Securities: SEC Issues Final Dodd-Frank Rules Relating to Asset-Backed Securities

On January 20, the Securities and Exchange Commission issued two sets of final rules to implement various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). The first rule, which implements section 943 of Dodd-Frank, involves "new rules related to representations and warranties in asset-backed securities offerings. The final rules require securitizers of asset-backed securities to disclose fulfilled and unfulfilled repurchase requests. [The] rules also require nationally recognized statistical rating organizations to include information regarding the representations, warranties and enforcement mechanisms available to investors in an asset-backed securities offering in any report accompanying a credit rating issued in connection with such offering, including a preliminary credit."

The second rule, implementing Section 945 of Dodd-Frank, is a new rule under the Securities Act of 1933 requiring "any issuer registering the offer and sale of an asset-backed security ('ABS') to perform a review of the assets underlying the ABS." The rule also amends Item 1111 of Regulation AB "that would require an ABS issuer to disclose the nature of its review of the assets and the findings and conclusions of the issuer’s review of the assets." Both sets of rules take effect March 28.