\1254\
---------------------------------------------------------------------------

    \1252\ See letters from BoA I, MBA I, Prudential I, and SIFMA I.
    \1253\ See letter from BoA I.
    \1254\ See letters from BoA I and MBA I.
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(c) Final Rule and Economic Analysis of the Final Rule
    After consideration of the comments, we are adopting the proposed
codification of the staff's position regarding incorporation by
reference of subsequently filed periodic reports in Form SF-3. Thus,
under Item 10(d) of Form SF-3, the prospectus shall provide a statement
regarding the incorporation by reference of Exchange Act reports prior
to the termination of the offering pursuant to one of the following two
ways. The registrant may state that all reports subsequently filed by
the registrant pursuant to Sections 13(a), 13(c), or 15(d) of the
Exchange Act prior to the termination of the offering shall be deemed
to be incorporated by reference into the prospectus. In the
alternative, the registrant may state that all current reports on Form
8-K subsequently filed by the registrant

pursuant to Sections 13(a), 13(c), or 15(d) of the Exchange Act prior
to the termination of the offering shall be deemed to be incorporated
by reference into the prospectus.
    We believe that the codification of these staff positions will
simplify our rules by making our staff's positions more transparent and
readily available to the public. Because these codifications are
consistent with current practice of issuers, we do not believe that
they will pose a cost to either issuers or investors.

VI. Filing Requirements for Transaction Documents

A. Proposed Rule

    Item 1100(f) of Regulation AB allows ABS issuers to file agreements
or other documents as exhibits on Form 8-K and, in the case of
offerings off a shelf registration statement, incorporate the exhibits
by reference instead of filing a post-effective amendment. In the 2010
ABS Proposing Release, we noted our belief that the information in the
transaction agreements and other documents provide important
information on the terms of the transactions, representations and
warranties about the assets, servicing terms, and many other rights
that would be material to an investor. In the staff's experience with
the filing of these documents, some ABS issuers have delayed filing
such material agreements with the Commission until several days or even
weeks after the offering of securities off a shelf registration
statement. We also noted that investors have expressed concerns
regarding the timeliness of information in ABS offerings, including the
timeliness of the filing of these documents.\1255\ In light of these
concerns, we proposed to revise Item 1100(f) of Regulation AB to state
explicitly that the exhibits filed with respect to an ABS offering
registered on Form SF-3 must be on file and made part of the
registration statement at the latest by the date the final prospectus
is required to be filed.\1256\ In response to the 2010 ABS Proposing
Release, some commenters recommended that the exhibits should be
available for investor review prior to making an investment
decision.\1257\ Therefore, in the 2011 ABS Re-Proposing Release, we re-
proposed the amendments to Item 1100(f) of Regulation AB to also
require that the underlying transaction documents, in substantially
final form, be filed and made part of the registration statement by the
date the preliminary prospectus is required to be filed rather than by
the date that the final prospectus is required to be filed.
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    \1255\ See the 2010 ABS Proposing Release at 23388.
    \1256\ We permit the filing of these agreements with the Form 8-
K and incorporated by reference into the registration statement in
lieu of filing a post-effective amendment to the registration
statement. As such, the filing requirements for these agreements,
including the timing of the filing, is governed by our registration
requirements, not the provisions of Form 8-K.
    \1257\ See letters from Tricadia Capital, Pacific Life Insurance
Company, PPM America, Inc., Allstate Investments LLC, New York Life
Investments, Guardian Life Insurance Company, AllianceBernstein
L.P., Prudential Fixed Income Management, Principal Real Estate
Investors, Capital Research Company, T. Rowe Price Associates, Inc.,
BlackRock, AEGON USA Investment Management, and State Street
Corporation (collectively, ``CMBS Investors'') dated Feb. 25, 2011
submitted in response to the 2010 ABS Proposing Release (suggesting
that the rules require that key disclosures, including the pooling
and servicing agreement, be made available to investors during the
marketing period so that investors have adequate time to review
prior to making an investment decision), Prudential I (noting its
concern with possible ``last minute financial engineering'' that
contributes to poor understanding of the transaction), and SIFMA I
(requesting for purposes of shelf eligibility that we clarify that
if exhibits are timely filed in substantially final form, the fact
that any such document is subsequently amended or otherwise
corrected will not be viewed by the Commission as a failure to
timely file the corrected document).
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B. Comments Received on Proposed Rule

    Comments on the re-proposed amendments to Item 1100(f) of
Regulation AB were mixed with mostly investors supporting the
amendments \1258\ and issuers opposing them.\1259\ The commenters that
opposed the proposal generally believed that the preliminary prospectus
provides all material information related to a particular transaction
and, therefore, there is no material benefit to providing the
transaction documents in substantially final form.\1260\ The commenters
also were concerned that the requirement would likely result in
additional costs to issuers or consumers; \1261\ that it would pose a
restriction on the parties' ability to tailor the transaction to meet
investor requests; \1262\ revising the prospectus and the transaction
documents at the same time could lead to more inconsistencies or
errors; \1263\ and may require the filing of the same documents three
times.\1264\ Some commenters also believed that for certain
transactions the documents cannot be given in the proposed time
frame.\1265\ Similarly, another commenter contended that the
requirement compels issuers to ``finalize transaction agreements'' by
the time of the preliminary prospectus filing, which will inevitably
delay issuers' access to the market and thereby potentially expose both
issuers and investors to market movements that may be adverse to one or
the other.\1266\
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    \1258\ See letters from ASF V (expressed views of investors
only), Better Markets, ICI II, MetLife II (stating that the
prospectus and transaction documents in substantially final form
should be provided at least five business days before the first sale
in an offering), Prudential II (stating that a draft set of
operative documents should be released at least five business days
prior to the first sale in the offering and the executed set of
operative documents should be released with the final prospectus
filing at least three business days prior to closing), and SIFMA II-
investors.
    \1259\ See letters from ABA II, AFME, ASF V (expressed views of
dealers and sponsors only), Kutak, SIFMA III-dealers and sponsors,
Sallie Mae II, VABSS III, and Wells Fargo II.
    \1260\ See, e.g., letters from ABA II, Sallie Mae II (suggesting
the transaction documents should be filed no earlier than the time
the final prospectus is filed), SIFMA III-dealers and sponsors,
VABSS III, and Wells Fargo II. See also letter from AFME (supporting
SIFMA's (dealer and sponsor members) position and stating that any
filing requirements adopted by the Commission should be consistent
with the requirements already in place in the European Union and its
member states, such as posting the relevant closing documents on an
issuer Web site).
    \1261\ See letters from Sallie Mae II (focusing on increased
costs to the issuer without any explanation or quantification),
VABSS III (focusing on costs to the issuer without any explanation
or quantification), and Wells Fargo II.
    \1262\ See letters from AFME and SIFMA III-dealers and sponsors.
    \1263\ See letter from ABA II (stating that the proposed
amendments to Item 1100(f) will impose unnecessary costs and timing
constraints on the issuer and introduce ``inefficiencies into the
offering process,'' but if the Commission requires ``current
documentation'' before pricing, the ABA believes that to the extent
that deal-specific terms create significant changes to or
clarifications of the forms filed with the registration statement,
then the updated documents should be made available to investors one
business day before they are asked to make an investment decision).
    \1264\ See letter from ASF V (stating that a filing may be
necessary, at the time the preliminary prospectus is filed, again at
the time the final prospectus is filed, in the event a change (other
than a ``minor'' change) to the agreement occurs, and at or after
the time those transaction agreements are executed because
``regulations appear to provide that an exhibit to a registration
statement filed without signatures would be considered an incomplete
exhibit and, therefore, could not be incorporated by reference in
any subsequent filing under any Act administered by the
Commission'').
    \1265\ See letters from ABA II (stating swap agreements are
generally negotiated after the transaction has been priced to
reflect pricing terms and market conditions on the date of entry and
that some of the technical real estate mortgage investment conduit
(``REMIC'') provisions that must be added into RMBS and CMBS
documentation cannot be provided within the proposed time frame (but
also have little relevance for investors, so long as they are
properly drafted) and Kutak (suggesting the documents are constantly
being revised, although in most cases, not materially, until the
final prospectus is filed).
    \1266\ See letter from ASF V (without clarification as to why
this requirement may delay pricing and the formation of contracts).
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    On the other hand, some investors believed that the transaction
documents

should be provided in substantially final form at least five business
days before the first sale in an offering,\1267\ and one of these
investors believed that an executed set of operative documents should
be released with the filing of the final prospectus (at least three
business days prior to closing).\1268\ One investor stated that access
to these documents was necessary in order to conduct appropriate due
diligence on transactions,\1269\ and a group of investors also stated
that the underlying transaction documents are material to their
investment decision and should be available in substantially final form
at the time the preliminary prospectus is filed.\1270\ Another group of
investors supported the proposal and stated that ``[t]he complexity of
those transactions does not lend itself to abbreviated disclosure.''
\1271\ Another commenter noted that ``access to the underlying
transaction documents is also essential for the benefit of investors.''
\1272\
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    \1267\ See letters from ASF V (expressed views of investors
only), MetLife II, Prudential II, and SIFMA II-investors.
    \1268\ See letter from Prudential II.
    \1269\ See letter from MetLife II (stating that in order to
conduct due diligence, investors need access to the following
documents: The pooling and servicing agreement and a blackline
against the original pooling and servicing agreement contained in
the shelf; the representations, warranties, and exceptions and a
blackline against industry model representations and warranties
(e.g., CMBS or other sectors that adopt these); or a blackline
against original representations and warranties contained in the
shelf; and the indenture (along with any blacklines thereto)).
    \1270\ See letter from ASF V (expressed views of investors
only).
    \1271\ See letter from SIFMA II-investors.
    \1272\ See letter from Better Markets.
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    In the 2011 ABS Re-Proposing Release, we also requested comment on
whether we should require issuers to file as an exhibit a copy of the
representations, warranties, remedies, and exceptions marked to show
how it compares to industry-developed model provisions. The comments
that we received on our request for comment as to filing exhibits
marked to industry-developed models were mixed with investors
supporting the proposal \1273\ and mostly issuers opposing it.\1274\
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    \1273\ See letters from ASF V (expressed views of investors
only), MetLife II (recommending that a copy of the current pooling
and servicing agreement be marked against the original pooling and
servicing agreement in the registration statement), and Prudential
II (recommending that we should require certain marked copies of
current filings against prior filings to assist investors in
identifying structural changes and suggesting that the release of
operative documents and blacklined documents should begin within 30
days after adoption of the new rules because this information is
critical to an investor's understanding of a securitization).
    \1274\ See letters from Better Markets, CREFC II (noting that
the representations and warranties will be in the ``substantially
final mortgage loan purchase agreement'' filed with the Rule 424(h)
filing), MBA II (with respect to CMBS), and SIFMA III-dealers and
sponsors (noting its support of industry efforts to develop model
provisions but emphasizing that such models do not currently exist
for most asset classes and that identifying trade associations to be
tasked with generating model provisions and doing so in a fair and
open manner would be an enormous challenge while resulting in
minimal additional investor protection).
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C. Final Rule and Economic Analysis of the Final Rule

    After considering the comments received, we are adopting the
requirement, as proposed in the 2010 ABS Proposing Release, to clarify
existing exhibit filing requirements by making explicit that the
exhibits filed with respect to an ABS offering, registered on new Form
SF-3, must be on file and made part of the registration statement at
the latest by the date the final prospectus is filed. We believe that
this revision should address the problem that we noted above about some
issuers delaying their filing of the transaction agreements with the
Commission until several days and, in some cases, even weeks after a
shelf offering of the securities. We also note that ABS shelf offerings
were designed to mirror non-shelf offerings in terms of filing the
exhibits and final prospectuses. Because all exhibits to Form SF-1 must
be filed by the time of effectiveness, we believe that all transaction
agreements for shelf offerings filed as exhibits should be filed and
made part of the shelf registration statement by the time of the final
prospectus.
    We are not adopting at this time, however, the part of the proposal
to require the transaction documents be filed, in substantially final
form, and made part of the registration statement by the date the
preliminary prospectus is required to be filed. We continue to consider
the balance between investors' interest in having access to the
transaction documents earlier and the costs and difficulties with
requiring issuers to provide the transaction documents in substantially
final form by the time of the preliminary prospectus. Also, in light of
the new disclosure requirements that must be provided at the time of
the preliminary prospectus, as well as the certification by the issuer
that the prospectus must fairly present information about the
transaction, including the structure of the transaction, we believe
further consideration is warranted. Therefore, the proposal to require