The SEC today proposed rules intended to enhance disclosure to investors in the asset-backed securities market.  The proposed rules would require ABS issuers to perform a review of the assets underlying the securities and publicly disclose information relating to that review.  The proposal also would require an ABS issuer or ABS underwriter to make publicly available the findings and conclusions of any 3rd-party due diligence report. Public comments are requested by 11/15.

“This marks the third Commission proposal to address the ABS issues that came to light during the financial crisis.”  ...  “This proposal will require issuers to provide investors with better information about the loans backing the asset-backed securities.”  -- SEC Chairman Mary Schapiro.

As proposed, ABS disclosure would be enhanced in 3 ways:

1. ABS issuers that are registered with the SEC would be required to perform a review of the bundled assets that underlie the ABS.   
2. Proposed amendments to Regulation AB would require an ABS issuer to disclose the nature, findings and conclusions of this review of assets.
3. The issuer or underwriter for both registered and unregistered ABS offerings would be required to disclose the findings and conclusions of any review performed by a 3rd party that was hired to conduct such a review.

The proposal includes detailed requests for comment on whether the Commission should set a minimum review standard, including possible standards that could be included in a final rule.

In addition to today’s proposed rule, the Commission last week proposed regulations to require issuers of ABS's - and credit rating agencies that rate ABS's - to provide investors with new disclosures about representations, warranties, and enforcement mechanisms.   Last April, the SEC proposed rules that would revise the disclosure, reporting and offering process for ABS's to better protect investors in the securitization market.

For further details, click onto:   [ SEC PR 10-192, 10/13 ]