Cadwalader Clients & Friends Memo: SEC Re-Proposes Shelf Eligibility Conditions for Asset-Backed Securities

Cadwalader Clients & Friends Memo: SEC Re-Proposes Shelf Eligibility Conditions for Asset-Backed Securities

On July 26, 2011, the Securities and Exchange Commission (the "SEC") re-proposed rules (the "Re-Proposal") regarding new shelf eligibility requirements for asset-backed securities ("ABS"). In April 2010, the SEC had proposed rules that would revise the disclosure, reporting and offering process for ABS (the "2010 Proposal"), and the Re-Proposal is being made in light of changes mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act3 (the "Dodd-Frank Act") as well as to address certain comments that the SEC received on the 2010 Proposal.

Specifically, the Re-Proposal for ABS shelf eligibility would require:

  • a certification filed at the time of each shelf offering of the chief executive officer of the depositor or the executive officer in charge of securitization of the depositor concerningthe disclosure contained in the prospectus and the design of the securitization;
  • provisions in the underlying transaction agreements regarding the appointment of a credit risk manager to review the securitized assets upon the occurrence of certain trigger events and provisions requiring repurchase request dispute resolution;
  • a provision in the underlying transaction agreements that would enable an investor to communicate with other investors by means of a request made in Form 10-D; and
  • an annual evaluation of compliance with the registrant requirements for shelf eligibility.

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