[Federal Register Volume 69, Number 93 (Thursday, May 13, 2004)]
[Proposed Rules]
[Pages 26650-26748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-10467]



[[Page 26649]]

-----------------------------------------------------------------------

Part II





Securities and Exchange Commission





-----------------------------------------------------------------------



17 CFR Part 210, et al.



Asset-Backed Securities; Proposed Rule

  Federal Register / Vol. 69, No. 93 / Thursday, May 13, 2004 / 
Proposed Rules  

[[Page 26650]]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 210, 228, 229, 230, 232, 239, 240, 242, 245 and 249

[Release Nos. 33-8419; 34-49644; File No. S7-21-04]
RIN 3235-AF74


Asset-Backed Securities

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: We are proposing new and amended rules and forms to address 
comprehensively the registration, disclosure and reporting requirements 
for asset-backed securities under the Securities Act of 1933 and the 
Securities Exchange Act of 1934. Principally, we are proposing to: 
Update and clarify the Securities Act registration requirements for 
asset-backed securities offerings, including expanding the types of 
asset-backed securities that may conduct delayed primary offerings on 
Form S-3; consolidate and codify existing interpretive positions that 
allow modified Exchange Act reporting that is more tailored and 
relevant to asset-backed securities; provide tailored disclosure 
guidance and requirements for Securities Act and Exchange Act filings 
involving asset-backed securities; and streamline and codify existing 
interpretive positions that permit the use of written communications in 
a registered offering of asset-backed securities in addition to the 
statutory registration statement prospectus.

DATES: Comments should be received on or before July 12, 2004.

ADDRESSES: Comments may be submitted by any of the following methods:
    Electronic comments:
     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml shtml); or
     Send an e-mail to [email protected]. Please include 
File Number S7-21-04 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov gov). Follow the instructions for submitting comments.
    Paper comments:
     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number S7-21-04. This file 
number should be included on the subject line if e-mail is used. To 
help us process and review your comments more efficiently, please use 
only one method. The Commission will post all comments on the 
Commission's Internet Web site (http://www.sec.gov/rules/ 
proposed.shtml). Comments are also available for public inspection and 
copying in the Commission's Public Reference Room, 450 Fifth Street, 
NW., Washington, DC 20549. All comments received will be posted without 
change; we do not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly.

FOR FURTHER INFORMATION CONTACT: Jeffrey J. Minton, Special Counsel, or 
Jennifer G. Williams, Attorney-Advisor, Office of Rulemaking, Division 
of Corporation Finance, at (202) 942-2910, or Eric J. Schuppenhauer, 
Professional Accounting Fellow, Office of Chief Accountant, at (202) 
942-4400, U.S. Securities and Exchange Commission, 450 Fifth Street, 
NW., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are proposing to amend Rules 1-02, 2-01, 
2-02 and 2-07 1 of Regulation S-X 2 under the 
Securities Act of 1933 (the ``Securities Act'') 3; to amend 
Items 10, 308, 401 and 406 4 of Regulation S-B 5 
under the Securities Act; to amend Items 10, 202, 308, 401, 406, 501, 
503, 512 and 601 6 of Regulation S-K 7 under the 
Securities Act, to add a new subpart of Regulation S-K, the 1100 series 
(``Regulation AB''); 8 to amend Rules 411, 424 and 434 
9 under the Securities Act; to add Rules 139a, 167, 190, 191 
and 426 10 under the Securities Act; to amend Rule 311 
11 of Regulation S-T; 12 to amend Forms S-1, S-2, 
S-3, S-11, F-1, F-2 and F-3 13 under the Securities Act; to 
amend Rules 10A-3, 12b-2, 12b-15, 13a-10, 13a-11, 13a-13, 13a-14, 13a-
15, 13a-16, 15c2-8, 15d-10, 15d-11, 15d-13, 15d-14, 15d-15 and 15d-16 
14 under the Securities Exchange Act of 1934 (the ``Exchange 
Act''); 15 to add Rules 3a12-12, 3b-19, 13a-17, 13a-18, 15d-
17, 15d-18, 15d-22 and 15d-23 16 under the Exchange Act; to 
amend Rule 100 17 of Regulation M 18 under the 
Exchange Act; to amend Rule 101 19 of Regulation BTR 
20 under the Sarbanes-Oxley Act of 2002 (the ``Sarbanes-
Oxley Act''); 21 to amend Forms 20-F, 40-F, 8-K and 10-K 
22 under the Exchange Act; and to add Form 10-D 
23 under the Exchange Act.
---------------------------------------------------------------------------

    \1\ 17 CFR 210.1-02; 17 CFR 210.2-01; 17 CFR 210.2-02; and 17 
CFR 210.2-07.
    \2\ 17 CFR 210.1-01 et seq.
    \3\ 15 U.S.C. 77a et seq.
    \4\ 17 CFR 228.10; 17 CFR 228.308; 17 CFR 228.401; and 17 CFR 
228.406.
    \5\ 17 CFR 228.10 et seq.
    \6\ 17 CFR 229.10; 17 CFR 229.202; 17 CFR 229.308; 17 CFR 
229.401; 17 CFR 229.406; 17 CFR 229.501; 17 CFR 229.503; 17 CFR 
229.512; and 17 CFR 229.601.
    \7\ 17 CFR 229.10 et seq.
    \8\ 17 CFR 229.1100 through 1121.
    \9\ 17 CFR 230.411; 17 CFR 230.424; and 17 CFR 230.434.
    \10\ 17 CFR 230.139a; 17 CFR 230.167; 17 CFR 230.190; 17 CFR 
230.191; and 17 CFR 230.426.
    \11\ 17 CFR 232.311.
    \12\ 17 CFR 232.10 et seq.
    \13\ 17 CFR 239.11; 17 CFR 239.12; 17 CFR 239.13; 17 CFR 239.18; 
17 CFR 239.31; 17 CFR 239.32; and 17 CFR 239.33.
    \14\ 17 CFR 240.10A-3; 17 CFR 240.12b-2; 17 CFR 240.12b-15; 17 
CFR 240.13a-10; 17 CFR 240.13a-11; 17 CFR 240.13a-13; 17 CFR 
240.13a-14; 17 CFR 240.13a-15; 17 CFR 240.13a-16; 17 CFR 240.15c2-8; 
17 CFR 240.15d-10; 17 CFR 240.15d-11; 17 CFR 240.15d-13; 17 CFR 
240.15d-14; 17 CFR 240.15d-15; and 17 CFR 240.15d-16.
    \15\ 15 U.S.C. 78a et seq.
    \16\ 17 CFR 240.3a12-12; 17 CFR 240.3b-19; 17 CFR 240.13a-17; 17 
CFR 240.13a-18; 17 CFR 240.15d-17; 17 CFR 240.15d-18; 17 CFR 
240.15d-22; and 17 CFR 240.15d-23.
    \17\ 17 CFR 242.100.
    \18\ 17 CFR 242.100 through 105.
    \19\ 17 CFR 245.101.
    \20\ 17 CFR 245.101 through 104.
    \21\ 15 U.S.C. 7201 et seq.
    \22\ 17 CFR 249.220f; 17 CFR 249.240f; 17 CFR 249.308; and 17 
CFR 249.310.
    \23\ 17 CFR 249.312.
---------------------------------------------------------------------------

Table of Contents

I. Overview
    A. What are Asset-Backed Securities?
    B. Securities Act Registration
    C. Disclosure
    D. Communications During the Offering Process
    E. Ongoing Reporting under the Exchange Act
    F. Other Miscellaneous Proposals
II. Background and Development of ABS and Regulatory Treatment
III. Discussion of the Proposals
    A. Securities Act Registration
    1. Current Requirements
    2. Definition of Asset-Backed Security
    a. Basic Definition
    b. Nature of the Issuing Entity
    c. Delinquent and Non-Performing Pool Assets
    d. Lease-Backed Securitizations and Residual Values
    e. Exceptions to the ``Discrete'' Requirement
    3. Securities Act Registration Statements
    a. Form Types
    b. Presentation of Disclosure in Base Prospectuses and 
Prospectus Supplements
    c. Form S-3 Eligibility Requirements for ABS
    d. Determining the ``Issuer'' and Required Signatures
    4. Foreign ABS
    5. Proposed Exclusion From Exchange Act Rule 15c2-8(b)
    6. Registration of Underlying Pool Assets
    a. Current Requirements
    b. Proposal for When Registration Is Required

[[Page 26651]]

    c. Proposed Exceptions From Disclosure and Delivery Conditions
    B. Disclosure
    1. Proposed Regulation AB
    2. Forepart of Registration Statement and Prospectus
    3. Transaction Parties
    a. Sponsor
    b. Depositor
    c. Issuing Entity and Transfer of Asset Pool
    d. Servicers
    e. Trustees
    f. Originators
    g. Other Transaction Parties and Scope of Disclosure
    4. Pool Assets
    a. Pool Composition
    b. Sources of Pool Cash Flow
    c. Changes to the Asset Pool
    d. Rights and Claims Regarding the Pool Assets
    5. Transaction Structure
    6. Significant Obligors
    7. Credit Enhancement and Other Support
    8. Other Basic Disclosure Items
    a. Tax Matters
    b. Legal Proceedings
    c. Affiliations and Certain Relationships and Related 
Transactions
    d. Ratings
    e. Reports and Additional Information
    9. Alternatives to Present Third Party Financial Information
    a. Incorporation by Reference
    b. Reference Information
    C. Communications During the Offering Process
    1. ABS Informational and Computational Material
    a. Current Requirements
    b. Proposed Exemptive Rule
    c. Proposed Definition of ABS Informational and Computational 
Material
    d. Proposed Conditions for Use
    e. Proposed Filing Requirements
    2. Research Reports
    a. Current Requirements
    b. Proposed ABS Research Report Safe Harbor
    D. Ongoing Reporting Under the Exchange Act
    1. Current Requirements
    2. Determining the ``Issuer'' and Operation of the Section 15(d) 
Reporting Obligation
    3. Reporting Under EDGAR
    4. Distribution Reports on Proposed Form 10-D
    5. Annual Reports on Form 10-K
    6. Certifications Under Section 302 of the Sarbanes-Oxley Act
    7. Report of Compliance With Servicing Criteria and Accountant's 
Attestation
    a. Current Requirements
    b. Proposed Assessment and Attestation of Servicing Compliance
    c. Attestation Report on Assessment of Compliance
    d. Alternative Proposal
    8. Current Reporting on Form 8-K
    a. Items Requiring Current Disclosure
    b. Clarifying Amendments to Existing Items
    c. Proposed New Items
    d. Safe Harbor and Eligibility To Use Form S-3
    9. Other Exchange Act Reporting Proposals
    a. Proposed Exclusion From Form 10-Q
    b. Proposed Exemptions From Section 16
    c. Proposals Regarding Transition Reports
    E. Other Miscellaneous Proposals
    F. Transition Period
    G. General Request for Comment
IV. Paperwork Reduction Act
V. Cost-Benefit Analysis
VI. Consideration of Impact on the Economy, Burden on Competition 
and Promotion of Efficiency, Competition and Capital Formation
VII. Regulatory Flexibility Analysis Certification
VIII. Statutory Authority and Text of Rule Amendments

I. Overview

A. What Are Asset-Backed Securities?

    Asset-backed securities, or ABS, are securities that are backed by 
a discrete pool of self-liquidating financial assets. Asset-backed 
securitization is a financing technique in which financial assets, in 
many cases themselves less liquid, are pooled and converted into 
instruments that may be offered and sold more freely in the capital 
markets.\24\ In a basic securitization structure, an entity, often a 
financial institution and commonly known as a ``sponsor,'' originates 
or otherwise acquires a pool of financial assets, such as mortgage 
loans, directly or through an affiliate. It then sells the financial 
assets to a specially created investment vehicle that issues securities 
backed by those financial assets, which are ``asset-backed 
securities.'' Payment on the asset-backed securities depends primarily 
on the cash flows generated by the assets in the underlying pool and 
other rights designed to assure timely payment, such as guarantees or 
other features generally known as credit enhancements. The structure of 
asset-backed securities is intended, among other things, to insulate 
ABS investors from the corporate credit risk of the sponsor that 
originated or acquired the financial assets.
---------------------------------------------------------------------------

    \24\ ``Securitization'' is a commonly used term to describe this 
financing technique, although other terms, such as ``asset-backed 
financing,'' also are used.
---------------------------------------------------------------------------

    The ABS market is fairly young and has rapidly become an important 
part of the U.S. capital markets. One source estimates that U.S. public 
ABS issuance grew from $46.8 billion in 1990 to $416 billion in 
2003.\25\ Another source estimates 2003 new issuance closer to $800 
billion.\26\ While residential mortgages were the first financial 
assets to be securitized, non-mortgage related securitizations have 
grown to include many other types of financial assets, such as credit 
card receivables, auto loans and student loans. The Commission has not 
previously addressed on a comprehensive basis the regulatory treatment 
of asset-backed securities under the Securities Act or the Exchange 
Act.
---------------------------------------------------------------------------

    \25\ See Bank One Capital Markets, Inc., 2004 Structured Debt 
Yearbook.
    \26\ See Asset Securitization Report (pub. by Thomson Media 
Inc). See also Asset-Backed Alert (pub. by Harrison Scott 
Publications).
---------------------------------------------------------------------------

    Asset-backed securities and ABS issuers differ from corporate 
securities and operating companies. In offering these securities, there 
is generally no business or management to describe. Instead, 
information about the transaction structure and the quality of the 
asset pool and servicing is often what is most important to investors. 
Many of the Commission's existing disclosure and reporting 
requirements, which are designed primarily for corporate issuers, do 
not elicit the information that is relevant for most asset-backed 
securities transactions. Over time, Commission staff, through no-action 
letters and the filing review process, has developed a framework to 
address the different nature of asset-backed securities while being 
cognizant of developments in market practice.
    We now propose to address comprehensively the treatment of asset-
backed securities under the Securities Act and the Exchange Act. With a 
few exceptions, our proposals consolidate and codify current staff 
positions and industry practice. Our proposals relate to four primary 
regulatory areas: Securities Act registration; disclosure; 
communications during the offering process; and ongoing reporting under 
the Exchange Act.

B. Securities Act Registration

    We propose a definition of asset-backed security that would 
demarcate the securities and offerings to which the new proposed rules 
would apply. The proposed definition would consolidate several staff 
positions regarding the definition of asset-backed security, including 
those regarding delinquent and non-performing pool assets. The proposed 
definition also would allow more lease-backed transactions to be 
included in the definition of asset-backed security and permit the use 
of master trusts and revolving periods by more asset classes. These 
changes are designed to remove regulatory uncertainty and reduce 
regulatory obstacles and costs of securitization.
    In 1992, the Commission amended Form S-3 to allow registration of 
offerings of investment grade asset-backed securities on a delayed, or

[[Page 26652]]

``shelf,'' basis.\27\ We propose that all registered offerings of 
asset-backed securities be registered either on Form S-1 or Form S-3, 
and we propose to specify in those forms which disclosure items would 
be required. We propose to expand the types of investment grade asset-
backed securities that qualify for shelf registration. Consistent with 
existing staff positions, we do not propose to add a reporting history 
requirement for Form S-3 eligibility. However, we do propose to codify 
that previously established reporting obligations regarding other 
asset-backed securities transactions by the sponsor or the depositor 
must have been satisfied to maintain Form S-3 eligibility for new 
transactions. Consistent with a staff no-action letter, we also propose 
to exclude offerings of asset-backed securities eligible for Form S-3 
registration from the requirements of Exchange Act Rule 15c2-8(b) to 
deliver a preliminary prospectus prior to delivery of a confirmation of 
sale.
---------------------------------------------------------------------------

    \27\ See Release No. 33-6964 (Oct. 22, 1992) [57 FR 48970] (the 
``1992 Release'').
---------------------------------------------------------------------------

    We propose to clarify that the depositor--often the sponsor or an 
affiliated intermediary that receives the pool assets and transfers 
them to the issuing entity--would be the statutory ``issuer'' for 
purposes of signing the registration statement for the asset-backed 
securities transaction. We also propose to alleviate impediments to the 
shelf registration of offerings of asset-backed securities by foreign 
issuers or backed by foreign financial assets. Finally, we propose to 
codify, consolidate and streamline staff positions regarding when and 
how the offering of underlying debt securities must be concurrently 
registered with an offering of the asset-backed securities backed by 
those underlying securities.

C. Disclosure

    Currently, there are no disclosure items specifically tailored to 
asset-backed securities. We propose a new principles-based set of 
disclosure items, ``Regulation AB,'' that would form the basis for 
disclosure in both Securities Act registration statements and Exchange 
Act reports. While we request comment on this point, we do not believe 
it would be practical or effective to draft detailed disclosure guides 
for each asset type that may be securitized. Instead, we have attempted 
to identify the disclosure concept required and provide several 
illustrative examples, while understanding that the application of the 
particular concept must be tailored to the information material to the 
particular transaction and asset type involved.
    For the most part, our proposed disclosure items are based on the 
market-driven disclosures that appear today. With a proposed 
codification of a universal set of disclosure items, however, we do 
seek a reevaluation by transaction participants of the manner and 
content of presented disclosure, including the elimination of 
unnecessary boilerplate and a de-emphasis on unnecessary legal 
recitations of terms. We also understand that existing disclosure 
standards may not adequately capture certain categories of information 
that may be material to an asset-backed securities transaction, such as 
the background, experience, performance and roles of various 
transaction parties, including the sponsor, the servicing entity that 
administers or services the financial assets and the trustee. Our 
proposed disclosure items relating to these entities are designed to 
elicit more useful information in these areas. We also propose to 
require, for the first time, that certain statistical information on a 
``static pool'' basis be provided if material to the transaction to aid 
in an investor's analysis of current and prior pool performance. 
Consistent with current practice, we do not propose to require audited 
financial statements regarding the issuing entity for the asset-backed 
securities in Securities Act or Exchange Act filings, although we do 
request comment on this point.
    Finally, we propose to consolidate and codify current staff 
positions on when financial or other descriptive information would be 
required regarding certain third parties, such as obligors of financial 
assets that reach pool concentration levels or significant providers of 
credit enhancement or other support for the asset-backed securities. We 
also propose to streamline and codify current staff positions on when 
financial information regarding such third parties may be incorporated 
by reference or referred to in an asset-backed securities filing in 
lieu of actually including the information in the filing.

D. Communications During the Offering Process

    In the mid 1990s, Commission staff issued a series of no-action 
letters permitting the use of various written materials in addition to 
the statutory registration statement prospectus in an offering of 
asset-backed securities.\28\ These materials provide data about the 
potential payouts of the financial assets and the asset-backed 
securities using various prepayment and other assumptions as well as 
disclose information about the structure of the offering or about the 
underlying asset pool. We propose to codify and simplify current staff 
positions on when these materials can be used and when they must be 
publicly filed with the Commission. We also propose to clarify several 
interpretive issues regarding the use of these materials given market 
developments over the decade since the letters were issued. In this 
regard and given advances made to EDGAR (our electronic data gathering, 
analysis and retrieval system), we also propose to eliminate the 
current exemption from electronic filing for these materials.
---------------------------------------------------------------------------

    \28\ See Greenwood Trust Co., Discover Master Card Trust I (Apr. 
5, 1996); Public Securities Ass'n (Mar. 9, 1995); Public Securities 
Ass'n (Feb. 17, 1995); Public Securities Ass'n (May 27, 1994); and 
Kidder Peabody Acceptance Corporation I (May 20, 1994). The 
``statutory registration statement prospectus'' refers to the full 
prospectus required by Section 10(a) of the Securities Act (15 
U.S.C. 77j(a)).
---------------------------------------------------------------------------

    Shortly after the no-action letters referred to above were issued, 
Commission staff also issued a no-action letter regarding the 
publication of research reports by brokers or dealers proximate to an 
offering of asset-backed securities registered or to be registered on 
Form S-3.\29\ The Commission had previously adopted several rules that 
provided safe harbors under which the publication of research reports 
would not be deemed a violation of the communications restrictions of 
Section 5 of the Securities Act.\30\ However, several of the conditions 
in those rules were not relevant or practical for asset-backed 
securities. We propose to codify the modified conditions in the staff 
no-action letter to provide a similar safe harbor for research reports 
as they relate to registered offerings of asset-backed securities on 
Form S-3.
---------------------------------------------------------------------------

    \29\ See Public Securities Ass'n (Feb. 7, 1997).
    \30\ 15 U.S.C. 77e. See Securities Act Rules 137, 138 and 139 
(17 CFR 230.137; 17 CFR 230.138; and 17 CFR 230.139).
---------------------------------------------------------------------------

E. Ongoing Reporting Under the Exchange Act

    As with registration, the ongoing periodic and current reporting 
requirements applicable to operating companies do not elicit 
information that would be the most relevant for asset-backed 
securities. First through a series of exemptive orders, and then 
primarily through the issuance of no-action letters and other 
interpretations, Commission staff has allowed modified Exchange Act 
reporting by ABS issuers. In lieu of quarterly reports on Form 10-
Q,\31\ ABS issuers generally file under cover of

[[Page 26653]]

Form 8-K the distribution reports required to be prepared under the 
transaction agreements that detail the payments and performance of the 
financial assets in the asset pool and payments on the securities 
backed by that pool. Current reporting on Form 8-K for certain 
extraordinary events also is required regarding asset-backed 
securities, but historically only for a narrow subset of events. A 
modified annual report on Form 10-K is required with two items being 
most important: A servicer's statement of compliance with its servicing 
obligations; and a report by an independent public accountant regarding 
compliance with particular servicing criteria. Financial statements of 
the issuing entity are not required. An asset-backed issuer is required 
to include a certification under Section 302 of the Sarbanes-Oxley Act 
\32\ with its Form 10-K, and, as provided by the Commission's rules 
governing certification, the staff has previously provided a special 
form of certification for ABS issuers to use.\33\ ABS issuers are 
exempt from the rules implementing Section 404 of the Sarbanes-Oxley 
Act \34\ regarding reporting on internal control over financial 
reporting.\35\
---------------------------------------------------------------------------

    \31\ 17 CFR 249.308a.
    \32\ 15 U.S.C. 7241.
    \33\ See Exchange Act Rules 13a-14 and 15d-14; Release No. 33-
8124 (Aug. 28, 2003) [67 FR 57276]; and Division of Corporation 
Finance, ``Revised Statement: Compliance by Asset-Backed Issuers 
with Exchange Act Rules 13a-14 and 15d-14'' (Feb. 21, 2003). See 
also Merrill Lynch Depositor, Inc. (Mar. 28, 2003) and Mitsubishi 
Motors Credit of America, Inc. (Mar. 27, 2003).
    \34\ 15 U.S.C. 7262.
    \35\ See Exchange Act Rules 13a-15 and 15d-15.
---------------------------------------------------------------------------

    We propose to codify the basic modified reporting system for asset-
backed securities. To distinguish periodic reporting regarding 
distributions from disclosure of important events that appropriately 
call for current reporting, we propose one new form type, Form 10-D, to 
act as the report for the periodic distribution information currently 
provided under cover of Form 8-K. We also propose to specify which of 
the Commission's recently adopted Form 8-K events would be applicable 
to asset-backed securities, and we propose a few additional events 
specific to asset-backed securities. Consistent with the modified 
reporting no-action letters, we propose to exclude ABS from quarterly 
reporting on Form 10-Q and exempt ABS from reporting under Section 16 
of the Exchange Act.\36\ We also propose to clarify how transition 
reports are to be filed regarding a change in fiscal year.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78p.
---------------------------------------------------------------------------

    We propose to specify the disclosure requirements applicable for 
annual reports on Form 10-K regarding asset-backed securities, which 
also will be drawn from Regulation AB, and to codify the form of 
certification to be used under Section 302 of the Sarbanes-Oxley Act. 
We propose to retain the long-standing requirements for a servicer 
compliance statement and a report by an independent public accountant 
as to compliance with particular servicing criteria. Regarding 
servicing criteria, there are very few existing criteria for evaluating 
compliance, the most widely used of which currently is the Uniform 
Single Attestation Program, or USAP, promulgated by the Mortgage 
Bankers Association of America. However, the USAP's ``minimum servicing 
standards'' are designed to be applicable only to servicing of 
mortgages and do not necessarily represent the full spectrum of 
servicing activities that may be material to an asset-backed securities 
transaction. We propose disclosure-based servicing criteria that would 
form the basis for an assessment and assertion as to material 
compliance with such criteria (or disclosure as to non-compliance). We 
also continue the practice of accountant involvement in assessing 
compliance with servicing criteria by proposing a requirement that a 
registered public accounting firm attest to the assertion of 
compliance. Both the report containing the assertion of compliance and 
the accountant's attestation report would be required to be filed with 
the report on Form 10-K.
    As with the Securities Act, we propose to codify that the depositor 
is the ``issuer'' for purposes of Exchange Act reporting regarding 
asset-backed securities. We also propose to specify who may sign the 
various Exchange Act reports. Under the proposals, either the depositor 
or the servicer may sign the reports on Form 10-K, Form 10-D and Form 
8-K, and the same party that signs the annual report on Form 10-K also 
would be the party that would be required to sign the Sarbanes-Oxley 
Act Section 302 certification and make the proposed assertion of 
compliance with servicing criteria. We also propose to clarify how 
filings regarding asset-backed securities are to be filed on EDGAR and 
the operation of the reporting obligation for asset-backed securities 
under Section 15(d) of the Exchange Act,\37\ including proposals to 
codify several interpretive positions as to when the obligation starts 
and when it may be suspended.
---------------------------------------------------------------------------

    \37\ 37 15 U.S.C. 78o(d).
---------------------------------------------------------------------------

F. Other Miscellaneous Proposals

    Finally, our proposals include several miscellaneous and technical 
amendments to our rules and forms to accommodate the new proposals and 
update references regarding asset-backed securities. We also request 
comment on any additional areas that should be addressed regarding the 
registration, reporting and disclosure requirements for asset-backed 
securities under the Securities Act or the Exchange Act.

II. Background and Development of ABS and Regulatory Treatment

    The ABS market rapidly has developed into an important part of the 
U.S. capital markets.\38\ The modern securitization market originated 
in the 1970's with the securitization of residential mortgages.\39\ 
Since the mid-1980's, the techniques pioneered in the mortgage-backed 
securities, or MBS, market have been used to securitize other asset 
types. Most asset types that have been securitized have homogenous 
characteristics, including similar terms, structures and credit 
characteristics, with proven histories of performance, which in turn 
facilitate modeling of future payments and thus analysis of yield and 
credit risks.
---------------------------------------------------------------------------

    \38\ See, e.g., Gary Silverman et al., ``A $2.5 Trillion Market 
You Hardly Know,'' Business Week, Oct. 26, 1998 (``Securitization is 
one of the most important and abiding innovations to emerge in the 
financial markets since the 1930s'' (quoting Leon T. Kendall)).
    \39\ The modern ABS market can be traced to 1970 when the 
Government National Mortgage Association (Ginnie Mae), a wholly 
owned Federal government corporation, first guaranteed a pool of 
mortgage loans. The Federal Home Loan Mortgage Corporation (Freddie 
Mac) in 1971 issued its first mortgage-backed participation 
certificates. For a number of years, mortgage-backed securities were 
almost exclusively a product of government-sponsored entities 
(GSE's), such as Freddie Mac and the Federal National Mortgage 
Association (Fannie Mae), and Ginnie Mae. MBS issued by these GSE's 
and Ginnie Mae have been and continue to be exempt from registration 
under the Securities Act and most provisions of the Federal 
securities laws. For example, Ginnie Mae guarantees are exempt 
securities under Section 3(a)(2) of the Securities Act (15 U.S.C. 
77c(a)(2)) and Section 3(a)(12) of the Exchange Act (15 U.S.C. 
78c(a)(12)). The chartering legislation for Fannie Mae and Freddie 
Mac contain exemptions with respect to those entities. See 12 U.S.C. 
1723c and 12 U.S.C. 1455g. Only non-GSE ABS, or so called ``private 
label'' ABS, would be required to comply with these proposals. For 
more information regarding the GSE's and Ginnie Mae, see Task Force 
on Mortgage-Backed Securities Disclosure, ``Staff Report: Enhancing 
Disclosure in the Mortgage-Backed Securities Markets'' (Jan. 2003) 
(hereinafter, the ``2003 MBS Disclosure Report''). This report is 
available on our website at www.sec.gov.
---------------------------------------------------------------------------

    While the ABS market is still fairly young, it has rapidly become 
very large. By way of example, one source estimates that annual 
issuance of U.S. public non-GSE ABS grew from $46.8 billion in 1990 to 
$416 billion in 2003.\40\

[[Page 26654]]

Another source estimates 2003 new issuance at $800 billion.\41\ The 
four primary asset classes currently securitized are residential 
mortgages, automobile receivables, credit card receivables and student 
loans, which represented approximately 52%, 19%, 16% and 9% of 2003 new 
issuance, respectively.\42\
---------------------------------------------------------------------------

    \40\ 40 See note 25 above. Amounts cited include MBS as well as 
ABS for other asset-classes. As residential mortgages simply 
represent another asset type that may be securitized, unless 
otherwise specified, we use the term ABS to include MBS.
    \41\ See note 26 above.
    \42\ See note 25 above.
---------------------------------------------------------------------------

    There are several distinguishing features between asset-backed 
securities and other fixed-income securities. For example, ABS 
investors are generally interested in the characteristics and quality 
of the underlying assets, the standards for their servicing, the timing 
and receipt of cash flows from those assets and the structure for 
distribution of those cash flows. As a general matter, there is 
essentially no business or management (and therefore no management's 
discussion and analysis of financial performance and condition) of the 
issuing entity, which is designed to be a solely passive entity. GAAP 
financial information about the issuing entity generally does not 
provide useful information to investors. Information regarding 
characteristics and quality of the assets is important for investors in 
assessing how a pool will perform. Information relating to the quality 
of servicing of the underlying assets also is relevant to assessing how 
the asset pool is expected to perform and the reliability of the 
allocation and distribution functions. Another focus is the legal and 
structural nature of the issuing entity and the transfer of the assets 
to the issuing entity to assess legal and credit separation from third 
parties. ABS investors also analyze the impact and quality of any 
credit enhancements and other support designed to provide additional 
protection against losses and ensure timely payments.
    A sponsor typically initiates a securitization transaction by 
selling or pledging to a specially created issuing entity a group of 
financial assets that the sponsor either has originated itself or has 
purchased in the secondary market.\43\ Sponsors of asset-backed 
securities often include banks, mortgage companies, finance companies, 
investment banks and other entities that originate or acquire and 
package financial assets for resale as ABS. In some instances, the 
transfer of assets is a two-step process: the financial assets are 
transferred by the sponsor first to an intermediate entity, often a 
limited purpose entity created by the sponsor for a securitization 
program and commonly called a depositor, and then the depositor will 
transfer the assets to the issuing entity for the particular asset-
backed transaction.\44\
---------------------------------------------------------------------------

    \43\ While ``sponsor'' is a commonly used term for the entity 
that initiates the asset-backed securities transaction, the terms 
``seller'' or ``originator'' also are often used in the market. 
However, as noted in the text, in some instances the sponsor is not 
the originator of the financial assets but has purchased them in the 
secondary market. Hence, we use the term ``sponsor.''
    \44\ Where there is not a two-step transfer, the terms 
``sponsor'' and ``depositor'' are commonly used interchangeably in 
the market.
---------------------------------------------------------------------------

    The issuing entity, most often a trust with an independent trustee, 
then issues asset-backed securities to investors that are either backed 
by or represent interests in the assets transferred to it. The proceeds 
of the sale of the asset-backed securities are used to pay for the 
assets that were transferred to the trust. Because the issuing entity 
is designed to be a passive entity, a ``servicer,'' which may often be 
an affiliate of the sponsor, is often necessary to collect payments 
from obligors of the pool assets, carry out the other important 
functions involved in administering the assets and to calculate and pay 
the amounts net of fees due to the investors that hold the asset-backed 
securities to the trustee, which actually makes the payments to 
investors.
    The predominant purchasers of asset-backed securities today are 
institutional investors, including financial institutions, pension 
funds, insurance companies and money managers.\45\ Generally, ABS are 
not marketed to retail investors. However, securitizations of one 
fairly unique asset type--transactions that pool and securitize 
outstanding debt securities of other issuers--often are marketed to 
retail investors and are listed on a national securities exchange.\46\
---------------------------------------------------------------------------

    \45\See 2003 MBS Disclosure Report.
    \46\ A ``national securities exchange'' is an exchange 
registered as such under Section 6 of the Exchange Act (15 U.S.C. 
78f).
---------------------------------------------------------------------------

    While some ABS transactions consist of simple pass-through 
certificates representing a pro rata share of the cash flows from the 
underlying asset pool, ABS transactions often involve multiple classes 
of securities, or tranches, with complex formulas for the calculation 
and distribution of the cash flows. In addition to creating internal 
credit enhancement or support for more senior classes, these structures 
allow the cash flows from the asset pool, and hence varying degrees of 
risk from pool performance, to be packaged into securities designed to 
address a given risk and return profile.
    Transaction agreements specify the structure of an ABS transaction. 
A common form for these agreements is a ``pooling and servicing 
agreement,'' or PSA, often among the sponsor, the trustee and the 
servicer. A pooling and servicing agreement often governs the transfer 
of the assets from the sponsor to the issuing entity and sets forth the 
rights and responsibilities of participants. Typically the agreement 
also will detail how cash flows generated by the asset pool will be 
divided, typically referred to as the ``flow of funds'' or 
``waterfall.'' The flow of funds specifies the allocation and order of 
cash flows, including interest, principal and other payments on the 
various classes of securities, as well as any fees and expenses, such 
as servicing fees, trustee fees or amounts to maintain credit 
enhancement or other support. Cash flows also may be directed into 
various accounts, such as reserve accounts to provide support against 
potential future shortfalls. The agreement also specifies the type and 
content of reports that will be provided to investors regarding ongoing 
performance of the transaction.
    In addition to any internally provided credit enhancement or 
support, the sponsor or other third parties may provide external credit 
enhancements or other support for the asset-backed securities.\47\ For 
example, third party insurance may be obtained to reimburse losses on 
the pool assets or the asset-backed securities themselves. In addition, 
the issuing parties may arrange with a counterparty for an interest 
rate swap or similar swap transaction to avoid a cash-flow mismatch, 
such as where a floating-rate interest is to be paid on ABS backed by 
financial assets that pay a fixed rate of interest.
---------------------------------------------------------------------------

    \47\ A guarantee of a security would be a separate ``security'' 
under Section 2(a)(1) of the Securities Act (15 U.S.C. 77b(a)(1)).
---------------------------------------------------------------------------

    Credit rating agencies play a large role in most ABS transactions. 
As with a traditional corporate debt security, a rating on an asset-
backed security is designed only to reflect credit risk. The rating 
generally does not address other market risks that may result from 
changes in interest rates or from prepayments on the underlying asset 
pool.
    To date, there have been few Commission initiatives directly 
related to ABS. In connection with the passage of the Secondary 
Mortgage Market Enhancement Act of 1984 (SMMEA),\48\ the Commission 
permitted shelf

[[Page 26655]]

registration to SMMEA eligible securities.\49\ In 1992, the Commission 
extended shelf registration to non-mortgage investment grade ABS.\50\ 
That same year, the Commission also adopted a rule under the Investment 
Company Act of 1940 \51\ to exclude ABS transactions under specific 
conditions from the definition of an investment company.\52\ More 
recently, the Commission tailored rules for asset-backed securities in 
its implementing rulemakings under the Sarbanes-Oxley Act, including 
exempting asset-backed securities from the reporting and attestation 
requirements relating to internal control over financial reporting 
established by Section 404 of the Sarbanes-Oxley Act.\53\ The 
Commission followed this approach in contemplation of current staff 
practice and this rulemaking initiative where applicable objectives 
underlying the Sarbanes-Oxley Act, including requirements suitable to 
ABS transactions, could be evaluated.
---------------------------------------------------------------------------

    \48\ Pub. L. 98-440, 98 Stat. 1689. See also Section II.C.1. of 
the 2003 MBS Disclosure Report.
    \49\ See Release No. 33-6499 (Nov. 17, 1983) [48 FR 52889] and 
Securities Act Rule 415(a)(1)(vii) (17 CFR 230.415(a)(1)(vii)).
    \50\ See note 27 above.
    \51\ 15 U.S.C. 80a-1 et seq.
    \52\ See Release No. IC-19105 (Nov. 19, 1992) [57 FR 56248] and 
Investment Company Act Rule 3a-7 (17 CFR 270.3a-7). See also Release 
No. IC-18736 (May 29, 1992) [57 FR 23980] (proposing Investment 
Company Act Rule 3a-7 and explaining the application of the 
Investment Company Act to ABS transactions). The application of the 
Investment Company Act to ABS transactions is beyond the scope of 
this release. We note, however, that an ABS transaction that relies 
on Rule 3a-7 must comply with the conditions of that rule regardless 
of whether the issuer may register the offering of its asset-backed 
securities on Form S-3 or S-1. We encourage pre-filing conferences 
with the staff to discuss, as appropriate, questions or issues that 
may arise regarding the availability of Rule 3a-7, or any other 
applicable exemption, under the Investment Company Act to an ABS 
transaction.
    \53\ See, e.g., Release No. 33-8238 (Jun. 5, 2003) [68 FR 36636] 
(Management's report on internal control over financial reporting 
and certification of disclosure in Exchange Act reports); Release 
No. 33-8220 (Apr. 9, 2003) [68 FR 18788] (Standards relating to 
listed company audit committees); Release No. 33-8183 (Jan. 28, 
2003) [68 FR 6006] (Commission requirements regarding auditor 
independence); and Release No. 33-8177 (Jan. 23, 2003) [68 FR 5110] 
(Disclosure required by Sections 406 and 407 of the Sarbanes-Oxley 
Act of 2002).
---------------------------------------------------------------------------

    The staff has to date addressed the lack of a defined set of 
regulatory requirements for asset-backed securities through the filing 
review process and, where necessary, through staff no-action letters or 
interpretive statements. For example, through the filing review 
process, an informal disclosure scheme for ABS registration statements 
has developed taking into account evolving industry practices. The 2003 
MBS Disclosure Report also provided valuable insight on the type of 
information investors find useful in ABS transactions. A system of 
modified reporting under the Exchange Act has developed, first through 
exemptive orders under Exchange Act Section 12(h),\54\ and then 
subsequently through staff no-action letters and interpretative 
positions.
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 78l(h).
---------------------------------------------------------------------------

    The Commission recognizes that securitization is playing an 
increasingly important role in the evolution of the fixed income 
financial markets. Our staff has attempted to accommodate the different 
nature of ABS and evolving business practices, while reducing 
unnecessary or impractical compliance burdens, through its numerous no-
action and interpretive positions. However, the accumulated informal 
guidance, while helpful to some ABS transactions, has diminished the 
transparency of applicable requirements because an ABS registrant or 
investor seeking to understand the applicable requirements must review 
and assimilate a large body of no-action letters and other staff 
positions. This time-consuming practice decreases efficiency and 
transparency and leads to uncertainty and common problems. Many 
issuers, investors and other market participants have requested a 
defined set of regulatory requirements for guidance.\55\ Staff reviews 
of filings provide further evidence that many compliance issues may be 
mitigated and potential issues avoided through clearer and more 
transparent regulatory requirements. Recent market events involving 
distressed transactions also have highlighted the need for improved 
disclosures as well as a renewed attention on servicing practices.\56\ 
The Commission believes it is thus appropriate to clarify the 
regulatory requirements for asset-backed securities in order to 
increase market efficiency and transparency and provide more certainty 
for the overall ABS market and its investors and other participants.
---------------------------------------------------------------------------

    \55\ See, e.g., Letter from the Association for Investment 
Management and Research (``AIMR'') to Brian J. Lane, Director, 
Division of Corporation Finance, ``Recommendations for a Disclosure 
Regime for Asset-Backed Securities'' (Sep. 30, 1996); Letter from 
the Investment Company Institute (``ICI'') to Michael H. Mitchell, 
Special Counsel, Division of Corporation Finance, ``Asset-Backed 
Securities Offerings'' (Oct. 29, 1996); Letter from the Bond Market 
Association (``BMA'') to Brian Lane, Director, Division of 
Corporation Finance, ``Response to Staff Request for Suggestions 
Concerning Possible Reforms of Disclosure and Reporting Rules for 
Mortgage and Asset-Backed Securities'' (Nov. 5, 1996); Letter from 
BMA to Jonathan G. Katz, Secretary, Securities and Exchange 
Commission, ``Securities Acts Concepts and Their Effects on Capital 
Formation (Release No. 33-7314) (File No. S7-19-96)'' (Nov. 8, 
1996); Letter from the Mortgage Bankers Association of America 
(``MBA'') to Brian J. Lane, Director, Division of Corporation 
Finance (Feb. 18, 1997); Letter from The Association of the Bar of 
the City of New York to Jonathan G. Katz, Secretary, Securities and 
Exchange Commission, ``Securities Act Release No. 33-7606A File No. 
S7-30-98'' (Apr. 5, 1999); Letter from American Bar Association 
(``ABA'') to Jonathan G. Katz, Secretary, Securities and Exchange 
Commission, ``The Regulation of Securities Offerings (File No. S7-
30-98)'' (Jun. 29, 1999); Letter from ICI to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, ``The Regulation of 
Securities Offerings (File No. S7-30-98)'' (Jun. 29, 1999); Letter 
from MBA to Jonathan G. Katz, Secretary, Securities and Exchange 
Commission, ``The Regulation of Securities Offerings (File No. S7-
30-98)'' (Jun. 30, 1999); Letter from Merrill Lynch & Co., Inc. to 
Securities and Exchange Commission, ``The Regulation of Securities 
Offerings (File No. S7-30-98)'' (Jun. 30, 1999); Letter from 
Residential Funding Corporation to Securities and Exchange 
Commission, ``File No. S7-30-98--The `Aircraft Carrier Release' '' 
(Jun. 30, 1999); Letter from BMA to David B.H. Martin, Director, 
Division of Corporation Finance, ``Securities Act Reform'' (Nov. 30, 
2001); and Letter from BMA to Alan L. Beller, Director, Division of 
Corporation Finance, ``Prior Correspondence Regarding Asset-Backed 
Securities Reform'' (Apr. 23, 2002).
    \56\ See, e.g., notes 120, 136, 139, 262 and 264 below.
---------------------------------------------------------------------------

III. Discussion of the Proposals

A. Securities Act Registration

1. Current Requirements
    The 1992 Release, as part of a broad effort to expand access to 
shelf registration, allowed shelf registration for offerings of 
investment grade \57\ asset-backed securities without requiring a 
reporting history requirement for the issuing entity.\58\ As a result, 
a sponsor or depositor may register asset-backed securities to be 
offered on a delayed basis in the future through one or more offerings, 
or ``takedowns,'' of securities off of the shelf registration 
statement. Since the 1992 Release, shelf registration on Form S-3 has 
become the predominant method of registration for public offerings of 
asset-backed securities. Offerings generally are only registered

[[Page 26656]]

on another form, most likely Form S-1 and less frequently Form S-11, if 
for some reason the securities technically do not meet the definition 
of ``asset-backed security'' in General Instruction I.B.5 of Form S-3 
or an interpretation of that definition.
---------------------------------------------------------------------------

    \57\ ``Investment grade'' is defined in General Instruction 
I.B.2 of Form S-3 to mean that, at the time of sale, at least one 
nationally recognized statistical rating organization (as that term 
is used in Exchange Act Rule 15c3-1(c)(2)(vi)(F) (17 CFR 240.15c3-
1(c)(2)(vi)(F))) has rated the security in one of its generic rating 
categories which signifies investment grade. Typically, the four 
highest rating categories (within which there may be sub-categories 
or gradations indicating relative standing) signify investment 
grade.
    \58\ Securities Act Rule 415 (17 CFR 230.415) permits 
registration of offerings of securities on a delayed or continuous 
basis, and paragraph (a)(1)(x) of that rule permits such 
registration with respect to offerings registered (or qualified to 
be registered) on Form S-3. The 1992 Release, among other things, 
added General Instruction I.B.5 to Form S-3, which permits 
registration of offerings of investment grade asset-backed 
securities. Certain mortgage-backed securities, as defined in 
Section 3(a)(41) of the Exchange Act (15 U.S.C. 78c(a)(41)), were 
previously permitted to be offered on a delayed basis under 
Securities Act Rule 415(a)(1)(vii). See note 49 above.
---------------------------------------------------------------------------

    For offerings registered on a shelf basis on Form S-3, the 
prospectus disclosure in the registration statement is often presented 
through the use of two primary documents: The ``base'' or ``core'' 
prospectus and the prospectus supplement. The base prospectus outlines 
the parameters of the various types of ABS offerings that may be 
conducted in the future, including asset types that may be securitized, 
the types of security structures that may be used and possible credit 
enhancements. The registration statement at the time of effectiveness 
also contains a form of prospectus supplement, which outlines the 
format of deal-specific information that will be disclosed at the time 
of each takedown. At the time of a takedown, a final prospectus 
supplement is prepared which describes the specific terms of the 
takedown, and the base prospectus and the final prospectus supplement 
together form the final prospectus which is filed with the Commission 
pursuant to Securities Act Rule 424(b).\59\
---------------------------------------------------------------------------

    \59\ 59 17 CFR 230.424(b).
---------------------------------------------------------------------------

2. Definition of Asset-Backed Security
    Currently, the term ``asset-backed security'' is defined only for 
purposes of Form S-3. As many of our proposals relate to the treatment 
of asset-backed securities regardless of the form on which their 
offering is initially registered, we are proposing to move the 
definition of ``asset-backed security'' to the definition section of 
proposed Regulation AB, our proposed sub-part in Regulation S-K for 
asset-backed securities (discussed more fully in Section III.B). We 
propose to retain any additional conditions appropriate for Form S-3 
eligibility, such as an investment grade requirement, in General 
Instruction I.B.5 of Form S-3. Under our proposed format, however, a 
security that met the general definition of ``asset-backed security'' 
would be subject to the disclosure and other requirements we propose 
regardless of how registered.
    After more than ten years of experience with the definition of 
``asset-backed security,'' we believe that the core definition is still 
sound. The definition allows broad flexibility as to asset types and 
structures that we believe should be subject to the alternative 
disclosure and regulatory regime that exists for asset-backed 
securities. As the Commission stated in the 1992 Release, the 
definition does not distinguish between pass-through (i.e., equity) and 
pay-through (i.e., debt) asset-backed securities nor does it limit 
application to a list of ``eligible'' assets that can be securitized, 
so long as such assets meet the general principle that they are 
financial assets that by their terms convert into cash within a finite 
time period.\60\ We believe, conversely, that the alternative regime 
for asset-backed securities would not be appropriate for securities 
that fall outside the definition.
---------------------------------------------------------------------------

    \60\ For example, common stock and similar equity instruments 
would not meet this general principle.
---------------------------------------------------------------------------

    Experience with the definition has resulted in several 
interpretations since its adoption. These interpretations have 
developed primarily through staff processing of ABS registration 
statements and in a few instances through staff no-action letters. As 
such, these interpretations may not always have been transparent.
    Accordingly, we propose to retain the same basic definition of 
asset-backed security, with one modification discussed below with 
respect to leases. We also propose to codify several clarifying 
interpretations of the definition that recognize and build upon the 
operational and structural distinctions between ABS and non-ABS 
transactions. In many cases, through the process of codifying these 
interpretations, we also are proposing to expand many of the existing 
interpretations to allow additional asset types and transaction 
features to be considered an ``asset-backed security,'' including for 
purposes of shelf registration if the asset-backed securities meet the 
additional criteria for registration on Form S-3, such as the 
investment grade requirement.
    Our proposed definition and interpretations are intended to 
establish parameters for the types of securities that are appropriate 
for our proposed alternative regulatory regime for asset-backed 
securities, including, for securities that meet the additional criteria 
for Form S-3 registration, delayed shelf registration and the use of 
certain written communications. The proposals would not mean or imply 
that public offerings of securities outside of these parameters may not 
be registered with the Commission, but only that the disclosure and 
other requirements in the regime for asset-backed securities are not 
designed for those securities. The proposals would mean that such 
securities would need to rely on non-ABS form eligibility for 
registration, including shelf registration. Additional disclosures are 
currently required for such securities under our existing disclosure 
regime.
a. Basic Definition
    Under our proposal, the basic definition of ``asset-backed 
security'' would be ``a security that is primarily serviced by the cash 
flows of a discrete pool of receivables or other financial assets, 
either fixed or revolving, that by their terms convert into cash within 
a finite time period, plus any rights or other assets designed to 
assure the servicing or timely distributions of proceeds to the 
securityholders; provided that in the case of financial assets that are 
leases, those assets may convert to cash partially by the cash proceeds 
from the disposition of the physical property underlying such 
leases.''\61\ The only change we propose from the current definition is 
the addition of the proviso with respect to leases, discussed below.
---------------------------------------------------------------------------

    \61\ As the Commission stated in the 1992 Release, the 
definition is sufficiently broad to encompass any self-liquidating 
asset which by its terms converts into one or more cash payments 
within a finite time period. There are no substantive requirements 
as to the timing of the cash flows under the definition, such as 
that they must be constant and uninterrupted. The payments on the 
asset-backed securities, however, must be based primarily upon the 
cash flow from the pool assets.
---------------------------------------------------------------------------

    The proposed definition of ``asset-backed security'' includes the 
same basic concept of a discrete pool of financial assets that by their 
terms convert into cash within a finite time period. We believe this 
does not include so-called ``synthetic'' securitizations.\62\

[[Page 26657]]

Synthetic securitizations are a relatively recent development in 
structured finance designed to create exposure to an asset that is not 
transferred to or otherwise part of the asset pool. These synthetic 
transactions are often effectuated through the use of credit 
derivatives such as a credit default swap or total return swap. 
Synthetic securitizations do not actually own the underlying assets; 
instead, the assets that are to constitute the actual ``asset pool'' 
under which the return on the ABS is primarily based are only 
referenced through the credit derivative.
---------------------------------------------------------------------------

    \62\ Synthetic securitizations do not meet the basic concepts 
embodied in our definition of an asset-backed security for several 
reasons. For example, payments on the securities in a synthetic 
securitization comprise or include payments based on the value of a 
reference asset, unrelated to the value of or payments on any actual 
assets in the pool. Payment is therefore by reference to an asset 
not in the pool instead of primarily from the performance of a 
discrete pool of financial assets that by their terms convert into 
cash and are transferred to a separate issuing entity. Neither does 
the derivative act as credit enhancement on existing pool assets or 
as rights or other assets designed to ensure timely servicing or 
distribution, because it does not relate to the value of any pool 
asset but instead relates to an external asset, in order to bring 
the risk of that asset into the pool synthetically. Further, in a 
synthetic securitization, if a credit event occurs there may be a 
transfer of assets that would no longer make the pool discrete.
    Another example of a synthetic exposure would be a transaction 
where the asset pool consists of securities coupled with a swap or 
other derivative under which payments are made based on the value of 
an equity or commodity or other index such that the payments on the 
security comprise or include payments based on the performance of 
the external index and not by the performance of the actual 
securities in the pool. Our view that securities resulting from 
synthetic securitizations are not ABS within the proposed definition 
is not altered by the fact that payments on the swap or other 
derivative based on the value of assets or indices not related to 
the assets in the pool held by the issuer are conditioned on 
performance of the assets in the pool held by the issuer. Because 
payments in synthetic securitizations are based on the performance 
of assets or indices not included in the pool, such a securitization 
would not fall within the ABS definition. Payments on ABS must be 
based primarily on the performance of the financial assets in the 
pool.
    Synthetic securitization transactions differ from ABS 
transactions where swaps or other derivatives are used either to 
reduce or alter risk resulting from assets contained in the pool 
held by the issuer, or to provide credit enhancement related to 
assets in the pool. For example, the existence of an interest rate 
or currency swap covering either or both of the principal or 
interest payments on assets in the pool held by the issuer are 
designed to reduce or alter risk resulting from those assets and 
fall within the definition of asset-backed security. The return on 
the ABS are still based primarily on the performance of the 
financial assets in the pool.
    As another example of a swap or other derivative permissible in 
an ABS transaction, a credit derivative such as a credit default 
swap could be used to provide viable credit enhancement for asset-
backed securities. For example, a credit default swap may be used to 
reference assets actually in the asset pool, which would be 
analogous to buying protection against losses on the pool asset. The 
issuing entity would pay premiums to the counterparty (as opposed to 
the counterparty paying the premiums to the issuing entity). If a 
credit event occurred with respect to the referenced pool asset, the 
counterparty would be required to make settlement payments regarding 
the pool asset or purchase the asset to provide recovery against 
losses.

    Questions regarding the proposed definition of ``asset-backed 
security:''
     We request comment on our proposed definition. Are any 
further modifications to the definition necessary? If so, what 
modifications should be made and why?

b. Nature of the Issuing Entity
    The first set of interpretations we propose to codify relates to 
the nature of the issuing entity in whose name the asset-backed 
securities are issued. In this regard, we believe that two 
interpretations always have been implied. We propose to codify both as 
additional conditions to the definition of ``asset-backed security.''
    The first condition is that neither the depositor nor the issuing 
entity is an investment company under the Investment Company Act, nor 
will either become one as a result of the asset-backed securities 
transaction. If either was the case, we believe the separate regulatory 
regime for investment companies should be followed in lieu of our 
proposals for asset-backed securities.
    The second condition is that the issuing entity must be passive and 
its activities restricted to the asset-backed securities transaction. 
In particular, the activities of the issuing entity must be limited to 
passively owning or holding the pool of assets, issuing the asset-
backed securities supported or serviced by those assets, and other 
activities reasonably incidental thereto.\63\ As we stated in the 
proposing release for the 1992 amendments, the legal nature of the 
issuing entity--whether a trust, limited purpose subsidiary or other 
legal person--is not necessarily relevant.\64\ However, we believe the 
limited function and permissible activities of the issuing entity are 
fundamental to the notion of a security that is to be backed solely by 
a pool of assets.
---------------------------------------------------------------------------

    \63\ In this regard, so-called ``series trusts'' would not 
qualify as an ``asset-backed security'' under our proposed 
definition. Under a series trust, the same trust will hold multiple 
pools of assets and will issue multiple classes of securities, some 
of which are backed by one pool while others are backed by other 
pools. Securities backed by one pool do not have rights to the other 
pools. In this instance, the issuing entity is not limited to owning 
and holding one asset pool and issuing securities backed by that 
pool. This is not to be confused with a master trust structure 
typical in credit card ABS and discussed later where all securities 
are backed by one pool, which would meet the definition. Of course, 
an ABS transaction with one asset pool could divide allocations of 
the cash flows from the pool among separate classes of securities 
and still qualify as an ``asset-backed security.''
    \64\ See Release No. 33-6943 (July 16, 1992) [57 FR 32461].

    Questions regarding the nature of the issuing entity:
     We request comment on the proposed conditions regarding 
the nature of the issuing entity. Is the proposed condition on the 
passive and restricted nature of the issuing entity appropriate? Is 
any additional specificity or clarification needed for the 
condition? Should there be any exceptions to the condition? If so, 
what would they be and how would they be consistent with the notion 
of an ``asset-backed security?''
     Should there be any additional conditions on the nature 
of the issuing entity?
c. Delinquent and Non-Performing Pool Assets
    In 1997, Commission staff issued a no-action letter clarifying that 
an asset pool having total delinquencies of up to 20% at the time of 
the proposed offering may still be considered an ``asset-backed 
security.'' \65\ In addition, there also exists a longstanding staff 
interpretive position that no non-performing assets may be included as 
part of the asset pool at the time of the proposed offering. The issue 
in either case is that such assets may no longer be (or in the case of 
non-performing assets, are not) converting into cash within a finite 
time period, as required by the definition of asset-backed security, 
given that such assets are not performing in accordance with their 
terms and management or other action may be needed to convert them to 
cash.
---------------------------------------------------------------------------

    \65\ See Bond Market Ass'n (Oct. 8, 1997). The no-action letter 
also confirmed that notwithstanding whether a security meets the 
definition of ``asset-backed security'' set forth in General 
Instruction I.B.5 of Form S-3, an offering of securities may 
nevertheless be eligible for registration on Form S-3 so long as the 
issuer satisfies the issuer requirements in General Instruction I.A. 
(including, but not limited to, the reporting history requirements 
in General Instructions I.A.2 and I.A.3) and satisfies an applicable 
transaction requirement in General Instruction I.B. (e.g., a 
registered offering of investment grade securities under General 
Instruction I.B.2). This option, which has always existed without 
regard to General Instruction I.B.5, would remain under our 
proposals.
---------------------------------------------------------------------------

    We propose to codify these interpretations. First, we propose that 
no non-performing assets may be part of the original asset pool at the 
time of issuance of the asset-backed securities.\66\ Part of the 
difficulty for issuers in complying with the existing interpretive 
position is that there is no uniform definition of what is a ``non-
performing asset.'' We understand that the point at which a financial 
asset is considered ``non-performing'' is often dependent upon asset 
type, with some financial assets being considered non-performing before 
other types of financial assets would. However, we believe the point at 
which the financial asset should be charged-off appears to be a 
consistent reference point, even if the point at which that event would 
occur may vary. Accordingly, we propose to define ``non-performing'' to 
be a pool asset if any of the following was true:
---------------------------------------------------------------------------

    \66\ Consistent with the existing staff no-action letter, the 
cut-off date (the date on and after which collections on the pool 
assets accrue for the benefit of the ABS holders) may be employed to 
establish delinquency and non-performance levels.

     The pool asset meets the requirements in the 
transaction agreements for the asset-backed securities for when a 
pool asset should be charged-off; or
     The pool asset meets the charge-off policies of the 
sponsor.\67\
---------------------------------------------------------------------------

    \67\ As a result, the charge-off requirement that was more 
restrictive would govern.

    We believe this definition provides flexibility for different asset 
classes while still ensuring that no assets are included in the pool 
that would otherwise be considered to be non-performing and thus 
charged-off under

[[Page 26658]]

an objective standard. We propose to require disclosure of these 
charge-off policies in Regulation AB, discussed more fully in Section 
III.B.
    We also propose to codify a delinquency concentration limit in a 
manner consistent with the staff no-action letter. However, as we are 
proposing a general definition of ``asset-backed security'' regardless 
of eligibility for shelf registration, we propose two separate 
delinquency concentration limits. For the general definition (e.g., for 
offerings that could be registered on a non-shelf basis on Form S-1), 
we propose that delinquent assets may not constitute 50% or more, as 
measured by dollar volume, of the original asset pool at the time of 
issuance of the asset-backed securities. We believe concentrations 
above that threshold begin to raise serious doubt that the transaction 
should be characterized as an ``asset-backed security'' as the payments 
on the securities in such transactions would appear to depend more on 
the ability of the entity or entities that provide collection services 
for the delinquent assets than on the self-liquidating nature of the 
underlying assets. For shelf registration eligibility, we propose to 
retain the existing 20% delinquency concentration level. For purposes 
of determining whether a pool asset is delinquent under either 
threshold, we propose to define a pool asset as ``delinquent'' if any 
portion of a contractually required payment on the asset is 30 days or 
more past due. This is the existing standard in the staff no-action 
letter.\68\
---------------------------------------------------------------------------

    \68\ See note 65 above.
---------------------------------------------------------------------------

    With regard to determining delinquency, one potential area of 
concern is improper re-aging or restructuring of delinquent accounts, 
such as declaring an asset with multiple past-due payments as current 
even if only the last payment was made. Improper re-aging or 
recharacterization of delinquent accounts cannot be employed for 
purposes of satisfying delinquency concentration limits. We propose to 
clarify in the definition of ``delinquent'' that a pool asset that was 
more than one payment past due could not be characterized as not 
delinquent if only partial payment on the total past due amount had 
been made, unless the obligor had contractually agreed to restructure 
the obligation, such as part of a workout plan.\69\ In proposing our 
delinquency limits, we also are proposing to require disclosure, 
discussed more fully in Section III.B., of policies regarding grace 
periods, re-aging, restructures or other such practices on 
delinquencies. We also propose disclosure on an on-going basis, 
discussed more fully in Section III.D., regarding material 
modifications, extensions or waivers to pool asset terms, fees, 
penalties or payments.
---------------------------------------------------------------------------

    \69\ We propose similar language for the definition of ``non-
performing.'' We propose to define ``obligor'' to mean any person 
who is directly or indirectly committed by contract or other 
arrangement to make payments on all or part of the obligations on a 
pool asset.

    Questions regarding proposals for delinquent and non-performing 
assets:
     We request comment on the codification of these 
existing interpretations. Is there a reason to re-evaluate these 
interpretations? In particular, should there still be an absolute 
bar on non-performing assets? We also request comment on the 
proposed delinquency concentration limits. The 50% non-shelf limit 
is designed to help assure that even those asset-backed securities 
that do not qualify for shelf registration are appropriately subject 
to our proposed ABS disclosure and reporting regime. Should either 
limit be higher or lower? Should these tests be conducted at any 
time other than issuance of the asset-backed securities?
     We request comment on our proposed definitions of 
``non-performing'' and ``delinquent.'' Should the definition of non-
performing be tied to the charge-off policies of both the 
transaction documents and the sponsor? Is it necessary to require 
disclosure of the sponsor's charge-off policies? Is the proposed 
clarification regarding re-aging appropriate? Should there be a 
specific delinquency date for when an asset is non-performing? What 
would that date be (e.g., 90 or 180 days delinquent)? If possible, 
please provide supporting data in relation to current market 
practices.
d. Lease-Backed Securitizations and Residual Values
    The one change we propose to the basic definition of ``asset-backed 
security'' is to expand the definition to include securitizations 
backed by leases where part of the cash flows backing the securities is 
to come from the disposal of the residual asset underlying the lease 
(e.g., selling an automobile at the end of an automobile lease).\70\ In 
that instance, the asset-backed securities are not backed solely by 
financial assets that ``by their terms convert into cash,'' because the 
transaction also involves a physical asset that must be sold in order 
to obtain cash. As a result, securitizations where a portion of the 
cash flow to repay the securities is anticipated to come from the 
residual value of the physical property do not fall within the current 
definition of ``asset-backed security'' in Form S-3 and thus are often 
registered on a non-shelf basis on Form S-1.
---------------------------------------------------------------------------

    \70\ Securitizations backed solely from the payment on the 
leases and not including the residual value of the underlying 
physical property would not of course need to comply with the 
proposed thresholds.
---------------------------------------------------------------------------

    Lease-backed ABS have grown into a common and recognized segment of 
the overall ABS market.\71\ However, even though we are recognizing the 
growth in lease-backed ABS that include securitizations of residual 
value, such securitizations are subject to additional factors that are 
not present in securitizations backed solely by financial assets that 
convert into cash. Residual value is often determined at the inception 
of a lease contract and represents an estimate of the leased property's 
resale value at the end of the lease. Assumptions and modeling are 
necessary to determine the amount of the residual value. In addition, 
the transaction is not simply dependent on the servicing and 
amortization of the pool assets, but also on the capability and 
performance of the party that will be used to convert the physical 
property into cash and thus realize the residual values.
---------------------------------------------------------------------------

    \71\ See, e.g., Fitch, Inc., ``Under the Hood: Automobile Lease 
ABS Uncovered'' (Jun. 14, 2000).
---------------------------------------------------------------------------

    The higher the percentage of cash flows that are to come from 
residual values, the more important these other factors become and the 
less the transaction resembles a traditional securitization of 
financial assets for which our regime for asset-backed securities is 
designed. We propose to address this concern in two ways. First, we 
propose additional disclosures, discussed more fully in Section III.B., 
on how residual values were estimated and derived, statistical 
information on historical realization rates and disclosure of the 
manner and process in which residual values will be realized, including 
disclosure about the entity that will convert the residual values into 
cash. Second, similar to existing practice regarding delinquencies, we 
propose limits on the percentage of the cash flow anticipated to come 
from residual values in order to be considered an ``asset-backed 
security.''
    In proposing residual value limits, we recognize that market 
practice regarding lease-backed securitizations vary on the typical 
percentage of cash flows that are expected to come from residual 
values. For example, auto lease securitizations often have higher 
residual value percentages than equipment-backed securitizations due to 
the higher resale values that often exist between automobiles and other 
equipment. Accordingly, after reviewing residual value percentages for 
typical lease-backed securitizations, we propose that for the general 
definition of ``asset-backed security,'' the portion of the cash

[[Page 26659]]

flow to repay the securities anticipated to come from the residual 
value of the physical property underlying the leases may not 
constitute:

     For automobile leases, 60% or more, as measured by 
dollar volume, of the original asset pool at the time of issuance of 
the asset-backed securities;\72\ and
---------------------------------------------------------------------------

    \72\ For purposes of our proposal, automobile leases would 
include motorcycle leases but not leases for leisure craft such as 
watercraft or snowmobiles. The 60% threshold is consistent with our 
understanding of how the market currently views auto lease-backed 
ABS.
---------------------------------------------------------------------------

     For all other leases, 50% or more, as measured by 
dollar volume, of the original asset pool at the time of issuance of 
the asset-backed securities.

    In addition, we propose a more stringent limitation for cash flow 
from residual values for offerings of securities backed by leases other 
than automobile leases that may be registered on Form S-3 and thus 
eligible for shelf registration. For Form S-3 eligibility, we propose 
that for leases other than automobile leases, the portion of the cash 
flow anticipated to come from residual values may not constitute 20% or 
more, as measured by dollar volume, of the original asset pool at the 
time of issuance of the asset-backed securities, which we believe is 
consistent with market practice and the types of offerings that would 
be appropriate for shelf eligibility. We believe these proposals will 
expand eligibility of lease-backed transactions for shelf registration 
and appropriately permit lease-backed transactions under our proposed 
rules while continuing to apply the basic principles underlying the 
definition of ``asset-backed security.''

    Questions regarding the proposals for lease-backed ABS:
     Should ABS backed in part by cash flows from residual 
values be included in the definition of asset-backed security? Does 
the proposed proviso to the definition of asset-backed security 
capture the types of lease transactions that include residual 
values? Should there be any additional requirements for such 
securitizations apart from those proposed?
     We request comment on our proposed limits on the cash 
flows that are anticipated to come from residual values. Should 
there be such limits? What alternatives could be used in lieu of 
limits to address the concerns identified? Is there a disclosure-
based solution that would preclude the need for such limits? Are 
there additional concerns we have not identified? Should there be 
different limits for automobile leases versus other leases? Should 
there be different limits for non-automobile leases for shelf 
registration eligibility? Should there be such limits for automobile 
leases? Should any of the proposed limits be higher or lower? Should 
the limits be based on a different amount (e.g., percentage of 
offering proceeds instead of asset pool)? If possible, please 
provide supporting data in relation to current market practices.

e. Exceptions to the ``Discrete'' Requirement
    The last set of interpretations we propose to codify relates to 
exceptions to the requirement in the definition of ``asset-backed 
security'' that the asset pool be ``discrete.'' The existence of the 
``discrete'' requirement is to prevent a level of portfolio management 
that is not contemplated by the definition of ``asset-backed security'' 
or consistent with this registration and reporting regime. In addition, 
the lack of a ``discrete'' requirement would make it difficult for an 
investor to make an informed investment decision when the composition 
of the pool is unknown or could change over time.
    However, ever since the original definition of ``asset-backed 
security'' was adopted, there has been some confusion over the meaning 
of the term ``discrete'' in the definition, particularly with respect 
to language in the definition that specifies the asset pool must be a 
``discrete pool of receivables or other financial assets, either fixed 
or revolving.'' The 1992 Release specified that the phrase ``fixed or 
revolving'' was added ``in order to make clear that the definition 
covers 'revolving' credit arrangements, such as credit card and short-
term trade receivables, home equity loans and automotive dealer 
floorplan financings, where account or loan balances revolve due to 
periodic payments, charge-offs and closings of the receivables.''\73\ 
Thus, the basic principle is that the balance of a pool asset may 
revolve, but not the asset pool itself.\74\
---------------------------------------------------------------------------

    \73\ See note 27 above. The 1992 Release also explained that, 
``In credit card financings, for example, the securities are backed 
by current and future receivables generated by specified credit card 
accounts. The balances of the pool assets fluctuate as new 
receivables are generated and existing amounts are paid or charged 
off as a default. If the accounts do not generate sufficient cash 
flow to support the securities, the sponsor may be required to 
assign additional receivables from other accounts to the public 
security holders' interest in the pool.''
    \74\ There are additional instances when the asset pool may 
change under the current definition without infringing the 
``discrete pool'' requirement. For example, often the depositor or 
other seller of the pool assets will make standard representations 
and warranties regarding the pool assets, such as to their principal 
balance and status at the time of transfer to the trust. If an asset 
fails to meet the requirements of those representations or 
warranties, there may be obligations for the depositor to repurchase 
or substitute that asset for assets that do comply with the 
representations or warranties. These pool composition changes are 
permissible under the current defintion as ``rights or other assets 
designed to assure the servicing or timely distribution of proceeds 
to securityholders.'' There is thus no need to specify a separate 
exception from the ``discrete'' requirement for such instances.
---------------------------------------------------------------------------

    Nevertheless, in response to market developments, the staff has 
allowed certain exceptions, with limits, to the discrete pool 
requirement. These exceptions relate to master trusts, prefunding 
periods and revolving periods. In a master trust, the ABS transaction 
contemplates adding additional pool assets in connection with future 
issuances of asset-backed securities backed by the same, but expanded, 
asset pool. Pre-existing securities also would therefore be backed by 
the same expanded asset pool. In a prefunding period, a limited portion 
of the proceeds of the offering is set aside for the future acquisition 
of additional pool assets within a specified period of time after the 
issuance of the asset-backed securities. In a revolving period, a 
limited amount of cash flows from the asset pool may be recycled for a 
specified period to acquire new pool assets instead of being applied to 
payments on the asset-backed securities.\75\
---------------------------------------------------------------------------

    \75\ The period after the revoling period when cash flows are 
applied to payments on the asset-backed securities is often called 
the ``amortization'' or ``pay-down'' period.
---------------------------------------------------------------------------

    The staff's interpretive history in this area has resulted in 
limits on which asset classes may use these structures and still be 
considered an ``asset-backed security.''\76\ We now propose to codify 
these three exceptions and also expand them so that they are applicable 
to all asset types.\77\ A transaction could employ one or more of these 
features and still qualify as an ``asset-backed security.'' These 
expansions should result in increased flexibility in structuring 
transactions that meet market demands without regard to regulatory 
restrictions.
---------------------------------------------------------------------------

    \76\ For example, nearly all asset classes may employ a limited 
prefunding period. However, only a limited subset of asset classes 
are permitted to have revolving periods. Not all of these 
interpretations may be transparent.
    \77\ But see note 111 and the accompanying text regarding other 
factors that may limit the use of these features where the 
distribution of the underlying pool assets may need to be separately 
registered.
---------------------------------------------------------------------------

    As in the case of our proposals for lease-backed ABS that involve 
residual values, we believe the concern relating to these structures 
can be appropriately addressed through disclosure, both at the time of 
issuance of the asset-backed securities as well as on an ongoing basis 
through disclosure of how the asset pool is materially changing.\78\ As 
such, we

[[Page 26660]]

are proposing more detailed disclosures in Regulation AB, discussed 
more fully in Section III.B., regarding the operation of such 
structures and changes to the asset pool over time.
---------------------------------------------------------------------------

    \78\ See, e.g., Letter from the Investment Company Institute to 
Michael H. Mitchell, Special Counsel, Division of Corporation 
Finance, ``Asset-Backed Securities Offerings'' (Oct. 29, 1996).
---------------------------------------------------------------------------

    Consistent with current staff practice, we also are proposing 
limits on the amount and duration of prefunding and certain revolving 
periods to limit the amount of changes to the asset pool, while still 
allowing flexibility to accommodate market demands. These limits are 
designed to establish parameters for the types of securities that 
should be subject to the ABS regulatory regime. As with lease-backed 
ABS, we believe these proposals will expand eligibility of these 
structures while continuing to apply the basic principles underlying 
the definition of ``asset-backed security.''
    Our proposal would allow master trust structures to meet the 
definition of ``asset-backed security'' without any pre-determined 
limits.\79\ For prefunding periods, we propose separate limits for 
shelf and non-shelf offerings similar to our proposals for lease-backed 
ABS. For the general definition of ``asset-backed security,'' the 
amount of proceeds that may be used for a prefunding period may be up 
to 50% of offering proceeds and the length of the prefunding account 
may last up to one year from the date of issuance of the asset-backed 
securities. As with our other proposed thresholds, we believe 
prefunding periods above these thresholds begin to raise serious doubt 
that the transaction should be characterized as an ``asset-backed 
security.'' For Form S-3 eligibility, we propose that the amount of 
proceeds that may be used for a prefunding period may be up to 25% of 
offering proceeds over a similar one-year period. With larger 
prefunding periods, as with larger revolving periods discussed below, 
we believe investors should be entitled to the additional time and 
information they would receive that is typical for transactions 
conducted on a non-shelf basis.
---------------------------------------------------------------------------

    \79\ Of course, each additional issuance of securities backed by 
the same pool and the additional pool assets would need to be 
consistent with the requirements for an ``asset-backed security.''
---------------------------------------------------------------------------

    For revolving periods, our proposals would recognize the nature of 
the asset being securitized (i.e., whether it itself is fixed or 
revolving). For receivables or other financial assets that by their 
nature revolve (e.g., credit cards, dealer floorplan financings or home 
equity lines of credit), there would as today be no limit on the number 
of assets that may revolve nor a limit on the duration of the revolving 
period. For fixed receivables or other financial assets (e.g., standard 
residential mortgages, auto loans and leases), we propose limits 
similar to prefunding periods; that is, the general definition of 
``asset-backed security'' would specify that the additional assets that 
may be acquired in the revolving period may constitute up to 50% of the 
proceeds of the offering and the duration of the revolving period may 
last for up to one year from the date of issuance of the asset-backed 
securities. For Form S-3 eligibility, the revolving period would be 
limited to 25% of proceeds over a one-year period.

    Questions regarding proposed exceptions to the ``discrete pool'' 
requirement:
     Should asset-backed securities transactions be allowed 
to have master trusts, prefunding periods and revolving periods? Are 
there some asset types where the inclusion of such features should 
disqualify any issued securities from being considered an ``asset-
backed security?'' Should one or more of the features (e.g., master 
trusts or revolving periods) not be included or expanded for all 
asset types? Are there any additional exceptions that should be 
made?
     Should there be any pre-determined limits on master 
trust structures? Are the proposed limits appropriate for the use of 
prefunding or revolving periods? Should there be such limits? What 
alternatives could be used in lieu of limits? Should there be 
different limits for shelf registration eligibility? Should there be 
different limits based on the nature of the asset (fixed or 
revolving)? Should there be a limitation that the assets that may be 
acquired in a prefunding or revolving period are of the same 
character as the original pool? Should any of the proposed limits be 
higher or lower? Should the limits be based on a different amount? 
Should the length of prefunding or revolving periods be longer or 
shorter than one year? If possible, please provide supporting data 
in relation to current market practices. Please see Section III.B.4. 
for comment requested regarding disclosure related to these 
features.

3. Securities Act Registration Statements
a. Form Types
    We do not propose a new registration statement form for offerings 
of asset-backed securities. We preliminarily believe that the existing 
form structure is sufficient, provided there are appropriate 
instructions in the applicable forms as to their use for ABS offerings. 
We do propose to limit the registration of asset-backed securities 
offerings to two forms: Form S-1 or Form S-3.\80\ As is currently the 
case, Form S-3 would retain the requirements that would qualify an 
offering for delayed shelf registration on that form. Form S-1 would 
thus become the form for all offerings that meet the basic definition 
of an ``asset-backed security'' but do not meet the additional 
eligibility requirements for Form S-3 (e.g., investment grade and 
proposed additional limits on lease-backed ABS, delinquent pool assets 
and prefunding and revolving periods). We propose to amend our other 
Securities Act registration statement forms for primary offerings to 
exclude explicitly their use for ABS offerings.\81\ Since as discussed 
below we do not intend to have a separate disclosure regime or 
requirements for foreign ABS, there is no need to provide separate form 
types for foreign ABS offerings. These offerings also would be 
registered on Forms S-1 or S-3, as applicable.
---------------------------------------------------------------------------

    \80\ Form S-4 also would remain available with respect to 
transactions, such as exchange offers, authorized by that Form.
    \81\ See proposed amendments to Form S-2, S-11, F-1, F-2 and F-
3. Any offerings meeting the definition of asset-backed security 
that previously used one of these forms for registration, such as 
Form S-11, in lieu of Form S-3 would henceforth be registered on 
Form S-1 instead. As discussed in Section III.F., we also are 
proposing to clarify that ABS issuers could not qualify as a ``small 
business issuer.'' Therefore, ABS offerings would be ineligible for 
Forms SB-1 and SB-2 (referenced in 17 CFR 239.9 and 17 CFR 239.10).
---------------------------------------------------------------------------

    While Form S-3 currently specifies eligibility for ABS offerings, 
neither it nor any other form clarifies how the form is to be prepared 
for such an offering. Therefore, we propose separate general 
instructions for both Form S-1 and Form S-3 to specify use for ABS 
offerings.
    Proposed General Instruction VI. to Form S-1 would clarify how that 
form is to be prepared for an ABS offering. In particular, the proposed 
instruction would clarify who is to sign the registration statement 
(discussed more fully in Section III.A.3.d.) as well as the menu of 
required disclosure items. As to the latter, the proposed instruction 
would identify the existing items in the form that may be omitted as 
well as substitute core disclosure items from proposed Regulation AB 
that would be required. As discussed in Section III.B., proposed Items 
1102-1118 of Regulation AB would represent the basic disclosure package 
for registered ABS offerings. Any other applicable items specified in 
Form S-1, such as the description of the securities and the offering, 
would continue to be required.\82\ The proposed application of the 
disclosure items for Form S-1 is presented in the following table:
---------------------------------------------------------------------------

    \82\ As is generally the case today, no disclosure need be 
provided in response to items that are not applicable to the 
transaction in question. See Securities Act Rule 404(c) (17 CFR 
230.404(c)).

[[Page 26661]]



      Proposed Disclosure for Form S-1 for Registered ABS Offerings
------------------------------------------------------------------------
                                       Required if
        Existing form items             applicable       May be omitted
------------------------------------------------------------------------
Item 1. Forepart of Registration               .................
 Statement and Outside Front Cover
 Page of Prospectus.
Item 2. Inside Front and Outside    .................  .................
 Back Cover Pages of Prospectus.
Item 3. Summary Information, Risk              .................
 Factors and Ratio of Earnings to
 Fixed Charges.
Item 4. Use of Proceeds...........             .................
Item 5. Determination of Offering              .................
 Price.
Item 6. Dilution..................             .................
Item 7. Selling Security Holders..             .................
Item 8. Plan of Distribution......             .................
Item 9. Description of Securities              .................
 to be Registered.
Item 10. Interests of Named                    .................
 Experts and Counsel.
Item 11. Information with Respect
 to the Registrant:
    (a) Item 101 of Regulation S-   .................  
     K, description of business.
    (b) Item 102 of Regulation S-              1 
     K, description of property.
    (c) Item 103 of Regulation S-   .................  
     K, legal proceedings.
    (d) Item 201 of Regulation S-              .................
     K, market price of and
     dividends on the registrant's
     common equity and related
     stockholder matters.
    (e) Financial statements        .................  
     meeting the requirements of
     Regulation S-X.
    (f) Item 301 of Regulation S-   .................  
     K, selected financial data.
    (g) Item 302 of Regulation S-   .................  
     K, supplementary financial
     information.
    (h) Item 303 of Regulation S-   .................  
     K, management's discussion
     and analysis of financial
     condition and results of
     operations.
    (i) Item 304 of Regulation S-   .................  
     K, changes in and
     disagreements with
     accountants on accounting and
     financial disclosure.
    (j) Item 305 of Regulation S-   .................  
     K, quantitative and
     qualitative disclosures about
     market risk.
    (k) Item 401 of Regulation S-   .................  2 
     K, directors and executive
     officers.
    (l) Item 402 of Regulation S-   .................  2 
     K, executive compensation.
    (m) Item 403 of Regulation S-   .................  3 
     K, security ownership of
     certain beneficial owners and
     management.
    (n) Item 404 of Regulation S-   .................  4 
     K, certain relationships and
     related transactions.
Item 12. Disclosure of Commission              .................
 Position on Indemnification for
 Securities Act Liabilities.
Item 13. Other Expenses of                     .................
 Issuance and Distribution.
Item 14. Indemnification of                    .................
 Directors and Officers.
Item 15. Recent Sales of                       .................
 Unregistered Securities.
Item 16. Exhibits and Financial                .................
 Statement Schedules.
Item 17. Undertakings.............             .................
Additional Disclosure Items from
 Regulation AB:
    Items 1102-1118 of Regulation              .................
     AB.
------------------------------------------------------------------------
1 Descriptions regarding pool assets and relevant property underlying
  the pool assets would be covered under new Items in proposed
  Regulation AB.
2 If the issuing entity does not have any executive officers or
  directors.
3 Except for Item 403(a) of Regulation S-K and if the issuing entity
  does not have any executive officers or directors.
4 If the issuing entity does not have any executive officers or
  directors. We propose a separate item in Regulation AB regarding
  affiliations and related transactions among transaction participants.

    Proposed General Instruction V. to Form S-3 would perform a similar 
function for that form. Unlike current practice on Form S-1, non-ABS 
offerings on Form S-3 rely predominately on incorporation by reference 
of Exchange Act reports for disclosure unrelated to the offering. As a 
result, existing Form S-3 does not set forth a detailed menu of 
disclosure items apart from disclosure about the offering. However, 
because a reporting history is not required for ABS for Form S-3 
eligibility, investment grade ABS offerings registered on that form 
often must present all of their disclosure in the base prospectus and 
prospectus supplement in lieu of incorporating information by 
reference. Accordingly, the proposed Form S-3 instruction for ABS does 
not specify any existing items that may be omitted, but rather simply 
specifies the addition of the same basic disclosure package from 
Regulation AB. The other disclosure items required by Form S-3, such as 
the description of the securities and the offering, would continue to 
be required as applicable. Therefore, as shown in the following table, 
the effect of the proposed general instruction is to add the basic 
disclosure package of proposed Items 1102-1118 of Regulation AB:

      Proposed Disclosure for Form S-3 for Registered ABS Offerings
------------------------------------------------------------------------
                                               Required if     May be
             Existing form items               applicable      omitted
------------------------------------------------------------------------
Item 1. Forepart of Registration Statement          ............
 and Outside Front Cover Page of Prospectus.
Item 2. Inside Front and Outside Back Cover         ............
 Pages of Prospectus........................
Item 3. Summary Information, Risk Factors           ............
 and Ratio of Earnings to Fixed Charges.....
Item 4. Use of Proceeds.....................        ............
Item 5. Determination of Offering Price.....        ............
Item 6. Dilution............................        ............
Item 7. Selling Security Holders............        ............
Item 8. Plan of Distribution................        ............

[[Page 26662]]

 
Item 9. Description of Securities to be             ............
 Registered.................................
Item 10. Interests of Named Experts and             ............
 Counsel....................................
Item 11. Material Changes...................        ............
Item 12. Incorporation of Certain                   ............
 Information by Reference...................
Item 13. Disclosure of Commission Position          ............
 on Indemnification for Securities Act
 Liabilities................................
Item 14. Other Expenses of Issuance and             ............
 Distribution...............................
Item 15. Indemnification of Directors and           ............
 Officers...................................
Item 16. Exhibits...........................        ............
Item 17. Undertakings.......................        ............
Additional Disclosure Items from Regulation
 AB:
Items 1102--1118 of Regulation AB...........        ............
------------------------------------------------------------------------

    Questions regarding proposed form types:
     We request comment on our proposal to require ABS 
offerings to be registered on either Form S-1 or Form S-3. Is there 
a reason to continue to provide access to another form type? Would 
there be any reason to provide a separate form type specifically for 
ABS?
     We request comment on the proposed general instructions 
to Forms S-1 and S-3. Is the proposed menu of disclosure items 
appropriate? Should any additional items be included or omitted? For 
example, should information required by Item 305 of Regulation S-K 
regarding quantitative and qualitative disclosures about market risk 
be included? Should disclosure be required of any changes in or 
disagreements with accountants used in prior transactions by the 
sponsor or depositor involving the same asset class regarding 
attestations of assessments of compliance with servicing criteria? 
If so, should the disclosure be similar to that required by existing 
Item 304 of Regulation S-K? Are there any additional instructions 
that should be included for ABS offerings?

b. Presentation of Disclosure in Base Prospectuses and Prospectus 
Supplements
    In proposing to specify the menu of disclosure items applicable for 
ABS offerings eligible for Form S-3, and thus shelf registration, we do 
not intend to change the current practice or ability to present such 
disclosure in a separate base prospectus and prospectus supplement, a 
practice also available for non-ABS offerings.\83\ Items in the basic 
disclosure package that are known or reasonably available should 
continue to be described in the base prospectus, while disclosure 
dependent on the final terms of the particular takedown could still be 
provided in the prospectus supplement.\84\ A form of prospectus 
supplement would still be required to accompany the base prospectus in 
the registration statement at the time of effectiveness that outlines 
the format of deal-specific information that will be disclosed at the 
time of each takedown.\85\
---------------------------------------------------------------------------

    \83\ However, as stated in the 1992 Release and as applicable to 
all shelf offerings, registrants are reminded that disclosure in the 
registration statement at the time of effectiveness should 
accurately reflect the registrant's current plans and arrangements 
with respect to the distribution of its securities. If a registrant 
plans to conduct a prompt takedown of asset-backed securities, the 
registration statement at the time of effectiveness must include all 
available information regarding the offering, including information 
about the asset pool, subject to any omissions permitted by 
Securities Act Rule 430A (17 CFR 230.430A), including a completed 
prospectus supplement and not just a form of prospectus supplement. 
Tax and legality opinions reflecting the takedown and related 
consents also would need to be filed pre-effectively with respect to 
any proposed offering contemplated to occur promptly.
    \84\ For example, the base prospectus should likely contain risk 
factors applicable to the transaction as a whole or the nature of 
the securities to be issued. The base prospectus also should include 
a discussion of the material Federal income tax consequences from 
investing in asset-backed securities. Of course, the prospectus 
supplement would include any additional risk factors or more 
specific disclosure as to tax consequences applicable to the 
particular structure and securities to be offered.
    \85\ In addition, any applicable opinions of counsel regarding 
tax consequences and the legality of the securities being registered 
would continue to be filed prior to effectiveness of the 
registration statement. See Items 601(b)(5) and 601(b)(8) of 
Regulation S-K. Note that these requirements exist independently 
from any contractual requirements of the transaction to deliver 
opinions at the closing of the asset-backed securities transaction. 
Where a prompt offering under the registration statement is not 
contemplated, opinions filed as of effectiveness may be 
appropriately conditioned or qualified pending the actual issuance 
of securities in the future. However, the opinions filed as of the 
time of effectiveness must still be signed opinions, not unsigned or 
draft forms of opinion. For each takedown that occurs, as with other 
exhibits representing the final terms of the takedown, amended or 
final opinions without such conditions or qualifications must be 
filed, either as an exhibit to the registration statement (See 
Securities Act Rule 462(d) (17 CFR 230.462(d)) which provides for 
immediate effectiveness of a post-effective amendment filed solely 
to add exhibits), or under cover of Form 8-K and incorporated by 
reference into the registration statement.
---------------------------------------------------------------------------

    As referenced in the 1992 Release, the type or category of asset to 
be securitized must be fully described in the registration statement at 
the time of effectiveness. The structural features contemplated also 
should be disclosed. In addition, risks associated with changes in 
interest rates or prepayment levels should be fully disclosed. The 
various scenarios under which payments on the asset-backed securities 
could be impaired also should be discussed, as well as identification 
of the types or categories of securities that may be offered, such as 
interest-weighted or principal-weighted classes (including IO or PO 
securities), planned amortization or companion classes or residual or 
subordinated interests.
    In presenting disclosure in base prospectuses and prospectus 
supplements, registrants are reminded that, as is the case today for 
all shelf offerings, the base prospectus must fully describe the types 
of offerings contemplated by the registration statement. A takedown off 
of a shelf that involves assets, structural features, credit 
enhancement or other features that were not described as contemplated 
in the base prospectus will usually require either a new registration 
statement (e.g., to include additional assets) or a post-effective 
amendment (e.g., to include new structural features or credit 
enhancement) rather than simply describing them in the final prospectus 
filed with the Commission pursuant to Securities Act Rule 424.\86\ 
Registrants should exercise discretion, however, in describing only the 
material

[[Page 26663]]

asset types or features reasonably contemplated to be included in an 
actual takedown in lieu of attempting to identify every conceivable 
permutation, no matter how remote. Such a practice only exacerbates 
unnecessarily the length of the base prospectus and limits the 
usefulness of this method of disclosure by including unnecessary and 
uninformative disclosure that obscures material information.
---------------------------------------------------------------------------

    \86\ Regarding the registration of market-making or remarketing 
transactions on Form S-3, in non-ABS transactions the registration 
statement is kept current by the incorporation by reference of 
subsequent Exchange Act reports. In an ABS transaction, the 
incorporation by reference of subsequent Exchange Act reports also 
is important, although the information in those reports does not 
include the extent of disclosure in the registration statement 
regarding the asset pool, such as the pool composition tables. 
Consistent with staff interpretations, this information should be 
kept current for use in ABS market-making and remarketing 
transactions. This can be accomplished either by filing a new 
prospectus under Securities Act Rule 424 or through the filing of a 
Form 8-K with the updated information that is incorporated by 
reference.
---------------------------------------------------------------------------

    We do propose to specify in the proposed general instruction to 
Form S-3 the existing requirement to prepare separate base prospectuses 
and forms of prospectus supplements when multiple asset types may be 
securitized. As stated in the 1992 Release, a registration statement 
may not merely identify several alternative types of assets that may be 
securitized. A separate base prospectus and form of prospectus 
supplement must be presented for each asset class that may be 
securitized in a discrete pool in a takedown under that registration 
statement. Any difference in country of origin or country of property 
securing the pool assets also would require a separate base prospectus 
and form of prospectus supplement for each country.
    An additional issue that often results in staff comment is the 
inclusion of language in registration statements that investors should 
rely on the information in the prospectus supplement if the terms of a 
particular series of securities conflict or vary between the base 
prospectus and the accompanying prospectus supplement. Disclosure in 
prospectus supplements regarding the transaction may enhance disclosure 
in the base prospectus regarding contemplated transactions, but should 
not contradict it. Similarly, including language to the effect of 
``Except as otherwise provided in the prospectus supplement'' will 
permit some supplemental or modified terms of transactions, but should 
not be construed as creating the ability to add asset types or 
structural features in a takedown that were not otherwise contemplated 
by and described in the base prospectus.

    Questions regarding presentation of disclosure in base 
prospectuses and prospectus supplements:
     Is any additional guidance or clarification necessary 
regarding the presentation of base prospectus and prospectus 
supplement disclosure? Should we be more specific, including by rule 
if necessary, on what information must be in the base prospectus as 
opposed to the prospectus supplement? If so, how should disclosures 
be delineated? Are there additional ways to cut down on unnecessary 
volume or detail in base prospectuses?
     Is the proposed specification that a separate base 
prospectus and form of prospectus supplement must be presented for 
each asset class and country of origin appropriate? If not, how 
would the staff ensure the base prospectus provides clear disclosure 
that did not confuse investors?
     Does the process of a base prospectus and a later 
prospectus supplement ensure that investors have adequate 
information at the time of their investment decision? Do the 
provisions permitting additional written communications in shelf ABS 
offerings, discussed in Section III.C., permit adequate information 
to be provided to investors in that time?

c. Form S-3 Eligibility Requirements for ABS
    We propose to maintain the existing requirement for ABS Form S-3 
eligibility that the asset-backed securities must be rated ``investment 
grade'' by a nationally recognized statistical rating organization, or 
NRSRO, at the time of offer and sale to the public.\87\ The definition 
of ``investment grade'' would remain the same as for other investment 
grade securities that may be registered on Form S-3.\88\ The 
``investment grade'' requirement has existed for over ten years with 
respect to asset-backed securities and for over twenty years with 
respect to other non-convertible securities. The Commission is engaged 
in a review of the role of credit rating agencies in the operation of 
the securities markets, including whether credit ratings should 
continue to be used for regulatory purposes under the Federal 
securities laws.\89\ However, pending outcome of that review, we 
propose to maintain the same rules and standards currently used for 
purposes of Form S-3 eligibility.
---------------------------------------------------------------------------

    \87\ NRSRO would continue to have the same meaning as used in 17 
CFR 240.15c3-1(c)(2)(vi)(F).
    \88\ See General Instruction I.B.2 of Form S-3 and note 57 
above.
    \89\ See Release No. 33-8236 (Jun. 4, 2003) [68 FR 35258]. For a 
detailed discussion on credit rating agencies and the Commission's 
use of credit ratings under the Federal securities laws, see the 
U.S. Securities and Exchange Commission, ``Report on the Role and 
Function of Credit Rating Agencies in the Operation of the 
Securities Markets, As Required by Section 702(b) of the Sarbanes-
Oxley Act of 2002'' (Jan. 2003). The Report is available on our 
website.
---------------------------------------------------------------------------

    As discussed previously, we propose four additional conditions 
regarding the types of asset-backed securities that would qualify for 
Form S-3 eligibility. First, we propose to codify the current position 
that delinquent assets may not constitute 20% or more, as measured by 
dollar volume, of the original asset pool. Second, for securities 
backed by leases other than automobile leases, the portion of the cash 
flow to repay the securities anticipated to come from the residual 
value of the physical property underlying the leases may not constitute 
20% or more, as measured by dollar volume, of the original asset pool. 
Third, the offering may not contemplate a prefunding account in excess 
of 25% of the proceeds of the offering or that lasts for more than one 
year. Finally, with respect to fixed financial assets that do not by 
their nature revolve, the amount of additional assets to be acquired in 
a revolving period may not exceed 25% of the proceeds of the offering 
or last for more than one year.
    Consistent with existing requirements, we do not propose to add a 
reporting history requirement for ABS Form S-3 eligibility. However, we 
do propose codifying that reporting obligations regarding other asset-
backed securities transactions established by the sponsor and the 
depositor have been complied with for the prior 12 months for continued 
Form S-3 eligibility for new transactions.\90\ This proposal would not 
require that there be a reporting history with respect to any prior 
transactions, only that any existing or prior requirements during the 
past year have been met. This would include all prior reporting 
obligations during the preceding year, even if and only up until those 
obligations were suspended at some point during the year pursuant to 
Section 15(d) of the Exchange Act. While we believe the instances when 
this requirement would not be met should be rare, we do not believe it 
would be appropriate to continue to allow the benefits of shelf 
registration to new transactions established by sponsors or depositors 
that have not complied with ongoing reporting obligations involving 
previous asset-backed securities transactions.
---------------------------------------------------------------------------

    \90\ This proposal with regard to the depositor is consistent 
with existing staff policy.

    Questions regarding Form S-3 eligibility:
     Should we continue to require an investment grade 
requirement for Form S-3 eligibility? Are any modifications to that 
requirement necessary? Should alternatives be considered, such as 
investor sophistication, minimum denomination or experience 
criteria?\91\ If so, what criteria should be considered?
---------------------------------------------------------------------------

    \91\ See note 89 above.
---------------------------------------------------------------------------

     Are there any additional conditions that should be 
required to qualify for Form S-3 eligibility? Are the proposed 
conditions appropriate?
     Should our proposed clarification of the impact of 
prior reporting obligations be limited to prior transactions by the 
same sponsor and depositor involving the same asset class? If so, 
why?


[[Page 26664]]


d. Determining the ``Issuer'' and Required Signatures
    We propose to clarify which entity is considered the ``issuer'' 
under the Securities Act with respect to an offering of asset-backed 
securities. The Securities Act defines the term ``issuer'' in part to 
include every person who issues or proposes to issue any security, 
except that with respect to certificates of deposit, voting-trust 
certificates, or collateral trust certificates, or with respect to 
certificates of interest or shares in an unincorporated investment 
trust not having a board of directors (or persons performing similar 
functions), the term issuer means the person or persons performing the 
acts and assuming the duties of depositor or manager pursuant to the 
provision of the trust or other agreement or instrument under which the 
securities are issued.\92\ Under current staff positions, the depositor 
must sign the Securities Act registration statement for an ABS 
offering. In addition, the issuing entity also must sign in the rare 
situation where it is formed prior to effectiveness.
---------------------------------------------------------------------------

    \92\ See Section 2(a)(4) of the Securities Act (15 U.S.C. 
77b(a)(4)).
---------------------------------------------------------------------------

    We propose to clarify that the depositor for the asset-backed 
securities, acting solely in its capacity as depositor to the issuing 
entity, is the ``issuer'' for purposes of the asset-backed securities 
of that issuing entity.\93\ Further, our proposed rule would specify 
that the person acting in its capacity as the depositor for the issuing 
entity of an asset-backed security is a different ``issuer'' from that 
same person acting as a depositor for any other issuing entity or for 
purposes of that person's own securities. As the proposed definition of 
asset-backed security would clarify that the issuing entity would need 
to be a passive special purpose investment vehicle, the proposed rule 
would apply regardless of the issuing entity's form of organization.
---------------------------------------------------------------------------

    \93\ See proposed Securities Act Rule 191 (17 CFR 230.191). We 
propose an identical rule for purposes of the Exchange Act. See 
proposed Exchange Act Rule 3b-19 (17 CFR 240.3b-19) and Section 
III.D.2. As noted in Section III.B.2., we propose to define the 
``depositor'' as the depositor who receives or purchases and 
transfers or sells the pool assets to the issuing entity. For asset-
backed securities where there is not an intermediate transfer of the 
assets from the sponsor to the issuing entity, the term 
``depositor'' would refer to the sponsor. See proposed Item 1101(e) 
of Regulation AB. It should be noted that the definition of 
``issuer'' under the Investment Company Act is different from the 
definitions in the Securities Act and the Exchange Act. See 15 
U.S.C. 80a-2(a)(22). Our proposals would not affect that definition.
---------------------------------------------------------------------------

    By clarifying that the person acting as the depositor in its 
capacity as depositor to the issuing entity is a different ``issuer'' 
from that person in respect of its own securities, any applicable 
exemptions from registration that person may have with respect to its 
own securities would not be applicable to the asset-backed 
securities.\94\ Similarly, the reporting history with respect to a 
particular class of asset-backed securities would not affect Form S-3 
eligibility with respect to the depositor's or sponsor's own 
securities, although as discussed above we do propose that the 
reporting history with respect to prior asset-backed securities 
transactions established by the sponsor or the depositor could affect 
continued Form S-3 eligibility for future ABS transactions.
---------------------------------------------------------------------------

    \94\ For example, in an ABS transaction where there is not an 
intermediate transfer of the pool assets from the sponsor to the 
issuing entity and the sponsor is a bank, the proposed rule would 
not mean that because the bank is acting as depositor, the asset-
backed securities would then be a ``security issued * * * by a 
bank'' and thus exempt from registration under Section 3(a)(2) of 
the Securities Act (15 U.S.C. 77c(a)(2)). See, e.g., Bank of America 
National Trust & Savings Ass'n (May 19, 1977).
---------------------------------------------------------------------------

    Consistent with this proposal, we propose to codify in the general 
instructions for Forms S-1 and S-3 that the registration statement 
would need to be signed, as is currently the case, by the depositor, 
the depositor's principal executive officer or officers, principal 
financial officer and controller or principal accounting officer, and 
by at least a majority of the depositor's board of directors or persons 
performing similar functions. We would no longer require the issuing 
entity to sign if formed prior to effectiveness as such a requirement 
would be superfluous.

    Questions regarding proposed definition of ``issuer'' and 
signatures required:
     We request comment on our proposed rule clarifying the 
``issuer'' for an asset-backed security. In addition to, or in lieu of 
the depositor, should another entity be considered the ``issuer,'' such 
as the sponsor, the servicer, the trustee or the issuing entity? What 
would be the bases for designating such entity or entities as the 
``issuer?''
     Is there still a reason to require the issuing entity to 
sign the registration statement if formed prior to effectiveness? If 
so, who should sign on behalf of the issuing entity? Should any other 
party to the transaction be required to sign the registration 
statement?
     Our proposal regarding which individuals of the depositor 
must sign is consistent with requirements for all registration 
statements. Should they be modified for ABS? If so, how?
4. Foreign ABS
    While not as prevalent as in the U.S., securitization by foreign 
issuers has been developing rapidly.\95\ However, asset-backed 
securities issued by a foreign issuer \96\ or that are backed by 
foreign assets raise special issues due to potential differences in the 
legal and regulatory regime of the relevant home country. Differing 
laws and practices regarding banking regulation, accounting, 
bankruptcy, property rights, secured transactions, ``true sale,'' tax, 
asset servicing, consumer protection and other matters may alter 
fundamentally the basic principles underlying an ``asset-backed 
security.'' Also, given the early stage of securitization in some 
foreign markets, ABS may be used not just as an alternative funding 
source, but more for capital management, including efforts to ``prune'' 
a lender's portfolio by off-loading poorly performing assets.\97\
---------------------------------------------------------------------------

    \95\ For example, one source estimates that non-U.S.ABS issuance 
grew from $93 billion in 2000 to $185 billion in 2003. See Asset-
Backed Alert (pub. by Harrison Scott Publications).
    \96\ The term ``foreign issuer'' is defined in Securities Act 
Rule 405 (17 CFR 230.405) as ``any issuer which is a foreign 
government, a national of any foreign country or a corporation or 
other organization incorporated or organized under the laws of any 
foreign country.''
    \97\ See, e.g., Brian Bremner et al., ``An Exit Plan for 
Japan?'' Business Week, Oct. 26, 1998. Our separate proposed limits 
on delinquency concentrations and non-performing assets would act 
somewhat as a limiter on such transactions qualifying as an ``asset-
backed security.'' In particular, the proposed standard for non-
performing assets would be linked to the charge-off policies of the 
sponsor, regardless of whether those policies were enforced by the 
sponsor or any relevant regulatory authority.
---------------------------------------------------------------------------

    As a result of these concerns, the staff currently requires 
additional conditions for the processing of Form S-3 registration 
statements involving foreign ABS offerings. These conditions may 
include first requiring one or more registered offerings on a non-shelf 
basis on Form S-1 or S-11 that is fully reviewed by the staff, as well 
as other steps or conditions to help assure that novel or unique 
questions can be addressed by the staff. As experience with a 
particular issuer, asset type and laws related to asset-backed issues 
in the home country increases, the requirements decrease. Nevertheless, 
while designed to address the concerns noted above, these additional 
steps and conditions can result in delays and possible impediments to 
access to the U.S. public capital markets through shelf registration 
for foreign ABS, even if the other requirements for shelf registration, 
such as an investment grade rating, can be met.

[[Page 26665]]

    To address the foreign and legal and regulatory issues while 
appropriately treating foreign ABS transactions, we are not proposing a 
different disclosure or regulatory regime for foreign ABS, with the one 
exception discussed below. Foreign ABS would be registered on the same 
Securities Act registration forms as domestic ABS, and with the 
exception of the disclosure discussed below, foreign ABS would be 
subject to the same disclosure requirements in proposed Regulation AB. 
Foreign ABS offerings registered on Form S-3 also would be eligible for 
our proposals regarding the use of ABS informational and computational 
material and ABS research reports discussed in Section III.C.
    Like several of our other proposals, we believe that many of the 
concerns relating to foreign ABS can be appropriately addressed through 
adequate disclosure. As such, we are proposing an additional general 
instruction in Regulation AB focused on foreign ABS that if asset-
backed securities are issued by a foreign issuer, are backed by foreign 
assets, or are affected by credit enhancement or other support provided 
by a foreign entity, then in providing the disclosures required, the 
filing also must describe any pertinent governmental legal or 
regulatory or administrative matters and any pertinent tax matters, 
exchange controls, currency restrictions or other economic, fiscal, 
monetary or potential factors that could materially affect payments on 
the performance of, or other matters relating to, the assets contained 
in the pool or the asset-backed securities.\98\ This disclosure should 
particularly address the material items and legal and regulatory or 
administrative factors discussed above. Similar to the proposed 
requirement that registrants have separate base prospectuses for 
different asset classes, as discussed in Section III.A.3.c., is a 
proposed requirement that a registrant would need to prepare separate 
base prospectuses for each country of origin or country of property 
securing the pool assets.
---------------------------------------------------------------------------

    \98\ See proposed Item 1100(e) of Regulation AB. Information 
specified in Item 101(g) of Regulation S-K and Instruction 2 to Item 
202 of Regulation S-K also would be required by the proposed Item.
---------------------------------------------------------------------------

    We would expect that at the time of filing, the registration 
statement would include fully developed disclosure clearly articulating 
the material differences and effects of the home country legal and 
regulatory regime. In this regard, we also encourage pre-filing 
conferences with the staff where appropriate to discuss the home 
country legal and regulatory environment, the proposed transaction and 
the relevant disclosures that would be required.\99\
---------------------------------------------------------------------------

    \99\ Registrants also should consider building additional time 
into their planning schedules given the possibility for staff review 
of the disclosure The review of these disclosures could include, for 
example, representative prospectus supplement disclosure, including 
statistical disclosure, regarding a hypothetical portfolio of 
financial assets that would be securitized in a takedown under the 
registration statement.
---------------------------------------------------------------------------

    We also do not propose a different Exchange Act reporting structure 
for foreign ABS. We believe periodic disclosure of distribution and 
pool performance information, reports regarding servicing compliance 
(including an attestation report on an assessment of compliance with 
servicing criteria) and current disclosure of significant events would 
be equally relevant and applicable for foreign ABS as they are for 
domestic ABS. Thus, like domestic ABS, foreign ABS would be required to 
report on Forms 10-D, 10-K and 8-K. In addition, ongoing disclosures 
would be required in Forms 10-D and 10-K regarding any material impact 
caused by foreign legal and regulatory developments during the period 
covered by the report which had not been previously described.

    Questions regarding foreign ABS:
     We request comment on the application of our proposals 
to foreign ABS. Is there a need to create different regulatory 
requirements for foreign ABS? If so, what accommodations should be 
made and why? In particular, is there any reason why foreign ABS 
should be subject to differing ongoing Exchange Act reporting 
obligations than domestic ABS? We request comment particularly from 
the point of views of potential issuers of foreign ABS who would 
prepare this information as well as potential investors in foreign 
ABS regarding what information would be material to their investing 
decisions.
     Should our proposed general instruction regarding 
foreign ABS disclosure be more specific? Are there any particular 
categories of disclosure that should be delineated?
     Are there any investor protection concerns raised by 
the approach of the proposals to foreign ABS? Should there be any 
additional conditions for Form S-3 eligibility for foreign ABS? For 
example, should there be a requirement of one or more previous 
registered offerings on a non-shelf basis? Should certain 
representations or undertakings be required, such as that subsequent 
offerings will be substantially similar to prior transactions? 
Should there be any minimum denomination requirements, investor 
sophistication or other suitability requirements regarding the types 
of investors that may invest? Should we have different standards 
regarding the type of pool assets (e.g., level of delinquencies) 
that may be securitized? Should any of these conditions also be 
imposed with respect to Form S-1, such as an investment grade 
requirement?
     Are there structures commonly used in foreign ABS 
transactions that would be restricted from the definition of 
``asset-backed security'' under our proposals? Would this limit the 
ability of these transactions to register public offerings in the 
U.S.? Are there any foreign structures that would be contemplated by 
our proposals but should not be considered appropriate for an 
``asset-backed security?''
5. Proposed Exclusion From Exchange Act Rule 15c2-8(b)
    Through a series of staff no-action letters, in connection with 
offerings of asset-backed securities eligible for registration on Form 
S-3, broker-dealers are not required under Exchange Act Rule 15c2-8(b) 
to deliver a copy of a preliminary prospectus to any person who is 
expected to receive a confirmation of sale at least 48 hours prior to 
the sending of such confirmation.\100\ Without these no-action letters, 
most broker-dealers would be required to deliver a preliminary 
prospectus in ABS offerings because Rule 15c2-8(b) requires such 
delivery if the issuer has not previously been required to file reports 
with the Commission pursuant to Section 13(a) \101\ or 15(d) of the 
Exchange Act, which most ABS issuers at the time of the ABS offering 
are not. In arguing for the no-action relief, the incoming requests to 
the staff cited the ability to use term sheets and computational 
material as substitutes,\102\ the expense of preparing a preliminary 
prospectus and practical difficulties in preparing a preliminary 
prospectus given that the structure of an ABS transaction often evolves 
during the offering process.
---------------------------------------------------------------------------

    \100\ See Bond Market Ass'n (Dec. 15, 2000); Bond Market Ass'n 
(Dec. 15, 1999); Bond Market Ass'n (Nov. 20, 1998); PSA The Bond 
Market Ass'n (Sep. 26, 1997); and Public Securities Ass'n (Dec. 15, 
1995).
    \101\ 15 U.S.C. 78m(a).
    \102\ See Section III.C.1.
---------------------------------------------------------------------------

    Given our more than eight years of experience with the staff no-
action letters, we are proposing to codify the position as a formal 
exclusion from Exchange Act Rule 15c2-8(b).\103\ Although we propose to 
codify the staff position regarding Rule 15c2-8(b), the proposal does 
not affect any other obligation in that rule nor any other prospectus 
delivery obligation that may

[[Page 26666]]

be applicable. The proposed exclusion only would be available with 
respect to registered offerings of investment grade asset-backed 
securities that meet the requirements of General Instruction I.B.5 of 
Form S-3. With respect to asset-backed securities that do not meet Form 
S-3 requirements (i.e., those that would be registered on Form S-1), we 
believe investors should be entitled to the additional time and 
information they would receive as a result of Rule 15c2-8(b). We also 
believe that because of a separate registration statement for each Form 
S-1 offering, the impact of complying with the rule is less significant 
in that context.
---------------------------------------------------------------------------

    \103\ The original no-action relief included a condition that 
the ABS offering would not contemplate a prefunding account in 
excess of 25% of the principal balance of the offered securities, 
which was consistent with staff practice regarding prefunding 
periods at the time. As we are proposing specific prefunding limits 
in the definition of ``asset-backed security'' and limiting Form S-3 
to a 25% prefunding limit, the prefunding limit contained in the no-
action letters for the Exchange Act Rule 15c2-8(b) exclusion will 
now be in Form S-3 eligibility requirements.
---------------------------------------------------------------------------

    Although we do propose to codify the exclusion from Rule 15c2-8(b) 
for Form S-3 ABS, we are concerned with statements from investors in 
previous communications to the staff that a combination of factors, 
including the introduction of shelf registration for ABS, relief from 
Rule 15c2-8(b) and the ability to use term sheets and computational 
material, has reduced the amount of time and information investors have 
to make informed investment decisions.\104\ In this regard, we note 
that investors should have adequate information at the time of an 
investment decision in an ABS offering, as in the case of all 
offerings. We request comment regarding these concerns.
---------------------------------------------------------------------------

    \104\ See, e.g., Letter from ICI to Michael H. Mitchell, Special 
Counsel, Division of Corporation Finance, ``Asset-Backed Securities 
Offerings'' (Oct. 29, 1996); and Letter from AIMR to Brian J. Lane, 
Director, Division of Corporation Finance, ``Recommendations for a 
Disclosure Regime for Asset-Backed Securities'' (Sep. 30, 1996). 
These letters also questioned the premise that there are ongoing 
dialogues with investors regarding structuring publicly offered ABS 
classes.

    Questions regarding proposed exclusion from Exchange Act Rule 
15c2-8(b):
     Should we codify an exclusion from the preliminary 
prospectus delivery requirements of Rule 15c2-8(b) for Form S-3 ABS? 
Do investors have enough time and information before the offering to 
make fully informed investment decisions? What alternatives might 
exist to Rule 15c2-8(b) to address this concern?
     What would be the costs and benefits of not codifying 
the staff position? Should there be any additional conditions to the 
exclusion? Should the proposed exclusion not apply to ABS targeted 
to non-institutional investors? For example, should preliminary 
prospectus delivery be required if the ABS is expected to have low 
minimum investment denominations (e.g., less than $1,000) or for ABS 
that are to be listed? Should the exclusion be available for foreign 
ABS?
     Is the proposed limitation to Form S-3 ABS still 
appropriate? If not, under what circumstances should the proposal be 
extended to Form S-1 ABS? In particular, are there any additional 
conditions that should be required for extending the exclusion to 
Form S-1 ABS?

6. Registration of Underlying Pool Assets
a. Current Requirements
    The 1992 Release included a statement that the definition of 
``asset-backed security'' does not encompass securities issued in 
structured financings for one obligor or group of related obligors. It 
also stated that asset-backed offerings with a significant asset 
concentration--that is, a significant concentration of obligations of 
one obligor or related obligors--may involve one or more co-issuers 
under Securities Act Rule 140.\105\ In interpreting these provisions, 
the staff has focused on ensuring that an ABS offering does not 
constitute an unregistered distribution of underlying securities and 
that non-S-3 eligible registrants do not circumvent Form S-3 
eligibility requirements by attempting to structure their offering as 
an asset-backed offering. One of the basic premises underlying ABS 
offerings is that an investor is buying participation in the assets. 
Therefore, if the assets being securitized are themselves securities 
under the Securities Act, the offering of those securities also must be 
registered or exempt from registration from the Securities Act.\106\
---------------------------------------------------------------------------

    \105\ 17 CFR 230.140. Securities Act Rule 140 states, in 
pertinent part, as follows:
    ``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(a)(11) of the [Securities] Act.''
    \106\ Similarly, if a loan participation were securitized, that 
would be viewed as a public distribution of the loan participation 
and the loan participation would therefore be a security, the offer 
and sale of which would be subject to the registration requirements 
of the Securities Act. See, e.g., Pollack v. Laidlaw Holdings, 27 
F.3d 808 (2nd Cir. 1994).
---------------------------------------------------------------------------

    In considering whether the distribution of the underlying assets 
must be registered in addition to the distribution of the ABS, the 
basic proposition is that where the underlying securities themselves 
are not exempt from registration, the depositor must be free to 
publicly resell the underlying securities without registration. 
Otherwise, their distribution must be registered. If registration of 
the underlying securities distribution is required, certain conditions 
and disclosures have developed through the staff comment process and 
industry practice regarding the method and manner of such registration. 
These conditions are designed to provide clear disclosure to investors 
of the different distributions involved, the relationships between the 
distributions and investor rights with respect to each distribution.
    The nature of the distribution of the underlying securities is the 
important factor in determining whether concurrent registration is 
required, not necessarily their concentration in the pool. For example, 
if a $100 million asset pool included $5 million of securities that 
were not freely resalable by the depositor without registration, then 
the distribution of those $5 million of securities through the ABS 
distribution also would need to be registered, even though such 
securities only constituted 5% of the asset pool. Similarly, if a 
depositor obtained $100 million of freely resalable securities of one 
obligor from the secondary market, the offering of ABS backed by those 
securities would not require concurrent registration of the 
distribution of the underlying securities, even though one obligor 
represented 100% of the pool, because the securities were not purchased 
from the issuer or underwriter but rather were purchased in the 
secondary market. In that case, additional disclosure would be required 
regarding the concentrated obligor, including financial information 
about the obligor, but the concentration itself would not trigger a 
separate registration requirement.\107\ As a result, the definition of 
``asset-backed security'' may encompass securities issued in structured 
financings for one obligor or group of related obligors, so long as any 
required disclosure about the underlying obligor is provided and any 
distribution of the underlying securities is registered, if required.
---------------------------------------------------------------------------

    \107\ See Sections III.B.6 and 7. See also Section III.B.9. 
regarding alternative methods that may be available to present 
information regarding the concentrated obligor, such as through 
incorporation by reference or by including a reference to the 
obligor's Commission filings.
---------------------------------------------------------------------------

b. Proposal for When Registration Is Required
    To provide further clarification and regulatory certainty regarding 
this topic, we propose to codify in substantial part existing staff 
positions, as well as to streamline the conditions that would be 
required if the distribution of the underlying securities also must be 
registered.\108\ First, we propose to delineate the conditions when 
registration of the distribution of the underlying security would not 
be required. Most asset types that are securitized today, including 
residential

[[Page 26667]]

mortgages, student loans, auto loans and credit card receivables, would 
meet these conditions and thus would not be affected.
---------------------------------------------------------------------------

    \108\ See proposed Securities Act Rule 190 (17 CFR 230.190).
---------------------------------------------------------------------------

    Under our proposal, in an ABS offering where the asset pool 
includes securities of another issuer, unless the underlying securities 
are exempt from registration under the Securities Act, the offering of 
the underlying securities itself must be registered as a primary 
offering of such securities, unless all of the following are true:

     The depositor would be free to publicly resell the 
underlying securities without registration under the Act;
     Neither the issuer of the underlying securities nor any 
of its affiliates has a direct or indirect agreement, arrangement, 
relationship or understanding, written or otherwise, relating to the 
underlying securities and the asset-backed securities transaction; 
and
     Neither the issuer of the underlying securities nor any 
of its affiliates is an affiliate of the sponsor, depositor, issuing 
entity or underwriter of the asset-backed securities transaction.

    The first condition states the basic proposition that the 
securities of the underlying issuer must be freely resalable without 
registration. Consistent with existing staff practice, we propose to 
include two examples to clarify this condition. First, the underlying 
securities may not include restricted securities (e.g., privately 
placed securities) that do not meet the conditions for resale in 
Securities Act Rule 144(k) (e.g., a two-year holding period by non-
affiliates).\109\ Second, the offering of the asset-backed security 
could not constitute part of a distribution of the underlying 
securities. Underlying securities which at the time of their purchase 
for the asset pool are part of a subscription or unsold allotment would 
be considered a distribution of the underlying securities.
---------------------------------------------------------------------------

    \109\ 17 CFR 230.144(k). The term ``restricted securities'' is 
defined in Securities Act Rule 144(a)(3) (17 CFR 230.144(a)(3)).
---------------------------------------------------------------------------

    We also propose to codify a staff interpretive position where the 
ABS offering involves a sponsor, depositor or underwriter that was an 
underwriter or an affiliate of an underwriter in a registered offering 
of the underlying securities.\110\ Under the proposal, the distribution 
of the asset-backed securities would not constitute part of a 
distribution of the underlying securities if the underlying securities 
were purchased at arm's length in the secondary market at least three 
months after the last sale of any unsold allotment or subscription by 
the affiliated underwriter that participated in the registered offering 
of the underlying securities. In this instance, we believe three months 
provides sufficient certainty that the purchase was not part of the 
original distribution.
---------------------------------------------------------------------------

    \110\ See, e.g., Section VIII.B.3.b.i. of the Division of 
Corporation Finance's ``Current Issues and Rulemaking Projects'' 
(Nov. 14, 2000).
---------------------------------------------------------------------------

    The second and third conditions clarify that if the issuer of the 
underlying securities is engaged in the distribution of its securities 
through the asset-backed securities or is affiliated with the sponsor, 
depositor, issuing entity or any underwriter for the ABS offering, then 
registration of the underlying distribution would be required along 
with registration of the ABS offering.
    If any of the three conditions was not met, the offering of the 
relevant underlying securities itself would be required to be 
separately registered as a primary offering of such securities. Such 
registration would need to be conducted in accordance with the 
following proposed conditions:\111\
---------------------------------------------------------------------------

    \111\ The proposed conditions, except as noted, are consistent 
with existing staff practice. In addition, as a result of the 
proposed conditions, a prefunding or revolving period could not be 
used to purchase unidentified securities whose distribution would 
need to be registered. We also do not propose to codify an existing 
staff condition that the prospectus include affirmative disclosure 
that ABS holders may proceed directly against issuers and 
underwriters of the underlying securities because even without such 
a condition ABS holders could proceed directly against such parties.

     If the ABS offering is registered on Form S-3, the 
offering of the underlying securities itself must be eligible to be 
registered under Form S-3 or F-3 as a primary offering of such 
securities;\112\
---------------------------------------------------------------------------

    \112\ This condition ensures that an offering of underlying 
securities that itself would not be eligible for shelf registration 
could not be conducted through the distribution of an ABS offering 
that was shelf eligible.
---------------------------------------------------------------------------

     The plan of distribution in the registration statement 
for the offering of the underlying securities contemplates this type 
of distribution at the time of the commencement of the ABS 
offering;\113\
---------------------------------------------------------------------------

    \113\ For underlying securities that have already been 
registered under a previous shelf registration statement, this may 
require a post-effective amendment to that registration statement to 
incorporate this type of distribution into the plan of distribution 
description.
---------------------------------------------------------------------------

     The prospectus for the ABS offering describes the plan 
of distribution for both the underlying securities and the asset-
backed securities;
     The prospectus relating to the offering of the 
underlying securities is delivered simultaneously with delivery of 
the prospectus relating to the ABS offering, and the prospectus for 
the ABS offering includes disclosure that the prospectus for the 
offering of the underlying securities will be delivered with it or 
is combined with it;
     The prospectus for the ABS offering identifies the 
issuing entity, depositor, sponsor and each underwriter for the ABS 
offering as an underwriter for the offering of the underlying 
securities;
     Neither prospectus disclaims or limits responsibility 
by the issuing entity, sponsor, depositor, trustee or any 
underwriter for information regarding the underlying securities; and
     If the ABS offering and the underlying securities 
offering are not made on a firm commitment basis, the issuing entity 
or the underwriters for the ABS offering must distribute a 
preliminary prospectus for both the underlying securities offering 
and the ABS offering that identifies the issuer of the underlying 
securities and the expected amount of the issuer's underlying 
securities that is to be included in the asset pool to any person 
who is expected to receive a confirmation of sale of the ABS at 
least 48 hours prior to sending such confirmation.\114\
---------------------------------------------------------------------------

    \114\ In this instance, this condition would therefore overrule 
the proposed exclusion from Exchange Act Rule 15c2-8(b).

c. Proposed Exceptions From Disclosure and Delivery Conditions
    Some ABS transactions are structured such that the asset pool 
consists of one or more financial assets that represent an interest in 
or the right to the payments or cash flows of another asset pool solely 
in order to facilitate the asset-backed issuance and not in order to 
re-securitize other securities. For example, some older credit card 
master trust structures have added an ``issuance trust'' structure to 
provide additional flexibility in the types of ABS that may be offered. 
An issuance trust generally receives a collateral certificate from the 
master trust representing an interest in the master trust asset pool. 
The master trust often may have issued its own ABS backed by the same 
pool. The issuance trust then issues its own ABS backed by the 
collateral certificate, and hence indirectly by the whole master trust 
pool.
    Similarly, in some auto lease transactions, the auto leases and car 
titles often are originated in the name of a separate trust, sometimes 
called an ``origination'' or ``titling'' trust, to avoid administrative 
expenses in retitling the physical property underlying the leases. The 
origination trust will issue to the issuing entity for the ABS a 
certificate, often called a ``special unit of beneficial interest'' or 
SUBI, representing a beneficial interest in a pool of leases and 
automobiles in the origination trust which is to constitute the asset 
pool. The ABS issuing entity will issue ABS backed by the SUBI 
certificate, and hence indirectly by the assets underlying the SUBI.
    In each instance, these structures are solely designed to 
facilitate the ABS transaction. The ABS will be primarily serviced by 
cash flows from the

[[Page 26668]]

underlying pool assets.\115\ However, the deposit of the certificate of 
interest regarding the other pool would likely fail to satisfy our 
proposed conditions to avoid registration of its distribution. In fact, 
the deposit of the certificate of interest is concurrently registered 
today in connection with ABS offerings involving these structures.
---------------------------------------------------------------------------

    \115\ See Section III.B.2 regarding our proposed general 
instruction regarding the scope of disclosure that would be required 
regarding these structures. In addition, any additional material 
risks regarding these structures should be clearly described.
---------------------------------------------------------------------------

    While these certificates do trigger additional registration 
obligations, they do not raise the same issues discussed above 
regarding the resecuritization of other underlying securities because 
they are merely facilitating structural devices.\116\ Accordingly, 
although the distribution of the underlying financial asset in 
connection with the ABS offering would still need to be separately 
registered, we propose to exclude such transactions from the proposed 
disclosure and delivery conditions above with respect to other 
resecuritizations, if the following conditions were met: \117\
---------------------------------------------------------------------------

    \116\ These other resecuritizations would be subject to the 
proposals in the previous section on the method and manner of 
registering the distribution of the underlying securities.
    \117\ Any separate registration of the distribution of the 
underlying financial asset would need to be on a form eligible for 
such distribution. The issuer of the underlying financial asset 
would need to sign the registration statement and any intervening 
transferors of the asset to the ABS issuing entity would need to be 
named as underwriters.

     Both the issuing entity for the asset-backed securities 
and the entity issuing the underlying financial asset were 
established under the direction of the same sponsor or depositor;
     The financial asset was created solely to satisfy legal 
requirements or otherwise facilitate the structuring of the ABS 
transaction;
     The financial asset was not part of a scheme to avoid 
registration or our resecuritization proposals; and
     The financial asset was held by the issuing entity and 
was a part of the asset pool for the asset-backed securities.
    Questions regarding registration of underlying financial assets:
     We request comment on the list of conditions that 
clarify when the distribution of underlying securities in the asset 
pool needs to be separately registered. Are any modifications or 
clarifications necessary? Should we address further examples?
     We also request comment on the proposed conditions 
codifying the manner of registration of the underlying securities 
distribution. Are any modifications or clarifications necessary? 
Should any of these conditions no longer be required? Should any 
additional conditions be added?
     Should transactions that involve features such as 
issuance trusts or SUBIs be excluded from the proposed disclosure 
and delivery conditions? Should we specify more particularly the 
manner in which they should be registered? Does our proposed list of 
conditions adequately identify the relevant structures while 
excluding the resecuritization of other underlying securities? Are 
any other exceptions necessary?

B. Disclosure

1. Proposed Regulation AB
    No disclosure items currently exist that are specifically tailored 
to asset-backed securities. While some disclosure items in Regulation 
S-K are relevant, such as a description of the security, most items do 
not elicit the most useful disclosure for ABS investors. There is 
generally no business or management to describe; rather, information 
about the pool assets, servicing, transaction structure, flow of funds 
and enhancements is more relevant. Analysis regarding the 
characteristics of the pool assets is necessary to determine the timing 
and amount of expected payments on the assets and thus payments on the 
ABS. In addition, the legal and often complex flow of funds of the 
transaction and the impact of any credit enhancement or other support 
must be analyzed. Through the staff comment process and industry 
practice, informal disclosure practices have developed. These 
practices, however, may not be fully transparent to issuers and 
investors.
    We propose a new principles-based set of disclosure items in one 
central location in a subpart of Regulation S-K, called Regulation 
AB.\118\ These disclosure items, which are based on existing disclosure 
practices, would form the basis for disclosure in both Securities Act 
registration statements and Exchange Act reports for asset-backed 
securities. As noted in Sections III.A. and D., specific disclosure 
requirements in ABS registration statements and forms would be keyed to 
items in Regulation AB in a manner consistent with the integrated 
disclosure system applicable to other issuers.
---------------------------------------------------------------------------

    \118\ See proposed Items 1100-1121 of Regulation AB.
---------------------------------------------------------------------------

    We believe a principles-based approach would provide the best 
framework for disclosure in the context of asset-backed securities. In 
addition, due to differences between asset classes, we believe it would 
be impractical to provide an exhaustive list of disclosure items 
required for each asset class. Not only do we believe this approach 
would be impractical due to the many existing asset classes that are 
securitized today, it would not provide any effective guidance with 
respect to new asset classes that may be securitized in the future. Due 
to the dynamic nature of the ABS market, any such list would likely 
become outdated.
    Under our proposed principles-based approach, we identify the 
disclosure concept or objective required and provide one or more 
illustrative examples. Application of the particular concept or 
objective would need to be tailored in preparing and presenting the 
disclosure to the information material to the particular transaction 
and asset-type involved. The balance we strive to achieve through this 
approach is to provide enough clarity so that the disclosure concept or 
objective is understood and can be applied on a consistent basis, while 
not providing too much detail that could obscure or override the 
concept or objective. Of course, in some instances we believe we must 
and therefore do propose certain disclosure items with greater 
specificity. Further, we propose to codify several existing percentage 
tests that provide guidance as to when particular disclosure is 
required, particularly regarding concentrated obligors or significant 
credit enhancement or other support. We believe these proposed 
breakpoints provide consistency, comparability and clarity.
    The structure of Regulation AB would be as follows:

     Item 1100 would set forth items of general 
applicability for the whole subpart, such as guidance regarding the 
presentation of delinquency and loss information when it is 
required, alternative methods for presenting third party financial 
information (discussed further in Section III.B.9.) and guidance 
regarding disclosures related to foreign ABS (previously discussed 
in Section III.A.4.).
     Item 1101 would set forth definitions applicable to 
asset-backed securities.
     Items 1102--1118 would constitute the basic disclosure 
required for Securities Act registration statements for ABS 
offerings. In addition, several of the items would be required on an 
ongoing basis in Exchange Act reports, such as updated financial 
information regarding certain third parties and disclosure regarding 
legal proceedings.
     Item 1119 would form the basis for disclosure required 
in distribution reports on proposed Form 10-D regarding cash flows 
and performance of the asset pool and the allocation of cash flows 
and distribution of payments on the ABS. This item is discussed more 
fully in Section III.D.4.
     Items 1120 and 1121 would address two long-standing 
requirements for the Form 10-K report based on market practice and 
the modified reporting system. Item 1120 would specify the form of 
the proposed report on compliance with servicing criteria based on 
an assessment by the depositor or servicer. It also would require 
filing of the registered public accounting firm's attestation report 
on

[[Page 26669]]

the assessment. This item is discussed more fully in Section 
III.D.7. Item 1121 would specify the form of the separate servicer 
compliance statement. This compliance statement pertains to the 
servicer's compliance with the particular servicing agreement for 
the transaction, as opposed to an attested assertion of compliance 
against a general set of servicing criteria. This item is discussed 
more fully in Section III.D.5.

    Many of our proposed disclosure items are based on the market-
driven disclosures that appear in filings today. In addition, our 
consideration of the proposed disclosure items was informed by the 
staff review process as well as the staff's participation in the 2003 
MBS Disclosure Report. However, we are concerned that disclosure 
practice without a previously defined set of universal disclosure 
standards has resulted in the inclusion of undue boilerplate language 
in ABS filings, particularly prospectuses and registration statements, 
and a disproportionate emphasis on legal recitations of transaction 
terms. Further, as disclosure practice may have been driven primarily 
by the staff review process and by observing and conforming to filings 
for other transactions, disclosures may have been included from other 
filings or retained from prior filings without necessarily considering 
their applicability or continued applicability with respect to the 
transaction in question.
    However, the cumulative effect of these practices is to diminish in 
some cases the usefulness of the document through the accumulation of 
unnecessary detail, duplicative or uninformative disclosure that 
obscures material information and legalistic recitations of transaction 
terms. Efforts to revise disclosure documents in response to our 
``plain English'' initiative have certainly helped by demonstrating 
that even the most complex structures can be described clearly and 
accurately without resorting to overly legalistic presentations.\119\ 
However, we believe more work can be done regarding the manner and 
content of disclosures.
---------------------------------------------------------------------------

    \119\ See, e.g., Release No. 33-7497 (Jan. 28, 1998) [63 FR 
6370]. See also Division of Corporation Finance Staff Legal Bulletin 
No. 7A, ``Plain English Disclosure'' (Jun. 7, 1999) and Office of 
Investor Education and Analysis, ``A Plain English Handbook: How to 
Create Clear SEC Disclosure Documents'' (Aug. 1998). All of these 
documents are available on our website at www.sec.gov.
---------------------------------------------------------------------------

    Therefore, in connection with our proposed codification of a 
universal set of disclosure items, we seek a reevaluation by 
transaction participants of the manner and content of presented 
disclosure, including the elimination of unnecessary boilerplate and 
immaterial legal recitations of terms. Transaction participants should 
view this rulemaking initiative as an opportunity to evaluate whether 
there is information that has been included in registration statements 
and prospectuses that is not required, not material and not useful to 
investors, and therefore should be reduced or omitted. Transaction 
participants should similarly consider whether disclosure should be 
revised so that its relevance to the transaction in question is more 
apparent and is presented in a manner that is more focused on providing 
clear and understandable disclosure for investors. Transaction 
participants also should continue to be mindful of the plain English 
disclosure principles to avoid legalistic or overly complex 
presentations and recitations that make the substance of the disclosure 
difficult to understand. Transaction participants should continue to 
focus on the use of tabular presentations, flow charts and other design 
elements that aid understanding and analysis.
    In addition to the manner and presentation of disclosures, we also 
are concerned that existing disclosure standards may not adequately 
capture certain categories of information that may be material to an 
asset-backed securities transaction, such as the background, 
experience, performance and roles of various transaction parties, 
including the sponsor, the servicer and the trustee. While asset-backed 
securities are not intended to be direct obligations of these entities, 
it seems apparent from recent market events that their roles often can 
be as important to the performance of an ABS transaction as the 
transaction structure or its governing documents.\120\As a result, our 
proposed disclosure items relating to these entities are designed to 
elicit more useful information in these areas.
---------------------------------------------------------------------------

    \120\ See, e.g., Michael Gregory, ``Lessons of Risk in AAA-rated 
ABS: In the Rare Bankruptcy, It's Servicers, Not Collateral, That 
Are the Problem,'' Investment Dealers Digest, Mar. 15, 2004; Luis 
Araneda, ``Distress in Credit Card ABS,'' Asset Securitization 
Report, Mar. 3, 2003, at 8; Moody's Investors Service, Inc., 
``Securitizations that Dodge Bankruptcy `Bullet' Rest on Qualitative 
Strengths'' (Sep. 16, 2002); ``Integrity Analysis to the Forefront: 
Is Issuer Quality More Important Than Structure,'' Asset 
Securitization Report, Oct. 14, 2002, at 4; Moody's Investors 
Service, Inc., ``Two Key Components of Mortgage Servicer Ratings Are 
Technical Ability and Financial Stability'' (Dec. 2, 2002); Moody's 
Investors Service, Inc., ``Evaluating Seller/Servicer Risk 
Concentrations in Structured Transactions Wrapped by Financial 
Guarantors'' (Jan. 30, 1998); and Securitization of Financial Assets 
Sec.  8.08 (2nd ed. 1996).
---------------------------------------------------------------------------

    Consistent with current practice, we do not propose to require 
audited financial statements for the issuing entity in either 
Securities Act or Exchange Act filings. It does not appear that audited 
financial statements prepared in accordance with generally accepted 
accounting principles would provide material information to 
investors.\121\ Often a new issuing entity is created for each 
transaction, so prior financial information about that entity would 
likely be of little use. On an ongoing basis, while an annual audit 
could provide benefits in providing some assurance with respect to 
controls over the administration of the transaction and the pool 
assets, we preliminarily believe our proposal to require an attestation 
by a registered public accounting firm as to an assessment of 
compliance with particular servicing criteria discussed in Section 
III.D.7. is a more direct and targeted approach to achieve such 
objectives. Similarly, we believe that one of the other objectives for 
financial statements--to present results of financial activity during a 
period--can be addressed more particularly by our proposed disclosure 
requirements regarding distributions on the asset-backed securities.
---------------------------------------------------------------------------

    \121\ For example, GAAP financial statements are primarily based 
on historical cost measurements and allocations that are not 
necessarily meaningful to an ABS investor that is trying to assess 
the amount and timing of cash distributions from an ABS transaction.

    Questions regarding overall approach to proposed Regulation AB:
     We request comment on our proposed principles-based 
approach for Regulation AB. Should we provide detailed disclosure 
guides by asset type instead? In evaluating the proposed items in 
Regulation AB, do the items provide sufficient clarity in 
identifying the disclosure concept? Should we be more specific (or 
less specific) regarding any particular items?
     We also request comment on methods to improve the 
usefulness of disclosure documents. What additional actions can we 
take to encourage focus on clear and understandable material 
disclosures?
     Is additional disclosure regarding the background, 
experience, performance and role of transaction parties needed? In 
evaluating the proposed disclosure items relating to these parties, 
should we be more specific on particular aspects that should be 
disclosed?
     Should audited financial statements be required to be 
filed for issuing entities? If so, for what periods? What would be 
the costs and benefits of such a requirement? Should they be 
required in some filings (e.g., ongoing Exchange Act reports) but 
not others (e.g., Securities Act registration statements)? Are there 
alternative methods to reach the same objectives that would be 
achieved by requiring financial statements?
    [ctrcir] Are one or more of the basic audited financial 
statements (balance sheet, statement of income, retained earnings, 
or cash flows) more relevant for issuing entities than the

[[Page 26670]]

others? If so, which one(s) and should it (they) be required to be 
filed?
    [ctrcir] Should a statement of cash flows using the direct 
method be required? \122\
---------------------------------------------------------------------------

    \122\ See paragraph 27 of FASB Statement No. 95, Statement of 
Cash Flows (Nov. 1987).
---------------------------------------------------------------------------

    [ctrcir] What additional disclosures would be relevant if only 
one or more basic financial statements, rather than full audited 
financial statements, are provided (for example, disclosures about 
the fair value of financial instruments pursuant to FASB Statement 
107)? \123\
---------------------------------------------------------------------------

    \123\ See FASB SFAS No. 107, Disclosures about Fair Value of 
Financial Instruments (Dec. 1991).
---------------------------------------------------------------------------

    [ctrcir] Instead of GAAP financial statements, should financial 
statements be required that are prepared on another basis, such as 
on the basis of cash receipts and cash disbursements?\124\
---------------------------------------------------------------------------

    \124\ The cash basis system of accounting is a system in which 
an issuer recognizes revenues when it receives cash and records 
expenses as it makes disbursements. Reporting oil and gas royalty 
trusts sometimes prepare financial statements under this system of 
accounting. See, e.g., Topic 12.E. to Release No. SAB-103 (Dec. 17, 
2003) [68 FR 26840].
---------------------------------------------------------------------------

2. Forepart of Registration Statement and Prospectus
    Existing Items 501-503 of Regulation S-K would still provide the 
basic disclosure requirements for the forepart of Securities Act 
registration statements and registration statement prospectuses, which 
cover items such as the cover page of the prospectus, the prospectus 
summary and risk factors. Proposed Items 1102 and 1103 of Regulation AB 
would amplify those requirements by providing guidance on preparing 
those sections for ABS offerings consistent with current practice. In 
particular, they would clarify information that is to appear on the 
cover page of the prospectus, as well as inform the type and manner of 
presentation for ABS-specific disclosure items for the prospectus 
summary.
    As with prospectuses for all registered offerings, disclosure on 
the cover page is to be limited and brief. For example, credit 
enhancement disclosure for the cover page should consist of only brief 
identifying statements, such as bond insurance provided by the 
particular named insurer.
    Consistent with common ABS-specific items such as a summary of the 
flow of funds and credit enhancement, disclosure specified for the 
summary would include disclosure of the classes offered by the 
prospectus and classes issued in the same transaction or residual or 
equity interests in the transaction not being offered by the 
prospectus.\125\ Also required would be a summary of any prefunding or 
revolving periods, such as the length and amount of such periods and 
the requirements for assets that may be added.\126\ A summary of the 
amount or formula for calculating the servicing fee, including the 
source of payment of those fees and their distribution priority, also 
would be separately required in the prospectus summary.
---------------------------------------------------------------------------

    \125\ A particular issuance of asset-backed securities often 
involves one or more publicly offered classes (e.g., classes rated 
investment grade) as well as one or more privately placed classes 
(e.g., non-investment grade subordinated classes). In most 
instances, the subordinated classes act as structural credit 
enhancement for the publicly offered senior classes by receiving 
payments after, and therefore absorbing losses before, the senior 
classes. Cash flows from the pool assets back both the senior 
classes and the subordinate classes, and thus allocation of the cash 
flows to the subordinate classes could affect directly or indirectly 
the publicly offered classes. For example, while historically the 
servicing fee is near the top of the flow of funds, if the servicing 
fee in the flow of funds is subordinated below payments to the 
subordinated classes, and there are insufficient funds to pay the 
servicing fee in full after distribution to the subordinated 
classes, then the drop in the level of funds to the servicer could 
impact overall servicing, which could affect cash flows to senior 
classes. Identification of all classes and their impact on the 
transaction is thus relevant to the offering of the publicly offered 
classes. So long as the description of the non-offered classes is 
presented in this manner, that description alone in the prospectus 
would not raise general solicitation issues with respect to the 
private placement of the subordinated classes.
    \126\ Similar disclosure would be required for other instances 
when pool assets could be added, removed or substituted (for 
example, non-compliance with representations and warranties 
regarding pool assets). Like all of the proposed disclosure items, 
reference to particular activities would not imply that limits that 
exist elsewhere regarding such activities (e.g., the requirement 
that the asset pool be ``discrete'') could be disregarded.
---------------------------------------------------------------------------

    We do not propose to identify a representative list of risk factors 
that may be common to many ABS transactions. We are concerned that any 
such list would result in boilerplate and generic disclosures in all 
prospectuses even if not applicable to the particular transaction. 
Registrants should take care in analyzing the most significant factors 
that make the ABS offering speculative and risky, and explain briefly 
yet particularly how those risks affect investors. We do propose to 
clarify that in identifying risk factors, registrants are to identify 
any risks that may be different for investors in any offered class of 
asset-backed securities (such as subordinated classes or principal-
weighted or interest-weighted classes), and if so, identify such 
classes and describe such differences.

    Questions regarding proposed disclosure for forepart of 
registration statement and prospectus:
     Are any modifications needed to the proposed list of 
items? Should we be more specific (or less specific) regarding any 
items?
     Should we provide a list of representative risk 
factors? How could we address our concern that any such list would 
become boilerplate disclosure in all filings?
3. Transaction Parties
a. Sponsor
    We propose to define the ``sponsor'' as the person who organizes 
and initiates an asset-backed securities transaction by selling or 
transferring assets, either directly or indirectly, including through 
an affiliate, to the issuing entity. As discussed above, in addition to 
basic identifying information about the sponsor, we propose to require 
a description of the sponsor's securitization program. The purpose of 
the description would be to provide context within which to analyze the 
characteristics and quality of the asset pool.
    Such a description would consist of both a general discussion of 
the sponsor's experience in securitizing assets of any type, as well as 
a more detailed discussion of the sponsor's experience in and overall 
procedures for originating or acquiring and securitizing assets of the 
type to be included in the current transaction. Information should be 
included, to the extent material, regarding the size, composition and 
growth of the sponsor's portfolio of assets of the type to be 
securitized and information or factors related to the sponsor that may 
be materially relevant to an analysis of the origination or performance 
of the pool assets. For instance, this could include whether any prior 
securitizations organized by the sponsor have defaulted or experienced 
an early amortization or other performance triggering event, or if any 
action was taken outside the ordinary performance of the transaction to 
prevent such an occurrence.
    Other relevant information, to the extent material, would include 
the sponsor's credit-granting or underwriting criteria for the asset 
types being securitized (and the extent to which they have changed), 
the extent to which the sponsor outsources to third parties any of its 
origination or purchasing functions and the extent to which the sponsor 
relies on securitization as a funding source. A description of the 
sponsor's roles and responsibilities in its securitization program and 
the sponsor's participation in structuring the transaction also would 
be required, including whether the sponsor or an affiliate is 
responsible for the selection of the pool assets.
    In addition to this information, an increasingly valuable tool to 
analyze performance is the use of static pool

[[Page 26671]]

data.\127\ Such data indicate how the performance of groups, or static 
pools, of assets, such as those originated at different intervals, are 
performing over time. By presenting comparisons between originations at 
similar points in the assets' lives, such data allow the detection of 
patterns that may not be evident from overall portfolio numbers and 
thus may reveal a more informative picture of material elements of 
portfolio performance and risk.
---------------------------------------------------------------------------

    \127\ See, e.g., Moody's Investors Service, Inc., ``Undisclosed 
Truths: Are ABS Investors Being Left in the Dark?'' (May 23, 1996) 
and Letter from AIMR to Brian J. Lane, Director, Division of 
Corporation Finance, ``Recommendations for a Disclosure Regime for 
Asset-Backed Securities'' (Sep. 30, 1996). Static pool data also is 
sometimes referred to as ``vintage data.''
---------------------------------------------------------------------------

    For example, while presentation of a delinquency or loss statistic 
at the pool level, such as an overall charge-off rate, may be useful, 
it does not indicate the amount and timing of charge-offs over time. 
Static pool analysis may indicate that more recent originations are 
experiencing higher delinquencies at each point in their life cycle 
than older originations, which could suggest a declining quality in the 
obligor pool or a possible relaxation of credit standards. In that 
case, as more seasoned originations with a lower delinquency profile 
matured and exited the asset pool, the pool would increasingly be left 
with more recent originations with a higher delinquency profile, which 
may begin to affect performance. However, the overall delinquency 
statistic presented at the beginning of the transaction would be a 
blending of all originations and thus may not indicate the potential 
performance change. Without static pool data, an investor might have no 
means to identify a material potential increase in delinquency rates 
that would be indicated by these data.
    Static pool data for several different data groups may be material 
for the current offering. For example, static pool data for the 
sponsor's overall portfolio can indicate origination trends relevant to 
how a currently offered pool can be expected to perform, particularly 
if the offered pool is unseasoned. Static pool data on a pool level 
basis with respect to prior securitized pools of the sponsor also can 
provide valuable information on both the quality and experience of pool 
selection as well as additional insight into asset performance. 
Finally, if the offered pool is seasoned, static pool data based on 
originations in the pool itself may reveal trends that may not be 
evident by aggregate pool-level statistics.
    We have previously received requests that disclosure of such data 
should be received because investors view static pool data regarding 
delinquency and loss experience as important information in evaluating 
an investment in asset-backed securities.\128\ We understand that such 
data are often available to sponsors and in many instances may be used 
in the rating process for asset-backed securities. We propose to 
require disclosure of such data if material to the transaction. In 
particular, we propose to require three years of static pool data with 
respect to the sponsor's overall portfolio (or for such shorter period 
as the sponsor has been making originations or purchases) because we 
preliminarily believe this would be the minimum period to provide 
meaningful evaluation of the data.\129\ Such data should be presented 
for delinquency and loss information relevant to the particular asset 
type involved. Similarly, increments for the static pools and 
increments in which performance is presented (e.g., monthly or 
quarterly) should be material to the asset type being securitized. 
Statistical data should be presented in tabular or graphical format, 
such as by loss curves, if such presentation will aid understanding.
---------------------------------------------------------------------------

    \128\ See, e.g., note 104 above.
    \129\ We also propose to require static pool data to the extent 
material for the pool itself.
---------------------------------------------------------------------------

    If material, static pool data also would be required on a pool 
level basis with respect to prior securitized pools involving the same 
asset type established by the sponsor during the period. Static pool 
data, whether with respect to the sponsor's portfolio, prior pools or 
the pool itself, should be presented separately, to the extent 
material, according to factors relevant to the pool involved, such as 
by asset term, asset type, yield, geography or ranges of credit scores 
or other applicable measures of obligor credit quality. Selection of 
factors should result in disclosure of material information. How and 
according to which factors static pool information is presented, if at 
all, will depend on the particular asset class, the sponsor's history 
and the asset pool and transaction involved. Our proposals would not 
require preparation or disclosure of static pool data for data groups 
or factors that are immaterial.
    In providing static pool data that is material to the transaction, 
registrants are encouraged to provide accompanying explanatory 
information about the data to place it in context for the current pool, 
such as how the composition of the offered pool may differ from the 
static pool data provided. In instances where the particular assets 
selected for the pool differ materially from the data provided 
regarding the overall portfolio or prior transactions, such additional 
information may be required.\130\
---------------------------------------------------------------------------

    \130\ See Securities Act Rule 408 (17 CFR 230.408); Exchange Act 
Section 10(b) (15 U.S.C. 78j(b)); Exchange Act Rule 10b-5 (17 CFR 
240.10b-5); and Exchange Act Rule 12b-20 (17 CFR 240.12b-20).
---------------------------------------------------------------------------

b. Depositor
    We propose to define the ``depositor'' as the person who receives 
or purchases and transfers or sells the pool assets to the issuing 
entity. For asset-backed securities transactions where there is not an 
intermediate transfer of assets from the sponsor to the issuing entity, 
the sponsor would be deemed to be the depositor.\131\
---------------------------------------------------------------------------

    \131\ As noted in Section III.B.5, some ABS transactions, such 
as issuance trusts, are structured such that the asset pool consists 
of one or more financial assets that represent an interest in or the 
right to the payments or cash flows of another asset pool. In an 
issuance trust structure, the collateral trust certificate that is 
deposited into the asset pool comes from the master trust. For ABS 
transactions where the person transferring or selling the pool 
assets is itself a trust, we propose to specify that the 
``depositor'' of the issuing entity is the depositor of that trust.
---------------------------------------------------------------------------

    If the depositor was not the same entity as the sponsor, separate 
identifying information about the depositor would be required, 
including information on the ownership structure of the depositor and 
the general character of any activities of the depositor other than 
securitizing assets. In addition, if materially different from the 
sponsor, information similar to that discussed above regarding the 
depositor's securitization program and its experience would be 
required. Finally, disclosure would be required regarding any 
continuing duties of the depositor after issuance of the asset-backed 
securities with respect to the asset-backed securities or the pool 
assets.
c. Issuing Entity and Transfer of Asset Pool
    The nature of the issuing entity and the transfer of the pool 
assets is elemental to the concept of securitization. We propose to 
define the ``issuing entity'' to mean the trust or other entity created 
at the direction of the sponsor or depositor that owns or holds the 
pool assets and in whose name the asset-backed securities supported or 
serviced by the pool assets are issued.
    Consistent with existing practice, disclosure would be required 
regarding both the nature of the issuing entity and the sale or 
transfer of the pool assets. Information about the issuing entity

[[Page 26672]]

itself would include a description of its permissible activities, 
restrictions on activities and capitalization. The governing documents 
of the issuing entity would need to be filed as an exhibit.\132\ The 
material terms of any management or administration agreement for the 
issuing entity also would need to be described,\133\ and such agreement 
would need to be filed as an exhibit. If the issuing entity has its own 
executive officers, board of directors or persons performing similar 
functions, all of Item 403 of Regulation S-K, as well as Items 401, 402 
and 404 of Regulation S-K, would be required.
---------------------------------------------------------------------------

    \132\ Proposed Item 1100(f) of Regulation AB would specify that 
where agreements or other documents are specified by Regulation AB 
to be filed as exhibits to a registration statement, such final 
agreements or other documents, if applicable, may be incorporated by 
reference as an exhibit to the registration statement, such as by 
filing a Form 8-K in the case of offerings registered on Form S-3.
    \133\ Any such description should include the specific material 
duties imposed on the parties and not generic disclosure such as 
``various administrative services.''
---------------------------------------------------------------------------

    In addition to a material narrative description of the sale or 
transfer of the pool assets, such information also should be provided 
graphically or in a flow chart if it will aid understanding. The 
discussion also must describe the creation (and perfection and priority 
status) of any security interests for the benefit of the transaction. 
Information would be required on the amount paid or to be paid for the 
pool assets, including the principles followed in determining such 
amounts, as well as information on any expenses incurred in connection 
with the selection and acquisition of the pool to be payable from 
offering proceeds.
    Disclosure would be required to the extent material regarding any 
provisions or arrangements included to address any one or more of the 
following issues:\134\
---------------------------------------------------------------------------

    \134\ If applicable law prohibits the issuing entity from 
holding the pool assets directly (for example, an ``eligible 
lender'' trustee must hold student loans originated under the 
Federal Family Education Loan Program of the Higher Education Act of 
1965 (20 U.S.C. 1001 et seq.)), a description would be required of 
any arrangements to hold the pool assets on behalf of the issuing 
entity. Disclosure would need to be included regarding steps taken 
regarding bankruptcy separation and remoteness, as applicable, with 
respect to any such additional entity.

     Whether any security interests granted in connection 
with the transaction are perfected, maintained and enforced;
     Whether a declaration of bankruptcy, receivership or 
similar proceeding with respect to the issuing entity can occur;
     Whether in the event of a bankruptcy, receivership or 
similar proceeding with respect to the sponsor, originator, 
depositor or other seller of the pool assets, the issuing entity's 
assets will become part of the bankruptcy estate or subject to the 
bankruptcy control of a third party; and
     Whether in the event of a bankruptcy, receivership or 
similar proceeding with respect to the issuing entity, the issuing 
entity's assets will become subject to the bankruptcy control of a 
third party.

    Of course, any material risks related to the above must be 
discussed in the risk factors section of the prospectus.\135\ 
Consistent with current practice and our proposed disclosure, we do not 
propose to require the filing of any statement or opinion, such as an 
opinion of counsel, regarding any of the above items, although we 
request comment on this point.
---------------------------------------------------------------------------

    \135\ In addition, additional disclosure may be required 
depending on the disclosures provided about any such issues, 
provisions or arrangements. See Securities Act Rule 408 (17 CFR 
230.408); Exchange Act Section 10(b) (15 U.S.C. 78j(b)); Exchange 
Act Rule 10b-5 (17 CFR 240.10b-5); and Exchange Act Rule 12b-20 (17 
CFR 240.12b-20).
---------------------------------------------------------------------------

d. Servicers
    The role of the servicer is often not limited to administration and 
collection of the pool assets. The servicer also often is the primary 
party responsible for calculating the flow of funds for the 
transaction, preparing distribution reports and disbursing funds to the 
trustee who in turn uses the allocations provided by the servicer to 
distribute funds to security holders. Our proposed definition of 
``servicer'' is designed to capture this entire spectrum of activity to 
include both collection and asset maintenance activities as well as 
cash flow allocation and distribution functions for the ABS. We propose 
to define ``servicer'' as any person responsible for the management or 
collection of the pool assets or making allocations or distributions to 
holders of the asset-backed securities. This would include parties 
often referred to as ``administrators.'' Also, given that some of these 
functions may be performed by the trustee in certain transactions, the 
definition would clarify that the term ``servicer'' does not include a 
trustee for the issuing entity or the asset-backed securities that 
makes allocations or distributions to holders of the asset-backed 
securities, if the trustee receives such allocations or distributions 
from a servicer and the trustee does not otherwise perform the 
functions of a servicer.
    Given the increasing realization of the importance of the role of 
the servicer in ABS transactions, our proposed disclosure requirement 
regarding servicers is designed to elicit additional information 
regarding their function, experience and servicing practices.\136\ We 
also recognize that many transactions use multiple servicers to perform 
different servicing functions. For example, an ABS transaction may 
involve one or more master servicers that oversee the actions of other 
servicers and perform allocation and distribution functions. Different 
servicers, often called ``primary servicers,'' may be responsible for 
primary contact with obligors and collection efforts. In addition, one 
or more ``special servicers'' may exist for specific servicing 
functions, such as borrower work-out or foreclosure functions. While 
some servicers may be affiliated with the sponsor, other non-affiliated 
sub-servicers may be employed. Understanding the material aspects of 
the entire servicing function is important to understanding how 
servicing may impact expected performance.
---------------------------------------------------------------------------

    \136\ See, e.g., Fitch, Inc., ``Seller/Servicer Risk Trumps 
Trustee's Role in U.S. ABS'' (Mar. 4, 2003).
---------------------------------------------------------------------------

    Our proposed disclosure requirements would require information 
regarding the entire servicing function, including a clear description 
of the roles, responsibilities and oversight requirements of the entire 
servicing process and the parties involved. In addition, separate 
information would be required regarding certain sub-servicers. In 
particular, where servicing of the pool assets utilizes multiple 
servicers, separate information would be required for the master 
servicer, each affiliated servicer, each unaffiliated servicer (such as 
primary servicers) that services 10% or more of the pool assets and any 
other servicer, such as a special servicer, that performs work-outs, 
foreclosures or other material aspect of the servicing of the pool 
assets upon which the performance of the pool assets or the asset-
backed securities is materially dependent. The 10% threshold we propose 
for unaffiliated servicers is consistent with our proposed thresholds 
for disclosure regarding other parties to the ABS transaction, such as 
third party originators, concentrated obligors and providers of 
enhancement or other support. We believe this breakpoint provides 
consistency and clarity in determining a triggering event for 
disclosure, and is consistent with many other longstanding standards 
used for our existing disclosure requirements.\137\
---------------------------------------------------------------------------

    \137\ See, e.g., Items 101(c)(7), 503(d), 601(b)(4)(ii) and 
911(c)(5) of Regulation S-K (17 CFR 229.101(c)(7), 17 CFR 
229.503(d), 17 CFR 229.601(b)(4)(ii) and 17 CFR 229.911(c)(5)); 
Instruction 2 to Item 103 of Regulation S-K (17 CFR 229.103); 
Instruction 1(a)(2) to Item 401 of Regulation S-K (17 CFR 229.401); 
and Topic 1.I. to Release No. SAB-103.
---------------------------------------------------------------------------

    For servicers where disclosure is required, the information to be 
provided can be categorized into three general

[[Page 26673]]

categories: Basic information and experience; the agreement with the 
servicer and servicing practices; and back-up servicing. Basic 
information and experience regarding the servicer would include a 
description of the general character of the servicer's business and how 
long it has been servicing assets. As with the sponsor, this 
description would include both a general discussion of the servicer's 
experience in servicing assets of any type, as well as a more detailed 
discussion of the servicer's experience in, and procedures for, 
servicing assets of the type included in the current transaction. 
Information should be included, to the extent material, regarding the 
size, composition and growth of the servicer's portfolio of serviced 
assets of the type to be securitized and information on factors related 
to the servicer that may be material to an analysis of the servicing of 
the pool assets, such as collection processes, billing processes, 
computer systems and back-up systems.
    Other information that may be material could include whether any 
prior securitizations involving the servicer have defaulted or 
experienced an early amortization or other performance triggering event 
because of servicing, the extent of outsourcing the servicer utilizes 
or if there has been previous disclosure of material noncompliance with 
servicing criteria with respect to other securitizations involving the 
servicer. Disclosure would be required of any material changes to the 
servicer's policies or procedures in servicing assets of the same type 
during the past three years in order to demonstrate recent trends 
involving the servicer. Finally, information regarding the servicer's 
financial condition would be required where it could have a material 
impact on one or more aspects of servicing of the pool assets and where 
those aspects could materially impact pool performance on the asset-
backed securities. General financial information would not be required. 
We are seeking particular information that could have a material impact 
as described.
    The material terms of the servicing agreement and the servicer's 
duties regarding the asset-backed securities transaction would need to 
be described, and the servicing agreement would be required to be filed 
as an exhibit. A description of the servicer's servicing practices also 
would be required, which would include such commonly disclosed items 
as:\138\
---------------------------------------------------------------------------

    \138\ Note that while this is a proposed list of commonly 
disclosed items, there may exist other applicable requirements 
regarding these items as well. For example, Investment Company Act 
Rule 3a-7(a)(4)(iii) has requirements for segregating funds.

     The manner in which collections on the pool assets will 
be collected and maintained, including the extent of commingling of 
funds.
     Terms or arrangements regarding advances of funds 
regarding cash flows, including interest or other fees charged and 
terms of recovery. Statistical information regarding past advance 
activity would be required, if material.
     The servicer's process for handling delinquencies and 
losses.
     Any material ability to waive or modify any terms, 
fees, penalties or payments on the pool assets.
     Custodial requirements regarding the pool assets.
     Any material minimum criteria the servicer is required 
to meet not specified in our proposed list of servicing criteria 
discussed in Section III.D.7.

    As the ABS market has matured, another aspect of such transactions 
that has increased in importance is the role of servicer transition 
arrangements, or back-up servicing.\139\ An efficient transition from 
one servicer to another can be essential to prevent portfolio 
deterioration and possible losses. However, depending on the nature of 
the assets and the availability of alternative servicers, the process 
of transferring servicing can be complex. In particular, if the 
existing servicing fee in a transaction is insufficient to attract a 
replacement servicer, delays may occur that could affect portfolio 
performance, and any additional fees required by a replacement servicer 
could affect cash flows that otherwise would be available to security 
holders.
---------------------------------------------------------------------------

    \139\ See, e.g., note 136; ``Trustees Seek to Reinforce Loan 
Servicing,'' Asset-Backed Alert, Jul. 18, 2003; and Moody's 
Investors Service, Inc., ``Warming Up to Backup Servicing: Moody's 
Approach'' (Aug. 8, 1997).
---------------------------------------------------------------------------

    As a result, the scrutiny of back-up servicing arrangements has 
increased, including the level of arrangements with a particular back-
up servicer, often referred to in market practice as how ``warm'' the 
back-up servicer is. We propose to require disclosure regarding any 
terms regarding a servicer's removal, replacement, resignation or 
transfer, including arrangements regarding, and any qualifications 
required for, a successor servicer. Material information on the process 
for transferring servicing would need to be described, as well as any 
provisions for the payment of expenses associated with a servicing 
transfer or any additional fees that may be charged by a successor 
servicer.
e. Trustees
    An ABS transaction may involve one or more trustees. For example, 
there may be a separate trustee for the issuing entity and for the ABS 
indenture. In addition to basic identifying information about any such 
trustee, disclosure would be required regarding the general character 
of the trustee's business, the trustee's prior experience in similar 
ABS transactions, indemnification provisions, limitations on liability 
and removal or replacement provisions.
    Recently, there has been debate in the market on the nature and 
role of the trustee in ABS transactions, in particular the trustee's 
level of oversight regarding the transaction.\140\ To help provide 
transparency to this topic, we are proposing to require explicit 
disclosure of the trustee's duties and responsibilities regarding the 
asset-backed securities under the governing documents and under 
applicable law. In providing this information, the description should 
address factors such as the extent to which the trustee independently 
verifies distribution calculations, access to and activity in 
transaction accounts, compliance with transaction covenants, use of 
credit enhancement, the addition, substitution or removal of pool 
assets, and the underlying data used for such determinations. In 
addition, the proposed item would require disclosure of any actions 
required by the trustee, including whether notice is required to 
investors, rating agencies or other third parties, upon an event of 
default, potential event of default (and how defined) or other breach 
of a transaction covenant. The required percentage of a class or 
classes of asset-backed securities needed to require the trustee to 
take action also would need to be described.
---------------------------------------------------------------------------

    \140\ Compare, e.g., Moody's Investors Service, Inc., ``Moody's 
Re-examines Trustee's Role in ABS and RMBS'' (Feb. 4, 2003) with the 
American Bankers Association, ``The Trustee's Role in Asset-Backed 
Securities'' (Mar. 10, 2003). See also ``Moody's Unearths Trustee 
Failures,'' Asset-Backed Alert, Jun. 27, 2003; ``Trustee Role Seen 
as `Minimal' at ASF Gathering,'' Asset Securitization Report, Jun. 
16, 2003, at 12; and Paul Beckett, ``Asset-Backed Deals Draw 
Scrutiny--Trustees Must Administer and Oversee, Moody's Says, or 
Downgrades are Likely,'' The Wall Street Journal, Feb. 5, 2003, at 
C13.
---------------------------------------------------------------------------

f. Originators
    Some ABS transactions involve pool assets that were not originated 
by the sponsor. The sponsor may have acquired the pool assets from a 
separate originator or through one or more intermediaries in the 
secondary market before securitizing them. If the pool

[[Page 26674]]

assets from a single originator or group of affiliated originators 
reach a certain concentration threshold, information regarding that 
originator and its own origination program may become relevant.
    Accordingly, we propose to require disclosure regarding any 
originator apart from the sponsor that has originated, or is expected 
to originate, 10% or more of the pool assets. As noted above with 
respect to disclosure regarding unaffiliated servicers, a 10% threshold 
is consistent with our proposed thresholds for disclosure regarding 
other parties to the transaction, such as concentrated obligors and 
providers of enhancement or other support. For any originator that 
meets the 10% threshold, the originator's origination program would 
need to be described, to the extent material, including the size and 
composition of the originator's portfolio, as well as other information 
material to an analysis of the performance of the pool assets, such as 
the originator's credit-granting or underwriting criteria.
g. Other Transaction Parties and Scope of Disclosure
    ABS transactions may involve additional or intermediate parties 
other than the typical ones identified above, such as intermediate 
transferors. We propose to clarify in the general applicability section 
of Regulation AB that if the ABS transaction involves such a party, 
information is required to the extent material regarding that party and 
its role, function and experience in relation to the asset-backed 
securities and the asset pool.\141\ The material terms of any agreement 
with such party would need to be described, and the agreement with that 
party would need to be filed as an exhibit.
---------------------------------------------------------------------------

    \141\ See proposed Item 1100(d) of Regulation AB.
---------------------------------------------------------------------------

    In addition, as noted in Section III.A.6., some ABS transactions 
arestructured such that the asset pool consists of one or more 
financial assets that represent an interest in or the right to the 
payments or cash flows of another asset pool, such as in the case of an 
origination trust in an automobile lease transaction. In many cases, 
such structures are established under the direction of the same sponsor 
and depositor and are designed solely to facilitate the ABS 
transaction. The actual source of the cash flows that are to be used to 
service the asset-backed securities is the asset pool underlying the 
intermediate financial asset. Consistent with current practice, we 
propose to clarify that in such an instance, references to the asset 
pool and the pool assets of the issuing entity also include the other 
asset pool.\142\ As such, required disclosure regarding the composition 
of the asset pool would include disclosure of the composition of the 
underlying asset pool, as material. In addition, our proposed 
requirement for an assessment of compliance with servicing criteria and 
the proposed servicer compliance statement would encompass the assets 
underlying the intermediate financial asset.
---------------------------------------------------------------------------

    \142\ Id.

    Questions regarding proposed disclosure for transaction parties:
     We request comment on the proposed disclosure regarding 
transaction parties. We also request comment on our proposed 
definitions. Are there additional parties not mentioned that should 
be specifically referenced? For each particular disclosure item, are 
there any modifications that should be made to the list of items to 
be disclosed? For example, should information regarding personnel or 
management of the sponsor, servicer or other party, including any 
recent turnover in personnel or management, be listed as an 
additional item for disclosure, if material? Should any of the 
examples of disclosure be added explicitly to the proposed items? 
Would information about the depositor's securitization program ever 
materially differ from the sponsor's? Several rating agencies 
provide ratings for servicers. Should these be required to be 
disclosed?
     Should specific financial information be required 
regarding any of the transaction parties? If so, for which parties 
should information be required? What information should be required 
(e.g., audited financial statements) and for what periods? Under 
what circumstances should such information be required? Should 
audited financial statements be required for the servicer? Would 
this place too much emphasis on the servicer?
     We request comment on the proposed requirement to 
include static pool data for the sponsor's portfolio and for prior 
securitized pools by the sponsor. Is such data material? Is such 
data available? Is additional clarity needed regarding the scope of 
the requirement? For what period should such data be presented? How 
should variations in what may be relevant for each asset type or 
asset pool be considered? Are there particular statistics that 
should be specifically identified for presentation on a static pool 
basis? If data on a static pool basis are required, should any 
updates to the data be required on an ongoing basis? If so, what 
data should be updated, how often and where should they appear? 
Should we require explanatory information about static pool data?
     Is additional specificity required for disclosure of 
the transfer of the pool assets? For example, should there be any 
modifications to the disclosure regarding bankruptcy separation, 
bankruptcy remoteness and the creation of security interests? In the 
case of sponsors that acquire pool assets for securitization from 
other originators or issuers, should there be disclosure of the 
difference between the acquisition price and the price paid by the 
issuing entity?
     Should any statement or opinion, such as an opinion of 
counsel, regarding any bankruptcy separation or bankruptcy 
remoteness issues be required to be filed? Should they only be 
required if they are required by the underlying transaction 
documents? Should there be disclosure if such opinions are not 
provided?
     We request comment on requiring more disclosure 
regarding sub-servicers. What are the ramifications of including 
additional disclosure regarding sub-servicers, including the 
material terms of the agreements with such sub-servicers? Is such 
disclosure important to investors? Are there instances where this 
information should not be required?
     Is a 10% breakpoint appropriate for triggering 
disclosure regarding unaffiliated servicers and significant 
originators? Should the percentage be higher (e.g., 20%) or lower 
(e.g., 5%)? Should a specific percentage not be used for determining 
when disclosure is appropriate? Is disclosure regarding other 
servicers that account for a material portion or aspect of the 
servicing of the pool assets appropriate?
     Should the proposed disclosure regarding the trustee 
include more explicit examples of activities that the trustee does 
and does not do? Should there be disclosure of any other entity that 
would perform such activities if the trustee does not? Is the same 
disclosure needed for both the trustee for the issuing entity and 
the trustee for the ABS indenture?
     Should any information regarding third party 
originators be required other than what is provided today? If so, is 
it practical to obtain such information? Should material static pool 
data regarding such originators be required?
     We request comment on the clarification regarding the 
application of our proposals to the asset pool underlying a 
financial asset that represents an interest in or the right to the 
payments or cash flows of that asset pool. Does our proposed list of 
conditions adequately identify the relevant structures?

4. Pool Assets
    Information about the composition and characteristics of the asset 
pool is a cornerstone of the disclosure necessary to make an informed 
investment decision regarding an asset-backed security. As noted above, 
we do not propose detailed industry guides for each asset type to be 
securitized. However, while the material characteristics will vary 
depending on the nature of the pool assets, there are certain broad 
categories of disclosure and examples of common characteristics that 
can be identified as representative of the material disclosure that is 
to be provided. The actual disclosure to be provided would need to be 
tailored to the asset type and asset pool involved for the particular 
offering, just as it is today.

[[Page 26675]]

a. Pool Composition
    Under our proposal, certain general information regarding the asset 
pool would be required, including a brief description of the asset type 
to be securitized and a general description of the material terms of 
the pool assets. In addition, the solicitation, credit-granting or 
underwriting criteria used to originate or purchase the pool assets 
would need to be described. The selection criteria for the asset pool 
also would need to be described, as well as the cut-off date or similar 
date for establishing pool composition. Finally, the effects of any 
legal or regulatory provisions would need to be described, such as any 
bankruptcy, consumer protection, predatory lending, privacy, property 
rights or foreclosure laws or regulations, to the extent they may 
materially affect pool asset performance or payments or expected 
payments on the asset-backed securities.\143\
---------------------------------------------------------------------------

    \143\ An instruction to the proposed Item would specify that 
unless a material concentration of assets exists, it is not 
necessary to provide details of the laws in each jurisdiction apart 
from the material potential effects of such laws. A legalistic 
description or recitation of the laws or regulations in a particular 
jurisdiction would not be required.
---------------------------------------------------------------------------

    As information about the asset pool necessarily includes 
statistical information, the need for clear and material presentations 
is important. Appropriate introductory and explanatory information 
should be provided to introduce characteristics and any terms or 
abbreviations used. As is the case today, statistical information 
should be presented in tabular or graphical format, if it would aid 
understanding. Statistical information also should be presented in 
appropriate distributional groups or incremental ranges material to an 
analysis of the information, in addition to presenting appropriate 
overall pool totals, averages and weighted averages.\144\
---------------------------------------------------------------------------

    \144\ As noted in the proposed Item, in making any calculations 
regarding overall pool balances, any funds set aside for a 
prefunding account should be disregarded.
---------------------------------------------------------------------------

    Currently, statistical disclosures by distribution groups or ranges 
often present just the number, amount and percentage of pool assets for 
each group or range. If material, registrants also should provide 
statistical information for each group or range by other material 
variables, such as, among others, average balance, weighted average 
coupon, average age and remaining term, average loan-to-value or 
similar ratio, and weighted average credit score or other applicable 
measure of obligor credit quality. Similarly, when presenting averages 
on an aggregate basis and within each group or range, registrants 
should consider providing minimums and maximums underlying the 
averages. As is often the case today, historical data on pool assets is 
to be provided, as appropriate, such as the lesser of three years or 
the time such assets have existed, to allow a material evaluation of 
the pool data.
    Examples of material characteristics specified in the proposed 
disclosure item that may be common for many asset types and 
representative of disclosures currently provided include:

     Number of each type of pool assets.
     Asset size, such as original balance and outstanding 
balance as of a designated cut-off date.
     Interest rate or rate of return, including type of 
interest rate if the pool includes different types, such as fixed 
and floating rates, and annual percentage rate.
     Capitalized or uncapitalized accrued interest.
     Age, maturity, remaining term, average life (based on 
different prepayment assumptions), current payment/prepayment speeds 
and pool factors, as applicable.
     Servicer, if different servicers service different pool 
assets.
     If a loan or similar receivable: amortization period; 
loan purpose; loan status; loan-to-value (LTV) ratios and debt 
service coverage ratios (DSCR); type and/or use of underlying 
property, product or collateral; and number of points or other 
origination charges paid on the pool assets.
     If a receivable or other financial asset with a 
revolving balance, such as a credit card receivable: monthly payment 
rate; maximum credit lines; average account balance; yield 
percentages; type of receivable account; finance charges, fees and 
other income earned; gross and net purchases and returns granted; 
and percentage of full-balance and minimum payments made.
     Whether the pool asset is secured or unsecured, and if 
secured, the type(s) of collateral.
     Ranges of standardized credit scores of obligors and 
other information regarding obligor credit quality.
     Billing and payment procedures, including frequency of 
payment, payment options, fees, charges and origination or payment 
incentives.
     Information about the origination channel and 
origination process for the pool assets, such as originator 
information (and how acquired) and level of origination 
documentation required, as applicable.
     Geographic distribution, such as by state or other 
material geographic region.\145\ In particular and consistent with 
existing practice and our other proposed thresholds for increased 
disclosure, if 10% or more of the pool assets are or will be located 
in any one state or other geographic region, information is to be 
provided regarding any economic or other factors specific to such 
state or region that may materially impact the pool assets or pool 
asset cash flows. In addition, if material, statistical data should 
be provided according to the factors or variables in this proposed 
list for each such geographic concentration.
---------------------------------------------------------------------------

    \145\ An instruction to this proposed item would specify that 
for most assets, such as credit card accounts, automobile leases, 
trade receivables and student loans, the location of the asset is 
the underlying obligor's billing address. For assets involving real 
estate, such as mortgages, the location of the asset is where the 
physical property underlying the asset is located.
---------------------------------------------------------------------------

     If material, other concentrations material to the asset 
type (e.g., school type for student loans), with information 
regarding such concentrations similar to that provided for 
geographic concentrations.

    In addition to the above and consistent with existing practice, 
delinquency and loss information for the pool would be required. A 
proposed item of general applicability for Regulation AB would provide 
guidance regarding the presentation of such information.\146\ In 
addition to overall delinquency percentages, delinquency experience is 
to be presented in 30-day increments, beginning with assets 30-59 days 
delinquent, through the point that assets are written off or charged 
off as uncollectable. At a minimum, such information is to be presented 
by number of accounts and dollar amount. Disclosure also would be 
required on how delinquencies, charge-offs and uncollectable accounts 
are defined or determined, addressing the effect of any grace period, 
re-aging, restructure or other practices on delinquency experience. 
Similar information would be required with respect to the sponsor in a 
registration statement or otherwise if delinquency and loss information 
was being presented with respect to the sponsor.
---------------------------------------------------------------------------

    \146\ See proposed Item 1100(b) of Regulation AB.
---------------------------------------------------------------------------

    As discussed in Section III.B.3.a., we also propose to require 
static pool data for the asset pool regarding delinquency and losses, 
to the extent material. As with static pool data at the sponsor level, 
additional explanatory disclosure regarding the static pool data could 
be included, and in some cases could be required.\147\ We recognize, 
however, that there may be instances where such static pool data would 
not be material, such as where the asset pool predominantly consisted 
of new originations without a history of data to present.
---------------------------------------------------------------------------

    \147\ See note 130 above.
---------------------------------------------------------------------------

    In a commercial mortgage-backed securitization, given the 
importance of the underlying properties, our sample list of proposed 
disclosure items for these assets is consistent with similar disclosure 
required by existing Form S-11 for the registration of offerings of 
securities for certain real estate

[[Page 26676]]

companies. This information would include, to the extent material: 
\148\
---------------------------------------------------------------------------

    \148\ Similar to Form S-11, an instruction to the proposed 
disclosure item would specify that what is required is information 
material to an investor's understanding of the asset-backed 
securities. Detailed descriptions of the physical characteristics of 
individual properties or legal descriptions by metes and bounds are 
not required.

     Net cash flow information from the pool assets and the 
components of net cash flow.
     Location and general character of all materially 
important real properties.
     Nature and amount of other material mortgages, liens or 
encumbrances.
     Proposed renovation, improvement or development 
programs.
     Competitive conditions.
     Management of the properties, occupancy rates and 
property uses.
     Material tenants and lease terms.
b. Sources of Pool Cash Flow
    In some ABS transactions, cash flows to support the asset-backed 
securities come from more than one source, such as in lease-backed 
transactions that include separate cash flows from lease payments and 
from the sale of the residual asset at the termination of the lease. In 
such instances, disclosure would be required, consistent with what is 
provided today, of the specific sources of funds and their uses, 
including, if applicable, the relative amount and percentage of funds 
that are to be derived from each source. Any assumptions, data, models 
and methodology used to derive such amounts also would need to be 
described.
    As discussed in Section III.A.2.d., we propose additional specific 
disclosures if the asset pool includes leases or other assets where a 
portion of the cash flow is anticipated to come from the residual value 
of an underlying physical asset. Such disclosure would include 
information on how residual values are estimated and derived, 
statistical information regarding estimated residual values and 
historical statistics on turn-in rates and residual value realization 
rates. Information also would be required regarding the manner and 
process in which residual values are to be realized, including 
disclosure of the entity that will convert the residual values into 
cash and the experience of such entity. Finally, disclosure would be 
required of the effects if not enough cash flow was received from the 
realization of residual values, whether there existed any provisions to 
address such a contingency, as well as how any cash flow greater than 
that necessary to repay security holders would be allocated.
c. Changes to the Asset Pool
    As discussed in Section III.A.2.e., we are proposing more detailed 
disclosures on when and how the composition of an asset pool may 
change, such as through a prefunding or revolving period. Such 
disclosure would include:

     The term or duration of any prefunding or revolving 
period.
     Aggregate amounts and percentages involved in the 
prefunding or revolving period.
     Triggers that would terminate limits or terminate such 
periods.
     When and how new pool assets may be added, removed or 
substituted, and the acquisition or underwriting criteria for 
additional pool assets, and the party that makes determinations on 
such changes.
     Any minimum requirements to add or remove pool assets.
     Temporary investment of funds pending use.
     How investors will be notified of any changes to the 
asset pool.
d. Rights and Claims Regarding the Pool Assets
    When pool assets are transferred to the issuing entity, the 
sponsor, transferor or other party often makes certain representations 
and warranties concerning the pool assets, such as to their principal 
balance and status at the time of transfer. If an asset fails to meet 
the requirements of those representations or warranties, there may be 
obligations for the depositor to repurchase or substitute that asset 
for assets that do comply with the representations and warranties. 
Consistent with current practice, disclosure of these rights and 
remedies would be required. Similarly, disclosure would be required 
regarding any material direct or contingent claims that parties other 
than the holders of the asset-backed securities have on any pool 
assets, such as prior mortgages, liens or encumbrances.

    Questions regarding proposed disclosure for the asset pool:
     We request comment on the proposed disclosure regarding 
the asset pool. Are there any modifications that should be made to 
the list of representative items to be disclosed? For example, is 
additional specificity needed regarding when and how the asset pool 
may change? Is the disclosure regarding rights and claims regarding 
the pool assets appropriate?
     Is the proposed disclosure regarding lease-backed ABS 
appropriate? Is additional specificity needed regarding residual 
value disclosures or how residual values are to be realized?
     Should additional guidance be provided on the methods 
to present statistical disclosure so that it is presented in a clear 
and understandable format?
     Similar to our proposals for the sponsor, we request 
comment on the proposed requirement to include static pool data for 
the asset pool. Is such data material to an investment decision? Is 
it readily available for presentation? Is additional clarity needed 
regarding the scope of the requirement? Should any updates to the 
data be required on an ongoing basis? If so, what data should be 
updated, how often should they be updated, and where should they 
appear?
5. Transaction Structure
    Existing Item 202 of Regulation S-K would continue to provide the 
core disclosure requirements for describing the securities being 
offered. Proposed Item 1112 of Regulation AB would provide additional 
guidance consistent with existing practice for preparing this 
disclosure for asset-backed securities. For example, the item would 
clarify that an explanation is to be given of the types or categories 
of securities that may be offered, such as interest-weighted or 
principal-weighted classes or planned amortization or companion 
classes, as well has how principal and interest on each class of 
securities is calculated and payable. Other specified items would 
include amortization, performance or similar triggers or events (and 
their effects on the transaction if triggered), overcollateralization 
or undercollateralization information, cross-default or cross-
collateralization provisions, voting requirements to amend the 
transaction documents and any minimum standards, restrictions or 
suitability requirements regarding ownership of the securities.
    A clear description of the flow of funds for the transaction would 
be required. Such a description would include payment allocations, 
rights and distribution priorities among all classes of the issuing 
entity's securities, and within each class, with respect to cash flows, 
credit enhancement and any other structural features in the 
transaction. Any requirements directing cash flows would need to be 
described, such as to reserve accounts, along with a description of the 
purpose and operation of those requirements. In addition to an 
appropriate narrative description, the flow of funds should be 
presented graphically if doing so would aid understanding.
    There has been increased emphasis in the market on the level of 
fees and expenses involved in an ABS transaction.\149\ To provide 
increased transparency of this information in a unified location, we 
propose to require in a separate table an itemized list of all 
estimated fees and expenses to be paid or payable out of the cash flows 
for the transaction. This fee and expense table would indicate for each 
item the

[[Page 26677]]

amount of the fee or expense, its general purpose, the party receiving 
such fees or expenses, the source of funds for such fees or expenses 
(if different from other fees or expenses or if such fees or expenses 
are to be paid from a specified portion of the cash flows) and the 
distribution priority of such expenses. If the amount of a fee or 
expense was not fixed, the formula used to determine it would need to 
be provided. The tabular presentation could be accompanied by footnotes 
or other accompanying narrative disclosure to the extent necessary for 
an understanding of the timing or amount of such fees and expenses. In 
addition, through footnote or other accompanying narrative disclosure, 
disclosure would be required if any, and if so how, any fees or 
expenses could be changed without notice to, or approval by, security 
holders.
---------------------------------------------------------------------------

    \149\ See, e.g., notes 136 and 140 above.
---------------------------------------------------------------------------

    Other disclosures regarding the transaction structure would include 
information on the frequency of distribution dates and the collection 
periods for the pool assets and arrangements for cash held pending use, 
including identification of the parties with access to cash balances 
and the authority to make decisions regarding their investment and use. 
Information on the ownership of any residual or retained interests to 
the cash flows would be required, as well as the disposition of excess 
cash flow. Disclosure would need to be provided of any requirements to 
maintain a minimum amount of excess cash flow or spread from, or 
retained interest in, the transaction, and effects on the transaction 
if the requirements were not met.
    As with any fixed-income security, optional or mandatory redemption 
or termination provisions would need to be described, including any 
``clean up'' calls if the principal balance of the pool assets reaches 
a specified minimum level. Many ABS transactions include ``clean up'' 
calls whereby the securities are called and the trust terminated before 
its stated termination date when the administrative costs no longer 
justify the limited outstanding life.\150\ This is typically conducted 
only when less than 10% of the outstanding pool balance is outstanding. 
We also propose to codify the existing staff position that the title of 
any class of securities with an optional or mandatory redemption or 
termination feature that may be exercised when 25% or more of the 
original principal balance of the pool assets is still outstanding must 
include the word ``callable.'' This is to alert investors that the 
callable feature is greater than a typical ABS ``clean up'' call.
---------------------------------------------------------------------------

    \150\ See Frank J. Fabozzi et al., The Handbook of Nonagency 
Mortgage-Backed Securities, at 165 (1997).
---------------------------------------------------------------------------

    We propose to require additional information if the transaction 
structure involves a master trust. For example, information would be 
required to the extent material regarding any additional securities 
already outstanding or that may be issued in the future that are backed 
by the same asset pool, including:

     The relative priority of those additional securities to 
the securities being offered and their respective rights to the 
underlying pool assets and cash flows;
     Allocations of cash flow from the asset pool and any 
expenses or losses among the various series or classes;
     Terms under which additional series or classes may be 
issued and pool assets increased or changed; and
     The terms of any security holder approval or 
notification of any additional issuance.

    In describing generally the scope of disclosure expected in ABS 
registration statements, the 1992 Release specifically referenced 
disclosure regarding prepayment, maturity and yield considerations that 
may be material to ABS. In our proposed disclosure requirements, a 
description would be required, which is often provided today, of any 
material models, including material assumptions and limitations, used 
as a means to identify cash flow patterns with respect to the pool 
assets. Similarly, the disclosure would need to explain, to the extent 
material, the degree to which each class of securities is sensitive to 
changes in the rate of payment on the pool assets, and describe the 
specific consequences of such changing rate of payment.\151\ Consistent 
with market practice, statistical information of such effects is to be 
provided, such as the effect of prepayments on yield and weighted 
average life at one or more given prepayment speeds. Any special 
allocations of prepayment risks among the classes of securities would 
need to be described, as well as whether any class protects other 
classes from the effects of the uncertain timing of cash flow.
---------------------------------------------------------------------------

    \151\ This would include, for example, information on interest 
rate sensitivity.

    Questions regarding proposed disclosure regarding the 
transaction structure:
     We request comment on the above proposed disclosure 
regarding transaction structure. Are there any modifications that 
should be made to the list of items? For example, is additional 
specificity needed regarding the information that should be provided 
regarding prepayment, maturity and yield considerations?
     Is a separate itemized fee and expense table useful, or 
would disclosure of fees and expenses as part of a flow of funds 
discussion be sufficient?
     If the proposal regarding an assessment of compliance 
with servicing criteria is modified, should additional disclosure be 
required regarding controls and procedures over collections and cash 
balances?
     Is the proposed disclosure about additional series or 
classes of securities in master trust structures sufficient? Should 
disclosure of additional information be required?
6. Significant Obligors
    In most securitizations, the asset pool represents obligations of a 
large enough number of separate obligors that information on any 
individual obligor is not material. However, as discussed in Section 
III.A.6., as concentration with a particular obligor or group of 
related obligors increases, additional disclosures regarding that 
obligor or group of related obligors, including financial information, 
is required. Analogizing to the standards in Topic 1.I of Staff 
Accounting Bulletin No. 103, current staff and market practice is to 
require additional disclosures regarding a particular obligor or group 
of related obligors when concentration reaches 10%, with more 
particular disclosures at 20%.\152\
---------------------------------------------------------------------------

    \152\ Topic 1.I. to Release No. SAB-103.
---------------------------------------------------------------------------

    Consistent with this long-standing practice, we propose to define a 
``significant obligor'' that would trigger additional disclosures as 
any of the following:

     An obligor or a group of affiliated obligors on any 
pool asset or group of pool assets if such pool asset or group of 
pool assets represents 10% or more of the asset pool;
     A single property or group of related properties 
securing a pool asset or a group of pool assets if such pool asset 
or group of pool assets represents 10% or more of the asset pool; or
     A lessee or group of affiliated lessees if the related 
lease or group of leases represents 10% or more of the asset pool.

    Instructions to the proposed definition would clarify that if 
separate pool assets, or properties underlying pool assets, are cross-
defaulted and/or cross-collateralized, such pool assets are to be 
aggregated and considered together in determining concentration levels. 
With respect to lessees, the concentration calculation must focus on 
the leases whose cash flow supports the asset-backed securities 
directly or indirectly, regardless of whether the asset pool contains 
the leases themselves, mortgages on properties

[[Page 26678]]

that are the subject of the leases or other assets related to the 
leases. Finally, if the pool asset is a mortgage or lease relating to 
real estate and non-recourse to the obligor, and the obligor does not 
manage the property or does not own other assets and has no other 
operations, then the obligor need not be considered a separate 
significant obligor from the real estate. Otherwise, if any of the 10% 
tests were met, the obligor would be a separate significant obligor for 
which disclosure would be required.
    For each significant obligor, both descriptive and financial 
information would be required consistent with existing practice. 
Descriptive information would include the identity of the significant 
obligor, its organizational form, the general character of its 
business, the nature of the concentration and the material terms of the 
pool assets or the agreements with the obligor involving the pool 
assets.
    Consistent with current practice, different levels of financial 
information would be required depending upon the level of 
concentration.\153\ If the pool assets relating to a significant 
obligor represented 10% or more, but less than 20%, of the asset pool, 
selected financial data required by Item 301 of Regulation S-K would 
need to be provided.\154\ If the pool assets relating to the 
significant obligor represented 20% or more of the asset pool, audited 
financial statements meeting the requirements of Regulation S-X would 
be required. Both thresholds represent long-standing breakpoints in 
Commission and staff requirements for determining the level of required 
financial disclosure.\155\ Section III.B.9. discusses proposals for 
alternative methods that may be available, subject to conditions, to 
present this disclosure, such as through incorporation by reference or 
by including a reference to the obligor's Commission filings.
---------------------------------------------------------------------------

    \153\ See, e.g., Section VIII.B.3.a.ii. of the Division of 
Corporation Finance's ``Current Issues and Rulemaking Projects'' 
(Nov. 14, 2000).
    \154\ 17 CFR 229.301.
    \155\ See, e.g., note 152 above.
---------------------------------------------------------------------------

    We propose instructions to address exceptions to the requirement to 
provide financial information regarding a significant obligor. For 
example, no financial information would be required if the obligations 
of the significant obligor as they relate to the pool assets are backed 
by the full faith and credit of the United States. Similarly, no 
financial information would be required if the obligations of the 
significant obligor as they relate to the pool assets are backed by the 
full faith and credit of a foreign government, if the pool assets are 
investment grade securities. Otherwise, information required by 
paragraph (5) of Schedule B of the Securities Act \156\ regarding the 
foreign government could be incorporated by reference. If the 
significant obligor was an asset-backed issuer and the pool assets 
relating to the significant obligor were asset-backed securities, 
rather than financial information we would require disclosure under 
proposed Items 1104-1113 and 1117 of Regulation AB regarding such 
asset-backed securities.
---------------------------------------------------------------------------

    \156\ 56 15 U.S.C. 77aa.

    Questions regarding proposed disclosure regarding significant 
obligors:
     We request comment on the proposed definition of 
significant obligor. Are any modifications necessary? Is the test of 
whether the pool asset represents 10% or more of the asset pool the 
appropriate test? Should it instead be based on cash flows 
supporting the offered ABS, the principal amount of the offered 
asset-backed securities or a combination of any of these tests? Is 
the application to lessees appropriate? Should any other particular 
entities be included or excluded?
     Are the 10% and 20% breakpoints still appropriate for 
triggering when different levels of financial disclosure should be 
required? Should they be changed?
     We also request comment on the level of disclosure to 
be required, both descriptive and financial, regarding significant 
obligors. Are there alternative disclosures that should be required 
or permitted? For example, in the case of an insurance company or 
other regulated entity that is not subject to Exchange Act reporting 
requirements and does not otherwise provide GAAP financial 
statements, should financial statements prepared under the entities' 
regulatory accounting principles be acceptable as a substitute?
     Should there be any additional exclusions to when 
financial information would be required? Are the proposed 
instructions regarding governments and asset-backed securities 
appropriate?
7. Credit Enhancement and Other Support
    The definition of asset-backed security contemplates the inclusion 
of ``rights or other assets designed to assure the servicing or timely 
distribution of proceeds to security holders.'' Credit enhancement or 
other support for asset-backed securities can be provided in a variety 
of ways, including features internally structured into the transaction 
to provide support as well as externally provided enhancement. 
Disclosure would be required of all such methods of enhancement, to the 
extent material, including any of the following:\157\
---------------------------------------------------------------------------

    \157\ In addition to the level of disclosure required, credit 
enhancement may raise questions as to whether a separate security is 
involved that needs to be separately registered. For example, a 
guarantee of a security, rather than on the underlying assets, would 
be a separate ``security'' under Section 2(a)(1) of the Securities 
Act (15 U.S.C. 77b(a)(1)) and must be covered by a Securities Act 
registration statement filed by the guarantor, as issuer, unless 
exempt from registration.

     Any external credit enhancement designed to ensure that 
the asset-backed securities or pool assets will pay in accordance 
with their terms, such as bond insurance, letters of credit or 
guarantees;
     Any mechanisms to ensure that payments on the asset-
backed securities are timely, such as liquidity facilities, lending 
facilities, guaranteed investment contracts and minimum principal 
payment agreements;
     Any derivatives that are used to reduce or alter risk 
resulting from financial assets in the asset pool and that provide 
payments in return for payments on such assets, such as interest 
rate or currency swaps, or that are used to provide credit 
enhancement related to assets in the pool;\158\ and
---------------------------------------------------------------------------

    \158\ Derivatives that are not related to the financial assets, 
such as credit default swaps or other derivatives designed to create 
a synthetic exposure to an external asset or index, are not 
permitted under the definition of ``asset-backed security.'' See, 
e.g., note 62 and the accompanying text.
---------------------------------------------------------------------------

     Any internal credit enhancement structured into the 
transaction to increase the likelihood that one or more classes of 
asset-backed securities will pay in accordance with their terms, 
such as subordination provisions, overcollateralization, reserve 
accounts, cash collateral accounts or spread accounts.

Disclosure of the material terms of any agreement to provide such 
enhancement would be required, including any limits on the timing or 
amount of the enhancement or any conditions that must be met before the 
enhancement can be accessed. Provisions permitting the substitution of 
enhancement also would need to be disclosed. The agreement relating to 
the enhancement would be required to be filed as an exhibit to the 
filing.
    Similar to significant obligors, enhancement or other support by a 
particular entity or group of affiliated entities may reach a certain 
level of concentration such that additional disclosures, including 
financial disclosures, would be appropriate. Consistent with current 
practice, we propose that if an entity or group of affiliated entities 
providing enhancement or other support for the asset-backed securities 
is liable or contingently liable to provide payments representing 10% 
or more of the cash flow supporting any offered class of asset-backed 
securities, additional information, both descriptive and financial, 
would be required. The descriptive information would include the name 
of the enhancement provider, its organizational form and the general 
character of its business.

[[Page 26679]]

    Also consistent with current practice and our proposals for 
significant obligors, we propose to use 10% and 20% thresholds in 
determining the level of financial information that would be required 
regarding an enhancement provider. In particular, if any entity or 
group of affiliated entities that provided enhancement or other support 
for the asset-backed securities was liable or contingently liable to 
provide payments representing 10% or more, but less than 20%, of the 
cash flow supporting any class of the asset-backed securities, selected 
financial data required by Item 301 of Regulation S-K would need to be 
provided. If the entity or group of affiliated entities was liable or 
contingently liable to provide payments representing 20% or more of the 
cash flow supporting any class of the asset-backed securities, audited 
financial statements meeting the requirements of Regulation S-X would 
be required. As with financial disclosure regarding significant 
obligors, Section III.B.9. discusses a proposal for an alternative 
method that may be available to incorporate the information by 
reference. We also propose similar instructions if the obligations of 
the enhancement provider are backed by the full faith and credit of the 
United States or certain foreign governments.
    These disclosure requirements would apply to all providers of 
external credit or liquidity enhancement, insurance or guarantees, 
counterparties to swap or hedging arrangements, interest rate exchange 
arrangements, interest rate cap or floor arrangements, currency 
exchange arrangements or similar arrangements, and any other parties 
providing external credit enhancement or other support for payments on 
the asset-backed securities. Enhancement may support payment on the 
pool assets or payments on the asset-backed securities themselves.
    Unlike current practice, our proposals would base the triggering 
event for disclosure on payments that the enhancement provider is 
liable or contingently liable to provide. Valuation of the enhancement, 
such as for swaps or other derivatives, would not be the relevant test. 
Even if a swap, such as an interest rate swap, was currently ``out of 
the money'' and no payments were required, if the swap provider was 
contingently liable for more than 10% of the cash flow supporting a 
class (for example, if interest rates changed), disclosure would be 
required on the same basis as any other form of enhancement, such as a 
guarantee, even though probability of payment on the guarantee likewise 
could be remote due to a high quality asset pool.

    Questions regarding proposed disclosure regarding credit 
enhancement and other support:

     We request comment on our proposals for disclosure 
regarding credit enhancement and other forms of support for an ABS 
transaction. Are any modifications necessary? Are there any 
additional examples we should provide?
     Is the test of whether the enhancement provider is 
liable or contingently liable for payments representing 10% or more 
of the cash flows to any class of the asset-backed securities the 
appropriate test? If not, why? What alternatives should be used? 
Should different tests be used for different forms of enhancement? 
What would be the rationale for different tests?
     Are the 10% and 20% breakpoints still appropriate for 
triggering when different levels of financial disclosure should be 
required? Should they be changed?
     We also request comment on the level of disclosure to 
be required, both descriptive and financial. Are there alternative 
disclosures that should be required or permitted? For example, in 
the case of an insurance company or other regulated entity that is 
not subject to Exchange Act reporting requirements and does not 
otherwise provide GAAP financial statements, should financial 
statements prepared under the entities' regulatory accounting 
principles be acceptable as a substitute?
     Should there be any additional exclusions as to when 
financial information would be required? Are the proposed 
instructions regarding U.S. and foreign government-backed 
obligations appropriate?
8. Other Basic Disclosure Items
a. Tax Matters
    Consistent with existing practice, the registration statement would 
need to include a brief, clear and understandable summary of:

     The tax treatment of the asset-backed securities 
transaction under federal income tax laws.
     The material federal income tax consequences of 
purchasing, owning and selling the asset-backed securities. In 
addition, if any of the material federal income tax consequences are 
not expected to be the same for investors in all classes offered by 
the registration statement, the material differences would need to 
be described.
     The substance of counsel's tax opinion, including 
identification of the material consequences upon which counsel has 
not been asked, or is unable, to opine.
    The filing and disclosure of tax opinions is a frequent topic of 
staff comment. The requirements with respect to tax opinions in ABS 
transactions are generally consistent with the requirements for non-
ABS transactions.\159\ For example, when using a ``short form'' tax 
opinion where disclosure in the prospectus is to constitute 
counsel's opinion, the tax opinion filed as an exhibit to the 
registration statement must confirm or adopt the statements in the 
prospectus discussion as counsel's opinion. It is not sufficient for 
the tax opinion to merely state that the disclosure in the 
prospectus is accurate in all material respects. Registrants and 
their counsel should take care in preparing and describing tax 
opinions consistent with practices required for Securities Act 
registration statements.\160\
---------------------------------------------------------------------------

    \159\ See also note 85.
    \160\ See Item 601(b)(8) of Regulation S-K.
---------------------------------------------------------------------------

b. Legal Proceedings

    In lieu of Item 103 of Regulation S-K, we propose a more 
tailored disclosure item for material legal proceedings with respect 
to asset-backed securities. For example, under the proposed 
disclosure item, a brief description would be required regarding any 
legal proceedings pending or known to be threatened against the 
sponsor, depositor, trustee, issuing entity, any servicer or any 
enhancement provider, or of which any property of the foregoing is 
the subject, that is material to security holders. Similar 
information would be required as to any such proceedings known to be 
contemplated by governmental authorities.

c. Affiliations and Certain Relationships and Related Transactions

    There often can be several affiliations between parties in an 
ABS transaction. For example, the servicer often is an affiliate of 
the sponsor. We propose to require a description of whether, and if 
so, how, the sponsor, depositor or issuing entity is an affiliate of 
any of the following parties: servicer, trustee, originator of at 
least 10% of the pool assets, significant obligor, significant 
enhancement provider, underwriter or other material party identified 
with respect to the transaction. Disclosure also would be required, 
to the extent known, of any affiliate relationships among any of the 
parties listed above. An ``affiliate'' of, or a person 
``affiliated'' with, a specified person, is defined in Commission 
rules to mean ``a person that directly, or indirectly through one or 
more intermediaries, controls, or is controlled by, or is under 
common control with, the person specified.''\161\
---------------------------------------------------------------------------

    \161\ See, e.g., Securities Act Rule 405 and Exchange Act Rule 
12b-2. The term ``control'' also is defined in those rules as ``the 
possession, direct or indirect, of the power to direct or cause the 
direction of the management and policies of a person, whether 
through the ownership of voting securities, by contract, or 
otherwise.''
---------------------------------------------------------------------------

    We also propose disclosure regarding whether there is, and if 
so, the general character of, any business relationship, agreement, 
arrangement, transaction or understanding entered into outside the 
ordinary course of business or on terms other than would be obtained 
in an arm's length transaction with an unrelated third party, apart 
from the asset-backed securities transaction, between the sponsor, 
depositor or issuing entity and any of the above referenced parties 
that either currently exists or that existed during the past two 
years that is material to an investor's understanding of the asset-
backed securities. An instruction to the proposed item would clarify 
that what would be required is information material to an investor's 
understanding of the asset-backed securities. A detailed description 
or

[[Page 26680]]

itemized listing of all commercial relationships among the parties 
would not be required. Instead, the disclosure should indicate 
whether any relationships outside of the asset-backed securities 
transaction do exist that meet the specified standard, including 
materiality to an understanding of the asset-backed securities, and 
the general character of those relationships. However, disclosure of 
specific relationships involving or related to the ABS transaction 
and the pool assets, including the material terms and approximate 
dollar amount involved, would be required to the extent material. 
For example, material credit arrangements relating to the pool 
assets provided by an underwriter or promoter for the asset-backed 
securities, such as providing a warehouse line of credit to fund 
originations or acquisitions pending securitization, would need to 
be described.

d. Ratings

    We propose to codify current industry practice by requiring 
disclosure of whether the issuance or sale of any class of the 
offered securities is conditioned on the assignment of a rating by 
one or more rating agencies, whether or not NRSROs.\162\ If so, each 
rating agency must be identified as well as the minimum rating that 
must be assigned. A description regarding any arrangements to have 
such rating monitored while the securities are outstanding also 
would be required.
---------------------------------------------------------------------------

    \162\ We are not proposing to codify one of the items specified 
for disclosure in the 1992 Release, which was an explanation of what 
an NRSRO rating addresses and the characteristics the rating does 
not address. We believe this issue no longer requires general 
clarification with respect to the ABS market.
---------------------------------------------------------------------------

e. Reports and Additional Information

    Post-issuance reporting of information regarding an ABS 
transaction is important to an understanding of transaction 
performance and, hence, investment decisions, including whether 
existing holders should sell their securities and whether 
prospective buyers should purchase them. Such disclosures in the ABS 
context generally involve both updated information about pool 
performance as well as information on allocations and distributions 
of cash flows to holders of the securities and other third parties 
according to the flow of funds. Investors necessarily consider the 
availability and quality of transaction reporting in determining 
whether, and at what level, to invest in such securities.
    In addition to disclosure regarding reports to be filed with the 
Commission, we propose to require disclosure, which is often 
provided today, of the reporting investors can expect to receive and 
be able to access. This disclosure would need to include a 
description of the reports or other documents required under the 
transaction agreements, including the information to be included in 
the reports, the schedule and manner of their distribution or 
availability and who will prepare the reports.
    We also propose to require disclosure of whether website access 
will be provided to Commission and transaction reports.\163\ 
Disclosure would be required in the prospectus regarding whether the 
issuing entity's annual reports on Form 10-K, distribution reports 
on Form 10-D, current reports on Form 8-K and amendments to those 
reports filed or furnished with the Commission will be made 
available on the website of a specified transaction party (e.g., 
sponsor, depositor, servicer, issuing entity or trustee) as soon as 
reasonably practicable after such material is electronically filed 
with, or furnished to, the Commission. As the Commission specified 
in its release adopting similar disclosure for accelerated filers, 
we interpret the ``as soon as reasonably practicable'' standard to 
mean that the report would be available, barring unforeseen 
circumstances, on the same day as filing.\164\ In addition, 
disclosure would be required regarding:
---------------------------------------------------------------------------

    \163\ ``Accelerated filers,'' as defined in 17 CFR 240.12b-2, 
already are required to include similar disclosure in their annual 
reports on Form 10-K. See Item 101(e)(4) of Regulation S-K.
    \164\ See Release No. 33-8128 (Sep. 5, 2002) [67 FR 58480].
---------------------------------------------------------------------------

     Whether other reports to security holders or 
information about the asset-backed securities will be made available 
in this manner;
     If filings will be made available in this manner, the 
Web site address where such filings may be found; and
     If filings and other reports will not be made available 
in this manner, the reasons why they will not and whether an 
identified transaction party voluntarily will provide electronic or 
paper copies of those filings free of charge upon request.

    The guidance provided in the Commission's release adopting similar 
disclosure for accelerated filers, such as how the Web site access can 
be provided, would be equally applicable to this disclosure.\165\ In 
addition, the inclusion of the Web site address in response to the 
disclosure requirement would not, by itself, include or incorporate by 
reference the information on the site into the prospectus or 
registration statement, unless the registrant otherwise acts to 
incorporate the information by reference.\166\ Similarly, the proposed 
disclosure is not designed to create new duties under the antifraud 
provisions of the federal securities laws or in private rights of 
action or to alter any existing liability provisions. For example, the 
new disclosure would not separately create or otherwise affect any duty 
to update prior statements.
---------------------------------------------------------------------------

    \165\ Id.
    \166\ In Release No. 33-7856 (Apr. 28, 2000) [65 FR 25843], we 
provided interpretive guidance on the effect of including a Web site 
address in other situations. We are not changing that guidance for 
those other situations.

    Questions regarding other proposed basic disclosure items:
     We request comment on these other basic disclosure 
items. Are there any modifications that should be made to these 
items? For example, is additional specificity needed regarding the 
tax consequences that should be described?
     What should be the proper scope for disclosure of 
affiliations and relationships between transaction parties? Should 
any modifications be made to the proposed disclosure item? Are all 
of the proposed related party transaction disclosures useful, or 
should the disclosure be limited from what is proposed? Should 
disclosure be required regarding any relationships at an individual 
level, such as with an executive officer or director of the sponsor, 
depositor or issuing entity, if applicable, that exists in 
connection with or apart from the asset-backed securities 
transaction?
     Should additional disclosure regarding ratings or the 
rating process be required? For example, should disclosure of fees 
paid to rating agencies be required? Should we require an 
explanation of what an NRSRO rating addresses and the 
characteristics the rating does not address?
     With regard to the content of reports that will be 
provided to investors, should a copy of the form of the report to be 
used be included with the registration statement or filed as an 
exhibit?
     We request comment on the proposed disclosure regarding 
Web site access to reports. Should disclosure also be required on an 
ongoing basis in the Form 10-K or in distribution reports? Is 
additional guidance necessary in how to comply with the proposal? 
Should alternative methods be considered in promoting the 
availability of transaction reporting to investors and market 
participants?
     Are there additional areas of disclosure that should be 
separately identified? For example, should there be a separate 
disclosure item for legal investment considerations, such as ERISA 
qualifications?
9. Alternatives to Present Third Party Financial Information
    As discussed in Sections III.B.6. and 7., there are instances both 
today and under our proposals when additional financial information 
regarding third parties would be required in ABS filings, including 
financial information about significant obligors and significant 
providers of enhancement or other support. Over time, through several 
no-action letters and interpretations, the staff has permitted 
alternative methods to present or refer to this information if it 
exists in other Commission filings of the third party. The first 
alternative allows incorporation by reference of the third party's 
financial information into the ABS filing. The second alternative, 
available only with respect to significant obligors, allows an ABS 
filing to reference the significant obligor's Exchange Act reports on 
file with the Commission in lieu of providing the information.
    We propose to codify both of these alternatives and clarify the 
conditions

[[Page 26681]]

for their use. Both alternatives would relate only to the presentation 
of financial information regarding the third party. Information 
specific to the asset-backed securities transaction, such as the 
material terms of the pool assets in the case of significant obligors 
or the enhancement in the case of an enhancement provider, would still 
be required as is the case today.
a. Incorporation by Reference
    The first alternative is derived from several staff no-action 
letters that permit the incorporation by reference of financial 
information regarding certain bond insurers from their or their 
affiliated entities' Exchange Act reports.\167\ We propose to codify 
the expansion of these positions by the staff to permit incorporation 
by reference (by means of a statement in the ABS filing to that effect) 
of the required financial information of any enhancement provider from 
its Exchange Act reports (or the reports of the entity that 
consolidates such party), if the following conditions were met:\168\
---------------------------------------------------------------------------

    \167\ See Financial Security Assurance, Inc. (Jul. 16, 1993); 
MBIA Insurance Corp. (Sep. 6, 1996); and AMBAC Indemnity Corp. (Dec. 
19, 1996).
    \168\ If the conditions were not met, the required information 
would need to be provided in the filing.

     The third party or entity that consolidates the third 
party in its financial statements is subject to the Exchange Act 
reporting requirements and is current with its reporting for the 
past twelve months (or such shorter period that it has been required 
to file reports);
     The reports to be incorporated by reference include (or 
properly incorporate by reference) the financial statements of the 
third party or such information is consolidated into the financial 
statements of the entity that consolidates the third party;
     The filing incorporating the information by reference 
describes any and all material changes to the incorporated 
information which have occurred subsequent to the filing of the 
incorporated information; and
     If included in a prospectus or registration statement, 
the prospectus also states that all documents subsequently filed by 
such third party, or the entity that consolidates the third party, 
prior to the termination of the offering also will be deemed to be 
incorporated by reference into the prospectus.

This option also could be used to include the information required of 
any significant obligor.
    As we propose to expand the basic definition of asset-backed 
security to registered offerings on Form S-1, we also are proposing to 
permit incorporation by reference of third party financial information 
for ABS offerings registered on that form. In addition, several 
amendments to our existing incorporation by reference and updating 
rules are necessary to reflect incorporation by reference of 
information of third party filings in Securities Act registration 
statements.\169\ For example, if the registrant was relying on the 
incorporation by reference alternative for third party financial 
information, it would need to make an undertaking in its registration 
statement, similar to that required for existing registration 
statements that rely on incorporation of subsequent Exchange Act 
reports of the registrant,\170\ that, for purposes of determining any 
liability under the Securities Act, each filing of the annual report of 
the third party that is incorporated by reference in the registration 
statement will be deemed to be a new registration statement relating to 
the securities offered by that registration statement, and the offering 
of such securities at that time will be deemed to be the initial bona 
fide offering thereof.
---------------------------------------------------------------------------

    \169\ See, e.g., proposed amendments to Items 10 and 512 of 
Regulation S-K and Securities Act Rule 411.
    \170\ See, e.g., Item 512(c) of Regulation S-K.
---------------------------------------------------------------------------

    We also propose to add three instructions that would remind 
registrants of our other existing incorporation by reference and 
updating requirements. The first instruction would remind ABS issuers 
that in addition to the proposed conditions above, any information 
incorporated by reference must comply with any other applicable 
Commission rules pertaining to incorporation by reference.\171\ The 
second instruction would remind issuers that any applicable 
requirements under the Securities Act or our rules and regulations 
regarding the filing of a written consent for the use of incorporated 
material also would apply to the material incorporated by 
reference.\172\ For example, if a subsequent Form 10-K of a third party 
was being used to update the ABS registration statement under Section 
10(a)(3) of the Securities Act,\173\ any required consents would need 
to be filed under a filing by the ABS issuer, such as in a Form 10-K, 
10-D or 8-K with respect to registered offerings on Form S-3. The third 
instruction reminds issuers that any undertakings set forth in Item 512 
of Regulation S-K would apply to any material incorporated by reference 
in a registration statement or prospectus.
---------------------------------------------------------------------------

    \171\ Other such rules include Rule 10(d) of Regulation S-K; 
Rule 303 of Regulation S-T (17 CFR 232.303); Rule 411 of Regulation 
C; and Exchange Act Rules 12b-23 and 12b-32 (17 CFR 240.12b-23 and 
17 CFR 240.12b-32).
    \172\ See, e.g., Securities Act Rule 439 (17 CFR 230.439).
    \173\ 15 U.S.C. 77j(a)(3).

    Request for comment on the incorporation by reference 
alternative:
     We request comment on the alternative that permits 
incorporation by reference of required third party financial 
information. Should any of the conditions to the proposal be 
modified? Should the proposal be allowed for all significant 
obligors and enhancement providers that meet the proposed 
conditions?
     Is it appropriate to extend incorporation by reference 
for third parties to registered ABS offerings on Form S-1? Would it 
be appropriate to extend it to all parties?
     We also request comment on our proposed amendments to 
the incorporation by reference and updating rules to accommodate the 
proposal. In particular, we request comment on the proposed 
undertaking for incorporation by reference of third party 
information. Is additional guidance necessary regarding updating 
requirements?

b. Reference Information
    The second alternative to presenting third party financial 
information is derived from several staff no-action letters and 
interpretive positions that permit reference to the Exchange Act 
reports of a significant obligor in lieu of inclusion of the obligor's 
financial information in the filing or incorporating them by 
reference.\174\ In particular, these positions recognize the practical 
difficulties that may be involved in obtaining the required information 
or the necessary consent to use the information, or the ability to 
evaluate the information, from an unaffiliated significant obligor 
whose securities have been securitized without any obligor involvement 
in the ABS transaction. A common example of such a situation is a 
sponsor that acquires outstanding corporate debt securities of other 
issuers in purely secondary market transactions (i.e., there is no 
relationship to the issuer or the issuer's distribution) and 
securitizes them in a transaction where one or more of these issuers is 
a significant obligor.
---------------------------------------------------------------------------

    \174\ See, e.g., Morgan Stanley & Co., Inc. (Jun. 24, 1996). 
This letter related to exchangeable securities rather than ABS, but 
the concept has been subsequently extended to ABS by the staff. See 
Section VIII.B.3.b.i. of the Division of Corporation Finance's 
``Current Issues and Rulemaking Projects'' (Nov. 14, 2000).
---------------------------------------------------------------------------

    Under our proposal, an ABS filing may include a reference to a 
significant obligor's Exchange Act reports (which would include a 
statement of how those reports may be accessed, including the third 
party's name and Commission reporting number) in lieu of providing the 
required financial information in the

[[Page 26682]]

filing, if the following conditions were met:\175\
---------------------------------------------------------------------------

    \175\ Like the incorporation by reference alternative, the 
reference alternative would be available to ABS offerings registered 
on Form S-1.
---------------------------------------------------------------------------

     Neither the significant obligor nor any of its 
affiliates has had a direct or indirect agreement, arrangement, 
relationship or understanding, written or otherwise, relating to the 
asset-backed securities transaction, and neither the third party nor 
any of its affiliates is an affiliate of the sponsor, depositor, 
issuing entity or underwriter of the asset-backed securities 
transaction;\176\
---------------------------------------------------------------------------

    \176\ See Section III.A.6. as to registration and resulting 
disclosure issues if the ABS transaction also comprises a 
distribution of underlying securities. These registration and 
disclosure issues are not dependent on whether the issuer of the 
underlying securities is a significant obligor.
---------------------------------------------------------------------------

     The significant obligor meets at least one of the 
eligibility categories discussed below; and
     An undertaking is included that if the significant 
obligor ceases to meet any of the eligibility conditions, either the 
required information will be provided or the transaction, or that 
portion of the transaction, will terminate.

    The first condition would clarify that the significant obligor must 
be unaffiliated and otherwise not involved with the ABS transaction. If 
the obligor was affiliated or involved with or participating in the ABS 
transaction, the policy argument to permit reference to the third 
party's reports in lieu of presenting the information or incorporating 
it by reference because of the potential impracticality in obtaining it 
is not present. As a result, the proposed reference alternative would 
not be available for financial information regarding a significant 
enhancement provider due to its involvement in the transaction and the 
information would have to be included in the filing or, if the 
conditions in Section III.B.9.a. are met, incorporated by reference.
    The second condition refers to the categories of significant 
obligors that would be eligible for the reference alternative. 
Consistent with existing staff positions and market practice, the 
proposed eligible categories relate to the existing Form S-3 
eligibility of the significant obligor. For example, the first category 
would be a significant obligor eligible to use Form S-3 or F-3 for a 
primary offering of non-investment grade securities pursuant to General 
Instruction I.B.1 of such forms, which requires a $75 million public 
float.\177\ A second category would be a significant obligor that would 
be eligible to register the related pool assets under General 
Instruction I.B.2 of Form S-3 or F-3 (i.e., the pool assets relating to 
the significant obligor are non-convertible investment grade 
securities). A third and fourth category would relate to pool assets 
guaranteed by a parent or subsidiary of the significant obligor where 
both the information requirements under Rule 3-10 of Regulation S-
X\178\ and applicable Form S-3 or Form F-3 eligibility requirements 
(such as General Instruction I.C.3 of Form S-3) are met.
---------------------------------------------------------------------------

    \177\ Public float is the aggregate market value of a company's 
outstanding voting and non-voting common equity (i.e., market 
capitalization) minus the value of common equity held by affiliates 
of the company. See General Instruction I.B.1 to Form S-3.
    \178\ 17 CFR 210.3-10.
---------------------------------------------------------------------------

    A fifth category would relate to significant obligors that are U.S. 
government-sponsored enterprises. Several GSE's historically have not 
been subject to Exchange Act reporting requirements. The staff has made 
accommodations for several of these entities so long as they have 
outstanding securities held by non-affiliates with a market value of 
$75 million or more and publicly make available audited financial 
statements prepared in accordance with generally accepted accounting 
principles and extensive business information. Our proposal would 
clarify the meaning of this requirement by permitting reference if the 
GSE had $75 million outstanding of securities held by non-affiliates 
and the GSE makes information publicly available on an annual and 
quarterly basis, including audited financial statements prepared in 
accordance with generally accepted accounting principles covering the 
same periods that would be required for audited financial statements 
under Regulation S-X and non-financial information consistent with that 
required by Regulation S-K.
    A final category relates to significant obligors where the pool 
assets in question are themselves asset-backed securities. We would 
permit reference in this instance if the significant obligor was filing 
Exchange Act reports and was current in such reporting for at least 
twelve calendar months and any portion of a month immediately preceding 
the filing referencing the obligor's reports (or such shorter period 
that the obligor was required to file such materials). We do not 
propose to include an additional existing staff condition that the 
significant obligor has outstanding securities in excess of $75 million 
because we do not believe a market capitalization condition is relevant 
in the context of underlying ABS.
    Because of the possibility that corporate debt issuers could 
suspend their reporting requirements, the staff has permitted ABS 
issuers securitizing such debt to include a provision that, if a 
significant obligor's financial information is not available, the 
transaction, or a portion of the transaction, would terminate, such as 
by distributing the pool assets to investors or selling the pool assets 
and liquidating the asset-backed securities. This option to terminate 
the transaction has developed through market practice where it is 
believed that the alternative of including the information in the ABS 
filing might become impractical or impossible. Our proposal addresses 
this problem and allows termination as an option. However, if the 
termination option was elected, the transaction, or that portion of the 
transaction, must terminate before updated information regarding the 
third party would be required. Provisions that the transaction would 
terminate ``in a reasonable time'' or after a given period of time 
would not be an alternative to providing information regarding a third 
party that otherwise would be required.

    Request for comment on the reference alternative:
     We request comment on the alternative that permits 
reference to a third party's Exchange Act reports on file with the 
Commission in lieu of providing that information. Should any of the 
conditions to the proposal be modified? Should a termination option 
be recognized? We also request comment on the limitation of the 
proposal to only unaffiliated and uninvolved significant obligors. 
What are the reasons that would justify reference to reports by 
affiliated obligors, others involved in the transaction or an 
enhancement provider even though that entity is involved with the 
ABS transaction?
     We request comment on the proposed codification of the 
eligible categories of significant obligors for which reference 
information would be permitted. Given the size of most ABS 
transactions, would a $75 million requirement for outstanding 
securities add value for the ABS category?

C. Communications During the Offering Process

1. ABS Informational and Computational Material
a. Current Requirements
    The Securities Act restricts the types of offering communications 
that a registrant or those acting on its behalf (such as an 
underwriter) may use during a registered public offering.\179\ The 
level of restriction depends on the period during which the 
communications are to occur. Before the registration statement is 
filed, all offers, in whatever

[[Page 26683]]

form, are prohibited.\180\ After the registration statement is filed 
until it is declared effective, offers made in writing (including by e-
mail or Internet), by radio or by television must conform to the 
information requirements of Section 10 of the Securities Act.\181\ 
Thus, the only written material that may be used in connection with the 
offering of the securities during this period is a preliminary 
prospectus meeting the requirements of Section 10, which must be filed 
with the Commission.\182\ After the registration statement is declared 
effective, the registrant may use additional materials to offer the 
securities, but only if it delivers a final prospectus that meets the 
requirements of Section 10(a) of the Securities Act before or with 
those materials.\183\
---------------------------------------------------------------------------

    \179\ See Section 5 of the Securities Act (15 U.S.C. 77e).
    \180\ See Section 5(c) of the Securities Act (15 U.S.C. 77e(c)).
    \181\ 15 U.S.C. 77j. See Section 5(b)(1) of the Securities Act 
(15 U.S.C. 77e(b)(1)).
    \182\ Person-to-person oral offers are allowed during this 
period and do not have to satisfy the informational requirements of 
Section 10. See note 179 above.
    \183\ 15 U.S.C. 77j(a).
---------------------------------------------------------------------------

    The structuring of various classes of ABS can be quite complex 
involving a detailed analysis of the asset pool and a complicated 
allocation of pool asset cash flows. Given the important focus on 
tranching and pool characteristics, including potential cash flow 
patterns, sponsors or underwriters often wish to provide to potential 
investors computational materials and term sheets identifying the 
structure and underlying assets prior to finalizing the deal structure 
and printing the final prospectus. These materials may help investors 
understand the proposed transaction and analyze prepayment assumptions 
and other issues affecting yield and flow of funds. This information, 
which often includes detailed statistical and tabular data, would be 
impractical to provide orally. Historically, few investors have had the 
computer resources to prepare these analytics themselves.
    Following a series of staff no-action letters from the mid-1990's, 
ABS issuers are permitted to use term sheets and computational material 
after the effectiveness of a registration statement but before 
availability and delivery of a final Section 10(a) prospectus.\184\ 
Under these no-action letters, three basic types of materials can be 
used: Structural term sheets; collateral term sheets; and computational 
materials. Structural term sheets identify the proposed structure of 
the securities being offered, such as the parameters of the various 
types of classes offered. Collateral term sheets provide information 
regarding the proposed underlying assets. Computational materials 
contain statistical data displaying for a particular class of asset-
backed securities the yield, average life, expected maturity, interest 
rate sensitivity, cash flow characteristics or other such information 
under specified prepayment, interest rate, loss or related scenarios.
---------------------------------------------------------------------------

    \184\ See note 28 above.
---------------------------------------------------------------------------

    The existing staff no-action letters contain filing requirements 
for the use of these materials, and provide that no confirmations of 
sale can be sent until the filing requirements are met. The filing 
requirements vary depending upon the type of material used and how it 
is used. Subject to various conditions, any collateral term sheet used 
before the final prospectus is delivered that represents a substantive 
change from a prior collateral term sheet must be filed on Form 8-K 
within two business days of first use and incorporated by reference 
into the registration statement for the offering.
    Under slightly more complex conditions, structural term sheets and 
computational materials used before the final prospectus is available 
must be filed on Form 8-K prior to or with the filing of the final 
prospectus and incorporated by reference into the registration 
statement. If the materials are provided after the final prospectus is 
available but before it is delivered, they must be filed as soon as 
possible but not later than two business days of first use. Materials 
that relate to abandoned structures or that are furnished before the 
structure of the entire issue is finalized to investors which have not 
indicated their intention to purchase the ABS need not be filed.
    We understand that where they are used, term sheets and 
computational material often represent the primary, if not the only, 
written materials that are used to offer asset-backed securities. We 
also understand that advances in technology over the ten years since 
the first no-action action letter was issued have raised several 
interpretive issues regarding the scope and application of the letters. 
For example, an increasing number of investors possess or have access 
to the analytical capacity to perform their own models and scenarios on 
pool data and therefore may request data at the individual pool asset 
level, or ``loan level'' data, instead of summarized charts and 
tables.\185\ There has been some concern over whether the existing no-
action letters would permit disclosure at this level of granularity. In 
addition, various third party services have developed over the past 
decade that allow issuers and underwriters to import collateral and 
structural data about a proposed transaction into a format that allows 
investors to conduct their own analytics and computations with self-
selected assumptions and estimates in lieu of relying on underwriters 
to perform these functions for them. This has raised questions over 
what information should be filed with the Commission under the no-
action letters where such services are used.
---------------------------------------------------------------------------

    \185\ See, e.g., ``Investors Gain Clout, Urge Specifics,'' 
Asset-Backed Alert, Jun. 6, 2003.
---------------------------------------------------------------------------

b. Proposed Exemptive Rule
    We are proposing to codify the concept in the staff no-action 
letters that permits the use of ABS informational and computational 
material after the effectiveness of a registration statement for an 
offering of asset-backed securities registered on Form S-3 but before 
delivery of the final Section 10(a) prospectus. Recognizing the current 
use of these materials in providing an increased flow of information to 
investors, the flexibility to tailor materials to specifically 
identified investor needs, and the liability for false and misleading 
statements or omissions, we believe permitting the use of ABS 
informational and computational material for Form S-3 ABS after 
effectiveness of the registration statement would be appropriate in the 
public interest and consistent with the protection of investors under 
the proposed conditions discussed below, including the proposed filing 
conditions. Accordingly, we propose to exempt from Section 5(b)(1) of 
the Securities Act the use of these materials during that period if 
certain specified conditions are met, including filing 
requirements.\186\ In doing so, we propose to streamline the conditions 
in the no-action letters for how the materials can be used and when 
they must be filed. The proposed rule would make clear, however, that 
similar to our existing communications exemptions regarding business 
combination transactions, the exemption would not be available to 
communications that may technically comply with the rule,

[[Page 26684]]

but have the primary purpose or effect of conditioning the market for 
another transaction or are part of a plan or scheme to evade the 
requirements of Section 5 of the Securities Act.\187\
---------------------------------------------------------------------------

    \186\ See proposed Securities Act Rule 167. Similar to our 
existing rules that allow communications in business combination 
transactions outside of the Section 10 prospectus, for ABS 
informational and computational material we propose a general 
Securities Act Rule that sets forth the basic exemption and its 
conditions (proposed Securities Act Rule 167) and a rule under 
Regulation C (17 CFR 230.401 through 230.498) that sets forth the 
filing requirements for such communications (proposed Securities Act 
Rule 426). For more on our exemptive rules in the business 
combination context, see Release No. 33-7760 (Oct. 22, 1999) [64 FR 
61408].
    \187\ For similar provisions, see Securities Act Rules 165 and 
166 (17 CFR 230.165 and 17 CFR 230.166).
---------------------------------------------------------------------------

    The proposed exemption only would be available with respect to 
registered offerings of investment grade asset-backed securities that 
meet the requirements of General Instruction I.B.5 of Form S-3. We 
believe this is consistent with the intent of the existing staff no-
action letters. We also believe offerings of asset-backed securities 
meeting the additional requirements for Form S-3 registration represent 
the appropriate categories of offerings that should be permitted to use 
ABS informational and computational material outside of the 
registration statement prospectus. The proposed rule, like the existing 
staff no-action letters, would not be available to offerings that meet 
the definition of asset-backed security but are registered on Form S-1.
    Similar to requests we have received regarding non-ABS offerings, 
the Commission and the staff have received requests over the past 
several years with respect to ABS to liberalize the use of 
communications in and around the registered offering process beyond 
those allowed by the existing staff no-action letters and our proposed 
exemptive rule.\188\ The existing staff no-action letters already 
permit ABS offerings on Form S-3 to use significantly more material 
outside of the Section 10 prospectus than non-ABS offerings. Requests 
for further relaxation of the communications restrictions, including 
the type of materials that can be used, when they can be used and 
filing and liability requirements, raise broad issues that also are 
implicated by requests we have received to relax communication 
restrictions for non-ABS offerings. Staff in our Division of 
Corporation Finance is currently developing recommendations to the 
Commission on potential reforms to the registration process under the 
Securities Act, including potential reforms to the communications 
restrictions. We plan to address the issue of whether additional 
accommodations to the communications restrictions would be appropriate, 
including for ABS offerings, in connection with any recommendations on 
broader reforms. Therefore, our approach here involves the existing 
allowance for additional materials in the ABS context.
---------------------------------------------------------------------------

    \188\ See, e.g., Letter from BMA to Brian J. Lane, Director, 
Division of Corporation Finance, ``Response to Staff Request for 
Suggestions Concerning Possible Reforms of Disclosure and Reporting 
Rules for Mortgage and Asset-Backed Securities'' (Nov. 5, 1996); 
Letter from BMA to Jonathan G. Katz, Secretary, Securities and 
Exchange Commission, ``Securities Acts Concepts and Their Effects on 
Capital Formation (Release No. 33-7314) (File No. S7-19-96)'' (Nov. 
8, 1996); Letter from MBA to Jonathan G. Katz, Secretary, Securities 
and Exchange Commission, ``The Regulation of Securities Offerings 
(File No. S7-30-98)'' (June 30, 1999); Letter from Residential 
Funding Corporation to Securities and Exchange Commission, ``File 
No. S7-30-98--The `Aircraft Carrier Release' '' (June 30, 1999); 
Letter from BMA to David B.H. Martin, Director, Division of 
Corporation Finance, ``Securities Act Reform'' (Nov. 30, 2001); and 
Letter from BMA to Alan L. Beller, Director, Division of Corporation 
Finance, ``Prior Correspondence Regarding Asset-Backed Securities 
Reform'' (Apr. 23, 2002).

    Questions regarding the proposed exemptive rule:
     We request comment on the proposed exemptive rule. What 
is the use of these materials in today's market? Is the proposed 
exemption consistent with the use of these materials? Does the use 
of these materials provide investors with enough time and 
information to make informed investment decisions?
     We do not propose to limit eligibility for the 
exemption on any variables such as transaction size or asset type. 
However, under the existing no-action letters we see few filings 
related to the use of term sheets or computational material outside 
of MBS. Should we limit eligibility by size, asset type or other 
variable? Is the use of these materials not necessary for other 
asset classes? Is there a reason why more of these materials are not 
filed?
     Should the exemption not be available to ABS targeted 
to non-institutional investors? For example, should the exemption 
not be available to ABS expected to have low minimum investment 
denominations (e.g., less than $1,000) or ABS that are to be listed?
     Is the proposed limitation to registered offerings on 
Form S-3 still appropriate? If not, under what circumstances should 
the proposal be extended to offerings on Form S-1? The existing 
letters and our proposals require filing of material on Form 8-K 
that is incorporated by reference into the registration statement. 
They also only apply to the use of materials after the effective 
date of the registration statement (e.g., before a takedown off of 
an effective shelf registration statement). How would this procedure 
work with respect to non-shelf registered offerings on Form S-1?
     Are any clarifying amendments necessary for ABS with 
respect to Securities Act Rule 134?\189\ This rule deems certain 
limited communications announcing an offering (often called a 
``tombstone'' announcement) not a prospectus so long as the 
communication is limited to the items specified in that rule. What 
items would be appropriate for ABS (e.g., announcing the asset type 
being securitized, asset concentrations, sponsor, servicer or 
weighted average life, maturity or coupon), and why should they be 
included?
---------------------------------------------------------------------------

    \189\ 17 CFR 230.134.
---------------------------------------------------------------------------

c. Proposed Definition of ABS Informational and Computational Material
    In the existing no-action letters, there is an overlap between the 
descriptions of structural term sheets, collateral term sheets and 
computational materials. There also are differences regarding which and 
how materials are to be filed depending on the type of materials used. 
These differences can create uncertainty as to when material needs to 
be filed given the overlapping descriptions. We propose to consolidate 
the descriptions of the materials that may be used under a single 
definition of ``ABS informational and computational material.'' ABS 
informational and computational material would be defined as a written 
communication consisting solely of one or some combination of the 
following:

     A brief summary of the structure of an offering of 
asset-backed securities that sets forth the name of the issuer, the 
size of the offering and the structure of the offering (such as the 
number of classes, seniority and priority and other terms of 
payment);
     Descriptive factual information regarding the pool 
assets underlying an offering of asset-backed securities, typically 
including data regarding the contractual and related characteristics 
of the underlying pool assets, such as weighted average coupon, 
weighted average maturity and other factual information regarding 
the type of assets comprising the pool;
     Static pool data, as discussed previously, for the 
sponsor's portfolio, prior transactions or the asset pool itself; or
     Statistical information displaying for a particular 
class of asset-backed securities the yield, average life, expected 
maturity, interest rate sensitivity, cash flow characteristics, 
total rate of return, option adjusted spread or other financial or 
statistical information relating to the class or classes under 
specified prepayment, interest rate, loss or other hypothetical 
scenarios. Examples of such information under the definition would 
include:
    [ctrcir]Statistical results of interest rate sensitivity 
analyses regarding the impact on yield or other financial 
characteristics of a class of securities from changes in interest 
rates at one or more assumed prepayment speeds;
    [ctrcir]Statistical information showing the cash flows that 
would be associated with a particular class of asset-backed 
securities at a specified prepayment speed; and
    [ctrcir]Statistical information reflecting the financial impact 
of losses based on a variety of loss or default experience, 
prepayment, interest rate and related assumptions.

    These proposed items are intended to include existing structural 
term sheets, collateral term sheets and computational materials and 
also to clarify that static pool data would be permitted. Consistent 
with our proposal discussed below for one unified filing

[[Page 26685]]

rule for these materials, ABS informational and computational material 
may be used that includes one or more of these basic types of materials 
in one set of materials without concern over the characterization of 
the material or differing standards regarding when it must be 
filed.\190\
---------------------------------------------------------------------------

    \190\ As a result, the proposed definition would subsume the 
concept of ``Series Term Sheets'' addressed in the Greenwood Trust 
Company no-action letter where a Series Term Sheet was defined as a 
combined collateral and structural term sheet. See note 28 above.
---------------------------------------------------------------------------

    While we do not intend to change the general scope of the materials 
that may be used, we do wish to clarify several interpretive issues 
regarding the no-action letters. First, and as noted above, some have 
been concerned whether the existing no-action letters would permit 
``loan level'' information to be provided. We believe providing data at 
the individual pool asset level is permitted under the no-action 
letters and would continue to be permitted under our proposal. In 
providing such detail, however, issuers and underwriters should be 
mindful of any privacy, consumer protection or other regulatory 
requirements regarding the disclosure of individual information, such 
as including Social Security Numbers, especially given that in most 
cases the data must be publicly filed with the Commission.
    Second, questions have arisen over what information should be 
considered ABS informational and computational material and filed with 
the Commission under the no-action letters, and by extension our 
proposal, regarding investor analytics or other third party services 
that allow issuers and underwriters to import into a system or 
otherwise provide data regarding structure or underlying assets that 
investors can then use to conduct their own analytics and computations. 
In the case of third party services, a particular relationship with the 
individual third party service may affect the analysis, such as whether 
the issuer or the underwriter are affiliates with the service provider 
or how the compensation is structured with the third party. Otherwise, 
if the investor analytics or third party service simply allow an 
investor to perform its own calculations based on collateral and 
structural inputs and models provided by the issuer or underwriter, 
only the inputs, models and other information provided by the issuer or 
underwriter would constitute ABS informational and computational 
material for purposes of the existing no-action letters and our 
proposal.\191\
---------------------------------------------------------------------------

    \191\ Any subsequent modification or updates to the information 
provided by the issuer or an underwriter would be considered new ABS 
informational and computational material no different than if a 
separate set of materials were prepared. As provided for in the no-
action letters and our proposed rule, data presented in ABS 
informational and computational material that are to be filed may be 
aggregated and filed in consolidated form, so long as any such 
aggregation does not result in the omission of any information that 
should have been filed or makes the information misleading.
---------------------------------------------------------------------------

    Some also have questioned the format in which the material must be 
filed, as the third party service may employ a unique file format for 
the data inputs. Consistent with an allowance already in the no-action 
letters and in our proposed filing rule discussed below, issuers and 
underwriters may aggregate data presented in ABS informational and 
computational material that are to be filed and file such data in 
consolidated form, so long as any such aggregation does not result in 
the omission of any information that should have been filed or makes 
the information misleading. Presentation of the information should be 
in an understandable form. While the preference is to file material 
using the same presentation used for investors, just as with other 
documents that contain computer instructions or formatting code, 
executable code used by a program to read the information is not to be 
filed.\192\
---------------------------------------------------------------------------

    \192\ See, e.g., Rule 106 of Regulation S-T (17 CFR 232.106).
---------------------------------------------------------------------------

    Questions regarding the proposed definition of ABS informational 
and computational material:
     We request comment on the proposed definition of ABS 
informational and computational material, including the proposed 
addition of static pool data to the types of materials that may be 
used. Does the definition reflect the scope of materials that are 
used under the existing no-action letters?
     Consistent with the no-action letters, we do not 
propose content restrictions for the material so long as it meets 
the definition of ABS informational and computational material. Is 
this still an appropriate approach? Of course, even without content 
restrictions, the antifraud rules and other liability provisions 
applicable to the material would continue to apply.
     Are additional interpretive clarifications necessary 
regarding loan level detail or third party analytics providers? Is 
any additional clarification needed regarding other uses of ABS 
informational and computational material?
d. Proposed Conditions for Use
    Under our proposed rule, two conditions would be required for ABS 
informational and computational material:
     The communications would need to be filed to the extent 
required under our proposed filing rule (discussed in Section 
III.C.1.e.);\193\ and
---------------------------------------------------------------------------

    \193\ Consistent with the no-action letters, failure by a 
particular underwriter to cause the filing of materials in 
connection with an offering would not affect the ability of any 
other underwriter who has complied with the procedures to rely on 
the exemption.
---------------------------------------------------------------------------

     The communication must include prominently on the cover 
page:
    [ctrcir]The issuing entity's name and depositor's name;
    [ctrcir] The Commission file number for the related registration 
statement;
    [ctrcir] A statement that the communication is ABS informational 
and computational material used in reliance on our proposed rule; 
and
    [ctrcir] A legend that urges investors to read the relevant 
documents filed or to be filed with the Commission because they 
contain important information. The legend also must explain to 
investors that they can get the documents for free at the 
Commission's website and describe which documents are available free 
from the issuer or an underwriter.

    These proposed conditions are consistent with the requirements of 
the existing staff no-action letters. We do not propose to require 
additional legends from the no-action letters that the information 
contained in the material supercedes all prior ABS informational and 
computational material for the offering or will be superseded by the 
description of the offering contained in the Section 10(a) 
prospectus.\194\ Instead, we propose the legend indicated above 
alerting investors of the documents filed or to be filed with the 
Commission. We also do not propose to require the condition in the 
letters that any required filings must be made before an Exchange Act 
Rule 10b-10 confirmation of sale may be sent.\195\ The filing 
requirement discussed below would be a separate requirement under 
Commission rules, and thus conditioning the exemption on when a Rule 
10b-10 confirmation could be sent does not appear to be warranted as an 
additional incentive for filing.
---------------------------------------------------------------------------

    \194\ Such statements do not appear applicable considering that 
not all of the information--particularly the computational 
material--is included or updated in subsequent materials or the 
final prospectus.
    \195\ See 17 CFR 240.10b-10.
---------------------------------------------------------------------------

    While the existing no-action letters require, and our proposal 
would require, a limited legend, we understand that today issuers or 
other users of these materials sometimes include additional legends or 
disclaimers in the materials. Several of these additional legends or 
disclaimers are inappropriate. As discussed more fully below, the 
materials are considered prospectuses and in many instances also must 
be

[[Page 26686]]

filed with the Commission and incorporated by reference into the 
registration statement. Thus, disclaimers of responsibility or 
liability that would be inappropriate for a prospectus or registration 
statement also are inappropriate for these materials.
    Examples of inappropriate legends or disclaimers include 
disclaimers regarding accuracy or completeness and statements requiring 
investors to read or acknowledge that they have read any disclaimers or 
legends or the registration statement.\196\ Language indicating that 
the communication is neither a prospectus nor an offer to sell or a 
solicitation or an offer to buy also would be inappropriate. Finally, 
as the information in many instances must be publicly filed, statements 
that the information is privileged, confidential or otherwise 
restricted as to use or reliance also are inappropriate.
---------------------------------------------------------------------------

    \196\ Such disclaimers of responsibility by the issuer are also 
inappropriate.
---------------------------------------------------------------------------

    Consistent with a similar provision in our communications 
exemptions for business combination transactions,\197\ we propose to 
clarify that the exemption for ABS informational and computational 
material is applicable not only to the offeror of the asset-backed 
securities, but also to any other party to the asset-backed securities 
transaction and any persons authorized to act on their behalf that may 
need to rely on and complies with the rule in communicating about the 
transaction. This ensures that affiliates, underwriters, dealers and 
others acting on behalf of the parties to the transaction would be 
permitted to rely on the exemption. While we realize that in many 
circumstances the exemptions would not be necessary for persons other 
than the parties to the transaction or the parties making the offer, we 
do not want to chill the appropriate free flow of the information where 
it would be helpful to investors and efficient capital formation.
---------------------------------------------------------------------------

    \197\ See, e.g., Securities Act Rule 165(d) (17 CFR 230.165(d)).
---------------------------------------------------------------------------

    However, we do not propose another provision that currently exists 
in the communications exemptions for business combination transactions 
that a good faith immaterial or unintentional failure to file or delay 
in meeting the filing requirements would not result in a loss of 
protection under the exemption, primarily because an analogous 
provision does not exist in the current staff no-action letters for ABS 
term sheets and computational materials.\198\ This provision was added 
to the business combination rule to address concerns raised by 
commenters on its proposal regarding the potential chilling of 
communications and that people would not use the new rule as a result. 
The ABS market has been operating for almost a full decade under the 
existing staff no-action letters without such a provision, and the lack 
of such a provision does not appear to have chilled the use of such 
materials. However, we do request comment below on whether, and if so 
why, such a provision would be justified now.
---------------------------------------------------------------------------

    \198\ See, e.g., Securities Act Rule 165(e) (17 CFR 230.165(e)). 
As noted in the adopting release for Rule 165, this provision is 
similar to the good faith standard in Rule 508(a) of Regulation D 
(17 CFR 230.508(a)). In addition, although an immaterial or 
unintentional failure to file or delay in filing does not render the 
exemption in Rule 165 unavailable, it is a violation of the filing 
requirement in Securities Act Rule 425 (17 CFR 230.425). Factors 
identified in the adopting release to be considered in determining 
whether a delay in filing is immaterial or unintentional include: 
the nature of the information, the length of the delay, and the 
surrounding circumstances, including whether a bona fide effort was 
made to file timely. See Release No. 33-7760.

    Questions regarding the proposed conditions to the exemption:
     We request comment on our proposed conditions to the 
exemption, including whether any additional conditions would be 
appropriate. For example, we request comment on the basic 
information and legend we propose to require for the materials. 
Should any additional information be required? Is any of the 
proposed information not necessary? Is any additional clarification 
about inappropriate disclaimers or legends necessary?
     Is the proposed clarification that the exemption also 
is applicable to any other party to the asset-backed securities 
transaction and any persons authorized to act on their behalf 
appropriate? Is any additional clarification needed?
     While the ABS market has operated under the no-action 
letters for nearly a decade without it, should the rule include an 
exception for a good faith immaterial or unintentional failure to 
file or delay in meeting the filing requirements? Has the absence of 
this exception chilled communications? Why would such an exception 
be appropriate now?
e. Proposed Filing Requirements
    As noted above, under the staff no-action letters, there are 
currently multiple filing requirements depending on the type of 
materials used and the circumstances in which they are used. We propose 
to streamline these requirements into a unified filing rule that would 
apply regardless of the type of materials used. We believe this 
proposal will result in a more consistent approach and ease compliance 
without a significant drop in investor protection.
    Under our proposal, the following ABS informational and 
computational material would need to be filed:

     For each prospective investor that had indicated to the 
underwriter that it would purchase all or a portion of the class of 
asset-backed securities to which such materials relate, all 
materials relating to such class that were provided to such 
prospective investor;\199\ and
---------------------------------------------------------------------------

    \199\ This provision would apply regardless of whether the 
indication to purchase is given before or after the final terms have 
been established for all classes of the offering.
---------------------------------------------------------------------------

     For any other prospective investor, all materials 
provided to that prospective investor after the final terms have 
been established for all classes of the offering.

    If the materials met the conditions above, they would need to be 
filed on Form 8-K (under proposed Item 6.01 of that Form), and thereby 
incorporated by reference into the registration statement, by the later 
of the due date for filing the final prospectus or two business days of 
first use.
    The cover page of Form 8-K would need to disclose the Commission 
file number of the related registration statement for the asset-backed 
securities. Consistent with the no-action letters, ABS informational 
and computational material that relate to abandoned structures or that 
are furnished to a prospective investor prior to the time the final 
terms have been established for all classes of the offering where such 
prospective investor has not indicated to the underwriter its intention 
to purchase the asset-backed securities need not be filed.
    The proposed rule clarifies, as do the letters, that ABS 
informational and computational material that does not contain new or 
different information from that which was previously filed need not be 
filed. In addition, the issuer may aggregate data presented in ABS 
informational and computational material that are to be filed and file 
such data in consolidated form, so long as any such aggregation does 
not result in the omission of any information that should have been 
filed or makes the information misleading. Finally, the filing rule 
clarifies that certain communications allowed under other Commission 
rules, though they may technically fall into the definition of ABS 
informational and computational material, need not be filed under this 
filing rule, such as limited notices of the offering meeting the 
requirements of Securities Act Rules 134, 135 and 135c,\200\ Exchange 
Act Rule 10b-10 \201\ confirmations, prospectuses filed under 
Securities Act Rule 424 and research

[[Page 26687]]

reports relying on one of our safe harbors discussed below.\202\
---------------------------------------------------------------------------

    \200\ 17 CFR 230.134; 17 CFR 230.135; and 17 CFR 230.135c.
    \201\ 17 CFR 240.10b-10.
    \202\ Similar clarifying provisions exist in our existing 
communications exemptions for business combination transactions.
---------------------------------------------------------------------------

    Under the existing no-action letters and our proposal, multiple ABS 
informational and computational material for an offering may need to be 
filed. For example, if an underwriter provides a set of materials to an 
investor, and the investor then asks for and the underwriter provides 
an additional set of materials with the same pool and structure but 
with different modeling assumptions (e.g., different expectations of 
future interest rates or prepayment speeds), then both sets of 
materials would need to be filed if the offering was completed with 
that same structure or the investor had indicated an intention to 
purchase. Similarly, if multiple investors requested different 
analytics on the same structure but with different assumptions, each 
set of materials would need to be filed under the same circumstances.
    Consistent with the no-action letters, ABS informational and 
computational material would not be excluded from the definition of 
``offer,'' ``offer to sell,'' ``offer for sale'' or ``prospectus'' 
under the Securities Act.\203\ To the extent these communications 
constitute offers, they currently would be subject to liability under 
Section 12(a)(2) of the Securities Act.\204\ The proposed rule would 
specify that material used in reliance on the proposed exemption would 
be considered ``prospectuses'' and thus subject to Section 12(a)(2) 
liability, even if not filed. In addition, the materials that are filed 
on Form 8-K would be incorporated by reference into the registration 
statement, which is subject to liability under Section 11 of the 
Securities Act,\205\ consistent with the existing staff no-action 
letters.
---------------------------------------------------------------------------

    \203\ See 15 U.S.C. 77b(a)(3) and 15 U.S.C. 77b(a)(10).
    \204\ 15 U.S.C. 77l(a)(2).
    \205\ 15 U.S.C. 77k.
---------------------------------------------------------------------------

    The staff no-action letters were issued when electronic filing on 
EDGAR was still in its relative infancy. At that time, EDGAR only 
accepted submissions in ASCII format. Participants argued that data 
included in computational material, which could be extensive, were in 
formats that were impractical to convert into ASCII format for 
electronic filing. In response, we amended our EDGAR filing rules to 
exempt computational materials filed as an exhibit to Form 8-K from 
electronic filing.\206\ Instead, such materials can currently be filed 
in paper under cover of a Form SE.\207\
---------------------------------------------------------------------------

    \206\ See Rule 311(j) of Regulation S-T (17 CFR 232.311(j)).
    \207\ 17 CFR 239.64.
---------------------------------------------------------------------------

    There have been several advances to EDGAR since the original staff 
no-action letters. In particular, EDGAR now accepts HTML documents in 
addition to ASCII documents and also accepts filings made over the 
Internet. Even non-ABS registrants now routinely include detailed 
statistical and tabular data in their EDGAR filings. We no longer 
believe that the filing of ABS informational and computational material 
needs an electronic filing exemption. Filing in paper form is of little 
practical use to investors as the material cannot be retrieved 
electronically.
    Accordingly, we propose to eliminate the electronic filing 
exemption for these materials.\208\ By treating these materials 
consistently with nearly all other material filed with the Commission, 
we hope to realize the same investor benefits and efficiencies in 
information transmission, dissemination, retrieval and analysis 
achieved since we began mandating EDGAR filing in 1993.
---------------------------------------------------------------------------

    \208\ As electronically filed documents, ABS informational and 
computational material would be eligible for any applicable hardship 
exemptions similar to other filings that must be made 
electronically, such as the temporary hardship exemption in Rule 201 
of Regulation S-T (17 CFR 232.201). However, the practice that 
existed prior to adoption of the electronic filing exemption in Rule 
311(j) of Regulation S-T of seeking a continued hardship exemption 
for the filing of these materials would not be appropriate except in 
the rarest of circumstances. See Rule 202 of Regulation S-T (17 CFR 
232.202). We do not believe that the routine filing of such material 
would qualify for a continued hardship exemption.

    Questions regarding the proposed filing requirements:
     We believe our proposed unified filing rule will result 
in better administration and compliance with the filing 
requirements. However, it is possible that under the proposal some 
collateral term sheets that are required to be filed today under the 
no-action letters would no longer be filed. For example, the current 
no-action letters require all collateral term sheets to be filed. 
However, the existing letters use overlapping definitions and it is 
thus difficult to distinguish what truly is a ``collateral term 
sheet'' versus what is acceptable ``background information'' that 
can be included in computational material, which is not always 
required to be filed. We also understand that current practice is to 
call such materials ``computational material.'' We are thus 
proposing to codify current practice and treat all ABS informational 
and computational material the same. However, is it common practice 
to prepare multiple collateral term sheets separate from 
computational materials? Would the lack of filing each collateral 
term sheet result in substantial harm due to a reduction in 
materials filed?
     Under the no-action letters and our proposals, not all 
materials need be filed. Should all material related to the offering 
be filed? Are the conditions for the material that is to be filed 
appropriate? Should filing requirements distinguish between material 
provided or containing information provided by the issuer, on the 
one hand, and materials provided by underwriters or dealers not 
containing such issuer information, on the other? If so, why, and 
how should the two be differentiated?
     The filing requirement does not require filing until 
the later of the filing of the final prospectus or two business days 
of first use. Should there be an earlier filing requirement, such as 
always two business days of first use, even if the deadline is 
before filing of the final prospectus? Conversely, while the 
proposed deadlines are consistent with the no-action letters, is 
there any reason to shorten or extend the deadlines, and if so, to 
what period?
     Are any additional clarifications or modifications 
needed on when or how such materials need to be filed?
     We request comment on liability requirements for ABS 
informational and computational material. While the existing 
liability framework does not appear to have chilled the use of such 
materials, is there any reason to re-evaluate the liability 
framework for them? If so, how and why?
     Should we not remove the EDGAR filing exemption for ABS 
informational and computational material? Are there particular 
difficulties or unreasonable expenses that would be associated with 
electronic filing of such material that would still exist under 
EDGAR? If so, please explain and quantify any such expenses in 
relation to other electronic filings.
2. Research Reports
a. Current Requirements
    The publication or distribution by a broker or dealer of 
information, opinions or recommendations with respect to an issuer or 
its securities around the time of a registered offering can present 
issues under the communications restrictions of the Securities Act, 
especially if the broker is or will be a participant in the 
distribution of the securities.\209\ In particular, such a report may 
constitute an offer to sell the securities and would thus constitute an 
illegal offer if published or distributed before a

[[Page 26688]]

registration statement is filed, or it may constitute an illegal 
written offer to sell securities that does not meet the information 
requirements of Section 10 of the Securities Act if published or 
distributed after the registration statement is filed.
---------------------------------------------------------------------------

    \209\ The Commission's Securities Act safe harbors in this area 
(Rules 137, 138 and 139) refer to the publication by a broker or 
dealer of information, an opinion or a recommendation with respect 
to a registrant's securities or in some instances the registrant 
itself. For sake of simplicity, we refer to these publications in 
this release as ``research reports.'' By using this convention, we 
do not mean necessarily to encompass the separate definition of 
``research report'' in Section 15D of the Exchange Act (15 U.S.C. 
78o-6) added by the Sarbanes-Oxley Act. Nor do our proposals affect 
in any way the applicability of that Section, any of our other rules 
with respect to research reports or any applicable SRO rules or 
other requirements regarding research reports.
---------------------------------------------------------------------------

    To recognize the potential benefits of research reports while 
limiting their potential misuse to promote a securities offering, the 
Commission has previously issued Securities Act Rules 137, 138 and 139. 
These rules create safe harbors that describe circumstances under which 
brokers or dealers may publish or distribute research reports in and 
around a registered offering without fear of violating Section 5 of the 
Securities Act through making an illegal offer or using a non-
conforming prospectus. The existing rules look to the broker's 
participation in an offering, differences between the securities 
offered and those covered in the research report and the size and 
reporting history of the issuer.
    However, the conditions in those rules do not correspond well to 
ABS offerings. For example, several of the requirements in the research 
rules, particularly Rule 139 (the applicable rule where the broker also 
is participating in the registered offering), require issuer size and 
reporting history requirements, neither of which are applicable to most 
asset-backed securities.
    In response, the staff of the Division of Corporation Finance 
issued a no-action letter in 1997 to provide a separate safe harbor for 
the publication of research reports by brokers or dealers in and around 
offerings of asset-backed securities registered or to be registered on 
Form S-3.\210\ The no-action letter contained conditions for the safe 
harbor adapted from Rules 137, 138 and 139 and modified to address 
asset-backed securities. We now propose to codify this safe harbor with 
several minor adjustments to add it to our existing research report 
safe harbors.\211\
---------------------------------------------------------------------------

    \210\ See note 29 above.
    \211\ See proposed Securities Act Rule 139a (17 CFR 230.139a). 
Note that the proposed safe harbor would be a non-exclusive safe-
harbor the same as existing Rules 137, 138 and 139. Each of the 
existing safe harbors in Rules 137, 138 and 139 would remain 
available with respect to asset-backed securities if the conditions 
for the particular safe harbor were met.
---------------------------------------------------------------------------

b. Proposed ABS Research Report Safe Harbor
    As with the existing no-action letter, the proposed safe harbor 
would be available only with respect to ABS offerings registered on 
Form S-3. That is, it would only be available with respect to offerings 
of investment grade asset-backed securities that meet the requirements 
of General Instruction I.B.5 of Form S-3. Similar to our proposals for 
ABS informational and computational material and existing Rule 139, we 
believe offerings of securities meeting the additional requirements for 
Form S-3 registration represent the appropriate categories of offerings 
for the safe harbor.
    Under our proposal, the publication or distribution by a broker or 
dealer of a research report with respect to investment grade asset-
backed securities meeting the criteria of General Instruction I.B.5 of 
Form S-3 will not be deemed to constitute an offer for sale or offer to 
sell such asset-backed securities registered or proposed to be 
registered, even if the broker or dealer is or will be a participant in 
the registered offering, if the following conditions are met: \212\
---------------------------------------------------------------------------

    \212\ Consistent with the existing no-action letter, in the case 
of a multi-tranche registered offering of asset-backed securities, 
each tranche would be treated as a different security.

     The broker or dealer must have previously published or 
distributed with reasonable regularity information, opinions or 
recommendations relating to Form S-3 ABS backed directly (or, with 
respect to securitizations of other securities, indirectly) by 
substantially similar collateral as that directly or indirectly 
backing Form S-3 ABS that is the subject of the information, opinion 
or recommendation that is proposed to be published or distributed.
     If the securities for the registered offering are 
proposed to be offered, offered or part of an unsold allotment or 
subscription, the information, opinion or recommendation must not:
    [ctrcir] Identify those securities;
    [ctrcir] Give greater prominence to specific structural or 
collateral-related attributes of those securities than it gives to 
the same attributes of other ABS that it mentions;\213\ and
---------------------------------------------------------------------------

    \213\ Consistent with the staff no-action letter, this condition 
would not by itself prevent the dissemination of research material 
that focuses on a single topic (e.g., a single collateral attribute, 
asset type (but not a particular obligor), structural attribute or 
market sector).
---------------------------------------------------------------------------

    [ctrcir] Contain any ABS informational and computational 
material relating to those securities.
     If the material identifies specific ABS of a specific 
issuer and specifically recommends that such ABS be purchased, sold 
or held by persons receiving such material, then a recommendation as 
favorable or more favorable as to such ABS must have been published 
by the broker or dealer in the last publication of such broker or 
dealer addressing such ABS prior to the commencement of its 
participation in the distribution of the securities whose offering 
is being registered.
     Sufficient information is available from one or more 
public sources to provide a reasonable basis for the view expressed 
by the broker or dealer with respect to the ABS that are the subject 
of the information, opinion or recommendation.
     If the material published by the broker or dealer 
identifies other ABS backed directly or indirectly by substantially 
similar collateral as that directly or indirectly backing the 
securities whose offering is being registered and specifically 
recommends that such ABS be preferred over other ABS backed by 
different types of collateral, then the material must explain in 
reasonable detail the reasons for such preference.

    Not included in the above list of proposed conditions is a 
condition in the existing no-action letter that the research material 
must refer as required by law or applicable rules to any relationship 
that may exist between the issuer of the information, opinion or 
recommendation and any participant of the offering. A footnote in the 
incoming request for the no-action letter stated that the condition 
``contemplates statutory provisions such as Section 17(b) of the 
[Securities] Act or relevant SRO standards requiring disclosure of 
possible sources of bias.'' Because the types of disclosures 
contemplated already are themselves separate regulatory requirements, 
we do not believe this additional condition is necessary for the safe 
harbor. Further, no similar condition exists in Rules 137, 138 or 139 
even though the situation is analogous. However, our decision not to 
propose this condition here does not otherwise affect any requirement 
that would require disclosure of such relationships.
    As with our proposal for the use of ABS informational and 
computational material, the staff has received several requests to 
liberalize the ABS research report safe harbor beyond the staff no-
action letter.\214\ In 1998, the Commission proposed an extensive 
revision of Rules 137, 138 and 139.\215\ Those proposals would have 
removed or altered several conditions in those rules that were adapted 
for use in the no-action letter for the ABS research report safe 
harbor. As with communications restrictions, staff in our Division of 
Corporation Finance is reviewing those 1998 proposals and the comments 
received in possibly developing new recommendations to the Commission 
on potential reforms to the research report safe harbors. To the extent 
the existing safe harbors are modified, we also would consider similar 
modifications to the ABS safe harbor. Therefore, our

[[Page 26689]]

approach here, like our proposal for ABS informational and 
computational material, is consistent with the existing safe harbor in 
the staff no-action letter, with the few alterations discussed above.
---------------------------------------------------------------------------

    \214\ See, e.g., Letter from BMA to David B.H. Martin, Director, 
Division of Corporation Finance, ``Securities Act Reform'' (Nov. 30, 
2001); and Letter to Alan L. Beller, Director, Division of 
Corporation Finance, ``Prior Correspondence Regarding Asset-Backed 
Securities Reform'' (Apr. 23, 2002).
    \215\ See Release No. 33-7606A (Nov. 13, 1998) [63 FR 67174].

    Questions regarding the proposed ABS research report safe 
harbor:
     We request comment on the proposed safe harbor. We have 
reorganized and reordered the conditions from the staff no-action 
letter and altered the wording slightly to make them easier to read 
and consistent with terms used in our other proposals. We otherwise 
did not mean to change the intent or scope of the original no-action 
letter. Are any additional revisions necessary or would any 
additional clarifications be appropriate?
     We also request comment on the continued applicability 
of any of the conditions or whether any additional conditions are 
necessary. For example, should the condition regarding disclosures 
of additional relationships be retained?
     Our proposal, like the 1997 no-action letter, does not 
contain any instructions. Are any instructions or clarifications 
necessary for a codification of the ABS research report safe harbor?
     Is the limitation to offerings on Form S-3 still 
appropriate? If not, under what circumstances should the proposal be 
extended to offerings on Form S-1? In particular, are there any 
additional conditions that should be required for extending the safe 
harbor to Form S-1 offerings?

D. Ongoing Reporting Under the Exchange Act

1. Current Requirements
    As discussed previously, post-issuance reporting regarding an 
asset-backed security is important to monitoring and understanding the 
performance of both the asset pool and transaction parties.\216\ 
Issuers of asset-backed securities are not exempt from Exchange Act 
reporting requirements. In particular, if asset-backed securities are 
to be listed on a national securities exchange, they must be registered 
pursuant to Section 12 of the Exchange Act \217\ and file reports 
pursuant to Section 13(a) of the Exchange Act.\218\ Even without a 
listing, an offering of asset-backed securities pursuant to an 
effective Securities Act registration statement triggers a reporting 
obligation under Section 15(d) of the Exchange Act with respect to 
those securities, at least for a period of time. This obligation 
automatically suspends as to any fiscal year, other than the fiscal 
year within which the registration statement became effective, if, at 
the beginning of such fiscal year, the securities of each class to 
which the registration statement relates are held of record by less 
than 300 persons.\219\
---------------------------------------------------------------------------

    \1\ See Section III.B.8.e.
    \217\ 15 U.S.C. 78l.
    \218\ See Section 12(b) of the Exchange Act (15 U.S.C. 78l(b)). 
In addition, asset-backed securities that constitute equity 
securities also may need to register under Section 12(g) of the 
Exchange Act (15 U.S.C. 78l(g)) if they meet certain size and 
ownership requirements. Voluntarily registration of such securities 
also is permitted under Section 12(g). Whether registered under 
Section 12(b) or 12(g), reporting under Section 13(a) is required.
    \219\ If the duty to report is suspended, a Form 15 is required 
to be filed 30 days after the beginning of the first fiscal year it 
is suspended. See Exchange Act Rule 15d-6 (17 CFR 240.15d-6). See 
also Exchange Act Rule 12h-3 (17 CFR 240.12h-3). The term ``held of 
record'' is defined in Exchange Act Rule 12g5-1 (17 CFR 240.12g5-1).
---------------------------------------------------------------------------

    As most asset-backed securities are not presently listed and are 
held by less than three hundred record holders, most publicly offered 
asset-backed securities cease reporting with the Commission once they 
qualify for the automatic suspension. In the context of shelf 
registration statements where a new issuing entity is used for the 
issuance of each separate series of securities, a new reporting 
obligation is incurred with respect to those securities. Reporting 
regarding the asset-backed securities by that issuing entity may stop 
if those securities subsequently meet the suspension requirements of 
Section 15(d) of the Exchange Act (e.g., held of record by less than 
300 persons at the beginning of any fiscal year other than the fiscal 
year in which the takedown occurred), notwithstanding that separate 
issuing entities of the same sponsor may issue additional asset-backed 
securities during the fiscal year.
    Regardless of an ability to suspend reporting under the Exchange 
Act, ABS transaction agreements often require continued reporting of 
information to security holders. More and more issuers also are making 
such information available through their websites. Third party services 
continue to evolve to provide post-issuance performance data, although 
coverage may not be uniform.
    Even though asset-backed securities are subject to an Exchange Act 
reporting obligation, the type and frequency of disclosure required 
under the Exchange Act with respect to operating companies generally is 
not relevant with respect to asset-backed securities. As a result, 
issuers of asset-backed securities have requested and received, first 
through Commission exemptive orders under the Exchange Act and later 
through scores of staff no-action letters, permission to modify the 
reports they may file to fulfill their reporting obligation.\220\
---------------------------------------------------------------------------

    \220\ As representative examples of the many actions in this 
area, see, e.g., Release No. 34-16520 (Jan. 23, 1980) (order 
granting application pursuant to Section 12(h) of Home Savings and 
Loan Association); Release No. 34-14446 (Feb. 6, 1978) (order 
granting application pursuant to Section 12(h) of Bank of America 
National Trust and Savings Association); CWMBS, Inc. (Feb. 3, 1994); 
and Bank One Auto Trust 1995-A (Aug. 16, 1995). Such relief 
generally includes language stating that similar relief will apply 
to subsequent issuances of substantially similar securities 
representing ownership interests in a trust whose principal assets 
are substantially similar to the assets covered by the no-action 
letter. After many years of issuing modified reporting no-action 
letters, the staff ceased requiring each new registrant to obtain a 
new no-action letter and has instead instructed new ABS issuers they 
could look to an existing modified reporting no-action letter 
granted with respect to another issuer which has substantially 
similar characteristics to the new asset-backed securities for 
requirements of Exchange Act reporting. If the specified 
requirements in a particular exemptive order or no-action letter are 
not satisfied, the relief is not available.
---------------------------------------------------------------------------

    Under the modified reporting system, in lieu of quarterly reports 
on Form 10-Q, reports on Form 8-K typically are filed based on the 
frequency of distributions on the asset-backed securities 
(predominantly monthly), which in turn generally match the payment 
frequency of the underlying pool assets. These filings include a copy 
of the servicing or distribution report required by the ABS transaction 
agreements that contains unaudited information about the performance of 
the assets, payments on the asset-backed securities and any other 
material developments that affect the transaction. Disclosure that 
otherwise would be required by certain items of Form 10-Q, such as 
legal proceedings, material uncured defaults and matters submitted to a 
vote of security holders, also are required for the Form 8-K 
distribution report for the period in which such events occurred.
    In addition to these ``periodic'' filings on Form 8-K, current 
reports on Form 8-K also are required, but only for a narrow list of 
events. Insider reporting under Section 16 also is generally not 
required.
    An annual report on Form 10-K is still required, but the 
information required is reduced and modified. Audited financial 
statements for the issuing entity are not generally required. In lieu 
of audited financial statements, the ABS issuer must file as exhibits 
to the Form 10-K a servicer compliance statement and a report by an 
independent public accountant. The servicer compliance statement 
addresses compliance by the servicer with its obligations under the 
servicing agreement for the reporting period. The accountant's report 
generally relates to the report required under the transaction 
agreements from an independent public accountant attesting to an 
assertion of compliance regarding particular servicing criteria.
    As a result of implementation of the Sarbanes-Oxley Act, and in

[[Page 26690]]

consideration of the existing requirement in the modified reporting 
system that accountant's attest as to compliance with servicing 
criteria, the Commission exempted asset-backed issuers from the 
reporting requirements regarding internal control over financial 
reporting.\221\ They must, however, include a certification required by 
Section 302 of that Act with their annual report on Form 10-K. In a 
staff statement originally published on August 29, 2002 and 
subsequently revised on February 21, 2003, the staff provided a 
tailored form of certification for use with ABS annual reports to 
address the realities of their structure as well as to address the 
information included in their reports under the modified reporting 
system.\222\ In addition, the staff statement provided alternatives 
with respect to who can sign the certification given the lack of a 
traditional CEO or CFO. Under the staff statement, a designated officer 
of the depositor, servicer or trustee may sign the certification, and 
alternate language for the certification is permitted depending on 
which entity's officer is making the certification.
---------------------------------------------------------------------------

    \221\ See note 35 above.
    \222\ See Division of Corporation Finance, ``Statement: 
Compliance by Asset-Backed Issuers with Exchange Act Rules 13a-14 
and 15d-14'' (Aug. 29, 2002); and Division of Corporation Finance, 
``Revised Statement: Compliance by Asset-Backed Issuers with 
Exchange Act Rules 13a-14 and 15d-14'' (Feb. 21, 2003). In addition, 
the staff subsequently issued two no-action letters to address 
resecuritizations (Merrill Lynch Depositor, Inc. (Mar. 28, 2003)) 
and auto lease and similar securitizations (Mitsubishi Motors Credit 
of America, Inc. (Mar. 27, 2003)).
---------------------------------------------------------------------------

2. Determining the ``Issuer'' and Operation of the Section 15(d) 
Reporting Obligation
    We propose to codify the basic modified reporting system for asset-
backed securities, including the forms to use and how they are to be 
prepared. As noted in Section III.A.4., we do not propose a separate 
Exchange Act reporting system for foreign ABS. Foreign ABS would report 
on Forms 10-K, 10-D and 8-K, the same as domestic ABS.
    First we propose to clarify the definition of ``issuer'' with 
respect to the reporting obligation and the nature and operation of the 
Section 15(d) reporting obligation with respect to asset-backed 
securities. The relevant aspects of the definition of ``issuer'' under 
the Exchange Act are identical to the Securities Act definition.\223\ 
The modified reporting no-action letters generally have allowed 
Exchange Act reports to be signed and filed ``on behalf of the trust'' 
by either the depositor, servicer or trustee.
---------------------------------------------------------------------------

    \223\ See Section 3(a)(8) of the Exchange Act (15 U.S.C. 
77c(a)(8)).
---------------------------------------------------------------------------

    Similar to our proposal for the Securities Act, we propose to 
clarify that the depositor for the asset-backed securities, acting 
solely in its capacity as depositor to the issuing entity, is the 
``issuer'' for purposes of the asset-backed securities of that issuing 
entity.\224\ Like our proposal for the Securities Act, our proposal 
specifies that the person acting in its capacity as depositor for the 
issuing entity of an asset-backed security is a different ``issuer'' 
from that same person acting as a depositor for any other issuing 
entity or for purposes of that person's own securities. For example, 
the depositor for a particular issuing entity created for the first 
takedown under a shelf registration statement would be deemed to be a 
different ``issuer'' than that depositor acting as depositor for a 
subsequent issuing entity created for a subsequent takedown under the 
same registration statement.\225\ Like our proposed Securities Act 
rule, our proposed Exchange Act rule would apply regardless of the 
issuing entity's form of organization.
---------------------------------------------------------------------------

    \224\ See proposed Exchange Act Rule 3b-19 (17 CFR 240.3b-19). 
The proposed rule in the Exchange Act is identical to the proposed 
rule for the Securities Act. See proposed Securities Act Rule 191 
(17 CFR 230.191) and Section III.A.3.d. We propose to define the 
term ``asset-backed issuer'' as an issuer whose reporting obligation 
results from either the registration of an offering of asset-backed 
securities under the Securities Act, or the registration of a class 
of asset-backed securities under Section 12 of the Exchange Act.
    \225\ Likewise, any applicable exemptions from reporting that 
the personacting as depositor may have with respect to its own 
securities would not be applicable to the asset-backed securities.
---------------------------------------------------------------------------

    This approach addresses the reality of ABS offerings by different 
issuing entities registered on the same shelf registration statement 
are not related. Furthermore, it places responsibility for Exchange Act 
reporting with the party most able to oversee the reporting 
requirements. Finally, this approach differentiates reporting with 
respect to each issuing entity, and thus each ABS transaction, and does 
not require continuous reporting with respect to transactions that 
would otherwise be able to suspend reporting.
    Consistent with this proposal, we propose to identify who must sign 
Exchange Act reports. The particular requirements we propose are 
presented along with our other proposals for each report discussed 
below. The principle is that the depositor would be required to sign 
Exchange Act reports, although we would permit an authorized 
representative of the servicer to sign on behalf of the issuing entity 
as an alternative.
    As discussed in more detail in the next section, a takedown of 
asset-backed securities by a new issuing entity triggers a new 
reporting obligation under Exchange Act Section 15(d). Separate EDGAR 
filing codes need to be established for the new issuing entity created 
at the time of each takedown to ensure that Exchange Act reports 
related to these ABS are filed under a separate file number from other 
ABS or from the depositor's or sponsor's own securities. Issuers should 
not ``combine'' reporting regarding multiple transactions in one report 
or with a report for the depositor's or sponsor's own securities.
    In addition to clarifying who is the ``issuer,'' we propose to 
clarify several interpretive positions regarding the operation of the 
Section 15(d) reporting obligation with respect to asset-backed 
securities.\226\ The first position relates to the time when any 
reporting obligation begins. Where an aggregate amount of asset-backed 
securities to be offered on a delayed basis is registered on Form S-3, 
until the first takedown of securities under the registration 
statement, there is no asset pool or securities to report about and no 
Exchange Act reporting requirement. It is only when the first takedown 
occurs and ABS are issued that ongoing reporting becomes relevant. 
Accordingly, we propose to codify a longstanding interpretive position 
that no annual or other reports need be filed pursuant to Section 15(d) 
until the first bona fide sale in a takedown of securities under the 
registration statement.\227\ For example, if a Form S-3 shelf 
registration statement was declared effective on October 1, 2004 but no 
takedown occurred until February 1, 2005, no reports would need to be 
filed until after the first takedown. The first reporting obligation 
would be triggered by the first takedown of asset-backed 
securities.\228\
---------------------------------------------------------------------------

    \226\ These proposals only would be applicable to reporting 
obligations under Section 15(d). They are not meant to affect any 
reporting obligation that may exist as to any class of asset-backed 
securities registered under Section 12 of the Exchange Act. For 
example, a Section 15(d) reporting obligation is automatically 
suspended while a class of securities is registered under Section 12 
and reporting pursuant to Section 13(a) of the Exchange Act. See 
Exchange Act Section 15(d). Hence, any discussion regarding 
suspension of the Section 15(d) reporting obligation would not be 
applicable while a class of securities is reporting pursuant to 
Section 13(a).
    \227\ See proposed Exchange Act Rule 15d-22(a).
    \228\ A few modified reporting no-action letters permitted the 
filing of no reports, including a Form 10-K, if the takedown 
occurred near the end of a fiscal year and no distribution had 
occurred prior to the end of the fiscal year. See, e.g., Fleet 
Finance Home Equity Trust 1990-1 (Apr. 9, 1991); AIC Premium Finance 
Loan Master Trust (Apr. 3, 1995); and Toyota Auto Receivables 1995-A 
Grantor Trust (Dec. 19, 1995). Even if the period was short, we 
believe that information regarding the servicing of the asset pool 
for the period (particularly the servicer compliance statement and 
assessment of compliance with servicing criteria) would still be 
important information to provide to investors in an annual report, 
even if no distributions were made to investors prior to the fiscal 
year end. Accordingly, the accommodation in those letters would no 
longer be available.

---------------------------------------------------------------------------

[[Page 26691]]

    We also propose to codify the current position that the starting 
and suspension dates for any reporting obligation with respect to a 
takedown of asset-backed securities is determined separately for each 
takedown.\229\ For example, if takedowns involving different issuing 
entities occurred in 2004 and 2005, the reporting obligation related to 
the issuing entity created with respect to the 2004 takedown would be 
separate from the reporting obligation related to a different issuing 
entity created with respect to the 2005 takedown. If at the beginning 
of the 2005 fiscal year the securities in the 2004 takedown were held 
of record by less than 300 holders, the reporting obligation related to 
the issuing entity for the 2004 takedown would be suspended.\230\ Of 
course, the suspension of that reporting obligation would have no 
effect on any separate reporting obligation related to the issuing 
entity with respect to the 2005 takedown or related to issuing entities 
created with respect to any other takedown.
---------------------------------------------------------------------------

    \229\ See proposed Exchange Act Rule 15d-22(b).
    \230\ An annual report on Form 10-K for the 2004 fiscal period 
with respect to the classes in the 2004 takedown would be required 
although the report is not required until 90 days after the end of 
the 2004 fiscal period.
---------------------------------------------------------------------------

    Finally, we propose a separate rule to address the separate Section 
15(d) reporting obligation that may be involved in ABS transactions 
where the issuing entity holds a pool asset that represents the 
interest in or the right to the payments or cash flows of another asset 
pool.\231\ As discussed in Section III.A., some credit card and auto 
lease ABS transactions are structured such that the issuing entity's 
asset pool consists of one or more of such intermediate financial 
assets. For example, in an issuance trust structure, the asset pool of 
the issuing entity for the ABS consists of a collateral certificate 
representing an interest in the asset pool of the credit card master 
trust. In many instances, the deposit of the collateral certificate 
into the issuing entity's asset pool must be separately registered 
along with the registration of the offering of the issuing entity's 
asset-backed securities, thereby triggering a separate reporting 
obligation under Section 15(d) with respect to the collateral 
certificate.
---------------------------------------------------------------------------

    \231\ See proposed Exchange Act Rule 15d-23. This proposed rule 
would not be applicable with respect to underlying securities that 
do not meet its proposed conditions, such as the securitization of 
outstanding corporate debt securities or other ABS the offering of 
which must be separately registered under the Securities Act.
---------------------------------------------------------------------------

    Recognizing that these structures are designed solely to facilitate 
the structuring of the transaction, separate reports regarding the 
intermediate financial asset would provide no additional information to 
investors. Accordingly, we propose that no separate annual and other 
reports need be filed with respect to the intermediate financial 
asset's reporting obligation, if the following conditions were met: 
\232\
---------------------------------------------------------------------------

    \232\ As with note 226 above, these proposals would only be 
applicable with respect to the reports filed pursuant to Section 
15(d) for the intermediate financial asset. They would not affect 
any other reporting obligation that may exist with respect to the 
issuer of the intermediate financial asset, such as other securities 
by that entity.

     Both the issuing entity for the asset-backed securities 
and the entity that issued the financial asset were established 
under the direction of the same sponsor or depositor;
     The financial asset was created solely to satisfy legal 
requirements or otherwise facilitate the structuring of the ABS 
transaction;
     The financial asset is not part of a scheme to avoid 
registration or reporting requirements of the Act;
     The financial asset is held by the issuing entity and 
is a part of the asset pool for the asset-backed securities; and
     The offering of the asset-backed securities and the 
offering of the financial asset were both registered under the 
Securities Act.

    The proposed rule would not affect any reporting obligation 
applicable with respect to the asset-backed securities, nor would it 
affect any obligation to provide information regarding the financial 
asset or the underlying asset pool in the ABS reports.\233\
---------------------------------------------------------------------------

    \233\ See proposed Item 1100(d) of Regulation AB.
---------------------------------------------------------------------------

    Questions regarding proposed definition of ``issuer'' and operation 
of the Section 15(d) reporting obligation:

     We request comment on our proposed rule clarifying the 
``issuer'' of asset-backed securities for purposes of the Exchange 
Act. In addition to or in lieu of the depositor, should another 
entity be considered the ``issuer,'' such as the sponsor, the 
servicer, the trustee or the issuing entity? What would be the bases 
for requiring the servicer to be the reporting entity?
     Should the ability to suspend reporting under Section 
15(d) be revisited? For example, should it be a condition or 
required undertaking for registration statement form eligibility or 
for any of our other proposals that Exchange Act reporting will 
continue for the life of the asset-backed security? What would be 
the relative costs and benefits of such a requirement?
     We request comment on our proposed interpretive rules 
regarding the operation of the Section 15(d) reporting obligation. 
Should any of these positions be revised? Are additional 
interpretations or accommodations necessary?
     Should there be an accommodation for separate Section 
15(d) reporting obligations that may exist as a result of the 
registration of an intermediate financial asset, such as in an 
issuance trust/SUBI structure? Does our proposed list of conditions 
adequately identify the relevant structures?
3. Reporting Under EDGAR
    We do not propose to change how documents regarding asset-backed 
securities are to be filed on EDGAR. However, there have been 
inconsistencies by ABS issuers with respect to the filing of 
registration statements and annual and periodic reports on EDGAR, thus 
making it difficult and time-consuming for investors and others to 
locate documents related to particular asset-backed securities. As 
such, we are providing the following guidance on how to submit 
documents on EDGAR that will enable investors and others to locate 
material information about particular asset-backed securities more 
efficiently. This guidance clarifies existing practice regarding how 
documents are to be submitted on EDGAR.
    Registration statements and annual and other periodic reports are 
filed in electronic format on EDGAR. Each entity that makes an EDGAR 
submission is assigned a Central Index Key code, or ``CIK'' code. For 
submissions to appear under the correct entity, the correct CIK code 
must be included in the EDGAR submission header.
    Because typically no issuing entity exists at the time of filing, 
the depositor initially submits the registration statement registering 
the offering of an aggregate amount of asset-backed securities on EDGAR 
under its own CIK code. With each takedown of asset-backed securities 
by a new entity off the registration statement, a new reporting 
obligation under Exchange Act Section 15(d) is created. The EDGAR 
system will automatically generate a new CIK code and an Exchange Act 
reporting file number for the new entity when the depositor includes a 
``serial'' tag in the header of the prospectus filed under Securities 
Act Rule 424(b) to report the takedown.\234\ The depositor must

[[Page 26692]]

include the complete name of the new entity as part of the serial 
tag.\235\ Subsequent takedowns from the same registration statement 
that create new reporting entities should follow the same approach for 
obtaining separate CIK codes and file numbers through serial tags.\236\
---------------------------------------------------------------------------

    \234\ There are instances when materials relating to a 
particular ABS transaction may be filed before the filing of the 
final Rule 424 prospectus that generates the new CIK code and 
Exchange Act reporting file number for the new issuing entity. For 
example, with respect to one or more classes of asset-backed 
securities that are to be listed on a national securities exchange, 
an Exchange Act registration statement, such as a Form 8-A 
(referenced in 17 CFR 249.208a), often must be filed before the 
final Rule 424(b) prospectus is filed. In addition, under the 
existing no-action letters and our proposals regarding ABS 
informational and computational material, such material could be 
voluntarily filed on Form 8-K before the final Rule 424(b) 
prospectus is filed.
    We are considering programming changes to the EDGAR system to 
permit the generation of a new CIK code and an Exchange Act 
reporting file number for a new issuing entity before the Securities 
Act Rule 424(b) prospectus is filed. Until these programming changes 
are made, such materials should be filed under the CIK code for 
which the Securities Act registration statement was filed, which is 
usually the depositor's CIK code. Note that if a new CIK code and 
Exchange Act reporting file number for the new issuing entity had 
been previously generated (e.g., a preliminary prospectus with 
respect to the offering had been filed), these materials should be 
filed under the CIK code of the issuing entity. In either case, to 
insure increased efficiencies in the filing and processing of such 
material, we encourage the depositor to list the name of the issuing 
entity on the cover page of the material. For example, to ensure 
that the certifications that we receive from the exchanges may be 
properly matched against the Form 8-A's on file, the Form 8-A should 
identify the specific issuing entity. Where the Form 8-A calls for 
the name of the registrant, depositors should list their name but 
include a notation that they are filing on behalf of the issuing 
entity and name the issuing entity.
    \235\ In the past, issuing entity names have been truncated in 
order to comply with EDGAR requirements regarding the permissible 
length of a company name. These abbreviations, historically assigned 
by SEC staff, sometimes were not consistently applied. A recent 
upgrade to the EDGAR system now permits company names of up to 150 
characters in length. See Release No. 33-8409 (Apr. 19, 2004). The 
staff believes this revision will alleviate many of the problems we 
have seen in the past regarding inconsistent abbreviation of names.
    \236\ For example, if a depositor completes five takedowns from 
a shelf registration statement and creates five separate issuing 
entities, then each separate issuing entity should have its own CIK 
code. After obtaining a CIK code for the issuing entity, the 
depositor must obtain additional EDGAR codes from the Commission for 
the issuing entity to enable it to file additional documents under 
the CIK code. The Commission recently adopted rules to change this 
process. See Release No. 33-8410 (Apr. 21, 2004).
---------------------------------------------------------------------------

    When these procedures are followed, the Rule 424(b) prospectus will 
appear under both the depositor's and the new issuing entity's CIK 
codes. The issuer in its capacity as depositor for newly created 
entities should prepare separate annual, periodic and other reports for 
each issuing entity and file such reports under the separate CIK code 
for each issuing entity.\237\ To make these subsequent filings under 
the newly created issuing entities, the sponsor will have to obtain 
additional access codes by creating and submitting Form IDs to the SEC 
using the SEC's website.
---------------------------------------------------------------------------

    \237\ Once the issuing entity's CIK code is generated, 
subsequent filings relating to the transaction relating to that 
issuing entity should be filed under that CIK code. The filing of 
documents under the issuing entity's CIK code under cover of Form 8-
K, such as unqualified legality and tax opinions, would not affect 
the incorporation by reference of these documents into the 
registration statement originally filed under the depositor's CIK 
code.
---------------------------------------------------------------------------

    The creation of new issuing entities by identifying the serial tag 
in the Rule 424 filing header effectively separates the reporting 
obligation of the depositor from that of the new entities. Filing 
separate annual, periodic and other reports for each issuing entity 
provides easier access to information on a particular issuing entity 
and its asset-backed securities, which will increase transparency of 
such information for investors as well as the market for these 
securities. Also, submitting separate Exchange Act reports under the 
issuing entity's CIK code will facilitate tracking of the respective 
issuing entity's reporting obligation, as well as when such reporting 
obligation may be suspended under Section 15(d) of the Exchange Act, if 
applicable.
    Conversely, we do not believe providing required information for 
multiple issuing entities in a ``combined'' annual or periodic report 
containing information regarding multiple issuing entities of a single 
sponsor or depositor is consistent with these objectives.\238\ Combined 
reporting contributes to confusion on the part of investors attempting 
to locate a report on EDGAR relating to the securities that are 
relevant to that investor. Combined reporting forces investors and 
other users to wade through superfluous information in order to 
retrieve information that is relevant to them. Further, combined 
reports create inefficiencies in the storage, retrieval, and analysis 
of information on EDGAR, which impedes market access and staff review.
---------------------------------------------------------------------------

    \238\ We understand the staff in a few isolated instances has 
previously allowed combined reporting on a limited basis. See, e.g., 
TMS Home Equity Trust 1992-D-I; TMS Home Equity Trust 1992-D-II 
(Mar. 22, 1993) and The Money Story, Inc.; TMS Home Equity Trust 
1993-A-I (Aug. 4, 1993) (allowing combined reporting with respect to 
two trusts). The staff believes these rare exceptions have led to 
the current practice of a few registrants combining in some 
instances information on dozens of issuing entities into a lengthy 
combined report. The result is filings that can run for hundreds of 
pages that are unfriendly to the user.

    Questions regarding reporting on EDGAR:
     We request comment on any additional ways to make 
reporting on EDGAR less time-consuming or costly for ABS issuers 
while still providing an efficient and usable retrieval system for 
investors and the marketplace. For example, under the current system 
a filer must affirmatively indicate through a serial tag that a new 
issuing entity is being created when a prospectus is filed pursuant 
to Rule 424(b) to generate the new issuing entity's separate CIK 
code. Would it be more effective to require a mandatory serial tag 
for such filings or establish an ``opt-out'' system for the serial 
tag (in lieu of the current ``opt-in'' system)?
4. Distribution Reports on Proposed Form 10-D
    Under the modified reporting system, periodic distribution and pool 
performance information is generally filed on Form 8-K in lieu of 
filing quarterly reports on Form 10-Q. However, investors are not able 
to easily distinguish these Form 8-K reports from other reporting on 
Form 8-K, such as the reporting of extraordinary events or the filing 
of transaction agreements.
    Form 8-K is not designed to be a report filed on a periodic basis. 
Accordingly, we propose one new form type for asset-backed securities, 
Form 10-D, to act as the report for the periodic distribution and pool 
performance information.\239\ To codify this type of reporting, we 
propose to require that every asset-backed issuer subject to Exchange 
Act reporting requirements must make reports on Form 10-D.\240\ 
Consistent with the existing modified reporting system, these reports 
would be required to be filed within 15 days after each required 
distribution date on the asset-backed securities, as specified in the 
governing documents for such securities, although we request comment on 
this proposed deadline. A report would be required regardless of 
whether the required distribution was actually made or whether a 
distribution report was in fact prepared or delivered under the 
governing documents.
---------------------------------------------------------------------------

    \239\ See proposed 17 CFR 249.312. Like our other Exchange Act 
reports, the proposed form would be subject to all applicable 
requirements of the general rules and regulations under the Exchange 
Act for the preparation, signing and filing of Exchange Act reports, 
including Regulation 12B (17 CFR 240.12b-1 et seq.); Regulation 13A 
(17 CFR 240.13a-1 et seq.); and Regulation 15D (17 CFR 240.15d-1 et 
seq.). In addition, the report would be required to be submitted in 
electronic form in accordance with the EDGAR rules set forth in 
Regulation S-T.
    \240\ See proposed Exchange Act Rules 13a-17 and 15d-17.
---------------------------------------------------------------------------

    It is our understanding that in most ABS transactions, the trustee 
is the recipient and not necessarily the preparer of this information, 
and the depositor or the servicer is thus in a better position with 
respect to possession, responsibility and awareness of the information 
that would need to be reported. Our proposed

[[Page 26693]]

signature requirements for Form 10-D reflect this understanding by 
proposing that the report must be signed by either the depositor, or in 
the alternative, on behalf of the issuing entity by a duly authorized 
representative of the servicer. If multiple servicers were involved in 
the servicing of the pool assets, a duly authorized representative of 
the master servicer (or entity performing the equivalent functions) 
would need to sign if a representative of the servicer was to sign the 
report on behalf of the issuing entity. These signature proposals are 
consistent with our proposals for who must sign the annual report on 
Form 10-K, the Section 302 certification and the proposed report on an 
assessment of compliance with servicing criteria. We do not propose to 
permit the trustee to sign the report as an alternative to the 
depositor or the servicer.
    Consistent with the modified reporting system, the proposed 
disclosure content for Form 10-D would consist of the distribution and 
pool performance information for the distribution period as well as 
certain non-financial disclosures, similar to those required by Part II 
of Form 10-Q, that occurred during the period. The proposed menu of 
disclosure items for Form 10-D is presented in the following table:

                    Proposed Disclosure for Form 10-D
------------------------------------------------------------------------
              Form items and source of disclosure required
-------------------------------------------------------------------------
Item 1. Distribution and Pool Performance Information (proposed Item
 1119 of Regulation AB).
Item 2. Legal Proceedings (proposed Item 1115 of Regulation AB).
Item 3. Sales of Securities and Use of Proceeds (Item 2 of Part II of
 Form 10-Q).
Item 4. Defaults Upon Senior Securities (Item 3 of Part II of Form 10-
 Q).
Item 5. Submission of Matters to a Vote of Security Holders (Item 4 of
 Part II of Form 10-Q).
Item 6. Significant Obligors of Pool Assets (proposed Item 1111(b) of
 Regulation AB).
Item 7. Significant Enhancement Provider Information (proposed Item
 1113(b)(2) of Regulation AB).
Item 8. Other Information.
Item 9. Exhibits (Item 601 of Regulation S-K).
------------------------------------------------------------------------

    The requirement with respect to distribution and pool performance 
information would require the registrant to provide the information 
required by proposed Item 1119 of Regulation AB and to attach as an 
exhibit to the Form 10-D the distribution report delivered to the 
trustee or security holders, as the case may be, pursuant to the 
transaction agreements for the related distribution date. Recognizing 
that the distribution report specified under the transaction agreements 
will likely contain most, if not all, of the disclosures about the 
distribution and pool performance that would be required by proposed 
Item 1119 of Regulation AB, any information required by that Item that 
was included in the attached distribution report would not need to be 
repeated in the Form 10-D. As a result, and as is typically the case 
today with distribution reports filed under Form 8-K, no additional 
information may be required in the Form 10-D with respect to 
distribution or pool performance if all of the required information was 
included in the attached distribution report. However, taken together, 
the attached distribution report and the information provided in the 
Form 10-D would need to contain all of the information required by Item 
1119 of Regulation AB.
    Proposed Item 1119 of Regulation AB would require a description of 
the distribution and the performance of the asset pool during the 
distribution period. Recognizing the variety of asset types that can be 
securitized and the variety of transaction structures that can be used, 
we do not propose a standardized format for the presentation of either 
the information required by Item 1119 of Regulation AB or the 
distribution report prepared under the transaction agreements. However, 
while the material characteristics will vary depending on the nature of 
the transaction, we believe there are certain broad categories of 
disclosure and examples of common characteristics that can be 
identified as representative of the material disclosure that should be 
provided and that is often provided today. Proposed Item 1119 of 
Regulation AB would set forth examples of such information based on the 
disclosures currently provided under the modified reporting system. The 
actual disclosure to be provided would need to be tailored to the asset 
pool and transaction involved. In addition, appropriate introductory 
and explanatory information should be provided to introduce material 
terms, parties and abbreviations used, and statistical information 
should be presented in tabular and graphical formats, if such 
presentations will aid understanding.
    Examples of material characteristics in proposed Item 1119 of 
Regulation AB, which are based upon disclosures commonly provided 
today, include:

     Applicable record dates, accrual dates, determination 
dates and distribution dates.
     Cash flows received and their sources (including 
portfolio yield, if applicable).
     Calculated amounts and distribution of the flow of 
funds for the period itemized by type and priority of payment, 
including fees and expenses, payments with respect to enhancement, 
distributions to security holders and excess cash flow.
     Beginning and ending principal balances of the asset 
backed securities.
     Beginning and ending balances of transaction accounts, 
such as reserve accounts, and account activity during the period.
     Amounts drawn on any credit enhancement or other 
support and amounts still available.
     Updated pool composition information for the period, 
such as the number and amount of pool assets at the beginning and 
ending of each period, weighted average coupon, weighted average 
life, weighted average remaining term, pool factors, prepayment 
amounts, current payment/prepayment speeds and other prepayment or 
interest rate sensitivity information.\241\
---------------------------------------------------------------------------

    \241\ For asset-backed securities backed by leases where a 
portion of the cash flow to repay the asset-backed securities is 
anticipated to come from the residual value of the physical property 
underlying the leases, this information also would include turn-in 
rates and residual value realization rates.
---------------------------------------------------------------------------

     Delinquency and loss information for the period.
     The amount, terms and purpose of any advances made or 
reimbursed during the period.
     Material modifications, extensions or waivers to pool 
asset terms, fees, penalties or payments.
     Breaches of material pool asset representations or 
warranties or transaction covenants.
     Information on ratio, coverage or other tests used for 
determining any early amortization, liquidation or other performance 
trigger and whether the trigger was met.

    Because we are proposing to expand the availability of prefunding 
periods, revolving periods and master trusts, we also propose to expand 
the related periodic disclosure regarding these structures to include 
information regarding any new issuance of asset-backed securities 
backed by the same asset pool and any pool asset additions, removals, 
substitutions and repurchases, such as through a prefunding or 
revolving period. Such information would include any material changes 
in solicitation, credit-granting, underwriting, origination, 
acquisition or pool selection procedures.
    Further, if the addition, removal or substitution of pool assets 
had materially changed the composition of the asset pool as a whole, 
updated pool composition information would be required to the extent 
such information had not been provided previously. Such information 
would include information required by proposed Items 1107, 1109, 1110 
and 1111 of Regulation AB applied

[[Page 26694]]

taking the revised pool composition into account. No information would 
be required, however, if substantially the same information had been 
provided previously in an effective registration statement under the 
Securities Act or a prospectus timely filed pursuant to Securities Act 
Rule 424 under the same CIK code regarding a subsequent issuance of 
asset-backed securities backed by the same pool.
    Regarding the other proposed disclosure items for Form 10-D, the 
information regarding legal proceedings, sales of securities, use of 
proceeds, submission of matters to a vote of security holders, defaults 
on senior securities and other information is consistent with the non-
financial disclosures in Form 10-Q that are required under the modified 
reporting system.\242\ For legal proceedings, we would reference the 
tailored ABS disclosure in proposed Item 1115 of Regulation AB. As with 
legal proceedings disclosure in Form 10-Q, a proceeding only would need 
to be reported for the distribution period in which it first became a 
reportable event and in subsequent periods where there had been 
material developments. The other proposed disclosure items would 
contain cross-references to similar items in Form 10-Q.
---------------------------------------------------------------------------

    \242\ See Release No. 33-8400 (Mar. 16, 2004) [69 FR 15594] (the 
``Form 8-K Release'') regarding recent changes to these items of 
Form 10-Q that would be incorporated into the similar disclosure 
that would be required under proposed Form 10-D.
---------------------------------------------------------------------------

    Proposed Items 6 and 7 of Form 10-D would require updated financial 
information about significant obligors and providers of enhancement, to 
the extent updated information was required. Such information only 
would need to be included in the first distribution report filed after 
updated financial information regarding the third party would be 
required under Regulation S-X. Reports for periods in which updated 
information would not be required would reference the previous filing 
that included the most recent information. As discussed in Section 
III.B.9., alternative methods may be available, subject to conditions, 
to present information regarding the third party, such as through 
incorporation by reference or by including a reference to the third 
party's Commission filings.
    Similar to recent revisions to Form 10-Q, we propose to provide 
that if any event occurs that required the filing of a Form 8-K during 
the period covered by the particular distribution report, but was not 
disclosed on Form 8-K, the Form 10-D must include the disclosure 
prescribed by the relevant Form 8-K item for the period during which 
that event occurred. Like Form 10-Q, this would apply to all Form 8-K 
items, including those covered by the recently enacted Form 8-K safe 
harbor from liability under Exchange Act Section 10(b) or Rule 10b-5 
for failure to timely file certain Form 8-K reports.\243\ With respect 
to the Form 8-K items covered by the safe harbor, the safe harbor 
extends only until the due date of the next report of the issuer for 
the relevant periodic period in which the Form 8-K was not timely 
filed. As with similar disclosure now required in Forms 10-Q and 10-K, 
failure to make such disclosure would subject the issuer to potential 
liability under Section 10(b) and Rule 10b-5, in addition to potential 
liability under Section 13(a) or 15(d).
---------------------------------------------------------------------------

    \243\ As discussed more fully in Section III.D.8., this safe 
harbor only applies to a failure to file a report on Form 8-K for 
certain specified items. Material misstatements or omissions in a 
Form 8-K will continue to be subject to Section 10(b) and Rule 10b-5 
liability. In addition, the safe harbor does not apply to liability 
under Section 13(a) or 15(d) or with respect to any failure to 
satisfy any other separate disclosure obligation that may exist.

    Request for comment on proposed Form 10-D:
     We request comment on proposed Form 10-D. Would a 
separate form type for distribution reports be beneficial? Should 
additional parties be permitted to sign the report? Is there any 
additional identifying information that should be provided on the 
cover page?
     What should be the appropriate deadline for Form 10-D 
reports? Given that the Form 10-D will in most cases consist only of 
the distribution report and also given advancements in technology, 
should the proposed 15-day deadline be shorter (e.g., 2 business 
days, 5 days, 10 days)? Should the deadline be tied to the delivery 
of the distribution report to the trustee? If so, what would be the 
effect of such a deadline if there was a failure to send a report to 
the trustee? Should the deadline be tied to the end of the 
distribution period?
     As an alternative to the current system, should it be 
required (e.g., through a condition to an exemption to filing with 
the SEC or for continued Form S-3 eligibility) that distribution 
reports are posted on a specified party's website within a certain 
time period (e.g., same day or 2 business days after the 
distribution date) and not filed with the Commission until the Form 
10-K (e.g., so that it is filed and subject to the Section 302 
certification)? What would be the advantages and disadvantages of 
such a system? Under such a system, should non-financial 
disclosures, such as those incorporated from Part II of Form 10-Q, 
still be required to be filed during the distribution period in 
which the events occurred?
     Should the frequency of the Form 10-D report be based 
on the payment or collection frequency of the underlying pool 
assets, regardless of the distribution frequency of the asset-backed 
securities, so that updated pool performance information is 
included? How often do payments on the asset-backed securities not 
match payments on the underlying pool assets?
     The modified reporting system did not clearly 
contemplate any filing extensions for distribution information, such 
as those available under Exchange Act Rule 12b-25.\244\ Under that 
rule, registrants that face extenuating circumstances have the 
ability to gain a one-time filing extension for five calendar days 
for quarterly reports and fifteen calendar days for annual reports, 
if certain conditions are met. Is there a reason to provide a 
comparable filing extension for proposed Form 10-D? If so, what 
would be the length of such an extension (e.g., 2, 5 or 10 days)? 
Under what circumstances or conditions should such an extension be 
available?
---------------------------------------------------------------------------

    \244\ 17 CFR 240.12b-25.
---------------------------------------------------------------------------

     We request comment on the manner of presenting 
distribution and pool performance information. Should the 
distribution report required by the transaction agreements still 
serve as the primary method for presentation of this information? 
Are there better alternatives to our proposal regarding the 
interaction between Form 10-D and that report? Should the 
presentation of any information be standardized?
     Are there any modifications that should be made to the 
list of representative items that should be disclosed regarding the 
distribution or asset performance? In particular, are there 
additional items that should be added or should any proposed items 
be deleted? For example, what amount of detail regarding updated 
pool composition information should be specified? Should there be a 
requirement to update all or some part of the information required 
by proposed Item 1110 of Regulation AB? Should any of the 
representative items be specifically mandated for disclosure and not 
just as examples of representative material disclosure?
     Our proposed disclosure regarding changes to the asset 
pool, such as those that involve a master trust or a prefunding or 
revolving period, could result in additional disclosures from those 
that are currently provided today, particularly regarding material 
changes to the composition of the asset pool. Are these disclosures 
desirable? Are there alternatives to provide this information to 
investors? Should some or all of this information instead be filed 
on a more current basis on Form 8-K? Is the exception for providing 
this information if it is provided in a Rule 424 prospectus filed 
under the same CIK code appropriate? Should disclosures only be 
required if the pool differs materially by a certain percentage from 
the original pool? Should there instead be an express limitation in 
the definition of asset-backed security that pool changes may not 
materially alter the characteristics of the asset pool or alter the 
characteristics by some set percentage (e.g., 2%, 5%)? How should 
such changes be measured?
     If a previous filing, including the registration 
statement or ABS informational and computational material, included 
the

[[Page 26695]]

results of any payment or sensitivity analyses, models or estimates 
or projections regarding items such as expected yield, maturity or 
pool performance, should there be a requirement to disclose any 
material changes between the previously disclosed information and 
the actual performance of the pool assets or the asset-backed 
securities? Should any such information appear in the annual report 
on Form 10-K as well as, or in lieu of, Form 10-D?
     We also request comment regarding the proposed other 
disclosure items for Form 10-D. Should any additional disclosures be 
required (e.g., quantitative and qualitative disclosures about 
market risk required by Item 305 of Regulation S-K)? \245\ Should 
any of the proposed disclosures codifying the principles of the 
existing modified reporting system now be omitted?
---------------------------------------------------------------------------

    \245\ 17 CFR 229.305.
---------------------------------------------------------------------------

5. Annual Reports on Form 10-K
    Similar to our proposed general instructions for Forms S-1 and S-3, 
we propose a separate general instruction for Form 10-K to specify how 
that form is to be used for an annual report with respect to asset-
backed securities.\246\ Under the proposed instruction, the depositor's 
name and sponsor's name also would need to be listed on the cover page 
of the Form 10-K.\247\
---------------------------------------------------------------------------

    \246\ See proposed General Instruction J. to Form 10-K. We also 
propose to codify existing staff position that General Instruction 
I. to Form 10-K (Omission of Information by Certain Wholly-Owned 
Subsidiaries) is not applicable with respect to asset-backed 
issuers.
    \247\ While we propose to include the identification of these 
additional parties on the cover page, the report should still be 
filed on EDGAR only under the issuing entity's CIK code. See Section 
III.D.3.
---------------------------------------------------------------------------

    The proposed instruction would clarify who is to sign the Form 10-
K. Consistent with the existing requirements for who must sign the 
Sarbanes-Oxley Section 302 certification, the report would need to be 
signed either on behalf of the depositor by the senior officer in 
charge of securitization of the depositor, or on behalf of the issuing 
entity by the senior officer in charge of the servicing function of the 
servicer. If a servicer was to sign the report on behalf of the issuing 
entity and multiple servicers were involved in the servicing of the 
pool assets, the senior officer in charge of the servicing function of 
the master servicer (or entity performing the equivalent functions) 
would sign. For the same reasons as the Form 10-D, we do not propose to 
permit the trustee to sign the report as an alternative to the 
depositor or the servicer.
    The proposed general instruction would identify the existing items 
in the form that may be omitted as well as substitute items from 
proposed Regulation AB that would be required. Any other applicable 
items specified in Form 10-K would continue to be required.\248\ The 
requirements specified are consistent with the modified reporting 
system. The proposed application of the disclosure items for Form 10-K 
is presented in the following table:
---------------------------------------------------------------------------

    \248\ As is generally the case today, if any item is 
inapplicable or the answer thereto is in the negative, an 
appropriate statement to that effect shall be made. See Exchange Act 
Rule 12b-13 (17 CFR 240.12b-13).

                Proposed Disclosure for Form 10-K for ABS
------------------------------------------------------------------------
                                               Required if     May be
             Existing form items               applicable      omitted
------------------------------------------------------------------------
Item 1. Business............................  ............     
Item 2. Properties..........................  ............     
Item 3. Legal Proceedings...................  ............     
Item 4. Submission of Matters to a Vote of          ............
 Security Holders...........................
Item 5. Market for Registrant's Common              ............
 Equity and Related Stockholder Matters.....
Item 6. Selected Financial Data.............  ............     
Item 7. Management's Discussion and Analysis  ............     
 of Financial Condition and Results of
 Operations.................................
Item 7A. Quantitative and Qualitative         ............     
 Disclosure About Market Risk...............
Item 8. Financial Statements and              ............     
 Supplementary Data.........................
Item 9. Changes in and Disagreements with           ............
 Accountants on Accounting and Financial
 Disclosure.................................
Item 9A. Controls and Procedures............  ............     
Item 9B. Other Information..................        ............
Item 10. Directors and Executive Officers of  ............   \1\
 the Registrant.............................
Item 11. Executive Compensation.............  ............   \1\
Item 12. Security Ownership of Certain        ............   \2\
 Beneficial Owners and Management...........
Item 13. Certain Relationships and Related    ............   \1\
 Transactions...............................
Item 14. Principal Accountant Fees and        ............   
 Services...................................
Item 15. Exhibits and Financial Statement           ............
 Schedules..................................
---------------------------------------------
Additional disclosure items from Regulation AB
------------------------------------------------------------------------
Item 1111(b) of Regulation AB, Significant          ............
 Obligor Financial Information..............
Item 1113(b)(2) of Regulation AB,                   ............
 Significant Enhancement Provider Financial
 Information................................
Item 1115 of Regulation AB, Legal                   ............
 Proceedings................................
Item 1117 of Regulation AB, Affiliations and        ............
 Certain Relationships and Related
 Transactions...............................
Item 1120 of Regulation AB, Compliance with         ............
 Applicable Servicing Criteria..............
Item 1121 of Regulation AB, Servicer                ............
 Compliance Statement.......................
------------------------------------------------------------------------
\1\ If the issuing entity does not have any executive officers or
  directors.
\2\ Except for Item 403(a) of Regulation S-K and if the issuing entity
  does not have any executive officers or directors.

    As noted in the table above, security ownership information 
required by Item 403(a) of Regulation S-K would be required. In 
addition, if the issuing entity had its own executive officers, board 
of directors or persons performing similar functions, all of Item 403 
of Regulation S-K, as well as Items 401, 402 and 404 of Regulation S-K, 
would be required. As discussed in Section III.B.1., we do not propose 
to require audited financial statements for the issuing entity, nor do 
we propose to add reporting requirements regarding internal control 
over financial reporting.
    Regarding the proposed items to be included from Regulation AB, 
information about legal proceedings

[[Page 26696]]

required by proposed Item 1115 of Regulation AB would need to be 
provided, as well as information on affiliate relationships and related 
party transactions required by proposed Item 1117 of Regulation AB. 
Updated financial information regarding significant obligors and 
enhancement providers also would be required, although alternative 
methods may be available, subject to conditions, to present the 
information, such as through incorporation by reference or by including 
a reference to their Commission filings. Our proposed reporting 
requirement regarding an assessment of compliance with servicing 
criteria is discussed in Section III.D.7.
    We propose to codify the requirement in the modified reporting 
system that a servicer compliance statement must be filed as an exhibit 
to the Form 10-K.\249\ The servicer compliance statement requires a 
statement of compliance regarding the servicer's obligations under the 
particular servicing agreement for the ABS transaction. This is 
different from both our proposed assessment of compliance with 
servicing criteria, which is an assessment against a single set of 
criteria applicable to all ABS transactions, and the Section 302 
certification, which is related to disclosure in Commission reports.
---------------------------------------------------------------------------

    \249\ See proposed Item 1121 of Regulation AB. Proposed 
amendments to Item 601 of Regulation S-K would specify that the 
servicer compliance statement would be filed as Exhibit 35 to the 
Form 10-K.
---------------------------------------------------------------------------

    Like the existing requirement under the modified reporting system, 
the proposed servicer compliance statement would be a statement, signed 
by an authorized officer of the servicer, to the effect that a review 
of the activities of the servicer and its performance under the 
servicing agreement had been made under the officer's supervision, and 
that to the best of the officer's knowledge and except as otherwise 
disclosed, the servicer has fulfilled its obligations under the 
agreement in all material respects throughout the reporting period. If 
multiple servicers were involved in servicing the pool assets, a 
separate compliance statement would be required from each servicer that 
meets the criteria in proposed Item 1107(a) of Regulation AB (i.e., 
master servicer, each affiliated servicer, each unaffiliated servicer 
that services 10% or more of the pool assets and any other servicer 
that performs a material aspect of the servicing of the pool assets). 
We believe this is consistent with general practice and should result 
in coverage of the material aspects of the servicing function.

    Questions regarding proposed Form 10-K disclosure:
     We request comment on the proposed general instruction 
to Form 10-K. Should additional or different parties be permitted to 
sign the report? Should the designated person to sign be someone 
else, such as the entity's principal executive officer?
     Is the proposed menu of disclosure items appropriate? 
Should any additional items be included or omitted? Is the proposed 
presentation of this menu clear? Are there any additional 
instructions that should be included for ABS offerings?
     Should updated pool composition information be required 
for the Form 10-K? For example, several modified reporting no-action 
letters require aggregate distribution and pool performance 
information for the reporting period. Should such disclosure be 
required for the Form 10-K? Should there be a requirement to update 
and restate all or some part of the information required by proposed 
Item 1110 of Regulation AB, such as static pool information?
     Should specific financial information be required 
regarding any transaction parties, such as the sponsor, servicer or 
issuing entity? If so, for which parties should information be 
required? What information should be required (e.g., audited 
financial statements)? Under what circumstances should such 
information be required? Should any such information also be 
provided in distribution reports on Form 10-D?
     We request comment on the proposed servicer compliance 
statement. Would such a statement still be beneficial? In 
particular, would this compliance statement still be necessary given 
the Sarbanes-Oxley Section 302 certification and the proposed 
assessment of compliance with servicing criteria?
     If multiple servicers are involved, should additional 
statements be required by servicers other than the master servicer? 
Is the proposal to require each Item 1107(a) servicer to submit a 
compliance statement appropriate? Should compliance statements be 
limited to only the master servicer? Should servicer compliance 
statements be required for Form 10-D's as well?
6. Certifications Under Section 302 of the Sarbanes-Oxley Act
    In June, 2003, the Commission adopted amendments to its general 
rules relating to certifications required by the Sarbanes-Oxley Act, 
including providing the form of the Section 302 certification in the 
exhibit requirements in Item 601 of Regulation S-K.\250\ We propose to 
amend Item 601 of Regulation S-K to add also the specific form and 
content of the required ABS Section 302 certification to the exhibit 
filing requirements.\251\
---------------------------------------------------------------------------

    \250\ See Release No. 33-8238 (Jun. 5, 2003) [68 FR 36636].
    \251\ See proposed amendments to Item 601 of Regulation S-K and 
Exchange Act Rules 13a-14 and 15d-14. Under Exchange Act Rules 13a-
14 and 15d-14, the requirements relating to the ABS Section 302 
certification are specified in paragraph (d) of those Rules. The 
proposed amendments to Item 601 of Regulation S-K would segregate 
the separate forms of Section 302 certifications for non-ABS issuers 
(required by paragraph (a) of Exchange Act Rules 13a-14 and 15d-14) 
from those for ABS filings (paragraph (d) of Exchange Act Rules 13a-
14 and 15d-14). In both instances, Section 302 certifications would 
still be filed under Exhibit 31. We also are proposing to revise 
Exchange Act Rules 13a-14(d) and 15d-14(d) to delete from those 
paragraphs the detailed description of the contents of the ABS 
Section 302 certifications. We propose several other technical 
amendments to the rules regarding certifications, including 
amendments to Exchange Act Rule 12b-15 and paragraph (c) of Exchange 
Act Rules 13a-14 and 15d-14 to confirm the Commission's intention 
that those provisions also apply with respect to ABS Section 302 
certifications required by paragraph (d) of Exchange Act Rules 13a-
14 and 15d-14.
---------------------------------------------------------------------------

    In specifying the form of the ABS Section 302 certification, we 
propose several amendments to the form provided in the revised staff 
statement to reflect our other substantive Exchange Act proposals.\252\ 
Other changes reflect the approach that the language of the 
certification must not be revised in providing the certification apart 
from the alternatives specified. Instead, any issues should be 
addressed through disclosure in the reports. The proposed form of 
certification would be as follows: \253\
---------------------------------------------------------------------------

    \252\ We believe the combination of these and other proposed 
amendments would render the two staff no-action letters issued 
subsequent to the revised staff statement no longer necessary. See 
Merrill Lynch Depositor, Inc. (Mar. 28, 2003) and Mitsubishi Motors 
Credit of America, Inc. (Mar. 27, 2003).
    \253\ Unlike Section 302 certifications, certifications required 
by Section 906 of the Sarbanes-Oxley Act are required only in 
periodic reports that contain financial statements filed by the 
issuer. See 15 U.S.C. 1350. We do not propose to require reports on 
Form 10-K to contain the ABS issuer's financial statements, and thus 
a Section 906 certification requirement would not be triggered.
---------------------------------------------------------------------------

CERTIFICATION

    I, [identify the certifying individual], certify that:
    1. I have reviewed this report on Form 10-K and all reports on 
Form 10-D required to be filed in respect of the period covered by 
this report on Form 10-K of [identify the issuing entity];
    2. Based on my knowledge, the information in these reports, 
taken as a whole, does not contain any untrue statement of a 
material fact or omit to state a material fact necessary to make the 
statements made, in light of the circumstances under which such 
statements were made, not misleading as of the last day of the 
period covered by this report;
    3. Based on my knowledge, all of the distribution, servicing and 
other information required to be provided under Form 10-D for the 
period covered by this report is included in those reports;
    4. [I am responsible for reviewing the activities performed by 
the servicer(s) and based on my knowledge and the compliance review 
conducted in preparing the servicer compliance statement required in 
this report under Item 1121 of Regulation AB, and

[[Page 26697]]

except as disclosed in the reports, the servicer has fulfilled its 
obligations under the servicing agreement; and]
    [Based on my knowledge and the servicer compliance statement 
required in this report under Item 1121 of Regulation AB, and except 
as disclosed in the reports, the servicer has fulfilled its 
obligations under the servicing agreement; and]
    5. This report discloses all material instances of noncompliance 
with the servicing criteria as provided in Item 1120 of Regulation 
AB based on an assessment of compliance with such criteria.
    [In giving the certifications above, I have reasonably relied on 
information provided to me by the following unaffiliated parties 
[name of servicer, sub-servicer, co-servicer, depositor or 
trustee].]
 Date:-----------------------------------------------------------------

-----------------------------------------------------------------------
[Signature]
[Title]

    Compared to the revised staff statement, paragraphs 1 and 3 would 
be revised to reflect the addition of proposed Form 10-D and the fact 
that the certification covers the information filed in those 
distribution reports rather than Form 8-K. Paragraph 4 would refer to 
the servicer compliance statement that would be explicitly required by 
our rules. In addition and consistent with the revised staff statement, 
two alternatives would be provided for paragraph 4 depending on who was 
signing the Form 10-K report. The first version would be used when the 
servicer was signing the report on behalf of the issuing entity. The 
second version would be used when the depositor was signing the report. 
Paragraph 5 of the certification would be revised to refer specifically 
to our proposed assessment of compliance with servicing criteria. 
Consistent with the nature of that proposal and consistent with our 
recent amendments to our certification requirements,\254\ the paragraph 
also would reference ``material instances of noncompliance'' in lieu of 
language in the revised staff statement that refers to ``significant 
deficiencies.''
---------------------------------------------------------------------------

    \254\ See note 250 above.
---------------------------------------------------------------------------

    Because asset-backed issuers do not typically have a principal 
executive officer or principal financial officer, the signature 
requirements for the ABS certifications differ from other issuers. 
Consistent with the revised staff statement, our proposed amendments 
would specify who must sign the certification. We propose that the 
certification must be signed by either the senior officer in charge of 
securitization of the depositor if the depositor is signing the Form 
10-K report, or the senior officer in charge of the servicing function 
of the servicer if the servicer is signing the Form 10-K report on 
behalf of the issuing entity.\255\ If multiple servicers were involved 
in servicing the pool assets, the senior officer in charge of the 
servicing function of the master servicer (or entity performing the 
equivalent functions) must sign if a representative of the servicer is 
to sign, and references in the certification would relate to the master 
servicer. As is the case today for all Section 302 certifications, a 
natural person must sign the certification in his or her individual 
capacity, although the title of that person in the organization of 
which he or she is an officer may be included under the title.
---------------------------------------------------------------------------

    \255\ See proposed amendments to paragraph (e) of Exchange Act 
Rules 13a-14 and 15d-14.

    These signature requirements are consistent with our proposal for 
who must sign the Form 10-K and who must make the assessment of 
compliance with servicing criteria. The same person that signs the Form 
10-K must sign the Section 302 certification. As we are not proposing 
to permit the trustee to sign the annual report, we do not propose the 
third alternative in the revised staff statement of allowing a 
representative of the trustee to sign the Section 302 certification.
    Consistent with the revised staff statement, we propose to include 
an instruction to the certification to clarify that because the signer 
of the certification must rely in certain circumstances on information 
provided by unaffiliated parties outside of the signer's control, the 
signer in such situation may reasonably rely on information that 
unaffiliated trustees, depositors, servicers, sub-servicers or co-
servicers have provided. As is the case today, if the signer does so, 
it would need to provide an additional statement in the certification 
identifying the unaffiliated parties on which the signer reasonably 
relied. Like the revised staff statement, we do not propose to specify 
the manner in which reasonable reliance may be established. The 
reasonable reliance instruction for the Section 302 certification would 
not be applicable with respect to affiliated parties, nor would it be 
applicable with respect to information from the registered public 
accounting firm performing the attestation on the assessment of 
compliance with servicing criteria.

    Questions regarding certifications:
     We request comment on the certification requirements 
for ABS filings. Are any modifications needed to the form of 
certification? For example, is paragraph 5 necessary if the proposed 
assessment of compliance with servicing criteria is adopted? Are any 
modifications necessary for particular types of ABS transactions?
     Should additional or different persons be permitted to 
sign the proposed certification? For example, should we permit the 
trustee to sign the certification? Should both the depositor and the 
servicer sign a certification? Should the designated person to sign 
for an entity be someone else, such as the entity's principal 
executive officer?
     Because they would be filing Form10-D distribution 
reports, ABS issuers would be exempt from filing Form 10-Q quarterly 
reports. Should each Form 10-D be certified directly rather than at 
the end of the fiscal period?
     Is the reasonable reliance instruction necessary?
7. Report of Compliance With Servicing Criteria and Accountant's 
Attestation
a. Current Requirements
i. Requirements Under the Modified Reporting System
    As noted above, the modified reporting system does not require 
audited financial statements for the issuing entity in the annual 
report on Form 10-K, but instead requires a report by an independent 
public accountant regarding servicing. This framework was developed 
based on the recognition that one of the most important elements 
affecting an investor's assessment of a particular asset-backed 
security is the performance of the servicer and that an independent 
third party checking some aspect of the servicing function provides a 
certain level of assurance and transparency regarding the servicer's 
performance.
    The form of reporting and accountant involvement varies based on 
the no-action letter relied upon in preparing the Form 10-K. The most 
common example involves an assessment and assertion by the servicer of 
compliance with standard servicing criteria and an examination-level 
attestation of the servicer's assertion by an independent public 
accountant. This disclosure-based system identifies for investors those 
aspects of the standard servicing criteria with which the transaction 
is in material compliance.
    Another form of reporting that is used more rarely to fulfill the 
modified reporting requirement involves the performance of certain 
detailed agreed-upon procedures by an independent public 
accountant.\256\ The procedures that are generally agreed to by the 
servicer and the investors, or the trustee on the investors' behalf, 
generally

[[Page 26698]]

involve the independent public accountant re-performing certain 
accounting procedures performed by the servicer relating to the 
servicing of the transaction and the underlying pool assets. The 
accountant then prepares a report describing the agreed-upon procedures 
performed and the results of such procedures.\257\
---------------------------------------------------------------------------

    \256\ Given the multitude of modified reporting no-action 
letters, other isolated alternatives also exist. For example, a 
small minority of transactions will specify alternate servicing 
standards that may be used, such as criteria specifically in or 
attached as an exhibit to the pooling and servicing agreement.
    \257\ Specifically, Chapters 1 and 2 of Statements on Standards 
for Attestation Engagements No. 10 (SSAE No. 10), Attestation 
Standards: Revision and Recodification (Jan. 2001) (codified in AT 
section 601), set forth the standards that accountants are required 
to follow in performing agreed-upon procedure engagements. Paragraph 
2.06 of SSAE No. 10 specifies the conditions for engagement 
performance which includes, among other things, a requirement that 
the accountant ascertain that the criteria have been agreed upon 
with the specified parties (in this case, the servicer and the 
investors requesting the report). Paragraph 2.07 sets forth that 
this can be accomplished in one of three ways: comparing the 
procedures to be applied to written requirements of the specified 
parties, discussing the procedures to be applied with appropriate 
representatives of the specified parties involved, or reviewing 
relevant contracts with correspondence from the specified parties. 
Further, paragraph 2.06(e) requires that the specific subject matter 
to which the procedures are to be applied is subject to reasonably 
consistent measurement.
---------------------------------------------------------------------------

ii. Uniform Single Attestation Program for Mortgage Bankers (USAP)
    Most assertions on and disclosure regarding compliance with 
servicing criteria are based on criteria set forth in the Uniform 
Single Attestation Program for Mortgage Bankers, or USAP, developed by 
the Mortgage Bankers Association of America (MBA).\258\ The 
accountant's report attesting to the assertion under the USAP is 
prepared in accordance with SSAE No. 10.\259\ The servicer's assertion 
as to compliance and the accompanying accountant's report are commonly 
referred to as a ``USAP Report.''
---------------------------------------------------------------------------

    \258\ Mortgage Bankers Association of America, Uniform Single 
Attestation Program for Mortgage Bankers (last rev. 1995).
    \259\ Specifically, Chapters 1 and 6 of SSAE No. 10 set forth 
the standards that accountants are required to follow in attesting 
to an entity's compliance with specified requirements. As set forth 
in paragraph 1.23, ``the practitioner shall perform the engagement 
only if he or she has reason to believe that the subject matter is 
capable of evaluation against criteria that are suitable and 
available to users.'' The USAP has generally been accepted by 
practitioners as meeting that requirement. See paragraphs 1.24 
through 1.34 of SSAE No. 10.
---------------------------------------------------------------------------

    A task force of the MBA created the USAP during the early stages of 
development of securitization as a mortgage financing technique to 
provide uniform minimum criteria against which the servicing of 
mortgage-backed securities could be assessed. It was created at a time 
when most securitizations consisted of either simple pass-through or 
pay-through structures of simple pools of residential mortgages. As 
new, more-complex ABS transactions were introduced into the marketplace 
and additional asset types were securitized, the USAP, in the absence 
of any other well-recognized criteria, continued to be used as the 
default criteria for assessment and disclosure of servicer performance.
    The USAP describes uniform minimum servicing criteria against which 
a servicing entity is to assess material compliance. In general, the 
servicer's management will make a written assertion about compliance 
with the USAP minimum criteria for a particular period (usually a 
year). The accountant engaged to perform the examination engagement 
will evaluate the servicer's assertion regarding compliance with the 
minimum servicing criteria.\260\
---------------------------------------------------------------------------

    \260\ SSAE No. 10, paragraph 6.54, provides two methods of 
reporting: (a) Directly on an entity's compliance or (b) on a 
responsible party's written assertion regarding compliance. However, 
SSAE No. 10, paragraph 6.64, states that ``when an examination of an 
entity's compliance with specified requirements discloses 
noncompliance with the applicable requirements that the practitioner 
believes have a material effect on the entity's compliance, the 
practitioner should modify the report and, to most effectively 
communicate with the reader of the report, should state his or her 
opinion on the entity's specified compliance requirements, not on 
the responsible party's assertion.''
---------------------------------------------------------------------------

    In an examination of an assertion on compliance with the USAP's 
minimum servicing criteria, an accountant seeks to obtain reasonable 
assurance regarding the assertion that there has been compliance, in 
all material respects, with those minimum criteria. Unlike an agreed-
upon procedures engagement, specific findings (or exceptions) are not 
reported under a USAP Report unless the accountant concludes that the 
assertion is not fairly stated in all material respects.\261\
---------------------------------------------------------------------------

    \261\ Paragraph 6.36 of SSAE No. 10 states, ``In an examination 
of an entity's compliance with specified requirements, the 
practitioner's consideration of materiality differs from that of an 
audit of financial statements in accordance with GAAS. In an 
examination of an entity's compliance with specified requirements, 
the practitioner's consideration of materiality is affected by (a) 
the nature of the compliance requirements, which may or may not be 
quantifiable in monetary terms, (b) the nature and frequency of 
noncompliance identified with appropriate consideration of sampling 
risk, and (c) qualitative considerations, including the needs and 
expectations of the report's users.''
---------------------------------------------------------------------------

iii. Limitations of USAP in Context of ABS Reporting
    While the USAP has by default become the dominant criteria to 
assess servicing compliance for purposes of fulfilling the accountant 
report requirement of the modified reporting system, it has significant 
limitations in the context of ABS reporting. The USAP was originally 
written to address compliance criteria related to residential mortgage 
loan servicing. Over time, it has been extended to other ABS 
transactions, such as those involving auto loans. However, the USAP's 
minimum servicing criteria may not adequately capture the needs of 
investors in ABS transactions other than mortgage-backed securities. 
Some of the USAP criteria may not be applicable to these other asset 
types (e.g., criteria regarding property tax escrow accounts), and are 
often specifically excluded from the assertion of compliance and the 
related accountant's report. There does not appear to be any 
consistency as to which USAP criteria are applied to a particular asset 
type outside of residential mortgage loans, so the list of exceptions 
varies from issuer to issuer, even in the same asset class. In 
addition, rarely are substitute criteria included that would be 
relevant to that asset class, further diminishing the scope and 
relevance of the final report for other asset classes.
    Another difficulty with the current criteria is that they do not 
clearly address the totality of activities and parties involved in 
servicing an ABS transaction, even for mortgage-backed securities. The 
USAP does not completely address the full spectrum of servicing 
functions, including allocation and distribution functions, that are 
important in an ABS transaction, particularly as the complexity of flow 
of funds calculations has increased. In addition, the current system 
does not contemplate the fact that multiple unaffiliated parties may be 
involved in servicing an asset-backed security. Accordingly, the 
current system does not place responsibility for assessing compliance 
for all aspects of the servicing function with a single party to help 
assure that they are addressed, which is especially important if 
multiple parties are involved. As a result, the current system 
potentially leaves gaps in servicing compliance reporting.
b. Proposed Assessment and Attestation of Servicing Compliance
    We have previously noted the need to focus attention on the role of 
the servicer in the performance of an ABS transaction.\262\ The 
performance of the servicer and compliance with its responsibilities is 
of material importance to the performance of an ABS transaction. Recent 
events in both the ABS and non-ABS markets have highlighted the need 
for appropriate controls and processes and mechanisms

[[Page 26699]]

to assess compliance with controls and processes.\263\
---------------------------------------------------------------------------

    \262\ See, e.g., notes 120 and 139 above.
    \263\ Id. See also note 53 above; ``If Issuers Can Steal, 
Where's the Deal Cop,'' Asset Securitization Report, Feb. 17, 2003, 
at 6; and Christine Richard, ``Moody's Trustees Don't See Eye-to-Eye 
on Trustee Role,'' Dow Jones Newswires, Feb. 4, 2003.
---------------------------------------------------------------------------

    Similarly, we believe a meaningful assessment and assertion of 
compliance with a single set of transparent and comprehensive servicing 
criteria, attested to by an independent third party under recognized 
professional standards, would provide material information to investors 
in monitoring the transaction and thus their investments. Investors 
will be better able to evaluate servicing responsibilities and 
performance and the reliability of the information they receive. 
Additionally, the assessment should help to identify potential 
weaknesses that may adversely affect security holders. We believe that 
an assessment and attestation regarding servicing compliance achieves 
these objectives more directly and efficiently than an audit of 
financial statements or reporting on internal control over financial 
reporting.
    The current modified reporting system does not provide complete 
transparency as to what is expected of issuers, servicers, accountants 
and other parties. While the varying no-action letters on this subject 
need uniform codification, the principal weakness in the current system 
is the lack of suitable servicing criteria on which reporting can be 
based. The result has been vast inconsistencies in the type of 
reporting provided, diminishing its usefulness, relevance and 
comparability.\264\ We also are concerned that the lack of clarity in 
this area has resulted in inconsistencies and a lack of understanding 
of what the appropriate scope of this function is intended to be.
---------------------------------------------------------------------------

    \264\ See, e.g., ``SEC Filings Reveal Little ABS Reporting 
Consistency,'' Asset Securitization Report, Sep. 23, 2002, at 10.
---------------------------------------------------------------------------

    As a result, we are proposing to enhance the current framework for 
reporting on compliance with servicing criteria. Specifically, we are 
proposing to require an assertion by a ``responsible party,'' which we 
define in Section III.D.7.b.ii. to be the same entity whose officer 
signs the report on Form 10-K and makes the Section 302 certification, 
on compliance with specified servicing criteria in a report filed as an 
exhibit to the ABS issuer's report on Form 10-K. Further, this proposal 
contemplates that a registered public accounting firm will issue a 
report on the responsible party's assertion of compliance with the 
servicing criteria, and such report will be filed along with the 
responsible party's assertion as an exhibit to the report on Form 10-K.
    As discussed in Section III.D.7.b.vi., we are initially proposing 
to put forward a single set of servicing criteria for the responsible 
party and the registered public accounting firm to use in assessing and 
reporting on servicing compliance, although we request comment on 
alternative approaches. In particular, as discussed below, we are 
interested in whether there could be other sources of suitable 
servicing criteria that could be developed with appropriately objective 
inputs and appropriate due process that could be alternatives to our 
proposal. Our proposed disclosure-based criteria are designed to be 
incrementally broader than the servicing criteria that are generally 
used today for reporting on servicing compliance, such as those 
contained in the USAP. We propose that this reporting framework would 
apply to all ABS issuers. Accordingly, ABS transactions that have 
historically used other forms of reporting to fulfill the accountant's 
report requirement pursuant to no-action letters, such as those that 
use USAP Reports or engage an accountant to perform certain agreed-upon 
procedures, would use the proposed disclosure-based criteria to satisfy 
Exchange Act reporting requirements.
    If a material instance of noncompliance exists, the proposal would 
provide investors with information of that fact to assist them in 
making their investment decisions. We do not propose that material 
instances of noncompliance with the proposed criteria would have 
regulatory restrictions on market access, such as an effect on 
continued form eligibility under the Securities Act for additional ABS 
transactions.\265\ Rather, the assessment and reporting on the criteria 
would operate within a disclosure-based framework.
---------------------------------------------------------------------------

    \265\ Note, however, that one of the proposed criteria relates 
to reporting with the Commission. If there was a violation of 
Commission reporting rules, this may have an effect on continued 
form eligibility. See Section III.A.3.
---------------------------------------------------------------------------

i. Responsible Party's Report on Compliance With Servicing Criteria
    We propose Item 1120 of Regulation AB to require as an exhibit to 
the Form 10-K report a report of the responsible party on an assessment 
of compliance with the proposed servicing criteria, discussed more 
fully in Section III.D.7.b.vi.\266\ Such report would be expected to 
contain:
---------------------------------------------------------------------------

    \266\ See proposed Item 1120(a) of Regulation AB. Proposed 
amendments to Item 601 of Regulation S-K would specify that the 
report on the assessment of compliance would be filed as Exhibit 33 
to the Form 10-K. Note that this proposal differs from our rules 
regarding the reporting required by Section 404 of the Sarbanes-
Oxley Act where management's report and the accountant's attestation 
report would appear in the Form 10-K and not as an exhibit. We 
believe that requiring the ABS reports to appear as exhibits to the 
report, where they have traditionally appeared under the modified 
reporting system, will facilitate easy location and access to these 
reports.

     A statement of the responsible party's responsibility 
for assessing compliance with the servicing criteria.
     A statement that the responsible party used the 
servicing criteria to assess compliance with the servicing criteria.
     The responsible party's assessment of compliance with 
the servicing criteria as of and for the period ending the end of 
the fiscal year covered by the Form 10-K report. The report must 
include disclosure of any material instance of noncompliance 
identified by the responsible party.
     A statement that a registered public accounting firm 
has issued an attestation report on the responsible party's 
assessment of compliance with the servicing criteria as of and for 
the period ending the end of the fiscal year covered by the Form 10-
K report.

As discussed in Section III.D.7.c., our proposal also would require the 
attestation report of the registered public accounting firm to be filed 
as an exhibit to the Form 10-K report.\267\
---------------------------------------------------------------------------

    \267\ See proposed Item 1120(b) of Regulation AB. Proposed 
amendments to Item 601 of Regulation S-K would specify that the 
attestation report of the registered public accounting firm would be 
filed as Exhibit 34 to the Form 10-K. If the proposal is adopted, 
the substitution of another type of accountant's report or opinion, 
such as a USAP report or an agreed-upon procedures report, would not 
satisfy the reporting requirement. Of course, ABS transaction 
agreements may continue to require a separate accountant engagement, 
such as a USAP engagement or an agreed-upon procedures engagement, 
in addition to our proposal.
---------------------------------------------------------------------------

ii. Proposed Definition of ``Responsible Party''
    New Exchange Act Rules 13a-18 and 15d-18 would require that a 
``responsible party'' must perform an assessment of compliance with the 
servicing criteria.\268\ We propose to define the ``responsible party'' 
as either the depositor if the depositor signs the report on Form 10-K, 
or the servicer if the servicer signs the report on behalf of the 
issuing entity. If multiple servicers were involved in servicing the 
pool assets and a representative of the servicer is to sign the report 
on behalf of the issuing entity, the master servicer (or entity 
performing the equivalent functions) would be the ``responsible 
party.'' Consistent with our proposals for who must sign the report on 
Form 10-K and make the Sarbanes-Oxley Section 302 certification, we 
believe that depending on the particular transaction, one or the other 
of these

[[Page 26700]]

parties would be best suited to be in a position to be responsible for 
assessing compliance with the proposed criteria regarding the overall 
servicing function.
---------------------------------------------------------------------------

    \268\ See paragraphs (b) and (c) of proposed Exchange Act Rule 
13a-18 and 15d-18.
---------------------------------------------------------------------------

iii. Proposed Scope: Period to be Covered
    The report contemplated by this proposal would include an 
assessment of the servicing function for a full fiscal period, rather 
than just at a point in time. This approach is consistent with the 
current requirements set forth in the USAP and in other attestation 
examinations filed with the Commission following the modified reporting 
system.
iv. Proposed Scope: Level of Reporting
    Under the modified reporting no-action letters, different practices 
have developed regarding the type and scope of the assessment of 
compliance with servicing criteria. While an assessment of compliance 
on a transaction-by-transaction basis would provide the most 
particularized information, current practice appears to lean towards 
assessment of a given servicer's compliance with servicing criteria in 
respect of the ``platform'' through which it carries out its servicing 
activities for all transactions (or all transactions involving a 
particular asset class). In light of current practice and servicers' 
focus on overall compliance with standards at the platform level, we 
are proposing to accept a ``platform'' level assessment for purposes of 
this requirement.
    As such, the proposal contemplates an assessment of compliance with 
respect to all asset-backed securities transactions involving the 
responsible party that are backed by assets of the type backing the 
asset-backed securities covered by the Form 10-K report. This 
``platform'' level assessment would permit a single assessment and 
assertion regarding compliance as compared to requiring separate 
assessments for each individual transaction involving the responsible 
party, which would be more costly and might be administratively 
burdensome. The responsible party, as well as the registered public 
accounting firm with respect to the attestation engagement, would need 
to determine the amount of work that would need to be performed to be 
able to assess compliance with the servicing criteria for the 
responsible party's servicing of ABS transactions for the same asset 
class taken as a whole.
    We do not propose to specify how a responsible party should 
determine whether there is a material instance of noncompliance with 
the servicing criteria. In particular, we do not propose to specify the 
particular controls, policies or procedures that would be required in 
order to assert that material compliance with the servicing criteria 
had been achieved. We believe that each responsible party should be 
afforded the flexibility to design controls, policies and procedures to 
fit its particular circumstances.\269\
---------------------------------------------------------------------------

    \269\ Accountants would be guided in analyzing whether an 
instance of non-compliance was material by SSAE 10, paragraph 6.36, 
that focuses on the nature of the compliance requirements, the 
nature and frequency of noncompliance and qualitative 
considerations, including the needs and expectations of the report's 
users.
---------------------------------------------------------------------------

v. Proposed Scope: Entire Servicing Function
    As discussed in Section III.B.2., the servicing of an asset-backed 
security consists of many functions, including collecting principal, 
interest and other payments from obligors; paying taxes and insurance 
from escrowed funds; monitoring and accounting for delinquencies; 
executing foreclosure if necessary; temporarily investing funds pending 
distribution; remitting fees and payments to enhancement providers, 
trustees and others providing services; and allocating and remitting 
distributions to security holders. Each of these functions can 
represent a material element of ABS performance.
    In addition, the servicing function may be performed by a single 
party or by multiple parties (e.g., primary servicers, master 
servicers, trustees, etc.). For example, in some instances, one party 
may perform the servicing functions that relate to administration of 
the pool assets while another party may perform the servicing functions 
that relate to payments to security holders. Currently, when multiple 
parties are involved in the servicing function, sometimes only one 
report on servicing compliance by one servicer is filed with the Form 
10-K covering only a limited subset of the servicing function. This 
approach provides no assurance with respect to other aspects of the 
servicing function. In other instances, multiple reports may be filed, 
one from each party involved in the servicing function covering only 
those steps that are applicable for the standards impacted by their 
work. This approach leads to fragmented reporting that potentially 
results in certain aspects of the servicing function not being 
addressed by the reports at all or requiring an investor to ascertain 
if all aspects have been covered.
    To address this issue, we propose that the responsible party would 
assess material compliance with all of the servicing criteria. The 
responsible party would be required to use reasonable means to assess 
whether the parties performing the servicing functions that are 
material to the servicing function as a whole (e.g., servicers, master 
servicer, trustee, paying agent) are complying with the servicing 
criteria in all material respects. A single report approach may 
necessitate reliance upon unaffiliated third parties. Like the proposed 
Section 302 certification, our proposal would permit the responsible 
party to reasonably rely on information provided to the responsible 
party by unaffiliated parties in making its assessment. This could 
include examination reports on compliance with particular servicing 
criteria, SAS 70 reports \270\ or other information from unaffiliated 
parties appropriate on which to base reasonable reliance.
---------------------------------------------------------------------------

    \270\ See Statement on Auditing Standards (SAS) No. 70, Service 
Organizations, as amended by SAS No. 88, Service Organizations and 
Reporting on Consistency (AICPA, Professional Standards, Vol. 1, AU 
section 324).
---------------------------------------------------------------------------

    Like the responsible party's own assessment, the information from 
the unaffiliated party also could be at a ``platform'' level of 
assessment with respect to ABS or pool assets serviced by that party, 
thereby facilitating a single assessment and report or other 
information that could be delivered to multiple responsible parties for 
purposes of their assessments. For example, if a trustee is responsible 
for disbursing cash to investors, the trustee could assess compliance 
with the appropriate servicing criteria and then send a single 
examination report as to its material compliance with those criteria to 
multiple responsible parties. Those responsible parties could 
reasonably rely on such report to assess and assert material compliance 
as to those criteria with respect to the responsible party's own 
platform level assessment.
vi. Proposed Servicing Criteria
    Currently, the only generally used criteria for assessing and 
reporting on servicing compliance is the USAP. However, as previously 
discussed, the USAP was not designed for the breadth of asset classes 
included in ABS offerings. It also does not address aspects of the 
servicing function that may be important in servicing asset-backed 
securities.
    The Commission staff is not aware of another framework currently 
available for use in the ABS market. However, we believe an assessment 
of and reporting regarding compliance with a single set of transparent 
and comprehensive servicing criteria and the involvement of an 
independent third party to attest to

[[Page 26701]]

that assessment is an important component of both the existing modified 
reporting system and the system we propose to adopt. As a result, in 
the absence of other suitable criteria, we are proposing to establish 
disclosure-based servicing criteria to be used by the responsible party 
and the registered public accounting firm in assessing servicing 
compliance. We believe a single set of servicing criteria that is 
publicly available would enhance the quality of the assessment of 
compliance and promote the comparability of reports of different 
issuers. We also believe such servicing criteria would provide value in 
establishing market-wide benchmarks with respect to assessing the 
servicing function.
    If other suitable criteria were to be developed for use in 
assessing servicing compliance, we would consider such criteria for 
purposes of the proposed requirement. A suitable framework would need 
to: Be established by a group or body that has followed due process 
procedures; be free from bias; permit reasonably consistent qualitative 
and quantitative measurements; be sufficiently complete so that 
relevant factors that would alter a conclusion about the subject matter 
were not omitted; and be relevant to the subject matter.\271\ This 
would include criteria that address all material aspects of the 
servicing function with respect to an asset-backed securities 
transaction.
---------------------------------------------------------------------------

    \1\ See AT Sec.  101, paragraph 24.
---------------------------------------------------------------------------

    We invite comment on whether suitable criteria could be developed 
by others to meet the objectives of our proposal. Who would develop 
such criteria? What would be the process in developing such criteria? 
What would be the timeframe to develop such criteria? Should we provide 
flexibility in any final requirement that would allow for substitution 
of alternate suitable criteria that meet certain requirements? What 
requirements would be appropriate?
    The disclosure-based servicing criteria we propose are designed to 
be incremental to the current criteria in the USAP. Accordingly, many 
of the proposed servicing criteria are not new. Criteria noting 
specific timeframes, such as two business days, mirror for the most 
part the current criteria in the USAP. Those servicing criteria that 
are incremental to the USAP criteria were developed based on staff 
study and experience with ABS transactions, including experience gained 
through the filing review process and the 2003 MBS Disclosure Report.
    The servicing criteria we propose consist of four broad categories: 
General servicing considerations; cash collection and administration; 
investor remittances and reporting; and pool asset administration. 
These categories describe major components of the servicing function. 
Each category contains servicing criteria that have been designed to 
have general applicability to the servicing of all asset-backed 
securities. The complete criteria are set forth in the text of 
paragraph (d) of proposed Item 1120 of Regulation AB. We are seeking 
comment on the specific criteria set out in the proposed regulatory 
text. As noted above, some servicing criteria may be more or less 
applicable depending on the type of asset underlying the ABS 
transactions. Further, certain servicing criteria have been designed to 
rely upon the transaction agreements to set forth how certain aspects 
of the servicing function should operate. As such, the servicing 
criteria do not necessarily set forth specific details of the servicing 
function that must exist (e.g., timeframes for foreclosures), but 
rather rely upon the details set forth in the transaction agreements. 
We believe the proposed criteria thus appropriately leave the 
responsibility for determining the details of the servicing functions 
with investors and ABS issuers. As ABS transaction agreements are 
required to be filed with the Commission, disclosure of these details 
for individual transactions would be readily available.
    The proposed servicing criteria are summarized as follows:
    General servicing considerations. The general servicing 
considerations are designed to provide disclosure on whether the 
servicer or other relevant party has instituted policies and procedures 
for structural monitoring of the ABS securities (e.g., triggers or 
events of default) and performed other general administrative tasks 
during the period covered by the report as set forth in the transaction 
agreements, such as monitoring the activities of third parties to which 
material servicing activities have been outsourced, maintaining a back-
up servicer and maintaining certain insurance coverages in force, if 
applicable. With the exception of the criterion regarding the 
maintenance of certain insurance coverages in force, these criteria are 
not addressed in the current USAP. We believe they are appropriately 
included given their importance to an ABS transaction.
    Cash collection and administration. These servicing criteria are 
designed to provide disclosure on whether the servicer or other 
relevant party has administered the collection of cash from obligors, 
segregated and reconciled such cash for investors and maintained 
transaction accounts as set forth in the transaction agreements. The 
servicing criteria included within this section are comparable to those 
set forth in the USAP, although the current USAP does not have specific 
criteria to address the maintenance of transaction accounts. We believe 
disclosure of whether the servicer complies with maintenance of 
transaction accounts is information investors may need to confirm the 
ABS transaction is functioning as originally planned.
    Investor remittances and reporting. These servicing criteria are 
designed to provide disclosure on whether the servicer or other 
relevant party is calculating amounts due to investors and reporting 
such amounts to investors in accordance with the flow of funds in the 
transaction agreements. The servicing criteria also are designed to 
provide disclosure on whether the servicer or other relevant party has 
allocated and remitted distributions to investors in accordance with 
the transaction agreements and filed information with the Commission as 
required by its rules and regulations. While certain elements of these 
criteria are presently included in the USAP, an explicit assessment of 
compliance with the flow of funds calculations may be incremental to 
what is currently performed in satisfying the current USAP criteria. It 
is our understanding that flow of funds calculations sometimes are 
extremely complicated and oversight of this function may be critical 
for proper distributions to investors.
    Pool asset administration. These servicing criteria are designed to 
provide disclosure on whether the servicer or other relevant party is 
maintaining the pool assets as set forth in the transaction agreements, 
including:
     Maintaining specified collateral;
     Administering changes to the asset pool;
     Posting payments and other changes regarding pool assets;
     Instituting loss mitigation or recovery actions;
     Administering funds held in trust for an obligor, if 
required for the pool assets; and
     Maintaining external credit enhancement or other support.

These servicing criteria, mostly included within the USAP, have been 
incrementally enhanced to encompass more aspects of pool asset 
maintenance. For example, the USAP does not address external credit 
enhancement or other support.

[[Page 26702]]

vii. Identification of Inapplicable Criteria
    Because of the unique and fluid nature of the ABS market, our 
proposal provides discretion to the responsible party to exclude those 
servicing criteria that are inapplicable to the servicing of a 
particular asset class. If certain servicing criteria are not 
applicable in the context of the asset class backing the asset-backed 
securities, the inapplicability of the criteria would need to be 
disclosed in the responsible party's and the registered public 
accounting firm's reports. This flexibility should not be used to 
voluntarily exclude otherwise applicable criteria from an assessment of 
compliance.
viii. Disclosure of Material Instances of Noncompliance
    If the responsible party's report on compliance with servicing 
criteria identified any material instance of noncompliance with the 
criteria, disclosure would be required in the Form 10-K report of any 
material impacts or effects that have affected or that may reasonably 
be likely to affect pool asset performance, servicing of the pool 
assets or payments or expected payments on the asset-backed securities. 
As noted above, the period to be covered by the report is consistent 
with the current practices of assessing compliance as of and for the 
period ending on a particular date. This is different from reporting 
regarding internal control over financial reporting under Section 404 
of the Sarbanes-Oxley Act, which speaks as of a particular date only. 
Thus, under our proposal and consistent with general practice today, 
disclosure would be required of material instances of noncompliance 
during the reporting period, even if such noncompliance was 
subsequently corrected in the period. We believe this approach is 
consistent with our proposal not to require interim evaluations and 
reporting of compliance or disclosures of changes in reports (i.e., 
Form 10-D reports) during the Form 10-K reporting period.
c. Attestation Report on Assessment of Compliance
    Under the proposal, a registered public accounting firm would be 
required to attest to, and report on, the assessment of compliance made 
by the responsible party through performance of an examination 
engagement.\272\ As our proposal would be in lieu of audited financial 
statements and Sarbanes-Oxley Section 404 reporting, we believe 
requiring a registered public accounting firm to provide the 
attestation is important to help assure independence and objectivity 
for the attestation function, similar to that required with respect to 
an audit of financial statements. This should increase investor 
confidence in the reliability of the assessment of compliance. We also 
remind issuers that a responsible party could not delegate its 
responsibility to assess compliance with the servicing criteria to the 
registered public accounting firm.
---------------------------------------------------------------------------

    \272\ 272 See paragraph (d) of proposed Exchange Act Rules 13a-
18 and 15d-18.
---------------------------------------------------------------------------

    As noted above, the registered public accounting firm's report 
would need to be filed as an exhibit to the report on Form 10-K.\273\ 
The attestation examination would need to be made in accordance with 
standards for attestation engagements issued or adopted by the Public 
Company Accounting Oversight Board (PCAOB). On April 25, 2003, the 
Commission approved the PCAOB's adoption of the auditing and 
attestation standards in existence as of April 16, 2003 as interim 
auditing and attestation standards.\274\ The Attestation Standards for 
Compliance Attestation (AT Sec.  601) in those interim auditing and 
attestation standards would currently be used in performing this 
examination engagement.
---------------------------------------------------------------------------

    \273\ As is currently the case under the modified reporting 
system, to the extent the Form 10-K is incorporated by reference 
into a Securities Act registration statement, a consent would need 
to be filed with respect to the accountant's report. See Securities 
Act Rule 439.
    \274\ See Release No. 33-8222 (Apr. 25, 2003) [68 FR 23335].
---------------------------------------------------------------------------

    We are proposing conforming amendments to Regulation S-X to reflect 
the attestation report that will be prepared by a registered public 
accounting firm and to require an ABS issuer to file the attestation 
report with the report on Form 10-K. Under these proposed amendments, a 
new ``Attestation report on assessment of compliance with servicing 
criteria for asset-backed securities'' would be defined as a report in 
which a registered public accounting firm expresses an opinion, or 
states that an opinion cannot be expressed, concerning the proposed 
assessment of compliance by a responsible party with servicing 
criteria, in accordance with standards on attestation engagements.\275\ 
When an overall opinion cannot be expressed, the registered public 
accounting firm would need to state why it was unable to express such 
an opinion. The report would need to be dated, signed manually, 
identify the period covered by the report and clearly state the opinion 
of the accountant as to whether the responsible party's assessment of 
compliance with the servicing criteria was fairly stated in all 
material respects, or must include an opinion to the effect that an 
overall opinion cannot be expressed.\276\
---------------------------------------------------------------------------

    \275\ See proposed Rule 1-02(a)(3) of Regulation S-X.
    \276\ See proposed Rule 2-02(g) of Regulation S-X.
---------------------------------------------------------------------------

    This proposal contemplates that the report issued by the registered 
public accounting firm will be available for general use and will not 
contain restricted use language. We believe that the proposed servicing 
criteria would be suitable criteria, as that term is defined in SSAE 
No. 10, and are available to enable a registered public accounting firm 
to issue a report on the responsible party's assertion without 
restricted use language.

    Questions regarding proposed assessment of compliance with 
servicing criteria:
     We request comment on our proposal. Should the 
Commission specify the form of reporting required in ABS annual 
reports? For instance, should certain ABS transactions be allowed to 
use a form of agreed-upon procedures to fulfill the accountant 
report requirement of the modified reporting system? If so, why? If 
any additional reporting by an accountant is required by the 
transaction agreements, should we allow or require it to be filed as 
an exhibit to the Form 10-K or otherwise described?
     Would audited financial statements of the ABS issuer or 
servicer be more useful to an ABS investor than a report on 
servicing compliance and related attestation report by a registered 
public accounting firm?
     Should there be any revisions to the proposed 
requirements for the responsible party's report or the accountant's 
report?
     We request comment on our proposed definition of 
``responsible party.'' Should any other entities ever be the 
``responsible party'' (e.g., the trustee)? Should one party be 
required to assess and report on the entire servicing function?
     In lieu of a single assessment of compliance at the 
servicing ``platform'' level, should separate assessments of 
compliance be required with respect to each transaction? Does a 
``platform'' level assessment provide adequate assurance even if no 
testing was performed at the individual trust level for the 
particular Form 10-K report? What would be the relative costs of a 
``transaction'' level requirement in relation to the incremental 
benefits?
     How should unaffiliated parties be treated with respect 
to the assessment of compliance? Is the proposed approach of having 
a single responsible party assess material compliance with all of 
the servicing criteria, regardless of the actual party that performs 
the criteria, appropriate? Is it appropriate to allow the 
responsible party to reasonably rely on information from 
unaffiliated parties to make its own assessment? Is more guidance 
necessary on

[[Page 26703]]

the ability to reasonably rely on information received from 
unaffiliated parties? Should disclosure be required in the Form 10-K 
or in the responsible party's report identifying unaffiliated 
parties upon which the responsible party reasonably relied?
     What alternative approaches would be preferable to the 
proposed single party approach and why? For example, should separate 
reports be required for all parties that perform the respective 
criteria? If so, how will an investor have confidence that all 
criteria have been assessed? Instead, should the responsible party 
only assess compliance against the criteria it or an affiliate 
performs and assess compliance with an additional criterion that it 
has received reports from unaffiliated parties that perform the 
other criteria? How should exceptions noted in the unaffiliated 
parties' reports or the inability to obtain reports be treated? 
Should the Commission specify the type of reporting that 
unaffiliated parties must use?
     Is reporting by the accountant on the responsible 
party's assertion of compliance that covers the entire servicing 
function feasible? Should an approach be considered that would 
enable an accountant to make reference to the attestation or other 
procedures performed by another accountant performing procedures on 
parts of the servicing function, similar to the approach considered 
by AU Sec.  543, ``Part of Audit Performed by Other Independent 
Auditors?'' Would additional guidance be required to make such an 
approach operational outside the context of a financial statement 
audit? Do other analogous instances of such reporting already exist?
     Should material instances of noncompliance have 
regulatory ramifications, such as on Securities Act form 
eligibility?
     Is the period to be covered by the report appropriate? 
Should disclosure be required of material instances of noncompliance 
during the period, even if subsequently cured? Should there be a 
requirement to make an assessment and report on compliance regarding 
any interim periods?
     Has the Commission considered all of the servicing 
criteria in its proposed framework that are important to ABS 
servicing? If not, what additional criteria should be included in 
the framework? Answers should provide specific language relating to 
specific criteria.
     Are some of the servicing criteria included in the 
Commission's proposed framework more costly than the benefit they 
provide to investors? Should any of the criteria be modified? Any 
suggested modifications should provide specific language. We request 
particular comment on quantification of the costs that would be 
involved in the proposal.
     Are any of the servicing criteria not subject to 
objective evaluation for purposes of the responsible party's 
assertion regarding compliance and the registered public accounting 
firm's attestation on the assertion regarding compliance? If so, how 
could they be revised?
     Are there some asset classes or transaction structures 
where the proposal would not be operational? What alternatives would 
be appropriate?
     Should additional guidance be given regarding how a 
responsible party is to determine whether there is a material 
instance of noncompliance?
     Should disclosure regarding the effects of material 
instances of noncompliance be required in the Form 10-K report? 
Should we specify a particular place where this disclosure should 
appear? Is there any additional information that would be material? 
For example, should there be disclosure of any identified instances 
of noncompliance that would be material to the transaction but were 
not material to the responsible party's overall ``platform'' such 
that the instances of noncompliance were not noted in the 
responsible party's overall assertion?
     Should the attestation report be required to be by a 
registered public accounting firm? What alternatives would be 
appropriate? Should a non-accountant be permitted to perform the 
attestation? If so, what would be the professional standards such an 
entity would use to attest to the assertion of compliance?

d. Alternative Proposal
    As discussed in Section III.D.7.b.vii., under our proposal a 
responsible party may determine that a servicing criterion is 
inapplicable in the context of servicing a particular ABS transaction 
and exclude that servicing criterion from its assessment. Otherwise, 
there would not be flexibility to voluntarily exclude servicing 
criteria from the assessment. However, we do seek comment on an 
alternative approach that would permit a responsible party to 
voluntarily determine which specific servicing criteria to exclude from 
its assessment (even if they were otherwise applicable to the 
particular asset class), so long as any excluded criteria were 
disclosed and the reason for their exclusion was also disclosed. Under 
this alternate approach, it would be up to the market to decide the 
weight to attach to any particular criterion in evaluating a 
transaction where that criterion was excluded.

    Questions regarding alternative proposal:
     In exploring such an approach, we seek comment on 
whether such an approach would be operational and result in useful 
information to investors.
     Should disclosure of the reasons for the exclusion be 
required? How could we avoid boilerplate disclosures?
     How should the list of excluded items be presented? 
Would a list of what was included be better? Should a table or 
checklist be required clearly indicating what was included or 
excluded?
     Should it be a requirement that the original 
registration statement or base or preliminary prospectus for the 
particular offering identifies the particular servicing criteria 
that will be excluded?

8. Current Reporting on Form 8-K
    On March 11, 2004, the Commission adopted amendments to expand the 
number of events that are reportable on Form 8-K.\277\ The amendments 
also shorten the Form 8-K filing deadline for most items to four 
business days after the occurrence of an event requiring disclosure 
under the form. These amendments are responsive to the ``real time 
disclosure'' mandate in Section 409 of the Sarbanes-Oxley Act and are 
intended to provide investors with better and faster disclosure of 
important events.\278\ We believe the objectives of those amendments 
are equally applicable with respect to asset-backed securities. We 
propose to clarify application of the Form 8-K reporting items for 
asset-backed securities. The result of the existing amendments and our 
proposals will mean that the number of reportable events under Form 8-K 
with respect to asset-backed securities will increase from current 
modified reporting requirements.
---------------------------------------------------------------------------

    \277\ See the Form 8-K Release.
    \278\ Section 409 of the Sarbanes-Oxley Act added paragraph (l) 
to Section 13 of the Exchange Act (15 U.S.C. 78m(l)), which provides 
that ``each issuer reporting under section 13(a) or 15(d) shall 
disclose to the public on a rapid and current basis such additional 
information concerning material changes in the financial condition 
or operations of the issuer, in plain English, which may include 
trend and qualitative information and graphic presentations, as the 
Commission determines, by rule, is necessary or useful for the 
protection of investors and in the public interest.''
---------------------------------------------------------------------------

a. Items Requiring Current Disclosure
    Similar to Form 10-K, we propose a general instruction to Form 8-K 
to specify how the form is to be used with respect to asset-backed 
securities. Like the Form 10-D, the proposed instruction would permit 
either the depositor or the servicer to sign Form 8-K reports. The 
depositor's name and sponsor's name would need to be listed on the 
cover page of the Form 8-K. The instruction also would identify which 
of the existing items may be omitted. Any other applicable items 
specified in Form 8-K would continue to be applicable under existing 
reporting deadlines. We also propose several ABS-specific items under 
Section 6 of Form 8-K, discussed below. The resulting application of 
the Form 8-K items for ABS is presented in the following table:

[[Page 26704]]



                Proposed Disclosure for Form 8-K for ABS
------------------------------------------------------------------------
                                               Required if     May be
             Existing form items               applicable      omitted
------------------------------------------------------------------------
Item 1.01. Entry into a Material Definitive      
 Agreement..................................
Item 1.02. Termination of a Material             
 Definitive Agreement.......................
Item 1.03. Bankruptcy or Receivership.......     
Item 2.01. Completion of Acquisition or       ............     
 Disposition of Assets......................
Item 2.02. Results of Operations and             
 Financial Condition........................
Item 2.03. Creation of a Direct Financial     ............     
 Obligation or an Obligation under an Off-
 Balance Sheet Arrangement of a Registrant..
Item 2.04. Triggering Events That Accelerate     
 or Increase a Direct Financial Obligation
 or an Obligation under an Off-Balance Sheet
 Arrangement................................
Item 2.05. Costs Associated with Exit or      ............     
 Disposal Activities........................
Item 2.06. Material Impairments.............  ............     
Item 3.01. Notice of Delisting or Failure to  ............     
 Satisfy a Continued Listing Rule or
 Standard; Transfer of Listing..............
Item 3.02. Unregistered Sales of Equity       ............     
 Securities.................................
Item 3.03. Material Modifications to Rights      
 of Security Holders........................
Item 4.01. Changes in Registrant's               
 Certifying Accountant......................
Item 4.02. Non-Reliance on Previously Issued  ............     
 Financial Statements or a Related Audit
 Report or Completed Interim Review.........
Item 5.01. Changes in Control of Registrant.  ............     
Item 5.02. Departure of Directors or          ............     
 Principal Officers. Election of Directors
 Appointment of Principal Officers..........
Item 5.03. Amendments to Articles of             
 Incorporation or Bylaws Change in Fiscal
 Year.......................................
Item 5.04. Temporary Suspension of Trading    ............     
 Under Registrant's Employee Benefit Plans..
Item 5.05. Amendments to the Registrant's     ............     
 Code of Ethics, or Waiver of a Provision of
 the Code of Ethics.........................
Item 7.01. Regulation FD Disclosure.........     
Item 8.01. Other Events.....................     
Item 9.01. Financial Statements and Exhibits     
---------------------------------------------
Additional items to be added to form 8-K for ABS
------------------------------------------------------------------------
Item 6.01. ABS Informational and                 
 Computational Material.....................
Item 6.02. Change of Servicer or Trustee....     
Item 6.03. Change in Credit Enhancement or       
 Other External Support.....................
Item 6.04. Failure to Make a Required            
 Distribution...............................
Item 6.05. Sales of Additional Securities...     
Item 6.06. Securities Act Updating               
 Disclosure.................................
------------------------------------------------------------------------

b. Clarifying Amendments to Existing Items
    We propose several clarifying instructions to the existing items 
that would remain applicable for ABS. For example, we propose to 
clarify that a reportable event under Items 1.01 and 1.02 also would 
include the entry into, modification of or termination of a material 
transaction agreement, even if the issuing entity was not a party to 
the transaction, such as a servicing agreement. A proposed instruction 
to Item 1.03 would clarify that disclosure also would be required under 
that item if the depositor (or servicer if the servicer signs the 
report on Form 10-K on behalf of the issuing entity) becomes aware of 
the entry of bankruptcy or receivership of the sponsor, depositor, 
servicer, trustee, significant obligor, significant enhancement 
provider or other material party involved in the ABS transaction. A 
proposed instruction to Item 2.02 would reference that disclosure made 
in a distribution report filed with the Commission on proposed Form 10-
D would not trigger disclosure under that item. A proposed instruction 
to Item 2.04 would clarify that a reportable event also would include 
the occurrence of an early amortization, performance trigger or other 
event, including an event of default, that would materially alter the 
payment priority or distribution of cash flows regarding the asset-
backed securities or the amortization schedule for the asset-backed 
securities. We would clarify that the applicable accountant to which 
Item 4.01 relates would be the accountant engaged to provide the 
attestation report on assessment of compliance with servicing criteria. 
Finally, for Item 5.03 regarding amendments to governing documents, an 
instruction would clarify that regardless of the basis of reporting 
(Section 13 or 15(d)), any amendment to the governing documents of the 
issuing entity of the asset-backed securities would trigger disclosure 
under that Item.
c. Proposed New Items
    We propose to add several new ABS-specific reportable events to 
Form 8-K. These new items would be grouped under Section 6 to the Form. 
As with the existing Form 8-K items, we believe that, with the 
exception of the proposed Item regarding ABS informational and 
computational material, which is designed to facilitate the 
categorization of Form 8-K disclosures, these proposed items represent 
events that unquestionably or presumptively have such significance that 
timely disclosure should be required. All of the proposed items, except 
for proposed Item 6.01, would have a four business day reporting 
deadline similar to other Form 8-K reportable events. Filing deadlines 
with respect to proposed Item 6.01 would be pursuant to our proposals 
for filing ABS informational and computational material discussed in 
Section III.C.1.
    The following is a discussion of the proposed new items.\279\
---------------------------------------------------------------------------

    \279\ In the release for the March amendments, the Commission 
recognized that a registrant may need to report a given event under 
multiple items. General Instruction D to Form 8-K permits a 
registrant to file a single Form 8-K that sets forth the required 
disclosure once as long as the number and captions for all 
applicable items are included.
---------------------------------------------------------------------------

    Item 6.01. ABS Informational and Computational Material.
    This proposed Item would set forth a Form 8-K item to report any 
ABS informational and computational material filed in connection with 
our

[[Page 26705]]

ABS communications proposals.\280\ It would not otherwise create an 
obligation to file such material.
---------------------------------------------------------------------------

    \280\ See Section III.C.1.
---------------------------------------------------------------------------

    Item 6.02. Change of Servicer or Trustee.
    If a servicer that met the proposed thresholds for disclosure in 
Item 1107 of Regulation AB or a trustee had resigned or had been 
removed, replaced or substituted, or if a new servicer or trustee had 
been appointed, disclosure would be required of the date the event 
occurred and the circumstances surrounding the change. In addition, 
information relating to the transition, such as that required by 
proposed Item 1107(c) of Regulation AB, would be required. If a new 
servicer or trustee had been appointed, a description required by the 
applicable item of Regulation AB relating to that party would be 
required.
    Item 6.03. Change in Credit Enhancement or Other External Support.
    This item would require disclosure of the loss, addition or 
material modification of any material credit enhancement or other 
support provided by a third party.\281\ If any such enhancement was 
terminated other than by expiration of the contract on its stated 
termination date or as a result of all parties completing their 
obligations, disclosure would be required of the date of termination, 
identity of the parties to the agreement, a brief description of the 
terms of the enhancement, a brief description of the material 
circumstances surrounding the termination and any material early 
termination penalties paid or to be paid out of cash flows. If any new 
enhancement was added, disclosure specified in proposed Item 1113 of 
Regulation AB would be required regarding the new enhancement. If any 
existing material enhancement had been materially modified, a brief 
description of the material terms and conditions of the amendments 
would be required. An instruction would specify that disclosure under 
this Form 8-K item would be required whether or not the issuing entity 
was a party to any agreement regarding the enhancement if the loss, 
addition or modification of such enhancement materially affects, 
directly or indirectly, the asset-backed securities, the pool assets or 
the cash flows underlying the asset-backed securities.
---------------------------------------------------------------------------

    \281\ An instruction to the proposed item would clarify that 
disclosure regarding changes to material enhancements would be 
reported under proposed Item 6.03 in lieu of Items 1.01 and 1.02 of 
Form 8-K.
---------------------------------------------------------------------------

    Item 6.04. Failure to Make a Required Distribution.
    If a required distribution to holders of the asset-backed 
securities was not made as of the required distribution date under the 
transaction documents, disclosure would be required of the failure and 
the nature of the failure. Accelerated disclosure under this item would 
not replace the requirement to file a report on proposed Form 10-D with 
respect to the related distribution period (e.g., to include pool 
performance information).
    Item 6.05. Sales of Additional Securities.
    In lieu of Items 2.03 and 3.02 of Form 8-K, this new item would 
require disclosure of the information specified in paragraphs (a) 
through (e) of Item 701 \282\ and paragraph (e) of proposed Item 1112 
of Regulation AB regarding any sale of securities that are either 
backed by the same asset pool or are otherwise issued by the issuing 
entity, whether or not registered under the Securities Act.\283\ 
Consistent with Item 3.02 of Form 8-K, for purposes of determining the 
filing date for the Form 8-K under this proposed Item 6.05, the 
registrant would have no obligation to disclose information under this 
Item until an enforceable agreement, whether or not subject to 
conditions, had been entered into under which the securities were to be 
sold. If there was no such agreement, the registrant must provide 
disclosure within four business days after the occurrence of the 
closing or settlement of the transaction or arrangement under which the 
securities were to be sold. An instruction to the proposed Item would 
provide that no information would be required at all under the Item if 
substantially the same information had been provided previously in an 
effective registration statement under the Securities Act or a 
prospectus timely filed pursuant to Securities Act Rule 424 under the 
same CIK code regarding a subsequent issuance of asset-backed 
securities backed by the same pool.
---------------------------------------------------------------------------

    \282\ 17 CFR 229.701. Of course, information required by Item 
701(d) regarding the exemption from registration claimed would not 
be applicable with respect to disclosure of a registered offering of 
securities.
    \283\ This proposed item would provide initial disclosure of the 
sale. As discussed in Section VIII.D.4., material changes to pool 
composition that resulted from the sale would be required in the 
distribution report on Form 10-D for the applicable period, unless 
previously disclosed in an effective registration statement or Rule 
424 prospectus regarding a subsequent issuance of asset-backed 
securities backed by the same asset pool.
---------------------------------------------------------------------------

    Item 6.06. Securities Act Updating Disclosure.
    The last proposed Item is intended to address instances where the 
composition of the actual asset pool at the time of issuance of the 
asset-backed securities differs from the composition of the pool 
described in the final prospectus for the offering. Reflecting a 
current staff position, if, with respect to a takedown off of a shelf 
registration statement on Form S-3, the composition of the asset pool 
at the time of issuance of the asset-backed securities differed by 5% 
or more from the description of the asset pool in the final prospectus 
filed for the takedown pursuant to Securities Act Rule 424, disclosure 
about the actual asset pool would be required, including disclosure 
regarding any new significant obligors, servicers or significant 
originators.\284\ No report would be required if substantially the same 
information was provided in a post-effective amendment to the 
Securities Act registration statement or in a subsequent Rule 424 
prospectus.
---------------------------------------------------------------------------

    \284\ This reportable event only would be applicable with 
respect to offerings registered on Form S-3. For registered 
offerings on Form S-1, due to restrictions on incorporation by 
reference, if the final asset pool likewise differed from the final 
Rule 424 prospectus, a post-effective amendment to the registration 
statement would be required as is the case today. Of course, for 
Form S-3 registered offerings, some changes in pool composition or 
other features of a transaction not reflected in previous disclosure 
would be so significant that a filing on Form 8-K would not be the 
appropriate means to address the changes.
---------------------------------------------------------------------------

d. Safe Harbor and Eligibility To Use Form S-3
    In the March amendments, the Commission addressed concerns raised 
by commenters over the effect of failure to file Form 8-K reports on 
liability under Exchange Act Section 10(b) and Exchange Act Rule 10b-5. 
The Commission adopted a limited safe harbor for a defined subset of 
Form 8-K items that provides that no failure to file a Form 8-K that is 
required to be filed solely by reason of the provisions of the Form 
shall be deemed to be a violation of Section 10(b) and Rule 10b-5.\285\ 
The limited safe harbor was granted only to a subset of Form 8-K items 
premised on the recognition that those items may require quick 
assessments of the materiality of the event, adding difficulty to the 
determination of whether a triggering event has occurred. The existing 
Form 8-K safe harbor extends only until the due date of the periodic 
report for the relevant period in which the Form 8-K was not timely 
filed.
---------------------------------------------------------------------------

    \285\ See paragraph (c) of Exchange Act Rules 13a-11 and 15d-11. 
The safe harbor only applies to a failure to file a report on Form 
8-K. Material misstatements or omissions in a Form 8-K continue to 
be subject to Section 10(b) and Rule 10b-5. In addition, if a duty 
to disclose exists for some reason other than the Form 8-K 
requirement, the safe harbor is not available.

---------------------------------------------------------------------------

[[Page 26706]]

    Given the nature of the proposed ABS-specific reportable events, we 
preliminarily propose to extend the safe harbor to proposed Item 6.03, 
Change in Credit Enhancement or Other External Support. This Item 
appears to meet the criteria of the existing subset of Form 8-K items 
to which the safe harbor applies. As discussed in Section III.D.4., 
because we propose that asset-backed securities would be excluded from 
quarterly reporting on Form 10-Q, we propose to provide in Form 10-D 
that disclosure prescribed by a required but not filed item of Form 8-K 
would need to be included in the Form 10-D report for the period during 
which that event occurred. Consistent with similar requirements in 
Forms 10-K and 10-Q, failure to make such disclosure in the Form 10-D 
report would subject a company to potential liability under Section 
10(b) and Rule 10b-5 regarding any of the covered items in the safe 
harbor, in addition to potential liability under Section 13(a) or 
15(d).
    In the March amendments, the Commission also addressed concerns 
over the effect of failure to file Form 8-K reports with respect to 
Form S-3 eligibility.\286\ The Commission clarified that an untimely 
filing on Form 8-K of the items covered by the Section 10(b) and Rule 
10b-5 safe harbor would not result in loss of Form S-3 eligibility, so 
long as Form 8-K reporting is current at the time of filing. As noted 
in Section III.A.3., we propose that reporting obligations regarding 
other asset-backed securities transactions established by the sponsor 
or the depositor must be complied with for continued Form S-3 
eligibility for new transactions. Consistent with the March amendments, 
we would clarify that an untimely filing on Form 8-K regarding one of 
the items covered by the Section 10(b) and Rule 10b-5 safe harbor for 
another ABS transaction would not result in loss of Form S-3 for new 
transactions, so long as the Form 8-K reporting obligations for the 
prior obligations are current at the time of filing.
---------------------------------------------------------------------------

    \286\ Similar amendments were made with respect to Form S-2 and 
Securities Act Rule 144 (17 CFR 230.144).

    Questions regarding proposed Form 8-K reporting:
     We request comment on our proposed amendments to Form 
8-K for asset-backed securities. Should additional or different 
parties be permitted to sign the report?
     Should any additional reportable events be included or 
omitted? For example, current Item 3.01 with regard to delistings is 
limited only to common equity securities and thus may be omitted for 
most ABS issuers. Should the Item be made applicable with respect to 
any listing with respect to a class of asset-backed securities? 
Should Item 4.02 regarding non-reliance on a previously issued audit 
report apply with respect to the proposed attestation report on an 
assessment of compliance with servicing criteria? Should Item 5.02 
apply if the issuing entity has executive officers or directors?
     Are any other clarifying instructions needed regarding 
Items that would remain applicable? Are the proposed new Items 
sufficiently clear and detailed? Are any modifications necessary? 
For example, should we clarify how differences in pool composition 
in proposed Item 6.06 should be measured? Should disclosure of 
additional issuances of securities be required on Form 8-K even if 
disclosed in an effective registration statement or Rule 424 
prospectus?
     Given that most ABS transactions report distributions 
monthly, should any Form 8-K items be reported in the Form 10-D 
instead? Would this create too long of a delay? Should such an 
approach not be permitted for transactions that report distributions 
quarterly or semi-annually? Would differences between the reporting 
requirements for different ABS transactions be confusing? Should any 
of the items be revised in the case of a master trust?
     Which Form 8-K items for asset-backed securities should 
be included in the safe harbor? Should the safe harbor extend only 
until the next required Form 10-D? Are there any additional 
accommodations that should be made with respect to Form 8-K 
reporting with respect to ABS transactions?
9. Other Exchange Act Proposals
a. Proposed Exclusion From Form 10-Q
    As noted above, we propose to codify the requirement to file 
reports tied to distributions on asset-backed securities in lieu of 
quarterly reporting on Form 10-Q. The non-financial items that are in 
Form 10-Q would be required in proposed Form 10-D. As with our 
proposals for Form 10-K, we do not believe that the financial item 
requirements of Form 10-Q would be meaningful with respect to issuing 
entities. Accordingly, we are proposing to exclude asset-backed 
securities from quarterly reporting on Form 10-Q.\287\
---------------------------------------------------------------------------

    \287\ See proposed amendments to Exchange Act Rule 13a-13 and 
Rule 15d-13.
---------------------------------------------------------------------------

b. Proposed Exemptions From Section 16
    Under the modified reporting system, issuers of asset-backed 
securities are not subject to the disclosure requirements under Section 
16(a) of the Exchange Act to report transactions and holdings of 
directors, officers and principal shareholders. In arguing for no-
action relief, incoming requests to the staff indicated that the 
issuing entity often does not have directors and officers. In addition, 
the requesters advocate that any holders of asset-backed securities 
representing more than a ten percent interest in the issuing entity 
would not have access to more information concerning the trust than any 
other certificate holder, which would alleviate any risk of short-term 
profits based on inside information proscribed by Section 16.
    We are proposing to exempt asset-backed securities from Section 16 
in its entirety.\288\ In addition to the reporting requirements in 
Section 16(a), we believe the other subparts of Section 16 are equally 
inapplicable to asset-backed issuers given the passive nature of the 
issuing entity, including the restrictive activities of the issuing 
entity in connection with the ABS transaction. We believe such an 
exemption for asset-backed securities would be appropriate in the 
public interest and consistent with the protection of investors.
---------------------------------------------------------------------------

    \288\ See proposed amendment to Exchange Act Rule 3a12-12.
---------------------------------------------------------------------------

c. Proposals Regarding Transition Reports
    Current Exchange Act Rules 13a-10 and 15d-10 set forth reporting 
requirements that may be applicable when an issuer changes its fiscal 
year end. Transition reports are required to assure a continuous flow 
of information to investors and the marketplace. Although financial and 
business information normally required in transition reports may not be 
relevant to ABS transactions, information on the performance of the 
asset pool during the transition period is relevant to investors of 
asset-backed securities.
    We are proposing amendments to our transition report rules that 
would clarify their application to asset-backed issuers.\289\ Under the 
proposed amendments, an asset-backed issuer that changed its fiscal 
year end would be required to file a transition report on Form 10-K 
covering the transition period between the closing date of the issuer's 
most recent fiscal year and the opening date of its new fiscal 
year.\290\ The asset-backed issuer must provide all information 
required in response to

[[Page 26707]]

proposed General Instruction J. of Form 10-K, including filing the 
servicer compliance statement and the assessment of compliance and 
attestation report regarding compliance with servicing criteria. The 
servicer compliance statement and assessment reports would reflect the 
same transition period covered by the transition report. Of course, any 
obligation to file distribution reports under proposed Form 10-D would 
continue to apply regardless of a change in fiscal year.
---------------------------------------------------------------------------

    \289\ See proposed amendments to Exchange Act Rules 13a-10 and 
15d-10.
    \290\ For example, if an issuer whose most recent fiscal year 
ended on December 31, 2003 decided to change its fiscal closing date 
to June 30, 2004, the transition period for which a transition 
report must be filed under either Rule 13a-10 or 15d-10 would be 
January 1, 2004 through June 30, 2004. A current report on Form 8-K 
also would be required announcing the change in fiscal year. See 
Item 5.03 of Form 8-K. A transition report on Form 10-K would not be 
required if the transition period covers one month or less and the 
first annual report for the newly adopted fiscal year covers the 
transition period as well as the fiscal year. Section 302 
certifications would be applicable to transition reports on Form 10-
K.

    Questions regarding other Exchange Act proposals:
     Should we codify the exclusion from quarterly reporting 
on Form 10-Q for asset-backed issuers? Should we exempt asset-backed 
securities from Section 16? Should the non-reporting provisions of 
Section 16 remain applicable with respect to asset-backed issuers or 
other participants in an ABS transaction? Should the result be 
different if the issuing entity has officers or directors?
     Should all of the applicable Form 10-K items be 
required for a transition report? For example, are there any item 
requirements under proposed General Instruction J. of Form 10-K that 
would not be important to investors with respect to the transition 
period? Should we require a separate report even if the transition 
period is one month or less?

E. Other Miscellaneous Proposals

    In addition to our more substantive proposals, we also are 
proposing several minor and technical amendments to our rules and forms 
to address the regulatory treatment of ABS. These proposals include:

     Updating references to reflect proposed new definitions 
and references; \291\
---------------------------------------------------------------------------

    \291\ See, e.g., proposed amendments to Rules 2-01(c)(7) and 2-
07(a) of Regulation S-X; Items 401 and 701 of Regulation S-K; 
Securities Act Rules 424 and 434; Exchange Act Rules 10A-3, 13a-15 
and 15d-15; and Rule 100 of Regulation M.
---------------------------------------------------------------------------

     Removing instructions and references that would no 
longer be applicable; \292\
---------------------------------------------------------------------------

    \292\ See, e.g., proposed amendments to Items 308 and 406 of 
Regulation S-B and Items 308 and 406 of Regulation S-K. The forms 
required for ABS under our proposals would clarify that these items 
are no longer applicable to ABS, thus rendering the instructions 
unnecessary.
---------------------------------------------------------------------------

     Including cross-references for certain disclosure items 
in Regulation S-K to items in proposed Regulation AB that clarify 
their application for asset-backed securities; \293\
---------------------------------------------------------------------------

    \293\ See, e.g., proposed amendments to Items 202, 501 and 503 
of Regulation S-K.
---------------------------------------------------------------------------

     Clarifying that an ABS issuer could not be eligible for 
the disclosure system for ``small business issuers'' because that 
disclosure system, like most of the basic Regulation S-K disclosure 
system, is not applicable to asset-backed securities; \294\ and
---------------------------------------------------------------------------

    \294\ See, e.g., proposed amendments to Item 10 of Regulation S-
B and Exchange Act Rule 12b-2. The term ``small business issuer'' is 
defined in Item 10 of Regulation S-B and Exchange Act Rule 12b-2 as 
a U.S. or Canadian issuer with less than $25 million in revenues and 
public float that is not an investment company. Such issuers are 
eligible to use Form 10-KSB (17 CFR 249.310b) for their annual 
reports and Form 10-QSB (17 CFR 249.308b) for their quarterly 
reports, both of which are keyed off of disclosure items required by 
Regulation S-B.
---------------------------------------------------------------------------

     Clarifying that Regulation BTR \295\ is not applicable 
to any acquisition or disposition of an asset-backed security.\296\
---------------------------------------------------------------------------

    \295\ 17 CFR 245.101 through 245.104.
    \296\ See proposed amendment to 17 CFR 245.101.

---------------------------------------------------------------------------
    Questions regarding these miscellaneous proposals:

     We request comment on these proposed changes. Are any 
additional clarifying amendments needed to reflect our proposals?
     We request comment on the proposed exclusion of ABS 
issuers from the definition of ``small business issuer.'' Is there 
anything analogous to a ``small business issuer'' in the ABS 
context, and if so, is there a need to create different regulatory 
requirements for ABS by smaller issuers? If so, what accommodations 
should be made and why? By what level should a ``small ABS issuer'' 
be determined (e.g., size of sponsor, size of offering, etc.)
     We request comment on any additional areas that should 
be addressed regarding the registration, disclosure or reporting 
requirements for asset-backed securities under the Securities Act or 
the Exchange Act.

F. Transition Period

    While most of our proposals codify existing staff and market 
practice, we also are proposing several changes that may require 
implementation time. We are considering appropriate timing for 
implementation of the proposals, if adopted, and how best to allow for 
an orderly transition as a result of the new requirements imposed by 
the proposals. We are initially considering compliance with the 
proposals for new registration statements or takedowns off of shelf 
registration statements beginning three months after the effective 
date. This would include both the Securities Act and Exchange Act 
proposals with respect to such newly offered ABS. For outstanding ABS, 
we are initially considering compliance with the Exchange Act proposals 
beginning with fiscal years ending six months after the effective date. 
Of course, registrants could voluntarily comply with any adopted 
proposals before the compliance dates.

    Questions regarding implementation and a transition period:
     Should we provide a transition period with respect to 
the implementation of all or some portion of our proposals? If so, 
what proposals should be subject to any transition period and would 
be an appropriate length for any transition period (e.g., 3 months, 
6 months)?
     Should there be different transition periods for 
different proposals? In particular, should there be an extended 
transition period for the proposed assessment and attestation of 
compliance with servicing criteria?
     Are there special considerations we should take into 
account in providing a transition period with respect to certain 
issuers, such as foreign ABS, certain asset classes or existing 
transactions? Should transactions before a certain point be 
``grandfathered'' from the proposals? How should any remaining 
capacity under existing shelf registration statements be treated?

G. General Request for Comment

    We request and encourage any interested person to submit comments 
regarding:

     The proposals that are the subject of this release;
     Specific interpretive guidance under the Investment 
Company Act concerning issues that may arise in connection with 
asset-backed issuers' compliance with the proposals set forth in 
this release;
     Additional or different changes regarding asset-backed 
securities; or
     Other matters that may have an effect on the proposals 
contained in this release.

    We request comment from the point of view of investors in asset-
backed securities on their views of the proposals and any possible 
changes to the proposals. We also request comment from the point of 
view of issuers that would be subject to the requirements that would 
result from the proposals. We request comment from the view of 
underwriters or other participants in asset-backed securities 
transactions. With regard to any comments, we note that such comments 
are of greatest assistance to our rulemaking initiative if accompanied 
by supporting data and analysis of the issues addressed in those 
comments.

IV. Paperwork Reduction Act

A. Background

    Our proposals contain ``collection of information'' requirements 
within the meaning of the Paperwork Reduction Act of 1995 
(``PRA'').\297\ We are submitting our proposals to the Office of 
Management and Budget (``OMB'') for review in accordance with the 
PRA.\298\ The titles for the collection of information are:
---------------------------------------------------------------------------

    \297\ 44 U.S.C. 3501 et seq.
    \298\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.

(1) ``Form S-1'' (OMB Control No. 3235-0065);
(2) ``Form S-3'' (OMB Control No. 3235-0073);
(3) ``Form S-11'' (OMB Control No. 3235-0067);
(4) ``Form 10-K'' (OMB Control No. 3235-0063);
(5) ``Form 8-K'' (OMB Control No. 3235-0288);

[[Page 26708]]

(6) ``Regulation S-K'' (OMB Control No. 3235-0071); and
(7) ``Form 10-D'' (a proposed new collection of information).

    The regulations and forms listed as Items (1)-(6) were adopted 
pursuant to the Securities Act and the Exchange Act and set forth the 
disclosure requirements for registration statements, periodic reports 
and current reports filed with respect to asset-backed securities and 
other types of securities to ensure that investors are informed. Form 
10-D, if adopted, would represent a new form type for distribution 
reports currently filed under cover of Form 8-K under the modified 
reporting system for asset-backed securities, or ABS. The hours and 
costs associated with preparing, filing and sending these forms 
constitute reporting and cost burdens imposed by each collection of 
information. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid OMB control number.
    We are proposing to address comprehensively the registration, 
disclosure and reporting requirements for asset-backed securities under 
the Securities Act and the Exchange Act. This includes providing 
tailored disclosure requirements and guidance for Securities Act and 
Exchange Act filings involving asset-backed securities. This 
information is needed so that security holders can make informed 
investment decisions regarding asset-backed securities. ABS issuers and 
ABS differ from operating companies and their securities. Many of the 
Commission's existing disclosure and reporting requirements applicable 
to operating companies generally do not elicit information that is 
relevant for ABS transactions. Through the staff filing review process 
and, where necessary, through staff no-action letters and interpretive 
statements, an informal disclosure and reporting scheme has developed 
taking into account evolving industry practices.
    With some exceptions noted below, our proposals consolidate and 
codify current staff positions and industry practice. We propose a new 
principles-based set of disclosure items, ``Regulation AB,'' as a sub-
part of Regulation S-K that would form the basis for disclosure in both 
Securities Act registration statements and Exchange Act reports. 
Amendments to the forms referenced above (other than Form S-11) would 
specify the menu of disclosure items that apply to asset-backed 
securities, including items contained in new Regulation AB and a 
limited number of pre-existing disclosure requirements identified in 
the forms.\299\
---------------------------------------------------------------------------

    \299\ We are proposing to move all Securities Act registrations 
of ABS offerings to Form S-1 or Form S-3. Correspondingly, we are 
reducing our estimate of responses on Form S-11.
---------------------------------------------------------------------------

    These disclosure changes are designed to establish a tailored 
disclosure system for asset-backed securities offerings. Compliance 
with the revised disclosure requirements would be mandatory. There 
would be no mandatory retention period for the information disclosed, 
and responses to the disclosure requirements would not be kept 
confidential.

B. Revisions to PRA Reporting and Cost Burden Estimates

    Our existing PRA burden estimates for each of the affected 
collections of information are based on an average of the time and cost 
incurred by all types of public companies, not just ABS issuers, to 
prepare a particular information collection. As noted above, however, 
the existing disclosure and reporting system with respect to ABS that 
we propose to codify recognizes that information relevant to ABS 
differs substantially from that relevant to other securities. For each 
information collection discussed below, we first estimate the average 
number of hours that an ABS issuer currently spends to complete one of 
the listed forms. We then estimate the incremental burden change that 
would result if the Commission adopted the proposed changes. The staff 
estimated the average number of hours each ABS issuer currently spends 
completing the form by contacting a number of issuers and other persons 
regularly involved in completing the forms.
    Each entity that files reports with the Commission is assigned a 
Standard Industrial Classification (SIC) code to indicate the entity's 
type of business. SIC Code 6189 is used with respect to asset-backed 
securities. Entities assigned this SIC Code were used as a proxy for 
estimating the number of responses with respect to ABS issuers. In 
addition, unless otherwise specified below, all estimates of the number 
of responses are based on filings made during the Commission's 2003 
fiscal year: October 1, 2002 through September 30, 2003.
1. Form S-3
    Our current PRA burden estimate for Form S-3 is 398 hours per 
response. This estimate is based on the assumption that most disclosure 
regarding the issuer is incorporated by reference from separately 
required Exchange Act reports. However, because an Exchange Act 
reporting history is not an ABS condition for Form S-3 eligibility, ABS 
issuers using Form S-3 often must present all of their disclosure in 
the registration statement in lieu of incorporating it by reference. As 
a result, our burden estimate for ABS issuers using Form S-3 under 
existing requirements is similar to our Form S-1 burden estimate for 
asset-backed securities, given that all Form S-1 disclosure also must 
be provided in the form itself.
    During our 2003 fiscal year, we received 168 Form S-3 filings 
related to asset-backed securities compared to 1,695 Form S-3 filings 
overall. We estimate that currently it takes an ABS issuer an average 
of 1,000 hours to prepare a Form S-3 for an ABS offering. We estimate 
that 25% of the burden is borne by the ABS issuer and that 75% of the 
burden is borne by outside professionals retained by the issuer at an 
average cost of $300 per hour.\300\
---------------------------------------------------------------------------

    \300\ This estimate is consistent with the estimate of the 
allocation of the burden for non-ABS issuers on Form S-1 where all 
of the required information must be included in the form. The staff 
estimated the average hourly rate for outside professionals by 
contacting a number of issuers and other persons regularly involved 
in completing the forms.
---------------------------------------------------------------------------

    We propose to add a separate general instruction to Form S-3 to 
specify the disclosure to be provided with respect to ABS offerings. 
Our proposed disclosure requirements are based to a large extent on the 
disclosures that appear in ABS Form S-3 filings today. We do, however, 
propose to require a few additional items that may not appear in all 
ABS Form S-3 filings today. We preliminarily believe this information 
already should be readily available to issuers even if not currently 
disclosed, although some information would require additional attention 
and diligence before its use in a registration statement. For example, 
we propose to require delinquency and loss information to be provided 
on a static pool basis. While the information is, we believe, 
available, additional time and expense will be involved in including it 
in registration statements. Our proposals also are designed to elicit 
more disclosure regarding the background, experience, performance and 
roles of various transaction parties, including the sponsor, the 
servicer and the trustee. Other examples of disclosure that may be 
incremental include:
     How delinquencies and charge-offs are defined and 
determined;
     The use of prefunding periods, revolving periods and 
master trust structures;

[[Page 26709]]

     The realization of residual values in lease-backed ABS;
     The impact of differing legal and regulatory requirements 
in foreign ABS; and
     Fees and expenses, including a fee and expense table.
    We estimate that completing and filing a Form S-3 if the new 
disclosure requirements are adopted would result in an average increase 
of approximately 25% to our estimate of the current Form S-3 reporting 
burden imposed on ABS issuers. As a result, we estimate that, on 
average, completing and filing a Form S-3 to register ABS if the new 
disclosure requirements were adopted would result in a burden of 1,250 
hours, an increase of 250 hours per response over the current burden. 
Using our estimates of the percentages of the burden prepared by the 
issuer and outside professionals, we thus estimate that the proposals 
would result in an added annual burden of 10,500 hours (168 filings x 
250 additional hours x .25) and an added annual cost of $9,450,000 (168 
filings x 250 additional hours x .75 x $300 per hour).
2. Form S-1 and Form S-11
    Our current PRA burden estimate for Form S-1 is 1,749 hours per 
response. Unlike Form S-3, this estimate is based on the assumption 
that all required disclosure is presented in the form. However, as 
noted above, like Form S-3, the disclosure provided with respect to a 
registered ABS offering currently differs from that provided with 
respect to operating companies.
    During our 2003 fiscal year, we received 7 Form S-1 filings related 
to asset-backed securities compared to 247 Form S-1 filings overall. In 
addition, we received 18 filings on Form S-11 related to asset-backed 
securities. We are proposing to move all Securities Act registrations 
of ABS offerings to Form S-1 or Form S-3. Assuming that the filings on 
Form S-11 could not otherwise be conducted on Form S-3, we estimate 
that these filings would instead be made on Form S-1. Thus, we estimate 
that there would be 25 ABS offerings registered on Form S-1. We are 
correspondingly reducing our estimate of responses on Form S-11 by 18 
responses.
    For ABS filings on Form S-1, we are using the same estimate as for 
ABS filings on Form S-3, given that the disclosures in both filings are 
substantially similar.\301\ Thus, we estimate that an ABS Form S-1 
filing currently imposes a reporting burden of an average 1,000 hours 
per response. As with Form S-3, we estimate that 25% of the burden is 
borne by the ABS issuer and that 75% of the burden is borne by outside 
professionals retained by the issuer at an average cost of $300 per 
hour.
---------------------------------------------------------------------------

    \301\ The presentation of the disclosure may be somewhat 
different if the offering on Form S-3 is to be conducted on a 
delayed, or ``shelf,'' basis. In that case, the Form S-3 will 
typically consist of a base prospectus and prospectus supplement in 
lieu of a single document. However, the content of the disclosures 
should be substantially similar.
---------------------------------------------------------------------------

    As with Form S-3, we propose to add a separate general instruction 
to Form S-1 to specify the disclosure to be provided with respect to 
ABS offerings. These disclosures would be substantially similar to 
those required for Form S-3 filings. As a result, we estimate that 
completing and filing a Form S-1 if the new disclosure requirements 
were adopted would result in an increase of approximately 25% over the 
amount of time currently spent by ABS issuers to complete and file the 
form. This results in a revised estimate of 1,250 hours per response, 
an increase of 250 hours per response over the current reporting 
burden. Using our estimates of the percentages of the burden prepared 
by the issuer and outside professionals, we thus estimate that the 
proposals would result in an added annual burden of 1,563 hours (25 
filings x 250 additional hours x .25) and an added annual cost of 
$1,406,250 (25 filings x 250 additional hours x .75 x $300 per hour).
3. Form 10-K
    Our current PRA burden estimate for Form 10-K is 2,196 hours per 
response. Similar to Securities Act registration statements, however, 
the ongoing periodic and current reporting requirements applicable to 
operating companies under the Exchange Act differ substantially from 
the reporting that is most relevant to investors in asset-backed 
securities. The Commission staff has developed a system of modified 
Exchange Act reporting for ABS issuers. This includes a modified annual 
report on Form 10-K involving a reduced amount of disclosure than for 
operating companies. In addition to a limited menu of Form 10-K 
disclosure items, the ABS issuer must file as exhibits to the Form 10-K 
a servicer compliance statement and a report by an independent public 
accountant. Asset-backed issuers are required to include a 
certification required by Section 302 of the Sarbanes-Oxley Act in 
their Form 10-K reports. The staff has provided a tailored form of 
certification for use with ABS annual reports that we now propose to 
codify, with minor revisions.
    Based on filings in our 2003 fiscal year, we estimate 1,200 Form 
10-K filings related to asset-backed securities.\302\ Under the 
modified reporting system, we estimate that currently it takes an ABS 
issuer an average of 90 hours to prepare a Form 10-K. We estimate that 
25% of the burden is borne by the ABS issuer and that 75% of the burden 
is borne by outside professionals retained by the issuer at an average 
cost of $300 per hour.
---------------------------------------------------------------------------

    \302\ This estimate is based on the number of final prospectuses 
filed pursuant to Securities Act Rule 424(b) during this period with 
respect to asset-backed securities. For most ABS offerings, the 
filing of the prospectus under Rule 424(b) for a takedown of 
securities results in a new issuing entity and a separate Exchange 
Act reporting obligation. However, some issuers had been filing 
``combined'' reports of filing one Form 10-K covering multiple 
issuing entities. We are using this estimate to reflect the 
approximate number of Form 10-K filings that would have been made by 
ABS issuers in the absence of combined reporting.
---------------------------------------------------------------------------

    We propose to add a separate general instruction to Form 10-K to 
specify the disclosure to be provided with respect to ABS offerings. As 
with Securities Act registration statements, our proposed disclosure 
requirements are based on the disclosures that appear in ABS Form 10-K 
filings today. While the proposed disclosures are generally consistent 
with the disclosures provided today, the most significant difference 
between our proposed disclosure requirements and the average disclosure 
that appears today is with respect to the assessment of compliance with 
servicing criteria. The most common compliance framework being used 
today is the Mortgage Bankers Association of America's Uniform Single 
Attestation Program, or USAP. Our proposed criteria are intended to be 
incrementally broader than the USAP criteria to cover the full spectrum 
of servicing activities. Our proposals also would require additional 
disclosure in the Form 10-K report if any material instances of 
noncompliance were identified.
    Under these assumptions, we estimate that completing and filing a 
Form 10-K if the new disclosure requirements were adopted would result 
in an average increase of approximately 33% over the amount of time 
currently spent by entities completing the form. In deriving this 
estimate, we believe that many issuers will experience costs in excess 
of this average in the first year of compliance with the proposals. We 
believe that costs will decrease in subsequent years. This burden also 
will vary among issuers based on the complexity of the ABS transaction, 
the

[[Page 26710]]

number of parties involved, especially servicers, and the nature and 
level of initial development of their compliance procedures. We have 
considered all of these factors in formulating our proposed estimates.
    As a result, we estimate that, on average, completing and filing a 
Form 10-K if the new disclosure requirements are adopted would impose a 
reporting burden on ABS issuers of 120 hours, an increase of 30 hours 
over the current Form 10-K reporting burden for ABS issuers. Using our 
estimates of the percentages of the burden prepared by the issuer and 
outside professionals, we thus estimate that the proposals would result 
in an added annual burden of 9,000 hours (1,200 filings x 30 additional 
hours x .25) and an added annual cost of $8,100,000 (1,200 filings x 30 
additional hours x .75 x $300 per hour).
    We do not believe that the proposed amendments with respect to the 
Section 302 certification result in a need to alter the burden 
estimates. These amendments merely reflect conforming amendments 
already incorporated in the OMB burden estimates (e.g., relocating the 
certifications from the text of annual report to the ``Exhibits'' 
section of the report) and minor changes to the wording of the Section 
302 certification that do not alter the burden estimates that we 
previously submitted to OMB.
4. Form 8-K
    Our current PRA burden estimate for Form 8-K is 5 hours per 
response. This is based on the use of that report to disclose the 
occurrence of certain defined reportable events, some of which are 
applicable to asset-backed securities. However, under the existing 
modified reporting system, ABS issuers also use Form 8-K to file 
periodic distribution and pool performance information. To separate 
this reporting from the disclosure of current events, we propose one 
new form type for asset-backed securities, Form 10-D, to act as the 
report for the periodic distribution and pool performance information. 
Form 8-K would continue to prescribe certain reportable events that 
would require current disclosure by ABS issuers. Form 8-K also would 
continue to be available to report any events that an ABS issuer deems 
to be of importance to security holders.
    During our 2003 fiscal year, we received 12,633 Form 8-K filings 
related to asset-backed securities compared to 58,421 Form 8-K filings 
overall. Based on filings in our 2003 fiscal year, we estimate 9,500 
filings that would include distribution and pool performance 
information that would instead appear in Form 10-D under our 
proposals.\303\ Accordingly, assuming that our proposals are adopted, 
we estimate that there would be a decrease of 9,500 in the total number 
of Form 8-K filings.
---------------------------------------------------------------------------

    \303\ This estimate also reflects the approximate number of 
distribution report filings that would have been made by ABS issuers 
in the absence of combined reporting.
---------------------------------------------------------------------------

    We estimate that the time it takes to prepare a Form 8-K for a 
reportable event does not vary between an ABS and a non-ABS issuer. 
Thus, we estimate that an ABS issuer spends, on average, approximately 
5 hours completing the form. As with our estimates for non-ABS issuers, 
we estimate that 75% of the burden is borne by the ABS issuer and that 
25% of the burden is borne by outside professionals retained by the 
issuer at an average cost of $300 per hour.
    We propose to add a separate general instruction to Form 8-K to 
specify the events that would require disclosure under that form. 
Several reportable events would be excluded with respect to ABS 
issuers, and a few additional events specific to asset-backed 
securities would be added. We also propose clarifying amendments to 
several existing reportable events to identify how they should apply to 
asset-backed securities.
    We estimate that, on average, completing and filing a Form 8-K if 
the proposals were adopted would require the same amount of time 
currently spent by entities to complete the form-approximately 5 hours. 
We do estimate that the number of reportable events on Form 8-K would 
increase with respect to asset-backed securities as a result of the 
proposals. For purposes of the PRA, we estimate that the proposals 
would cause, on average, an increase of two reports on Form 8-K per ABS 
issuer per year. Based on our estimate of 1,200 ABS issuers, we 
estimate an increase of 2,400 Form 8-K filings per year. Using our 
estimates of the percentages of the burden prepared by the issuer and 
outside professionals, we thus estimate that the proposals would result 
in an added annual burden of 9,000 hours (2,400 filings x 5 hours x 
.75) and an added annual cost of $900,000 (2,400 filings x 5 hours x 
.25 x $300 per hour).
5. Proposed Form 10-D
    As discussed above, proposed Form 10-D would be the new form type 
under which ABS issuers would file their periodic distribution and pool 
performance information. As discussed above, we estimate that there 
would be 9,500 Form 10-D filings per year. The proposed disclosure 
content for Form 10-D would consist of the distribution and pool 
performance information for the distribution period as well as certain 
non-financial disclosures, similar to those required by Part II of Form 
10-Q, that occurred during the period. The requirement with respect to 
distribution and pool performance information would require the 
registrant to provide the information required by proposed Item 1119 of 
Regulation AB and to attach as an exhibit to the Form 10-D the 
distribution report delivered to the trustee or security holders, as 
the case may be, pursuant to the transaction agreements for the related 
distribution date. However, any information required by Item 1119 of 
Regulation AB that was included in the attached distribution report 
would not need to be repeated in the Form 10-D. As a result, and as is 
typically the case today with distribution reports filed under Form 8-
K, we estimate that on average no additional information is likely to 
be required in the Form 10-D with respect to distribution or pool 
performance.
    Accordingly, we are not including preparation of the distribution 
report in our burden hour estimates for preparing Form 10-D. We do 
estimate that it would take approximately 6 hours to assemble the 
distribution report with the Form 10-D for filing. We also propose a 
few incremental disclosures regarding distribution and pool performance 
information, such as those relating to the changes to the asset pool, 
that may not be required in the average distribution report today. We 
estimate that these disclosures would result in an average of 10 hours 
per filing. Finally, we estimate the remaining disclosures for the Form 
10-D, such as the disclosures required by Part II of Form 10-Q, would 
result in an average of 14 hours per filing.
    As a result, we estimate that, on average, completing and filing a 
Form 10-D if the new proposals were adopted would impose a burden of 30 
hours per filing. As with our other estimates for Exchange Act reports 
by non-ABS issuers, we estimate that 75% of the burden is borne by the 
ABS issuer and that 25% of the burden is borne by outside professionals 
retained by the issuer at an average cost of $300 per hour. We thus 
estimate that proposed Form 10-D would result in a total annual burden 
of 213,750 hours (9,500 filings x 30 hours x .75) and an added annual 
cost of $21,375,000 (9,500 filings x 30 hours x .25 x $300 per hour). 
It should be noted, however, that this reflection of the burden 
predominantly consists of codifying the already existing requirements 
applicable under

[[Page 26711]]

the modified reporting system where such filings appear under cover of 
Form 8-K and are offset by our corresponding reduction in our estimated 
number of Form 8-K's that would be filed.
6. Regulation S-K
    Regulation S-K includes the requirements that an issuer must 
provide in filings under both the Securities Act and the Exchange Act. 
Our proposed disclosure changes would include changes to items under 
Regulation S-K and the addition of a new subpart to Regulation S-K--
Regulation AB--that would provide disclosure items particularly 
tailored to asset-backed securities.\304\ However, as noted above, the 
filing requirements themselves are included in Forms S-1, S-3, 10-K and 
8-K and proposed Form 10-D. We have reflected the burden for the new 
requirements in the burden estimates for those forms. The items in 
Regulation S-K, including proposed Regulation AB, do not impose any 
separate burden. We assign one burden hour to Regulation S-K for 
administrative convenience to reflect the fact that the regulation does 
not impose any direct burden on companies.
---------------------------------------------------------------------------

    \304\ We also are proposing technical changes to Regulation S-B, 
which includes the requirements that a small business issuer must 
provide in the Securities Act and the Exchange Act similar to 
Regulation S-K. These technical changes are designed to clarify that 
Regulation S-B is inapplicable to asset-backed securities. Like, 
Regulation S-K, Regulation S-B does not impose any separate burden. 
We previously have assigned one burden hour to Regulation S-B for 
administrative convenience to reflect the fact that the regulation 
does not impose any direct burden on companies.
---------------------------------------------------------------------------

C. Request for Comment
    We request comment in order to (a) evaluate whether the proposed 
collections of information are necessary for the proper performance of 
the functions of the Commission, including whether the information will 
have practical utility; (b) evaluate the accuracy of our estimates of 
the burden of the proposed collections of information; (c) determine 
whether there are ways to enhance the quality, utility, and clarity of 
the information to be collected; (d) evaluate whether there are ways to 
minimize the burden of the collections of information on those who 
respond, including through the use of automated collection techniques 
or other forms of information technology; and (e) evaluate whether the 
proposals will have any effects on any other collections of information 
not previously identified in this section.
    Any member of the public may direct to us any comments concerning 
the accuracy of these burden estimates and any suggestions for reducing 
the burdens. Persons who desire to submit comments on the collection of 
information requirements should direct their comments to the OMB, 
Attention: Desk Officer for the Securities and Exchange Commission, 
Office of Information and Regulatory Affairs, Washington, DC 20503, and 
send a copy of the comments to Jonathan G. Katz, Secretary, Securities 
and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-
0609, with reference to File No. S7-21-04. Requests for materials 
submitted to the OMB by us with regard to these collections of 
information should be in writing, refer to File No. S7-21-04, and be 
submitted to the Securities and Exchange Commission, Records 
Management, Office of Filings and Information Services, 450 Fifth 
Street, NW., Washington, DC 20549. Because the OMB is required to make 
a decision concerning the collections of information between 30 and 60 
days after publication, your comments are best assured of having their 
full effect if the OMB receives them within 30 days of publication.

V. Cost-Benefit Analysis

    The proposed rules and Regulation AB codify staff and industry 
practice for public offerings of asset-backed securities with 
incremental changes. They would provide definitive rules for these 
offerings registered under the Securities Act as well as ongoing 
reporting by asset-backed issuers under the Exchange Act. In this 
section, we examine the benefits and costs of our proposed rules. We 
request that commenters provide views along with supporting data as to 
the benefits and costs associated with the proposals.
    The Commission's corporate offering and disclosure rules were not 
designed to accommodate some of the special characteristics of ABS 
offerings. The current offering and disclosure process for ABS has 
developed through no-action letters, staff comment, market practice and 
informal staff interpretations. This current informal regulatory regime 
for asset-backed offerings is sub-optimal for a well-developed market 
that represents a large portion of the U.S. capital markets. The 
accumulated informal guidance has diminished the transparency of 
applicable requirements, potentially decreasing efficiency and leading 
to uncertainty and common problems. Many issuers, investors and other 
market participants have requested a defined set of regulatory 
requirements.\305\ Many compliance issues may be mitigated and 
potential issues avoided through clearer and more transparent 
regulatory requirements. Establishing clear and transparent 
requirements also could reduce costs to entry into the market. As a 
result, the proposals to codify staff position and industry practice 
with incremental changes would clarify and simplify the process of 
registering an ABS offering. This should lower the overall costs of 
complying with the federal securities laws.
---------------------------------------------------------------------------

    \305\ See note 55 above.
---------------------------------------------------------------------------

    In order to improve an investor's understanding of an ABS offering, 
we propose incremental enhancements to disclosure regarding the 
participants involved in the ABS transaction and of historical data 
regarding the performance of the assets backing the current and prior 
comparable asset-backed offerings, known as static pool data. We 
propose to improve the current framework for reporting on compliance 
with servicing criteria that would operate within a disclosure-based 
framework and cover the entire spectrum of the servicing function in an 
ABS transaction. An independent public accountant would attest under 
recognized professional standards for attestation to the responsible 
party's assertion of compliance with the servicing criteria. We also 
propose incremental changes to current staff and industry practice to 
allow certain lease-backed and other ABS immediate access to shelf 
registration through Form S-3 eligibility, along with incremental 
disclosure to address the different nature of these offerings. In 
addition, we are proposing to allow additional asset types to be 
securitized through master trusts or through transactions using a 
revolving period, again with incremental disclosure to add transparency 
to the use of these structures and potential changes to the asset pool 
over time. We are relaxing restrictions on incorporation by reference. 
We also are proposing to give foreign issuers access to shelf offerings 
and Form S-3. Finally, we are providing interpretive guidance in a 
number of areas in addition to proposed rule changes, such as guidance 
regarding the preparation of base prospectuses and prospectus 
supplements and EDGAR reporting, to establish more clear and uniform 
practices across the ABS market.

[[Page 26712]]

A. Parties Eligible To Use the New Regulatory Structure

    The definition of asset-backed security would no longer be limited 
to those issuers eligible to register securities on Form S-3 but 
expanded to any type of security that meets the proposed definition of 
an asset-backed security. This would bring all ABS transactions and 
issuers into an appropriate disclosure system regardless of what 
Securities Act form they were eligible to use.
    Our proposals would codify several clarifying interpretations of 
existing staff positions to recognize and build upon the operational 
and structural distinctions between ABS and non-ABS transactions. The 
current staff position regarding non-performing assets and delinquent 
assets would be incorporated into the definition of an asset-backed 
security with clarifying guidance as to how these concepts are to be 
determined. However, in codifying staff positions, we also are 
proposing to expand some of them to allow additional asset types and 
transaction features to be included. For example, the definition of 
asset-backed security would be expanded so that additional lease-backed 
ABS would be included. The proposals would allow structures such as 
master trusts and revolving periods, currently allowed by the staff for 
only certain asset classes, to be used by all asset-backed issuers. 
Therefore, if the market found these structures attractive for other 
asset classes, asset-backed issuers could effectively utilize the 
structures in their ABS offerings. We propose to increase disclosure to 
provide greater transparency of changes to pool composition.
    The proposed definition and interpretations are intended to 
establish parameters for the types of securities that are appropriate 
for our proposed alternative regulatory regime for ABS. The proposals 
would not mean or imply that public offerings of securities outside of 
these parameters may not be registered, but only that the disclosure 
and other requirements in the ABS regime are not designed for those 
securities. Such securities would need to rely on non-ABS form 
eligibility for registration, and additional disclosures would be 
required. This may mean that on the margins the proposed requirements 
may influence market practice. However, we have taken an expansive 
approach to the concept of what is an ``asset-backed security'' to 
minimize such instances and to allow flexibility in market 
developments.

B. Securities Act Registration

    We propose to allow domestic and foreign issuers to use either Form 
S-1 or Form S-3 to register an offering of asset-backed securities. 
Transactions backed by additional lease pools also would be allowed to 
use Form S-3 under the proposal. This will provide the benefit of 
delayed offerings to foreign issuers and some issuers of ABS backed by 
lease pools. We believe this will make the offering process less costly 
for these issuers. We propose to require additional disclosure for 
these two types of offerings to provide investors with a clear 
understanding of the unique issues these offerings raise. To remove 
regulatory uncertainty for issuers, we propose to codify a number of 
current staff positions, including clarifying and streamlining the 
conditions when a distribution of underlying pool assets must be 
concurrently registered with the distribution of ABS. We also propose 
to codify current staff position that the depositor should sign the 
registration statement and who is considered the issuer for Securities 
Act purposes. In very limited situations, the staff required the 
issuing entity to sign the registration statement. As this did not 
appear to provide any significant benefit to investors, and in some 
cases, may have added costs to issuers, we have not codified this 
position. We believe the proposed rules for Securities Act registration 
would increase transparency of the current informal regulatory regime 
for issuers of asset-backed securities, provide increased flexibility 
for additional ABS transactions and help the asset-backed securities 
market function more efficiently.
    The proposals would revise the instructions for Form S-1 and Form 
S-3 for registered asset-backed offerings to clarify those items under 
Regulation S-K that an issuer would be required to disclose, if 
applicable, and list the items that an issuer would not be required to 
disclose due to the different nature of the ABS transactions. The 
instructions for Form S-1 and Form S-3 would include additional 
disclosure items under Regulation AB, a proposed set of principles-
based disclosure requirements for ABS discussed in the next section. We 
believe the proposed instructions integrate disclosure items for the 
respective forms, which will reduce compliance costs and provide 
certainty about the disclosure requirements for issuers while promoting 
relevant disclosure for investors. We request comment on the type and 
amount of any potential costs the proposed rules for an asset-backed 
offering would place on issuers or investors.
    The proposals for Form S-3 eligibility would remain essentially the 
same as under existing practice. We do propose codifying that reporting 
obligations regarding other ABS transactions established by the 
depositor have been complied with for the prior 12 months for continued 
Form S-3 eligibility for new transactions, which is consistent with 
existing staff policy. We propose to expand this requirement to also 
cover the reporting history of transactions by the sponsor. This is in 
order to avoid a sponsor merely setting up a new special purpose entity 
to obtain Form S-3 eligibility when prior transactions have not 
complied with Exchange Act reporting. While we believe the instances 
when this requirement would not be met should be rare, it could have 
the effect of foreclosing certain issuers from Form S-3 eligibility if 
they violate reporting requirements for other transactions. However, we 
do not believe it would be appropriate to continue to allow the 
benefits of shelf registration to new transactions established by the 
same market participants that have not complied with ongoing reporting 
obligations involving previous transactions.
    We propose to codify an existing no-action position that broker-
dealers involved in Form S-3 ABS transactions do not need to deliver a 
copy of the preliminary prospectus 48 hours prior to sending a 
confirmation of sale. The proposal would de-link this exclusion from 
the current requirement that the ABS transaction not include a 
prefunding account larger than 25% of the pool. We propose to put the 
25% prefunding limitation in Form S-3 eligibility, but allow prefunding 
accounts up to 50% to be used in transactions registered on Form S-1, 
which is consistent with the treatment of revolving periods. We believe 
codifying this position will benefit issuers in the distribution 
process, but we request comment from investors as to whether this will 
increase their burden by significantly increasing the number of 
transactions that are sold within compressed timeframes. We also 
request comment from issuers if moving transactions with prefunding 
levels between 25% to 50% of the pool to Form S-1 causes any material 
burden.

C. Disclosure

    The proposed disclosure items under Regulation AB would provide a 
disclosure structure tailored to the different nature of ABS. We 
anticipate the proposals would assist issuers and

[[Page 26713]]

investors by clarifying the disclosure requirements. In addition, the 
proposal:

     Confirms that financial statements of the issuing 
entity are not required for ABS transactions;
     Clarifies when third party financial information is 
required; and
     Codifies when third party financial information may be 
incorporated by reference or referred to in registration statements.

    The proposed disclosure required under Regulation AB is largely 
based on current market practices and therefore the increase in costs 
to issuers should be measured. Recognizing that it would be impractical 
to provide an exhaustive list of disclosure items for each asset class, 
the proposed disclosure requirements are principles-based and thus 
provide flexibility for issuers where doing so would yield more focused 
and descriptive disclosure for investors and reduce the burden for 
issuers. We believe the proposal attempts to mitigate the possibility 
that immaterial information may overwhelm the disclosure by keying many 
disclosure items to a materiality-based standard. Thus, the proposed 
disclosure gives registrants, underwriters and their advisors the 
opportunity to balance the need for registrants to have flexibility 
when drafting disclosure with investors' need for more transparency. 
Whether they will take advantage of this opportunity is largely their 
decision.
    The proposals attempt to increase transparency regarding roles and 
qualification of parties involved in the offering and on-going 
activities of the ABS transaction. Various market participants have 
indicated there has been confusion over the roles of parties in 
particular transactions or types of transactions. Similarly, market 
participants have indicated the role of the servicer and its servicing 
practices can materially impact an ABS transaction. In addition, 
investors have repeatedly requested that we require static pool data. 
According to these investors, this proposed disclosure would assist 
investors in analyzing the origination trends of the sponsor's overall 
portfolio, which would provide material information on both the quality 
and experience of pool selection and asset performance. As with many 
other disclosure items, we believe it would be impractical to impose 
standardized requirements that would be applicable and efficient for 
all transactions regarding disclosure of this data. Accordingly, the 
static pool data required would be keyed to the data material to the 
transaction. We understand almost all issuers already have static pool 
information available, although it may have to be subjected to 
additional procedures and diligence before it is included in disclosure 
documents. We nonetheless believe preliminarily that it should not 
present a significant burden to issuers, while it will improve 
transparency for investors in ways that investors have indicated is 
important. As noted below, we request comment on the type and magnitude 
of the burden these disclosure requirements would represent to issuers.
    The proposed expanded disclosure would offer a greater 
understanding of the background, previous experience, and specific role 
of the sponsor, depositor, servicer and trustee. The proposed 
disclosure on the asset underwriting criteria of the sponsor would 
provide a clear understanding of the type of assets investors should 
expect in the asset pool. Some discussion of underwriting criteria is 
currently included, although it is typically minimal. We do not believe 
the costs to prepare the proposed disclosure should substantially 
increase. The proposed disclosure on servicing practices of all 
servicers materially involved in the maintenance of the asset pool and 
the existence of contractual back-up servicing is indicative of the 
importance of the servicer to the ongoing performance of the ABS 
transaction. We believe the proposals would stimulate higher quality 
disclosures of key aspects of the ABS transaction and its participants, 
which would yield more relevant information available to investors and 
allow them to make better-informed investment choices and potentially 
reduce the likelihood that pool assets or an ABS transaction will 
perform dramatically different than anticipated by investors.
    This proposed disclosure under Regulation AB may increase the costs 
to issuers of asset-backed securities. The proposed disclosure is 
intended to enhance the utility of the disclosure in registration 
statements and ongoing Exchange Act reports. Issuers may need to 
reevaluate current disclosure from prior registration statements to 
determine the scope of additional information. We also encourage 
issuers to evaluate whether they should eliminate immaterial 
boilerplate disclosure that is not required under Regulation AB and 
that does not aid understanding, but that they currently provide. Due 
to the informal nature of the current requirements, issuers may be 
unnecessarily including information that is not relevant or helpful to 
investors. Issuers may need to employ additional resources, including 
in-house personnel and outside legal counsel, to assist in this 
evaluation. We anticipate that most of these costs may be short-term or 
one-time costs in preparing the first registration statement under the 
proposed codified disclosure regime.
    We also estimate that issuers may need extra time to prepare the 
proposed information or obtain such information from the respective 
parties to the ABS transaction. However, we believe that parties 
already provide much of this information to rating agencies during the 
process of obtaining a rating on the offering, and thus such 
information should be readily available. Therefore, we do not 
anticipate that issuers would incur significant costs in complying with 
the proposed disclosure regime.
    For purposes of the Paperwork Reduction Act, we estimate that the 
incremental burden in preparing the additional Securities Act 
disclosures would be on average 250 hours per registration statement. 
Based on our estimated costs of in-house personnel time, we estimate 
the incremental PRA hour-burden would translate into an approximate 
cost of $12,967,275.\306\ We request comment on the type, amount and 
duration of any additional costs to comply with the proposed disclosure 
regime. These additional compliance costs should result in consistent 
and more tailored information that may assist the capital markets in 
properly valuing asset-backed securities. These benefits are difficult 
to quantify.
---------------------------------------------------------------------------

    \306\ We estimate that the additional disclosures for Form S-1 
and Form S-3 would result in 12,063 internal burden hours and 
$10,856,250 in external costs. Assuming a cost of $175/hour for in-
house professional staff, the total cost for the internal burden 
hours would be $2,111,025. Hence the aggregate cost estimate is 
$12,967,275.
---------------------------------------------------------------------------

D. Communications During the Offering Process

    The proposals to codify the existing ability to use written 
communications outside of the registration statement prospectus 
recognize the current beneficial information these communications 
provide to potential investors in an ABS offering. The proposals would 
simplify the definitions of the written communications that an issuer 
may use and incrementally expand it by allowing the use of static pool 
data. The proposals also clarify that the scope of the written 
communications permits data at the individual pool asset level. Loan 
level data may in some cases assist investors in better understanding 
the nature of the individual loans included in the pool, which in turn 
may increase the quality of information available to investors.

[[Page 26714]]

    The proposals streamline the filing requirements for these 
communications by providing that all types of ABS informational and 
computational material be filed in the same timeframe, thus reducing 
the regulatory uncertainty for issuers as to when to file written 
communications. The proposals would eliminate the hardship exemption 
for filing these materials in paper rather than on EDGAR. Given the 
developments in our EDGAR system, we believe these materials can be 
filed easily on EDGAR. The proposals should increase the uniformity and 
timeliness of information received by investors as well as disseminated 
to the marketplace. Since all investors almost uniformly access 
Commission filings electronically, this proposal should significantly 
benefit them. We request comment on the cost to issuers of eliminating 
the EDGAR hardship exemption.
    We do not propose to change the scope or liability requirements of 
the material that may be used, so our proposals should not result in 
incremental costs from existing requirements. Staff in the Division of 
Corporation Finance is developing recommendations to the Commission on 
additional potential reforms to the Securities Act registration process 
for all offerings. We plan to address the issue of whether additional 
accommodations to the communications restrictions would be appropriate, 
including for ABS offerings, in connection with any recommendations on 
broader reforms.
    We also propose to codify an existing staff safe harbor regarding 
the use of research reports published or distributed by a broker or 
dealer involving ABS. Both the existing safe harbor and our proposal 
recognize the different nature of ABS by providing tailored conditions 
for ABS research reports. Given that the proposed safe harbor is 
consistent with the existing staff safe harbor, it too should not 
result in incremental costs.

E. Ongoing Reporting Under the Exchange Act

    We propose to integrate and streamline the modified reporting 
structure currently permitted by scores of no-action letters for 
issuers of asset-backed securities to meet their reporting obligations 
under the Exchange Act. The proposal clarifies who has the reporting 
obligation under the Exchange Act and who must file and sign the 
annual, periodic and current reports. The proposal differs from current 
practice of allowing trustees to sign since we believe either the 
depositor or the servicer is the party most able to monitor the ongoing 
Exchange Act reporting requirements of the ABS transaction. The 
proposal explains when the reporting obligation begins and may be 
terminated by the issuer. This should provide certainty to issuers as 
to when their reporting obligation is suspended.
    Our proposals would outline the required disclosure in the Exchange 
Act reports to ensure uniform reporting by issuers while reducing the 
information asymmetry between issuers and investors. We propose to 
codify the current requirements that periodic information be disclosed 
based on the periodicity of distributions on the securities. We believe 
most of the information we propose to require is typically disclosed in 
the current distribution reports. We request comment on the burden of 
any increased disclosure. Rather than filing these reports on Form 8-K, 
we propose that issuers use newly proposed Form 10-D for reporting 
periodic distributions to assist investors and the marketplace in 
distinguishing such distribution reports from the reporting of 
significant events relevant to the ABS transaction.
    We do not believe the use of Form 10-D rather than Form 8-K for 
filing these reports would result in additional costs beyond minimal 
one-time transition costs. Regarding the content of the Form 10-D, we 
do propose a few incremental disclosures, such as those relating to the 
changes to the asset pool. For purposes of the Paperwork Reduction Act, 
we estimate that the burden in preparing these incremental disclosures 
for the Form 10-D would be on average 10 hours per Form 10-D. Based on 
our estimated costs of in-house staff time, we estimate the incremental 
PRA hour-burden would translate into an approximate cost of 
$17,943,750.\307\
---------------------------------------------------------------------------

    \307\ We estimate that preparing the incremental disclosures 
would result in 71,250 internal burden hours and $7,125,000 in 
external costs. Assuming a cost of $175/hour for in-house 
professional staff, the total cost for the internal burden hours 
would be $12,468,750. Hence the aggregate cost estimate is 
$19,593,750. As Form 10-Q Part II information already is required 
under the modified reporting system, we do not estimate the 
codification of that reporting obligation would result in 
incremental costs.
---------------------------------------------------------------------------

    We have reviewed our recently revised Form 8-K requirements and 
propose the item requirements we believe should be applicable to ABS 
issuers. In addition, we propose several ABS-specific reportable events 
for Form 8-K disclosure. The separate filing of reportable events on 
Form 8-K will accelerate the delivery of information to the capital 
markets, which should enable investors to better monitor reportable 
events affecting the asset-backed securities or the relevant parties 
involved in the ABS transaction. Issuers of asset-backed securities may 
incur additional costs to report these events under a shorter 
timeframe; however, these additional costs should be consistent with 
the costs incurred by corporate issuers of other securities. For 
purposes of the PRA, we estimate that the proposals would cause, on 
average, an increase of two reports on Form 8-K per ABS issuer per 
year. Based on our estimated costs of in-house staff time, we estimate 
the PRA hour-burden would translate into an approximate cost of 
$2,475,000.\308\
---------------------------------------------------------------------------

    \308\ We estimate that the additional Form 8-K filings would 
result in 9,000 internal burden hours and $900,000 in external 
costs. Assuming a cost of $175/hour for in-house professional staff, 
the total cost for the internal burden hours would be $1,575,000. 
Hence the aggregate cost estimate is $2,475,000.
---------------------------------------------------------------------------

    Under the modified reporting no-action letters, ABS issuers include 
with their annual report on Form 10-K a report by an independent public 
accountant attesting to a responsible party's assertion of compliance 
with servicing criteria. We propose to codify this approach. Under this 
approach, audited financial statements of the issuing entity and 
reporting regarding internal control over financial reporting are not 
required. We also would propose to codify this practice because we 
believe the costs to provide audited financial statements and reporting 
regarding internal control over financial reporting would greatly 
outweigh any minimal benefits obtained from these requirements. We 
believe our current approach is more cost-effective and beneficial in 
ABS transactions.
    The current modified reporting system does not provide optimal 
transparency as to what is expected of issuers, servicers, accountants 
and other parties. We propose to enhance the current framework for 
reporting on compliance with a single set of transparent and 
comprehensive servicing criteria regarding an ABS transaction. The only 
framework generally used today is limited to a specific asset class, 
covers only limited servicing functions and represents minimum 
standards. Therefore, we believe the market would benefit by our 
proposed servicing criteria. We believe that the proposed disclosure-
based criteria would improve the quality of the assessment of 
compliance and elicit disclosure that is comparable among different 
issuers. We do request comment on whether alternate suitable criteria 
could be developed for purposes of the proposals.

[[Page 26715]]

    We propose that the responsible party and the registered public 
accounting firm would use the proposed servicing criteria in assessing 
and reporting on servicing compliance. We have attempted to provide 
flexibility by proposing servicing criteria that are principles-based 
and thus may be tailored to the servicing operations for ABS 
transactions of any asset class. In addition, we propose the assessment 
and reporting on the servicing criteria to operate within a disclosure-
based framework. For example, we would allow the responsible party to 
exclude the particular servicing criteria that are inapplicable to the 
servicing of a specific asset class provided that the inapplicability 
of the criteria was disclosed. In addition, the proposal would require 
the responsible party to disclose if a material instance of 
noncompliance with the proposed criteria exists to alert investors of 
potential problems with the servicing function. The proposal would not 
result in regulatory restrictions on market access such as Form S-3 
eligibility. This approach attempts to balance the need for responsible 
parties to have flexibility when drafting disclosure on the assessment 
of compliance with the proposed servicing criteria with investors' 
needs for more transparency.
    The proposed criteria cover the full spectrum of servicing asset-
backed securities thereby facilitating an evaluation of the servicing 
activities by the responsible party regardless of whether those 
servicing activities are conducted by the responsible party or other 
parties, such as sub-servicers. We believe one of the critical 
components is calculation of the payments on the securities, also 
referred to as the ``waterfall.'' Our proposal attempts to cover this 
part of the servicing function, which is not necessarily part of the 
scope of the current framework. This improved assessment would enable 
investors, other responsible parties to the transaction and ultimately 
the marketplace to analyze the operational quality of the entire 
servicing function, which should improve investor confidence in the 
overall performance of the asset-backed securities.
    We estimate that the proposed servicing criteria may impose new 
disclosure requirements on compliance assessments that do not presently 
utilize the current framework. Since the proposed servicing criteria 
are designed to evaluate servicing compliance, including compliance 
related to the waterfall, we estimate that the scope of compliance 
assessments may need to be enhanced to address these new disclosure 
requirements. We also understand that additional time and cost may be 
required to help assure that appropriate parties are accountable for 
reporting the applicable servicing criteria to the responsible party, 
which may include an internal assessment of servicing compliance or 
obtaining reports on servicing compliance from other parties involved 
in servicing. One of the benefits of a single responsible party 
approach would be assurance that all aspects of the servicing function 
have been assessed. To the extent that the responsible party and other 
parties involved in servicing do not maintain compliance with the 
proposed criteria and do not wish to publicly disclose this fact, the 
proposed disclosure-based criteria could lead to these parties 
instituting appropriate procedures to comply with the criteria and thus 
incur implementation costs. We request comment on the type, amount and 
duration of these costs.
    Consistent with the modified reporting system, we believe the 
requirement that a registered public accounting firm attest to the 
responsible party's assessment of compliance with a single set of 
servicing criteria is an important component of the proposal. The 
engagement of an independent accountant improves investor confidence by 
establishing an independent check on the responsible party's assessment 
of servicing compliance. In addition, the attestation by the 
independent accountant may detect material instances of noncompliance 
with the servicing criteria that may provide early warning signals of 
potential losses incurred by investors. The proposed attestation of the 
entire servicing function would increase the costs of preparing the 
annual report since the accounting costs would likely increase due to 
the increase in the breadth of servicing function covered. These costs 
should be mitigated since many of the proposed servicing criteria are 
based on the current framework and our criteria propose only 
incremental changes to the current framework.
    In addition to the proposed assessment of compliance with servicing 
criteria, we propose to continue requiring issuers to file a servicer 
compliance statement regarding compliance with material aspects of the 
servicing agreement. This codifies current practice and should not by 
itself result in any additional costs. We also propose to specify the 
form and content of the Sarbanes-Oxley Section 302 certification for 
ABS issuers consistent with existing staff practice. We propose minimal 
changes to the form to reflect our other Exchange Act proposals and to 
reflect the approach that the language of the certification must not be 
revised in providing the certification apart from the alternatives 
specified. Instead, any issues should be addressed through disclosure 
in the reports. We do not believe these revisions will result in 
incremental costs and should result in a more uniform and consistent 
certification process.
    For purposes of the Paperwork Reduction Act, we estimate that the 
incremental burden in preparing the Form 10-K, including the proposed 
assessment of compliance with servicing criteria, would be on average 
30 hours per response. Based on our estimated costs, we estimate the 
PRA hour-burden would translate into an approximate cost of 
$9,675,000.\309\ We request comment on the type, amount and duration of 
these costs. We believe this increased burden would result in benefits 
to the ABS market in terms of an enhanced assessment and disclosure 
regarding the servicing functions and increased assurance and investor 
confidence in these disclosures. These benefits are difficult to 
quantify.
---------------------------------------------------------------------------

    \309\ We estimate that the incremental burden would result in 
9,000 internal burden hours and $8,100,000 in external costs. 
Assuming a cost of $175/hour for in-house professional staff, the 
total cost for the internal burden hours would be $1,575,000. Hence 
the aggregate cost estimate is $9,675,000.
---------------------------------------------------------------------------

    We also reiterate existing staff view that the final prospectus and 
Exchange Act reports are to be separately filed under the CIK code and 
file number of the respective issuing entity on EDGAR. This facilitates 
access to information relevant to the particular securities involved. 
We anticipate that some issuers not following this existing practice 
may incur additional costs by preparing separate Exchange Act reports 
for each issuing entity because some issuers provide combined reports. 
However, we believe these costs will be limited since issuers are 
already reporting this information for a particular issuing entity, 
albeit in a combined report. Some of the issuers that combine reports 
do so for scores of issuers such that investors may have to sift 
through hundreds of pages that relate to securities they do not own. 
Further, combined reporting creates inefficiencies in the storage, 
retrieval and analysis of EDGAR information.

VI. Consideration of Impact on the Economy, Burden on Competition and 
Promotion of Efficiency, Competition and Capital Formation

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of

[[Page 26716]]

1996 (``SBREFA''),\310\ a rule is considered ``major'' where, if 
adopted, it results or is likely to result in:
---------------------------------------------------------------------------

    \310\ Pub. L. 104-121, Title II, 110 Stat. 857 (1996).

     An annual effect on the economy of $100 million or 
more;
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment 
or innovation.

We request comment on the potential impact of the proposals on the 
economy on an annual basis. Commenters are requested to provide 
empirical data and other factual support for their views if possible.
    Section 23(a)(2) of the Exchange Act \311\ requires us, when 
adopting rules under the Exchange Act, to consider the impact that any 
new rule would have on competition. In addition, Section 23(a)(2) 
prohibits us from adopting any rule that would impose a burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Exchange Act. Furthermore, Section 2(b) of the Securities Act 
\312\ and Section 3(f) of the Exchange Act \313\ require us, when 
engaging in rulemaking where we are required to consider or determine 
whether an action is necessary or appropriate in the public interest, 
to consider, in addition to the protection of investors, whether the 
action will promote efficiency, competition, and capital formation.
---------------------------------------------------------------------------

    \311\ 15 U.S.C. 78w(a)(2).
    \312\ 15 U.S.C. 77b(b).
    \313\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    The proposals are intended to increase transparency by amending 
informal industry and staff practices into a formal regulatory regime 
for offerings of asset-backed securities under the Securities Act and 
ongoing reporting under the Exchange Act. We anticipate that these 
proposals would enhance capital formation by simplifying the process of 
registering an offering of asset-backed securities allowing parties not 
fully immersed in the ABS market to ascertain and understand the 
offering and disclosure requirements, thus promoting efficiency and 
competitiveness of the U.S. capital markets for asset-backed offerings.
    Our specific proposals relate only to transactions that meet our 
proposed definition for an asset-backed security under the Securities 
Act. Although the definition for an asset-backed security captures most 
asset-backed structures, there may be transactions that are 
fundamentally different from the proposed definition. However, 
transactions that would not fit the parameters of the definition would 
still be able to access the capital markets. Instead, these 
transactions would be required to rely on non-ABS form eligibility for 
registration, and additional disclosures would be required.
    In addition, the proposed principles-based disclosure requirements 
would allow great flexibility in implementation for all asset classes 
while enhancing the quality of disclosure for ABS transactions. 
Similarly, the proposed servicing criteria are intended to provide a 
comprehensive assessment to evaluate the overall servicing function for 
the ABS transaction. We anticipate these proposals should improve 
investors' ability to make informed investment decisions about asset-
backed offerings as well as help increase investor confidence in the 
servicing of ABS transactions. We anticipate this would therefore lead 
to increased efficiency and competitiveness of the U.S. capital 
markets. Increased market efficiency and investor confidence also may 
encourage more efficient capital formation.
    The proposals could have certain indirect negative effects. For 
example, the proposed incremental disclosures would increase 
transparency regarding a sponsor's or servicer's business practices. 
However, all such parties would be required to disclose such 
information equally, and the increased disclosures are designed to 
facilitate information to investors to improve their ability to make 
informed investment decisions. In addition, if transactions in the 
private market for ABS or foreign markets do not result in similar 
disclosures, issuers could, all things being equal, migrate to those 
markets to avoid such disclosures. However, there may be limitations on 
the ability to migrate to these markets given the large size of the 
U.S. ABS market and potential regulatory or investment restrictions on 
the ability of investors to purchase non-public ABS. In addition, 
competitors and markets not subject to the proposed requirements may 
suffer from decreased investor confidence if the asset-backed offerings 
lack the transparency of asset-backed offerings that do comply with the 
disclosure regime.
    The proposals are designed to improve the current framework for 
reporting on compliance with servicing criteria that would operate 
within a disclosure-based framework and cover the entire spectrum of 
the servicing function. We believe the proposed servicing criteria will 
provide value to the ABS industry in establishing market-wide 
disclosure benchmarks and promote market efficiency by providing 
meaningful disclosure regarding the overall servicing function by a 
responsible party that is attested to by an independent public 
accountant. The disclosure-based framework of the servicing criteria 
would provide information about the entire servicing function to be 
publicly available for investors, as well as the marketplace, to 
monitor the performance of the ABS transaction. This should promote 
investor confidence and market efficiency by decreasing information 
asymmetries and promoting more efficient pricing and valuation of the 
securities. As a result, capital may be allocated more efficiently. In 
addition, the proposed servicing criteria would promote the 
comparability of reports of different issuers, thus promoting investor 
analysis as well as competition among such issuers.
    We request comment on whether the proposals, if adopted, would 
promote efficiency, competition and capital formation or have an impact 
or burden competition. Commenters are requested to provide empirical 
data and other factual support for their views if possible.

VII. Regulatory Flexibility Analysis Certification

    The Commission hereby certifies pursuant to 5 U.S.C. 605(b) that 
the proposals contained in this release, if adopted, would not have a 
significant economic impact on a substantial number of small entities. 
The proposals relate to the registration, disclosure and reporting 
requirements for asset-backed securities under the Securities Act and 
the Exchange Act. Securities Act Rule 157 \314\ and Exchange Act Rule 
0-10(a) \315\ defines an issuer, other than an investment company, to 
be a ``small business'' or ``small organization'' if it had total 
assets of $5 million or less on the last day of its most recent fiscal 
year. As the depositor and issuing entity are most often limited 
purpose entities in an ABS transaction, we focused on the sponsor in 
analyzing the potential impact of the proposals under the Regulatory 
Flexibility Act. The staff analyzed sponsors that conducted registered 
public offerings of asset-backed securities transactions during 2003. 
No sponsor had total assets of $5 million or less. Accordingly, the 
Commission does not believe that the proposals, if adopted, would have 
a significant economic impact on a substantial number of small 
entities.
---------------------------------------------------------------------------

    \314\ 17 CFR 230.157.
    \315\ 17 CFR 240.0-10(a).
---------------------------------------------------------------------------

    We solicit written comments regarding this certification. We 
request

[[Page 26717]]

comment on whether the proposals could have an effect that we have not 
considered. We request that commenters describe the nature of any 
impact on small entities and provide empirical data to support the 
extent of the impact.

VIII. Statutory Authority and Text of Rule Amendments

    The proposals contained in this document are being proposed under 
the authority set forth in Sections 2, 6, 7, 8, 10, 17, 19 and 28 of 
the Securities Act,\316\ Sections 3, 10, 10A, 12, 13, 14, 15, 16, 23 
and 36 of the Exchange Act,\317\ and Sections 3, 302, 306, 404, 406 and 
407 of the Sarbanes-Oxley Act.\318\
---------------------------------------------------------------------------

    \316\ 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77q, 77s and 77z-3.
    \317\ 15 U.S.C. 78c, 78j, 78j-1, 78l, 78m, 78n, 78o, 78p, 78w 
and 78mm.
    \318\ 15 U.S.C. 7202, 7241, 7244, 7262, 7264 and 7265.
---------------------------------------------------------------------------

Text of Proposed Amendments

List of Subjects

17 CFR Part 210

    Accountants, Accounting, Reporting and recordkeeping requirements, 
Securities.

17 CFR Parts 228, 229, 232, 239, 242, 245 and 249

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 230

    Advertising, Reporting and recordkeeping requirements, Securities.

17 CFR Part 240

    Brokers, Reporting and recordkeeping requirements, Securities.
    In accordance with the foregoing, title 17, chapter II of the Code 
of Federal Regulations is proposed to be amended as follows.

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL 
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 
1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT 
COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 1940, AND ENERGY 
POLICY AND CONSERVATION ACT OF 1975

    1. The authority citation for part 210 continues to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77aa(25), 77aa(26), 78c, 78j-1, 78l, 78m, 78n, 78o(d), 78q, 78u-5, 
78w(a), 78ll, 78mm, 79e(b), 79j(a), 79n, 79t(a), 80a-8, 80a-20, 80a-
29, 80a-30, 80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, unless 
otherwise noted.

    2. Section 210.1-02 is amended by adding paragraph (a)(3) to read 
as follows:


Sec.  210.1-02  Definition of terms used in Regulation S-X (17 CFR part 
210).

* * * * *
    (a)(1) * * *
    (3) Attestation report on assessment of compliance with servicing 
criteria for asset-backed securities. The term attestation report on 
assessment of compliance with servicing criteria for asset-backed 
securities means a report in which a registered public accounting firm, 
in accordance with Sec. Sec.  240.13a-18(d) or 240.15d-18(d) of this 
chapter, expresses an opinion, or states that an opinion cannot be 
expressed, concerning a responsible party's assessment of compliance 
with servicing criteria, as required by Sec. Sec.  240.13a-18 or 
240.15d-18 of this chapter, in accordance with standards on attestation 
engagements. When an overall opinion cannot be expressed, the 
registered public accounting firm must state why it is unable to 
express such an opinion.
* * * * *
    3. In 17 CFR Part 210, remove the phrase ``as defined in Sec.  
240.13a-14(g) and Sec.  240-15d-14(g) of this chapter'' and add, in its 
place, the phrase ``as defined in Sec.  229.1101 of this chapter'' in 
the following places:
    a. In the introductory text of Sec.  210.2-01(c)(7); and
    b. In the introductory text of Sec.  210.2-07(a).
    4. Amend Sec.  210.2-02 by:
    a. Revising the section heading; and
    b. Adding paragraph (g).
    The addition and revisions read as follows:


Sec.  210.2-02  Accountants' reports and attestation reports.

* * * * *
    (g) Attestation report on assessment of compliance with servicing 
criteria for asset-backed securities. The attestation report on 
assessment of compliance with servicing criteria for asset-backed 
securities, as required by Sec. Sec.  240.13a-18(d) or 240.15d-18(d) of 
this chapter, shall be dated, signed manually, identify the period 
covered by the report and clearly state the opinion of the registered 
public accounting firm as to whether the responsible party's assessment 
of compliance with the servicing criteria is fairly stated in all 
material respects, or must include an opinion to the effect that an 
overall opinion cannot be expressed. If an overall opinion cannot be 
expressed, explain why.

PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS

    5. The authority citation for Part 228 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 
77sss, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-29, 
80a-30, 80a-37, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *
    6. Amend Sec.  228.10 by revising paragraph (a)(1)(iii) to read as 
follows:


Sec.  228.10  (Item 10) General

    (a) Application of Regulation S-B. * * *
    (1) Definition of small business issuer. * * *
    (iii) Is not an investment company and is not an asset-backed 
issuer (as defined in Sec.  229.1101 of this chapter); and
* * * * *
    7. Amend Sec.  228.308 by revising the ``Instructions to Item 308'' 
to read as follows:


Sec.  228.308  (Item 308) Internal control over financial reporting.

* * * * *
    Instruction to Item 308. The small business issuer must maintain 
evidential matter, including documentation, to provide reasonable 
support for management's assessment of the effectiveness of the small 
business issuer's internal control over financial reporting.


Sec.  228.401  [Amended]

    8. Amend Sec.  228.401, ``Instructions to Item 401(e),'' by 
removing Instruction 4 and redesignating Instruction 5 as Instruction 
4.


Sec.  228.406  [Amended]

    9. Amend Sec.  228.406, ``Instructions to Item 406,'' by removing 
Instruction 3.

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

    10. The authority citation for Part 229 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 
77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 
78mm, 79e, 79j, 79n, 79t, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-
31(c), 80a-37, 80a-38(a), 80a-39, 80b-

[[Page 26718]]

11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *
    11. Amend Sec.  229.10, introductory text of paragraph (d), by 
revising the second sentence to read as follows:


Sec.  229.10  (Item 10) General.

* * * * *
    (d) Incorporation by reference. * * * Except where a registrant or 
issuer is expressly required to incorporate a document or documents by 
reference (or for purposes of Item 1100(c) of Regulation AB (Sec.  
229.1100(c)) with respect to an asset-backed issuer, as that term is 
defined in Item 1101 of Regulation AB (Sec.  229.1101)), reference may 
not be made to any document which incorporates another document by 
reference if the pertinent portion of the document containing the 
information or financial statements to be incorporated by reference 
includes an incorporation by reference to another document. * * *
* * * * *
    12. Amend Sec.  229.202 by:
    a. Removing the authority citation following the section; and
    b. Adding Instruction 6 to the ``Instructions to Item 202''.
    The addition reads as follows.


Sec.  229.202  (Item 202) Description of registrant's securities.

* * * * *
    Instructions to Item 202: * * *
    6. For asset-backed securities, see also Item 1112 of Regulation AB 
(Sec.  229.1112).
    13. Amend Sec.  229.308 by revising the ``Instructions to Item 
308'' to read as follows:


Sec.  229.308 (Item 308)  Internal control over financial reporting.

* * * * *
    Instruction to Item 308. The registrant must maintain evidential 
matter, including documentation, to provide reasonable support for 
management's assessment of the effectiveness of the registrant's 
internal control over financial reporting.


Sec.  229.401  [Amended]

    14. Amend Sec.  229.401 by removing the phrase ``(as defined in 
Sec. 240.13a-14(g) and Sec.  6240.15d-14(g) of this chapter)'' from 
Instruction 4 of the Instructions to Item 401(h) and adding, in its 
place, the phrase ``(as defined in Sec.  229.1101)''.
    15. Amend Sec.  229.406, ``Instructions to Item 406,'' by removing 
Instruction 3.
    16. Amend Sec.  229.501 by adding an Instruction to the end of 
Sec.  229.501 to read as follows:


Sec.  229.501  (Item 501) Forepart of Registration Statement and 
Outside Front Cover Page of Prospectus.

* * * * *
    Instruction to Item 501. For asset-backed securities, see also Item 
1102 of Regulation AB (Sec.  229.1102).
    17. Amend Sec.  229.503 by adding an Instruction to the end of 
Sec.  229.503 to read as follows:


Sec.  229.503  (Item 503) Prospectus summary, risk factors, and ratio 
of earnings to fixed charges.

* * * * *
    Instruction to Item 503. For asset-backed securities, see also Item 
1103 of Regulation AB (Sec.  229.1103).
    18. Amend Sec.  229.512 by:
    a. Adding a paragraph after the paragraph that begins ``Provided, 
however,'' after paragraph (a)(1)(iii); and
    b. Adding paragraph (k).
    The revisions read as follows:


Sec.  229.512  (Item 512) Undertakings.

* * * * *
    (a) * * *
    (1) * * *
    (iii) * * *
    Provided, however, * * *
    Provided further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) 
do not apply if the registration statement is for an offering of asset-
backed securities on Form S-1 (Sec.  239.11 of this chapter) or Form S-
3 (Sec.  239.13 of this chapter), and the information required to be 
included in a post-effective amendment is provided pursuant to Item 
1100(c) of Regulation AB (Sec.  229.1100(c)).
* * * * *
    (k) Filings regarding asset-backed securities incorporating by 
reference subsequent Exchange Act documents by third parties. Include 
the following if the registration statement incorporates by reference 
any Exchange Act document filed subsequent to the effective date of the 
registration statement pursuant to Item 1100(c) of Regulation AB (Sec.  
229.1100(c)):
    The undersigned registrant hereby undertakes that, for purposes of 
determining any liability under the Securities Act of 1933, each filing 
of the annual report pursuant to section 13(a) or section 15(d) of the 
Securities Exchange Act of 1934 of a third party that is incorporated 
by reference in the registration statement in accordance with Item 
1100(c)(1) of Regulation AB (17 CFR 229.1100(c)(1)) shall be deemed to 
be a new registration statement relating to the securities offered 
therein, and the offering of such securities at that time shall be 
deemed to be the initial bona fide offering thereof.
    19. Amend Sec.  229.601 by: a. Revising the exhibit table; b. 
Redesignating the text of paragraph (b)(31) as paragraph (b)(31)(i); c. 
Adding paragraph (b)(31)(ii); and d. Revising paragraphs (b)(33) 
through (b)(98).
    The revisions read as follows.


Sec.  229.601  (Item 601) Exhibits.

    (a) Exhibits and index required. * * *
* * * * *

Exhibit Table

Instructions to the Exhibit Table

* * * * *

 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          EXHIBIT TABLE
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Securities act forms                                                        Exchange act forms
                                           -----------------------------------------------------------------------------------------------------------------------------------------------------
                                               S-1       S-2       S-3     S-4\3\      S-8      S-11       F-1       F-2       F-3     F-4\3\      10      8-K\5\     10-D      10-Q      10-K
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1) Underwriting agreement................        X         X         X         X   ........        X         X         X         X         X   ........        X   ........  ........  ........
(2) Plan of acquisition, reorganization,          X         X         X         X   ........        X         X         X         X         X         X         X   ........        X         X
 arrangement, liquidation or succession...
(3) (i) Articles of incorporation.........        X   ........  ........        X   ........        X         X   ........  ........        X         X         X   ........        X         X
(ii) By-laws..............................        X   ........  ........        X   ........        X         X   ........  ........        X         X         X   ........        X         X
(4) Instruments defining the rights of            X         X         X         X         X         X         X         X         X         X         X         X   ........        X         X
 security holders, including indentures...
(5) Opinion re legality...................        X         X         X         X         X         X         X         X         X         X   ........  ........  ........  ........  ........
(6) [Reserved]............................      N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A
(7) Correspondence from an independent      ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X   ........  ........  ........
 accountant regarding non-reliance on a
 previously issued audit report or
 completed interim review.................

[[Page 26719]]

 
(8) Opinion re tax matters................        X         X         X         X   ........        X         X         X         X   ........  ........  ........  ........  ........
(9) Voting trust agreement................        X   ........  ........        X   ........        X         X   ........  ........        X         X   ........  ........  ........        X
(10) Material contracts...................        X         X   ........        X   ........        X         X         X   ........        X         X   ........  ........        X         X
(11) Statement re computation of per share        X         X   ........        X   ........        X         X         X   ........        X         X   ........  ........        X         X
 earnings.................................
(12) Statements re computation of ratios..        X         X         X         X   ........        X         X         X   ........        X         X   ........  ........  ........        X
(13) Annual report to security holders,     ........        X   ........        X   ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X
 Form 10-Q and 10-QSB, or quarterly report
 to security holders\1\...................
(14) Code of Ethics.......................  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X   ........  ........        X
(15) Letter re unaudited interim financial        X         X         X         X         X         X         X         X         X         X   ........  ........  ........        X   ........
 information..............................
(16) Letter re change in certifying               X         X   ........        X   ........        X   ........  ........  ........  ........        X         X   ........  ........        X
 accountant\4\............................
(17) Correspondence on departure of         ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X   ........  ........  ........  ........
 director.................................
(18) Letter re change in accounting         ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X         X
 principles...............................
(19) Report furnished to security holders.  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X   ........
(20) Other documents or statements to       ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X   ........  ........  ........  ........
 security holders.........................
(21) Subsidiaries of the registrant.......        X   ........  ........        X   ........        X         X   ........  ........        X         X   ........  ........  ........        X
(22) Published report regarding matters     ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X         X         X
 submitted to vote of security holders....
(23) Consents of experts and counsel......        X         X         X         X         X         X         X         X         X         X   ........     X\2\      X\2\      X\2\      X\2\
(24) Power of attorney....................        X         X         X         X         X         X         X         X         X         X         X         X         X         X         X
(25) Statement of eligibility of trustee..        X         X         X         X   ........        X         X         X         X         X   ........  ........  ........  ........  ........
(26) Invitations for competitive bids.....        X         X         X         X   ........  ........        X         X         X         X   ........  ........  ........  ........  ........
(27) through (30) [Reserved]..............  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........
(31) (i) Rule 13a-14(a)/15d-14(a)           ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X         X
 Certifications...........................
(ii) Rule 13a-14(d)/15d-14(d)               ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X
 Certifications\6\........................
(32) Section 1350 Certifications\6\.......  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X         X
(33) Report of compliance with servicing    ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X
 criteria for asset-backed securities.....
(34) Attestation report on assessment of    ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X
 compliance with servicing criteria for
 asset-backed securities..................
(35) Servicer compliance statement........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........  ........        X
(36) through (98) [Reserved]..............      N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A       N/A
(99) Additional exhibits..................        X         X         X         X         X         X         X         X         X         X         X         X         X         X        X
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Where incorporated by reference into the text of the prospectus and delivered to security holders along with the prospectus as permitted by the registration statement; or, in the case of
  the Form 10-K, where the annual report to security holders is incorporated by reference into the text of the Form 10-K.
\2\ Where the opinion of the expert or counsel has been incorporated by reference into a previously filed Securities Act registration statement.
\3\ An exhibit need not be provided about a company if: (1) with respect to such company an election has been made under Form S-4 or F-4 to provide information about such company at a level
  prescribed by Form S-2, S-3, F-2 or F-3; and (2) the form, the level of which has been elected under Form S-4 or F-4, would not require such company to provide such exhibit if it were
  registering a primary offering.
\4\ If required pursuant to Item 304 of Regulation S-K.
\5\ A Form 8-K Exhibit is required only if relevant to the subject matter reported on the Form 8-K report. For example, if the Form 8-K pertains to the departure of a director, only the
  exhibit described in paragraph (b)(17) of this section need be filed. A required exhibit may be incorporated by reference from a previous filing.
\6\ Pursuant to Sec.  Sec.   240.13a-13(b)(3) and 240.15d-13(b)(3) of this chapter, asset-backed issuers are not required to file reports on Form 10-Q.

* * * * *
    (b) Description of exhibits. * * *
    (31)(i) * * *
    (ii) Rule 13a-14(d)/15d-14(d) Certifications. If an asset-backed 
issuer, the certifications required by Rule 13a-14(d) (17 CFR 240.13a-
14(d)) or Rule 15d-14(d) (17 CFR 240.15d-14(d)) exactly as set forth 
below:

CERTIFICATIONS \1\
---------------------------------------------------------------------------

    \1\ With respect to asset-backed issuers, the certification must 
be signed by either: (1) The senior officer in charge of 
securitization of the depositor if the depositor is signing the 
report on Form 10-K; or (2) The senior officer in charge of the 
servicing function of the servicer if the servicer is signing the 
report on Form 10-K on behalf of the issuing entity. See Rules 13a-
14(e) and 15d-14(e) (Sec. Sec.  240.13a-14(e) and 240.15d-14(e)). If 
multiple servicers are involved in servicing the pool assets, the 
senior officer in charge of the servicing function of the master 
servicer (or entity performing the equivalent functions) must sign 
if a representative of the servicer is to sign the certification. If 
there is a master servicer and one or more underlying servicers, the 
references in the certification relate to the master servicer. A 
natural person must sign the certification in his or her individual 
capacity, although the title of that person in the organization of 
which he or she is an officer may be included under the signature.
---------------------------------------------------------------------------

    I, [identify the certifying individual], certify that:
    1. I have reviewed this report on Form 10-K and all reports on Form 
10-D required to be filed in respect of the period covered by this 
report on Form 10-K of [identify the issuing entity];
    2. Based on my knowledge, the information in these reports, taken 
as a whole, does not contain any untrue statement of a material fact or 
omit to state a material fact necessary to make the statements made, in 
light of the circumstances under which such statements were made, not 
misleading as of the last day of the period covered by this report;
    3. Based on my knowledge, all of the distribution, servicing and 
other information required to be provided under Form 10-D for the 
period covered by this report is included in those reports;
    4. [I am responsible for reviewing the activities performed by the 
servicer(s) and based on my knowledge and the compliance review 
conducted in preparing the servicer compliance

[[Page 26720]]

statement required in this report under Item 1121 of Regulation AB, and 
except as disclosed in the reports, the servicer has fulfilled its 
obligations under the servicing agreement; and]
    [Based on my knowledge and the servicer compliance statement 
required in this report under Item 1121 of Regulation AB, and except as 
disclosed in the reports, the servicer has fulfilled its obligations 
under the servicing agreement; and] \2\
---------------------------------------------------------------------------

    \2\ The first version of paragraph 4 is to be used when the 
servicer is signing the report on behalf of the issuing entity. The 
second version of paragraph 4 is to be used when the depositor is 
signing the report.
---------------------------------------------------------------------------

    5. This report discloses all material instances of noncompliance 
with the servicing criteria as provided in Item 1120 of Regulation AB 
based on an assessment of compliance with such criteria.
    [In giving the certifications above, I have reasonably relied on 
information provided to me by the following unaffiliated parties [name 
of servicer, sub-servicer, co-servicer, depositor or trustee].]\3\
---------------------------------------------------------------------------

    \3\ Because the signer of the certification must rely in certain 
circumstances on information provided by unaffiliated parties 
outside of the signer's control, this paragraph must be included if 
the signer is reasonably relying on information that unaffiliated 
trustees, depositors, servicers, sub-servicers or co-servicers have 
provided.
---------------------------------------------------------------------------

Date:------------------------------------------------------------------

-----------------------------------------------------------------------
[Signature]
[Title]
    (33) Report of compliance with servicing criteria for asset-backed 
securities. The responsible party's report of compliance with servicing 
criteria required by Sec.  229.1120(a).
    (34) Attestation report on assessment of compliance with servicing 
criteria for asset-backed securities. The attestation report on 
assessment of compliance with servicing criteria for asset-backed 
securities required by Sec.  229.1120(b).
    (35) Servicer compliance statement. The servicer compliance 
statement required by Sec.  229.1121.
    (36) through (98) [Reserved]
* * * * *


Sec.  229.701  [Amended]

    20. Amend paragraph Sec.  229.701(e) by revising the phrase ``Form 
10-KSB or Form 10-K (Sec. Sec.  249.308, 249.308b, 249.308a, 249.310b 
or 249.310)'' to read ``Form 10-KSB, Form 10-K or Form 10-D (Sec. Sec.  
249.308, 249.308b, 249.308a, 249.310b, 249.310 or 249.312)''.
    21. Add subpart 229.1100 consisting of Sec. Sec.  229.1100 through 
229.1121 to read as follows:

Subpart 229.1100--Asset-Backed Securities (Regulation AB)

Sec.
229.1100 (Item 1100) General.
229.1101 (Item 1101) Definitions.
229.1102 (Item 1102) Forepart of registration statement and outside 
cover page of the prospectus.
229.1103 (Item 1103) Transaction summary and risk factors.
229.1104 (Item 1104) Sponsors.
229.1105 (Item 1105) Depositors.
229.1106 (Item 1106) Issuing entities.
229.1107 (Item 1107) Servicers.
229.1108 (Item 1108) Trustees.
229.1109 (Item 1109) Originators.
229.1110 (Item 1110) Pool assets.
229.1111 (Item 1111) Significant obligors of pool assets.
229.1112 (Item 1112) Structure of the transaction.
229.1113 (Item 1113) Credit enhancement and other support.
229.1114 (Item 1114) Tax matters.
229.1115 (Item 1115) Legal proceedings.
229.1116 (Item 1116) Reports and additional information.
229.1117 (Item 1117) Affiliations and certain relationships and 
related transactions.
229.1118 (Item 1118) Ratings.
229.1119 (Item 1119) Distribution and pool performance information.
229.1120 (Item 1120) Compliance with applicable servicing criteria.
229.1121 (Item 1121) Servicer compliance statement.

Subpart 229.1100--Asset-Backed Securities (Regulation AB)


Sec.  229.1100  (Item 1100) General.

    (a) Application of Regulation AB. Regulation AB (Sec. Sec.  
229.1100 through 229.1121) is the source of various disclosure items 
for ``asset-backed securities'' filings under the Securities Act of 
1933 (15 U.S.C. 77a et seq.) (the ``Securities Act'') and the 
Securities Exchange Act of 1934 (the ``Exchange Act'') (15 U.S.C. 78a 
et seq.). Definitions to be used in this Regulation AB are set forth in 
Item 1101.
    (b) Presentation of historical delinquency and loss information. 
Several Items in Regulation AB call for the presentation of historical 
information and data on delinquencies and loss information. In 
providing such information:
    (1) Present delinquency experience in 30-day increments, beginning 
with assets 30-59 days delinquent, through the point that assets are 
written off or charged off as uncollectable. At a minimum, present such 
information by number of accounts and dollar amount. Present 
statistical information in a tabular or graphical format, if such 
presentation will aid understanding.
    (2) Disclose the total amount of delinquent assets as a percentage 
of the aggregate asset pool.
    (3) Present loss information, as applicable, regarding charge-offs, 
charge-off rate, gross losses, recoveries and net losses (with a 
description of how these terms are defined), the number and amount of 
assets experiencing a loss and the number and amount of assets with a 
recovery, the ratio of aggregate net losses to average portfolio 
balance and the average of net loss on all assets that have experienced 
a net loss.
    (4) Categorize all delinquency and loss information by pool asset 
type.
    (5) Describe how delinquencies, charge-offs and uncollectable 
accounts are defined or determined, addressing the effect of any grace 
period, re-aging, restructure or other practices on delinquency 
experience. In a registration statement under the Securities Act or the 
Exchange Act or otherwise if delinquency and loss information is being 
presented with respect to the sponsor, also provide such information 
with respect to the sponsor for assets of the type securitized.
    (6) Describe any other material information regarding delinquencies 
and losses particular to the pool asset type(s), such as repossession 
information, foreclosure information and real estate owned (REO) or 
similar information.
    (c) Presentation of certain third party financial information.
    If financial information of a third party is required in a filing 
by Item 1111(b) of this Regulation AB (Information regarding 
significant obligors) or Item 1113(b)(2) of this Regulation AB 
(Information regarding significant enhancement providers), such 
information may be provided as follows:
    (1) Incorporation by reference. If the following conditions are 
met, you may incorporate by reference (by means of a statement to that 
effect) the reports filed by the third party (or the entity that 
consolidates the third party) pursuant to section 13(a) or 15(d) of the 
Exchange Act (15 U.S.C. 78m(a) or 78o(d)):
    (i) Such third party or the entity that consolidates the third 
party is required to file reports with the Commission pursuant to 
section 13(a) or 15(d) of the Exchange Act.
    (ii) Such third party or the entity that consolidates the third 
party has filed all reports and other materials required to be filed by 
such requirements during the preceding 12 months (or such shorter 
period that such party was required to file such reports and 
materials).

[[Page 26721]]

    (iii) The reports filed by such third party, or entity that 
consolidates the third party, include (or properly incorporate by 
reference) the financial statements of such third party or such 
information is consolidated into the financial statements of the entity 
that consolidates the third party.
    (iv) The filing incorporating the information by reference 
describes any and all material changes to the incorporated information 
which have occurred subsequent to the filing of the incorporated 
information.
    (v) If included in a prospectus or registration statement, the 
prospectus also states that all documents subsequently filed by such 
third party, or the entity that consolidates the third party, pursuant 
to section 13(a) or 15(d) of the Exchange Act prior to the termination 
of the offering also shall be deemed to be incorporated by reference 
into the prospectus.

Instructions to Item 1100(c)(1).

    1. In addition to the conditions in paragraph (c)(1) of this 
section, any information incorporated by reference must comply with all 
applicable Commission rules pertaining to incorporation by reference, 
such as Item 10(d) of Regulation S-K (Sec.  229.10(d)), Rule 303 of 
Regulation S-T (Sec.  232.303 of this chapter), Rule 411 of Regulation 
C (Sec.  230.411 of this chapter), and Rules 12b-23 and 12b-32 under 
the Exchange Act (Sec. Sec.  240.12b-23 and 240.12b-32 of this 
chapter).
    2. In addition, any applicable requirements under the Securities 
Act or the rules and regulations of the Commission regarding the filing 
of a written consent for the use of incorporated material apply to the 
material incorporated by reference. See, for example, Sec.  230.439 of 
this chapter.
    3. Any undertakings set forth in Item 512 of Regulation S-K (Sec.  
229.512) apply to any material incorporated by reference in a 
registration statement or prospectus.
    (2) Reference information for significant obligors. If the third 
party information relates to a significant obligor and the following 
conditions are met, you may, rather than providing such information, 
include a reference to the third party's periodic reports (or the third 
party's parent with respect to paragraph (c)(2)(ii)(C) of this section) 
under section 13(a) or 15(d) of the Exchange Act (15 U.S.C. 78m(a) or 
78o(d)) that are on file with the Commission (or otherwise publicly 
available with respect to paragraph (c)(2)(ii)(F) of this section), 
along with a statement of how those reports may be accessed, including 
the third party's name and Commission reporting number, if applicable 
(See, e.g., Item 1116 of this Regulation AB):
    (i) Neither the third party nor any of its affiliates has had a 
direct or indirect agreement, arrangement, relationship or 
understanding, written or otherwise, relating to the asset-backed 
securities transaction, and neither the third party nor any of its 
affiliates is an affiliate of the sponsor, depositor, issuing entity or 
underwriter of the asset-backed securities transaction.
    (ii) Any of the following is true:
    (A) The third party is eligible to use Form S-3 or F-3 (Sec. Sec.  
239.13 or 239.33 of this chapter) for a primary offering of non-
investment grade securities pursuant to General Instruction I.B.1 of 
such forms.
    (B) The third party meets the requirements of General Instruction 
I.A. of Form S-3 or General Instructions 1.A.1, 2, 3, 4 and 6 of Form 
F-3 and the pool assets relating to such third party are non-
convertible investment grade securities, as described in General 
Instruction 1.B.2 of Form S-3 or Form F-3.
    (C) If the third party does not meet the conditions of paragraphs 
(c)(2)(ii)(A) or (c)(2)(ii)(B) of this section and the pool assets 
relating to the third party are fully and unconditionally guaranteed by 
a direct or indirect parent of the third party, General Instruction 
I.C.3 of Form S-3 or General Instruction I.A.5(iii) of Form F-3 is met 
with respect to the pool assets relating to such third party and the 
requirements of Rule 3-10 of Regulation S-X (Sec.  210.3-10 of this 
chapter) are satisfied regarding the information in the reports to be 
referenced.
    (D) If the pool assets relating to the third party are guaranteed 
by a wholly owned subsidiary of the third party and the subsidiary does 
not meet the conditions of paragraphs (c)(2)(ii)(A) or (c)(2)(ii)(B) of 
this section, the criteria in either paragraph (c)(2)(ii)(A) or 
paragraph (c)(2)(ii)(B) of this section are met with respect to the 
third party and the requirements of Rule 3-10 of Regulation S-X (Sec.  
210.3-10 of this chapter) are satisfied regarding the information in 
the reports to be referenced.
    (E) The pool assets relating to such third party are asset-backed 
securities and the third party is filing reports pursuant to section 12 
or 15(d) of the Exchange Act (15 U.S.C. 78l or 78o(d)) and has filed 
all the material that would be required to be filed pursuant to section 
13, 14 or 15(d) of the Exchange Act (15 U.S.C. 78m, 78n or 78o(d)) for 
a period of at least twelve calendar months and any portion of a month 
immediately preceding the filing referencing the third party's reports 
(or such shorter period that such third party was required to file such 
materials).
    (F) The third party is a U.S. government-sponsored enterprise, has 
outstanding securities held by non-affiliates with an aggregate market 
value of $75 million or more, and makes information publicly available 
on an annual and quarterly basis, including audited financial 
statements prepared in accordance with generally accepted accounting 
principles covering the same periods that would be required for audited 
financial statements under Regulation S-X (Sec. Sec.  210.1-01 through 
210.12-29 of this chapter) and non-financial information consistent 
with that required by Regulation S-K (Sec. Sec.  229.10 through 
229.1121).
    (iii) You include an undertaking that if such third party ceases to 
meet the requirements of paragraphs (c)(2)(i) and (ii) of this section, 
you will either provide the information required by Item 1111(b) of 
this Regulation AB, as applicable, relating to such third party or 
terminate the transaction or that portion of the transaction.
    (d) Other participants to the transaction and pool assets 
representing interests in certain other asset pools.
    (1) If the asset-backed securities transaction involves additional 
or intermediate parties not specifically identified in this Regulation 
AB, the disclosure required by this Regulation AB includes information 
to the extent material regarding any such party and its role, function 
and experience in relation to the asset-backed securities and the asset 
pool. Describe the material terms of any agreement with such party 
regarding the transaction, and file such agreement as an exhibit.
    (2) If the asset pool backing the asset-backed securities includes 
one or more pool assets representing an interest in or the right to the 
payments or cash flows of another asset pool, then for purposes of this 
Regulation AB and Sec. Sec.  240.13a-18 and 240.15d-18 of this chapter, 
references to the asset pool and the pool assets of the issuing entity 
also include the other asset pool and its pool assets if the following 
conditions are met:
    (i) Both the issuing entity for the asset-backed securities and the 
entity issuing the pool asset to be included in the issuing entity's 
asset pool were established under the direction of the same sponsor or 
depositor.
    (ii) The pool asset was created solely to satisfy legal 
requirements or otherwise facilitate the structuring of the asset-
backed securities transaction.

[[Page 26722]]

Instruction to Item 1100(d)(2)

    Reference to the underlying asset pool includes, without 
limitation, compliance with applicable servicing criteria referenced in 
Sec. Sec.  240.13a-18 and 240.15d-18 of this chapter and the servicer 
compliance statement required by Item 1121 of this Regulation AB. In 
addition, provide clear and concise disclosure, including by flow chart 
or other illustration, of the transaction and the various parties 
involved.
    (e) Foreign asset-backed securities. If the asset-backed securities 
are issued by a foreign issuer (as defined in Sec.  230.405 of this 
chapter), backed by pool assets that are foreign assets, or affected by 
enhancement contemplated by Item 1113 of this Regulation AB provided by 
a foreign entity, then in providing the disclosure required by this 
Regulation AB (including, but not limited to, Items 1104 and 1109 of 
this Regulation AB regarding origination and securitization practices, 
Item 1106 of this Regulation AB regarding the sale or transfer of the 
pool assets, bankruptcy remoteness and collateral protection, Item 1107 
of this Regulation AB regarding servicing, Item 1108 of this Regulation 
AB regarding the rights, duties and responsibilities of the trustee, 
Item 1110 of this Regulation AB regarding the terms, nature and 
treatment of the pool assets and Item 1113 of this Regulation AB 
regarding the enhancement provider), the filing must describe any 
pertinent governmental legal or regulatory or administrative matters 
and any pertinent tax matters, exchange controls, currency restrictions 
or other economic, fiscal, monetary or potential factors that could 
materially affect payments on the performance of, or other matters 
relating to, the assets contained in the pool or the asset-backed 
securities. See also Instruction 2 to Item 202 of Regulation S-K (Sec.  
229.202). In addition, in a registration statement under the Securities 
Act, provide the information required by Item 101(g) of Regulation S-K 
(Sec.  229.101(g)). Disclosure also is required in Forms 10-D (Sec.  
249.312 of this chapter) and 10-K (Sec.  249.310 of this chapter) with 
respect to the asset-backed securities regarding any material impact 
caused by foreign legal and regulatory developments during the period 
covered by the report which have not been previously described in a 
Form 10-D, 10-K or 8-K (Sec.  249.308 of this chapter) filed under the 
Exchange Act.
    (f) Filing of required exhibits. Where agreements or other 
documents in this Regulation AB are specified to be filed as exhibits 
to a registration statement, such final agreements or other documents, 
if applicable, may be incorporated by reference as an exhibit to the 
registration statement, such as by filing a Form 8-K in the case of 
offerings registered on Form S-3 (Sec.  239.13 of this chapter).


Sec.  229.1101  (Item 1101) Definitions.

    The following definitions apply to the terms used in Regulation AB 
(Sec. Sec.  229.1100 through 229.1121), unless specified otherwise:
    (a) ABS informational and computational material means a written 
communication consisting solely of one or some combination of the 
following:
    (1) A brief summary of the structure of an offering of asset-backed 
securities that sets forth the name of the issuer, the estimated size 
of the offering and the proposed structure of the offering (such as the 
number of classes, seniority and priority and other terms of payment).
    (2) Descriptive factual information regarding the pool assets 
underlying an offering of asset-backed securities, typically including 
data regarding the contractual and related characteristics of the 
underlying pool assets, such as weighted average coupon, weighted 
average maturity and other factual information regarding the type of 
assets comprising the pool.
    (3) Static pool data, as referenced in Items 1104(e) and 1110(c) of 
this Regulation AB.
    (4) Statistical information displaying for a particular class or 
classes of asset-backed securities the yield, average life, expected 
maturity, interest rate sensitivity, cash flow characteristics, total 
rate of return, option adjusted spread or other financial or 
statistical information relating to the class or classes under 
specified prepayment, interest rate, loss or other hypothetical 
scenarios. Examples of such information include:
    (i) The statistical results of interest rate sensitivity analyses 
containing data regarding the impact on the yield or other financial 
characteristics of a class of securities resulting from changes in 
interest rates at one or more assumed prepayment speeds.
    (ii) Statistical information showing the principal and interest 
cash flows that would be associated with a particular class of asset-
backed securities at a specified prepayment speed.
    (iii) Statistical information reflecting the financial impact of 
losses based on a variety of loss or default experience, prepayment, 
interest rate and related assumptions.
    (b) Asset-backed issuer means an issuer whose reporting obligation 
results from either the registration of an offering of asset-backed 
securities under the Securities Act, or the registration of a class of 
asset-backed securities under section 12 of the Exchange Act (15 U.S.C. 
78l).
    (c)(1) Asset-backed security means a security that is primarily 
serviced by the cash flows of a discrete pool of receivables or other 
financial assets, either fixed or revolving, that by their terms 
convert into cash within a finite time period, plus any rights or other 
assets designed to assure the servicing or timely distributions of 
proceeds to the security holders; provided that in the case of 
financial assets that are leases, those assets may convert to cash 
partially by the cash proceeds from the disposition of the physical 
property underlying such leases.
    (2) The following additional conditions apply in order to be 
considered an asset-backed security:
    (i) Neither the depositor nor the issuing entity is an investment 
company under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et 
seq.) or will become an investment company as a result of the asset-
backed securities transaction.
    (ii) The activities of the issuing entity for the asset-backed 
securities are limited to passively owning or holding the pool of 
assets, issuing the asset-backed securities supported or serviced by 
those assets, and other activities reasonably incidental thereto.
    (iii) No non-performing assets are part of the original asset pool 
at the time of issuance of the asset-backed securities.
    (iv) Delinquent assets do not constitute 50% or more, as measured 
by dollar volume, of the original asset pool at the time of issuance of 
the asset-backed securities.
    (v) With respect to securities that are backed by leases, the 
portion of the cash flow to repay the securities anticipated to come 
from the residual value of the physical property underlying the leases 
does not constitute:
    (A) For automobile leases, 60% or more, as measured by dollar 
volume, of the original asset pool at the time of issuance of the 
asset-backed securities.
    (B) For all other leases, 50% or more, as measured by dollar 
volume, of the original asset pool at the time of issuance of the 
asset-backed securities.
    (3) Notwithstanding the requirement in paragraph (c)(1) of this 
section that the asset pool be a discrete pool of assets, the following 
are considered to be a discrete pool of assets for purposes of being 
considered an asset-backed security:
    (i) Master trusts. The offering related to the securities 
contemplates adding additional assets to the pool that backs such 
securities in connection with

[[Page 26723]]

future issuances of asset-backed securities backed by such pool.
    (ii) Prefunding periods. The offering related to the securities 
contemplates a prefunding account where a portion of the proceeds of 
that offering is to be used for the future acquisition of additional 
pool assets, if such prefunding account does not involve in excess of 
50% of the proceeds of the offering and the duration of the prefunding 
period does not extend for more than one year from the initial date of 
issuance of securities backed by the asset pool.
    (iii) Revolving periods. The offering related to the securities 
contemplates a revolving period where cash flows from the pool assets 
may be used to acquire additional pool assets, provided, that, for 
fixed receivables or other financial assets that do not revolve, the 
amount of additional receivables or financial assets to be acquired in 
the revolving period does not exceed 50% of the proceeds of the 
offering and the duration of the revolving period does not extend for 
more than one year from the initial date of issuance of securities 
backed by the asset pool.
    (d) Delinquent, for purposes of determining if a pool asset is 
delinquent, means if any portion of a contractually required payment is 
30 days or more past due. A pool asset that is more than one payment 
past due cannot be characterized as not delinquent if only partial 
payment on the total past due amount had been made unless the obligor 
had contractually agreed to restructure the obligation, such as part of 
a workout plan.
    (e) Depositor means the depositor who receives or purchases and 
transfers or sells the pool assets to the issuing entity. For asset-
backed securities transactions where there is not an intermediate 
transfer of the assets from the sponsor to the issuing entity, the term 
depositor refers to the sponsor. For asset-backed securities 
transactions where the person transferring or selling the pool assets 
is itself a trust, the depositor of the issuing entity is the depositor 
of that trust.
    (f) Issuing entity means the trust or other entity created at the 
direction of the sponsor or depositor that owns or holds the pool 
assets and in whose name the asset-backed securities supported or 
serviced by the pool assets are issued.
    (g) Non-performing, for purposes of determining if a pool asset is 
non-performing, means a pool asset if any of the following is true: the 
pool asset meets the requirements in the transaction agreements for 
when a pool asset should be charged-off; or the pool asset meets the 
charge-off policies of the sponsor. A pool asset that is more than one 
payment past due cannot be characterized as not non-performing if only 
partial payment on the total past due amount had been made unless the 
obligor had contractually agreed to restructure the obligation, such as 
part of a workout plan.
    (h) NRSRO has the same meaning as the term ``nationally recognized 
statistical rating organization'' as used in Sec.  240.15c3-
1(c)(2)(vi)(F) of this chapter.
    (i) Obligor means any person who is directly or indirectly 
committed by contract or other arrangement to make payments on all or 
part of the obligations on a pool asset.
    (j) Servicer means any person responsible for the management or 
collection of the pool assets or making allocations or distributions to 
holders of the asset-backed securities. The term servicer does not 
include a trustee for the issuing entity or the asset-backed securities 
that makes allocations or distributions to holders of the asset-backed 
securities if the trustee receives such allocations or distributions 
from a servicer and the trustee does not otherwise perform the 
functions of a servicer.
    (k) Significant obligor means any of the following:
    (1) An obligor or a group of affiliated obligors on any pool asset 
or group of pool assets if such pool asset or group of pool assets 
represents 10% or more of the asset pool.
    (2) A single property or group of related properties securing a 
pool asset or a group of pool assets if such pool asset or group of 
pool assets represents 10% or more of the asset pool.
    (3) A lessee or group of affiliated lessees if the related lease or 
group of leases represents 10% or more of the asset pool.

Instructions to Item 1101(k)

    1. Regarding paragraph (k)(3) of this section, the calculation must 
focus on the leases whose cash flow supports the asset-backed 
securities directly or indirectly (including the residual value of the 
physical property underlying the leases if a portion of the cash flow 
to repay the asset-backed securities is anticipated to come from the 
residual value of such property), regardless of whether the asset pool 
contains the leases themselves, mortgages on properties that are the 
subject of the leases or other assets related to the leases.
    2. If separate pool assets, or properties underlying pool assets, 
are cross-defaulted and/or cross-collateralized, such pool assets are 
to be aggregated and considered together in determining concentration 
levels.
    3. If the pool asset is a mortgage or lease relating to real 
estate, the pool asset is non-recourse to the obligor, and the obligor 
does not manage the property or does not own other assets and has no 
other operations, then the obligor need not be considered a separate 
significant obligor from the real estate. Otherwise, the obligor is a 
separate significant obligor.
    (l) Sponsor means the person who organizes and initiates an asset-
backed securities transaction by selling or transferring assets, either 
directly or indirectly, including through an affiliate, to the issuing 
entity.


Sec.  229.1102  (Item 1102) Forepart of registration statement and 
outside cover page of the prospectus.

    In addition to the information required by Item 501 of Regulation 
S-K (Sec.  229.501), provide the following information on the outside 
front cover page of the prospectus. Present information regarding 
multiple classes in tables if doing so will aid understanding.
    (a) Identify the sponsor, the depositor and the issuing entity (if 
known).
    (b) In identifying the title of the securities, include the series 
number, if applicable. If there is more than one class of securities 
offered, state the class designations of the securities offered.
    (c) Identify the asset type(s) being securitized.
    (d) Include a statement, if applicable and appropriately modified 
to the transaction, that the securities represent the obligations of 
the issuing entity only and do not represent the obligations of or 
interest in the sponsor, depositor or any of their affiliates.
    (e) Identify the aggregate principal amount of all securities 
offered and the principal amount, if any, of each class of securities 
offered. If a class has no principal amount, disclose that fact, and, 
if applicable, state the notional amount, clearly identifying that the 
amount is a notional one. If the amounts are approximate, disclose that 
fact.
    (f) Indicate the interest rate or specified rate of return of each 
class of security offered. If a class of securities does not bear 
interest or a specified return, disclose that fact. If the rate is 
based on a formula or is calculated in reference to a generally 
recognized interest rate index, such as a U.S. Treasury securities 
index, either provide the formula on the cover, or indicate that the 
rate is variable, indicate the index upon which the rate is based and

[[Page 26724]]

indicate that further disclosure of how the rate is determined is 
included in the transaction summary.
    (g) Identify the distribution frequency, by class or series where 
applicable, and the first expected distribution date for the asset-
backed securities.
    (h) Briefly describe any credit enhancement for the transaction and 
identify any enhancement provider referenced in Item 1113(b) of this 
Regulation AB.
    Instruction to Item 1102. Also see Item 1112(g)(2) of this 
Regulation AB regarding the title of any class of securities with an 
optional or mandatory redemption or termination feature that may be 
exercised when 25% or more of the original principal balance of the 
pool assets are still outstanding.


Sec.  229.1103  (Item 1103) Transaction summary and risk factors.

    (a) Prospectus summary. In providing the information required by 
Item 503(a) of Regulation S-K (Sec.  229.503(a)), provide the following 
information in the prospectus summary, as applicable. Present 
information regarding multiple classes in tables if doing so will aid 
understanding. Consider using diagrams to illustrate the relationships 
among the parties, the structure of the securities offered (including, 
for example, the flow of funds or any subordination features) and any 
other material features of the transaction.
    (1) Identify the participants in the transaction, including the 
sponsor, depositor, issuing entity, servicers and trustee, and their 
respective roles. Describe the roles briefly if they are not apparent 
from the title of the role. Identify any originator referenced in Item 
1109 of this Regulation AB and any significant obligor.
    (2) Briefly identify the pool assets and summarize briefly the size 
and material characteristics of the asset pool. Identify the cut-off 
date or similar date for establishing the composition of the asset 
pool, if applicable.
    (3) State briefly the basic terms of each class of securities 
offered. In particular:
    (i) Identify the classes offered by the prospectus and any classes 
issued in the same transaction or residual or equity interests in the 
transaction that are not being offered by the prospectus.
    (ii) State the interest rate or rate of return on each class of 
securities offered, to the extent that the rates on any class of 
securities were not disclosed in full on the prospectus cover page.
    (iii) State the expected final and final scheduled maturity or 
principal distribution dates, if applicable, of each class of 
securities offered.
    (iv) Identify the denominations in which the securities may be 
issued.
    (v) Identify the distribution frequency on the securities.
    (vi) Summarize the flow of funds, payment priorities and 
allocations among the classes of securities offered, the classes of 
securities that are not offered, and fees and expenses, to the extent 
necessary to understand the payment characteristics of the classes that 
are offered by the prospectus.
    (vii) Identify any events in the transaction agreements that can 
trigger liquidation or amortization of the asset pool or other 
performance triggers that would alter the transaction structure or the 
flow of funds.
    (viii) Identify any optional or mandatory redemption or termination 
features.
    (ix) Identify any credit enhancement or other support for the 
transaction, as referenced in Item 1113(a) of this Regulation AB, and 
briefly describe what protection or support is provided by the 
enhancement. Identify any enhancement provider referenced in Item 
1113(b) of this Regulation AB. Summarize how losses not covered by 
credit enhancement will be allocated to the securities.
    (4) Identify any outstanding series or classes of securities that 
are backed by the same asset pool or otherwise have claims on the pool 
assets. In addition, state if additional series or classes of 
securities may be issued that are backed by the same asset pool and 
briefly identify the circumstances under which those additional 
securities may be issued. Specify if security holder approval is 
necessary for such issuances and if security holders will receive 
notice of such issuances.
    (5) Identify if the transaction will include prefunding or 
revolving periods. If so, indicate:
    (i) The term or duration of the prefunding or revolving period.
    (ii) For prefunding periods, the amount of proceeds to be deposited 
in the prefunding account.
    (iii) For revolving periods, the maximum amount of additional 
assets that may be acquired during the revolving period.
    (iv) The percentage of the asset pool and any class or series of 
the asset-backed securities represented by the prefunding account or 
the revolving period.
    (v) Any limitation on the ability to add pool assets.
    (vi) The requirements for assets that may be added to the pool.
    (6) If pool assets can otherwise be added, removed or substituted 
(for example, in the event of a breach in representations or warranties 
regarding pool assets), summarize briefly the circumstances under which 
such actions can occur.
    (7) Summarize the amount or formula for calculating the fee that 
the servicer will receive for performing its duties, and identify from 
what source those fees will be paid and the distribution priority of 
those fees.
    (8) Summarize the federal income tax issues material to investors 
of each class of securities offered.
    (9) Indicate whether the issuance or sale of any class of offered 
securities is conditioned on the assignment of a rating by one or more 
rating agencies. If so, identify each rating agency and the minimum 
rating that must be assigned.
    (b) Risk factors. In providing the information required by Item 
503(c) of Regulation S-K (Sec.  229.503(c)), identify any risks that 
may be different for investors in any offered class of asset-backed 
securities, and if so, identify such classes and describe such 
difference(s).


Sec.  229.1104  (Item 1104) Sponsors.

    Provide the following information about the sponsor:
    (a) State the sponsor's name and describe the sponsor's form of 
organization.
    (b) Describe the general character of the sponsor's business.
    (c) Describe the sponsor's securitization program and state how 
long the sponsor has been engaged in the securitization of assets. The 
description must include a general discussion of the sponsor's 
experience in securitizing assets of any type as well as a more 
detailed discussion of the sponsor's experience in and overall 
procedures for originating or acquiring and securitizing assets of the 
type included in the current transaction. Information regarding the 
size, composition and growth of the sponsor's portfolio of assets of 
the type to be securitized and information or factors related to the 
sponsor that may be material to an analysis of the origination or 
performance of the pool assets, such as whether any prior 
securitizations organized by the sponsor have defaulted or experienced 
an early amortization triggering event, should be included to the 
extent material.
    (d) Describe the sponsor's roles and responsibilities in its 
securitization program, including whether the sponsor or an affiliate 
is responsible for originating, acquiring, pooling or servicing the 
pool assets, and the

[[Page 26725]]

sponsor's participation in structuring the transaction.
    (e) Static pool data. To the extent material, provide delinquency 
and loss information, including static pool data in periodic increments 
(e.g., monthly or quarterly) regarding the delinquency and loss 
experience of static pools of periodic originations or purchases by the 
sponsor of assets of the type to be securitized. Provide such data for 
originations or purchases for the past three fiscal years, or for so 
long as the sponsor has been making such originations or purchases if 
less than three years, and the most recent interim period. If material, 
also provide such information on a pool level basis with respect to 
prior securitized pools involving the same asset type established by 
the sponsor during this period. In addition, to the extent material, 
present static pool data separately according to the factors listed in 
Item 1110(b) and (c) of this Regulation AB, such as by asset term, 
asset type, yield, payment rates, geography or ranges of credit scores 
or other applicable measures of obligor credit quality. Selection of 
factors should result in disclosure of material information. Present 
statistical information in tabular or graphical format, such as by loss 
curves, if such presentation will aid understanding.


Sec.  229.1105  (Item 1105) Depositors.

    If the depositor is not the same entity as the sponsor, provide 
separately the information regarding the depositor called for by 
paragraphs (a) and (b) and, to the extent information would be 
materially different, paragraph (c) of Item 1104 of this Regulation AB. 
In addition, provide the following information:
    (a) Describe the ownership structure of the depositor.
    (b) Describe the general character of any activities the depositor 
is engaged in other than securitizing assets and the time period during 
which it has been so engaged.
    (c) Describe any continuing duties of the depositor after issuance 
of the asset-backed securities being registered regarding the asset-
backed securities or the pool assets.


Sec.  229.1106  (Item 1106) Issuing entities.

    Provide the following information about the issuing entity:
    (a) State the issuing entity's name and describe the issuing 
entity's form of organization, including the State or other 
jurisdiction under whose laws the issuing entity is organized. File the 
issuing entity's governing documents as an exhibit.
    (b) Describe the permissible activities or any restrictions on the 
activities of the issuing entity under its governing documents, 
including any restrictions on the ability to issue or invest in 
additional securities, to borrow money or to make loans to other 
persons. Describe any provisions in the issuing entity's governing 
documents providing for modification of the issuing entity's governing 
documents, including its permissible activities.
    (c) Describe any specific discretionary activities with regard to 
the administration of the asset pool or the asset-backed securities, 
and identify the person or persons who will be authorized to exercise 
such discretion.
    (d) Describe any assets owned or to be owned by the issuing entity, 
apart from the pool assets, as well as any liabilities of the issuing 
entity, apart from the asset-backed securities. Disclose the fiscal 
year end of the issuing entity.
    (e) If the issuing entity has executive officers, a board of 
directors or persons performing similar functions, provide the 
information required by Items 401, 402 and 404 of Regulation S-K 
(Sec. Sec.  229.401, 402 and 404) for the issuing entity.
    (f) Describe the terms of any management or administration 
agreement regarding the issuing entity. File any such agreement as an 
exhibit.
    (g) Describe the capitalization of the issuing entity and the 
amount or nature of any equity contribution to the issuing entity by 
the sponsor, depositor or other party.
    (h) Describe the sale or transfer of the pool assets to the issuing 
entity as well as the creation (and perfection and priority status) of 
any security interest in favor of the issuing entity, the trustee, the 
asset-backed security holders or others, including the material terms 
of any agreement providing for such sale, transfer or creation of a 
security interest. File any such agreements as an exhibit. In addition 
to an appropriate narrative description, also provide this information 
graphically or in a flow chart if it will aid understanding.
    (i) State the amount paid or to be paid for the pool assets, the 
principles followed or to be followed in determining such amount and 
identify the persons making the determination and their relationship, 
if any, with the issuing entity, the depositor, the sponsor, originator 
identified pursuant to Item 1109 of this Regulation AB, or any 
underwriter.
    (j) If expenses incurred in connection with the selection and 
acquisition of the pool assets are to be payable from offering 
proceeds, disclose the amount of such expenses. If such expenses are to 
be paid to the sponsor, servicer, depositor, issuing entity, originator 
identified pursuant to Item 1109 of this Regulation AB, any underwriter 
or any affiliate of the foregoing, separately identify the type and 
amount of expenses paid to each such party.
    (k) Describe to the extent material any provisions or arrangements 
included to address any one or more of the following issues:
    (1) Whether any security interests granted in connection with the 
transaction are perfected, maintained and enforced.
    (2) Whether declaration of bankruptcy, receivership or similar 
proceeding with respect to the issuing entity can occur.
    (3) Whether in the event of a bankruptcy, receivership or similar 
proceeding with respect to the sponsor, originator, depositor or other 
seller of the pool assets, the issuing entity's assets will become part 
of the bankruptcy estate or subject to the bankruptcy control of a 
third party.
    (4) Whether in the event of a bankruptcy, receivership or similar 
proceeding with respect to the issuing entity, the issuing entity's 
assets will become subject to the bankruptcy control of a third party.
    (l) If applicable law prohibits the issuing entity from holding the 
pool assets directly (for example, an ``eligible lender'' trustee must 
hold student loans originated under the Federal Family Education Loan 
Program of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.)), 
describe the arrangements instituted to hold the pool assets on behalf 
of the issuing entity. Include disclosure regarding the arrangements 
taken, as applicable, regarding the items in paragraph (k) of this 
section with respect to any such additional entity that holds such 
assets on behalf of the issuing entity.


Sec.  229.1107  (Item 1107) Servicers.

    Provide the following information for the servicer. Where servicing 
of the pool assets utilizes multiple servicers, such as master 
servicers that oversee the actions of other servicers, primary 
servicers that have primary contact with the obligor, or special 
servicers for specific servicing functions, provide the information for 
the master servicer, each affiliated servicer, each unaffiliated 
servicer that services 10% or more of the pool assets and any other 
servicer that performs work-outs, foreclosures or other material aspect 
of the servicing of the pool assets upon which the performance of the 
pool assets or the asset-backed securities is materially dependent. In 
addition, provide clear

[[Page 26726]]

introductory description of the roles, responsibilities and oversight 
requirements of the entire servicing structure and the parties 
involved.
    (a) Servicer information and experience. (1) State the servicer's 
name and describe the servicer's form of organization.
    (2) Describe the general character of the servicer's business and 
state how long the servicer has been servicing assets. The description 
must include a general discussion of the servicer's experience in 
servicing assets of any type as well as a more detailed discussion of 
the servicer's experience in, and procedures for, servicing assets of 
the type included in the current transaction. Information regarding the 
size, composition and growth of the servicer's portfolio of serviced 
assets of the type to be securitized and information on factors related 
to the servicer that may be material to an analysis of the servicing of 
the pool assets, such as collection processes, billing processes, 
computer systems and back-up systems, should be included to the extent 
material.
    (3) Describe any material changes to the servicer's policies or 
procedures in servicing assets of the same type as the pool assets 
during the past three years.
    (4) Provide information regarding the servicer's financial 
condition where it could have a material impact on one or more aspects 
of servicing of the pool assets and where those aspects could 
materially impact pool performance on the asset-backed securities.
    (b) Servicing agreements and servicing practices. (1) Describe the 
material terms of the servicing agreement and the servicer's duties 
regarding the asset-backed securities transaction. File the servicing 
agreement as an exhibit.
    (2) Describe the manner in which collections on the pool assets 
will be collected and maintained, such as through a segregated 
collection account, and the extent of commingling of funds that occurs 
or may occur from the pool assets with other funds, serviced assets or 
other assets of the servicer.
    (3) Describe to the extent material any special or unique factors 
involved in servicing the particular type of assets included in the 
asset pool, such as subprime assets, and the servicer's processes and 
procedures designed to address such factors.
    (4) Describe the terms of any arrangements whereby the servicer is 
required or permitted to provide advances of funds regarding 
collections, cash flows or distributions, including interest or other 
fees charged for such advances and terms of recovery by the servicer of 
such advances. To the extent material, provide statistical information 
regarding servicer advances on the pool assets and the servicer's 
overall servicing portfolio for the past three years.
    (5) Describe the servicer's process for handling delinquencies, 
losses, bankruptcies and recoveries, such as through liquidation of the 
underlying collateral, note sale by a special servicer or borrower 
negotiation or workouts.
    (6) Describe any ability of the servicer to waive or modify any 
terms, fees, penalties or payments on the pool assets and the effect of 
any such ability, if material, on the potential cash flows from the 
pool assets.
    (7) If the servicer has custodial responsibility for the pool 
assets, describe arrangements regarding the safekeeping and 
preservation of the assets, such as the physical promissory notes, and 
procedures to reflect the segregation of the pool assets from other 
serviced assets. If the servicer does not have custodial responsibility 
for the pool assets, disclose that fact, identify the party that has 
such responsibility and provide the information called for by this 
paragraph for such party.
    (8) Describe any material minimum servicing requirements the 
servicer must meet not specified in Item 1120(d) of this Regulation AB.
    (9) Describe any limitations on the servicer's liability regarding 
the asset-backed securities transaction.
    (c) Back-up servicing. Describe the terms regarding the servicer's 
removal, replacement, resignation or transfer, including:
    (1) Provisions for selection of a successor servicer and financial 
or other requirements that must be met by a successor servicer.
    (2) The process for transferring servicing to a successor servicer.
    (3) Provisions for payment of expenses associated with a servicing 
transfer and any additional fees charged by a successor servicer. 
Specify the amount of any funds set aside for a servicing transfer.
    (4) Arrangements, if any, regarding a back-up servicer for the pool 
assets and the identity of any such back-up servicer.


Sec.  229.1108  (Item 1108) Trustees.

    Provide the following information for each trustee:
    (a) State the trustee's name and describe the trustee's form of 
organization.
    (b) Describe the general character of the trustee's business and to 
what extent the trustee has had prior experience serving as a trustee 
for asset-backed securities transactions involving similar pool assets.
    (c) Describe the trustee's duties and responsibilities regarding 
the asset-backed securities under the governing documents and under 
applicable law. In addition, describe any actions required by the 
trustee, including whether notices are required to investors, rating 
agencies or other third parties, upon an event of default, potential 
event of default (and how defined) or other breach of a transaction 
covenant and any required percentage of a class or classes of asset-
backed securities that is needed to require the trustee to take action.
    (d) Describe any limitations on the trustee's liability regarding 
the asset-backed securities transaction.
    (e) Describe any indemnification provisions that entitle the 
trustee to be indemnified from the cash flow that otherwise would be 
used to pay the asset-backed securities.
    (f) Describe any contractual provisions or understandings regarding 
the trustee's removal, replacement or resignation, as well as how the 
expenses associated with changing from one trustee to another trustee 
will be paid.


Sec.  229.1109  (Item 1109) Originators.

    Provide the following information for any originator or group of 
affiliated originators, apart from the sponsor, that originated, or is 
expected to originate, 10% or more of the pool assets:
    (a) The originator's name and form of organization.
    (b) To the extent material, a description of the originator's 
origination program and how long the originator has been engaged in 
originating assets. The description must include a discussion of the 
originator's experience in originating assets of the type included in 
the current transaction. In providing the description, include, if 
material, information regarding the size and composition of the 
originator's origination portfolio as well as information material to 
an analysis of the performance of the pool assets, such as the 
originator's credit-granting or underwriting criteria for the asset 
types being securitized.


Sec.  229.1110  (Item 1110) Pool assets.

    Describe the pool assets, including the information described in 
this Item 1110. Present statistical information in tabular or graphical 
format, if such presentation will aid understanding. Present 
statistical information in appropriate distributional groups or 
incremental ranges in addition to presenting appropriate overall pool 
totals, averages and weighted averages, if such presentation will aid 
in the understanding of the data. In addition to

[[Page 26727]]

presenting the number, amount and percentage of pool assets by 
distributional group or range, also provide statistical information for 
each group or range by variables such as average balance, weighted 
average coupon, average age and remaining term, average loan-to-value 
or similar ratio and weighted average credit score or other applicable 
measure of obligor credit quality. These variables are just examples 
and should be tailored to the particular asset class backing the asset-
backed securities. Consider providing minimums and maximums when 
presenting averages on an aggregate basis and within each group or 
range. In addition, provide historical data on the pool assets as 
appropriate (e.g., the lesser of three years or the time such assets 
have existed) to allow material evaluation of the pool data. In making 
any calculations regarding overall pool balances, disregard any funds 
set aside for a prefunding account.
    (a) General formation regarding pool asset types and selection 
criteria. Provide the following information:
    (1) A brief description of the type or types of pool assets to be 
securitized.
    (2) A general description of the material terms of the pool assets.
    (3) A description of the solicitation, credit-granting or 
underwriting criteria used to originate or purchase the pool assets, 
including, to the extent known, any changes in such criteria and the 
extent to which such policies and criteria are or could be overridden.
    (4) The method and criteria by which the pool assets were selected 
for the transaction.
    (5) The cut-off date or similar date for establishing the 
composition of the asset pool, if applicable.
    (6) If legal or regulatory provisions (such as bankruptcy, consumer 
protection, predatory lending, privacy, property rights or foreclosure 
laws or regulations) may materially affect pool asset performance or 
payments or expected payments on the asset-backed securities, briefly 
identify these provisions and their effects on such items.
    Instruction to Item 1110(a)(6). Unless a material concentration of 
assets exists, it is not necessary to provide details of the laws in 
each jurisdiction apart from the material potential effects of these 
laws. A legalistic description or recitation of the laws or regulations 
in a particular jurisdiction is not required.
    (b) Pool characteristics. Describe the material characteristics of 
the asset pool. Provide appropriate introductory and explanatory 
information to introduce the characteristics and any terms or 
abbreviations used. While the material characteristics will vary 
depending on the nature of the pool assets, examples of material 
characteristics that may be common for many asset types include:
    (1) Number of each type of pool assets.
    (2) Asset size, such as original balance and outstanding balance as 
of a designated cut-off date.
    (3) Interest rate or rate of return, including type of interest 
rate if the pool includes different types, such as fixed and floating 
rates, and annual percentage rate.
    (4) Capitalized or uncapitalized accrued interest.
    (5) Age, maturity, remaining term, average life (based on different 
prepayment assumptions), current payment/prepayment speeds and pool 
factors, as applicable.
    (6) Servicer, if different servicers service different pool assets.
    (7) If a loan or similar receivable:
    (i) Amortization period.
    (ii) Loan purpose (e.g., whether a purchase or refinance) and 
status, if applicable (e.g., repayment or deferment).
    (iii) Loan-to-value (LTV) ratios and debt service coverage ratios 
(DSCR), as applicable.
    (iv) Type and/or use of underlying property, product or collateral 
(e.g., occupancy type for residential mortgages or industry sector for 
commercial mortgages).
    (v) Number of points or other origination charges paid on the pool 
assets.
    (8) If a receivable or other financial asset with a revolving 
balance, such as a credit card receivable:
    (i) Monthly payment rate.
    (ii) Maximum credit lines.
    (iii) Average account balance.
    (iv) Yield percentages.
    (v) Type of receivable account.
    (vi) Finance charges, fees and other income earned.
    (vii) Gross and net purchases and returns granted.
    (viii) Percentage of full-balance and minimum payments made.
    (9) If the asset pool includes commercial mortgages, the following 
information, to the extent material:
    (i) Net cash flow information that will be generated from the pool 
assets and the components of net cash flow.
    (ii) The location and general character of all materially important 
real properties underlying the pool assets, including information as to 
the present or proposed use of and insurance for such properties.
    (iii) The nature and amount of all other material mortgages, liens 
or encumbrances against such properties and their priority.
    (iv) Any proposed program for the renovation, improvement or 
development of such properties, including the estimated cost thereof 
and the method of financing to be used.
    (v) The general competitive conditions to which such properties are 
or may be subject.
    (vi) Management of such properties.
    (vii) Occupancy rate expressed as a percentage for each of the last 
five years.
    (viii) Principal business, occupations and professions carried on 
in, or from the building.
    (ix) Number of tenants occupying 10% or more of the total rentable 
square footage of such properties and principal nature of business of 
such tenant, and the principal provisions of the leases with those 
tenants including, but not limited to: rental per annum, expiration 
date, and renewal options.
    (x) The average effective annual rental per square foot or unit for 
each of the last three years prior to the date of filing.
    (xi) Schedule of the lease expirations for each of the ten years 
starting with the year in which the registration statement is filed, 
stating:
    (A) The number of tenants whose leases will expire.
    (B) The total area in square feet covered by such leases.
    (C) The annual rental represented by such leases.
    (D) The percentage of gross annual rental represented by such 
leases.
    Instruction to Item 1110(b)(9). What is required is information 
material to an investor's understanding of the asset-backed securities. 
Detailed descriptions of the physical characteristics of individual 
properties or legal descriptions by metes and bounds are not required.
    (10) Whether the pool asset is secured or unsecured, and if 
secured, the type(s) of collateral.
    (11) Ranges of standardized credit scores of obligors and other 
information regarding obligor credit quality.
    (12) Billing and payment procedures, including frequency of 
payment, payment options, fees, charges and origination or payment 
incentives.
    (13) Information about the origination channel and origination 
process for the pool assets, such as originator information (and how 
acquired) and the level of origination documentation required, as 
applicable.
    (14) Geographic distribution, such as by state or other material 
geographic region. If 10% or more of the pool assets are or will be 
located in any one state or other geographic region, provide the 
following information:
    (i) Any economic or other factors specific to such state or region 
that may

[[Page 26728]]

materially impact the pool assets or pool asset cash flows.
    (ii) If material, statistical data referred to in this Item 1110(b) 
for each such geographic concentration.
    Instruction to Item 1110(b)(14). For most assets, such as credit 
card accounts, automobile leases, trade receivables and student loans, 
the location of the asset is the underlying obligor's billing address. 
For assets involving real estate, such as mortgages, the location of 
the asset is where the physical property underlying the asset is 
located.
    (15) Other concentrations material to the asset type (e.g., school 
type for student loans). If material, provide information required by 
paragraph (b)(14) of this section regarding such concentrations, as 
applicable.
    (c) Delinquency and loss information. Provide delinquency and loss 
information for the asset pool, including statistical information 
regarding delinquencies and losses. Also, present delinquency and loss 
data to the extent material about the asset pool on a static pool 
basis, such as by discrete origination periods (e.g., monthly or 
quarterly) or other factors listed in paragraph (b) of this section, 
such as by asset term, asset type, yield, payment rates, geography or 
ranges of credit scores or other applicable measures of obligor credit 
quality. Selection of factors should result in disclosure of material 
information. Present statistical information in tabular or graphical 
format, such as by loss curves, if such presentation will aid 
understanding.
    (d) Sources of pool cash flow. If the cash flows from the pool 
assets that are to be used to support the asset-backed securities are 
to come from more than one source (such as separate cash flows from 
lease payments and from the sale of the residual asset at the 
termination of the lease), provide the following information:
    (1) Disclose the specific sources of funds that will be used to 
make the payments and distributions on the asset-backed securities, 
and, if applicable, provide information on the relative amount and 
percentage of funds that are to be derived from each source, including 
a description of any assumptions, data, models and methodology used to 
derive such amounts. If payments on different classes or different 
categories of payments on or related to the asset-backed securities 
(e.g., principal, interest or expenses) are to come from different or 
segregated cash flows from the pool assets or other sources, disclose 
the source of funds that will be used for such payments.
    (2) Residual value information. If the asset pool includes leases 
or other assets where a portion of the cash flow is anticipated to come 
from the residual value of an underlying physical asset, disclose the 
following:
    (i) How the residual values used to structure the transaction were 
estimated, including an explanation of any material discount rates, 
models or assumptions used and who selected such rates, models or 
assumptions.
    (ii) Any material procedures or requirements incorporated to 
preserve residual values during the term of the lease, such as lessee 
responsibilities, prohibitions on subletting, indemnification or 
required insurance or guarantees.
    (iii) The procedures by which the residual values will be realized 
and by whom those procedures will be carried out, including information 
on the experience of such party, any affiliations with a party 
described in Item 1117(a) of this Regulation AB and the compensation 
arrangements with such party.
    (iv) Whether the pool assets are open-end leases (e.g., where the 
lessee is required to cover the shortfall between the residual value of 
the leased property and the sale proceeds) or closed-end leases (e.g., 
where the lessor is responsible for such shortfalls), and where both 
types of leases are included in the asset pool, the percentage of each.
    (v) Any lessor obligations that are required under the leases, and 
the effect or potential effect on the asset-backed securities from 
failure by the lessor to perform its obligations.
    (vi) Statistical information regarding estimated residual values 
for the pool assets.
    (vii) Summary historical statistics on turn-in rates, if 
applicable, and residual value realization rates by the party 
responsible for such process over the past three years, or such longer 
period as is material to an evaluation of the pool assets.
    (viii) The effect on security holders if not enough cash flow is 
received from the realization of the residual values, whether there are 
any provisions to address this contingency, and how any cash flow 
greater than that necessary to pay security holders will be allocated.
    (e) Representations and warranties and repurchase obligations 
regarding pool assets. Summarize any representations and warranties 
made concerning the pool assets by the sponsor, transferor, originator 
or other party to the transaction, and describe briefly the remedies 
available if those representations and warranties are breached, such as 
repurchase obligations.
    (f) Claims on pool assets. Describe any material direct or 
contingent claim that parties other than the holders of the asset-
backed securities have on any pool assets. Also, describe any material 
cross-collateralization or cross-default provisions relating to the 
pool assets.
    (g) Revolving periods, prefunding accounts and other changes to the 
asset pool. If the transaction contemplates a prefunding or revolving 
period, provide the following information. Provide similar information 
regarding any other circumstances where pool assets may be added, 
substituted or removed from the asset pool, such as in the event of 
additional issuances of asset-backed securities in a master trust:
    (1) The term or duration of any prefunding or revolving period.
    (2) For prefunding periods, the amount of proceeds to be deposited 
in the prefunding account.
    (3) For revolving periods, the maximum amount of additional assets 
that may be acquired during the revolving period.
    (4) The percentage of the asset pool and any class or series of the 
asset-backed securities represented by the prefunding account or the 
revolving account.
    (5) Triggers or events that would trigger limits on or terminate 
the prefunding or revolving period and the effects of such triggers. In 
particular for a revolving period, describe the operation of the 
revolving period and the amortization period.
    (6) When and how new pool assets may be acquired during the 
prefunding or revolving period, and if, when and how pool assets can be 
removed or substituted. Describe any limits on the amount, type or 
speed with which pool assets may be acquired, substituted or removed.
    (7) The acquisition or underwriting criteria for additional pool 
assets to be acquired during the prefunding or revolving period, 
including a description of any differences from the criteria used to 
select the current asset pool.
    (8) Which party has the authority to add, remove or substitute 
assets from the asset pool or determine if such pool assets meet the 
acquisition or underwriting criteria for additional pool assets. In 
addition, disclose if there will be any independent verification of 
such person's exercise of authority or determinations.
    (9) Any requirements to add or remove minimum amounts of pool 
assets and any effects of not meeting those requirements.

[[Page 26729]]

    (10) If applicable, the procedures and standards for the temporary 
investment of funds in a prefunding or revolving account pending use 
(including the disposition of gains and losses on pending funds) and a 
description of the financial products or instruments eligible for such 
accounts.
    (11) The circumstances under which funds in a prefunding or 
revolving account will be returned to investors or otherwise disposed 
of.
    (12) A statement of how investors will be notified of changes to 
the asset pool.


Sec.  229.1111  (Item 1111) Significant obligors of pool assets.

    (a) Descriptive information. Provide the following information for 
each significant obligor:
    (1) The name of the obligor.
    (2) The organizational form and general character of the business 
of the obligor.
    (3) The nature of the concentration of the pool assets with the 
obligor.
    (4) The material terms of the pool assets or the agreements with 
the obligor involving the pool assets.
    (b) Financial information. (1) If the pool assets relating to a 
significant obligor represent 10% or more, but less than 20%, of the 
asset pool, provide selected financial data required by Item 301 of 
Regulation S-K (Sec.  229.301) for the significant obligor.
    (2) If pool assets relating to a significant obligor represent 20% 
or more of the asset pool, provide financial statements meeting the 
requirements of Regulation S-X (Sec. Sec.  210.1-01 through 210.12-29 
of this chapter), except Sec.  210.3-05 of this chapter and Article 11 
of Regulation S-X (Sec. Sec.  210.11-01 through 210.11-03 of this 
chapter), of the significant obligor. Financial statements of such 
obligor and its subsidiaries consolidated (as required by Sec.  
240.14a-3(b) of this chapter) shall be filed under this item.
    Instructions to Item 1111(b).
    1. No information need be provided pursuant to paragraph (b) of 
this section if the obligations of the significant obligor as they 
relate to the pool assets are backed by the full faith and credit of 
the United States.
    2. No information need be provided pursuant to paragraph (b) of 
this section if the obligations of the significant obligor as they 
relate to the pool assets are backed by the full faith and credit of a 
foreign government (as defined in Sec.  240.3b-4(a) of this chapter) if 
the pool assets are investment grade securities as defined in Item 
I.B.2 of Form S-3 (Sec.  239.13 of this chapter). If the pool assets 
are not investment grade securities, information required by paragraph 
(5) of Schedule B of the Securities Act (15 U.S.C. 77aa) regarding the 
foreign government may be incorporated by reference in lieu of 
providing the financial information required pursuant to paragraph (b) 
of this section.
    3. If the significant obligor is an asset-backed issuer and the 
pool assets relating to the significant obligor are asset-backed 
securities, provide the information required by Items 1104 through 1113 
and Item 1117 of this Regulation AB regarding such asset-backed 
securities in lieu of the information required by paragraph (b) of this 
section.


Sec.  229.1112  (Item 1112) Structure of the transaction.

    (a) Description of the securities and transaction structure. In 
providing the information required by Item 202 of Regulation S-K (Sec.  
229.202), address the following specific factors relating to the asset-
backed securities, as applicable:
    (1) The types or categories of securities that may be offered, such 
as interest-weighted or principal-weighted classes (including IO 
(interest only) or PO (principal only) securities), planned 
amortization or companion classes or residual or subordinated 
interests.
    (2) The flow of funds for the transaction, including the payment 
allocations, rights and distribution priorities among all classes of 
the issuing entity's securities, and within each class, with respect to 
cash flows, credit enhancement or other support and any other 
structural features designed to enhance credit, facilitate the timely 
payment of monies due on the pool assets or owing to security holders, 
adjust the rate of return on the asset-backed securities, or preserve 
monies that will or might be distributed to security holders. In 
addition to an appropriate narrative discussion of the allocation and 
priority structure of pool cash flows, present the flow of funds 
graphically if doing so will aid understanding. In the flow of funds 
discussion, provide information regarding any requirements directing 
cash flows from the pool assets (such as to reserve accounts, cash 
collateral accounts or expenses) and the purpose and operation of such 
requirements.
    (3) In describing the interest rate or rate of return on the asset-
backed securities and how such amounts are payable, explain how the 
rate is determined and how frequently it will be determined. If the 
rate to be paid can be a combination of two or more rates (such as the 
lesser of a variable rate or the actual weighted average net coupon on 
the pool assets), provide sufficiently clear information regarding each 
rate and when each rate applies.
    (4) How principal, if any, will be paid on the asset-backed 
securities, including maturity dates, amortization or principal 
distribution schedules, principal distribution dates, formulas for 
calculating principal distributions from the cash flows and other 
factors that will affect the timing or amount of principal payments for 
each class of securities.
    (5) The denominations in which the asset-backed securities may be 
issued.
    (6) Any specified changes to the transaction structure that would 
be triggered upon a default or event of default (such as a change in 
distribution priority among classes).
    (7) Any liquidation, amortization, performance or similar triggers 
or events, and the rights of investors or changes to the transaction 
structure or flow of funds if such events were to occur.
    (8) Whether the servicer or other party is required to provide 
periodic evidence of the absence of a default or of compliance with the 
terms of the transaction agreements.
    (9) If applicable, the extent, expressed as a percentage, the 
transaction is overcollateralized or undercollateralized as measured by 
comparing the principal balance of the asset-backed securities to the 
original asset pool.
    (10) Any provisions contained in other securities that could result 
in a cross-default or cross-collateralization.
    (11) Any minimum standards, restrictions or suitability 
requirements regarding potential investors in purchasing the securities 
or any restrictions on ownership or transfer of the securities.
    (12) Security holder vote required to amend the transaction 
documents and allocation of voting rights among security holders.
    (b) Distribution frequency and cash maintenance. (1) Disclose the 
frequency of distribution dates for the asset-backed securities and the 
collection periods for the pool assets.
    (2) Describe how cash held pending distribution or other uses is 
held and invested. Also describe the length of time cash will be held 
pending distributions to security holders. Identify the party or 
parties with access to cash balances and the authority to invest cash 
balances. Specify who determines any decisions regarding the deposit, 
transfer or disbursement of pool asset cash flows and whether there 
will be any independent verification of the transaction accounts or 
account activity.
    (c) Fees and expenses. Provide in a separate table an itemized list 
of all fees

[[Page 26730]]

and expenses to be paid or payable out of the cash flows from the pool 
assets. In itemizing the fees and expenses, also indicate their general 
purpose, the party receiving such fees or expenses, the source of funds 
for such fees or expenses (if different from other fees or expenses or 
if such fees or expenses are to be paid from a specified portion of the 
cash flows) and the distribution priority of such expenses. If the 
amount of such fees or expenses is not fixed, provide the formula used 
to determine such fees or expenses. The tabular presentation may be 
accompanied by footnotes or other accompanying narrative disclosure to 
the extent necessary for an understanding of the timing or amount of 
such fees or expenses. In addition, through footnote or other 
accompanying narrative disclosure, describe if any, and if so how, such 
fees or expenses can be changed without notice to, or approval by, 
security holders.
    (d) Excess cash flow. (1) Disclose who owns any residual or 
retained interests to the cash flows and the disposition of excess cash 
flow.
    (2) Disclose any requirements in the transaction agreements to 
maintain a minimum amount of excess cash flow or spread from, or 
retained interest in, the transaction and any actions that would be 
required or changes to the transaction structure that would occur if 
such requirements were not met.
    (3) To the extent material to an understanding of the asset-backed 
securities, disclose any features or arrangements to facilitate a 
securitization of the excess cash flow or retained interest from the 
transaction, including whether any material changes to the transaction 
structure may be made without the consent of asset-backed security 
holders in connection with these securitizations.
    (e) Master trusts. If one or more additional series or classes have 
been or may be issued by the issuing entity that are backed by the same 
asset pool, provide information regarding the additional securities to 
the extent material to an understanding of their effect on the 
securities being offered, including the following:
    (1) Relative priority of such additional securities to the 
securities being offered and rights to the underlying pool assets and 
their cash flows.
    (2) Allocation of cash flow from the asset pool and any expenses or 
losses among the various series or classes.
    (3) Terms under which such additional series or classes may be 
issued and pool assets increased or changed.
    (4) The terms of any security holder approval or notification of 
such additional securities.
    (f) Optional or mandatory redemption or termination. (1) If any 
class of the asset-backed securities includes an optional or mandatory 
redemption or termination feature, provide the following information:
    (i) Terms for triggering the redemption or termination.
    (ii) The source of funds and amount of the redemption or repurchase 
price or formula for determining such amount.
    (iii) The procedures for redemption or termination, including any 
notices to security holders.
    (iv) If the amount allocated to security holders is reduced by 
losses, the policy regarding any amounts recovered after redemption or 
termination.
    (2) The title of any class of securities with an optional or 
mandatory redemption or termination feature that may be exercised when 
25% or more of the original principal balance of the pool assets is 
still outstanding must include the word ``callable.''
    (g) Prepayment, maturity and yield considerations. (1) Describe any 
models, including the related material assumptions and limitations, 
used as a means to identify cash flow patterns with respect to the pool 
assets.
    (2) Describe to the extent material the degree to which each class 
of securities is sensitive to changes in the rate of payment on the 
pool assets (e.g., prepayment or interest rate sensitivity), and 
describe the specific consequences of such changing rate of payment. 
Provide statistical information of such effects, such as the effect of 
prepayments on yield and weighted average life.
    (3) Describe any special allocations of prepayment risks among the 
classes of securities, and whether any class protects other classes 
from the effects of the uncertain timing of cash flow.


Sec.  229.1113  (Item 1113) Credit enhancement and other support.

    (a) Descriptive information. To the extent material, describe the 
following, including a clear discussion of the manner in which each 
potential item is designed to affect or ensure timely payment of the 
asset-backed securities:
    (1) Any external credit enhancement designed to ensure that the 
asset-backed securities or pool assets will pay in accordance with 
their terms, such as bond insurance, letters of credit or guarantees.
    (2) Any mechanisms to ensure that payments on the asset-backed 
securities are timely, such as liquidity facilities, lending 
facilities, guaranteed investment contracts and minimum principal 
payment agreements.
    (3) Any derivatives that are used to reduce or alter risk resulting 
from financial assets in the asset pool and that provide payments in 
return for payments on such assets, such as interest rate or currency 
swaps, or that are used to provide credit enhancement related to assets 
in the pool.
    (4) Any internal credit enhancement as a result of the structure of 
the transaction that increases the likelihood that payments will be 
made on one or more classes of the asset-backed securities in 
accordance with their terms, such as subordination provisions, 
overcollateralization, reserve accounts, cash collateral accounts or 
spread accounts.
    Instruction to Item 1113(a). Include a description of the material 
terms of any enhancement described, including any limits on the timing 
or amount of the enhancement or any conditions that must be met before 
the enhancement can be accessed. Any agreement is to be filed as an 
exhibit. Also describe any provisions permitting the substitution of 
enhancement.
    (b) Information regarding significant enhancement providers.
    (1) Descriptive information. If an entity or group of affiliated 
entities providing enhancement or other support for the asset-backed 
securities is liable or contingently liable to provide payments 
representing 10% or more of the cash flow supporting any offered class 
of asset-backed securities, provide the following information:
    (i) The name of such enhancement provider.
    (ii) The organizational form of enhancement provider.
    (iii) The general character of the business of such enhancement 
provider.
    (2) Financial information. (i) If any entity or group of affiliated 
entities providing enhancement or other support for the asset-backed 
securities is liable or contingently liable to provide payments 
representing 10% or more, but less than 20%, of the cash flow 
supporting any class of the asset-backed securities, provide financial 
data required by Item 301 of Regulation S-K (Sec.  229.301) for such 
entity or group of affiliated entities.
    (ii) If any entity or group of affiliated entities providing 
enhancement or other support for the asset-backed securities is liable 
or contingently liable to provide payments representing 20% or more of 
the cash flow supporting any class of the asset-backed securities, 
provide financial statements meeting the requirements of Regulation S-X 
(Sec. Sec.  210.1-01 through 210.12-29 of this

[[Page 26731]]

chapter), except Sec.  210.3-05 of this chapter and Article 11 of 
Regulation S-X (Sec. Sec.  210.11-01 through 210.11-03 of this 
chapter), of each such entity or group of affiliated entities. 
Financial statements of such enhancement provider and its subsidiaries 
consolidated (as required by Sec.  240.14a-3(b) of this chapter) shall 
be filed under this item.
    Instructions to Item 1113.
    1. The requirements in paragraph (b) of this section apply to all 
providers of external credit or liquidity enhancement, insurance or 
guarantees, counterparties to swap or hedging arrangements, interest 
rate exchange arrangements, interest rate cap or floor arrangements, 
currency exchange arrangements or similar arrangements, and any other 
parties providing external credit enhancement or other support for 
payments on the asset-backed securities. Enhancement may support 
payment on the pool assets or payments on the asset-backed securities 
themselves.
    2. No information need be provided pursuant to paragraph (b)(2) of 
this section if the obligations of the enhancement provider are backed 
by the full faith and credit of the United States.
    3. No information need be provided pursuant to paragraph (b)(2) of 
this section if the obligations of the enhancement provider are backed 
by the full faith and credit of a foreign government (as defined in 
Sec.  240.3b-4(a) of this chapter) if the enhancement provider has an 
investment grade credit rating, as the term investment grade is used in 
Item I.B.2 of Form S-3 (Sec.  239.13 of this chapter). If the 
enhancement provider does not have an investment grade credit rating, 
information required by paragraph (5) of Schedule B of the Securities 
Act (15 U.S.C. 77aa) regarding the foreign government may be 
incorporated by reference in lieu of providing the financial 
information required pursuant to paragraph (b)(2) of this section.


Sec.  229.1114  (Item 1114) Tax matters.

    Provide a brief, clear and understandable summary of:
    (a) The tax treatment of the asset-backed securities transaction 
under federal income tax laws.
    (b) The material federal income tax consequences of purchasing, 
owning and selling the asset-backed securities. If any of the material 
federal income tax consequences are not expected to be the same for 
investors in all classes offered by the registration statement, 
describe the material differences.
    (c) The substance of counsel's tax opinion, including 
identification of the material consequences upon which counsel has not 
been asked, or is unable, to opine.


Sec.  229.1115  (Item 1115) Legal proceedings.

    Describe briefly any legal proceedings pending or known to be 
threatened against the sponsor, depositor, trustee, issuing entity, 
servicer, enhancement provider, originator identified pursuant to Item 
1109 of this Regulation AB, or other party identified pursuant to Item 
1100(d)(1) of this Regulation AB, or of which any property of the 
foregoing is the subject, that is material to security holders. Include 
similar information as to any such proceedings known to be contemplated 
by governmental authorities.


Sec.  229.1116  (Item 1116) Reports and additional information.

    (a) Reports required under the transaction documents. Describe the 
reports or other documents to security holders required under the 
transaction agreements, including information included, schedule and 
manner of distribution or other availability, and the entity or 
entities that will prepare and provide the reports.
    (b) Reports to be filed with the Commission. (1) Specify the names, 
and if available, the Commission file numbers of the entity or entities 
that will be filing reports with the Securities and Exchange 
Commission. Identify the reports and other information filed with the 
Commission.
    (2) State that the public may read and copy any materials filed 
with the Commission at the Commission's Public Reference Room at 450 
Fifth Street, NW., Washington, DC 20549. State that the public may 
obtain information on the operation of the Public Reference Room by 
calling the Securities and Exchange Commission at 1-800-SEC-0330. State 
that the Commission maintains an Internet site that contains reports, 
proxy and information statements, and other information regarding 
issuers that file electronically with the Commission and state the 
address of that site (http://www.sec.gov).
    (c) Web site access to Commission reports. (1) State whether the 
issuing entity's annual reports on Form 10-K (Sec.  249.310 of this 
chapter), distribution reports on Form 10-D (Sec.  249.312 of this 
chapter), current reports on Form 8-K (Sec.  249.308 of this chapter), 
and amendments to those reports filed or furnished pursuant to section 
13(a) or 15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d)) will be 
made available on the Web site of a specified transaction party (e.g., 
the sponsor, depositor, servicer, issuing entity or trustee) as soon as 
reasonably practicable after such material is electronically filed 
with, or furnished to, the Commission.
    (2) Disclose whether other reports to security holders or 
information about the asset-backed securities will be made available in 
this manner.
    (3) If filings will be made available in this manner, disclose the 
Web site address where such filings may be found.
    (4) If filings and other reports will not be made available in this 
manner, describe the reasons why they will not and whether an 
identified transaction party voluntarily will provide electronic or 
paper copies of those filings free of charge upon request.


Sec.  229.1117  (Item 1117) Affiliations and certain relationships and 
related transactions.

    (a) Describe if so, and how, the sponsor, depositor or issuing 
entity is an affiliate (as defined in Sec.  240.405 of this chapter) of 
any of the following parties as well as, to the extent material, if so, 
and how, any of the following parties are affiliates of any of the 
other following parties:
    (1) Servicer.
    (2) Trustee.
    (3) Originator identified pursuant to Item 1109 of this Regulation 
AB.
    (4) Significant obligor identified pursuant to Item 1111 of this 
Regulation AB.
    (5) Enhancement provider identified pursuant to Item 1113 of this 
Regulation AB.
    (6) Underwriter or promoter for the asset-backed securities.
    (7) Any other material parties related to the asset-backed 
securities described in Item 1101(d)(1) of this Regulation AB.
    (b) Describe whether there is, and if so the general character of, 
any business relationship, agreement, arrangement, transaction or 
understanding that is entered into outside the ordinary course of 
business or is on terms other than would be obtained in an arm's length 
transaction with an unrelated third party, apart from the asset-backed 
securities transaction, between the sponsor, depositor or issuing 
entity and any of the parties in paragraphs (a)(1) through (a)(7) of 
this section, or any affiliates of such parties, that currently exists 
or that existed during the past two years and that is material to an 
investor's understanding of the asset-backed securities.
    Instruction to Item 1117(b). What is required is information 
material to an investor's understanding of the asset-backed securities. 
A detailed description or itemized listing of all commercial 
relationships among the

[[Page 26732]]

parties is not required. Instead, the disclosure should indicate 
whether any relationships outside of the asset-backed securities 
transaction do exist that are outside the normal course and the general 
character of those relationships. Disclosure of specific relationships 
involving or relating to the asset-backed securities transaction and 
the pool assets, including the material terms and approximate dollar 
amount involved, is required to the extent material. For example, 
regarding relationships with an underwriter or promoter for the asset-
backed securities, material credit arrangements relating to the pool 
assets, such as providing a warehouse line of credit to fund 
originations or acquisitions pending securitizations, are to be 
described.


Sec.  229.1118  (Item 1118) Ratings.

    Disclose whether the issuance or sale of any class of offered 
securities is conditioned on the assignment of a rating by one or more 
rating agencies, whether or not NRSROs. If so, identify each rating 
agency and the minimum rating that must be assigned. Describe any 
arrangements to have such rating monitored while the asset-backed 
securities are outstanding.


Sec.  229.1119  (Item 1119) Distribution and pool performance 
information.

    Describe the distribution for the related distribution period and 
the performance of the asset pool during the distribution period. 
Provide appropriate introductory and explanatory information to 
introduce any material terms, parties or abbreviations used. Present 
statistical information in tabular or graphical format, if such 
presentation will aid understanding. While the material information 
regarding the related distribution and pool performance will vary 
depending on the nature of the transaction, examples of material 
characteristics that may be common for many asset-backed securities 
transactions include:
    (a) Any applicable record dates, accrual dates, determination dates 
for calculating distributions and actual distribution dates for the 
distribution period.
    (b) Cash flows received and the sources thereof for distributions, 
fees and expenses (including portfolio yield, if applicable).
    (c) Calculated amounts and distribution of the flow of funds for 
the period itemized by type and priority of payment, including:
    (1) Fees or expenses accrued and paid, with an identification of 
the general purpose of such fees and the party receiving such fees or 
expenses.
    (2) Payments accrued or paid with respect to enhancement or other 
support identified in Item 1113 of this Regulation AB (such as for 
outgoing swap payments, insurance premiums or other enhancement 
maintenance fees), with an identification of the general purpose of 
such payments and the party receiving such payments.
    (3) Principal, interest and other distributions accrued and paid on 
the asset-backed securities by type and by class or series and any 
principal or interest shortfalls or carryovers.
    (4) The amount of excess cash flow or excess spread and the 
disposition of excess cash flow.
    (d) Beginning and ending principal balances of the asset backed 
securities.
    (e) Interest rates applicable to the pool assets and the asset-
backed securities, if variable.
    (f) Beginning and ending balances of transaction accounts, such as 
reserve accounts, and account activity during the period.
    (g) Any amounts drawn on any credit enhancement or other support 
identified in Item 1113 of this Regulation AB, the purpose, method of 
calculation and use of such draws, and the amount of coverage remaining 
under any such enhancement.
    (h) Number and amount of pool assets at the beginning and ending of 
each period, and updated pool composition information, such as weighted 
average coupon, weighted average life, weighted average remaining term, 
pool factors, prepayment amounts, current payment/prepayment speeds and 
other prepayment or interest rate sensitivity information. For asset-
backed securities backed by leases where a portion of the cash flow to 
repay the asset-backed securities is anticipated to come from the 
residual value of the physical property underlying the leases, this 
information also would include turn-in rates and residual value 
realization rates.
    (i) Delinquency and loss information for the period (See, e.g., 
Items 1100(b) and 1110(c) of this Regulation AB).
    (j) Information on the amount, terms and purpose of any advances 
made or reimbursed during the period, including the use of funds 
advanced and the source of funds for reimbursements.
    (k) Any material modifications, extensions or waivers to pool asset 
terms, fees, penalties or payments.
    (l) Breaches of material pool asset representations or warranties 
or transaction covenants.
    (m) Information on ratio, coverage or other tests used for 
determining any early amortization, liquidation or other performance 
trigger and whether the trigger was met.
    (n) Information regarding any new issuance of asset-backed 
securities backed by the same asset pool, any pool asset additions, 
removals, substitutions and repurchases (and purchase rates, if 
applicable), such as through a prefunding or revolving period, and cash 
flows available for future purchases, such as the balances of any 
prefunding or revolving accounts, including:
    (1) Any material changes in the solicitation, credit-granting, 
underwriting, origination, acquisition or pool selection procedures, as 
applicable, used to originate, acquire or select the new pool assets.
    (2) If the addition, removal or substitution of pool assets has 
materially changed the composition of the asset pool taken as a whole, 
provide the information required by Items 1104, 1107, 1109, 1110 and 
1111 of this Regulation AB applied taking the revised pool composition 
into account. However, no disclosure need be provided by this paragraph 
if substantially the same information was provided in an effective 
registration statement under the Securities Act or a prospectus timely 
filed pursuant to Sec.  230.424 of this chapter under the same Central 
Index Key (CIK) code regarding a subsequent issuance of asset-backed 
securities backed by a pool of assets that includes the pool assets 
that are the subject of this paragraph.


Sec.  229.1120  (Item 1120) Compliance with applicable servicing 
criteria.

    (a) Report on compliance with servicing criteria. Provide as an 
exhibit to the filing a report of the responsible party, as defined in 
Sec. Sec.  240.13a-18 or 240.15d-18 of this chapter, on compliance with 
the servicing criteria set forth in paragraph (d) of this section that 
contains the following:
    (1) A statement of the responsible party's responsibility for 
assessing compliance with the servicing criteria;
    (2) A statement that the responsible party used the criteria in 
paragraph (d) of this section to assess compliance with the servicing 
criteria;
    (3) The responsible party's assessment of compliance with the 
servicing criteria. This discussion must include disclosure of any 
material instance of noncompliance identified by the responsible party; 
and
    (4) A statement that a registered public accounting firm has issued 
an attestation report on the responsible party's assessment of 
compliance with the servicing criteria in accordance with paragraph (d) 
of Rule 13a-18 or Rule

[[Page 26733]]

15d-18 under the Exchange Act (Sec. Sec.  240.13a-18 or 240.15d-18 of 
this chapter).
    (b) Attestation report of the registered public accounting firm. 
Provide the registered public accounting firm's attestation report 
required by paragraph (d) of Rule 13a-18 or Rule 15d-18 under the 
Exchange Act on the responsible party's assessment of compliance with 
the servicing criteria as an exhibit to the asset-backed issuer's 
report on Form 10-K containing the disclosure required by this item.
    (c) Additional disclosure for the Form 10-K report. If the 
responsible party's report on compliance with servicing criteria 
required by paragraph (a) of this section identifies any material 
instance of noncompliance with the servicing criteria, describe in the 
report on Form 10-K any material impacts or effects that have affected 
or that may reasonably be likely to affect pool asset performance, 
servicing of the pool assets or payments or expected payments on the 
asset-backed securities.
    (d) Servicing criteria.--(1) General servicing considerations.
    (i) Policies and procedures are instituted to monitor any 
performance or other triggers and events of default in accordance with 
the transaction agreements.
    (ii) If any material servicing activities are outsourced to third 
parties, policies and procedures are instituted to monitor the third 
party's performance and compliance with such servicing activities.
    (iii) Any requirements in the transaction agreements to maintain a 
back-up servicer for the pool assets are maintained.
    (iv) A fidelity bond and errors and omissions policy is in effect 
on the servicer throughout the reporting period in the amount of 
coverage required by and otherwise in accordance with the terms of the 
transaction agreements.
    (2) Cash collection and administration.
    (i) Payments on pool assets are deposited into the appropriate 
custodial bank accounts and related bank clearing accounts no more than 
two business days of receipt.
    (ii) Disbursements made via wire transfer on behalf of an obligor 
or investor are made only by authorized personnel.
    (iii) Advances of funds or guarantees regarding collections, cash 
flows or distributions, and any interest or other fees charged for such 
advances, are made, reviewed and approved as specified in the 
transaction agreements.
    (iv) The related accounts for the transaction, such as cash reserve 
accounts or accounts established as a form of overcollateralization, 
are separately maintained (e.g., with respect to commingling of cash) 
as set forth in the transaction agreements.
    (v) Each custodial account is maintained at a federally insured 
depository institution as set forth in the transaction agreements. For 
purposes of this criterion, ``federally insured'' with respect to a 
foreign financial institution would mean that the laws or regulations 
of the foreign financial institution's home jurisdiction require the 
institution to insure its deposits.
    (vi) Unissued checks are safeguarded so as to prevent unauthorized 
access.
    (vii) Reconciliations are prepared on a monthly basis for all 
asset-backed securities related bank accounts, including custodial 
accounts and related bank clearing accounts. These reconciliations:
    (A) Are mathematically accurate;
    (B) Are prepared within 30 calendar days after the bank statement 
cutoff date;
    (C) Are reviewed and approved by someone other than the person who 
prepared the reconciliation; and
    (D) Contain explanations for reconciling items. These reconciling 
items are resolved within 90 calendar days of their original 
identification.
    (3) Investor remittances and reporting.
    (i) Reports to investors, including those to be filed with the 
Commission, are maintained in accordance with the transaction 
agreements and applicable Commission requirements. Specifically, such 
reports are:
    (A) Prepared in accordance with timeframes and other terms set 
forth in the transaction agreements;
    (B) Provide information calculated in accordance with the terms 
specified in the transaction agreements;
    (C) Filed with the Commission as required by its rules and 
regulations; and
    (D) Agree with investors' and/or the trustee's records as to the 
total unpaid principal balance and number of pool assets serviced by 
the servicer.
    (ii) Amounts due to investors are allocated and remitted in 
accordance with timeframes, distribution priority and other terms set 
forth in the transaction agreements.
    (iii) Disbursements made to an investor are posted within two 
business days to the investor's records maintained by the servicer.
    (iv) Amounts remitted to investors per the investor reports agree 
with cancelled checks, or other form of payment, or custodial bank 
statements.
    (4) Pool asset administration.
    (i) Collateral or security on pool assets is maintained as required 
by the transaction agreements or related pool asset documents.
    (ii) Pool assets and related documents are safeguarded as required 
by the transaction agreements.
    (iii) Any additions, removals or substitutions to the asset pool 
are made, reviewed and approved in accordance with any conditions or 
requirements in the transaction agreements.
    (iv) Payments on pool assets, including any payoffs, made in 
accordance with the related pool asset documents are posted to the 
applicable obligor's records no more than two business days after 
receipt and allocated to principal, interest or other items (e.g., 
escrow) in accordance with the related pool asset documents.
    (v) The servicer's records regarding the pool assets agree with the 
obligor's records with respect to the unpaid principal balance.
    (vi) Changes with respect to the terms or status of an obligor's 
pool asset (e.g., loan modifications or re-agings) are made, reviewed 
and approved by authorized personnel in accordance with the transaction 
agreements and related pool asset documents.
    (vii) Loss mitigation or recovery actions (e.g., foreclosures or 
repossessions) are initiated, conducted and concluded in accordance 
with the timeframes or other requirements established by the 
transaction agreements. Such programs include a hierarchy of workout 
procedures (e.g., forbearance plans, modifications and deeds in lieu of 
foreclosure, as applicable).
    (viii) Records documenting collection efforts are maintained during 
the period a pool asset is delinquent in accordance with the 
transaction agreements. Such records are maintained on at least a 
monthly basis and describe the entity's activities in monitoring 
delinquent pool assets including, for example, phone calls, letters and 
payment rescheduling plans in cases where delinquency is deemed 
temporary (e.g., illness or unemployment).
    (ix) Adjustments to interest rates or rates of return for pool 
assets with variable rates are computed based on the related pool asset 
documents.
    (x) Regarding any funds held in trust for an obligor (such as 
escrow accounts):
    (A) Such funds are analyzed, in accordance with the obligor's pool 
asset documents, on at least an annual basis;
    (B) Interest on such funds is paid, or credited, to obligors in 
accordance with applicable pool asset documents and state laws; and
    (C) Such funds are returned to the obligor within 30 calendar days 
of full repayment of the related pool asset.

[[Page 26734]]

    (xi) Payments made on behalf of an obligor (such as tax or 
insurance payments) are made on or before the related penalty or 
expiration dates, as indicated on the appropriate bills or notices for 
such payments, provided that such support has been received by the 
servicer at least 30 calendar days prior to these dates.
    (xii) Any late payment penalties in connection with any payment to 
be made on behalf of an obligor are paid from the servicer's funds and 
not charged to the obligor, unless the late payment was due to the 
obligor's error or omission.
    (xiii) Disbursements made on behalf of an obligor are posted within 
two business days to the obligor's records maintained by the servicer.
    (xiv) Delinquencies, charge-offs and uncollectable accounts are 
recognized and recorded in accordance with the transaction agreements.
    (xv) Any external enhancement or other support, identified in Item 
1113(a)(1) through (3) of this Regulation AB, is maintained as set 
forth in the transaction agreements.
    Instructions to Item 1120.
    1. If certain servicing criteria are not applicable in the context 
of the asset class backing the asset-backed securities, the 
inapplicability of the criteria should be disclosed in the responsible 
party's and the registered public accounting firm's reports.
    2. If the asset pool backing the asset-backed securities includes a 
pool asset representing an interest in or the right to the payments or 
cash flows of another asset pool and both the issuing entity for the 
asset-backed securities and the entity issuing the asset to be included 
in the issuing entity's asset pool were established under the direction 
of the same sponsor or depositor, see also Item 1100(d)(2) of this 
Regulation AB.


Sec.  229.1121  (Item 1121) Servicer compliance statement.

    Provide as a separate exhibit to the filing a statement of 
compliance from the servicer, signed by an authorized officer of such 
servicer, to the effect that:
    (a) A review of the servicer's activities during the reporting 
period and of its performance under the applicable servicing agreement 
has been made under such officer's supervision.
    (b) To the best of such officer's knowledge, based on such review, 
the servicer has fulfilled all of its obligations under the agreement 
in all material respects throughout the reporting period or, if there 
has been a default in the fulfillment of any such obligation in any 
material respect, specifying each such default known to such officer 
and the nature and status thereof.
    Instructions to Item 1121.
    1. If multiple servicers are involved in servicing the pool assets, 
a separate servicer compliance statement is required from each servicer 
that meets the criteria in Item 1107(a) of this Regulation AB.
    2. The filing must include a statement of compliance even if the 
issuing entity has not existed for a full twelve months.

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    22. The authority citation for Part 230 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 
77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78t, 78w, 
78ll(o), 78mm, 79t, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-
37, unless otherwise noted.
* * * * *
    23. Add Sec.  230.139a to read as follows:


Sec.  230.139a  Publications by brokers or dealers distributing asset-
backed securities.

    The publication or distribution by a broker or dealer of 
information, an opinion or a recommendation with respect to asset-
backed securities meeting the criteria of General Instruction I.B.5 of 
Form S-3 (Sec.  239.13 of this chapter)) (``S-3 ABS'') shall not be 
deemed to constitute an offer for sale or offer to sell S-3 ABS 
registered or proposed to be registered for purposes of sections 
2(a)(10) and 5(c) of the Act (15 U.S.C. 77b(a)(10) and 77e(c)) (the 
``registered securities''), even though such broker or dealer is or 
will be a participant in the distribution of the registered securities, 
if the following conditions are met:
    (a) The broker or dealer must have previously published or 
distributed with reasonable regularity information, opinions or 
recommendations relating to S-3 ABS backed directly (or, with respect 
to securitizations of other securities, indirectly) by substantially 
similar collateral as that directly or indirectly backing S-3 ABS that 
is the subject of the information, opinion or recommendation that is 
proposed to be published or distributed.
    (b) If the registered securities are proposed to be offered, 
offered or part of an unsold allotment or subscription, the 
information, opinion or recommendation must not:
    (1) Identify the registered securities;
    (2) Give greater prominence to specific structural or collateral-
related attributes of the registered securities than it gives to the 
same attributes of other asset-backed securities that it mentions; and
    (3) Contain any ABS informational and computational material (as 
defined in Sec.  229.1101 of this chapter) relating to the registered 
securities.
    (c) If the material published by the broker or dealer identifies a 
specific asset-backed security of a specific issuer and specifically 
recommends that such asset-backed security be purchased, sold or held 
by persons receiving such material, then a recommendation as favorable 
or more favorable as to such asset-backed security must have been 
published by the broker or dealer in the last publication of such 
broker or dealer addressing such asset-backed security prior to the 
commencement of its participation in the distribution of the registered 
securities.
    (d) Sufficient information is available from one or more public 
sources to provide a reasonable basis for the view expressed by the 
broker or dealer with respect to the asset-backed securities that are 
the subject of the information, opinion or recommendation.
    (e) If the material published by the broker or dealer identifies 
asset-backed securities backed directly or indirectly by substantially 
similar collateral as that directly or indirectly backing the 
registered securities and specifically recommends that such asset-
backed securities be preferred over other asset-backed securities 
backed by different types of collateral, then the material must explain 
in reasonable detail the reasons for such preference.
    24. Add Sec.  230.167 to read as follows:


Sec.  230.167  Communications in connection with certain registered 
offerings of asset-backed securities.

    Preliminary Note: This section is available only to communications 
in connection with certain offerings of asset-backed securities. The 
exemption does not apply to communications that may be in technical 
compliance with this section, but have the primary purpose or effect of 
conditioning the market for another transaction or are part of a plan 
or scheme to evade the requirements of section 5 of the Act (15 U.S.C. 
77e).
    (a) In an offering of asset-backed securities meeting the 
requirements of General Instruction I.B.5 of Form S-3 (Sec.  239.13 of 
this chapter) and registered under the Act on Form S-3 pursuant to 
Sec.  230.415, ABS informational and computational material regarding 
such securities used after the effective date of the registration 
statement and before the sending or giving to investors of a final 
prospectus that meets the requirements of section 10(a) of the Act (15 
U.S.C.

[[Page 26735]]

77j(a)) regarding such offering is exempt from section 5(b)(1) of the 
Act (15 U.S.C. 77e(b)(1)), if the conditions in paragraph (b) of this 
section are met.
    (b) Conditions. To rely on paragraph (a) of this section:
    (1) The communications must be filed to the extent required 
pursuant to Sec.  230.426.
    (2) Every communication used pursuant to this section must include 
prominently on the cover page or otherwise at the beginning of such 
communication:
    (i) The issuing entity's name and the depositor's name, if 
applicable;
    (ii) The Commission file number for the related registration 
statement;
    (iii) A statement that such communication is ABS informational and 
computational material used in reliance on Securities Act Rule 167 
(Sec.  230.167); and
    (iv) A legend that urges investors to read the relevant documents 
filed or to be filed with the Commission because they contain important 
information. The legend also must explain to investors that they can 
get the documents for free at the Commission's Web site and describe 
which documents are available free from the issuer or an underwriter.
    (c) This section is applicable not only to the offeror of the 
asset-backed securities, but also to any other participant that may 
need to rely on and complies with this section in communicating about 
the transaction. A participant for purposes of this section is any 
person or entity that is a party to the asset-backed securities 
transaction and any persons authorized to act on their behalf.
    (d) Terms used in this section have the same meaning as in Item 
1101 of Regulation AB (Sec.  229.1101 of this chapter).
    25. Add Sec. Sec.  230.190 and 230.191 to read as follows:


Sec.  230.190  Registration of underlying securities in asset-backed 
securities transactions.

    (a) In 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 
this section unless all of the following are true. Terms used in this 
section have the same meaning as in Item 1101 of Regulation AB (Sec.  
229.1101 of this chapter).
    (1) Neither the issuer of the underlying securities nor any of its 
affiliates has a direct or indirect agreement, arrangement, 
relationship or understanding, written or otherwise, relating to the 
underlying securities and the asset-backed securities transaction;
    (2) Neither the issuer of the underlying securities nor any of its 
affiliates is an affiliate of the sponsor, depositor, issuing entity or 
underwriter of the asset-backed securities transaction; and
    (3) The depositor would be free to publicly resell the underlying 
securities without registration under the Act. For example:
    (i) If the underlying securities are restricted securities, as 
defined in Sec.  230.144(a)(3), the underlying securities must meet the 
conditions set forth in Sec.  230.144(k) for the sale of restricted 
securities; and
    (ii) The offering of the asset-backed security does not constitute 
part of a distribution of the underlying securities. An offering of 
asset-backed securities with an asset pool containing underlying 
securities that at the time of the purchase for the asset pool are part 
of a subscription or unsold allotment would be a distribution of the 
underlying securities. For purposes of this section, in an offering of 
asset-backed securities involving a sponsor, depositor or underwriter 
that was an underwriter or an affiliate of an underwriter in a 
registered offering of the underlying securities, the distribution of 
the asset-backed securities will not constitute part of a distribution 
of the underlying securities if the underlying securities were 
purchased at arm's length in the secondary market at least three months 
after the last sale of any unsold allotment or subscription by the 
affiliated underwriter that participated in the registered offering of 
the underlying securities.
    (b) If all of the conditions in paragraph (a) of this section are 
not met, the offering of the relevant underlying securities itself must 
be registered as a primary offering of such securities in accordance 
with the following:
    (1) If the offering of asset-backed securities is registered on 
Form S-3 (Sec.  239.13 of this chapter), the offering of the underlying 
securities itself must be eligible to be registered under Form S-3 or 
F-3 (Sec.  239.33 of this chapter) as a primary offering of such 
securities;
    (2) The plan of distribution in the registration statement for the 
offering of the underlying securities contemplates this type of 
distribution at the time of the commencement of the offering of the 
asset-backed securities;
    (3) The prospectus for the asset-backed securities offering 
describes the plan of distribution for both the underlying securities 
and the asset-backed securities;
    (4) The prospectus relating to the offering of the underlying 
securities is delivered simultaneously with the delivery of the 
prospectus relating to the offering of the asset-backed securities, and 
the prospectus for the asset-backed securities includes disclosure that 
the prospectus for the offering of the underlying securities will be 
delivered along with, or is combined with, the prospectus for the 
offering of the asset-backed securities;
    (5) The prospectus for the asset-backed securities offering 
identifies the issuing entity, depositor, sponsor and each underwriter 
for the offering of the asset-backed securities as an underwriter for 
the offering of the underlying securities;
    (6) Neither prospectus disclaims or limits responsibility by the 
issuing entity, sponsor, depositor, trustee or any underwriter for 
information regarding the underlying securities; and
    (7) If the offering of the asset-backed securities and the 
underlying securities is not made on a firm commitment basis, the 
issuing entity or the underwriters for the offering of the asset-backed 
securities must distribute a preliminary prospectus for both the 
underlying securities offering and the asset-backed securities offering 
that identifies the issuer of the underlying securities and the 
expected amount of the issuer's underlying securities that is to be 
included in the asset pool to any person who is expected to receive a 
confirmation of sale of the asset-backed securities at least 48 hours 
prior to sending such confirmation.
    (c) Notwithstanding paragraphs (a) and (b) of this section, if the 
asset pool for the asset-backed securities includes a pool asset 
representing an interest in or the right to the payments or cash flows 
of another asset pool, then that pool asset is not considered an 
``underlying security'' for purposes of this section (although its 
distribution in connection with the asset-backed securities transaction 
may need to be separately registered) if the following conditions are 
met:
    (1) Both the issuing entity for the asset-backed securities and the 
entity issuing the pool asset were established under the direction of 
the same sponsor or depositor;
    (2) The pool asset is created solely to satisfy legal requirements 
or otherwise facilitate the structuring of the asset-backed securities 
transaction;
    (3) The pool asset is not part of a scheme to avoid registration or 
the requirements of this section; and

[[Page 26736]]

    (4) The pool asset is held by the issuing entity and is a part of 
the asset pool for the asset-backed securities.


Sec.  230.191  Definition of ``issuer'' in section 2(a)(4) of the Act 
in relation to asset-backed securities.

    The following applies with respect to asset-backed securities under 
the Act. Terms used in this section have the same meaning as in Item 
1101 of Regulation AB (Sec.  229.1101 of this chapter).
    (a) The depositor for the asset-backed securities acting solely in 
its capacity as depositor to the issuing entity is the ``issuer'' for 
purposes of the asset-backed securities of that issuing entity.
    (b) The person acting in the capacity as the depositor specified in 
paragraph (a) of this section is a different ``issuer'' from that same 
person acting as a depositor for another issuing entity or for purposes 
of that person's own securities.
    26. Amend Sec.  230.411 by:
    a. Removing the authority citation following the section; and
    b. Revising the first sentence of paragraph (a).
    The revision reads as follows:


Sec.  230.411  Incorporation by reference.

    (a) Prospectuses. Except as provided by this section, Item 1100(c) 
of Regulation AB (Sec.  229.1100(c) of this chapter) for registered 
offerings of asset-backed securities, or unless otherwise provided in 
the appropriate form, information shall not be incorporated by 
reference in a prospectus. * * *
* * * * *
    27. Add Sec.  230.426 to read as follows:


Sec.  230.426  Filing of certain prospectuses under Sec.  230.167 in 
connection with certain offerings of asset-backed securities.

    (a) All written communications made in reliance on Sec.  230.167 
are prospectuses that must be filed with the Commission in accordance 
with paragraphs (b) and (c) of this section on Form 8-K (Sec.  249.308 
of this chapter) and incorporated by reference to the related 
registration statement for the offering of asset-backed securities. 
Each prospectus filed under this section must identify the Commission 
file number of the related registration statement on the cover page of 
the related Form 8-K in addition to any other information required by 
that form. The information contained in any such prospectus shall be 
deemed to be a part of the registration statement as of the earlier of 
the time of filing of such information or the time of the filing of the 
final prospectus that meets the requirements of section 10(a) of the 
Act (15 U.S.C. 77j(a)) relating to such offering pursuant to Sec.  
230.424(b).
    (b) Except as specified in paragraph (c) of this section, ABS 
informational and computational material made in reliance on Sec.  
230.167 that meet the conditions in paragraph (b)(1) of this section 
must be filed within the time frame specified in paragraph (b)(2) of 
this section.
    (1) Conditions for which materials must be filed. The materials are 
provided to prospective investors under the following conditions:
    (i) For each prospective investor that has indicated to the 
underwriter that it will purchase all or a portion of the class of 
asset-backed securities to which such materials relate, all materials 
relating to such class that are provided to such prospective investor; 
and
    (ii) For any other prospective investor, all materials that are 
provided to such prospective investor after the final terms have been 
established for all classes of the offering.
    (2) Time frame to file the materials. The materials must be filed 
by the later of:
    (i) The due date for filing the final prospectus relating to such 
offering that meets the requirements of section 10(a) of the Act (15 
U.S.C. 77j(a)) pursuant to Sec.  230.424(b); or
    (ii) Two business days of first use.
    (c) Notwithstanding paragraphs (a) and (b) of this section, the 
following need not be filed under this section:
    (1) ABS informational and computational material that relate to 
abandoned structures or that are furnished to a prospective investor 
prior to the time the final terms have been established for all classes 
of the offering where such prospective investor has not indicated to 
the underwriter its intention to purchase the asset-backed securities.
    (2) Any ABS informational and computational material if a 
prospectus that meets the requirements of section 10(a) of the Act (15 
U.S.C. 77j(a)) relating to the offering of such asset-backed securities 
accompanies or precedes the use of such material.
    (3) Any ABS informational and computational material that does not 
contain new or different information from that which was previously 
disclosed and filed under this section.
    (4) Any written communication that is limited to the information 
specified in Sec.  230.134, 230.135 or 230.135c.
    (5) Any research report used in reliance on Sec.  230.137, 230.138, 
230.139 or 230.139a.
    (6) Any confirmation described in Sec.  240.10b-10 of this chapter.
    (7) Any prospectus filed under Sec.  230.424.
    (d) Terms used in this section have the same meaning as in Item 
1101 of Regulation AB (Sec.  229.1101 of this chapter).
    Instruction to Sec.  230.426.
    The issuer may aggregate data presented in ABS informational and 
computational material that are to be filed and file such data in 
consolidated form. Any such aggregation, however, must not result in 
either the omission of any information contained in such material 
otherwise to be filed, or a presentation that makes the information 
misleading.
    28. Amend Sec.  230.434 by removing the phrase ``General 
Instruction I.B.5. of Form S-3 (Sec.  239.13 of this chapter)'' in 
paragraph (f) and adding, in its place, the phrase ``Sec.  229.1101 of 
this chapter''.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

    29. The authority citation for Part 232 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a), 
78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8, 80a-
29, 80a-30 and 80a-37.
* * * * *
    30. Amend Sec.  232.311 by removing paragraph (j).

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

    31. The authority citation for Part 239 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77sss, 78c, 
78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 
79l, 79m, 79n, 79q, 79t, 80a-8, 80a-24, 80a-26, 80a-29, 80a-30, and 
80a-37, unless otherwise noted.
* * * * *
    32. Amend Form S-1 (referenced in Sec.  239.11) by adding General 
Instruction VI. to read as follows:

    Note: The text of Form S-1 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-1

* * * * *

GENERAL INSTRUCTIONS

* * * * *

VI. Offerings of Asset-Backed Securities

    The following applies if a registration statement on this Form S-1 
is being used to register an offering of asset-backed securities. Terms 
used in this General Instruction VI. have the same meaning as in Item 
1101 of Regulation AB (17 CFR 229.1101).

[[Page 26737]]

    A. Items that May be Omitted.
    Such registrants may omit the information called for by the 
following otherwise required items:
    1. Paragraphs (a), (b), (c), (e), (f), (g), (h), (i) and (j) of 
Item 11, Information with Respect to the Registrant.
    2. If the issuing entity does not have any executive officers or 
directors, paragraphs (k), (l) and (n) of Item 11, Information with 
Respect to the Registrant.
    3. Paragraph (m) of Item 11, Information with Respect to the 
Registrant, except for the information required by Item 403(a) of 
Regulation S-K (17 CFR 229.403(a)) and if the issuing entity does not 
have any executive officers or directors.
    B. Substitute Information to be Included. In addition to the Items 
that are otherwise required by this Form, the registrant must furnish 
in the prospectus the information required by Items 1102 through 1118 
of Regulation AB (17 CFR 229.1102 through 229.1118).
    C. Signatures. The registration statement must be signed by the 
depositor, the depositor's principal executive officer or officers, 
principal financial officer and controller or principal accounting 
officer, and by at least a majority of the depositor's board of 
directors or persons performing similar functions.
* * * * *
    33. Amend Sec.  239.12 by adding paragraph (i) to read as follows:


Sec.  239.12  Form S-2, for registration under the Securities Act of 
1933 of securities of certain issuers.

* * * * *
    (i) Asset-backed securities. This form shall not be used for an 
offering of asset-backed securities, as defined in Sec.  229.1101 of 
this chapter.
    34. Amend Form S-2 (referenced in Sec.  239.12) by adding paragraph 
I. to General Instruction I to read as follows:

    Note: The text of Form S-2 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-2

* * * * *

GENERAL INSTRUCTIONS

I. Eligibility Requirements for Use of Form S-2

* * * * *
    I. Asset-backed securities. This form shall not be used for an 
offering of asset-backed securities, as defined in Sec.  229.1101 of 
this chapter.
* * * * *
    35. Amend Sec.  239.13 by:
    a. Revising the phrase ``2.06 or 4.02(a) of Form 8-K'' in paragraph 
(a)(3)(ii) to read ``2.06, 4.02(a) or 6.03 of Form 8-K''; and
    b. Revising paragraphs (a)(4) and (b)(5).
    The revisions read as follows.


Sec.  239.13  Form S-3, for registration under the Securities Act of 
1933 of securities of certain issuers offered pursuant to certain types 
of transactions.

* * * * *
    (a) * * *
    (4) The provisions of paragraphs (a)(2) and (a)(3)(i) of this 
section do not apply to any registered offerings of asset-backed 
securities described in paragraph (b)(5) of this section. However, for 
such offerings, to the extent the depositor or any issuing entity 
previously established, directly or indirectly, by the sponsor or the 
depositor (as those terms are defined in Sec.  229.1101 of this 
chapter) are or were subject to the requirements of section 12 or 15(d) 
of the Exchange Act (15 U.S.C. 78l or 78o(d)) with respect to a class 
of asset-backed securities at any time during the twelve calendar 
months and any portion of a month immediately preceding the filing of 
the registration statement on this Form, such depositor and each such 
issuing entity must have filed all material required to be filed 
regarding such asset-backed securities pursuant to section 13, 14 or 
15(d) of the Exchange Act (15 U.S.C. 78m, 78n or 78o(d)) for such 
period (or such shorter period that each such entity was required to 
file such materials). In addition, such material must have been filed 
in a timely manner, other than a report that is required solely 
pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a) or 6.03 of 
Form 8-K (Sec.  249.308 of this chapter). If Sec.  240.12b-25(b) of 
this chapter was used during such period with respect to a report or a 
portion of a report, that report or portion thereof has actually been 
filed within the time period prescribed by that section.
* * * * *
    (b) * * *
    (5) Offerings of investment grade asset-backed securities. Asset-
backed securities (as defined in Sec.  229.1101 of this chapter) to be 
offered for cash that meet the conditions in General Instruction I.B.5 
of Form S-3.
* * * * *
    36. Amend Form S-3 (referenced in Sec.  239.13) by:
    a. Revising the phrase ``2.06 or 4.02(a) of Form 8-K'' in General 
Instruction I.A.3.(b) to read ``2.06, 4.02(a) or 6.03 of Form 8-K'';
    b. Revising General Instructions I.A.4. and I.B.5.; and
    c. Adding General Instruction V.
    The revisions and addition reads as follows.

    Note: The text of Form S-3 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-3

* * * * *

GENERAL INSTRUCTIONS

* * * * *

I. Eligibility Requirements for Use of Form S-3

* * * * *
    A. Registrant Requirements. * * *
    4. The provisions in paragraphs A.2. and A.3.(a) above do not apply 
to any registered offerings of asset-backed securities described in 
I.B.5 below. However, for such offerings, to the extent the depositor 
or any issuing entity previously established, directly or indirectly, 
by the sponsor or the depositor (as those terms are defined in Sec.  
229.1101 of this chapter) are or were subject to the requirements of 
section 12 or 15(d) of the Exchange Act (15 U.S.C. 78l or 78o(d)) with 
respect to a class of asset-backed securities at any time during the 
twelve calendar months and any portion of a month immediately preceding 
the filing of the registration statement on this Form, such depositor 
and each such issuing entity must have filed all material required to 
be filed regarding such asset-backed securities pursuant to section 13, 
14 or 15(d) of the Exchange Act (15 U.S.C. 78m, 78n or 78o(d)) for such 
period (or such shorter period that each such entity was required to 
file such materials). In addition, such material must have been filed 
in a timely manner, other than a report that is required solely 
pursuant to Item 1.01, 1.02, 2.03, 2.04, 2.05, 2.06, 4.02(a) or 6.03 of 
Form 8-K (Sec.  249.308 of this chapter). If Rule 12b-25(b) (17 CFR 
240.12b-25(b)) under the Exchange Act was used during such period with 
respect to a report or a portion of a report, that report or portion 
thereof has actually been filed within the time period prescribed by 
that rule.
* * * * *
    B. Transaction Requirements. * * *
    5. Offerings of Investment grade Asset-backed Securities. Asset-
backed securities (as defined in 17 CFR 229.1101) to be offered for 
cash, provided:
    (a) The securities are ``investment grade securities,'' as defined 
in I.B.2 above (Primary Offerings of Non-convertible Investment Grade 
Securities);

[[Page 26738]]

    (b) Delinquent assets do not constitute 20% or more, as measured by 
dollar volume, of the original asset pool at the time of issuance of 
the asset-backed securities;
    (c) With respect to securities that are backed by leases other than 
automobile leases, the portion of the cash flow to repay the securities 
anticipated to come from the residual value of the physical property 
underlying the leases does not constitute 20% or more, as measured by 
dollar volume, of the original asset pool at the time of issuance of 
the asset-backed securities;
    (d) The offering related to the securities does not contemplate a 
prefunding period that involves in excess of 25% of the proceeds of the 
offering and the duration of the prefunding period does not extend for 
more than one year from the initial date of issuance of securities 
backed by the asset pool.
    (e) With respect to securities that are backed by fixed receivables 
or other financial assets that do not revolve, the offering related to 
the securities does not contemplate a revolving period where the amount 
of additional receivables or financial assets to be acquired in the 
revolving period exceeds 25% of the proceeds of the offering and the 
duration of the revolving period does not extend for more than one year 
from the initial date of issuance of securities backed by the asset 
pool.
* * * * *

V. Offerings of Asset-Backed Securities

    The following applies if a registration statement on this Form S-3 
is being used to register an offering of asset-backed securities. Terms 
used in this General Instruction V. have the same meaning as in Item 
1101 of Regulation AB (17 CFR 229.1101).
    A. Disclosure. For a registration statement on this Form S-3 
relating to an offering of asset-backed securities, in addition to the 
Items that are otherwise required by this Form, the registrant must 
furnish in the prospectus the information required by Items 1102 
through 1118 of Regulation AB (17 CFR 229.1102 through 229.1118). For 
registered offerings pursuant to Securities Act Rule 415(a)(1)(x) (17 
CFR 230.415(a)(1)(x)) that include a base prospectus and form of 
prospectus supplement, a separate base prospectus and form of 
prospectus supplement must be presented for each asset class that may 
be securitized in a discrete pool in a takedown of asset-backed 
securities under the registration statement. A separate base prospectus 
and form of prospectus supplement also must be presented for each 
country of origin or country of property securing pool assets that may 
be securitized in a discrete pool in a takedown of asset-backed 
securities under the registration statement.
    B. Signatures. The registration statement must be signed by the 
depositor, the depositor's principal executive officer or officers, 
principal financial officer and controller or principal accounting 
officer, and by at least a majority of the depositor's board of 
directors or persons performing similar functions.
* * * * *
    37. Amend Sec.  239.18 by adding a sentence to the end of the 
section to read as follows:


Sec.  239.18  Form S-11, for registration under the Securities Act of 
1933 of securities of certain real estate companies.

    * * * In addition, this form shall not be used for an offering of 
asset-backed securities, as defined in Sec.  229.1101 of this chapter.
    38. Amend Form S-11 (referenced in Sec.  239.18) by adding a 
sentence to the end of General Instruction A to read as follows:

    Note: The text of Form S-11 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-11

* * * * *

GENERAL INSTRUCTIONS

A. Rules as to Use of Form S-11

    * * * In addition, this form shall not be used for an offering of 
asset-backed securities, as defined in 17 CFR 229.1101.
* * * * *
    39. Amend Sec.  239.31 by adding a sentence to the end of paragraph 
(a) to read as follows:


Sec.  239.31  Form F-1, registration statement under the Securities Act 
of 1933 for securities of certain foreign private issuers.

    (a) * * * In addition, this form shall not be used for an offering 
of asset-backed securities, as defined in Sec.  229.1101 of this 
chapter.
* * * * *
    40. Amend Form F-1 (referenced in Sec.  239.31) by adding a 
sentence to the end of General Instruction I.A to read as follows:

    Note: The text of Form F-1 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form F-1

* * * * *

GENERAL INSTRUCTIONS

I. Eligibility Requirements for Use of Form F-1

    A. * * * In addition, this form shall not be used for an offering 
of asset-backed securities, as defined in 17 CFR 229.1101.
* * * * *
    41. Amend Sec.  239.32 by adding paragraph (i) to read as follows:


Sec.  239.32  Form F-2, for registration under the Securities Act of 
1933 for securities of certain foreign private issuers.

* * * * *
    (i) Asset-backed securities. This form shall not be used for an 
offering of asset-backed securities, as defined in Sec.  229.1101 of 
this chapter.
    42. Amend Form F-2 (referenced in Sec.  239.32) by adding paragraph 
I. to General Instruction I to read as follows:

    Note: The text of Form F-2 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form F-2

* * * * *

GENERAL INSTRUCTIONS

I. Eligibility Requirements for Use of Form F-2

* * * * *
    I. Asset-backed securities: This form shall not be used for an 
offering of asset-backed securities, as defined in Sec.  229.1101 of 
this chapter.
* * * * *
    43. Add a sentence to the end of the introductory text of Sec.  
239.33 to read as follows:


Sec.  239.33  Form F-3, for registration under the Securities Act of 
1933 of securities of certain foreign private issuers offered pursuant 
to certain types of transactions.

    * * * In addition, this Form shall not be used for an offering of 
asset-backed securities, as defined in Sec.  229.1101 of this chapter.
* * * * *
    44. Amend Form F-3 (referenced in Sec.  239.33) by adding a 
sentence to the end of the introductory text of General Instruction I 
to read as follows:

    Note: The text of Form F-3 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form F-3

* * * * *

GENERAL INSTRUCTIONS

I. Eligibility Requirements for Use of Form F-3

    * * * In addition, this Form shall not be used for an offering of 
asset-backed

[[Page 26739]]

securities, as defined in 17 CFR 229.1101.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    45. The authority citation for Part 240 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-
3, 80b-4, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless 
otherwise noted.
* * * * *
    46. Add Sec.  240.3a12-12 to read as follows:


Sec.  240.3a12-12  Exemption from certain provisions of section 16 of 
the Act for asset-backed securities.

    Asset-backed securities, as defined in Sec.  229.1101 of this 
chapter, are exempt from section 16 of the Act (15 U.S.C. 78p).
    47. Add Sec.  240.3b-19 to read as follows:


Sec.  240.3b-19  Definition of ``issuer'' in section 3(a)(8) of the Act 
in relation to asset-backed securities.

    The following applies with respect to asset-backed securities under 
the Act. Terms used in this section have the same meaning as in Item 
1101 of Regulation AB (Sec.  229.1101 of this chapter).
    (a) The depositor for the asset-backed securities acting solely in 
its capacity as depositor to the issuing entity is the ``issuer'' for 
purposes of the asset-backed securities of that issuing entity.
    (b) The person acting in the capacity as the depositor specified in 
paragraph (a) of this section is a different ``issuer'' from that same 
person acting as a depositor for another issuing entity or for purposes 
of that person's own securities.


Sec.  240.10A-3  [Amended]

    48. Amend Sec.  240.10A-3 by removing the phrase ``(as defined in 
Sec.  240.13a-14(g) and Sec.  240.15d-14(g))'' from paragraph (c)(6)(i) 
and adding, in its place, the phrase ``(as defined in Sec.  229.1101 of 
this chapter)''.
    49. Amend Sec.  240.12b-2 by revising paragraph (3) of the 
definition of Small Business Issuer to read as follows:


Sec.  240.12b-2  Definitions.

* * * * *
    Small Business Issuer. * * *
    (3) Is not an investment company and is not an asset-backed issuer 
(as defined in Sec.  229.1101 of this chapter); and
* * * * *
    50. Amend Sec.  240.12b-15 by adding a sentence after the sixth 
sentence to read as follows:


Sec.  240.12b-15  Amendments.

    * * * An amendment to any report required to include the 
certifications as specified in Sec.  240.13a-14(d) or Sec.  240.15d-
14(d) must include a new certification by an individual specified in 
Sec.  240.13a-14(e) or Sec.  240.15d-14(e), as applicable. * * *
    51. Amend Sec.  240.13a-10 by adding paragraph (k) before the Notes 
to read as follows:


Sec.  240.13a-10  Transition reports.

* * * * *
    (k)(1) Paragraphs (a) through (g) of this section shall not apply 
to asset-backed issuers.
    (2) Every asset-backed issuer that changes its fiscal closing date 
shall file a report covering the resulting transition period between 
the closing date of its most recent fiscal year and the opening date of 
its new fiscal year. In no event shall a transition report cover a 
period longer than 12 months.
    (3) The report for the transition period shall be filed on Form 10-
K (Sec.  249.310 of this chapter) responding to all items to which such 
asset-backed issuer is required to respond pursuant to General 
Instruction J. of Form 10-K. Such report shall be filed within 90 days 
after the latter of either the close of the transition period or the 
date on which the issuer made the determination to change the fiscal 
closing date.
    (4) Notwithstanding the foregoing in paragraphs (k)(2) and (k)(3) 
of this section, if the transition period covers a period of one month 
or less, an asset-backed issuer need not file a separate transition 
report if the first annual report for the newly adopted fiscal year 
covers the transition period as well as the fiscal year.
    (5) Any obligation of the asset-backed issuer to file distribution 
reports pursuant to Sec.  240.13a-17 will continue to apply regardless 
of a change in the asset-backed issuer's fiscal closing date.
* * * * *


Sec.  240.13a-11  [Amended]

    52. Amend Sec.  240.13a-11 by revising the phrase ``2.06 or 4.02(a) 
of Form 8-K'' in paragraph (c) to read ``2.06, 4.02(a) or 6.03 of Form 
8-K''.
    53. Amend Sec.  240.13a-13 by:
    a. Removing the authority citation following Sec.  240.13a-13;
    b. Removing the period at the end of paragraph (b)(2) and adding, 
in its place, ``; and''; and
    c. Adding paragraph (b)(3).
    The addition reads as follows.


Sec.  240.13a-13  Quarterly reports on Form 10-Q and Form 10-QSB (Sec.  
249.308a and Sec.  249.308b of this chapter).

* * * * *
    (b) * * *
    (3) Asset-backed issuers required to file reports pursuant to Sec.  
240.13a-17.
* * * * *
    54. Amend Sec.  240.13a-14 by:
    a. Removing the phrase ``(as defined in paragraph (g) of this 
section)'' in the first sentence of paragraph (a) and adding, in its 
place, the phrase ``(as defined in Sec.  229.1101 of this chapter)'';
    b. Revising the reference to ``paragraph (a) or (b)'' in paragraph 
(c) to read ``paragraph (a), (b) or (d)'';
    c. Revising paragraphs (d) and (e); and
    d. Removing paragraphs (f) and (g).
    The revisions read as follows:


Sec.  240.13a-14  Certification of disclosure in annual and quarterly 
reports.

* * * * *
    (d) Each annual report and transition report filed on Form 10-K 
(Sec.  249.310 of this chapter) by an asset-backed issuer (as defined 
in Sec.  229.1101 of this chapter) under section 13(a) of the Act (15 
U.S.C. 78m(a)) must include a certification in the form specified in 
the applicable exhibit filing requirements of such report and such 
certification must be filed as an exhibit to such report.
    (e) With respect to asset-backed issuers, the certification 
required by paragraph (d) of this section must be signed by either:
    (1) The senior officer in charge of securitization of the depositor 
if the depositor is signing the report; or
    (2) The senior officer in charge of the servicing function of the 
servicer if the servicer is signing the report on behalf of the issuing 
entity. If multiple servicers are involved in servicing the pool 
assets, the senior officer in charge of the servicing function of the 
master servicer (or entity performing the equivalent functions) must 
sign if a representative of the servicer is to sign the report on 
behalf of the issuing entity.


Sec.  240.13a-15  [Amended]

    55. Amend Sec.  240.13a-15 by removing the phrase ``(as defined in 
Sec.  240.13a-14(g))'' and adding, in its place, the phrase ``(as 
defined in Sec.  229.1101 of this chapter)'' in paragraph (a).
    56. Amend Sec.  240.13a-16 by:
    a. Removing the word ``or'' at the end of paragraph (a)(2);

[[Page 26740]]

    b. Removing the period at the end of paragraph (a)(3) and adding, 
in its place, ``; or''; and
    c. Adding paragraph (a)(4).
    The addition reads as follows.


Sec.  240.13a-16  Reports of foreign private issuers on Form 6-K (17 
CFR 249.306).

    (a) * * *
    (4) Asset-backed issuers, as defined in Sec.  229.1101 of this 
chapter.
* * * * *
    57. Add Sec. Sec.  240.13a-17 and 240.13a-18 to read as follows:


Sec.  240.13a-17  Reports of asset-backed issuers on Form 10-D (Sec.  
249.312 of this chapter).

    Every asset-backed issuer subject to Sec.  240.13a-1 shall make 
reports on Form 10-D (Sec.  249.312 of this chapter). Such reports 
shall be filed within the period specified in Form 10-D.


Sec.  240.13a-18  Compliance with servicing criteria for asset-backed 
securities.

    (a) This section applies to every class of asset-backed securities 
subject to the reporting requirements of section 13(a) or 15(d) of the 
Act (15 U.S.C. 78m(a) or 78o(d)). Terms used in this section have the 
same meaning as in Item 1101 of Regulation AB (Sec.  229.1101 of this 
chapter).
    (b) Assessment required. With regard to a class of asset-backed 
securities subject to the reporting requirements of section 13(a) or 
15(d) of the Act, the following person (the ``responsible party'') must 
assess compliance with the servicing criteria specified in paragraph 
(d) of Item 1120 of Regulation AB (Sec.  229.1120(d) of this chapter), 
as of and for the period ending the end of each fiscal year, with 
respect to asset-backed securities transactions taken as a whole 
involving the responsible party and that are backed by the same asset 
type backing the class of asset-backed securities (including the asset-
backed securities transaction that is to be the subject of the report 
on Form 10-K for that fiscal year):
    (1) The depositor if the depositor signs the report on Form 10-K 
with respect to that fiscal year; or
    (2) The servicer if the servicer signs the report on Form 10-K on 
behalf of the issuing entity with respect to that fiscal year. If 
multiple servicers are involved in servicing the pool assets, the 
master servicer (or entity performing the equivalent functions) is the 
``responsible party'' if a representative of the servicer is to sign 
the report on behalf of the issuing entity.
    (c) Unaffiliated parties that perform the servicing criteria. (1) 
The responsible party must use reasonable means to assess whether the 
parties performing the servicing functions that are material to the 
servicing function as a whole (e.g., servicers, master servicer, 
trustee, paying agent) are complying with the servicing criteria in all 
material respects.
    (2) Because the responsible party must rely in certain 
circumstances on information provided by unaffiliated parties outside 
of the responsible party's control, the responsible party may 
reasonably rely on information provided to the responsible party by 
unaffiliated parties in making its assessment.
    (d) Attestation on assessment required. With respect to the 
responsible party's compliance assessment required by paragraph (b) and 
(c) of this section, a registered public accounting firm must attest 
to, and report on, the assessment made by the responsible party. An 
attestation made under this paragraph must be made in accordance with 
standards for attestation engagements issued or adopted by the Public 
Company Accounting Oversight Board.
    58. Amend Sec.  240.15c2-8 by adding a sentence to the end of 
paragraph (b) to read as follows.


Sec.  240.15c2-8  Delivery of prospectus.

* * * * *
    (b) * * * This paragraph (b) does not apply with respect to asset-
backed securities (as defined in Sec.  229.1101 of this chapter) that 
meet the requirements of General Instruction I.B.5 of Form S-3 (Sec.  
239.13 of this chapter).
* * * * *
    59. Amend Sec.  240.15d-10 by adding paragraph (k) before the Notes 
to read as follows:


Sec.  240.15d-10  Transition reports.

* * * * *
    (k)(1) Paragraphs (a) through (g) of this section shall not apply 
to asset-backed issuers.
    (2) Every asset-backed issuer that changes its fiscal closing date 
shall file a report covering the resulting transition period between 
the closing date of its most recent fiscal year and the opening date of 
its new fiscal year. In no event shall a transition report cover a 
period longer than 12 months.
    (3) The report for the transition period shall be filed on Form 10-
K (Sec.  249.310 of this chapter) responding to all items to which such 
asset-backed issuer is required to respond pursuant to General 
Instruction J. of Form 10-K. Such report shall be filed within 90 days 
after the later of either the close of the transition period or the 
date on which the issuer made the determination to change the fiscal 
closing date.
    (4) Notwithstanding the foregoing in paragraphs (k)(2) and (k)(3) 
of this section, if the transition period covers a period of one month 
or less, an asset-backed issuer need not file a separate transition 
report if the first annual report for the newly adopted fiscal year 
covers the transition period as well as the fiscal year.
    (5) Any obligation of the asset-backed issuer to file distribution 
reports pursuant to Sec.  240.15d-17 will continue to apply regardless 
of a change in the asset-backed issuer's fiscal closing date.
* * * * *


Sec.  240.15d-11  [Amended]

    60. Amend Sec.  240.15d-11 by revising the phrase ``2.06 or 4.02(a) 
of Form 8-K'' in paragraph (c) to read ``2.06, 4.02(a) or 6.03 of Form 
8-K''.
    61. Amend Sec.  240.15d-13 by:
    a. Removing the authority citation following Sec.  240.15d-13;
    b. Removing the period at the end of paragraph (b)(2) and adding, 
in its place, ``; and''; and
    c. Adding paragraph (b)(3).
    The addition reads as follows.


Sec.  240.15d-13  Quarterly reports on Form 10-Q and Form 10-QSB (Sec.  
249.308a and Sec.  249.308b of this chapter).

* * * * *
    (b) * * *
    (3) Asset-backed issuers required to file reports pursuant to Sec.  
240.15d-17.
* * * * *
    62. Amend Sec.  240.15d-14 by:
    a. Removing the phrase ``(as defined in paragraph (g) of this 
section)'' in the first sentence of paragraph (a) and adding, in its 
place, the phrase ``(as defined in Sec.  229.1101 of this chapter)'';
    b. Revising the reference to ``paragraph (a) or (b)'' in paragraph 
(c) to read ``paragraph (a), (b) or (d)'';
    c. Revising paragraphs (d) and (e); and
    d. Removing paragraphs (f) and (g).
    The revisions read as follows:


Sec.  240.15d-14  Certification of disclosure in annual and quarterly 
reports.

* * * * *
    (d) Each annual report and transition report filed on Form 10-K 
(Sec.  249.310 of this chapter) by an asset-backed issuer (as defined 
in Sec.  229.1101 of this chapter) under section 15(d) of the Act (15 
U.S.C. 78o(d)) must include a certification in the form specified in 
the applicable exhibit filing requirements of such report and such 
certification must be filed as an exhibit to such report.
    (e) With respect to asset-backed issuers, the certification 
required by paragraph (d) of this section must be signed by either:

[[Page 26741]]

    (1) The senior officer in charge of securitization of the depositor 
if the depositor is signing the report; or
    (2) The senior officer in charge of the servicing function of the 
servicer if the servicer is signing the report on behalf of the issuing 
entity. If multiple servicers are involved in servicing the pool 
assets, the senior officer in charge of the servicing function of the 
master servicer (or entity performing the equivalent functions) must 
sign if a representative of the servicer is to sign the report on 
behalf of the issuing entity.


Sec.  240.15d-15  [Amended]

    63. Amend Sec.  240.15d-15 by removing the phrase ``(as defined in 
Sec.  240.15d-14(g)'' and adding, in its place, the phrase ``(as 
defined in Sec.  229.1101'' in paragraph (a).
    64. Amend Sec.  240.15d-16 by:
    a. Removing the period at the end of paragraph (a)(2) and adding, 
in its place, ``; or''; and
    c. Adding paragraph (a)(3).
    The addition reads as follows.


Sec.  240.15d-16  Reports of foreign private issuers on Form 6-K [17 
CFR 249.306].

    (a) * * *
    (3) Asset-backed issuers, as defined in Sec.  229.1101 of this 
chapter.
* * * * *
    65. Add Sec.  240.15d-17 to read as follows:


Sec.  240.15d-17  Reports of asset-backed issuers on Form 10-D (Sec.  
249.312 of this chapter).

    Every asset-backed issuer subject to Sec.  240.15d-1 shall make 
reports on Form 10-D (Sec.  249.312 of this chapter). Such reports 
shall be filed within the period specified in Form 10-D.
    66. Add Sec.  240.15d-18 before the undesignated center heading to 
read as follows:


Sec.  240.15d-18  Compliance with servicing criteria for asset-backed 
securities.

    (a) This section applies to every class of asset-backed securities 
subject to the reporting requirements of section 13(a) or 15(d) of the 
Act (15 U.S.C. 78m(a) or 78o(d)). Terms used in this section have the 
same meaning as in Item 1101 of Regulation AB (Sec.  229.1101 of this 
chapter).
    (b) Assessment required. With regard to a class of asset-backed 
securities subject to the reporting requirements of section 13(a) or 
15(d) of the Act, the following person (the ``responsible party'') must 
assess compliance with the servicing criteria specified in paragraph 
(d) of Item 1120 of Regulation AB (Sec.  229.1120(d) of this chapter), 
as of and for the period ending the end of each fiscal year, with 
respect to asset-backed securities transactions taken as a whole 
involving the responsible party and that are backed by the same asset 
type backing the class of asset-backed securities (including the asset-
backed securities transaction that is to be the subject of the report 
on Form 10-K for that fiscal year):
    (1) The depositor if the depositor signs the report on Form 10-K 
with respect to that fiscal year; or
    (2) The servicer if the servicer signs the report on Form 10-K on 
behalf of the issuing entity with respect to that fiscal year. If 
multiple servicers are involved in servicing the pool assets, the 
master servicer (or entity performing the equivalent functions) is the 
``responsible party'' if a representative of the servicer is to sign 
the report on behalf of the issuing entity.
    (c) Unaffiliated parties that perform the servicing criteria.(1) 
The responsible party must use reasonable means to assess whether the 
parties performing the servicing functions that are material to the 
servicing function as a whole (e.g., servicers, master servicer, 
trustee, paying agent) are complying with the servicing criteria in all 
material respects.
    (2) Because the responsible party must rely in certain 
circumstances on information provided by unaffiliated parties outside 
of the responsible party's control, the responsible party may 
reasonably rely on information provided to the responsible party by 
unaffiliated parties in making its assessment.
    (d) Attestation on assessment required. With respect to the 
responsible party's compliance assessment required by paragraph (b) and 
(c) of this section, a registered public accounting firm must attest 
to, and report on, the assessment made by the responsible party. An 
attestation made under this paragraph must be made in accordance with 
standards for attestation engagements issued or adopted by the Public 
Company Accounting Oversight Board.
    67. Add Sec. Sec.  240.15d-22 and 240.15d-23 to read as follows:


Sec.  240.15d-22  Reporting regarding asset-backed securities under 
section 15(d) of the Act.

    (a) With respect to an offering of asset-backed securities 
registered pursuant to Sec.  230.415(a)(1)(x) of this chapter, annual 
and other reports need not be filed pursuant to section 15(d) of the 
Act (15 U.S.C. 78o(d)) regarding any class of securities to which such 
registration statement relates until the first bona fide sale in a 
takedown of securities under the registration statement.
    (b) Regarding any class of asset-backed securities in a takedown 
off of a registration statement pursuant to Sec.  230.415(a)(1)(x) of 
this chapter, no annual and other reports need be filed pursuant to 
section 15(d) of the Act regarding such class of securities as to any 
fiscal year, other than the fiscal year within which the takedown 
occurred, if at the beginning of such fiscal year the securities of 
each class in the takedown are held of record by less than three 
hundred persons.
    (c) Paragraphs (a) or (b) of this section do not affect any other 
reporting obligation applicable with respect to any classes of 
securities from additional takedowns under the same or different 
registration statements or any reporting obligation that may be 
applicable pursuant to section 12 of the Act (15 U.S.C. 78l).


Sec.  240.15d-23  Reporting regarding certain securities underlying 
asset-backed securities under section 15(d) of the Act.

    (a) Regarding a class of asset-backed securities, if the asset pool 
for the asset-backed securities includes a pool asset representing an 
interest in or the right to the payments or cash flows of another asset 
pool, then no separate annual and other reports need be filed pursuant 
to section 15(d) of the Act (15 U.S.C. 78o(d)) because of the separate 
registration of the distribution of the pool asset under the Securities 
Act (15 U.S.C. 77a et seq.), if the following conditions are met:
    (1) Both the issuing entity for the asset-backed securities and the 
entity that issued the pool asset were established under the direction 
of the same sponsor or depositor;
    (2) The pool asset was created solely to satisfy legal requirements 
or otherwise facilitate the structuring of the asset-backed securities 
transaction;
    (3) The pool asset is not part of a scheme to avoid the 
registration or reporting requirements of the Act;
    (4) The pool asset is held by the issuing entity and is a part of 
the asset pool for the asset-backed securities; and
    (5) The offering of the asset-backed securities and the offering of 
the pool asset were both registered under the Securities Act (15 U.S.C. 
77a et seq.).
    (b) Paragraph (a) of this section does not affect any reporting 
obligation applicable with respect to the asset-backed securities or 
any other reporting obligation that may be applicable with respect to 
the pool asset or any other securities by the issuer of that pool asset 
pursuant to section 12 or 15(d) of the Act (15 U.S.C. 78l or 78o(d)).
    (c) This section does not affect any obligation to provide 
information

[[Page 26742]]

regarding the pool asset or the asset pool underlying the pool asset in 
a filing with respect to the asset-backed securities. See Item 1100(d) 
of Regulation AB (Sec.  229.1100(d) of this chapter).
    (d) Terms used in this section have the same meaning as in Item 
1101 of Regulation AB (Sec.  229.1101 of this chapter).

PART 242--REGULATIONS M, ATS, AND AC AND CUSTOMER MARGIN 
REQUIREMENTS FOR SECURITY FUTURES

    68. The authority citation for part 242 is revised to read as 
follows:

    Authority: 15 U.S.C. 77g, 77q(a), 77s(a), 78b, 78c, 78g(c)(2), 
78i(a), 78j, 78k-1(c), 78l, 78m, 78n, 78o(b), 78o(c), 78o(g), 
78q(a), 78q(b), 78q(h), 78w(a), 78dd-1, 78mm, 80a-23, 80a-29, and 
80a-37.

    69. Amend Sec.  242.100 by revising the definition of Asset-backed 
security in paragraph (b) to read as follows:


Sec.  242.100  Preliminary note; definitions.

* * * * *
    (b) * * *
    Asset-backed security has the meaning contained in Sec.  229.1101 
of this chapter.
* * * * *

PART 245--REGULATION BLACKOUT TRADING RESTRICTION

    70. The authority citation for part 245 continues to read in part 
as follows:

    Authority: 15 U.S.C. 78w(a), unless otherwise noted.
* * * * *
    71. Amend Sec.  245.101 by:
    a. Removing the period at the end of paragraph (c)(2) and in its 
place adding a semicolon;
    b. Removing ``and'' at the end of paragraph (c)(9);
    c. Removing the period at the end of paragraph (c)(10) and in its 
place adding ``; and''; and
    d. Adding paragraph (c)(11).
    The addition reads as follows:


Sec.  245.101  Prohibition of insider trading during pension fund 
blackout periods.

* * * * *
    (c) * * *
    (11) Any acquisition or disposition of an asset-backed security, as 
defined in Sec.  229.1101 of this chapter.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    72. The authority citation for part 249 continues to read in part 
as follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C. 
1350, unless otherwise noted.
* * * * *
    73. Amend Form 8-K (referenced in Sec.  249.308) by:
    a. Adding General Instruction G.;
    b. Adding Instruction 3 to Item 1.01;
    c. Adding Instruction 3 to Item 1.02;
    d. Revising the phrase ``Instruction'' in Item 1.03 to read 
``Instructions'', redesignating the existing Instruction as Instruction 
1, and adding Instruction 2;
    e. Revising Instruction 4 to Item 2.02;
    f. Adding Instruction 5 to Item 2.04;
    g. Revising the phrase ``Instruction'' in Item 4.01 to read 
``Instructions'', redesignating the existing Instruction as Instruction 
1, and adding Instruction 2;
    h. Revising the phrase ``Instruction to Item 5.03'' in Item 5.03 to 
read ``Instructions'', redesignating the existing Instruction as 
Instruction 1, and adding Instruction 2; and
    i. Adding Section 6.
    The revisions and addition read as follows:

    Note: The text of Form 8-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

FORM 8-k

* * * * *

GENERAL INSTRUCTIONS

* * * * *

G. Use of this Form by Asset-Backed Issuers

    The following applies to registrants that are asset-backed issuers. 
Terms used in this General Instruction G. have the same meaning as in 
Item 1101 of Regulation AB (17 CFR 229.1101).
    1. Reportable Events That May Be Omitted.
    The registrant need not file a report on this Form upon the 
occurrence of any one or more of the events specified in the following:
    (a) Item 2.01, Completion of Acquisition or Disposition of Assets;
    (b) Item 2.03, Creation of a Direct Financial Obligation or an 
Obligation under an Off-Balance Sheet Arrangement of a Registrant;
    (c) Item 2.05, Costs Associated with Exit or Disposal Activities;
    (d) Item 2.06, Material Impairments;
    (e) Item 3.01, Notice of Delisting or Failure to Satisfy a 
Continued Listing Rule or Standard; Transfer of Listing;
    (f) Item 3.02, Unregistered Sales of Equity Securities;
    (g) Item 4.02, Non-Reliance on Previously Issued Financial 
Statements or a Related Audit Report or Completed Interim Review;
    (h) Item 5.01, Changes in Control of Registrant;
    (i) Item 5.02, Departure of Directors or Principal Officers; 
Election of Directors; Appointment of Principal Officers;
    (j) Item 5.04, Temporary Suspension of Trading Under Registrant's 
Employee Benefit Plans; and
    (k) Item 5.05, Amendments to the Registrant's Code of Ethics, or 
Waiver of a Provision of the Code of Ethics.
    2. Additional Disclosure for the Form 8-K Cover Page.
    Immediately after the name of the issuing entity on the cover page 
of the Form 8-K, as separate line items, identify the exact name of the 
depositor as specified in its charter and the exact name of the sponsor 
as specified in its charter.
    3. Signatures.
    The Form 8-K must be signed by the depositor. In the alternative, 
the Form 8-K may be signed on behalf of the issuing entity by a duly 
authorized representative of the servicer. If multiple servicers are 
involved in servicing the pool assets, a duly authorized representative 
of the master servicer (or entity performing the equivalent functions) 
must sign if a representative of the servicer is to sign the report on 
behalf of the issuing entity.

Information To Be Included in the Report

Item 1.01 Entry Into a Material Definitive Agreement

    Instructions. * * *
    3. With respect to asset-backed securities, as defined in Item 1101 
of Regulation AB (17 CFR 229.1101), disclosure is required under this 
Item 1.01 regarding the entry into or an amendment to a definitive 
agreement that is material to the asset-backed securities transaction, 
even if the registrant is not a party to such agreement (e.g., a 
servicing agreement with a servicer contemplated by Item 1107(a) of 
Regulation AB (17 CFR 229.1107(a)).

Item 1.02 Termination of a Material Definitive Agreement

    Instructions. * * *
    3. With respect to asset-backed securities, as defined in Item 1101 
of Regulation AB (17 CFR 229.1101), disclosure is required under this 
Item 1.02 regarding the termination of a definitive agreement that is 
material to the asset-backed securities transaction (otherwise than by 
expiration of the agreement on its stated termination date or as a 
result of all parties completing their obligations under such 
agreement), even if the registrant is not a party to such agreement 
(e.g., a servicing

[[Page 26743]]

agreement with a servicer contemplated by Item 1107(a) of Regulation AB 
(17 CFR 229.1107(a)).

Item 1.03 Bankruptcy or Receivership

    Instructions. * * *
    2. With respect to asset-backed securities, disclosure also is 
required under this Item 1.03 if the depositor (or servicer if the 
servicer signs the report on Form 10-K (17 CFR 249.310) of the issuing 
entity) becomes aware that a receiver, fiscal agent or similar officer 
has been appointed for the sponsor, depositor, servicer, trustee, 
significant obligor, enhancement provider contemplated by Item 1113(b) 
of Regulation AB (17 CFR 229.1113(b)) or other material party 
contemplated by Item 1101(d)(1) of Regulation AB (17 CFR 1101(d)(1)) in 
a proceeding under the U.S. Bankruptcy Code or in any other proceeding 
under State or Federal law in which a court or governmental authority 
has assumed jurisdiction over substantially all of the assets or 
business of such party, or if such jurisdiction has been assumed by 
leaving the existing directors and officers in possession but subject 
to the supervision and orders of a court or governmental authority. 
Terms used in this Instruction 2 have the same meaning as in Item 1101 
of Regulation AB (17 CFR 229.1101).
* * * * *

Item 2.02 Results of Operations and Financial Condition

* * * * *
    Instructions. * * *
    4. This Item 2.02 does not apply in the case of a disclosure that 
is made in a quarterly report filed with the Commission on Form 10-Q 
(17 CFR 249.308a) (or Form 10-QSB (17 CFR 249.308b)), a distribution 
report filed with the Commission on Form 10-D (17 CFR 249.312) with 
respect to asset-backed securities, or an annual report filed with the 
Commission on Form 10-K (17 CFR 249.310) (or Form 10-KSB (17 CFR 
249.310b)).
* * * * *

Item 2.04 Triggering Events That Accelerate or Increase a Direct 
Financial Obligation or an Obligation Under an Off-Balance-Sheet 
Arrangement

* * * * *
    Instructions. * * *
    5. With respect to asset-backed securities, as defined in 17 CFR 
229.1101, disclosure also is required under this Item 2.04 if an early 
amortization, performance trigger or other event, including an event of 
default, has occurred under the transaction agreements for the asset-
backed securities that would materially alter the payment priority or 
distribution of cash flows regarding the asset-backed securities or the 
amortization schedule for the asset-backed securities. In providing the 
disclosure required by this Item, identify the changes to the payment 
priorities, flow of funds or asset-backed securities as a result. 
Disclosure is required under this Item whether or not the registrant is 
a party to the transaction agreement that results in the occurrence 
identified.
* * * * *

Item 4.01 Changes in Registrant's Certifying Accountant

* * * * *
    Instructions. * * *
    2. With respect to asset-backed securities, as defined in 17 CFR 
229.1101, the applicable accountant to which this Item 4.01 should 
relate is the accountant engaged to provide the attestation report on 
assessment of compliance with servicing criteria for asset-backed 
securities, as defined in 17 CFR 210.1-02(a)(3).
* * * * *

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in 
Fiscal Year

* * * * *
    Instructions. * * *
    2. With respect to asset-backed securities, as defined in 17 CFR 
229.1101, disclosure is required under this Item 5.03 regarding any 
amendment to the governing documents of the issuing entity, regardless 
of whether the class of asset-backed securities is reporting under 
Section 13 or 15(d) of the Exchange Act.
* * * * *

Section 6--Asset-Backed Securities

    The Items in this Section 6 apply only to asset-backed securities. 
Terms used in this Section 6 have the same meaning as in Item 1101 of 
Regulation AB (17 CFR 229.1101).

Item 6.01 ABS Informational and Computational Material

    Report under this Item any ABS informational and computational 
material filed in, or as an exhibit to, this report.

Item 6.02 Change of Servicer or Trustee

    If a servicer contemplated by Item 1107(a) of Regulation AB (17 CFR 
229.1107(a)) or the trustee has resigned or has been removed, replaced 
or substituted, or if a new servicer contemplated by Item 1107(a) of 
Regulation AB or trustee has been appointed, state the date the event 
occurred and the circumstances surrounding the change. In addition, 
provide the disclosure required by Item 1107(c) of Regulation AB (17 
CFR 229.1107(c)), as applicable, regarding the servicer or trustee 
change. If a new servicer contemplated by Item 1107(a) of this 
Regulation AB or a new trustee has been appointed, provide the 
information required by Item 1107 of Regulation AB regarding such 
servicer or Item 1108 of Regulation AB (17 CFR 229.1108) regarding such 
trustee, as applicable.

Item 6.03 Change in Credit Enhancement or Other External Support

    (a) Loss of existing enhancement. If the depositor (or servicer if 
the servicer signs the report on Form 10-K (17 CFR 249.310) of the 
issuing entity) becomes aware that any material enhancement specified 
in Item 1113(a)(1) through (3) of Regulation AB (17 CFR 229.1113(a)(1) 
through (3)) that was previously applicable regarding one or more 
classes of the asset-backed securities has terminated other than by 
expiration of the contract on its stated termination date or as a 
result of all parties completing their obligations under such 
agreement, then disclose:
    (1) the date of the termination of the enhancement;
    (2) the identity of the parties to the agreement relating to the 
enhancement;
    (3) a brief description of the terms and conditions of the 
enhancement that are material to security holders;
    (4) a brief description of the material circumstances surrounding 
the termination; and
    (5) any material early termination penalties paid or to be paid out 
of the cash flows backing the asset-backed securities.
    (b) Addition of new enhancement. If the depositor (or servicer if 
the servicer signs the report on Form 10-K (17 CFR 249.310) of the 
issuing entity) becomes aware that any material enhancement specified 
in Item 1113(a)(1) through (3) of Regulation AB (17 CFR 229.1113(a)(1) 
through (3)) has been added with respect to one or more classes of the 
asset-backed securities, then provide the date of addition of the new 
enhancement and the disclosure required by Item 1113 of Regulation AB 
with respect to such new enhancement.
    (c) Material change to enhancement. If the depositor (or servicer 
if the servicer signs the report on Form 10-K (17 CFR 249.310) of the 
issuing entity) becomes aware that any existing material enhancement 
specified in Item

[[Page 26744]]

1113(a)(1) through (3) of Regulation AB (17 CFR 229.1113(a)(1) through 
(3)) with respect to one or more classes of the asset-backed securities 
has been materially amended or modified, disclose:
    (1) the date on which the agreement or agreements relating to the 
enhancement was amended or modified;
    (2) the identity of the parties to the agreement or agreements 
relating to the amendment or modification; and
    (3) a brief description of the material terms and conditions of the 
amendment or modification.
    Instructions. 1. Disclosure is required under this Item whether or 
not the registrant is a party to any agreement regarding the 
enhancement if the loss, addition or modification of such enhancement 
materially affects, directly or indirectly, the asset-backed 
securities, the pool assets or the cash flow underlying the asset-
backed securities.
    2. The instructions to Items 1.01 and 1.02 of this Form apply to 
this Item.
    3. Notwithstanding Items 1.01 and 1.02 of this Form, disclosure 
regarding changes to material enhancements are to be reported under 
this Item 6.03 in lieu of those Items.

Item 6.04 Failure To Make a Required Distribution

    If a required distribution to holders of the asset-backed 
securities is not made as of the required distribution date under the 
transaction documents, identify the failure and state the nature of the 
failure to make the timely distribution.

Item 6.05 Sales of Additional Securities

    If additional securities that are either backed by the same asset 
pool or are otherwise issued by the issuing entity are sold, whether or 
not registered under the Securities Act, provide the applicable 
information set forth in paragraphs (a) through (e) of Item 701 of 
Regulation S-K (17 CFR 229.701(a) through (e)) and paragraph (e) of 
Item 1112 of Regulation AB (17 CFR 229.1112(e)). For purposes of 
determining the filing date for the Form 8-K under this Item 6.05, the 
registrant has no obligation to disclose information under this Item 
6.05 until an enforceable agreement, whether or not subject to 
conditions, has been entered into under which the securities are to be 
sold. If there is no such agreement, the registrant must provide 
disclosure within four business days after the occurrence of the 
closing or settlement of the transaction or arrangement under which the 
securities are to be sold.
    Instruction. No information is required by this Item if 
substantially the same information has been provided previously in an 
effective registration statement under the Securities Act or a 
prospectus timely filed pursuant to Securities Act Rule 424 (17 CFR 
230.424) under the same CIK code regarding a subsequent issuance of 
asset-backed securities backed by the same pool.

Item 6.06 Securities Act Updating Disclosure

    Regarding an offering of asset-backed securities registered on Form 
S-3 (17 CFR 239.13), if the actual asset pool at the time of issuance 
of the asset-backed securities differs by 5% or more from the 
description of the asset pool in the prospectus filed for the offering 
pursuant to Securities Act Rule 424 (17 CFR 230.424), disclose the 
information required by Items 1110 and 1111 of Regulation AB (17 CFR 
229.1110 and 17 CFR 229.1111) regarding the characteristics of the 
actual asset pool. If applicable, also provide information required by 
Items 1107 and 1109 of Regulation AB (17 CFR 229.1107 and 17 CFR 
229.1109) regarding any new servicers or originators that would be 
required to be disclosed under those items regarding the pool assets.
    Instruction. No report is required under this Item if substantially 
the same information is provided in a post-effective amendment to the 
Securities Act registration statement or in a subsequent prospectus 
filed pursuant to 17 CFR 230.424.
* * * * *
    74. Amend Sec.  249.220f by revising paragraph (a) and (b) to read 
as follows:


Sec.  249.220f  Form 20-F, registration of securities of foreign 
private issuers pursuant to section 12(b) or (g) and annual and 
transition reports pursuant to sections 13 and 15(d).

    (a) Any foreign private issuer, other than an asset-backed issuer 
(as defined in Sec.  229.1101 of this chapter), may use this form as a 
registration statement under section 12 of the Securities Exchange Act 
of 1934 (the ``Exchange Act'') or as an annual or transition report 
filed under section 13(a) or 15(d) of the Exchange Act.
    (b) Except with respect to an asset-backed issuer, an annual report 
on this form shall be filed within six months after the end of the 
fiscal year covered by such report.
* * * * *
    75. Amend Form 20-F (referenced in Sec.  249.220f) by:
    a. Adding the phrase ``, other than an asset-backed issuer (as 
defined in 17 CFR 229.1101),'' after the phrase ``foreign private 
issuer'' in paragraphs (a) and (b) of General Instruction A;
    b. Revising the heading ``Instructions to Item 15'' to read 
``Instruction to Item 15'';
    c. Removing Instruction 2 to Item 15;
    d. Removing Instruction 4 to Item 16A;
    e. Removing Instruction 4 to Item 16B;
    f. Redesignating Instructions 5, 6 and 7 to Item 16B as 
Instructions 4, 5 and 6 to Item 16B;
    g. Revising the heading ``Instructions to Item 16C'' to read 
``Instruction to Item 16C''; and
    h. Removing Instruction 2 to Item 16C.

    Note: The text of Form 20-F does not, and this amendment will 
not, appear in the Code of Federal Regulations.

    76. Amend Form 10-K (referenced in Sec.  249.310) by:
    a. Removing ``and'' at the end of General Instruction I.(1)(b);
    b. Removing the period at the end of General Instruction I.(1)(c) 
and in its place adding ``; and'';
    c. Adding paragraph (d) to General Instruction I.(1);
    b. Adding General Instruction J.;
    c. Adding an Instruction to Item 9B; and
    d. Removing the Instruction to Item 14.
    The revisions read as follows.

    Note: The text of Form 10-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 10-K

* * * * *

GENERAL INSTRUCTIONS

* * * * *

I. Omission of Information by Certain Wholly-Owned Subsidiaries.

* * * * *
    (1) * * *
    (d) The registrant is not an asset-backed issuer, as defined in 
Item 1101 of Regulation AB (17 CFR 229.1101).
* * * * *

J. Use of This Form by Asset-Backed Issuers

    The following applies to registrants that are asset-backed issuers. 
Terms used in this General Instruction J. have the same meaning as in 
Item 1101 of Regulation AB (17 CFR 229.1101).
    (1) Items that May be Omitted. Such registrants may omit the 
information called for by the following otherwise required Items:

[[Page 26745]]

    (a) Item 1, Business;
    (b) Item 2, Properties;
    (c) Item 3, Legal Proceedings;
    (d) Item 6, Selected Financial Data;
    (e) Item 7, Management's Discussion and Analysis of Financial 
Condition and Results of Operations;
    (f) Item 7A, Quantitative and Qualitative Disclosures About Market 
Risk;
    (g) Item 8, Financial Statements and Supplementary Data;
    (h) Item 9A, Controls and Procedures;
    (i) Item 10, Directors and Executive Officers of the Registrant, 
Item 11, Executive Compensation, and Item 13, Certain Relationships and 
Related Transactions, if the issuing entity does not have any officers 
or directors;
    (j) Item 12, Security Ownership of Certain Beneficial Owners and 
Management, except for the information required by Item 403(a) of 
Regulation S-K (17 CFR 229.403(a)) and if the issuing entity does not 
have any executive officers or directors; and
    (k) Item 14, Principal Accountant Fees and Services.
    (2) Substitute Information to be Included. In addition to the Items 
that are otherwise required by this Form, the registrant must furnish 
in the Form 10-K the following information:
    (a) Immediately after the name of the issuing entity on the cover 
page of the Form 10-K, as separate line items, the exact name of the 
depositor as specified in its charter and the exact name of the sponsor 
as specified in its charter.
    (b) Item 1111(b) of Regulation AB;
    (c) Item 1113(b)(2) of Regulation AB;
    (d) Item 1115 of Regulation AB;
    (e) Item 1117 of Regulation AB;
    (f) Item 1120 of Regulation AB; and
    (g) Item 1121 of Regulation AB.
    (3) Signatures.
    The Form 10-K must be signed either:
    (a) On behalf of the depositor by the senior officer in charge of 
securitization of the depositor; or
    (b) On behalf of the issuing entity by the senior officer in charge 
of the servicing function of the servicer. If multiple servicers are 
involved in servicing the pool assets, the senior officer in charge of 
the servicing function of the master servicer (or entity performing the 
equivalent functions) must sign if a representative of the servicer is 
to sign the report on behalf of the issuing entity.
* * * * *

FORM 10-K

* * * * *

Item 9B. Other Information

* * * * *
    Instruction. With respect to a report on this Form regarding a 
class of asset-backed securities, the relevant period where disclosure 
is required is the period since the last required distribution report 
on Form 10-D (17 CFR 249.312).
* * * * *
    77. Amend Form 10-KSB (referenced in Sec.  249.310b) by removing 
the Instruction to Item 14.

    Note: The text of Form 10-KSB does not, and this amendment will 
not, appear in the Code of Federal Regulations.

    78. Amend Form 40-F (referenced in Sec.  249.240f) by:
    a. Revising the heading ``Instructions to paragraphs (b), (c), (d) 
and (e) of General Instruction B.6.'' to read ``Instruction to 
paragraphs (b), (c), (d) and (e) of General Instruction B.(6).'' and 
removing Instruction 2;
    b. Removing Note 4 of the Notes to Paragraph (8) of General 
Instruction B;
    c. Removing Note 4 of the Notes to Paragraph (9) of General 
Instruction B;
    d. Redesignating Notes 5, 6 and 7 of the Notes to Paragraph (9) of 
General Instruction B as Notes 4, 5 and 6 of the Notes to Paragraph (9) 
of General Instruction B; and
    e. Revising ``Notes to Instruction B.(10)'' to read ``Note to 
Instruction B.(10)'' and removing Note 2.

    Note: The text of Form 40-F does not, and this amendment will 
not, appear in the Code of Federal Regulations.

    79. Add Sec.  249.312 and Form 10-D to read as follows:


Sec.  249.312  Form 10-D, periodic distribution reports by asset-backed 
issuers.

    This form shall be used by asset-backed issuers to file periodic 
distribution reports pursuant to Sec.  240.13a-17 or Sec.  240.15d-17 
of this chapter. A distribution report on this form pursuant to Sec.  
240.13a-17 or Sec.  240.15d-17 of this chapter shall be filed within 15 
days after each required distribution date on the asset-backed 
securities.

    Note: The text of Form 10-D does not, and this addition will 
not, appear in the Code of Federal Regulations.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-D

ASSET-BACKED ISSUER DISTRIBUTION REPORT PURSUANT TO SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934

GENERAL INSTRUCTIONS

A. Rule as to Use of Form 10-D

    (1) This Form shall be used for distribution reports by asset-
backed issuers pursuant to Rule 13a-17 or Rule 15d-17 (17 CFR 240.13a-
17 or 17 CFR 240.15d-17) of the Securities Exchange Act of 1934 (the 
``Act''). Such a report is required to be filed even though the sponsor 
or depositor also files reports pursuant to Section 13(a) or 15(d) of 
the Act (15 U.S.C. 78m(a) or 78o(d)) with respect to classes of 
securities other than the asset-backed securities. See Rule 3b-19 (17 
CFR 240.3b-19). Terms used in this Form have the same meaning as in 
Item 1101 of Regulation AB (17 CFR 229.1101).
    (2) Reports on this Form shall be filed within 15 days after each 
required distribution date on the asset-backed securities, as specified 
in the governing documents for such securities.

B. Application of General Rules and Regulations

    (1) The General Rules and Regulations under the Act contain certain 
general requirements which are applicable to reports on any form under 
the Act. These general requirements should be carefully read and 
observed in the preparation and filing of reports on this Form, except 
that any provision in this Form or in these instructions is 
controlling.
    (2) Particular attention is directed to Regulation 12B (17 CFR 
240.12b-1 et seq.), which contains general requirements regarding 
filing reports under the Act. The definitions contained in Rule 12b-2 
should be especially noted. See also Regulations 13A (17 CFR 240.13a-1 
et seq.) and 15D (17 CFR 240.15d-1 et seq.).

C. Preparation of Report.

    (1) This Form is not to be used as a blank form to be filled in, 
but only as a guide in preparing the report in accordance with Rules 
12b-11 (17 CFR 240.12b-11), 12b-12 (17 CFR 240.12b-12) and 12b-13 (17 
CFR 240.12b-13). The Commission does not furnish blank copies of this 
Form to be filled in for filing.
    (2) These general instructions are not to be filed with the report. 
The instructions to the various captions of the Form are also to be 
omitted from the report as filed.
    (3) Any item which is inapplicable or to which the answer is 
negative may be omitted and no reference need be made in the report. If 
substantially the same information has been previously reported by the 
asset-backed issuer, an additional report of the information on this 
Form need not be made. The term ``previously reported'' is defined in 
Rule 12b-2 (17 CFR 240.12b-2).
    (4) Attention is directed to Rule 12b-20 (17 CFR 240.12b-20), which 
states:

[[Page 26746]]

``In addition to the information expressly required to be included in a 
statement or report, there shall be added such further material 
information, if any, as may be necessary to make the required 
statements, in the light of the circumstances under which they are made 
not misleading.''

D. Incorporation by Reference

    (1) If the asset-backed issuer makes available to the holders of 
its securities or otherwise publishes, within the period prescribed for 
filing the report on this Form, a press release or other document or 
statement containing information meeting some or all of the 
requirements of this Form, the information called for may be 
incorporated by reference to such published document or statement, in 
answer or partial answer to any item or items of this Form, provided 
copies thereof are filed as an exhibit to the report on this Form.
    (2) All information incorporated by reference must comply with the 
requirements of this Form and the following rules on incorporation by 
reference:
    (a) Item 10(d) of Regulation S-K (17 CFR 229.10(d)) (general rules 
on incorporation by reference, which, among other things, prohibit, 
unless specifically required by this Form, incorporating by reference a 
document that includes incorporation by reference to another document);
    (b) Item 1100(c) of Regulation AB (17 CFR 229.1100(c)) (additional 
requirements for incorporating information by reference in filings by 
asset-backed issuers);
    (c) Rule 303 of Regulation S-T (17 CFR 232.303) (specific 
requirements for electronically filed documents); and
    (d) Exchange Act Rules 12b-23 and 12b-32 (17 CFR 240.12b-23 and 
240.12b-32) (additional rules on incorporation by reference for reports 
filed pursuant to Sections 13 and 15(d) of the Act).

E. Signature and Filing of Report

    (1) The report on this Form must be signed by the depositor. In the 
alternative, the report on this Form may be signed on behalf of the 
issuing entity by a duly authorized representative of the servicer. If 
multiple servicers are involved in servicing the pool assets, a duly 
authorized representative of the master servicer (or entity performing 
the equivalent functions) must sign if a representative of the servicer 
is to sign the report on behalf of the issuing entity.
    (2) The name and title of each person who signs the report shall be 
typed or printed beneath his or her signature. Attention is directed to 
Rule 12b-11 (17 CFR 240.12b-11) concerning manual signatures.
    (3) An asset-backed issuer must submit the report on this Form in 
electronic format via the Commission's Electronic Data Gathering, 
Analysis, and Retrieval (EDGAR) system in accordance with the EDGAR 
rules set forth in Regulation S-T (17 CFR Part 232), except as 
discussed below. An issuer submitting the report in electronic format 
must provide the signatures required for the report in accordance with 
Regulation S-T Rule 302 (17 CFR 232.302). For assistance with technical 
questions about EDGAR or to request an access code, call the EDGAR 
Filer Support Office at (202) 942-8900. For assistance with the EDGAR 
rules, call the Office of EDGAR and Information Analysis at (202) 942-
2940.
    (4) If the report is filed in paper pursuant to a hardship 
exemption from electronic filing provided by Regulation S-T Rule 201 or 
202 (17 CFR 232.201 or 232.202), or as otherwise permitted by the 
Commission, eight copies of the report must be filed with the 
Commission. An issuer also must file at least one complete copy of the 
report with each national securities exchange on which any security of 
the issuer is listed and registered under Section 12(b) of the Exchange 
Act (15 U.S.C. 78l(b)). At least one complete copy of the report filed 
with the Commission and one such copy filed with each exchange must be 
manually signed. Copies not manually signed must bear typed or printed 
signatures. When submitting a report in paper under a hardship 
exemption, an issuer must provide the legend required by Regulation S-T 
Rule 201(a)(2) or 202(c) (17 CFR 232.201(a)(2) or 232.202(c)) on the 
cover page of the report. When submitting the report in electronic 
format to the Commission, an issuer may submit a paper copy containing 
typed signatures to each national securities exchange in accordance 
with Regulation S-T Rule 302(c) (17 CFR 232.302(c)).
BILLING CODE 8010-01-P

[[Page 26747]]

[GRAPHIC] [TIFF OMITTED] TP13MY04.000

BILLING CODE 8010-01-C

[[Page 26748]]

PART I--DISTRIBUTION INFORMATION

Item 1. Distribution and Pool Performance Information

    Provide the information required by Item 1119 of Regulation AB (17 
CFR 229.1119), and attach as an exhibit to this report the distribution 
report delivered to the trustee or security holders, as the case may 
be, pursuant to the transaction agreements for the distribution period 
covered by this report. Any information required by Item 1119 of 
Regulation AB that is provided in the attached distribution report need 
not be repeated in this report. However, taken together, the attached 
distribution report and the information provided under this Item must 
contain all of the information required by Item 1119 of Regulation AB.

PART II--OTHER INFORMATION

Item 2. Legal Proceedings

    Provide the information required by Item 1115 of Regulation AB (17 
CFR 229.1115). As to such proceedings which have been terminated during 
the period covered by the report, provide similar information, 
including the date of termination and a description of the disposition 
thereof.
    Instruction. A legal proceeding need only be reported in the report 
on this Form filed for the distribution period in which it first became 
a reportable event and in subsequent reports on this Form in which 
there have been material developments. Subsequent filings on this Form 
in the same fiscal year in which a legal proceeding or a material 
development is reported should reference any previous reports in that 
year.

Item 3. Sales of Securities and Use of Proceeds

    Provide the information required by Item 2 of Part II of Form 10-Q 
(17 CFR 249.308a) with respect to the period covered by this report. 
With respect to the information required by Item 2(a) of Part II of 
Form 10-Q, provide this information regarding any sale of securities 
that are either backed by the same asset pool or are otherwise issued 
by the issuing entity, regardless of whether the transaction was 
registered under the Securities Act of 1933 (15 U.S.C. 77a et seq.) 
during the period covered by the report. Also provide the information 
required by paragraph (e) of Item 1112 of Regulation AB (17 CFR 
229.1112(e)) regarding such securities. No information need be 
furnished in response to this Item if it has previously been included 
in a Current Report on Form 8-K (17 CFR 249.308).

Item 4. Defaults Upon Senior Securities

    Provide the information required by Item 3 of Part II of Form 10-Q 
with respect to the period covered by this report.

Item 5. Submission of Matters to a Vote of Security Holders

    Provide the information required by Item 4 of Part II of Form 10-Q 
with respect to the period covered by this report.

Item 6. Significant Obligors of Pool Assets

    Provide the information required by Item 1111(b) of Regulation AB 
(17 CFR 229.1111(b)).
    Instruction. Such information need only be reported in the report 
on this Form filed for the distribution period in which updated 
information regarding the significant obligor is required pursuant to 
Item 1111(b) of Regulation AB. Filings on this Form for distribution 
periods in which updated information is not required should reference 
the previous report on this Form or other filing by the asset-backed 
issuer that includes the most recent information. See also Item 1100(c) 
of Regulation AB (17 CFR 229.1100(c)) regarding the presentation of 
such information in certain instances.

Item 7. Significant Enhancement Provider Information

    Provide the information required by Item 1113(b)(2) of Regulation 
AB (17 CFR 229.1113(b)(2)).
    Instruction. Such information need only be reported in the report 
on this Form filed for the distribution period in which updated 
information regarding the enhancement provider is required pursuant to 
Item 1113(b)(2) of Regulation AB. Filings on this Form for distribution 
periods in which updated information is not required should reference 
the previous report on this Form or other filing by the asset-backed 
issuer that includes the most recent information. See also Item 1100(c) 
of Regulation AB (17 CFR 229.1100(c)) regarding the presentation of 
such information in certain instances.

Item 8. Other Information

    The registrant must disclose under this Item any information 
required to be disclosed in a report on Form 8-K during the period 
covered by the report on this Form, but not reported, whether or not 
otherwise required by this Form. If disclosure of such information is 
made under this Item, it need not be repeated in a report on Form 8-K 
which would otherwise be required to be filed with respect to such 
information or in a subsequent report on this Form.

Item 9. Exhibits

    (a) List the documents filed as a part of the report.
    (b) File, as exhibits to this report, the exhibits required by this 
Form and Item 601 of Regulation S-K (17 CFR 229.601).
SIGNATURES*
    Pursuant to the requirements of the Securities Exchange Act of 
1934, the registrant has duly caused this report to be signed on its 
behalf by the undersigned thereunto duly authorized.

-----------------------------------------------------------------------
Date:
-----------------------------------------------------------------------
(Depositor)

-----------------------------------------------------------------------
(Signature)**

    [or]

-----------------------------------------------------------------------
Date:

By:
-----------------------------------------------------------------------
(Issuing entity)

-----------------------------------------------------------------------
(Servicer)

-----------------------------------------------------------------------
(Signature)**

    *See General Instruction E to Form 10-D.
    ** Print the name and title of each signing officer under his or 
her signature.

    Dated: May 3, 2004.

    By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-10467 Filed 5-12-04; 8:45 am]
BILLING CODE 8010-01-P