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5 August 2024

SEC Staff Posts New Guidance For Asset-Backed Securities

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On July 31, 2024, the US Securities and Exchange Commission (SEC) staff in the Division of Corporation Finance posted three new Compliance and Disclosure Interpretations (C&DIs)...
United States Corporate/Commercial Law

On July 31, 2024, the US Securities and Exchange Commission (SEC) staff in the Division of Corporation Finance posted three new Compliance and Disclosure Interpretations (C&DIs) related to the rules and forms adopted under Regulation AB, the Securities Act, and the Exchange Act with respect to asset-backed securities. C&DIs provide guidance to those who must comply with the federal securities laws. However, because they represent the views of the staff, they are not legally binding.

C&DI 103.01 Securitization Participant – Information publicly available on EDGAR

This C&DI provides guidance on when affiliates and subsidiaries may be considered "securitization participants" under Rule 192. Here, staff confirms that merely having access to, or receiving, information that is publicly available on EDGAR, by itself, does not result in the affiliate or subsidiary being a securitization participant under paragraph (ii)(B) of the "securitization participant" definition in Rule 192(c). This is consistent with prior public statements made by SEC staff. For more insight into Rule 192, please see Conflict Resolution: The SEC Adopts Final Rule 192 (Conflicts of Interest in Securitization Transactions).

C&DI 112.01 Form Eligibility for Public Utility Securitizations

This C&DI provides guidance on the proper registration statement forms for offering of securities that are backed by securitization property which includes the right to assess and collect certain special charges on customers' public utility bills ("public utility securitizations"). Here, staff confirms that (1) Form SF-1 is the proper registration statement form and (2) Form 10-K, Form 8-K, and Form 10-D are the appropriate forms for periodic reporting for public utility securitizations regardless of whether they are structured as stand-alone trusts or "series trusts" (where multiple series of unrelated securities are issued by a single issuing entity). Staff also states that, because public utility securitizations structured as series trusts are Exchange Act ABS, series trust issuers should refrain from making statements in their filings that they are not asset-backed issuers or that their securities are not asset-backed securities, as such statements would not be accurate.

C&DI 301.04 Item 1101(c) – Single Asset Securitizations

This C&DI provides guidance that a security that is supported by the cash flow of a single asset satisfies the requirement in Item 1101(c)(1) of Regulation AB that an asset-backed security be primarily serviced by the cash flows of a discrete "pool" of receivables or other financial assets. Staff notes that the term "pool" in Item 1101(c)(1) of Regulation AB does not require more than one asset and instead refers to the general absence of active pool management. Issuers should note that this C&DI does not change the requirements of other rules and regulations, such as Rule 1401 or Rule 1902 under the Securities Act of 1933, or the disclosure requirements of Regulation AB, including, for example, Item 1112 (Significant obligors of pool assets).

Footnotes

1. 17 CFR 230.140. Rule 140 provides: "A person, the chief part of whose business consists of the purchase of the securities of one issuer, or of two or more affiliated issuers, and the sale of its own securities, ..., to furnish the proceeds with which to acquire the securities of such issuer or affiliated issuers, is to be regarded as engaged in the distribution of the securities of such issuer or affiliated issuers within the meaning of section 2(11) of the Act."

2. 17 CFR 230.190. Rule 190 provides that, unless certain enumerated conditions are satisfied, "[i]n an offering of asset-backed securities where the asset pool includes securities of another issuer ("underlying securities"), unless the underlying securities are themselves exempt from registration under section 3 of the Act (15 U.S.C. 77c), the offering of the relevant underlying securities itself must be registered as a primary offering of such securities in accordance with paragraph (b) of Rule 190.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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