Originally published on August 23, 2011

Keywords: SEC, final rules, suspension of duty, ABS issuers, exchange act reports

On August 17, 2011, the US Securities and Exchange Commission (the "SEC") issued final rules (the "Final Rules")1 regarding the suspension of the duty of issuers of asset-backed securities (ABS) to file reports under the Securities Exchange Act of 1934 (the "Exchange Act Reports").2 The Final Rules were adopted pursuant to Section 942(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act").3

Effective Date

The Final Rules become effective on September 22, 2011.

Summary of Final Rules

The Final Rules permit an ABS issuer to suspend its obligation to file Exchange Act Reports if all outstanding ABS are held by affiliates of the depositor or if no ABS remain outstanding. The terms and conditions of the Final Rules are summarized below.

Exchange Act Reporting Requirements for Legacy Transactions

Section 942(a) of the Dodd-Frank Act amended Section 15(d) of the Exchange Act by eliminating the automatic suspension of the duty of ABS issuers to file Exchange Act Reports for transactions in which the ABS are held by fewer than 300 persons. Some market participants expressed concern that Section 942(a) could result in a "springing" Exchange Act Report filing requirement for ABS issuers who suspended their Exchange Act Report filings prior to the enactment of the Dodd-Frank Act.6

In response to this concern, the SEC's Division of Corporation Finance issued a no-action letter on January 6, 2011 (the "No-Action Letter").7 Under the No-Action Letter, an ABS issuer may continue to determine its obligation to file

Exchange Act Reports based on the standards set forth in Section 15(d) of the Exchange Act immediately prior to the enactment of Section 942(a) of the Dodd-Frank Act if:

1. The ABS issuer's reporting obligation in respect of outstanding ABS had been suspended by operation of Section 15(d) immediately prior to the date of enactment of the Dodd- Frank Act (i.e., July 22, 2010);

2. The ABS issuer continues to comply with its requirements under the related transaction agreements to make ongoing information regarding the ABS and the related pool assets available to security holders, directly or through the trustee, in the manner and to the extent required by the transaction agreements; and

3. The ABS issuer retains the information for a period of not less than five years after the related ABS are no longer outstanding and, upon request, furnishes a copy of any or all such information to the SEC or its staff.

Although the Final Rules do not codify the relief provided by the No-Action Letter, neither the Final Rules nor the SEC commentary that accompanies the Final Rules suggests that the No-Action Letter is overturned or superseded by the Final Rules. Therefore, ABS issuers who have suspended their filing of Exchange Act Reports prior to July 22, 2010 should be able to continue to rely on the No-Action Letter so long as all of the other conditions of the No-Action Letter as described above are satisfied. ABS issuers that are not eligible to suspend their filing of Exchange Act Reports under the terms of the No- Action Letter must assess their eligibility to suspend filing under the Final Rules.

Footnotes

1 See SEC Release No. 34-65148 (available at: http://www.sec.gov/rules/final/2011/34-65148.pdf).

2 For ABS issuers, the primary Exchange Act Reports are annual reports on Form 10-K, distribution reports on Form 10-D and current reports on Form 8-K.

3 Section 942(a) of the Dodd-Frank Act eliminated the automatic suspension of the duty of ABS issuers to file Exchange Act Reports and granted the SEC the authority to issue rules providing for the suspension or termination of the reporting obligations for ABS issuers. Prior to the adoption of Section 942(a) of the Dodd-Frank Act, Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") provided that the duty of issuers to file Exchange Act Reports with respect to a class of ABS is automatically suspended as to any fiscal year, other than the fiscal year within which the registration statement became effective, if the securities of each class to which the registration statement relates are held of record by fewer than 300 persons.

4 Under the Final Rules, ABS held of record by a broker, dealer, bank or nominee for any of them for the accounts of customers are considered held by the separate accounts for which they are held. Thus, if an investment bank is an ABS issuer and holds securities in its name for the benefit of other non-affiliated investors, it cannot suspend reporting under Rule 15d-22(b)(1). Conversely, if an unaffiliated bank or broker holds ABS for affiliates of the ABS issuer, the unaffiliated status of the broker or bank will not preclude suspension of reporting.

5 For an ABS issuer with a fiscal year ending on December 31, the first semi-annual fiscal period begins on January 1 and ends on June 30 and the second semi-annual fiscal period begins on July 1 and ends on December 31.

6 See American Securitization Forum letter to the SEC Re: Suspension of Periodic Reporting under Section 15(d) of the Securities Exchange Act of 1934 by Certain Issuers of Asset-Backed Securities, dated December 23, 2010 (available at: http://www.sec.gov/divisions/corpfin/cfnoaction/ 2011/asf010611-15d-incoming.pdf ).

7 The No-Action Letter is available at: http://www.sec.gov/divisions/corpfin/cfnoaction/ 2011/asf010611-15d.htm.

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