Regulatory Disclosures:

Asset-Backed Securities

 

Reporting on Corporate Events

Position: Issuers or sponsors of asset-backed securities should have to notify ABS investors about:

• The creation of a direct financial obligation
• An obligation under an off-balance sheet arrangement
• Changes in control of the issuer

Rationale: Typically the entity that receives payments from borrowers and pays interest and principal to ABS investors, known as the “Servicer,” is the same company whose activities gave rise to the issuance of the ABS securities. ABS investors need relevant information about the Servicer to understand the long- and short-term risks associated with receiving their principal and interest payments when due. An exemption from reporting on these corporate events would put ABS investors at a disadvantage to both the company and to investors in other securities issued by the company.

Where stated: CFA Centre - SEC ABS (PDF)

 

Pre-ABS Offering Documents

Position: Issuers of asset-backed securities should have to ensure that investors have received relevant prospectus and computational information about an offering at least 24 hours prior to being permitted to issue ABS securities

Rationale: Permitting ABS offerings to proceed without giving investors sufficient information and time to review that information prior to an offering puts investors at legal and financial risk should a deal subsequently default.

Where stated: CFA Centre - SEC ABS (PDF)

 

Communications Between Investors and Servicers

Position: Servicers of asset-backed securities should create repositories on their Web sites to ensure that all investors receive answers to any parties’ questions about the relevant securities simultaneously.

Rationale: Such Web site repositories would ensure that all investors receive the same relevant information at the same time, and ensure that the information is widely distributed in a timely manner.

Where stated: CFA Centre - SEC ABS (PDF)

 

ABS Prospectuses

Position: Issuers of asset-backed securities should have to provide information about the structure of the deal, historical performance of similar or related transactions, and financial and legal information about the entities involved in the offering.

Rationale: Information about the structure, performance, issuer, servicer, and originator of the securities offered will give investors vital information they need to understand the risks involved in the securities offered.

Where stated: EAC - PD (PDF)