[Federal Register Volume 70, Number 5 (Friday, January 7, 2005)]
[Rules and Regulations]
[Pages 1506-1631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-53]



[[Page 1505]]

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Part II





Securities and Exchange Commission





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17 CFR Parts 210, 228, et al.



Asset-Backed Securities; Final Rule

  Federal Register / Vol. 70, No. 5 / Friday, January 7, 2005 / Rules 
and Regulations  

[[Page 1506]]


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SECURITIES AND EXCHANGE COMMISSION

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

[Release Nos. 33-8518; 34-50905; File No. S7-21-04]
RIN 3235-AF74


Asset-Backed Securities

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; request for comment.

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SUMMARY: We are adopting 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. The final rules and forms accomplish 
the following: update and clarify the Securities Act registration 
requirements for asset-backed securities offerings, including expanding 
the types of asset-backed securities that may be offered in 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. We also request additional comment regarding the 
appropriate treatment of certain structured securities that do not meet 
our definition of ``asset-backed security.''

DATES: Effective Date: March 8, 2005.
    Comment Date: Comments regarding the request for comment in Section 
III.A.2.a. of this document and the Form 12b-25 ``collection of 
information'' requirement, within the meaning of the Paperwork 
Reduction Act of 1995, should be received on or before March 8, 2005.
    Compliance Dates: Any registered offering of asset-backed 
securities commencing with an initial bona fide offer after December 
31, 2005, and the asset-backed securities that are the subject of that 
registered offering, must comply with the new rules and forms. For any 
such offerings that rely on Securities Act Rule 415(a)(1)(x), 
Securities Act registration statements filed after August 31, 2005 
related to such offerings must be pre-effectively or post-effectively 
amended, as applicable, to make the prospectus included in Part I of 
the registration statement compliant and to make any required 
undertakings or other changes for Part II of the registration 
statement. For Securities Act registration statements that were filed 
on or before August 31, 2005, the prospectus and prospectus supplement, 
taken together, relating to such offerings that rely on Rule 
415(a)(1)(x) must comply, provided, that, (1) the Securities Act 
registration statement will need to be post-effectively amended if any 
new undertakings are required to be made with respect to such offerings 
in Part II of the registration statement; and (2) the Securities Act 
registration statement will need to be post-effectively amended to make 
the prospectus included in Part I of the registration statement 
compliant, as well as to make changes, if any, to Part II of the 
registration statement with respect to any registered offering of 
asset-backed securities under such registration statement commencing 
with an initial bona fide offer after March 31, 2006.

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/final.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). 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/final.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, at (202) 942-2910, in the 
Office of Rulemaking, Division of Corporation Finance, U.S. Securities 
and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are adopting: amendments to 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\ amendments to Items 10, 308, 401 
and 406 \4\ of Regulation S-B \5\ under the Securities Act; amendments 
to Items 10, 202, 308, 401, 406, 501, 503, 512, 601 and 701 \6\ of 
Regulation S-K \7\ under the Securities Act; a new subpart of 
Regulation S-K, the 1100 series (``Regulation AB''); \8\ amendments to 
Rules 411 and 434 \9\ under the Securities Act; new Rules 139a, 167, 
190, 191 and 426 \10\ under the Securities Act; amendments to Rule 311 
\11\ of Regulation S-T; \12\ new Rule 312 \13\ of Regulation S-T; 
amendments to Forms S-1, S-2, S-3, S-11, F-1, F-2 and F-3 \14\ under 
the Securities Act; amendments to Rules 10A-3, 12b-2, 12b-15, 12b-25, 
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 \15\ under the Securities Exchange 
Act of 1934 (the ``Exchange Act''); \16\ new Rules 3a12-12, 3b-19, 13a-
17, 13a-18, 15d-17, 15d-18, 15d-22 and 15d-23 \17\ under the Exchange

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Act; amendments to Rule 100 \18\ of Regulation M \19\ under the 
Exchange Act; amendments to Rule 101 \20\ of Regulation BTR \21\ under 
the Sarbanes-Oxley Act of 2002 (the ``Sarbanes-Oxley Act''); \22\ 
amendments to Forms 20-F, 40-F, 8-K, 10-K, 10-KSB and 12b-25 \23\ under 
the Exchange Act; and new Form 10-D \24\ under the Exchange Act.
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    \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; 17 CFR 229.601; and 17 CFR 229.701.
    \7\ 17 CFR 229.10 et seq.
    \8\ 17 CFR 229.1100 through 1123.
    \9\ 17 CFR 230.411 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 232.312.
    \14\ 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.
    \15\ 17 CFR 240.10A-3; 17 CFR 240.12b-2; 17 CFR 240.12b-15; 17 
CFR 240.12b-25; 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.
    \16\ 15 U.S.C. 78a et seq.
    \17\ 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.
    \18\ 17 CFR 242.100.
    \19\ 17 CFR 242.100 through 105.
    \20\ 17 CFR 245.101.
    \21\ 17 CFR 245.101 through 104.
    \22\ 15 U.S.C. 7201 et seq.
    \23\ 17 CFR 249.220f; 17 CFR 249.240f; 17 CFR 249.308; 17 CFR 
249.310; 17 CFR 249.310b; and 17 CFR 249.322.
    \24\ 17 CFR 249.312.
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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 Amendments
II. Background and Development of ABS and Regulatory Treatment
III. Discussion of the Amendments
    A. Securities Act Registration
    1. Current Requirements
    2. Definition of Asset-Backed Security
    a. Approach and Supplemental Request for Comment for Other 
Structured Securities
    b. Basic Definition
    c. Nature of the Issuing Entity
    d. Delinquent and Non-Performing Pool Assets
    e. Lease-Backed Securitizations and Residual Values
    f. 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. Exclusion From Exchange Act Rule 15c2-8(b) for Form S-3 ABS
    6. Registration of Underlying Pool Assets
    a. Current Requirements
    b. When Registration Is Required
    c. Exceptions From Disclosure and Delivery Conditions and Form 
S-3 Eligibility Requirements
    7. Market-Making Transactions
    B. Disclosure
    1. 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. Static Pool Information
    a. Disclosure Required
    b. Method of Presentation
    5. 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
    6. Transaction Structure
    7. Significant Obligors
    8. Credit Enhancement and Other Support
    9. 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
    10. 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. Exemptive Rule
    c. Definition of ABS Informational and Computational Material
    d. Conditions for Use
    e. Filing Requirements
    2. Research Reports
    a. Current Requirements
    b. ABS Research Report Safe Harbor
    3. Other Communications During the Offering Process
    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 on EDGAR
    4. Distribution Reports on Form 10-D
    a. New Form 10-D and Deadline for Filing
    b. Signatures
    c. Content
    5. Annual Reports on Form 10-K
    6. Certifications under Section 302 of the Sarbanes-Oxley Act
    7. Report on Assessment of Compliance with Servicing Criteria 
and Accountant's Attestation
    a. Background
    b. Our Proposal and Overview of Revised Approach
    c. Assessment and Attestation of Servicing Compliance
    d. Attestation Report on Assessment of Compliance
    8. Current Reporting on Form 8-K
    a. Items Requiring Current Disclosure
    b. Clarifying Amendments to Existing Items
    c. New Items
    d. Safe Harbor and Eligibility To Use Form S-3
    9. Other Exchange Act Reporting Amendments
    a. Exclusion From Form 10-Q
    b. Exemptions From Section 16
    c. Transition Reports
    E. Other Miscellaneous Amendments
    F. Transition Period
IV. Paperwork Reduction Act
V. Cost-Benefit Analysis
VI. Consideration of Burden on Competition and Promotion of 
Efficiency, Competition and Capital Formation
VII. Regulatory Flexibility Analysis Certification
VIII.Statutory Authority and Text of Rule and Form Amendments

I. Overview

A. What Are Asset-Backed Securities?

    On May 3, 2004, we issued proposals to address comprehensively the 
registration, disclosure and reporting requirements for asset-backed 
securities, or ABS, under the Securities Act and the Exchange Act.\25\ 
We received over 50 comments in response to our proposals.\26\ 
Commenters expressed overall support for our proposals to establish a 
separate framework for the registration and reporting of asset-backed 
securities due to differences between asset-backed securities and other 
securities.\27\ The final rule and form amendments we adopt today have 
been revised, as discussed in this

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release, to incorporate a number of changes recommended by commenters.
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    \25\ See Release No. 33-8419 (May 3, 2004) [69 FR 26650] (the 
``Proposing Release'').
    \26\ The public comments we received and a summary of the 
comments prepared by our staff (the ``Comment Summary'') are 
available for inspection in our Public Reference Room at 450 Fifth 
Street, NW., Washington, DC 20549 in File No. S7-21-04, or may be 
viewed at http://www.sec.gov/rules/proposed/s72104.shtml.
    \27\ See, e.g., Letters of AIG Credit Corp. (``AIG''); Allen & 
Overy (``A&O''); American Bar Association (``ABA''); American 
Financial Services Association (``AFSA''); American Institute of 
Certified Public Accountants (``AICPA''); American Bankers 
Association (``Am. Bankers''); American Society of Corporate 
Secretaries (``ASCS''); American Securitization Forum (``ASF''); 
Australian Securitisation Forum (``Aus. SF''); Joint letter of 
American Honda Finance Corporation, DaimlerChrysler Services North 
America LLC, Ford Motor Credit Company, General Motors Acceptance 
Corporation, and Navistar Financial Corporation (``Auto Group''); 
Bond Market Association (``BMA''); Bank of America Corporation 
(``BOA''); Capital One Financial Corporation (``Capital One''); CFA 
Institute (``CFAI''); Citigroup Global Markets, Inc. (``CGMI''); 
Citigroup Inc. (``Citigroup''); Commercial Mortgage Securities 
Association (``CMSA''); Ernst & Young LLP (``E&Y''); European 
Securisation Forum (``ESF''); Fidelity Management & Research Company 
(``FMR''); First Marblehead Corporation (``First Marblehead''); 
Financial Services Roundtable (``FSR''); Investment Company 
Institute (``ICI''); Jones Day; JPMorganChase & Co. 
(``JPMorganChase); Kutak Rock LLP (``Kutak''); Mortgage Bankers 
Association (``MBA''); MBNA Corporation (``MBNA''); Metropolitan 
Life Insurance Company (``MetLife''); Moody's Investors Service 
(``Moody's''); PriceWaterhouseCoopers LLP (``PWC''); Joint letter of 
Sallie Mae., Inc. and Nelnet, Inc. (``Sallie Mae''); State Street 
Global Advisors (``State Street''); Toyota Motor Credit Corporation 
(``TMCC''); UBS Securities LLC (``UBS''); U.S. Bank National 
Association (``US Bank''); and Wells Fargo Bank, National 
Association (``Wells Fargo'').
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    Asset-backed securities 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 in the capital markets.\28\ 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, 
either directly or through an affiliate. It then sells the financial 
assets, again either directly or through an affiliate, to a specially 
created investment vehicle that issues securities ``backed'' or 
supported by those financial assets, which securities 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 
liquidity facilities, 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.
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    \28\ ``Securitization'' is a commonly used term to describe this 
financing technique, although other terms, such as ``asset-backed 
financing,'' also are used.
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    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 
non-agency ABS issuance grew from $46.8 billion in 1990 to $416 billion 
in 2003.\29\ Another source estimates 2003 new issuance closer to $800 
billion.\30\ ABS issuance is on pace to exceed corporate debt issuance 
in 2004.\31\ 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. Before the Proposing 
Release, the Commission had not previously addressed on a comprehensive 
basis the regulatory treatment of asset-backed securities under the 
Securities Act or the Exchange Act.
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    \29\ See Bank One Capital Markets, Inc., 2004 Structured Debt 
Yearbook.
    \30\ See Asset Securitization Report (pub. by Thomson Media 
Inc). See also Asset-Backed Alert (pub. by Harrison Scott 
Publications). 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.
    \31\ See, e.g., Jennifer Hughes and David Wells, ``Asset-Backed 
Bonds Hit Record,'' Financial Times, Nov. 11, 2004, at 17; Aaron 
Lucchetti, ``Indebted Consumers Reshape the Bond Market--Betting on 
Americans' Ability To Pay Their Bills May Pose Risks If Interest 
Rates Move Higher,'' Wall St. J., Sep. 14, 2004, at C1; and 
Christine Richard, ``US Asset-Backeds: No Slowdown As Consumers 
Borrow,'' Dow Jones Capital Markets Report, Sep. 17, 2004. See also 
The Bond Market Association, Bond Market Research Quarterly, 
November 2004.
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    Asset-backed securities and ABS issuers differ from corporate 
securities and operating companies. In offering ABS, there is generally 
no business or management to describe. Instead, information about the 
transaction structure and the characteristics and 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 and their 
securities, do not elicit relevant information for most asset-backed 
securities transactions. Over time, Commission staff, through no-action 
letters and the filing review process, have developed a framework to 
address the different nature of asset-backed securities while being 
cognizant of developments in market practice.
    With a few exceptions, our proposals were designed to consolidate 
and codify current staff positions and industry practice. After 
carefully evaluating the public comment received, we are adopting new 
rules and amendments to address the four primary regulatory areas 
affecting asset-backed securities that were the subject of the 
proposal: Securities Act registration; disclosure; communications 
during the offering process; and ongoing reporting under the Exchange 
Act.

B. Securities Act Registration

    We are adopting a principles-based definition of asset-backed 
security, substantially as proposed, to demarcate the securities and 
offerings to which the new rules apply. The definition consolidates 
several staff positions regarding the definition of asset-backed 
security, including those regarding delinquent and non-performing pool 
assets, with several revisions to the proposal in response to comment. 
The definition we are adopting today also allows more lease-backed 
transactions to be included in the definition of asset-backed security 
and permits the use of master trusts and revolving periods for more 
asset classes. As we explained in the Proposing Release, 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 
``shelf,'' basis.\32\ As proposed, we are requiring that all registered 
offerings of asset-backed securities be registered either on Form S-1 
or Form S-3, and we are specifying in those forms which disclosure 
items are required. In addition, we are expanding the types of 
investment grade asset-backed securities that qualify for shelf 
registration.
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    \32\ See Release No. 33-6964 (Oct. 22, 1992) [57 FR 48970] (the 
``1992 Release'').
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    Consistent with existing staff positions and our proposal, we are 
not adding a reporting history requirement for Form S-3 eligibility. 
However, we are codifying a staff position, as modified from the 
Proposing Release in response to comment, that Exchange Act reporting 
obligations regarding other ABS of the same asset class established by 
the depositor or an affiliate of the depositor must have been satisfied 
to maintain Form S-3 eligibility for new registration statements. Also 
consistent with existing staff positions, and pending consideration of 
our broader proposals recently issued for all Securities Act 
offerings,\33\ we are excluding 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.
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    \33\ See Release No. 33-8501 (Nov. 3, 2004) [69 FR 67392] (the 
``Offering Process Release'').
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    We also are adopting proposals to alleviate impediments to the 
shelf registration of offerings of asset-backed securities by foreign 
issuers or backed by foreign financial assets. We are adopting 
proposals that consolidate and streamline existing staff positions 
regarding when and how the offering of underlying securities must be 
concurrently registered with an offering of asset-backed securities 
backed by those underlying securities. Finally, we are revisiting staff 
interpretations regarding the registration of market-making 
transactions in the ABS context in response to comment. In particular, 
we will no longer require registration or delivery of a prospectus for 
market-making transactions for asset-backed securities.

C. Disclosure

    Before today, there were no disclosure items tailored specifically 
to asset-backed securities. We are adopting, with modifications in 
response to comment, a new principles-based set of disclosure items, 
``Regulation AB,'' that will form

[[Page 1509]]

the basis for disclosure in both Securities Act registration statements 
and Exchange Act reports. Although the few comments we received on this 
point were mixed, we still do not believe it would be practical or 
effective to draft detailed disclosure guides for each asset type that 
may be securitized. Instead, and as proposed, we have attempted to 
identify the disclosure concept required and provide several 
illustrative examples, while understanding and emphasizing, as we did 
in the Proposing Release, that the application of the particular 
concept must be tailored to the particular transaction and asset type 
involved and resulting determinations as to the materiality of 
information.
    As we explained in the Proposing Release, the new disclosure items 
are for the most part based on the market-driven disclosures that 
appear today. However, with a codification of a universal set of 
disclosure items, we do seek, as we stated in the Proposing Release, 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, and the comment process confirmed, 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 new disclosure items relating to these entities are 
designed to elicit additional information in these areas to the extent 
material, and we have made several revisions to the proposed disclosure 
items in response to comment.
    Consistent with our proposal, we also are requiring for the first 
time that certain statistical information on a ``static pool'' basis be 
provided if material to the transaction. The final rules relating to 
the provision of this information have been revised from the Proposing 
Release in response to comment. The requirement to provide static pool 
data is still based upon the materiality of the data, although we are 
providing additional guidance on the scope of the data covered by the 
requirement. In addition, the guidance for static pool data under the 
final rules includes not only delinquency and loss data, but also 
prepayment data, if material. We also are providing flexibility in the 
manner of making the static pool data available. The final rules permit 
issuers to provide data that would be included in the prospectus but 
provided through a Web site under certain specified conditions.
    Consistent with current practice and our proposals, we are not 
requiring audited financial statements regarding the issuing entity for 
the asset-backed securities in Securities Act or Exchange Act filings. 
However, we are adopting proposals, revised in response to comment, 
that consolidate and codify current staff positions on when financial 
or other descriptive information is required regarding certain other 
third parties, such as obligors of financial assets that reach pool 
concentration levels or providers of significant credit enhancement or 
other cash flow support for the asset-backed securities. In particular, 
we have revised our proposals regarding the provision of such 
information with respect to certain derivative counterparties to use an 
alternate measure for determining significance. We also are 
streamlining and codifying current staff positions, substantially as 
proposed, on when financial information regarding 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 1990's, Commission staff issued a series of no-action 
letters permitting the use of various written materials in addition to 
the statutory prospectus in an offering of asset-backed securities.\34\ 
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. 
Pending consideration of our broader communications proposals in the 
recently-issued Offering Process Release, we are here codifying and 
simplifying, as proposed, the current staff positions on when these 
materials can be used and when they must be publicly filed with the 
Commission. We are clarifying our intention stated in the Proposing 
Release that the communications allowed under our final rules mirror 
those allowed under the staff no-action letters. We also are 
reiterating clarifications regarding several interpretive issues 
involving 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 are eliminating as proposed the current exemption from 
electronic filing for these materials.
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    \34\ 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 prospectus'' refers to the full prospectus required by 
Section 10 of the Securities Act (15 U.S.C. 77j).
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    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.\35\ 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.\36\ However, several of the conditions 
in those rules were not relevant or practical for asset-backed 
securities. Again, pending consideration of any further changes to the 
research report safe harbors as a result of the Offering Process 
Release, we are codifying here, as proposed, the modified conditions in 
the staff no-action letter that provide a similar safe harbor for 
research reports as they relate to registered offerings of asset-backed 
securities on Form S-3.
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    \35\ See Public Securities Ass'n (Feb. 7, 1997).
    \36\ 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).
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E. Ongoing Reporting Under the Exchange Act

    As with registration, the ongoing periodic and current reporting 
requirements under the Exchange Act applicable to operating companies 
do not elicit information that would be most relevant for asset-backed 
securities. First through a series of exemptive orders, and then 
primarily through the issuance of scores 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,\37\ ABS issuers today generally file under cover of 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

[[Page 1510]]

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 \38\ 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.\39\ ABS issuers are exempt from the rules implementing 
Section 404 of the Sarbanes-Oxley Act \40\ regarding reporting on 
internal control over financial reporting.\41\
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    \37\ 17 CFR 249.308a.
    \38\ 15 U.S.C. 7241.
    \39\ 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).
    \40\ 15 U.S.C. 7262.
    \41\ See Exchange Act Rules 13a-15 and 15d-15.
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    We are codifying as proposed 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 are adopting our proposal 
for 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 are adopting instructions, substantially as proposed, that specify 
which of the Commission's recently adopted Form 8-K events will be 
applicable to asset-backed securities, and we are adding a few 
additional events specific to asset-backed securities, again with 
certain modifications from the proposal. Consistent with the modified 
reporting no-action letters, we are adopting our proposals to expressly 
exclude ABS from quarterly reporting on Form 10-Q and exempt ABS from 
Section 16 of the Exchange Act.\42\ We also are adopting proposed 
amendments to clarify how transition reports are to be filed regarding 
a change in fiscal year.
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78p.
---------------------------------------------------------------------------

    We are adopting instructions, substantially as proposed, that 
specify the disclosure requirements applicable for annual reports on 
Form 10-K regarding asset-backed securities, which also are drawn from 
Regulation AB, and we are codifying the form of certification to be 
used under Section 302 of the Sarbanes-Oxley Act for asset-backed 
securities. As proposed, we are retaining the longstanding requirements 
relating to servicer compliance statements and reports by an 
independent public accountant as to compliance with particular 
servicing criteria. Regarding servicing criteria, we explained in the 
Proposing Release that 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. However, the USAP's ``minimum servicing 
standards'' are designed to be applicable only to servicing of 
residential mortgages and do not necessarily represent the full 
spectrum of servicing activities that may be material to an asset-
backed securities transaction. We are adopting, with modifications, the 
proposed disclosure-based servicing criteria that will 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 adopting a requirement that a registered public 
accounting firm attest to the assertion of compliance. We are revising 
our proposal, however, to permit separate reports from each party that 
performs the actual servicing or administration functions. Both the 
reports containing the assertion of compliance and the accountant's 
attestation reports will be required to be filed with the report on 
Form 10-K. We also are revising the form of the Sarbanes-Oxley Section 
302 certification to include an express statement by the certifying 
party as to whether reports have been filed covering the entire 
servicing function.
    As with the Securities Act, we are adopting our proposed 
specification that the depositor is the ``issuer'' for purposes of 
Exchange Act reporting regarding asset-backed securities. We also are 
specifying who may sign the various Exchange Act reports. As proposed, 
either the depositor or the servicer may sign the reports on Form 10-K, 
Form 10-D and Form 8-K. A designated officer of that same party also 
must sign the Sarbanes-Oxley Section 302 certification. We also are 
clarifying 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,\43\ 
including codifying as proposed several interpretive positions as to 
when the obligation starts and when it may be suspended.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78o(d).
---------------------------------------------------------------------------

F. Other Miscellaneous Amendments

    Finally, as discussed in the Proposing Release, we are making 
several miscellaneous and technical amendments to our rules and forms 
to accommodate the new rules and to update references regarding asset-
backed securities.

II. Background and Development of ABS and Regulatory Treatment

    As noted above, the ABS market rapidly has developed into an 
important part of the U.S. capital markets.\44\ The modern 
securitization market originated in the 1970's with the securitization 
of residential mortgages.\45\ 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.
---------------------------------------------------------------------------

    \44\ See note 31 above. See also 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)).
    \45\ 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. As a result, only non-GSE ABS, or so 
called ``private label'' ABS, will be required to comply with the 
new rules. 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 Web site at http: 
www.sec.gov.
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    There are several distinguishing features between asset-backed 
securities and other fixed-income securities. For example, ABS 
investors are generally

[[Page 1511]]

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.\46\ 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.\47\
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    \46\ 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.''
    \47\ 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, one or more ``servicers,'' often 
affiliated with the sponsor, are generally 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, mutual funds and money managers.\48\ 
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.\49\
---------------------------------------------------------------------------

    \48\ See 2003 MBS Disclosure Report.
    \49\ 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 to be packaged into securities 
designed to provide returns with specific risk and timing 
characteristics.
    Transaction agreements specify the structure of an ABS transaction. 
A common form of such an agreement is a ``pooling and servicing 
agreement'' 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, 
commonly 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.\50\ 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 provide incidental changes to 
cash-flow and return, such as where a floating-rate interest is to be 
paid on ABS backed by financial assets that pay a fixed rate of 
interest.
---------------------------------------------------------------------------

    \50\ 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.
    Before the Proposing Release, there had been few Commission 
initiatives directly related to ABS. In connection with the passage of 
the Secondary Mortgage Market Enhancement Act of 1984 (SMMEA),\51\ the 
Commission permitted shelf registration to SMMEA eligible 
securities.\52\ In 1992, the Commission extended shelf registration to 
non-mortgage investment grade ABS.\53\ That same year, the Commission 
also adopted a rule under the Investment Company Act of 1940 \54\ to 
exclude ABS transactions under specific conditions from the definition 
of an investment company.\55\ More recently,

[[Page 1512]]

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.\56\ 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.
---------------------------------------------------------------------------

    \51\ Pub. L. No. 98-440, 98 Stat. 1689. See also Section II.C.1. 
of the 2003 MBS Disclosure Report.
    \52\ 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)).
    \53\ See note 32 above.
    \54\ 15 U.S.C. 80a-1 et seq.
    \55\ 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). As we stated in the 
Proposing Release, 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.
    \56\ 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).
---------------------------------------------------------------------------

    As we stated in the Proposing Release, we recognize 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. Even before we issued the proposals, 
many issuers, investors and other market participants had requested a 
defined set of regulatory requirements for guidance.\57\ Commenters on 
the proposals expressed universal support for a separate framework for 
the registration and reporting of ABS.\58\ 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.\59\
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    \57\ 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 
ICI to Michael H. Mitchell, Special Counsel, Division of Corporation 
Finance, ``Asset-Backed Securities Offerings'' (Oct. 29, 1996); 
Letter from 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 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 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).
    \58\ See note 27 above.
    \59\ See, e.g., notes 201, 229, and 235 below. See, also, ``If 
Issuers Can Steal, Where's the Deal Cop,'' Asset Securitization 
Report, Feb. 17, 2003, at 6; Christine Richard; ``Moody's Trustees 
Don't See Eye-to-Eye on Trustee Role,'' Dow Jones Newswires, Feb. 4, 
2003; and ``SEC Filings Reveal Little ABS Reporting Consistency,'' 
Asset Securitization Report, Sep. 23, 2002, at 10.
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    Against this background, we issued the proposals 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. 
After carefully evaluating the comments received on the proposals, we 
are adopting these new regulatory requirements, as discussed further 
below.

III. Discussion of the Amendments

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 \60\ asset-backed securities without a reporting 
history requirement for the issuing entity.\61\ 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 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.
---------------------------------------------------------------------------

    \60\ ``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.
    \61\ 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 related securities, as defined in 
Section 3(a)(41) of the Exchange Act (15 U.S.C. 78c(a)(41)), are 
permitted to be offered on a delayed basis under Securities Act Rule 
415(a)(1)(vii). See note 52 above. Our actions today do not affect 
the continued availability of Rule 415(a)(1)(vii) for shelf 
registration of mortgage related securities, as defined, even if 
they do not meet the requirements of Form S-3. However, consistent 
with our movement of all asset-backed securities offerings to Form 
S-1 or Form S-3, to the exclusion of Form S-11, mortgage related 
securities offerings should use Form S-1 in lieu of Form S-11 for 
future transactions. Just like prior practice on Form S-11, an 
offering meeting the requirements of Rule 415(a)(1)(vii) could be a 
continuous or delayed offering on Form S-1.
---------------------------------------------------------------------------

    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

[[Page 1513]]

conducted in the future, including asset types that may be securitized, 
the types of security structures that may be used and possible credit 
enhancements or other forms of support. The registration statement at 
the time of effectiveness also contains one or more forms of prospectus 
supplement, which outline 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).\62\
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    \62\ 17 CFR 230.424(b).
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2. Definition of Asset-Backed Security
a. Approach and Supplemental Request for Comment for Other Structured 
Securities
    As we explained in the Proposing Release, the term ``asset-backed 
security'' currently is defined only for purposes of Form S-3. As many 
of our amendments relate to the treatment of asset-backed securities 
regardless of the form on which their offering is initially registered, 
we are moving the definition of ``asset-backed security,'' as proposed, 
to the definition section of Regulation AB, our new sub-part in 
Regulation S-K for asset-backed securities (discussed more fully in 
Section III.B). Under this new format, a security that meets the 
general definition of ``asset-backed security'' will be subject to the 
disclosure and other requirements of the new rules, regardless of the 
Form used for registration. Any additional conditions appropriate for 
Form S-3 eligibility, such as an investment grade requirement, will be 
retained in General Instruction I.B.5 of Form S-3, as discussed in 
Section III.A.3.c.
    As we explained in the Proposing Release, 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 is 
principles-based and 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 and pay-through 
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 a discrete pool of financial 
assets that by their terms convert into cash within a finite time 
period.\63\ We continue to believe, conversely, that the regime we have 
specifically designed for asset-backed securities is not necessarily 
appropriate for securities that do not meet these principles.
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    \63\ For example, common stock and similar equity instruments do 
not meet this general principle. Our view would not be altered if 
the equity security was subject to a separate liquidity or 
repurchase agreement or other arrangement. However, limited life 
equity securities, such as trust preferred securities, that 
themselves have a finite life and a mandatory redemption, could 
satisfy the general principle.
---------------------------------------------------------------------------

    As we explained in the Proposing Release, experience with the 
definition has resulted in several interpretations since its adoption. 
These interpretations clarify the principles in the definition or, in 
some instances, permit limited exceptions to one or more of those 
principles where appropriate and consistent with overall application of 
the ABS regulatory regime. 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, and we proposed 
codifying them with several expansions 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.
    Commenters were mixed on our proposed approach. On the one hand, 
commenters representing investors expressed reticence in expanding 
access to the ABS regulatory regime out of concern that it could have 
certain unintended consequences, such as investment decisions on these 
additional transactions being made under more compressed time frames 
and with less access to information through shelf registration.\64\ On 
the other hand, commenters representing primarily issuers and their 
representatives would have preferred, in lieu of our proposed approach 
of codifying limited exceptions to the existing definition's core 
principles, abandoning many of the core principles themselves to allow 
additional securities to receive the benefits of the proposed regime, 
such as immediate shelf registration and the ability to use ABS 
informational and computational material.\65\ For example, most of 
these commenters would have preferred deleting the ``discrete pool'' 
requirement from the existing 1992 definition, hence rendering the 
proposed expansions to the existing interpretive exceptions from that 
requirement, such as those relating to master trusts, prefunding 
periods and revolving periods, unnecessary and thereby permitting 
unlimited use of those concepts. These commenters generally argued that 
such requirements would restrict innovation and were unnecessary to 
protect the universe of mostly institutional investors. According to 
the view of these commenters, any concerns with abandoning these and 
several other existing principles in the definition, such as the 
proposed delinquency and non-performing interpretations designed to 
uphold the principle that the ABS are primarily dependent on a pool of 
assets that self-liquidate instead of on the ability of the entity 
managing and foreclosing on the assets, could be addressed through 
disclosure.
---------------------------------------------------------------------------

    \64\ See, e.g., Letter of ICI.
    \65\ See, e.g., Letters of ABA; ASF; Auto Group; ESF; and FSR.
---------------------------------------------------------------------------

    We continue to believe that the ABS regime is at bottom not 
designed for transactions that depart significantly from the principles 
behind the definition. The alternative regime for asset-backed 
securities represents the codification of a very different 
registration, disclosure and reporting regime from that applicable to 
other securities, including other structured securities. We continue to 
believe that the current and proposed definition of ``asset-backed 
security'' reflects the core principles for securities that should be 
subject to this alternative regime, while still providing great 
flexibility and room for development. We continue to believe that 
emphasis on certain core principles is appropriate for these purposes, 
such as that the securities are primarily backed by a pool of assets, 
that there is a discrete pool with a general absence of active pool 
management, and an emphasis on the self-liquidating nature of pool 
assets that by their own terms convert into cash.
    We do recognize, as have the staff in their prior interpretations, 
that there are instances where some limited exceptions to these general 
principles would be appropriate and consistent with access to the 
alternate regulatory regime, and these are reflected in the 
interpretations and exceptions discussed below. However, necessarily 
there is a point where application of the alternate regime is no longer 
appropriate. The further the security deviates from the core 
principles, the more acute concerns, such as those expressed by 
investors, become, which are not just disclosure concerns, that the 
security should not be treated necessarily the same as other securities

[[Page 1514]]

that meet our definition of ``asset-backed security.'' In those 
instances, additional or different disclosures and/or registration and 
reporting treatment may be more appropriate.
    As an example, we noted in the Proposing Release that, given the 
existing concept in the definition of a discrete pool of financial 
assets that by their terms convert into cash within a finite time 
period, so-called ``synthetic'' securitizations are not included in 
Regulation AB's basic definition of ABS for purposes of determining 
whether the security qualifies for the particularized registration, 
disclosure and reporting regime under the Securities Act and Exchange 
Act we are adopting today. Synthetic securitizations are designed to 
create exposure to an asset that is not transferred to or otherwise 
part of the asset pool. These synthetic transactions are generally 
effectuated through the use of derivatives such as a credit default 
swap or total return swap. The assets that are to constitute the actual 
``pool'' under which the return on the ABS is primarily based are only 
referenced through the credit derivative.
    Some commenters representing primarily issuers and underwriters 
objected to not making accommodations in the definition of asset-backed 
security for synthetic securitizations.\66\ These commenters generally 
argued that while these securities may not necessarily meet all of the 
core principles in the existing definition, they are still structured 
securities that should be treated under the Securities Act and the 
Exchange Act in the same manner and with access to the same benefits as 
an asset-backed security. The commenters also expressed concern that 
not addressing the appropriate treatment of synthetic securities would 
make it more difficult for market participants to develop such products 
without continued discussions with the staff, as they do today, for 
this developing submarket.
---------------------------------------------------------------------------

    \66\ See, e.g., ASF; BMA; and CGMI.
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    As we explained in the Proposing Release, for purposes of 
determining whether a security qualifies for the particularized 
regulation regime of Regulation AB, we believe the requirement that 
performance is primarily tied to a discrete pool of financial assets 
that by their terms convert into cash entails that the performance is 
primarily by reference to the assets in the pool. Synthetic 
securitizations do not meet the basic concepts embodied in our 
definition of asset-backed security for several reasons. Payments on 
the securities in a synthetic securitization can primarily or entirely 
comprise or include payments based on the value of a reference asset 
which is 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.
    An 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 primarily on the 
performance of the external index and not by the performance of the 
actual securities in the pool. Because payments in synthetic 
securitizations are primarily based on the performance of assets or 
indices not included in the pool, we do not believe such a 
securitization should fall into the Regulation AB registration, 
disclosure and reporting regime. Payments on ABS must be based 
primarily on the performance of the financial assets in the pool.\67\
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    \67\ Our view that securities resulting from synthetic 
securitizations are not within the definition of ``asset-backed 
security'' 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. In 
addition, the derivative does not 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.
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    Synthetic securitization transactions also 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. 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 is still based primarily on the 
performance of the financial assets in the pool.\68\ We believe there 
is a principles-based difference between structures that use an 
interest rate or currency swap but whose performance is still primarily 
based on the performance of the financial assets in the pool and 
structures that use a swap or other derivative such that the 
performance of the security is no longer primarily related to the 
performance of the pool. Because certain interest rate and currency 
swaps have been permitted consistent with this principle does not lead 
to the conclusion that there is no such principle or that the principle 
should be abandoned. Instead, the difference as to application in many 
instances necessarily depends on the particular nature and structure of 
the transaction in question.
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    \68\ 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 those pool assets. 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 a 
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.
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    As we explained in the Proposing Release, the basic definition of 
``asset-backed security'' and its interpretations are intended to 
establish parameters for the types of securities that are appropriate 
for the alternate disclosure and regulatory regime we are adopting 
today. This approach is based on the history and development of the 
traditional ABS market such that a definable set of criteria and 
requirements can be established. The definition does not mean or imply 
in any way that public offerings of securities outside of these 
parameters, such as synthetic securitizations, may not be registered 
with the Commission, but only that the alternate regulatory regime we 
are adopting today is not designed for those securities. The definition 
does mean that such securities must rely on non-ABS form eligibility 
for registration, including shelf registration.\69\
---------------------------------------------------------------------------

    \69\ As is the case today, Form S-1 is the default form for 
registration for which no other form is authorized or prescribed. 
See General Instruction I. to Form S-1.
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    Some commenters were concerned that if such structured securities 
were left outside the definition, issuers of those securities would be 
forced to provide potentially misleading disclosures under Regulation 
S-K if they were not included in Regulation AB. Structured securities 
outside of the definition have been registered before the adoption of 
Regulation AB, and the staff has worked with issuers to develop 
appropriate disclosures for such securities under our existing 
disclosure regime. As is the case today, we encourage issuers that are

[[Page 1515]]

contemplating structured securities outside of the Regulation AB 
definition to have pre-filing conferences with the staff to discuss the 
proposed transaction and the appropriate approach.
    At the same time, we recognize that while it is pragmatic and 
feasible to establish Regulation AB at this time for an appropriately 
definable group of asset-backed securities, we also want to foster a 
system that is most efficient and consistent with investor protection 
for other structured securities, particularly for those that may 
develop in the future but may not be contemplated in Regulation AB. We 
understand that a default application of the existing disclosure regime 
might not be most appropriate for these structured securities, but we 
also believe that neither would it be appropriate for such securities 
to be treated the same as ``asset-backed securities'' as we are 
defining that term under Regulation AB. Depending on the structure of 
the transaction and the terms of the securities, some disclosure 
aspects of Regulation AB may be applicable, but aspects from the 
traditional disclosure regime also may be applicable. In some 
instances, a third approach might be more appropriate.
    We seek additional comment on whether we should consider an 
alternative scheme for these kinds of securities. We will evaluate 
comments received in determining whether it is appropriate to issue 
additional proposals or take other additional action, as appropriate. 
In providing comments, please be as specific as possible.

Request for Comment

     Apart from the traditional approach of addressing hybrid 
securities as they arise, are there definable categories of securities 
where neither the existing regime nor Regulation AB would be 
appropriate, but a specifiable alternative regime would be? What would 
be the advantages and disadvantages of such an approach? Is the 
existing approach of addressing these securities more practical if and 
until a market for that particular type of security matures such that 
establishing a separate regime is appropriate? Are there additional 
alternatives that should be considered? How are these securities 
offered and sold today? Who offers and purchases these securities?
     If an alternative regime should be established, how would 
these securities be defined? Why should they be treated differently?
     What would be appropriate for this alternative regime with 
respect to registration, disclosure and ongoing reporting? What 
flexibility should be permitted under the existing regime and what 
additional or alternate requirements should be imposed?
     While the Investment Company Act considerations are beyond 
the scope of this release for ABS, we also would seek comment as to the 
treatment of such securities, including synthetic securitizations, 
under Rule 3a-7 under that Act or other exemptive provisions of that 
Act or rules thereunder.
     Regarding synthetic securitizations where the return on 
the securities is not primarily dependent on the performance of the 
pool, what additional disclosures would be appropriate? For example, 
for other entities that offer securities and have derivatives or 
contingent obligations, there is required disclosure of financial 
intricacies, such as disclosures under FIN No. 45,\70\ FIN No. 46,\71\ 
SFAS No. 5 \72\ and SFAS No. 133,\73\ and off-balance sheet and MD&A 
disclosure.\74\ Would some or all of these disclosures be appropriate 
in synthetic securitizations? If not, why not? Please note these are 
non-exclusive examples.
---------------------------------------------------------------------------

    \70\ See FASB Interpretation No. 45, Guarantor's Accounting and 
Disclosure Requirements for Guarantees, Including Indirect 
Guarantees of Indebtedness of Others (Nov. 2002).
    \71\ See FASB Interpretation No. 46R, Consolidation of Variable 
Interest Entities (Dec. 2003).
    \72\ See FASB Statement of Financial Accounting Standards No. 5, 
Accounting for Contingencies (Mar. 1975).
    \73\ See FASB Statement of Financial Accounting Standards No. 
133, Accounting for Derivative Instruments and Hedging Activities 
(Jun. 1998).
    \74\ See Item 303 of Regulation S-K.
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     Would financial statements be necessary to fully 
understand the risks and potential performance of these securities? 
Should some form of off-balance sheet disclosure be required when 
performance is tied to such instruments? Should market valuations of 
assets and liabilities be required?
     Where performance of the security is primarily tied to the 
performance of a derivative rather than the performance of the pool 
assets, what additional disclosure should be required regarding the 
derivative counterparty? Should financial statements for the derivative 
counterparty always be required?
     Where performance is by reference to an unrelated entity 
or assets, what information should be required about the referenced 
entity or assets?
b. Basic Definition
    We are retaining the same basic definition of asset-backed security 
that has existed since 1992, with the addition of the one modification 
we proposed with respect to leases, discussed below. Under Regulation 
AB, the basic definition of ``asset-backed security'' is ``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.'' \75\ We also are codifying, 
with modifications and expansions in response to specific comment, the 
several clarifying interpretations we proposed to the definition that 
recognize and build upon the operational and structural distinctions 
between ABS and non-ABS transactions. Each of these interpretations is 
discussed below in a separate subsection.
---------------------------------------------------------------------------

    \75\ The reference to ``financial assets that are leases'' is 
meant to clarify the application of the definition with respect to 
leases and is not meant to affect the accounting treatment of the 
lease.
---------------------------------------------------------------------------

    As we stated in the 1992 Release and the Proposing Release, the 
basic definition is sufficiently broad to encompass any self-
liquidating asset which by its terms converts into 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. For example, so-called ``balloon'' loans 
that have large payments at maturity that differ from other payments 
during the term of the loan would be included.\76\
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    \76\ We understand that in some jurisdictions, balloon loans for 
motor vehicles are structured to be similar to leases. At maturity 
of the loan, the obligor may return the vehicle to the lender to 
satisfy the balloon payment. In such instances, if the cash flows 
that are to back the asset-backed securities are to include the 
balloon payment, the limits on the portion of the securitized pool 
balance attributable to residual values of the pool assets, 
discussed in Section III.A.2.d., should apply to such securities the 
same as if they were backed by leases and disclosure similar to that 
described in Section III.B.5.b. should be provided. If the pool 
includes a mixture of leases and balloon loans, they should be 
treated together for purposes of those calculations.
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c. Nature of the Issuing Entity
    The first set of interpretations we are codifying relates to the 
nature of the issuing entity in whose name the asset-backed securities 
are issued. As we explained in the Proposing Release, we believe that 
two interpretations always have been implied, and, as proposed, we are 
codifying both as additional

[[Page 1516]]

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 continue to believe that the 
regime for asset-backed securities that we are adopting today would not 
be appropriate.
    The second condition relates to the passive nature of the issuing 
entity in that its activities must be 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. 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.\77\ 
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.
---------------------------------------------------------------------------

    \77\ See Release No. 33-6943 (July 16, 1992) [57 FR 32461].
---------------------------------------------------------------------------

    Commenters generally agreed with this principle, although several 
expressed concern with the wording of the condition that the issuing 
entity's activities are limited to ``passively'' owning or holding the 
pool assets, issuing the ABS and other reasonably incidental 
activities.\78\ This formulation already exists in Exchange Act Rule 
10A-3 to exclude similar securities from the mandated requirements for 
national securities exchanges and national securities associations to 
impose audit committee listing requirements for such issuers.\79\ We 
are retaining the term in the final condition for the definition of 
``asset-backed security.'' We believe the use of this term neither 
imposes a new requirement, nor is inconsistent with existing practice, 
but instead is confirmatory of one of the fundamental premises of 
asset-backed securitization that the issuing entity is intended to be 
passive in nature and its activities limited to the asset-backed 
securities transaction.
---------------------------------------------------------------------------

    \78\ See, e.g., Letters of ABA; ASF; and MBA.
    \79\ See 17 CFR 240.10A-3(c)(7).
---------------------------------------------------------------------------

    In the Proposing Release, we also specified that in connection with 
this condition, securities issued out of so-called ``series trusts'' do 
not qualify as asset-backed securities under the definition. Under the 
concept of a series trust, the same trust will conduct wholly separate 
ABS transactions out of the same trust. The trust will hold separate 
pools of assets with separate classes of securities for each pool. 
Securities backed by one pool do not have rights to the other pools. As 
we described in the Proposing Release, the issuing entity in this 
instance is not limited to owning and holding one asset pool and 
issuing securities backed by that pool.
    Several commenters representing issuers, underwriters and their 
representatives wished to relax this existing principle, arguing that 
series trusts may reduce the costs of creating multiple issuing 
entities by having multiple unrelated transactions under one 
entity.\80\ However, the more fundamental issue with the use of 
multiple, separate and unrelated transactions under one issuing entity 
for asset-backed securities is that it raises concerns that deviate 
from the core principle that investors of a particular asset-backed 
security should look solely to the related pool of assets for primary 
repayment. With a series trust structure, instead of only analyzing the 
particular pool, an investor also may need to analyze any effect on its 
security, including bankruptcy remoteness issues, if problems were to 
arise in another wholly separate and unrelated transaction in the same 
issuing entity. These concerns are exacerbated if new unrelated 
transactions are created after the original transaction involving the 
investor. No commenter indicated that series trusts as described above 
have been commonly used for issuing asset-backed securities.
---------------------------------------------------------------------------

    \80\ See, e.g., Letters of ABA; ASF; and BMA.
---------------------------------------------------------------------------

    Other commenters requested clarification as to the scope of what is 
considered in the concept of a ``series trust.'' As we explained in the 
Proposing Release, the concept of a series trust, with multiple, 
separate and unrelated transactions in one issuing entity, is different 
from a master trust structure typical in credit card ABS and discussed 
later where all securities, although issued at different times, are 
backed by one pool. In addition, we explained that 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.'' \81\ This could include allocating cash 
flows from various defined subpools within the larger pool to support 
particular classes but not others, regardless of whether there is any 
cross-cashflow support or collateralization. In these instances, there 
is still only one ultimate pool held by the issuing entity with 
securities backed by that single pool.
---------------------------------------------------------------------------

    \81\ Further, both the condition relating to the passive nature 
of the issuing entity and the concept of a series trust are 
unrelated to the tax treatment of the transaction, such as REMIC 
elections.
---------------------------------------------------------------------------

    We also explained in the Proposing Release that 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. 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. This structure would be consistent with the definition of 
``asset-backed security.'' \82\
---------------------------------------------------------------------------

    \82\ However, using the issuance trust for subsequent unrelated 
transactions in the manner discussed in the text with respect to 
series trusts would not be consistent with the definition.
---------------------------------------------------------------------------

    Another structure we referenced in the Proposing Release relates to 
one used in some auto lease transactions where 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. 
For the next transaction, the origination trust will issue a separate 
SUBI representing a separate pool of leases and automobiles in the 
origination trust which is to constitute the asset pool for the next 
transaction. This SUBI will be transferred to a newly created issuing 
entity for the next transaction which will issue ABS backed by the 
second SUBI. In each instance, although the same origination trust will 
issue multiple SUBIs representing multiple pools in the trust, there is 
a separate

[[Page 1517]]

issuing entity for each ABS issuance whose ``pool'' consists of a 
separate SUBI, and hence indirectly a separate underlying group of 
assets. In our proposals and in our final rules we recognize this 
unique structure that developed under current practice before the 
codification of the new ABS regulatory regime, but, as proposed, we do 
not extend the origination trust structure to other asset classes that 
do not use it currently.
d. 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.'' \83\ 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. We are 
codifying these interpretations, with modifications from our original 
proposal.
---------------------------------------------------------------------------

    \83\ See Bond Market Ass'n (Oct. 8, 1997).
---------------------------------------------------------------------------

    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. While as discussed above some 
commenters requested relaxing these clarifications, we believe the 
principle that the ABS should be primarily dependent on a pool of 
assets that self-liquidate instead of on the ability of the entity 
performing collection services is an important principle that should be 
retained. Further, we believe the conditions we are codifying regarding 
delinquent and non-performing assets, as revised in response to comment 
and discussed below, are appropriate in achieving this principle.
i. How To Calculate Delinquency and Non-Performing Levels
    Several commenters requested clarification regarding when 
delinquency and non-performance levels should be measured.\84\ In the 
Proposing Release, we reiterated the standard in the 1997 no-action 
letter that the cut-off date (i.e., 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 commenters requested further specificity regarding this 
standard, as well as clarity regarding application to master trusts. In 
response to commenters' suggestions, we are adding an instruction 
specifying that the measurement date for the delinquency and non-
performing thresholds is to be the cut-off date for the transaction, if 
applicable, or, in the case of master trusts, the date as of which 
delinquency and loss information is presented in the prospectus for the 
securities.\85\
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    \84\ See, e.g., Letters of ABA; ASF; and Kutak.
    \85\ Also in response to commenters' concerns, we have 
eliminated the word ``original'' from the proposed reference to the 
asset pool as unnecessary under the revised formulation.
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    Additional commenters requested clarification regarding 
transactions that include non-performing or delinquent assets as part 
of a pool but not as part of the funded portion and not as part of cash 
flow calculations for the asset-backed securities.\86\ In other words, 
some transactions permit non-performing or delinquent loans to be 
included, although the proceeds of the asset-backed securities are not 
used to fund or purchase those assets for the pool and those assets are 
not considered in cash flow calculations. As another example, a master 
trust may contemplate that a pool asset that becomes non-performing may 
remain designated to the pool after being charged-off, with the asset 
being assigned a zero balance and not considered in cash flow 
calculations. We are including an instruction clarifying that non-
performing and delinquent assets that are not funded or purchased by 
proceeds from the asset-backed securities and that are not considered 
in cash flow calculations for the asset-backed securities need not be 
considered as part of the asset pool for purposes of determining non-
performing and delinquency thresholds.\87\
---------------------------------------------------------------------------

    \86\ See, e.g., Letters of ASF; Capital One; and MBNA.
    \87\ Of course, in such instances clear disclosure should be 
provided to investors of these features and the manner, composition, 
treatment and effect of those assets.
---------------------------------------------------------------------------

    Some commenters also requested clarification as to calculating the 
thresholds for master trusts given that the same asset pool supports 
different series of ABS over time.\88\ We are adding an additional 
instruction clarifying that the thresholds are to be measured against 
the entire pool whose cash flows support the asset-backed securities 
and not just against any new assets that are added as a result of the 
new issuance. Otherwise, issuers could effectively avoid the 
requirements by conducting the transaction through a multi-step master 
trust transaction instead of through a single transaction.\89\
---------------------------------------------------------------------------

    \88\ See, e.g., Letters of A&O ASF; and MBNA.
    \89\ Some of these commenters expressed concern regarding master 
trusts with assets that were originally performing for a previous 
issuance but that subsequently become non-performing. This situation 
for subsequent ABS issuances can be addressed by the codification of 
existing practice that such assets be assigned a zero pool balance 
and no longer be considered in cash flow transactions as part of the 
securitized pool.
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ii. Non-Performing Pool Assets
    Regarding non-performing pool assets, we are codifying as proposed 
the longstanding requirement that no non-performing assets may be part 
of the asset pool, determined as of the measurement date discussed 
above. We are not persuaded by commenters' requests that the position 
should be relaxed.\90\
---------------------------------------------------------------------------

    \90\ See, e.g., Letters of ABA and Jones Day.
---------------------------------------------------------------------------

    As we discussed in the Proposing Release, part of the difficulty 
for issuers in complying with the existing interpretive position is 
that there has been no uniform definition of what is a ``non-performing 
asset.'' As commenters confirmed to us, 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.\91\ However, we continue to 
believe the point at which the financial asset should be charged-off is 
a consistent reference point, even if the point at which that event 
would occur may vary. Accordingly, we are defining ``non-performing'' 
to be a pool asset if any of the following is true:
---------------------------------------------------------------------------

    \91\ See, e.g., Letters of ABA; Auto Group; MBA; and MBNA.
---------------------------------------------------------------------------

     The pool asset would be treated as wholly or partially 
charged-off under the requirements in the transaction agreements for 
the asset-backed securities;
     The pool asset would be treated as wholly or partially 
charged-off under the charge-off policies of the sponsor, an affiliate 
of the sponsor that originates the pool asset or a servicer that 
services the pool asset; or
     The pool asset would be treated as wholly or partially 
charged-off under the charge-off policies applicable to such pool asset 
established by the primary safety and soundness regulator of any entity 
listed above or the program or regulatory entity that oversees the 
program under which the pool asset was originated.\92\
---------------------------------------------------------------------------

    \92\ As a result, the charge-off requirement that is most 
restrictive will govern. Of course, under the definition as proposed 
and as adopted, a pool asset that changes payment status in 
accordance with its terms (e.g., a student loan that is in ``in-
school,'' grace, deferment or forbearance status) does not make the 
asset ``non-performing,'' unless the asset also meets a charge-off 
policy identified in the definition of ``non-performing.''

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[[Page 1518]]

    We believe this definition provides flexibility for different asset 
classes while still ensuring that no assets are included in the 
securitized pool balance that would otherwise be considered to be non-
performing and thus charged-off under an objective standard. Commenters 
generally supported this approach.\93\ This definition differs from our 
original proposal in two principal ways. First, the definition has been 
revised in response to a commenter's request to include references not 
only to the sponsor's charge-off policies, but also to the policies of 
any affiliated originator or the servicer of the pool asset.\94\ 
Second, the definition also includes a reference to the charge-off 
policies applicable to such pool asset established by either the 
primary safety and soundness regulator of the sponsor, an originating 
affiliate or the servicer, or the program or regulatory entity that 
oversees the program under which the pool asset was originated, as 
applicable. Several commenters indicated that, depending on the loan 
type, these regulators also have requirements for recognizing 
delinquencies and losses.\95\
---------------------------------------------------------------------------

    \93\ See, e.g., Letters of ABA; Auto Group; and MBA.
    \94\ See Letter of ABA.
    \95\ See, e.g., Letters of ASF and MBNA.
---------------------------------------------------------------------------

    As we described in the Proposing Release, we also are adopting 
requirements for disclosure of the relevant charge-off policies in 
Regulation AB, discussed more fully in Section III.B. Commenters 
representing investors in particular strongly supported such 
disclosure.\96\
---------------------------------------------------------------------------

    \96\ See, e.g., Letters of MetLife and State Street.
---------------------------------------------------------------------------

iii. Delinquent Pool Assets
    In addition to the non-performing limitation, we also are codifying 
a delinquency concentration limit in a manner consistent with the 1997 
staff no-action letter. As we stated in the Proposing Release, because 
we are creating a general definition of ``asset-backed security'' 
regardless of eligibility for shelf registration, we are adopting two 
separate delinquency concentration limits. We are adopting the 
percentage limits as proposed. For the general definition (e.g., for 
offerings that could be registered on a non-shelf basis on Form S-1), 
delinquent assets may not constitute 50% or more, as measured by dollar 
volume, of the asset pool as of the measurement date described above. 
As we noted in the Proposing Release, 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 are retaining 
the existing 20% delinquency concentration level in the no-action 
letter, as proposed.
    For purposes of determining whether a pool asset is delinquent 
under either threshold, we proposed 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. The proposed definition was 
based on the existing standard in the staff no-action letter.\97\
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    \97\ See note 83 above.
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    Several commenters requested more flexibility for the definition. 
In particular, several commenters noted that some sponsors do not 
consider an obligor delinquent when any portion of a contractually 
required payment is late, but instead only when less than some 
percentage (e.g., 90%) or amount of a payment is received.\98\ Changing 
their systems for purposes of the proposed requirement, these 
commenters argued, would be burdensome. Others argued that sponsors use 
different reporting methodologies in determining delinquency, such as 
the Office of Thrift Supervision method or the Mortgage Bankers 
Association of America method.\99\
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    \98\ See, e.g., Letters of ABA; ASFA; Auto Group; Citigroup; 
MBA; and TMCC.
    \99\ See, e.g., Letters of ABA; MBA; and Metlife. See also 
Fitch, Inc., ``Residential Mortgage Delinquency Reporting Methods'' 
(Nov. 13, 2003).
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    We noted in the Proposing Release that, 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. We proposed clarifying 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. 
While not all agreed, commenters generally objected to this approach, 
arguing that servicers sometimes restructure obligations without 
contractually amending the pool asset documents.\100\
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    \100\ Compare, e.g., Letters of ABA; ASFA; ASF; and TMCC; with 
Letter of State Street.
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    As an alternative to the proposed definition of ``delinquent,'' 
some of these commenters suggested an approach similar to the 
definition of ``non-performing'' that looks to the provisions specified 
in the relevant transaction agreements or the policies of the sponsor 
in determining delinquency, so long as these provisions and policies 
are disclosed. As commenters confirmed to us, policies relating to 
delinquency vary somewhat across asset types and sponsors, similar to 
charge-off policies. However, we continue to believe a standard linked 
to the longstanding 1997 no-action letter should be retained to clarify 
the degree of flexibility permitted.
    Accordingly, we are defining a pool asset as ``delinquent'' if a 
pool asset is more than 30 or 31 days or a single payment cycle, as 
applicable, past due from the contractual due date, as determined in 
accordance with any of the following:
     The transaction agreements for the asset-backed 
securities;
     The delinquency recognition policies of the sponsor, any 
affiliate of the sponsor that originated the pool asset or the servicer 
of the pool asset; or
     The delinquency recognition policies applicable to such 
pool asset established by the primary safety and soundness regulator of 
any entity listed above or the program or regulatory entity that 
oversees the program under which the pool asset was originated.\101\
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    \101\ Similar to the ``non-performing'' definition, the 
delinquency requirement that is most restrictive will govern. In 
addition and as similar to the ``non-performing'' definition, a pool 
asset that changes payment status in accordance with its terms 
(e.g., a student loan that is in ``in-school,'' grace, deferment or 
forbearance status) does not make the asset ``delinquent,'' unless 
the asset also meets a delinquency policy identified in the 
definition of ``delinquent.''
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    With an approach that relies more on a party's delinquency 
recognition policies, we believe appropriate disclosure of the policies 
and their application becomes even more important.\102\ As a result and 
as referenced in the Proposing Release, in adopting delinquency limits, 
we also are adopting disclosure requirements, discussed more fully in 
Section III.B., of policies regarding grace periods, re-aging, 
restructures, partial payments considered current or other such 
practices on delinquencies. We also are adopting disclosure 
requirements for

[[Page 1519]]

on-going reporting, discussed more fully in Section III.D., regarding 
material modifications, extensions or waivers to pool asset terms, 
fees, penalties or payments. We also are requiring disclosure of any 
material changes to delinquency recognition policies. Given this 
disclosure-based approach, we are not adopting the proposed requirement 
permitting only contractual-based re-agings.
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    \102\ See, e.g., Moody's Investors Service, Inc., ``Loan 
Modifications and Forbearance Plans Impact on Home Equity 
Securitizations'' (Sep. 24, 2004).
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e. Lease-Backed Securitizations and Residual Values
    As discussed above, the one change we proposed making 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). 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.
    As we explained in the Proposing Release, lease-backed ABS have 
grown into a common and recognized segment of the overall ABS 
market.\103\ We received support from commenters for adding lease-
backed ABS to the definition of ``asset-backed security,'' and 
therefore eligibility for shelf-registration if the requirements of 
Form S-3 are met.\104\ However, as we explained in the Proposing 
Release, 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.
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    \103\ See, e.g., Fitch, Inc., ``Under the Hood: Automobile Lease 
ABS Uncovered'' (Jun. 14, 2000).
    \104\ See, e.g., Letter of Auto Group.
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    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. Although some commenters did not believe we should have any 
limits on residual values,\105\ we continue to believe, as discussed 
above, that the core principle that an asset-backed security should be 
primarily serviced by financial assets that by their terms convert into 
cash should be retained. At the same time, we believe a defined limited 
exception to this general principle is appropriate and consistent for 
access to the alternate regulatory regime for certain lease-backed ABS.
---------------------------------------------------------------------------

    \105\ See, e.g., Letters of ABA; American Honda Finance 
Corporation (``AHFC''); ASF; Auto Group; and TMCC.
---------------------------------------------------------------------------

    As we explained in the Proposing Release, we are addressing 
concerns with the deviation from the core principle in two principal 
ways. First, we are adopting disclosures, discussed more fully in 
Section III.B., on how residual values are 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, we are establishing limits on the percentage 
of the securitized pool balance attributable to residual values in 
order to be considered an ``asset-backed security.'' We believe these 
changes will expand eligibility of lease-backed transactions for shelf 
registration and appropriately permit lease-backed transactions under 
our new rules while continuing to apply the core principles underlying 
the definition of ``asset-backed security.''
    As we noted in the Proposing Release, market practice regarding 
lease-backed securitizations varies on the typical percentage of the 
securitized pool balance attributable to residual values. For example, 
motor vehicle lease securitizations often have higher residual value 
percentages than equipment lease securitizations due to the higher 
resale values that often exist between motor vehicles and other 
equipment. Accordingly, after reviewing residual value percentages for 
typical lease-backed securitizations, we proposed that the portion of 
the cash flow to repay the securities anticipated to come from the 
residual value of the physical property underlying the leases could 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; and
     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 proposed a more stringent limitation for cash flow 
from residual values for offerings of securities backed by leases other 
than motor vehicle leases that may be registered on Form S-3 and thus 
eligible for shelf registration. For Form S-3 eligibility of ABS backed 
by such leases, we proposed that the portion of the cash flow 
anticipated to come from residual values could 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.
    Commenters raised several concerns with our proposal if percentage 
limitations were to be maintained. First, commenters believed the 
proposal did not provide enough clarity on how to make the necessary 
calculations.\106\ In particular, commenters were concerned with the 
proposed choice of language for the calculation, which was phrased in 
reference to ``the portion of the cash flow anticipated to come from 
residual values.'' We note that filings for lease-backed ABS today 
typically disclose the portion of the securitized pool balance 
attributable to residual values and the method of determining such 
figures. Our intention had been and is to codify that practice in 
connection with complying with the residual value percentages. To 
clarify this intention, we are revising the language in the requirement 
to more closely track language used in lease-backed ABS filings to 
refer to the portion of the securitized pool balance attributable to 
residual values, as determined as of the measurement date in accordance 
with the transaction agreements for the asset-backed securities. We 
note that the residual value itself is often calculated at the 
inception of the lease, but the portion of the securitized pool balance 
attributable to it (e.g., vis a vis lease payments) is a percentage 
determined at the time of the transaction. Similar to our final rules 
with respect to determining delinquency and non-performance thresholds, 
we are

[[Page 1520]]

clarifying in an instruction that the ``measurement date'' is the cut-
off date for the transaction, if applicable, or, in the case of master 
trusts, the date as of which securitized pool balance information is 
presented in the prospectus for the securities.
---------------------------------------------------------------------------

    \106\ See, e.g., Letters of ABA; ASF; Auto Group; and TMCC.
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    Second, commenters believed the proposed percentages were too 
stringent to permit all motor vehicle lease-backed ABS transactions 
that have been conducted.\107\ A threshold set against market practice 
may not encompass every transaction conducted before the threshold was 
set. However, we do seek to codify percentages that are based upon 
current market practice. Based on further review of lease-backed ABS 
transactions during the past five years, including the examples 
provided by commenters, we are raising the percentage for motor vehicle 
lease-backed ABS from 60% to 65%.
---------------------------------------------------------------------------

    \107\ See, e.g., Letters of ABA; AHFC; ASF; Auto Group; and 
TMCC.
---------------------------------------------------------------------------

    Finally, commenters believed that if residual value limitations are 
retained, an exception should be made to the extent there is a residual 
value guarantee, residual value insurance or where the lessee is 
obligated to cover any residual losses.\108\ In each instance, these 
commenters argued, the credit risk for the residual loss is with a 
separate obligated party. We are providing an instruction that residual 
values need not be included in measuring against the limitation to the 
extent a separate party is obligated for such amount. However, we note 
that, depending on the extent of the separate party's obligation for 
such amounts, such obligation may result in that party constituting a 
significant provider of credit enhancement or other support or, when 
the lessee is obligated to cover any residual losses, a significant 
obligor. In that instance, as described in Sections III.B.7 and 8, 
additional disclosures, including financial disclosures, may be 
required.
---------------------------------------------------------------------------

    \108\ See, e.g., Letters of ABA; ASF; and Auto Group.
---------------------------------------------------------------------------

    In addition to other technical changes,\109\ we are adopting as 
proposed the limits for non-motor vehicle leases. For the basic 
definition, the portion of the securitized pool balance attributable to 
residual values for such leases may not constitute 50% or more, as 
measured by dollar volume. For Form S-3 eligibility, the portion of the 
securitized pool balance attributable to residual values for such 
leases may not constitute 20% or more, as measured by dollar 
volume.\110\
---------------------------------------------------------------------------

    \109\ For example, in response to comment we are clarifying the 
reference from ``automobile'' lease to ``motor vehicle'' lease. 
Motor vehicle leases for this purpose includes leases for 
automobiles (which includes light duty trucks, sport utility 
vehicles and vans), motorcycles, trucks and buses. As proposed, 
motor vehicle lease would not include leases for leisure craft such 
as watercraft or snowmobiles.
    \110\ 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 
thresholds.
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f. Exceptions to the ``Discrete'' Requirement
    The last set of interpretations we are codifying relates to 
exceptions to the requirement in the definition of ``asset-backed 
security'' that the asset pool be ``discrete.'' As discussed above, 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, as we explained in the Proposing Release, 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.''\111\ Thus, the basic principle was 
that the balance of a pool asset may revolve, but not the asset pool 
itself.\112\
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    \111\ See note 32 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.''
    \112\ As we indicated in the Proposing Release, 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 definition 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 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, 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.\113\
---------------------------------------------------------------------------

    \113\ The period after the revolving 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.''\114\ As discussed above, we 
are codifying these three exceptions and also expanding them so that 
they are applicable to all asset types.\115\ As we noted in the 
Proposing Release, a transaction can employ one or more of these 
features and still qualify as an ``asset-backed security.''\116\ We 
believe these expansions will result in increased flexibility in 
structuring transactions to meet market demands.
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    \114\ For example, nearly all asset classes might employ a 
limited prefunding period. However, only a limited subset of asset 
classes were permitted to have revolving periods. Not all of these 
interpretations have been transparent.
    \115\ But see note 179 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.
    \116\ For example, an offering may be set up as a master trust 
with a prefunding period for a portion of the proceeds of the 
issuance and a revolving period.
---------------------------------------------------------------------------

    As in the case of our treatment of lease-backed ABS that involve 
residual values, we believe a large part of the concern relating to 
these structures can be appropriately addressed through disclosure, 
both at the time of issuance

[[Page 1521]]

of the asset-backed securities as well as on an ongoing basis through 
disclosure of how the asset pool is materially changing. As such, we 
are adopting, with certain modifications, our proposed requirements for 
more detailed disclosures in Regulation AB, discussed more fully in 
Sections III.B. and III.D., regarding the operation of such structures 
and changes to the asset pool over time.
    We also are adopting limits, as discussed below, 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. As noted in the Proposing Release, 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 core principles underlying the 
definition of ``asset-backed security.''
i. Master Trusts
    As proposed, master trust structures will be allowed to meet the 
definition of ``asset-backed security'' without any pre-determined 
limits.\117\ Commenters supported expanding access to master 
trusts.\118\ However, several commenters noted that most master trusts 
permit, and in some cases require, the depositor to make additional 
asset additions to the asset pool from time to time, regardless of when 
ABS are issued.\119\ In particular, commenters expressed concern that 
the proposed wording of the exception for master trusts, which was 
limited to asset additions in connection with future issuances of 
asset-backed securities, would not allow for additions of pool assets 
in current master trust structures that are necessary to maintain 
minimum pool balances, such as the depositor's interest in the trust. 
As the commenters explained, permitting such additions is an essential 
means for these current structures of assuring an adequate pool balance 
for master trusts with revolving assets. To maintain existing practice, 
we are modifying the exception for master trusts to clarify that the 
offering related to the securities may contemplate both adding 
additional assets to the pool in contemplation of future issuances of 
asset-backed securities backed by such pool as well as, for master 
trusts with revolving periods or receivables or other financial assets 
that arise under revolving accounts, additions to the asset pool in 
connection with maintaining minimum pool balances in accordance with 
the transaction agreements.\120\
---------------------------------------------------------------------------

    \117\ 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.''
    \118\ See, e.g., Letters of ABA; AFSA; AIG; Capital One; MBNA; 
and State Street.
    \119\ See, e.g., Letters of AFSA, Capital One; and MBNA.
    \120\ Note that the limit on revolving periods for securities 
backed by receivables or other financial assets that do not arise 
under revolving accounts is co-extensive with this provision for 
master trusts. Hence, if a master trust for such pool assets uses a 
revolving period, including to maintain minimum pool balances, the 
revolving period for each series would be limited to a three-year 
period. We have included clarifying language regarding this point in 
the ``discrete'' pool exception for master trusts.
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ii. Prefunding Periods
    For prefunding periods, we proposed separate limits for shelf and 
non-shelf offerings similar to our proposals for lease-backed ABS. For 
the general definition of ``asset-backed security,'' we proposed that 
the amount of proceeds that may be used for a prefunding period could 
be up to 50% of offering proceeds and the length of the prefunding 
account could last up to one year from the date of issuance of the 
asset-backed securities. As we stated in the Proposing Release, 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 proposed that 
the amount of proceeds that may be used for a prefunding period could 
be up to 25% of offering proceeds over a similar one-year period.
    Commenters were mixed on our proposals. One commenter representing 
an ABS investor supported the proposed limits.\121\ Several other 
commenters representing primarily issuers and their representatives 
noted that although the proposed Form S-3 level was consistent with the 
requirements in the staff's no-action letter regarding relief from Rule 
15c2-8(b), they believed the staff has permitted higher limits and 
requested eliminating or expanding the tests to provide increased 
flexibility.\122\
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    \121\ See Letter of State Street. In addition, the commenter 
suggested further limiting prefunding such that it is applicable 
only to financially secure sponsors with a track record of 
securitizations with the same asset type.
    \122\ See, e.g., Letters of ASFA; ASF; Auto Group; BMA; Capital 
One; FSR; and TMCC.
---------------------------------------------------------------------------

    As discussed above, we continue to believe a limit on prefunding is 
appropriate. However, after evaluating the comment received, we no 
longer believe it is necessary to have separate limits for Form S-3 
shelf registration. Therefore, we are only codifying the proposal with 
respect to the basic definition. In addition and in response to 
comment, we are clarifying application of the prefunding limitation 
with respect to master trusts.\123\ Under the final rule, regardless of 
the form on which the offering was registered, a prefunding period is 
permitted for up to one year from the date of issuance of the asset-
backed securities and the prefunded amount may consist of up to 50% of 
offering proceeds or, in the case of master trusts, up to 50% of the 
aggregate principal balance of the total asset pool whose cash flows 
support the asset-backed securities.
---------------------------------------------------------------------------

    \123\ See, e.g., Letter of ASF.
---------------------------------------------------------------------------

iii. Revolving Periods
    Our proposals for revolving periods recognized the nature of the 
asset being securitized (i.e., whether it itself is fixed or 
revolving). We proposed that 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 proposed limits similar to prefunding periods; that is, the 
basic 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.
    Several commenters urged eliminating any restrictions on revolving 
periods, regardless of the type of asset or the form of 
registration.\124\ Revolving periods, these commenters argued, allow 
issuers flexibility to create ABS with longer or different maturities 
and weighted average lives than the underlying pool assets. Revolving 
periods were argued to be particularly necessary in the case of 
shorter-term assets to create ABS with meaningful maturities. As with 
the other proposed exceptions to the definition of asset-backed 
security, these commenters believed concerns about increased revolving 
periods were mitigated by the proposed increased disclosure regarding

[[Page 1522]]

such periods and changes to the asset pool over time.
---------------------------------------------------------------------------

    \124\ See, e.g., Letters of ABA; AIG; ASF; Auto Group; ESF; and 
TMCC.
---------------------------------------------------------------------------

    Revolving periods have long been permitted under staff practice for 
assets that by their nature revolve, as discussed above. There is thus 
an established record of experience with revolving periods for such 
asset classes. For other assets, while we recognize the commenters' 
arguments regarding the benefit of revolving periods in structuring 
asset-backed securities, we also recognize the management aspects that 
arise and are thus not prepared at this point to eliminate all 
restrictions on revolving periods for purposes of which securities 
should qualify as an ``asset-backed security'' subject to Regulation 
AB. However, after evaluating the comments and their arguments 
regarding the market reality of the use of revolving periods, we are 
expanding the exception from that proposed for those asset classes. We 
also are making technical changes to the proposal in response to 
comment to clarify the types of assets subject to the requirement.
    Accordingly, under the final rules there will remain no 
restrictions on revolving periods for securities backed by receivables 
or other financial assets that arise under revolving accounts. For 
securities backed by receivables or other financial assets that do not 
arise under revolving accounts, an unlimited revolving period will be 
permitted for up to three years, so long as the new pool assets that 
are added are of the same general character as the original pool 
assets. One group of commenters who suggested such an alternative 
believed a three year revolving period would improve efficiency in 
structuring transactions.\125\ As with prefunding accounts, we are not 
establishing a more stringent revolving limitation for Form S-3 
eligibility. These expansions from the proposal allow issuers 
substantially increased flexibility over current staff practice to 
structure asset-backed securities.
---------------------------------------------------------------------------

    \125\ See Letter of Auto Group.
---------------------------------------------------------------------------

3. Securities Act Registration Statements
a. Form Types
    As we noted in the Proposing Release, we are not creating a new 
registration statement form for ABS offerings. We believe the existing 
form structure is sufficient, provided there are appropriate 
instructions in the applicable forms as to their use for ABS offerings. 
As proposed, we are limiting registration of asset-backed securities 
offerings to two forms: Form S-1 or Form S-3.\126\ As is currently the 
case, Form S-3 will retain the requirements that will qualify an 
offering for delayed shelf registration on that form pursuant to Rule 
415(a)(1)(x).\127\ Form S-1 will be the form for all other offerings 
that meet the definition of an ``asset-backed security'' but do not 
meet the additional eligibility requirements for Form S-3 (e.g., 
investment grade and additional limits on lease-backed ABS and 
delinquent pool assets). We received support from commenters for this 
approach.\128\ As proposed, we are amending our other Securities Act 
registration statement forms for primary offerings to exclude 
explicitly their use for ABS offerings.\129\ Since as discussed below 
we are not establishing a separate disclosure regime or requirements 
for foreign ABS, we continue to believe it is unnecessary to provide 
separate form types for foreign ABS offerings. These offerings also 
will be registered on Forms S-1 or S-3, as applicable.
---------------------------------------------------------------------------

    \126\ As is the case today, Form S-4 also will remain available 
with respect to transactions, such as exchange offers, authorized by 
that Form. The disclosure required will remain consistent with that 
for a primary offering on Form S-1 or S-3, as applicable.
    \127\ 17 CFR 230.415(a)(1)(x). In the Offering Process Release, 
we proposed several changes to the operation of the shelf 
registration system under the Securities Act. We encourage ABS 
market participants to comment specifically on those proposals.
    \128\ See, e.g., Letter of ABA.
    \129\ See 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 must henceforth be registered on Form S-1 
instead. As discussed in Section III.E., we also are clarifying that 
ABS issuers do not qualify as a ``small business issuer.'' 
Therefore, ABS offerings are ineligible for Forms SB-1 and SB-2 
(referenced in 17 CFR 239.9 and 17 CFR 239.10). For mortgage related 
securities that are relying on Rule 415(a)(1)(vii), see note 61 
above.
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    As we noted in the Proposing Release, 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 are adopting our proposal for separate general 
instructions for both Form S-1 and Form S-3 to specify use for ABS 
offerings.
    New General Instruction VI. to Form S-1 clarifies how that form is 
to be prepared for an ABS offering. In particular, the instruction 
clarifies 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 instruction identifies the existing items 
in the form that may be omitted as well as substitute core disclosure 
items from Regulation AB that will be required. As discussed in Section 
III.B., Items 1102-1120 of Regulation AB 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, will continue to be required.\130\ Under the final rules, 
the application of the disclosure items for Form S-1 will be as 
follows:
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    \130\ As is the case today, unless otherwise specified, no 
reference need be made in the prospectus to inapplicable items. See 
Securities Act Rule 404(c) (17 CFR 230.404(c)).

          Disclosure for Form S-1 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................        ............
Item 9. Description of Securities to be             ............
 Registered.................................
Item 10. Interests of Named Experts and             ............
 Counsel....................................
Item 11. Information with Respect to the            ............
 Registrant.................................
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...................................

[[Page 1523]]

 
Item 15. Recent Sales of Unregistered               ............
 Securities.................................
Item 16. Exhibits and Financial Statement           ............
 Schedules..................................
Item 17. Undertakings.......................        ............
Additional Disclosure Items from Regulation
 AB:
    Items 1102-1120 of Regulation AB........        ............
------------------------------------------------------------------------

    New General Instruction V. to Form S-3 performs a similar function 
for that form. As we explained in the Proposing Release, 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 most of their disclosure in the base 
prospectus and prospectus supplement in lieu of incorporating 
information by reference. Accordingly, the new Form S-3 instruction for 
ABS, as proposed, does not specify any existing items that may be 
omitted, but rather 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, will 
continue to be required as applicable. Therefore, as shown in the 
following table, the effect of the new instruction is to add the basic 
disclosure package of Items 1102-1120 of Regulation AB:

          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................        ............
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--1120 of Regulation AB.......        ............
------------------------------------------------------------------------

b. Presentation of Disclosure in Base Prospectuses and Prospectus 
Supplements
    As we noted in the Proposing Release, by specifying 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.\131\ 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 can still be provided in the prospectus 
supplement.\132\ If this approach is followed, a form of prospectus 
supplement is 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.\133\
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    \131\ However, as stated in the 1992 Release and as currently 
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 currently 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. The Commission has proposed to 
eliminate this restriction on the use of so called ``convenience 
shelf.'' See the Offering Process Release. This proposed general 
change, if adopted, would also apply to ABS.
    \132\ 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.
    \133\ In addition, consistent with the longstanding requirements 
for all registered offerings, required opinions of counsel regarding 
tax consequences and the legality of the securities being registered 
must 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.
    We also are adding a clarifying instruction to General 
Instruction V.A.2. of Form S-3 that when a preliminary prospectus is 
required under Form S-3 pursuant to new Securities Act Rule 
190(b)(7), the information to be included in the base prospectus and 
prospectus supplement is to be substantially similar to that which 
would be included if the preliminary prospectus was required under 
Form S-1 pursuant to such rules.

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[[Page 1524]]

    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, 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 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.
    In the Proposing Release, we explained the longstanding position 
that when presenting disclosure in base prospectuses and prospectus 
supplements, the base prospectus must 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. Registrants should 
exercise discretion, however, in describing only the material asset 
types or features reasonably contemplated to be included in an actual 
takedown.
    As proposed, we are specifying in the 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 in discrete pools in takedowns under that registration 
statement. 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. We also are adopting as proposed a similar requirement for 
takedowns involving pools of foreign assets where the assets originate 
in separate countries or the property securing the pool assets is 
located in separate countries.
    Commenters raised several questions about the proposed instruction, 
particularly regarding the proposed requirement for a separate base and 
form of supplement for takedowns involving separate jurisdictions.\134\ 
We wish to clarify a potential misconception regarding these 
requirements. A separate base and form of supplement only is required 
for asset types or jurisdictions that may be securitized in a discrete 
pool in separate takedowns under the registration statement. If pool 
assets of different asset types or different jurisdictions are to be 
pooled together in a single transaction (e.g., an offering with a 
multi-jurisdictional pool or an offering with a pool of 45% residential 
mortgages and 55% commercial mortgages), a single base and form of 
prospectus supplement would be permitted, so long as the appropriate 
disclosures for each asset type or jurisdiction were included.
---------------------------------------------------------------------------

    \134\ See, e.g., Letters of A&O ABA; ASF; Association of the 
Bar of the City of New York (``NYCBA''); Aus. SF; CMSA; and ESF.
---------------------------------------------------------------------------

    Similarly, several commenters pointed out that the staff has 
permitted the use of a single base and form of supplement for 
transactions that principally consist of a particular asset class, but 
which also describes one or more potential additional asset classes, so 
long as the pool assets for the additional classes in the aggregate are 
limited to 10% of the pool for any particular takedown. We also are 
clarifying this position in the instruction and applying it to both 
separate asset classes and separate jurisdictions.
    We noted in the Proposing Release that 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. As is currently the case today, 
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.
c. Form S-3 Eligibility Requirements for ABS
    As proposed, we are maintaining 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.\135\ The definition of ``investment grade'' will remain the 
same as for other investment grade securities that may be registered on 
Form S-3.\136\ As we explained in the Proposing Release, 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 broad 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.\137\ We received comment in response to the Proposing

[[Page 1525]]

Release on possible alternatives to using an investment-grade 
requirement for ABS Form S-3 eligibility purposes.\138\ However, 
pending the outcome of our review of credit rating agencies, we are 
maintaining the same rules and standards currently used for purposes of 
Form S-3 eligibility.
---------------------------------------------------------------------------

    \135\ NRSRO continues to have the same meaning as used in 17 CFR 
240.15c3-1(c)(2)(vi)(F).
    \136\ See General Instruction I.B.2 of Form S-3 and note 60 
above.
    \137\ 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 Web 
site.
    \138\ See, e.g., Letters of ABA; Kutak; Moody's; and State 
Street.
---------------------------------------------------------------------------

    As discussed more fully in Section III.A.2. above, we are adding 
two additional conditions regarding the types of asset-backed 
securities that would qualify for Form S-3 eligibility. First, we are 
codifying the current position that delinquent assets may not 
constitute 20% or more, as measured by dollar volume, of the asset 
pool. Second, for securities backed by leases other than motor vehicle 
leases, the portion of the securitized pool balance attributable to 
residual values may not constitute 20% or more, as measured by dollar 
volume. As referenced in Section III.A.2.f., we are not adopting the 
proposed additional restrictions for prefunding accounts and revolving 
periods for Form S-3 eligibility.
    Consistent with existing requirements, we did not propose to add an 
issuer Exchange Act reporting history requirement for ABS Form S-3 
eligibility. However, we did propose codifying that Exchange Act 
reporting obligations regarding other asset-backed securities 
transactions established by the sponsor and the depositor must have 
been complied with for the prior 12 months for continued Form S-3 
eligibility for new registration statements.\139\ This proposal would 
not have required that there be a reporting history with respect to any 
prior transactions, only that any existing or prior requirements during 
the past year had been met. As explained in the Proposing Release, we 
did not believe it would be appropriate to continue to allow the 
benefits of shelf registration to new registration statements 
established by sponsors or depositors that have not complied with 
ongoing reporting obligations involving previous asset-backed 
securities transactions.
---------------------------------------------------------------------------

    \139\ The proposal with regard to the depositor was consistent 
with existing staff policy.
---------------------------------------------------------------------------

    Comments from issuers and their representatives objected to the 
proposals as generally being more restrictive than necessary to 
encourage better Exchange Act reporting compliance.\140\ Commenters 
also thought the proposed formulation linked to the sponsor was 
potentially ambiguous as to which depositors were affected. While some 
suggested alternatives, some commenters objected to conditioning form 
eligibility on any reporting history. Commenters also thought any 
disqualification should be limited to depositors of the same asset 
class, arguing that securitizations of separate asset classes are often 
separately managed business units within a sponsor and to penalize all 
of the sponsor's programs for the reporting noncompliance of one would 
be too burdensome. Several commenters also believed that Form S-3 
eligibility for asset-backed securities should be treated differently 
from the requirements for non-ABS securities in that eligibility should 
not be impaired by good faith, immaterial, inadvertent or involuntary 
failures in Exchange Act reporting, particularly if the untimely 
reporting was the result of the inability to obtain information from an 
unaffiliated third party.
---------------------------------------------------------------------------

    \140\ See, e.g., Letters of ABA; ASF; BMA; BOA; CGMI; Citigroup; 
CMSA; FSR; MBA; NYSBA; and UBS.
---------------------------------------------------------------------------

    Compliance with Exchange Act reporting by ABS issuers under the 
existing modified reporting no-action letters has been unacceptable. 
While this may be partially attributable to a lack of widely understood 
requirements due to reduced transparency in the current process, which 
these final rules are intended to help remedy, the concerns in this 
area are more broad-based than minor inadvertent or unintentional 
failures to file. Instead, reporting issues in the ABS market include 
widespread instances of untimely, deficient and sometimes even complete 
lapses in reporting.
    As a resultant responsibility from registering a public offering of 
securities under the Securities Act, the Exchange Act specifically 
requires that the obligation to provide information does not stop with 
the final prospectus, but continues afterwards, at least for a period 
of time.\141\ For asset-backed securities in particular, commenters 
representing investors have expressed a clear preference for required 
Exchange Act reporting, regardless of whether the issuer also elects to 
provide the information voluntarily.\142\ Given past deficiencies in 
Exchange Act reporting compliance in the ABS sector, we continue to 
believe that issuers that fail to comply with their responsibilities 
under the Exchange Act for prior transactions should not continue to 
receive the benefits of shelf registration for new registration 
statements. Nor do we believe that the current practice of being able 
to form a new special purpose depositor to avoid the consequences of 
reporting noncompliance creates appropriate incentives for reporting 
compliance. Several commenters also recognized the need to fix this 
current problem.\143\ Further, the ability for investment grade ABS 
offerings to have immediate access to Form S-3 without a reporting 
history requirement for the newly created issuing entity separates ABS 
from most non-ABS issuers such that a linkage to affiliated entities is 
appropriate.
---------------------------------------------------------------------------

    \141\ See, e.g., Section 15(d) of the Exchange Act.
    \142\ See, e.g., Letters of FMR and ICI.
    \143\ See, e.g., Letters of ASF and BMA.
---------------------------------------------------------------------------

    Accordingly, we believe it is appropriate to continue to link Form 
S-3 eligibility requirements to Exchange Act reporting compliance for 
prior transactions. In response to several commenter suggestions,\144\ 
we are revising the proposal to focus not on any transactions 
established directly or indirectly by a sponsor, but instead on 
transactions established by affiliated depositors involving the same 
asset class. We think this approach addresses many commenter concerns 
about the potential breadth of the proposed application across asset 
classes and tying the requirements to the sponsor definition.\145\
---------------------------------------------------------------------------

    \144\ See, e.g., Letters of ASF; BMA; CMSA; FSR; NYCBA; and UBS.
    \145\ Commenters were particularly concerned that tying to 
common sponsors could inadvertently link a person's Form S-3 
eligibility to an unrelated entity's reporting history in the 
``rent-a-shelf'' context. We are persuaded that tying the 
requirements to a common depositor avoids this problem while still 
ensuring related sponsors are covered because all depositors of a 
given sponsor would be considered affiliates.
---------------------------------------------------------------------------

    Under the final rules, to the extent the depositor for an ABS 
offering or any issuing entity previously established, directly or 
indirectly, by the depositor or any affiliate of the depositor are or 
were during the previous twelve calendar months and any portion of a 
month immediately preceding the filing of the Form S-3 registration 
statement subject to Exchange Act reporting requirements with respect 
to asset-backed securities involving the same asset class, such 
depositor and each such issuing entity must have timely complied with 
its Exchange Act reporting requirements.\146\ This would include all 
prior Exchange Act reporting obligations for such asset-backed 
securities 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.''\147\
---------------------------------------------------------------------------

    \146\ As discussed subsequently, compliance with Form 8-K 
requirements for certain Items of that Form is limited to whether 
such filings are current, instead of timely and current, as of the 
filing of the registration statement.
    \147\ 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.'' 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.''

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

[[Page 1526]]

    In response to comment, we are adopting one exception to the 
requirement. Some comments requested an exception for depositors of 
other parties that are acquired in a good faith business combination 
transaction, arguing that prior noncompliance by the acquired 
depositors should not affect pare-existing depositors of the acquirer, 
so long as the acquisition is not part of a plan or scheme to evade the 
reporting requirements.\148\ We are providing an exception that, 
regarding an affiliated depositor that became an affiliate as a result 
of a business combination transaction during the twelve month period 
before the filing of the registration statement, the filing of any 
material prior to the business combination transaction relating to 
asset-backed securities of an issuing entity previously established, 
directly or indirectly, by such affiliated depositor is excluded, 
provided such business combination transaction was not part of a plan 
or scheme to evade the requirements of the Securities Act or the 
Exchange Act.
---------------------------------------------------------------------------

    \148\ See, e.g., Letters of ABA; ASF; and Citigroup.
---------------------------------------------------------------------------

    With respect to imposing a reporting compliance requirement, some 
commenters expressed concern that an untimely Exchange Act filing would 
have an immediate effect on the ability to conduct offers and sales 
under previously filed registration statements.\149\ We wish to clarify 
that Securities Act Form eligibility requirements for ABS issuers are 
determined at the time of filing of the registration statement.\150\
---------------------------------------------------------------------------

    \149\ See, e.g., Letters of ABA; ASF; BMA; BOA; CMSA; FSR; 
Sallie Mae; and TMCC.
    \150\ In the Offering Process Release, the Commission has 
proposed that a new Form S-3 shelf registration statement would be 
required after three years, at which time form eligibility 
requirements would be reassessed.
---------------------------------------------------------------------------

    In the Proposing Release, we proposed to add one of our proposed 
new Form 8-K items for ABS--Item 6.03, Change in Credit Enhancement or 
Other External Support--to the list of Form 8-K Items where failure to 
file such Items timely would not result in Form S-3 ineligibility.\151\ 
One commenter believed two other ABS Form 8-K Items--Item 6.01, ABS 
Informational and Computational Material, and Item 6.05, Securities Act 
Updating Disclosure--should be added to the list because they relate to 
offerings for specific transactions and not to ongoing reporting.\152\ 
We are adding Items 6.01 and 6.05 along with Item 6.03 to the Form 8-K 
Item list for Form S-3 eligibility purposes. However, we do not believe 
it is appropriate to include Items 6.01 and 6.05 in the list of Form 8-
K items for the Rule 10b-5 safe harbor for failure to file such items. 
As discussed in Section III.D.8.d., we are only adding Item 6.03 to 
that safe harbor, as proposed.
---------------------------------------------------------------------------

    \151\ All required Form 8-K filings, however, must be current as 
of the date of filing.
    \152\ See Letter of ASF.
---------------------------------------------------------------------------

    We do not underestimate the effects of linking reporting compliance 
with continued Form S-3 eligibility. Non-ABS issuers have long dealt 
with the consequences of reporting compliance for Form S-3 eligibility, 
and we appreciate the consequences of losing access to shelf 
registration. There are several accommodations, both in the amendments 
we are adopting today and under existing Commission rules, which should 
assist ABS issuers. Most notably, we are providing an extensive 
transition period to allow issuers to improve their reporting processes 
from the present state. As noted above, we also are expanding the 
number of Form 8-K Items that need only be current and not timely for 
ABS Form S-3 eligibility purposes. As discussed in Section III.D.4.a., 
we are extending Rule 12b-25 to provide filing extensions for Form 10-D 
reports. We also are modifying several of the proposed Regulation AB 
disclosure requirements, discussed more fully in Section III.D., that 
could potentially require third party information, such as information 
about unaffiliated servicers.\153\
---------------------------------------------------------------------------

    \153\ Finally, we note that the need to rely on third party 
information certainly is not unique to ABS reporting, although we 
realize the extent of third party information that may be material 
for an ABS offering may be different from a non-ABS issuer. We also 
understand that informational and other aspects of ABS transactions 
are uniquely contractually based and that the long transition period 
should allow for contractual arrangements consistent with our 
adopted requirements.
---------------------------------------------------------------------------

d. Determining the ``Issuer'' and Required Signatures
    We are clarifying as proposed 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.\154\ Under current staff positions, the 
depositor must sign the Securities Act registration statement for an 
ABS offering.
---------------------------------------------------------------------------

    \154\ See Section 2(a)(4) of the Securities Act (15 U.S.C. 
77b(a)(4)).
---------------------------------------------------------------------------

    We are clarifying 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.\155\ Further, our new rule specifies 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 definition of asset-
backed security requires the issuing entity to be a restricted special 
purpose investment vehicle, the new rule will apply regardless of the 
issuing entity's form of organization.
---------------------------------------------------------------------------

    \155\ See Securities Act Rule 191 (17 CFR 230.191). We are 
adopting an identical rule for purposes of the Exchange Act. See 
Exchange Act Rule 3b-19 (17 CFR 240.3b-19) and Section III.D.2. As 
noted in Section III.B.3.b., we are defining ``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'' refers to the sponsor. 
See 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 final rules do 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, we are making clear 
our longstanding position that any applicable exemptions from 
registration that person may have with respect to its own securities 
are not applicable to the asset-backed securities.\156\ Similarly, the 
reporting history with respect to a particular class of asset-backed 
securities does not affect Form S-3 eligibility with respect to the 
depositor's

[[Page 1527]]

or sponsor's own securities, although as discussed above we are 
requiring that the reporting history with respect to certain prior ABS 
transactions can affect continued Form S-3 eligibility for future ABS 
registration statements.
---------------------------------------------------------------------------

    \156\ 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 rule does not mean 
that because the bank is acting as depositor, the asset-backed 
security is then 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 our proposal, we also are codifying in the general 
instructions for Forms S-1 and S-3 that the registration statement must 
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. As proposed, we are not requiring the issuing entity 
to sign if formed prior to effectiveness as such a requirement would be 
superfluous.
4. Foreign ABS
    As we described in the Proposing Release, while not as prevalent as 
in the U.S., securitization by foreign issuers has been developing 
rapidly.\157\ However, asset-backed securities issued by a foreign 
issuer \158\ or that are backed by foreign assets raise special issues 
due to potential differences in the legal and regulatory regime of the 
relevant home jurisdiction. 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.\159\
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    \157\ 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).
    \158\ 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.''
    \159\ See, e.g., Brian Bremner et al., ``An Exit Plan for 
Japan?'' Business Week, Oct. 26, 1998. Our separate limits on 
delinquency concentrations and non-performing assets act somewhat as 
a limiter on such transactions qualifying as an ``asset-backed 
security.'' For example, the standard for non-performing assets 
includes linkage to the charge-off policies of the sponsor and the 
safety and soundness regulator, regardless of whether those policies 
are enforced by the sponsor or any relevant regulatory authority.
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    As a result of these concerns, the staff historically has required 
additional conditions for the processing of Form S-3 registration 
statements involving foreign ABS offerings. These conditions have 
included 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 jurisdiction 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.
    As proposed, to address the foreign and legal and regulatory issues 
while appropriately treating foreign ABS transactions, we are not 
establishing a different disclosure or regulatory regime for foreign 
ABS, with the one exception discussed below. Foreign ABS will be 
registered on the same Securities Act registration forms as domestic 
ABS, and with the exception of the disclosure discussed below, foreign 
ABS will be subject to the same disclosure requirements in Regulation 
AB. Foreign ABS offerings registered on Form S-3 also will be eligible 
for our new rules regarding use of ABS informational and computational 
material and ABS research reports discussed in Section III.C.
    As discussed in the Proposing Release, we believe that many of the 
concerns relating to foreign ABS can be appropriately addressed through 
adequate disclosure. Commenters supported this approach.\160\ As such, 
we are adopting as proposed an additional general instruction in 
Regulation AB focused on foreign ABS. This instruction provides 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 in the applicable home 
jurisdiction 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.\161\ This disclosure should particularly 
address the material items and legal and regulatory or administrative 
factors discussed above.
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    \160\ See, e.g., Letters of A&O ABA; ASF; Aus. SF; ESF; Jones 
Day; and MBA.
    \161\ See 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 are required by Item 1100(e).
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    We expect that at the time of filing, the registration statement 
will include fully developed disclosure clearly articulating the 
material aspects and effects of the applicable home jurisdiction legal 
and regulatory regime. In this regard, we also encourage pre-filing 
conferences with the staff where appropriate to discuss the applicable 
home jurisdiction legal and regulatory environment, the proposed 
transaction and the relevant disclosures that will be required.\162\
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    \162\ 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, statistical disclosure regarding a hypothetical 
portfolio of financial assets that would be securitized in a 
takedown under the registration statement.
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    As proposed, we also are not creating a different Exchange Act 
reporting structure for foreign ABS. We believe periodic disclosure of 
distribution and pool performance information, reports regarding 
servicing compliance (including the requirements regarding assessment 
and attestation of compliance with servicing criteria) and current 
disclosure of significant events are equally relevant and applicable 
for foreign ABS as they are for domestic ABS. Thus, like domestic ABS, 
foreign ABS will be required to report on Forms 10-D, 10-K and 8-K. In 
addition, ongoing disclosures will be required in Forms 10-D and 10-K, 
as proposed, regarding any material impact caused by foreign legal and 
regulatory developments during the period covered by the report which 
had not been previously described.
5. Exclusion From Exchange Act Rule 15c2-8(b) for Form S-3 ABS
    Through a series of staff no-action letters dating back to 1995, 
broker-dealers, in connection with offerings of asset-backed securities 
eligible for registration on Form S-3, 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.\163\ Without these no-

[[Page 1528]]

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)\164\ or 15(d) of 
the Exchange Act. Most ABS issuers at the time of the ABS offering are 
not so required to report.
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    \163\ 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).
    \164\ 15 U.S.C. 78m(a).
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    Given the more than eight years of experience with the staff no-
action letters, we proposed codifying the basic concept in those 
letters as a formal exclusion from Exchange Act Rule 15c2-8(b).\165\ 
However, we expressed concern in the Proposing Release 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.\166\ We requested comment on these concerns.
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    \165\ The original no-action relief for Rule 15c2-8(b) 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. Otherwise, the relief from Rule 
15c2-8(b) would not have been available. As discussed in Section 
III.A.2.f., we are now addressing limitations on prefunding periods 
in the definition of ``asset-backed security'' in lieu of in Rule 
15c2-8(b). Because the definition of ``asset-backed security'' will 
permit a prefunding period of up to 50%, we are not codifying the 
25% restriction on prefunding periods for the exclusion from Rule 
15c2-8(b).
    \166\ 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.
---------------------------------------------------------------------------

    Commenters were split on our proposal to codify the exclusion from 
Rule 15c2-8(b). Commenters representing primarily issuers and their 
representatives supported the codification of the existing staff 
positions and requested it be expanded to all ABS offerings, not just 
those eligible to use Form S-3.\167\ One commenter noted that Rule 
15c2-8(b) was originally designed to take into account new and 
speculative offerings.\168\ Some of the commenters discounted concerns 
that investors do not have adequate information to make informed 
investment decisions. Also, one commenter believed most ABS investors 
are institutional investors and can refrain from purchasing if they 
believe they do not have sufficient information.\169\ In light of the 
fact that most investors continue to purchase ABS under the current no-
action letter relief, the commenter argued, it would appear most 
investors believe they have sufficient information.
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    \167\ See, e.g., Letters from ABA; ASF; and NYCBA.
    \168\ See, e.g., Letter of ASF.
    \169\ See, e.g., Letter of ABA.
---------------------------------------------------------------------------

    Commenters representing investors disagreed.\170\ These commenters 
believed there are problems and inconsistencies with the absence of 
material information at the time investment decisions are made, 
especially given the complexity of ABS and the need to properly assess 
risk. In addition, in order for investors to receive the full benefits 
of the proposed new disclosure requirements, the commenters argued it 
is critical that investors receive the information for investment 
decisions. These commenters generally did not support excluding any ABS 
from Rule 15c2-8(b). The commenters also recommended requiring, such as 
a condition to shelf registration, ABS informational and computational 
material in a reasonable time frame prior to effecting sales, either as 
an addition to or as an alternative to delivery of a preliminary 
prospectus under Rule 15c2-8(b).
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    \170\ See, e.g., Letters of CFAI; FMR; ICI; and MetLife.
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    On November 3, 2004, we issued proposals to revise the Securities 
Act regulatory process for securities offerings in the Offering Process 
Release. As noted in that release, we agree with investors that 
materially accurate and complete information regarding an offering 
should be available to investors at the time they make an investment 
decision, and we issued an interpretation and proposed an interpretive 
rule to support that unassailable proposition. Under that 
interpretation and proposed rule, in determining whether there is a 
material misstatement or material omission necessary to make the 
statements made at the time of contract of sale not misleading under 
Securities Act Sections 12(a)(2) and 17(a)(2), information conveyed 
only after that time would not be taken into account. We believe 
concerns about the availability of adequate information for ABS 
offerings raise the same issues as those discussed in the Offering 
Process Release for all offerings and are best addressed through those 
proposals.
    We also agree with issuers that Form S-3 ABS offerings differ from 
the offerings that were the focus of Rule 15c2-8(b) when it was 
originally adopted. In light of our proposals to address the 
information disparity issue for all offerings in the Offering Process 
Release, we have determined to continue our proposed approach here with 
respect to the existing staff no-action position regarding Rule 15c2-
8(b). Accordingly, we are codifying, as proposed, an exclusion from 
Rule 15c2-8(b) for Form S-3 ABS.\171\
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    \171\ We also are making an unrelated technical correction to 
paragraph (a) of Rule 15c2-8 to correct references to other 
paragraphs of the rule.
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    We will evaluate the comments we received regarding the 
availability of information in ABS offerings in connection with the 
Offering Process Release. We also encourage ABS market participants to 
comment specifically on the proposals in that release to address 
information availability issues. We will consider whether additional 
action is necessary or appropriate with respect to ABS offerings in 
connection with those proposals.
    As we stated in the Proposing Release, although we are codifying 
the basic concept of the staff position regarding Rule 15c2-8(b), the 
codification does not affect any other obligation in that rule nor any 
other prospectus delivery obligation that may be applicable. Also, as 
proposed, the exclusion only is available, as it is today, 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. 
Although some commenters representing issuers and their representatives 
requested expanding the exclusion to other asset-backed securities, we 
continue to believe that such securities should remain subject to Rule 
15c2-8(b). As we noted in the Proposing Release, because a separate 
registration statement is prepared for each Form S-1 offering, the 
impact of continued compliance with Rule 15c2-8(b) is less significant.
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 backed by assets of 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-

[[Page 1529]]

issuers under Securities Act Rule 140.\172\ 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.\173\
---------------------------------------------------------------------------

    \172\ 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.''
    \173\ 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, unless exempt, 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).
---------------------------------------------------------------------------

    As we explained in the Proposing Release, in considering whether 
the distribution of the underlying assets must be registered, 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.\174\ As a result, the definition of 
``asset-backed security'' may encompass securities issued in structured 
financings backed by assets of 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.
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    \174\ See Sections III.B.7 and 8. See also Section III.B.10. 
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.
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b. When Registration Is Required
    To provide further clarification and regulatory certainty regarding 
this topic, we are adopting in substantial part our proposal that would 
codify existing staff positions in this area.\175\ First, we are 
adopting conditions when registration of the distribution of the 
underlying security will not be required. As noted in the Proposing 
Release, most asset types that are securitized today, including 
residential mortgages, student loans, auto loans and credit card 
receivables, meet these conditions and thus will not be affected. Under 
our final rule, 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:
---------------------------------------------------------------------------

    \175\ See Securities Act Rule 190 (17 CFR 230.190).
---------------------------------------------------------------------------

     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 our proposal and existing staff practice, 
we are including two examples in the final rule 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 under the safe harbor of Securities Act Rule 
144(k) (e.g., a two-year holding period by non-affiliates).\176\ 
Second, the offering of the asset-backed security cannot 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 will be considered a 
distribution of the underlying securities.
---------------------------------------------------------------------------

    \176\ 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 are codifying as proposed the staff's 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.\177\ As proposed, 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.\178\ As we stated in 
the Proposing Release, in this instance we believe three months 
provides sufficient certainty that the purchase was not part of the 
original distribution.
---------------------------------------------------------------------------

    \177\ See, e.g., Section VIII.B.3.b.i. of the Division of 
Corporation Finance's ``Current Issues and Rulemaking Projects'' 
(Nov. 14, 2000).
    \178\ If an underwriter or dealer transfers an unsold allotment 
to an investment account or an affiliate, that does not turn the 
allotment into anything other than an unsold allotment. Rule 144 is 
not available to underwriters or dealers with unsold allotments.
---------------------------------------------------------------------------

    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

[[Page 1530]]

offering, then registration of the underlying distribution is required 
along with registration of the ABS offering.
    If any of the three conditions discussed above are not met, the 
offering of the relevant underlying securities itself must be 
separately registered as a primary offering of such securities. As 
proposed, such registration must be conducted in accordance with the 
following conditions: \179\
---------------------------------------------------------------------------

    \179\ As noted in the Proposing Release, because of the 
conditions, a prefunding or revolving period cannot be used to 
purchase unidentified securities whose distribution needs to be 
registered.
---------------------------------------------------------------------------

     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;\180\
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    \180\ 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.
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     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;\181\
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    \181\ 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. Consistent with current practice, no additional filing 
fee is required for the underlying securities if they have already 
been registered under a previous registration statement. If adopted, 
the proposals in the Offering Process Release would allow a plan of 
distribution to be amended by supplement.
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     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;\182\
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    \182\ The two prospectuses can be combined in a single 
prospectus that is filed pursuant to Rule 424 for each offering.
---------------------------------------------------------------------------

     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.\183\
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    \183\ In this instance, this condition would therefore overrule 
the exclusion from Exchange Act Rule 15c2-8(b). As noted above, the 
prospectuses may be combined into a single prospectus. See also note 
133 above.
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c. Exceptions from Disclosure and Delivery Conditions and Form S-3 
Eligibility Requirements
    As discussed in Section III.A.2., some ABS transactions, such as 
credit card issuance trusts and motor vehicle lease 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. In each instance, these structures are solely designed to 
facilitate the ABS transaction. The ABS will be primarily serviced by 
cash flows from the underlying pool assets.\184\ 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.
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    \184\ See Section III.B.3.g. regarding the general instruction 
we are adopting for Regulation AB regarding the scope of disclosure 
that is required regarding these structures. In addition, any 
additional material risks regarding these structures should be 
clearly described.
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    As we noted in the Proposing Release, 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.\185\ Accordingly, although the distribution of the underlying 
financial asset in connection with the ABS offering must still be 
separately registered, we are excluding such transactions as proposed 
from the disclosure and delivery conditions discussed above with 
respect to other resecuritizations, if the following conditions are 
met:
---------------------------------------------------------------------------

    \185\ These other resecuritizations are subject to the 
requirements in the previous section on the method and manner of 
registering the distribution of the underlying securities.
---------------------------------------------------------------------------

     Both the issuing entity for the asset-backed securities 
and the entity issuing the underlying financial asset have been 
established under the direction of the same sponsor and 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 the resecuritization requirements discussed in the 
previous section; and
     The financial asset is held by the issuing entity and is a 
part of the asset pool for the asset-backed securities.
    In the Proposing Release, we indicated that any separate 
registration of the distribution of the underlying financial asset 
would need to be on a form eligible for such distribution. Commenters 
requested relaxing Form S-3 eligibility requirements for such 
registration, arguing that the underlying financial asset being used to 
structure the transaction is not likely to otherwise be Form S-3 
eligible.\186\ If the underlying financial asset was required to be 
registered on Form S-1, the benefits of shelf registration for the ABS 
registered on Form S-3 would be lost. In response to these concerns, we 
are revising General Instruction I.B.5 to Form S-3 to permit the 
registration of the underlying financial asset on that form if it meets 
the same conditions outlined above.\187\ As we indicated in the 
Proposing Release, 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 an 
underwriter.
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    \186\ See, e.g., Letters of ABA and Citigroup.
    \187\ The registration of the asset-backed securities and the 
underlying financial asset can be included on a combined Form S-3 
registration statement.
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7. Market-Making Transactions
    In the Proposing Release, we briefly noted the requirements for 
keeping an ABS prospectus current for market-making or remarketing 
transactions. In non-ABS transactions, the Form S-3 registration 
statement is kept current by the incorporation by reference of 
subsequent Exchange Act reports. In a Form S-3 ABS transaction, the 
incorporation by reference of subsequent Exchange Act reports also 
would be important, although the information in those reports would not 
include the disclosure required in the registration statement regarding 
the

[[Page 1531]]

asset pool, such as the pool composition tables. Consistent with staff 
interpretations, this information would have been required to be kept 
current for use in ABS market-making and remarketing transactions.
    Many commenters argued that the basic policy of when registration 
of market-making transactions is required for ABS transactions was 
neither appropriate nor comparable to the requirements for non-ABS 
issuers.\188\ One of the basic principles requiring registration of 
market-making transactions is that a broker-dealer affiliated with the 
issuer does not meet the definition of ``dealer'' in Section 2(a)(12) 
of the Securities Act,\189\ and therefore the exemption from 
registration in Section 4(3) of the Securities Act \190\ is not 
available for the market-making transaction, and it must be registered. 
Given the structure of ABS offerings, the staff has interpreted the 
requirement for ABS as instead relating to an affiliation between the 
broker-dealer and the servicer.
---------------------------------------------------------------------------

    \188\ See, e.g., Letters of ABA; ASF; BMA; BOA; CGMI; CMSA; FSR; 
JPMorganChase; and NYCBA.
    \189\ 15 U.S.C. 77b(a)(12).
    \190\ 15 U.S.C. 77d(3).
---------------------------------------------------------------------------

    Commenters argued that this market-making registration paradigm is 
not appropriate to ABS transactions.\191\ Unlike the relationship of an 
affiliated broker-dealer to a corporation, these commenters argued that 
a broker-dealer's affiliation with the servicer does not involve the 
same level of relationship to the issuer, the transaction and the 
securities as that of a broker-dealer affiliated with a corporate 
issuer. In addition, these commenters argued that other adequate 
safeguards exist under the federal securities laws, such as the general 
anti-fraud provisions, to prevent a broker-dealer from misusing any 
material non-public information it might obtain through its affiliated 
servicer.\192\ We are sufficiently persuaded by these comments such 
that we no longer will require registration and delivery of a 
prospectus for market-making transactions for asset-backed 
securities.\193\
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    \191\ See, e.g., Letter of ABA.
    \192\ See, e.g., Letter of BMA.
    \193\ There remain a few situations where the prospectus must be 
kept evergreen or updated such as in a delayed or continuous selling 
shareholder offering, a registered remarketing transaction or a 
resecuritization of asset-backed securities where the underlying 
asset-backed securities constitute a significant obligor. In those 
situations our position on updating remains the same. A number of 
commenters requested clarification that merely incorporating by 
reference subsequent Exchange Act reports was sufficient for 
updating. A few commenters suggested that even if the issuer had 
suspended its reporting obligation, the prospectus could be used if 
it was accompanied by a copy of the most recent distribution report. 
We continue to believe that investors are entitled to the 
information required to be included in the prospectus when making an 
investment decision for a transaction covered by the registration 
statement. Therefore, to the extent information in the prospectus is 
not updated through incorporation of Exchange Act filings, which is 
typically not the case for much of the information about the 
composition of the asset pool, then the prospectus would need to be 
updated. This could be done either through filing and incorporating 
by reference a Form 8-K containing the information or by actually 
updating the prospectus.
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B. Disclosure

1. Regulation AB
    As we explained in the Proposing Release, no disclosure items have 
previously existed that were tailored specifically to asset-backed 
securities. While some disclosure items in Regulation S-K are relevant 
to ABS, such as a description of the security, most items do not elicit 
useful disclosure for ABS investors. For ABS, 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 have been fully transparent to issuers and investors.
    As proposed, we are adopting a new principles-based set of 
disclosure items in one central location in a subpart of Regulation S-
K, called Regulation AB.\194\ These disclosure items, based on existing 
disclosure practices and revised from the proposal in response to 
comment, will 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 will be keyed to 
items in Regulation AB in a manner consistent with the integrated 
disclosure system applicable to other issuers.
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    \194\ See Items 1100-1123 of Regulation AB.
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    While not all commenters agreed, the majority of commenters 
supported our proposal for principles-based disclosure rules in lieu of 
detailed disclosure guides for each securitized asset class.\195\ For 
example, one commenter representing ABS investors believed proposed 
Regulation AB represents a major step in improving disclosures provided 
to investors and includes many of the items investors have previously 
recommended as critical to investors.\196\ We continue to believe a 
principles-based approach provides the best framework for disclosure in 
the context of asset-backed securities. 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 
quickly.
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    \195\ Compare, e.g., Letters of AICPA; PWC; and State Street; 
with Letters of ABA; ASCS; ASF; FSR; ICI; MBA; MBNA; and MetLife.
    \196\ See Letter of ICI. See also Letter of CFAI.
---------------------------------------------------------------------------

    Under our principles-based approach, in many instances we identify 
the disclosure concept or objective required and provide one or more 
illustrative examples. Some commenters objected to our providing 
illustrative examples, expressing concern that the mere identification 
of an item in the list could suggest that the item is required, 
regardless of its applicability or materiality to the particular asset 
class or transaction involved.\197\ This concern is misplaced and 
would, if accepted, lead to a rules-based regime that would be both 
inflexible and subject to evasion. As we stressed in the Proposing 
Release, application of the particular concept or objective needs to be 
tailored in preparing and presenting the disclosure to the information 
material to the particular transaction and asset type involved. We have 
made several revisions to the proposed disclosure items where 
illustrative lists are used to clarify this point.
---------------------------------------------------------------------------

    \197\ See, e.g., Letters of ASF; ASFA; Capital One; MBA; and 
MBNA.
---------------------------------------------------------------------------

    The balance we are striving 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 or that would result in disclosure that would be immaterial 
or inapplicable. We believe using illustrative lists, with a reference 
that the actual disclosure must be tailored based on the material 
aspects of the transaction involved, helps to identify the types of 
disclosures that may be

[[Page 1532]]

applicable in response to the identified disclosure concept. Issuers 
must assess the materiality to investors of the information that is 
identified by the particular concept or objective, or that would result 
from employing the example given, in the case of the particular 
transaction and asset type involved. We believe this approach fosters 
transparency and comparability without being overly rigid and reduces 
the risk that the disclosure requirements will become out-of-date. We 
also note that in some instances an item may not be material and 
therefore no disclosure would be required. We also direct issuers to 
longstanding Commission rules that state that, unless specified 
otherwise, no reference need be made in the prospectus to inapplicable 
disclosure items.\198\
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    \198\ See, e.g., Securities Act Rule 404(c).
---------------------------------------------------------------------------

    Of course, as we stated in the Proposing Release, in some instances 
we believe we must and therefore do set forth certain disclosure items 
with greater specificity. Further, we are codifying several existing 
percentage tests, with several revisions from our proposal in response 
to comment, that provide requirements as to when particular disclosure 
is required, particularly regarding concentrated obligors or 
significant credit enhancement or other support. As we stated in the 
Proposing Release, we believe such breakpoints provide consistency, 
comparability and clarity.
    The structure of Regulation AB is as follows:
     Item 1100 sets 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.10.) and guidance regarding disclosures 
related to foreign ABS (previously discussed in Section III.A.4.).
     Item 1101 sets forth definitions applicable to asset-
backed securities.
     Items 1102--1120 constitute the basic disclosure package 
for Securities Act registration statements for ABS offerings. In 
addition, several of the items will 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 1121 identifies disclosure for distribution reports 
on 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 1122 and 1123 address two longstanding requirements 
for the annual Form 10-K report based on market practice and the 
modified reporting system. Item 1122 addresses assessments of 
compliance with servicing criteria and the filing of attestation 
reports by registered public accounting firms on such assessments. This 
item, as revised from the proposal, is discussed more fully in Section 
III.D.7. Item 1123 specifies 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.
    As we stated in the Proposing Release, many of our disclosure items 
are based on the market-driven disclosures that appear in filings 
today. Commenters, although suggesting comment on some individual 
items, generally agreed with this assessment.\199\ In addition, as we 
explained in more detail in the Proposing Release, our consideration of 
the disclosure items was informed by the staff review process as well 
as the staff's participation in the 2003 MBS Disclosure Report. 
Commenters on the proposals also provided additional examples and 
suggestions to improve the disclosure items.
---------------------------------------------------------------------------

    \199\ See, e.g., Letters of ABA; ASF; and MetLife.
---------------------------------------------------------------------------

    As we stated in the Proposing Release, however, we remain concerned 
that current disclosure practice 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. The cumulative effect of 
these practices is to diminish in some cases the usefulness of the 
disclosure documents through the accumulation of unnecessary detail, 
duplicative or uninformative disclosure and legalistic recitations of 
transaction terms that obscures material information. 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.\200\
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    \200\ 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 Web site at http://www.sec.gov.
---------------------------------------------------------------------------

    Therefore, in connection with our codification of a universal set 
of disclosure items, we continue to seek a reevaluation by transaction 
participants of the manner and content of presented disclosure, 
including the elimination of unnecessary boilerplate legal recitations 
of immaterial terms. Transaction participants should view this 
rulemaking initiative and the pre-compliance period for the new rules 
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, and we have included, as proposed, several 
reminders and suggestions of these principles in various Items of 
Regulation AB where they may be particularly appropriate.
    In addition to the manner and presentation of disclosures, we also 
stated in the Proposing Release and remain concerned that existing 
disclosure standards have not adequately captured certain categories of 
information in respect of 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, that may be material and should be disclosed when they are 
material. While asset-backed securities are designed not to be direct 
obligations of these entities,

[[Page 1533]]

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.\201\ As a result, we 
proposed specific disclosure line items relating to these entities 
designed to elicit additional information in these areas to the extent 
material. While we received comment on the particularities of these 
disclosure items, we received overall support for increasing disclosure 
in this area beyond current market practice.\202\ Accordingly, we have 
adopted these new disclosure items, with revisions in response to 
comment, discussed in more detail below.
---------------------------------------------------------------------------

    \201\ See, e.g., Moody's Investors Service, Inc., ``Rating 
Agency Will Launch Assessments of ABS, RMBS Governance'' (Oct. 6, 
2004); Standard & Poor's, ``Operating Risk Analysis Strengthens Ties 
Between Structured Finance and Corporate Finance Sectors' (Sep. 15, 
2004); 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).
    \202\ See, e.g., Letters of ABA; ASF; CFAI; ICI; and State 
Street.
---------------------------------------------------------------------------

    We also note that several commenters speaking for investors 
expressed concerns that certain information is provided to rating 
agencies but is not otherwise disclosed or shared with investors, even 
upon request.\203\ This practice, to the extent it exists, controverts 
in part issuer comments that such information is not available or that 
disclosure would be costly. If an issuer concludes that it need not 
disclose information in response to a particular disclosure line item 
because the issuer determines that the information is not material, but 
agrees to provide the information to credit rating agencies, the issuer 
should consider its determination regarding materiality in the context 
of the decision to provide the information to rating agencies.
---------------------------------------------------------------------------

    \203\ See, e.g., Letters of ICI and State Street.
---------------------------------------------------------------------------

    Finally, consistent with current practice and our proposal, we are 
not requiring audited financial statements for the issuing entity in 
either Securities Act or Exchange Act filings. Commenters overall 
agreed that audited financial statements prepared in accordance with 
generally accepted accounting principles would not provide material 
information to investors.\204\ 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 believe our amendments to require registered public 
accounting firm attestation reports as to assessments of compliance 
with particular servicing criteria, discussed in Section III.D.7., are 
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 disclosure requirements 
regarding distributions on the asset-backed securities.
---------------------------------------------------------------------------

    \204\ See, e.g., Letters of ABA; AICPA; ASF; E&Y NYCBA; PWC; 
and Wells Fargo.
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2. Forepart of Registration Statement and Prospectus
    Existing Items 501-503 of Regulation S-K will 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. As proposed, new Items 1102 and 1103 of 
Regulation AB amplify those requirements by providing guidance on 
preparing those sections for ABS offerings consistent with current 
practice. In particular, they 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. We proposed that certain class-specific 
information appear on the cover page. However, some commenters noted 
that in some transactions, given the number of classes in the offering, 
it is difficult and sometimes impractical to provide such class-
specific information on the cover page.\205\ As suggested by these 
commenters, we are clarifying that if the information regarding 
multiple classes cannot appear on the cover page due to space 
limitations, the information is to be included in the summary or in an 
immediately preceding separate table.
---------------------------------------------------------------------------

    \205\ See, e.g., Letters of ABA and ASF.
---------------------------------------------------------------------------

    Consistent with common ABS-specific items such as a summary of the 
flow of funds and credit enhancement, disclosure specified for the 
summary includes 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.\206\ 
Also required is 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.\207\ 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 is separately required for 
the prospectus summary.
---------------------------------------------------------------------------

    \206\ 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 a comparable manner, that description alone in the 
prospectus would not raise general solicitation issues with respect 
to the private placement of the subordinated classes.
    \207\ Similar disclosure is 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 disclosure items, reference to particular 
activities do not imply that limits that exist elsewhere regarding 
such activities (e.g., the requirement that the asset pool be 
``discrete'') can be disregarded.
---------------------------------------------------------------------------

    As proposed, we are not providing a representative list of risk 
factors that may be common to many ABS transactions. The comment we 
received on this point supported this decision.\208\ We remain 
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

[[Page 1534]]

particularly how those risks affect investors. We are clarifying, as 
proposed, 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.
---------------------------------------------------------------------------

    \208\ See, e.g., Letter of ABA.
---------------------------------------------------------------------------

3. Transaction Parties
a. Sponsor
    We are adopting our proposed definition of ``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. 
While some commenters supported the definition for purposes of 
disclosure,\209\ others expressed various concerns about the 
definition, particularly given that the proposed definition also was to 
be used in our proposed Form S-3 filing eligibility condition relating 
to Exchange Act reporting compliance.\210\ As discussed in Section 
III.A.3.c., we are adopting a revised formulation of the reporting 
compliance condition that is no longer linked to the sponsor 
definition.
---------------------------------------------------------------------------

    \209\ See, e.g., Letter of ABA.
    \210\ See, e.g., Letter of ASF.
---------------------------------------------------------------------------

    In addition, commenters who questioned the proposed sponsor 
definition appeared to construe the proposed definition beyond its 
plain language. In particular, the commenters questioned application of 
the definition to so-called aggregator or consolidator transactions 
where the sponsor acquires loans from many other unaffiliated sellers 
before securitization by the sponsor. We do not believe in these 
typical situations that each of the underlying sellers, who did not 
take part in the organization or initiation of the securitization 
transaction, would meet the plain language of the definition of 
``sponsor.'' We do recognize that the facts and circumstances of the 
particular transaction may result in a sponsor that is unaffiliated 
with the depositor (e.g., a ``rent-a-shelf'' transaction) or that there 
may even be more than one unaffiliated sponsor. We also believe that 
where pool assets are transferred through one or more affiliates of the 
sponsor before transfer to the depositor and the issuing entity, it 
will be clear in nearly all instances as to which party was in the 
position of organizing and initiating the securitization transaction 
and thus is the sponsor.
    We also are adopting, with minor revisions in response to comment, 
our proposed disclosure item for the sponsor.\211\ Commenters 
representing investors particularly supported the disclosure discussed 
in the Proposing Release.\212\ In addition to basic identifying 
information about the sponsor, a description of the sponsor's 
securitization program will be required. The purpose of the description 
is to provide context within which to analyze the asset-backed 
securities and the characteristics and quality of the asset pool. Such 
a description is to consist, to the extent material, 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 is to 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, as well as information or factors related 
to the sponsor that may be materially relevant 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 or other performance triggering 
event. Another example would be any action taken outside the ordinary 
performance of a transaction to prevent such an occurrence.
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    \211\ See Item 1104 of Regulation AB. We discuss the disclosure 
requirement for static pool information separately in Section 
III.B.4.
    \212\ See, e.g., Letters of ICI and State Street.
---------------------------------------------------------------------------

    As we stated in the Proposing Release, other relevant information 
for the description, 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 material funding source. A description of 
the sponsor's material roles and responsibilities in its securitization 
program and the sponsor's participation in structuring the transaction 
also is required, including whether the sponsor or an affiliate is 
responsible for the selection of the pool assets.
b. Depositor
    We are adopting our proposed definition of ``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 is the depositor.\213\
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    \213\ As noted in Section III.A.2.c., 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 are specifying, as proposed, that 
the ``depositor'' of the issuing entity is the depositor of that 
trust.
---------------------------------------------------------------------------

    Consistent with our proposal, if the depositor was not the same 
entity as the sponsor, separate identifying information about the 
depositor will 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.\214\ In addition, if 
material and 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 will 
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.
---------------------------------------------------------------------------

    \214\ See Item 1106 of Regulation AB.
---------------------------------------------------------------------------

c. Issuing Entity and Transfer of Asset Pool
    As we explained in the Proposing Release, the nature of the issuing 
entity and the transfer of the pool assets is elemental to the concept 
of securitization. We are adopting our proposed definition of ``issuing 
entity'' as 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 our proposal, disclosure will be required regarding 
both the nature of the issuing entity and the sale or transfer of the 
pool assets.\215\ Information about the issuing entity itself will 
include a description of its permissible activities, restrictions on 
activities and capitalization. If the issuing entity has its own 
executive officers, board of directors or persons performing similar 
functions, disclosure required by Items 401, 402, 403 and 404 of 
Regulation S-K will be required.
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    \215\ See Item 1107 of Regulation AB.

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[[Page 1535]]

    The governing documents of the issuing entity will need to be filed 
as an exhibit.\216\ This is consistent with the requirement in Item 601 
of Regulation S-K of filing all governing documents and material 
agreements for the offering, which for ABS includes, among other things 
and as applicable depending on the transaction's structure, the pooling 
and servicing agreement, the indenture and related documents. The 
management or administration agreement for the issuing entity also must 
be filed in addition to describing its material terms in the 
prospectus.\217\
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    \216\ Item 1100(f) of Regulation AB specifies that where 
agreements or other documents are specified by Regulation AB to be 
filed as exhibits to a Securities Act 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.
    \217\ Any such description should avoid legal boilerplate and 
include the specific material duties imposed on the parties and not 
generic descriptions 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. 
Disclosure also is required regarding any expenses incurred in 
connection with the selection and acquisition of the pool to be payable 
from offering proceeds.
    Several commenters objected to our proposed disclosure requirement 
of the amount paid or to be paid for the pool assets, arguing that such 
information, particularly for pool assets that are not securities, is 
proprietary or in some instances not a meaningful concept.\218\ We are 
limiting disclosure to instances when the pool assets are securities, 
as defined under the Securities Act, and requiring disclosure of the 
market price of the securities and the basis on which the market price 
was determined. We continue to support disclosure of such information 
in those securitizations, such as corporate debt securitizations or ABS 
repackagings.
---------------------------------------------------------------------------

    \218\ See, e.g., Letters ABA; AHFC; ASF; BMA; JPMorganChase; 
MBA; and TMCC.
---------------------------------------------------------------------------

    We also are adopting our proposed requirements for disclosure, to 
the extent material, regarding any provisions or arrangements included 
to address any one or more of the following issues:\219\
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    \219\ As proposed, 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.

We continue to believe such disclosure, where material, is appropriate 
to provide transparency to investors regarding the legal and structural 
complexities of ABS transactions. In addition, any material risks 
related to the above must be discussed in the risk factors section of 
the prospectus. Consistent with current practice and our proposal, we 
are not mandating the filing of any report or opinion of an expert or 
counsel regarding any of the above items, although registrants may 
elect to file such items voluntarily, subject to any applicable consent 
requirements.\220\
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    \220\ See, e.g., Securities Act Rule 436 (17 CFR 230.436).
---------------------------------------------------------------------------

d. Servicers
    As we explained in the Proposing Release, the role of the servicer 
is often not limited to administration and collection of the pool 
assets. The servicer often also 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. We also recognize that in many transactions, multiple 
entities are used to perform different servicing functions. For 
example, while the particular division of responsibilities may vary by 
transaction or asset class, an ABS transaction may involve one or more 
entities, sometimes called ``master servicers,'' that oversee the 
actions of other servicers and may perform the allocation and 
distribution functions. Different servicers, sometimes called ``primary 
servicers,'' may be responsible for primary contact with obligors and 
collection efforts. In addition, one or more other servicers, sometimes 
called ``special servicers,'' may exist for specific servicing 
functions, such as borrower work-out or foreclosure functions. The 
allocation and distribution functions may be with a separate entity, 
sometimes called an ``administrator.'' While some servicers may be 
affiliated with the sponsor, other non-affiliated sub-servicers may be 
employed.
    We are adopting as proposed a unified definition of ``servicer'' to 
mean any person responsible for the management or collection of the 
pool assets or making allocations or distributions to holders of the 
asset-backed securities. As we stated in the Proposing Release, our 
definition of ``servicer'' is designed to capture the entire spectrum 
of activity to include both collection and asset maintenance activities 
as well as cash flow allocation and distribution functions for the ABS. 
This includes parties often referred to as ``administrators.'' However, 
given that some of these functions may be performed by the trustee in 
certain transactions, the definition clarifies 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.
    We are not persuaded by some commenter suggestions that we should 
create separate definitions for different aspects of the servicing 
function.\221\ These commenters suggested various additional 
definitions, including master servicer, administrator, primary 
servicer, special servicer, affiliated servicer and unaffiliated 
servicer. Similar to our concerns about creating asset-specific 
disclosure guides, there is not a uniform differentiation of servicing 
functions consistent across all asset classes or even within the same 
asset class. Nor do we think it is appropriate to establish rigid 
definitions that may not encompass future changes to market practice 
involving servicing. Our definition of servicer is a principles-based 
definition for any entity that performs any one or more of the 
servicing functions.
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    \221\ See, e.g., Letters of ABA; ASF; JPMorganChase; MBA; Sallie 
Mae; and Wells Fargo.

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[[Page 1536]]

    Some of these commenters were concerned that applying the servicer 
disclosure item to an entity that performs only a limited aspect of the 
servicing function would compel inapplicable or immaterial disclosure. 
As stated above, this does not reflect an accurate understanding of how 
Commission disclosure items are to be applied. We have made several 
additional modifications to the servicer disclosure item to make clear 
that disclosure is required based on materiality.\222\ If an entity's 
role is limited to one or more of the servicing or administrative 
functions such that an aspect of the disclosure item is not applicable 
or material, it is not required. For example, if a trustee also 
calculated the flow of funds for the transaction, information about the 
size, composition and growth of its serviced asset portfolio may not be 
material. However, even if a party performs only one function, if that 
function is material, such as calculation of the flow of funds for the 
transaction, material disclosure with respect to that function would of 
course be required.
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    \222\ See Item 1108 of Regulation AB.
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    Understanding the material aspects of the entire servicing function 
is important to understanding how servicing may impact expected 
performance. As proposed, the disclosure item requires information 
regarding the entire servicing function, including a clear introductory 
description of the roles, responsibilities and oversight requirements 
of the entire servicing process and the parties involved.\223\ This 
will include identifying, as applicable:
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    \223\ In addition to an appropriate narrative discussion of the 
allocation of servicing responsibilities, registrants also should 
consider presenting the information graphically if doing so will aid 
understanding.
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     Each master servicer;
     Each affiliated servicer;
     Each unaffiliated servicer (such as primary servicers) 
that services 10% or more of the pool assets; and
     Any other material servicer responsible for calculating or 
making distributions to holders of the asset-backed securities, 
performing work-outs or foreclosures, or other aspect of the servicing 
of the pool assets or the asset-backed securities upon which the 
performance of the pool assets or the asset-backed securities is 
materially dependent.
    In addition, additional information, discussed further below, will 
be required about each servicer identified in the first, second and 
fourth bullets above, as well as each unaffiliated servicer identified 
in the third bullet above that services 20% or more of the pool assets.
    We are not limiting disclosure, as suggested by some commenters, 
only to those in actual contractual privity with the issuing 
entity.\224\ We received support for disclosure of underlying servicers 
and all entities with a role in the servicing function that may 
materially impact performance of the pool assets and thus the asset-
backed securities.\225\ As proposed, disclosure will be required for 
such entities, to the extent material. In addition, we are maintaining 
our proposed approach of requiring disclosure regarding all affiliated 
servicers.
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    \224\ See, e.g., Letters of ABA; ASF; BMA; CMSA; and Sallie Mae.
    \225\ See, e.g., Letters of ICI; MetLife; and Wells Fargo.
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    We have revised our percentage breakpoints for determining servicer 
disclosure for unaffiliated servicers, such as primary servicers, that 
service individual pool assets. While not all commenters agreed, 
several commenters believed the 10% threshold we originally proposed 
was too low.\226\ To lessen potential disclosure burdens, many of these 
commenters suggested, alternatively, limited disclosure for 
unaffiliated servicers that service at least 10% of the pool assets, 
but less than some higher threshold, such as 20%.\227\ As noted above, 
the final disclosure item will require identification of each 
unaffiliated servicer that services 10% or more of the pool assets. The 
more detailed disclosure discussed below will only be required for such 
servicers that service 20% or more of the pool assets. As noted in the 
Proposing Release, we believe 10% and 20% breakpoints provide 
consistency and clarity in determining a triggering event for 
disclosure, and are consistent with many other longstanding standards 
used for our existing disclosure requirements.\228\
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    \226\ Compare, e.g., Letters of ABA; ASF; BMA; MBA; and NYCBA; 
with Letter of MetLife.
    \227\ See, e.g., Letters of ABA; ASF; JPMorganChase; MBA; and 
NYCBA.
    \228\ See, e.g., Items 101(c)(1)(vii), 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); and 
Topic 1.I. to Release No. SAB-103.
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    As to those servicers where more detailed information is required, 
we explained in the Proposing Release that given the increasing 
realization of the importance of the role of the servicer in ABS 
transactions, the disclosure item is designed to elicit additional 
material information regarding the servicer's function, experience and 
servicing practices.\229\ Commenters were mixed over our proposed 
disclosure requirements for these servicers. Commenters representing 
investors in particular supported additional disclosure regarding 
servicers,\230\ while those representing primarily issuers and their 
representatives suggested reductions for disclosure that is not 
typically provided today.\231\ In most instances, the objections from 
this latter group of commenters centered around concerns that aspects 
of the disclosure item may not be material in all instances. As we 
specified above, we are making additional revisions to the disclosure 
item to clarify that disclosure is required based upon materiality. We 
also are making a few other minor changes to individual aspects of the 
disclosure item in response to comment, discussed in further detail 
below.
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    \229\ See also, e.g., Fitch, Inc., ``Rating ABS Seller/
Servicers: Credit Where Credit is Due'' (Sep. 14, 2004); and Fitch, 
Inc., ``Seller/Servicer Risk Trumps Trustee's Role in U.S. ABS'' 
(Mar. 4, 2003).
    \230\ See, e.g., Letter of ICI.
    \231\ See, e.g., Letter of ABA; ASF; Auto Group; JPMorganChase; 
and MBA.
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    The information to be provided, to the extent material, can be 
categorized into three general categories: basic information and 
experience; the agreement with the servicer and servicing practices; 
and back-up servicing. Basic information and experience regarding the 
servicer includes disclosing how long it has been servicing assets. As 
with the sponsor, the servicer disclosure is to include, to the extent 
material, 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.
    We also are retaining disclosure 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. Some commenters expressed concern that the 
disclosure required about servicing policies and procedures and their 
changes could result in excessive disclosure or inappropriate 
disclosure of competitively sensitive information.\232\ The description 
contemplated is limited to that which a reasonable investor would find 
material in considering an investment in the asset-backed securities 
and the servicing and administration of the pool assets and the ABS, as 
the case may be. Further, we believe this will not encompass

[[Page 1537]]

inappropriate disclosure of information that would cause competitive 
harm.
---------------------------------------------------------------------------

    \232\ See, e.g., Letters of JPMorganChase and MBA.
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    Other information specified in the disclosure item includes, to the 
extent material, 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 assets or the asset-
backed securities, as applicable. Other information that may be 
material could include whether any prior securitizations of the same 
asset type 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.
    As proposed, information regarding the servicer's financial 
condition will continue to be required in some situations. In response 
to comments, we have revised this requirement to clarify information 
regarding the servicer's financial condition may be required to the 
extent that there is a material risk that the effect on one or more 
aspects of servicing resulting from such financial condition could have 
a material impact on pool performance or performance of the asset-
backed securities. As we stated in the Proposing Release, general 
financial information is not required. We are seeking particular 
information when there is a material risk the financial condition could 
have a material impact as described.
    Regarding the second category of disclosure, the material terms of 
the servicing agreement will need to be described, as well as the 
servicer's duties regarding the asset-backed securities transaction. As 
proposed, the servicing agreement will be required to be filed as an 
exhibit.\233\ A description of the servicer's servicing practices also 
will be required to the extent material and applicable to the 
servicer's role in the transaction. The disclosure item identifies the 
following types of information: \234\
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    \233\ We note that in certain limited instances, a registrant 
may request confidential treatment regarding information that 
otherwise would be required to be disclosed, such as commercial 
information obtained from a person and that is privileged or 
confidential. See, e.g., Securities Act Rule 406 (17 CFR 230.406); 
Exchange Act Rule 24b-2 (17 CFR 240.24b-2); and Division of 
Corporation Finance Staff Legal Bulletins Nos. 1 (Feb. 28, 1997) and 
1A (Jul. 11, 2001).
    \234\ Note that while this is a list for disclosure purposes, 
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.
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     The manner in which collections on the assets will be 
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. As proposed, statistical information regarding past 
advance activity will 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 assets.
     Custodial requirements regarding the assets.
    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.\235\ 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.
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    \235\ See, e.g., note 229 above; ``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 are adopting our proposed disclosure 
requirements 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 will 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.\236\
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    \236\ We note that a trustee's prospective role as a servicer 
``of last resort'' would not alone make that trustee a ``servicer'' 
as defined in Regulation AB.
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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. Commenters overall supported the proposed disclosure item 
regarding trustees.\237\ We did not propose a separate definition of 
trustee, and, based on the comments received, we do not believe it is 
necessary to provide one.
---------------------------------------------------------------------------

    \237\ See, e.g., Letters of ABA; Am. Bankers; and MetLife.
---------------------------------------------------------------------------

    As proposed, in addition to basic identifying information about any 
trustee, disclosure will be required regarding the trustee's prior 
experience in similar ABS transactions (if applicable), indemnification 
provisions, limitations on liability and removal or replacement 
provisions.\238\ In addition, as we explained in the Proposing Release, 
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.\239\ To help provide transparency 
to this topic, we are adopting our proposal for 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 material 
factors, as applicable, 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.
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    \238\ See Item 1109 of Regulation AB.
    \239\ 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,'' Wall St. J., Feb. 5, 2003, at C13.
---------------------------------------------------------------------------

    In addition, the trustee disclosure item requires 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 must be described.

[[Page 1538]]

    Finally, in response to comment regarding transactions with 
multiple trustees,\240\ we are adding a clarifying instruction to the 
disclosure item that if multiple trustees are involved in the 
transaction, a description should be provided of the roles and 
responsibilities of each trustee.
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    \240\ See, e.g., Letters of ABA; ASF; and CMSA.
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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 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.
    We are adopting our proposed disclosure item for originators, but 
with revised percentage breakpoints for when disclosure is 
required.\241\ The breakpoints we are adopting are similar to those 
being adopted for servicers. Like our proposed 10% threshold for 
servicers, some commenters believed the more detailed disclosure we 
proposed for originators should only be provided for originators that 
meet a higher percentage threshold, although again not all commenters 
agreed.\242\
---------------------------------------------------------------------------

    \241\ See Item 1110 of Regulation AB.
    \242\ Compare, e.g., Letters of ABA and ASF; with Letter of 
MetLife.
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    Under the final disclosure item, each originator, apart from the 
sponsor or its affiliates, that has originated, or is expected to 
originate, 10% or more of the pool assets must be identified. In 
addition, for any originator where the percentage is 20% or more, 
additional information regarding the originator's origination program 
must be provided, including, 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. As with trustees, we do not believe it is necessary to 
provide a separate definition for originators.
g. Other Transaction Parties and Scope of Disclosure
    As we explained in the Proposing Release, ABS transactions may 
involve additional or intermediate parties other than the typical ones 
identified above, such as intermediate transferors. As proposed, we are 
clarifying 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.\243\ The material terms of any agreement with such party will 
need to be described, and the agreement with that party will need to be 
filed as an exhibit.
---------------------------------------------------------------------------

    \243\ See Item 1100(d) of Regulation AB.
---------------------------------------------------------------------------

    In addition, as noted in Section III.A.2.c., 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, such as in the case of a 
credit card issuance trust and an origination trust in a motor vehicle 
lease transaction. In many cases, such structures are established under 
the direction of the same sponsor or 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 are clarifying as proposed that, in such an 
instance, references to the asset pool and the pool assets of the 
issuing entity also include the other asset pool.\244\ As such, 
required disclosure regarding the composition of the asset pool, 
including servicers and significant originators and obligors, will 
include disclosure of the composition of the underlying asset pool, to 
the extent material. In addition, the requirements regarding 
assessments of compliance with servicing criteria and servicer 
compliance statements, discussed in Section III.D., encompass the 
assets underlying the intermediate financial asset.
---------------------------------------------------------------------------

    \244\ Id.
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4. Static Pool Information
    In the Proposing Release, we noted the development of static pool 
information as an increasingly valuable tool in analyzing 
performance.\245\ Such information indicates 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. We had previously received requests that disclosure of such data 
should be required because investors view static pool data regarding 
delinquency and loss experience as important information in evaluating 
an investment in asset-backed securities.\246\
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    \245\ See also, 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).
    \246\ See, e.g., note 166 above.
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    We proposed to require disclosure of static pool data if material 
to the transaction. In particular, we proposed to require static pool 
data with respect to the delinquency and loss experience of the 
sponsor's overall portfolio for the past three years, or such shorter 
period that the sponsor had been making originations or purchases, and 
that such data be presented in increments (e.g., monthly or quarterly) 
material to the asset type being securitized. In addition to the 
sponsor's overall portfolio, static pool data also was proposed to be 
required, if material, on a pool level basis with respect to prior 
securitized pools involving the same asset type established by the 
sponsor during the period. We separately proposed requiring static pool 
data for the offered asset pool itself, to the extent material, such as 
in the case of securitizations involving seasoned assets.
    Our proposals relating to static pool information generated 
considerable comment. Investors uniformly supported the proposals, 
emphasizing the importance of the information to them in making 
informed investment decisions.\247\ Commenters representing issuers and 
their representatives generally expressed reticence about, and in some 
cases even opposition to, the proposed requirement, primarily because 
static pool data is not typically provided to investors today.\248\ 
While this was in fact one of the primary reasons for our proposal, 
issuers nevertheless expressed concern about the lack of existing 
market practice for gauging materiality of the data.
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    \247\ See, e.g., Letters of ASF; FMR; ICI; MetLife; and State 
Street. Please note that the ASF submitted a separate comment 
letter, dated July 30, 2004, on our static pool disclosure proposal. 
In general, references in this section to the ASF letter are to that 
separate letter.
    \248\ See, e.g., Letters of ABA; AFSA; ASF; Auto Group; 
Citigroup; Capital One; JPMorganChase; MBA; and UBS.
---------------------------------------------------------------------------

    Some of these commenters argued that because static pool data is 
not provided today, issuers have determined that such data is not and 
never would be material. However, as set out in the leading cases on 
the

[[Page 1539]]

subject, TSC Industries, Inc. v. Northway, Inc.\249\ and Basic, Inc. v. 
Levinson,\250\ materiality is judged from the standpoint of a 
reasonable investor and whether there is a substantial likelihood that 
a reasonable investor would consider the information important in 
making an investment decision.\251\ The argument by commenters against 
the materiality of the data is to some extent belied by the universal 
and sustained comment we have received from investors that they would 
find the information very important in making their investment 
decisions.
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    \249\ 426 U.S. 438 (1976).
    \250\ 485 U.S. 224 (1988).
    \251\ See TSC Industries, Inc. v. Northway, Inc., at 449; and 
Basic, Inc. v. Levinson, at 231. See also the definition of 
``material'' in Securities Act Rule 405, which states: The term 
``material,'' when used to qualify a requirement for the furnishing 
of information as to any subject, limits the information required to 
those matters to which there is a substantial likelihood that a 
reasonable investor would attach importance in determining whether 
to purchase the security registered.
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    A new line item disclosure requirement represents our judgment that 
an item is or has become material. It is not, in and of itself, a 
judgment about past disclosure practices or requirements.\252\ This is 
particularly true in the ABS context, where there have not previously 
been explicit Commission disclosure requirements. Disclosures for ABS 
offerings have developed informally over time through the staff review 
process. However, the basic disclosure framework was developed with the 
staff nearly two decades ago when the registered ABS market was in its 
relative infancy. The market has matured since that time, as has 
sophistication of investors in analyzing ABS. In addition, the growth 
of technology and the attendant ability to analyze more information 
means that information that may have not been considered material in 
the past may now have become material. The fact that we are now 
requiring static pool information as a disclosure item represents a 
judgment by us today that there are cases where the data is material 
and should be disclosed in such cases.
---------------------------------------------------------------------------

    \252\ See, e.g., Securities Act Rule 408; Securities Act 
Sections 11, 12(a)(2) and 17(a); Exchange Act Section 10(b); 
Exchange Act Rule 10b-5; and Exchange Act Rule 12b-20.
---------------------------------------------------------------------------

    Some commenters, instead of arguing that static pool data would 
never be material, argued alternatively that the lack of additional 
guidance from the Commission regarding the scope of the proposed 
requirement could lead issuers to conclude that static pool information 
is required in all cases, which could, among other things, lead to 
unnecessary, excessive and expensive disclosure without corresponding 
benefits to investors. We stressed in the Proposing Release that in all 
instances disclosure was conditioned on what would be material for the 
particular asset class, sponsor and asset pool involved, and that 
disclosure for groups or factors that would not be material was not 
required. We recognize that under both our proposal and our final 
rules, there may be transactions where static pool information is not 
material. At the same time, and similar to many other disclosure 
requirements under the Federal securities laws, materiality 
determinations are necessary to determine appropriate levels of 
disclosure. Finally, we do not believe it is appropriate to exclude 
particular asset classes or transactions from the requirement in their 
entirety in lieu of requiring issuers and other offering participants 
to make materiality determinations.
    Other commenters not taking blanket positions against the inclusion 
of static pool data instead requested more specific guidance as to the 
scope of the requirement, as well as additional flexibility in 
presenting the information that would be provided in response to the 
requirement. After careful consideration of all comments, we continue 
to believe that a requirement to provide static pool information based 
on the materiality of the information is appropriate to provide greater 
transparency to investors. As with our approach for Regulation AB 
overall, we do not believe it is practical or effective to prescribe 
specific disclosure by asset class. However, in response to comment, we 
are making several revisions to the proposal to provide more guidance 
on the scope of information contemplated by the requirement, as well as 
to provide alternative means to present the information. Both issuers 
and investors strongly support using electronic communications and Web 
site availability to present static pool information. We believe these 
changes should address many of the commenters' concerns as to the 
potential breadth and burdens of the proposal.
a. Disclosure Required
    Several commenters expressed concern over the breadth of the 
proposals to require data for several different data groups, including 
the sponsor's overall portfolio, prior securitized pools and the asset 
pool itself.\253\ These commenters believed that without additional 
direction regarding the appropriate starting point and parameters of 
the disclosure, uncertainty may promote excessive or redundant 
disclosures for all data groups. While not all commenters agreed, most 
believed the starting point for disclosure should be information for a 
single data group, with that data group being dependent on the type of 
ABS transaction being offered.\254\ In particular, commenters suggested 
that the starting point could be different depending on whether the 
transaction involved an amortizing asset pool, such as residential 
mortgages, or a revolving asset master trust, such as a credit card 
master trust. For transactions involving amortizing asset pools, the 
starting point for disclosure also could be different depending on the 
sponsor's ``seasoning'' (e.g., the amount of experience the sponsor has 
had securitizing assets of the same asset class). Using such starting 
points for disclosure also could promote comparability of information 
across issuers within particular asset types.
---------------------------------------------------------------------------

    \253\ See note 248 above.
    \254\ See, e.g., Letters of ABA; ASF; and BMA. But see, e.g., 
Letter of FMR.
---------------------------------------------------------------------------

    To provide further clarity in determining the material information 
to disclose, we are adopting this framework in the final rules.\255\ We 
provide separate starting points for disclosure depending on whether 
the ABS transaction involves an amortizing asset pool or a revolving 
asset master trust. For amortizing asset pools, we further specify 
suggested starting points based on the sponsor's experience with 
securitizing assets of the type to be included in the offered asset 
pool.
---------------------------------------------------------------------------

    \255\ See Item 1105 of Regulation AB.
---------------------------------------------------------------------------

    In addition, while we proposed requiring material static pool 
information with respect to delinquency and loss experience, several 
commenters recommended expanding the requirement to also include 
prepayment experience, to the extent material for the particular asset 
class.\256\ Prepayments typically include both voluntary prepayments 
and liquidations after defaults or charge-offs. For some asset types, 
such as home equity loans, prepayments also could refer to the 
liquidation rate of a portfolio, where such rate is a combination of 
scheduled payments, prepayments and charge-offs.
---------------------------------------------------------------------------

    \256\ See, e.g., Letters of ABA and ASF. While some commenters 
suggested cumulative prepayment information, investors also 
expressed a preference for period prepayment information.
---------------------------------------------------------------------------

    Under our final rules, the scope of the static pool requirement 
will encompass, to the extent material, static pool

[[Page 1540]]

information regarding delinquencies, cumulative losses and prepayments, 
as applicable for the respective asset type.\257\ As with prepayments, 
we also recognize that the particular metrics that would be material 
for delinquencies and cumulative losses may vary by asset class. For 
example, metrics for student loans, depending on the program, could 
include not only current period delinquency and cumulative net loss 
information, but also payment status information (e.g., forbearance and 
deferment percentages) and claims reject information. For leases, 
metrics could include credit losses and residual losses.
---------------------------------------------------------------------------

    \257\ As discussed in Section III.B.4.a.ii., additional 
variables were suggested and are included for revolving asset master 
trusts.
---------------------------------------------------------------------------

i. Amortizing Asset Pools
    Several commenters believed that in the context of amortizing asset 
pools, static pool data for prior securitized pools would be a better 
starting point for disclosure over information about the sponsor's 
overall portfolio, particularly as the sponsor's experience in 
securitizing prior pools increases.\258\ These commenters argued that 
sponsor portfolio data by year, sometimes called ``vintage data,'' is 
less ``static'' than prior securitized pools because new loans are 
continually added to the portfolio over the course of that year's 
vintage. In addition, the sponsor's retained portfolio may include 
assets not eligible for securitization. As such, these commenters 
argued, static pool data for prior securitized pools would typically be 
more readily comparable to the current securitization transaction. 
However, to the extent the sponsor's experience with prior securitized 
pools is limited, vintage data on the sponsor's portfolio could be more 
appropriate as a starting point for static pool disclosure.
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    \258\ See., e.g., Letters of ABA; ASF; and BMA.
---------------------------------------------------------------------------

    We are adopting this suggested approach for amortizing asset pools. 
Unless the registrant determines that such information is not material, 
the starting point for disclosure is static pool information, to the 
extent material, regarding delinquencies, cumulative losses and 
prepayments, if applicable, for prior securitized pools of the sponsor 
for that asset type. For unreasoned sponsors--sponsors lacking three 
years of securitization experience with the same asset type--
consideration should be given to instead using as a starting point 
static pool information, to the extent material, regarding 
delinquencies, cumulative losses and prepayments, if applicable, by 
vintage origination years of originations or purchases by the sponsor, 
as applicable, for that asset type. A vintage origination year 
represents assets originated during the same year.
    We proposed three years of static pool data (or such shorter period 
of time as the sponsor had been making originations or purchases). 
However, some commenters indicated that the amount of pool experience 
necessary for a meaningful evaluation of trends varies by asset type 
and three years may not be sufficient.\259\ Our final rules call for 
information, to the extent material, for a minimum of five years (or 
such shorter period the sponsor has been either securitizing assets of 
the same asset type (in the case of seasoned sponsors) or making 
originations or purchases of assets of the same type (in the case of 
unseasoned sponsors)).
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    \259\ See, e.g., Letters of ASF and MetLife.
---------------------------------------------------------------------------

    Consistent with our proposal, delinquency, cumulative loss and 
prepayment data for each prior securitized pool or vintage origination 
year, as applicable, is to be presented in periodic increments (e.g., 
monthly or quarterly), to the extent material, over the life of the 
prior securitized pool or vintage origination year. We also are 
establishing a requirement regarding the age of the most recent 
periodic increment to ensure the currency of the data. Under the final 
rule, the most recent periodic increment for the data must be as of a 
date no later than 135 days of first use of the prospectus. For data 
based on quarterly increments, this allows 45 days from the end of the 
most recent quarter to include the data. The 135-day standard is 
consistent with our updating rules for interim financial information 
for non-ABS issuers that are not ``accelerated filers.'' \260\
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    \260\ See, e.g., Rule 3-01 of Regulation S-X (17 CFR 210.3-01) 
and Rule 3-12 of Regulation S-X (17 CFR 210.3-12).
---------------------------------------------------------------------------

    Several commenters also believed that selected material 
characteristics for the prior securitized pools or vintage origination 
years should be provided along with the data to facilitate review and 
to assess comparability.\261\ We are including in the requirement that 
summary information is to be provided for the original characteristics 
of the prior securitized pools or vintage origination years, as 
applicable and material. Commenters provided several examples of 
metrics that could be provided based on the relevant asset type. The 
final rule specifies that while the material summary characteristics 
may vary, these characteristics may include, among other things, the 
following: the number of pool assets; original pool balance; weighted 
average initial pool balance; weighted average interest or note rate; 
weighted average original term; weighted average remaining term, 
weighted average and minimum and maximum standardized credit scores or 
other applicable measure of obligor credit quality; product type; loan 
purpose; loan-to-value information; distribution of assets by loan or 
note rate; and geographic distribution information.
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    \261\ See, e.g., Letters of ABA; ASF; and Auto Group.
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    Based on the comment received, we are not adopting for amortizing 
asset pools our proposal to include a line-item disclosure requirement 
for static pool information for the offered pool itself. However, as we 
discuss more fully in Section III.B.4.a.iii., while we are not 
including a specific disclosure requirement for such information, we 
note there may be instances where failure to provide such information 
would make the data that is presented misleading.\262\ For example, for 
a pool with a material concentration of seasoned assets, disclosure of 
static pool data about the pool itself may be necessary depending on 
whether such data would reveal a trend or pattern concerning one or 
more elements of pool performance and risk that is material and not 
evident from data relating to asset performance otherwise presented and 
such omission makes the information presented misleading.\263\
ii. Revolving Asset Master Trusts
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    \262\ See note 252 above.
    \263\ See Section III.B.3.a. of the Proposing Release.
---------------------------------------------------------------------------

    We received comment that an alternative starting point would be 
more suitable for revolving asset master trusts, such as credit card 
master trusts.\264\ In particular, these commenters argued there could 
be even more concerns about the ``static'' nature of the pool due to 
changes in the master trust revolving asset pool over time and the 
relationship between the sponsor's retained portfolio or other 
securitized pools previously established by the sponsor and the master 
trust asset pool. Instead, additional incremental performance 
information based on asset age for the master trust revolving asset 
pool itself was suggested as a more appropriate starting point. The 
additional disclosure, where material, would allow an investor to 
distinguish performance of newer accounts comprising the master trust 
asset pool from those of more seasoned accounts. Investors also 
suggested presenting static age-related data for payment rate, yield 
and standardized credit scores or

[[Page 1541]]

other applicable measure of obligor credit quality in addition to 
delinquency and loss data, if applicable.\265\
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    \264\ See, e.g., Letter of ASF.
    \265\ Id.
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    For such transactions, we are clarifying that, unless the 
registrant determines that such information is not material, the 
starting point for disclosure is data, to the extent material, 
regarding delinquencies, cumulative losses, prepayments, payment rate, 
yield and standardized credit scores or other applicable measure of 
obligor credit quality, as applicable, in separate increments based on 
the date of origination of the pool assets. While the material 
increments for presenting the performance data may vary, we are 
suggesting, based on comment, that issuers consider presenting such 
data at a minimum in 12-month increments through the first five years 
of the account's life (e.g., 0-12 months, 13-24 months, 25-36 months, 
37-48 months, 49-60 months and 61 months or more). However, as noted 
above for amortizing asset pools, performance data for longer periods, 
in shorter increments or for different pool characteristics may be more 
appropriate depending on the asset class involved.
iii. Alternative Presentations or Other Disclosure
    We have attempted to identify above characteristics that may 
suggest to issuers the appropriate starting point for static pool 
disclosure. However, we recognize that materiality considerations may 
dictate that these starting points may not always be suitable to the 
particular sponsor, asset pool and transaction involved. For example, a 
sponsor may have three years of experience securitizing a particular 
asset type, but the sponsor's experience may have been sporadic, there 
may have been a significant gap in the experience, or the sponsor's 
origination or acquisition program may have materially changed to the 
point such that information about the sponsor's vintage portfolio, as 
well as any explanatory disclosure, may be more appropriate in lieu of 
or in addition to prior pool information. Similarly, for takedowns 
involving a new revolving asset master trust, information about prior 
master trusts by the sponsor or information about the sponsor's vintage 
portfolio, in addition to other explanatory disclosure, may also be 
appropriate in addition to or in lieu of age-related information about 
the offered master trust pool. Also, as we are expanding the ability to 
use master trusts to new asset classes, the same may be true for 
additional asset classes that may be securitized in the future. We 
noted above as well that in some instances static pool data about the 
pool itself may be more appropriate for amortizing asset pools.
    To clarify this point, we are expressly providing in the final rule 
that if the information that would otherwise be required by the 
directed starting point is not material, but alternative static pool 
information (e.g., prior pools, portfolio vintage or asset pool) would 
provide material disclosure, such alternative information is to be 
provided instead. Further, as we stated in the Proposing Release, 
registrants may and are encouraged to provide other explanatory 
information, including disclosure explaining the absence of data.\266\
---------------------------------------------------------------------------

    \266\ As we stated in the Proposing Release, in some instances 
such additional information may be required. See note 252 above.
---------------------------------------------------------------------------

    Several commenters also expressed concern as to application of the 
disclosure requirement in transactions, such as ``rent-a-shelf'' \267\ 
and aggregator transactions, where one or more entities transfer the 
pool assets to an unaffiliated depositor.\268\ In particular, these 
commenters argued that in some instances static pool information for 
one or more entities other than the sponsor may be more appropriate 
than information about the sponsor. In response, we are clarifying that 
static pool information regarding a party or parties other than the 
sponsor may be provided in addition to or in lieu of the contemplated 
information regarding the sponsor if appropriate to provide material 
disclosure.
---------------------------------------------------------------------------

    \267\ A typical ABS ``rent-a-shelf'' transaction is one where 
the sponsor of the transaction transfers the pool assets to an 
unaffiliated depositor for a takedown off of a registration 
statement filed by the unaffiliated depositor, usually for a fee.
    \268\ See, e.g., Letters of ASF and BMA.
---------------------------------------------------------------------------

    We are not including in the final rule the proposed general 
instruction to present static pool data separately based on other pool 
variables. Although as with the rest of our proposal this instruction 
was conditioned on materiality, the majority of commenters objected to 
including the language, arguing that the potential breadth of the 
disclosure that would be required would be too burdensome for 
prospectus disclosure.\269\ Several of these commenters also believed 
the alternative approach we are adopting of requiring material summary 
characteristics for prior securitized pools or vintage origination 
years deemphasized the need for such data stratifications.
---------------------------------------------------------------------------

    \269\ See, e.g., Letters of A&O ABA; ASF; BMA; MBA; Sallie Mae; 
and TMCC.
---------------------------------------------------------------------------

b. Method of Presentation
    Many commenters, including those representing investors, requested 
flexibility in the presentation of required static pool 
information.\270\ In particular, such commenters universally argued for 
the ability to provide such information electronically through an 
Internet Web site. Even under the revised disclosure framework 
suggested by commenters that we are adopting, commenters believed the 
resulting disclosure could nevertheless involve a significant amount of 
statistical information for some issuers with features that would be 
difficult to file electronically on EDGAR as it exists today and 
difficult for investors to use in that format. Commenters noted that 
several issuers already provide performance data through their Web 
sites, although it may not be freely accessible by all investors. In 
addition, a Web site-based approach, these commenters argued, could 
provide greater dynamic functionality and utility both for the ability 
of issuers to present the information and the ability of investors to 
access and analyze the information, including interactive facilities 
for organizing and viewing the information. Moreover, given that much 
of the information for prior securitized pools or the sponsor's 
portfolio would be similar from one transaction to the next, providing 
flexibility to allow the information to be presented in one place for 
multiple prospectuses would reduce the burdens of repeating the data 
for each prospectus. In addition, allowing a single place for 
presentation of the information would provide efficiencies for keeping 
the data updated and current for future transactions.
---------------------------------------------------------------------------

    \270\ See, e.g., Letters of ABA; ASF; Auto Group; BMA; 
Citigroup; JPMorganChase; NYCBA; and TMCC.
---------------------------------------------------------------------------

    We wish to encourage efficient means of providing information to 
investors. Advances in technology, particularly the Internet, have 
greatly increased efficiencies in the ability to gather, process, 
present and analyze information of this type.\271\ Both issuers and 
investors have expressed a preference for Web site disclosure of such 
information. Accordingly, we are providing issuers with alternatives 
for providing the required information for inclusion in the prospectus, 
as discussed below.
---------------------------------------------------------------------------

    \271\ See also, e.g., the Offering Process Release.
---------------------------------------------------------------------------

    First, as is the case today, the issuer could physically include 
the information in the prospectus or, for ABS offerings on Form S-3, 
incorporate the information by reference from a filed Exchange Act 
report. Some commenters

[[Page 1542]]

also suggested flexibility to provide the information in an electronic 
format together with the prospectus, such as a CD-ROM delivered with 
the prospectus. We have previously provided guidance on the use of such 
electronic media in providing prospectus disclosure.\272\ This guidance 
continues to apply. However, as discussed below, we also are providing 
separate and specific guidance for providing the information through a 
Web site.
---------------------------------------------------------------------------

    \272\ See Release No. 33-7233 (Oct. 6, 1995) [60 FR 53458]; 
Release No. 33-7288 (May 9, 1996) [61 FR 24644]; Release No. 33-7856 
(Apr. 28, 2000) [65 FR 25843]; and Rule 304 of Regulation S-T (17 
CFR 232.304).
---------------------------------------------------------------------------

    The second alternative for providing static pool information 
involves a temporary filing accommodation under our rules governing 
EDGAR filing that applies until December 31, 2009 and permits the 
posting of the information on an Internet Web site, subject to the 
following conditions.\273\ As discussed further below, if these 
conditions are met, the information will be deemed to be included in 
the prospectus and need not be physically repeated in the prospectus or 
in a Form 8-K report incorporated by reference into the prospectus and 
registration statement. It will therefore be subject to all liability 
provisions applicable to prospectuses and registration statements, 
including Section 11 of the Securities Act.\274\
---------------------------------------------------------------------------

    \273\ See Rule 312 of Regulation S-T.
    \274\ 15 U.S.C. 77k.
---------------------------------------------------------------------------

    First, the prospectus at effectiveness shall disclose the intention 
to provide the information through a Web site and the final prospectus 
shall provide the specific Internet address where the information is 
posted.\275\ This alerts investors to the location of the information. 
The specificity of the Internet address should be directly to the 
information that is to be deemed part of the prospectus.\276\ The Web 
site used for disclosure of the information need not be a Web site 
maintained by the issuer, although, as noted below, there are 
conditions for the retention and availability of the information and 
the information provided through the Web site will be deemed part of 
the prospectus included in the registration statement.
---------------------------------------------------------------------------

    \275\ Note that the EDGAR System prohibits the use of active 
HTML hypertext links to external Web sites other than the SEC Web 
site. See Rule 105(b) of Regulation S-T (17 CFR 232.105(b)). 
Accordingly, the reference to the Internet address should be 
presented in the EDGAR submission as an inactive textual reference 
to avoid a suspension of the submission. Further, because new Rule 
312 of Regulation S-T specifically provides for the availability of 
this accommodation to satisfy the disclosure requirement under 
identified conditions, which includes, among other conditions, an 
identification in the filing of an Internet address (which will not 
be an HTML hypertext link), Rule 105(c) of Regulation S-T (which 
prohibits satisfying reporting obligations through an external HTML 
hypertext link) is not implicated. Rule 105(c) of Regulation S-T 
continues to prohibit a filer from satisfying its disclosure 
requirements through impermissible hypertext links or references to 
external Web sites. However, like Rule 105(c) of Regulation S-T and 
as further explained in the text, the inclusion of the address in 
response to Rule 312 of Regulation S-T will cause the filer to be 
subject to the civil liability and anti-fraud provisions of the 
federal securities laws with reference to the information contained 
in the Internet address.
    \276\ See also the subsequent discussion in notes 281, 282 and 
their accompanying text. Our final rules are designed to provide 
issuers flexibility regarding the methods of presenting the 
information through a Web site.
---------------------------------------------------------------------------

    Second, the information shall be provided through the designated 
Web site unrestricted as to access and free of charge. As we have 
stated in our other releases regarding Web site posting,\277\ the 
medium to access the information must not be so burdensome that the 
intended users cannot effectively access the information provided. In 
addition, as the information provided through the Web site will be 
deemed a portion of the prospectus no different than if the information 
was physically included in the prospectus itself and available on 
EDGAR, we do not believe it would be appropriate to require prior user 
registration to access the Web site information.
---------------------------------------------------------------------------

    \277\ See, e.g., Release No. 33-7233, at n. 24 and the 
accompanying text; Release No. 33-8128 (Sep. 16, 2002) [67 FR 58480] 
and Release No. 33-8230 (May 7, 2003) [68 FR 25788].
---------------------------------------------------------------------------

    Third, the information shall remain available on the Web site for a 
period of not less than five years. If a subsequent update or change is 
made to the information, the date of such update or change shall be 
clearly indicated on the Web site and the registrant shall undertake to 
provide to any person without charge, upon request, a copy of the 
information as of the date of the prospectus. In addition, the 
registrant shall retain all versions of the information posted through 
the Web site address for a period of not less than five years in a form 
that permits delivery to an investor or the Commission, and the 
registrant shall furnish to the Commission or its staff upon request a 
copy of any or all information retained pursuant to this requirement. 
The five-year period shall commence from the filing date of the 
prospectus, or the date of first use of the prospectus, whichever is 
earlier. These record retention provisions are consistent with record 
retention requirements for information retained by the issuer regarding 
Securities Act registration statements.\278\ The requirement to keep 
the information posted ensures that, no different than if the 
information was physically included in the prospectus, an investor has 
access to the information at all times during such period.
---------------------------------------------------------------------------

    \278\ See, e.g., Securities Act Rule 428 (17 CFR 230.428); and 
Rule 304 of Regulation S-T (17 CFR 232.304).
---------------------------------------------------------------------------

    Fourth, the registration statement shall contain an undertaking 
that, except as discussed below regarding certain information relating 
to periods before the compliance date of the new disclosure 
requirement, the information provided through the specified Internet 
address is deemed to be a part of the prospectus included in the 
registration statement for the asset-backed securities.\279\ As the 
information will be deemed to be included in that prospectus no 
different than if the information was physically included in the 
prospectus, disclaimers of liability or responsibility for the 
information are not appropriate.\280\
---------------------------------------------------------------------------

    \279\ See also amendments to Item 512(l) of Regulation S-K (17 
CFR 229.512(l)).
    \280\ For more information regarding inappropriate disclaimers 
or legends, see Section III.C.1.d.
---------------------------------------------------------------------------

    The information that will be deemed to be part of the prospectus 
included in the registration statement as a result of the undertaking 
is limited to the information provided through the specified Web site 
address.\281\ The reference to the specified Web site address would not 
mean, standing alone, that other information, including additional 
static pool information, available elsewhere on the Web site but not 
available through the Web site address would automatically be deemed to 
be a part of that prospectus.\282\ As such, issuers electing the Web 
site disclosure option should ensure that the portion of the Web site 
used to disclose the information that is to be included as part of the 
prospectus does not contain references or hyperlinks to other portions 
of the Web site not to be included as part of the prospectus (for 
example, to the general corporate home page of the sponsor). However, 
for purposes of this requirement, we believe the Internet address to be 
disclosed in the prospectus would not necessarily be required to be to 
a separate address for each address that is a ``cul-de-sac.'' There may 
be circumstances where the

[[Page 1543]]

reference could be to a general index or introduction page for static 
pool data for multiple offerings with links on that page clearly 
indicating the information to be provided for each prospectus.\283\ 
Unless the registrant or another offering participant otherwise acts to 
include the other static pool information as part of the prospectus 
included in the registration statement, the reference to the other 
information on the index or introduction page will not, by itself, make 
that information part of that prospectus or an offer for the respective 
asset-backed securities.\284\
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    \281\ The static pool information could be provided through an 
address to a webpage that provides links or access to additional 
webpages that together constitutes the required information. All 
such information would be deemed a part of the prospectus.
    \282\ For additional interpretive guidance regarding the 
treatment of other Web site information during a registered offering 
and issuer responsibility for hyperlinked information, see Release 
No. 33-7856. For recent proposals in this area and a discussion of 
when other information by an issuer is considered an offering 
communication, see the Offering Process Release.
    \283\ Such an index or introduction page is a possible example 
of how the information might under appropriate circumstances be 
provided through a Web site. If market participants need additional 
guidance regarding the operation of the Web site disclosure option 
for other considered alternatives, please feel free to contact the 
staff.
    \284\ Note that if an offering participant is otherwise using 
the information as part of the offering process, such information 
might be considered an ``offer'' and a ``prospectus,'' regardless of 
whether it is deemed to be part of the prospectus included in the 
registration statement discussed in the text. For more information, 
see the Offering Process Release.
---------------------------------------------------------------------------

    While recognizing the desire to provide a potentially more cost-
effective and useful method of providing static pool information 
through Web sites, nevertheless we continue to believe at some point 
for future transactions the information should also be submitted with 
the Commission in some fashion, provided this does not result in 
investors not receiving the information in the form they have 
requested. Accordingly, we are providing that the filing accommodation 
will apply with respect to filings filed on or before December 31, 
2009. We are directing our staff to consult with the EDGAR contractor, 
EDGAR filing agents, issuers, investors and other market participants 
to consider how such information can be filed so it is also with the 
Commission in a cost-effective manner without undue burden or expense 
and without affecting the result we achieve today that realizes the 
overriding objective of allowing issuers to be able to provide the data 
in the form expressed as most desirable by commenters. We wish to 
assure market participants that any such filing mechanism to replace or 
supplement the temporary accommodation for filings after December 31, 
2009 will not undercut these objectives. As a result, this could 
include, if necessary, extending the accommodation or, if it appears 
that an EDGAR solution would not be feasible in that timeframe, 
alternative methods of having the information submitted to the 
Commission.
    Several commenters expressed concern over applying Securities Act 
liability standards \285\ to static pool information, arguing instead 
for application of only general antifraud liability.\286\ We note that 
investors expressed uniform support for the value of static pool 
information in making informed investment decisions.\287\ We believe it 
is appropriate for such information used as part of the offering 
process to be subject to Securities Act liability requirements for the 
accuracy and reliability of the information, regardless of the medium 
in which the information is presented. Similarly, just because the 
information also may be prepared and used for additional corporate 
purposes does not mean that it should be treated differently from other 
offering information when used in connection with the offering.
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    \285\ See Sections 11, 12(a)(2) and 17(a) of the Securities Act.
    \286\ See, e.g., Letters of ABA; ASF; BMA; and NYCBA.
    \287\ See note 247 above.
---------------------------------------------------------------------------

    Some of these commenters, due to concerns about issuer 
responsibility for materiality judgments, also requested a liability 
safe harbor for the selection of static pool information similar to 
that provided for forward-looking information.\288\ However, many 
disclosure requirements under the Federal securities laws are based on 
a materiality standard without such a safe harbor.\289\ Further, unlike 
forward-looking information relating to subjective events that may 
occur in the future, static pool information is by definition 
historical performance information. We also are not persuaded that the 
lack of existing market practice for the disclosure of static pool 
information justifies excluding such disclosure from Securities Act 
liability requirements. We note from the comments received that issuers 
already are developing standards for static pool disclosure for various 
asset classes. We are, however, providing accommodations, discussed 
below, for data regarding certain historical transactions and periods 
before the compliance date of the disclosure requirement.
---------------------------------------------------------------------------

    \288\ See, e.g., Letters of ABA; ASF; and BMA.
    \289\ In particular, see Item 303 of Regulation S-K (17 CFR 
229.303) regarding Management's Discussion and Analysis of Results 
of Operations.
---------------------------------------------------------------------------

    As discussed further in Section III.F., we are providing an 
extended transition period for compliance with the disclosure 
requirements in Regulation AB, including the static pool disclosure 
requirements. This extended period allows issuers time to implement 
policies, processes and procedures to adapt to the new disclosure 
requirements. For offerings covered by the new rules and forms, 
material static pool information will be required for the time periods 
identified above (e.g., previous five years). We believe this approach 
minimizes the amount of time before investors can begin to incorporate 
the information into their investment decisions. Of course, registrants 
voluntarily may comply with the new disclosure requirement before the 
compliance date, and we encourage them to do so if practicable.
    However, we recognize that issuers may not have been collecting the 
necessary data for periods before the implementation date of the new 
rules. Even if they had been collecting the necessary information, the 
information may not have been collected under processes and controls 
with a view toward disclosure in a prospectus. Similarly, several 
commenters expressed concern regarding historical data before the 
implementation date of the rules that may not exist or cannot be 
provided without unreasonable effort or expense.\290\
---------------------------------------------------------------------------

    \290\ See, e.g., Letters of ABA; ASF; and BMA.
---------------------------------------------------------------------------

    Given that we are establishing a requirement for disclosure of 
material static pool information as well as an extended transition 
period to prepare for such disclosure, we believe many commenter 
concerns regarding availability and access to the data on a going 
forward basis will not be applicable. However, we are addressing 
commenter concerns in two ways to address the following static pool 
information:
     For static pool information regarding prior securitized 
pools of the sponsor that do not include the currently offered pool, 
information regarding prior securitized pools that were established 
before January 1, 2006; and
     For static pool information regarding the currently 
offered pool, information about the pool for periods before January 1, 
2006.

First, we are providing in the Item that if any of such information is 
unknown and not available to the registrant without unreasonable effort 
or expense, such information may be omitted, provided the registrant 
provides the information on the subject it possesses or can acquire 
without unreasonable effort or expense, and the registrant includes a 
statement showing that unreasonable effort or expense would be involved 
in obtaining the omitted information.
    Second, even for such information that is available or accessible 
without

[[Page 1544]]

unreasonable effort of expense, given concerns about proper due 
diligence regarding such information, we are specifying that the pre-
January 1, 2006 information identified above provided in response to 
the static pool information disclosure requirement will not be deemed 
to be a prospectus or part of a prospectus for the asset-backed 
securities, nor shall such information be deemed to be part of the 
registration statement for the asset-backed securities. Of course, such 
information will remain subject to the general antifraud provisions of 
the Securities Act and Exchange Act.\291\ In addition, the prospectus 
must disclose that such information is not deemed to be part of that 
prospectus or the registration statement for the asset-backed 
securities in order to alert investors.
---------------------------------------------------------------------------

    \291\ See 15 U.S.C. 77q(a) and 78j(b) and Exchange Act Rule 10b-
5.
---------------------------------------------------------------------------

5. 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 are not establishing 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, we continue to believe, as 
proposed, that there are certain broad categories of disclosure and 
examples of common characteristics that can be identified. Of course, 
the actual disclosure to be provided must be tailored to the asset type 
and asset pool involved for the particular offering and resulting 
determinations as to the materiality of information.
a. Pool Composition
    As proposed, certain general information regarding the asset pool 
will 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.\292\ In addition, the solicitation, credit-granting or 
underwriting criteria used to originate or purchase the pool assets 
must be described. The selection criteria for the asset pool also must 
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 are 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.\293\
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    \292\ See Item 1111 of Regulation AB.
    \293\ As proposed, an instruction to the Item would specify that 
unless a material concentration of assets exists, it is not 
necessary to provide details of the laws in each jurisdiction. Even 
in that case, a legalistic description or recitation of the laws or 
regulations in a particular jurisdiction is not required.
---------------------------------------------------------------------------

    As information about the asset pool necessarily includes 
statistical information, the need for clear presentations emphasizing 
material information is important. Appropriate introductory and 
explanatory information is to be provided to introduce characteristics, 
the methodology used in determining or calculating the characteristics 
and any terms or abbreviations used. For example, this would include 
explaining the definitions and methodologies for various categories 
provided (e.g., documentation guidelines for each loan documentation 
type), the components and method of calculating variables (e.g., loan-
to-value or debt-to-income ratios) and the date used for determining 
statistical data (e.g., if not the cut-off date), as applicable. As is 
the case today, statistical information is to be presented in tabular 
or graphical format, if it will aid understanding. Statistical 
information also is to 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.\294\
---------------------------------------------------------------------------

    \294\ As noted in the Item, in making any calculations regarding 
overall pool balances, any funds set aside for a prefunding account 
are to 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, statistical information for each 
group or range also should be presented by other material variables, 
such as, average balance, weighted average coupon, average age and 
remaining term, average loan-to-value or similar ratio, and weighted 
average standardized 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 presented regarding 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.
    As discussed above, we have made several technical and clarifying 
revisions in response to comment to the proposed list of pool 
characteristics. While again recognizing that the characteristics that 
are material will vary depending on the nature of the pool assets, 
examples of illustrative characteristics in the disclosure item 
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.
     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 distribution, 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); and type and/or use of underlying property, 
product or collateral.
     If a receivable or other financial asset that arises under 
a revolving account, such as a credit card receivable: Monthly payment 
rate; maximum credit lines; average account balance; yield percentages; 
type of asset; finance charges, fees and other income earned; balance 
reductions granted for refunds, returns, fraudulent charges or other 
reasons; 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.
     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.
    In addition to the above, we are retaining a reference in the 
disclosure list to standardized credit scores of obligors and other 
information regarding obligor credit quality. While disclosure of 
standardized credit scores is typical today for several consumer asset 
classes, commenters representing issuers from other consumer asset 
classes that do not typically disclose such information, although 
generally agreeing that material information surrounding the

[[Page 1545]]

credit underwriting process and data used to determine suitability and 
extension of credit should be disclosed, nevertheless expressed 
reticence to the proposed reference to standardized credit scores.\295\ 
However, comment from investors uniformly emphasized the importance of 
such data as an indicator of potential performance, similar to other 
variables such as loan-to-value and geographic origination, even though 
the data may not have been, like these other variables, the primary 
basis for the initial credit decision.\296\ Accordingly, we are 
retaining the reference to standardized credit scores.\297\
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    \295\ See, e.g., Letters of ASF; AHFC; MBNA; and TMCC.
    \296\ See, e.g., Letter of ASF.
    \297\ As proposed, the reference is to standardized credit 
scores, not proprietary internally-derived credit scores of the 
originator. However, as discussed above, a description of the 
material solicitation, credit-granting and underwriting criteria 
used to originate or purchases the pool assets is to be described.
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    Our proposed disclosure item also included disclosure about the 
geographic distribution of the pool assets, such as by state or other 
material geographic region. This aspect of the proposal caused some 
confusion among commenters as to the extent of disclosure that would be 
required.\298\ We are clarifying this aspect of the disclosure 
item.\299\ We are retaining a requirement for disclosure regarding the 
geographic distribution of the pool assets.\300\ In addition, we are 
retaining the aspect of the proposal, which is typical for transactions 
today, that 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. To avoid confusion, we are not adopting the other part of our 
proposed disclosure item that suggested separate statistical data 
should be provided for each 10% geographic concentration according to 
the factors or variables listed above for the entire asset pool. 
However, if additional material information about the geographic 
concentration would be necessary to make the disclosure otherwise 
provided not misleading, such disclosure would be required.\301\ In 
addition to geographic concentrations, the disclosure requirement also 
references 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.
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    \298\ See, e.g., Letters of ABA; AFSA; ASF; Citigroup; and TMCC.
    \299\ As proposed, an instruction to this Item specifies 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.
    \300\ See, e.g., Kevin Donovan, ``Zimmerman Outlines Risks in 
HELs,'' Asset Securitization Report (Sep. 20, 2004).
    \301\ See note 252 above.
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    Consistent with existing practice, delinquency and loss information 
for the pool also will be required. As proposed, an item of general 
applicability for Regulation AB will provide guidance regarding the 
presentation of such information.\302\ We received comment on the 
proposed minimum distributional groupings, or ``buckets,'' that are to 
be used in presenting delinquency information in addition to overall 
delinquency percentages.\303\ We are clarifying that, at a minimum, 
delinquency experience is to be presented in 30 or 31 day increments, 
as applicable, beginning at least with assets that are 30 or 31 days 
delinquent, as applicable, through the point that assets are written 
off or charged off as uncollectable. Such information is to be 
presented at a minimum by number of accounts and dollar amount. 
Disclosure also will be required, as proposed, on how delinquencies, 
charge-offs and uncollectable accounts are defined or determined, 
addressing the effect of any grace period, re-aging, restructure, 
partial payments considered current or other practices on delinquency 
experience.\304\ We believe this would include separate information on 
the amount of pool assets that had been previously re-aged, if 
material.
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    \302\ See Item 1100(b) of Regulation AB.
    \303\ See, e.g., Letters of ABA; ASF; Auto Group; MBA; and 
MetLife.
    \304\ Such disclosure should include the policies being used for 
purposes of the non-performing and delinquency thresholds in the 
definition of ``asset-backed security.''
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    In a commercial mortgage-backed securitization, given the 
importance of the underlying properties, we proposed a separate list of 
illustrative disclosure items for these assets. The proposed disclosure 
was consistent with similar disclosure required by existing Form S-11 
for the registration of offerings of securities for certain real estate 
companies. We received additional comment to tailor the disclosure 
further for CMBS transactions, particularly for significant loans in 
the pool.\305\ Under the final rule, the following is to be provided, 
to the extent material.\306\ For all commercial mortgages:
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    \305\ See, e.g., Letter of CMSA.
    \306\ Similar to Form S-11, an instruction to the disclosure 
item specifies that what is required under the item 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.
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     Location and present use of each mortgaged property;
     Net operating income and net cash flow information, as 
well as the components of such items, for each mortgaged property;
     Current occupancy rates for each mortgaged property;
     Identity, square feet occupied by and lease expiration 
dates for the three largest tenants at each mortgaged property; and
     The nature and amount of all other material mortgages, 
liens or encumbrances against such properties and their priority.
    In addition, the following additional information is to be provided 
for each commercial mortgage that represents, by dollar value, 10% or 
more of the asset pool, as measured as of the cut-off date:
     Proposed renovation, improvement or development programs.
     Competitive conditions.
     Management of the properties, historical occupancy rates 
and property uses.
     Further information about material tenants and lease 
terms.
b. Sources of Pool Cash Flow
    As we explained in the Proposing Release, cash flows to support the 
asset-backed securities in some transactions 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 will be 
required, as proposed, 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 must be described.
    As discussed in Section III.A.2.e., we are adopting our proposed 
requirements for additional specific disclosures in lease backed ABS if 
a portion of the securitized pool balance is attributable to the 
residual values of the physical property underlying the leases. Such 
disclosure includes information on how residual values are estimated 
and derived, statistical information regarding estimated residual 
values and historical statistics on turn-in rates and

[[Page 1546]]

residual value realization rates. Information also will 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 will be required of the effects if not enough proceeds are 
received from the realization of residual values, whether there exists 
any provisions to address such a contingency, as well as how any cash 
flow greater than that necessary to repay security holders will be 
allocated.
c. Changes to the Asset Pool
    As discussed in Section III.A.2.f., we are adopting, as proposed, 
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 includes:
     The term or duration of any prefunding or revolving 
period.
     Aggregate amounts and percentages involved in the 
prefunding or revolving period, if applicable.
     Triggers that would limit 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.
     Whether, and if so, 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 assets that 
do comply with the representations and warranties for that non-
complying asset. As proposed, and consistent with current practice, 
disclosure of these rights and remedies will be required, as well as 
disclosure 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.
6. Transaction Structure
    As proposed, existing Item 202 of Regulation S-K will continue to 
provide the core disclosure requirements for describing the securities 
being offered, and new Item 1113 of Regulation AB will provide 
additional guidance consistent with existing practice for preparing 
this disclosure for asset-backed securities. For example, the item 
clarifies 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 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 is 
required. Such a description is to 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 are 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.\307\ To provide 
increased transparency of this information in a single location, we are 
adopting our proposal for a separate table with an itemized list of all 
estimated fees and expenses to be paid or payable out of the cash flows 
for the transaction. As proposed, the fee and expense table is to 
indicate for each item the 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 is not fixed, the formula or method of 
calculation used to determine the fee or expense is to be provided. The 
tabular presentation should 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, such 
as any restrictions or limits on fees or whether the estimate may 
change in certain instances, such as in the event of an event of 
default (and how the fees would change in such an instance or the 
factors that would affect the change). In addition, through footnote or 
other accompanying narrative disclosure, disclosure is required of any, 
and if so how, fees or expenses could be changed without notice to, or 
approval by, security holders and any restrictions on the ability to 
change a fee or expense amount, such as due to a change in transaction 
party.
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    \307\ See, e.g., notes 229 and 239 above. See also Fitch, Inc., 
``Credit Card ABS Servicing Fee Adequacy and Priority'' (Sep. 15, 
2004).
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    Other disclosures regarding the transaction structure include 
information on the frequency of distribution dates and 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. 
We also are retaining information on the ownership of any residual or 
retained interests to the cash flows, as well as the disposition of 
excess cash flow, although we are making revisions in response to 
comment.\308\ In particular regarding residual ownership, the identity 
of the residual holder must be disclosed only if the residual holder is 
an affiliated party or if the residual holder has rights that may alter 
the transaction structure beyond receipt of residual or excess cash 
flows. Finally, disclosure will be required 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.
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    \308\ See, e.g., Letters of ABA; ASF; BMA; JPMorganChase; and 
MetLife.
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    As with any fixed-income security, optional or mandatory redemption 
or termination provisions are to be described, including any ``clean 
up'' calls if the principal balance of the pool assets reaches a 
specified minimum level, with minor revisions to our

[[Page 1547]]

proposal in response to comment.\309\ 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.\310\ They are 
typically conducted only when less than 10% of the outstanding pool 
balance is outstanding. As proposed, we are codifying the existing 
staff position that the title of any class of securities with an 
optional 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.''\311\ This is to 
alert investors that the callable feature is greater than a typical ABS 
``clean up'' call. In addition, in response to comment,\312\ we are 
clarifying that in the case of a master trust, a title of a class of 
securities must include the word ``callable'' when an optional 
redemption or termination feature may be exercised when 25% or more of 
the original principal balance of the particular series in which the 
class was issued is still outstanding, in lieu of the original 
principal balance of the entire master trust asset pool.
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    \309\ See, e.g., Letter of ABA.
    \310\ See Frank J. Fabozzi et al., The Handbook of Nonagency 
Mortgage-Backed Securities, at 165 (1997).
    \311\ In response to comment, we are not including a mandatory 
redemption or termination features in this requirement. See, e.g., 
Letter of ABA. However, structuring a redemption or termination 
feature as ``mandatory,'' but with the ability to waive or opt-out 
of the redemption or termination will still constitute an optional 
redemption or termination feature subject to the ``callable'' 
titling requirement.
    \312\ See, e.g., Letters of ASF and Capital One.
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    As proposed, we are adopting additional disclosure requirements if 
the transaction structure involves a master trust. For example, 
information will 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;
     The terms of any security holder approval or notification 
of any additional issuance; and
     Which party has the authority to determine whether 
additional securities may be issued.
    In addition, if there are conditions to such additional issuance, 
whether or not there will be an independent verification of such 
person's exercise of authority or determinations.\313\
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    \313\ This final bullet was included to conform to the similar 
disclosure for the other ``discrete'' pool exceptions (prefunding 
and revolving periods).
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    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. As proposed, a description is required 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 must, to the extent material, explain 
the degree to which each class of securities is sensitive to changes in 
the rate of payment on the pool assets, and describe the consequences 
of such changing rate of payment.\314\ 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 must be described, as well as whether 
any class protects other classes from the effects of the uncertain 
timing of cash flow.
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    \314\ This includes, for example, information on interest rate 
sensitivity.
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7. Significant Obligors
    As we explained in the Proposing Release, a securitized asset pool 
typically represents obligations of a large enough number of separate 
obligors such that information on any individual obligor may not be 
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%.\315\ Commenters supported our proposals to codify these 
longstanding practices.\316\
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    \315\ Topic 1.I. to Release No. SAB-103.
    \316\ See, e.g., Letters of ABA; CMSA; and MetLife.
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    As proposed, we 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 definition 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 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 is required, consistent with existing practice and our 
proposal.\317\ Descriptive information includes 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 and the agreements with the obligor involving the pool 
assets.
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    \317\ See Item 1112 of Regulation AB.
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    Also consistent with current practice and our proposal, different 
levels of financial information will be required depending upon the 
level of concentration.\318\ If the pool assets relating to a 
significant obligor represent 10% or more, but less than 20%, of the 
asset pool, selected financial data required by Item 301 of Regulation 
S-

[[Page 1548]]

K must be provided.\319\ If the pool assets relating to the significant 
obligor represent 20% or more of the asset pool, audited financial 
statements meeting the requirements of Regulation S-X are 
required.\320\ As we noted in the Proposing Release, both thresholds 
represent longstanding breakpoints in Commission and staff requirements 
for determining the level of required financial disclosure.\321\ 
Section III.B.10. discusses 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.
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    \318\ See, e.g., Section VIII.B.3.a.ii. of the Division of 
Corporation Finance's ``Current Issues and Rulemaking Projects'' 
(Nov. 14, 2000).
    \319\ 17 CFR 229.301. We also are clarifying in response to 
comment that for a significant obligor under Item 1100(k)(2) of 
Regulation AB, only net operating income for the most recent fiscal 
year and interim period is required. We also are providing a 
separate instruction if the significant obligor is a foreign 
business clarifying how the requirements may be complied with for 
such entities.
    \320\ Existing practices regarding financial statements that 
meet the requirements of Regulation S-X, including applicability of 
requirements for real estate properties, will continue to apply. 
See, e.g., Rule 3-14 of Regulation S-X (17 CFR 210.3-14).
    \321\ See, e.g., note 315 above.
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    As proposed, we are adopting instructions to address exceptions to 
the requirement to provide financial information regarding a 
significant obligor. For example, no financial information is 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 is 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 \322\ regarding the foreign government can be incorporated by 
reference from a Commission filing.\323\ 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 
disclosure is required pursuant to Items 1104-1115, 1117 and 1119 of 
Regulation AB regarding such asset-backed securities. However, if the 
disclosure about the asset-backed securities is required in a Form 10-K 
or Form 10-D, the information required by General Instruction J. of 
Form 10-K regarding such asset-backed securities is to be provided 
instead for the period for which the last Form 10-K of the asset-backed 
securities was due (or would have been due if such asset-backed 
securities are not subject to Exchange Act reporting requirements).
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    \322\ 15 U.S.C. 77aa.
    \323\ For example, a Form 18-K (17 CFR 249.318) or a Securities 
Act registration statement or filed prospectus.
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8. 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 or 
support.
    We proposed a unified disclosure item for all such methods of 
enhancement and support, to the extent material, regardless of form. As 
we noted in the Proposing Release, our disclosure requirements were 
intended to cover all providers of external credit or liquidity 
enhancement, including 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.
    In addition, similar to significant obligors and consistent with 
existing practice, we proposed that if the enhancement or other support 
by a particular entity or group of affiliated entities reached a 
certain level of concentration, additional disclosures, including 
financial disclosures, would be required. We also proposed a unified 
method for determining concentration based on whether the enhancement 
or support provider was liable or contingently liable to provide 
payments regarding cash flows supporting any offered class of asset-
backed securities. Similar to significant obligors and existing 
practice, we proposed 10% and 20% breakpoints for determining the level 
of financial information that would be required.
    We received substantial comment on our proposed unified approach. 
While generally agreeing with the proposal for most forms of 
enhancement or support, such as guarantees and bond insurance, many 
commenters believed the proposed approach was not appropriate for 
determining financial significance for all forms of such enhancement or 
support, in particular for counterparties of certain derivative 
instruments such as interest rate and currency swaps.\324\ According to 
the commenters, this is because for some swaps, such as uncapped 
interest rate or currency swaps, a test based on contingent liability 
would require a measurement against maximum potential exposure, which 
would always result in financial disclosures regarding the swap 
counterparties. Such a result, the commenters argued, was against 
prevailing market practice and would be burdensome.
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    \324\ See, e.g., ABA; ASFA; ASF; Auto Group; BMA; Capital One; 
ESF; JPMorganChase; MBNA; NYCBA; Sallie Mae; and TMCC.
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    Several commenters suggested treating such derivative instruments 
differently from other forms of enhancement or support and suggested 
alternatives, such as using alternate tests for significance or 
alternate disclosures in lieu of any significance test. After 
evaluating the comments, we are separating the treatment and method of 
determining disclosure for such counterparties from other providers of 
enhancement or support for the ABS.\325\ Derivatives, such as interest 
rate and currency swaps, that are used to alter the payment 
characteristics of the cashflows from the issuing entity and whose 
primary purpose is not to provide credit enhancement related to the 
pool assets or the ABS will have their own disclosure item and 
disclosure breakpoints. As noted in Section III.A.2.a., however, there 
are certain derivative instruments that could be structured such that 
their primary purpose is to provide credit enhancement for asset-backed 
securities.\326\ These derivatives will continue to be treated the same 
as other forms of enhancement or support, as proposed.\327\
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    \325\ As with significant obligors, however, if the same party, 
or its affiliate, is providing multiple forms of enhancement or 
support, the exposure is to be aggregated and considered together in 
determining significance levels.
    \326\ See, e.g., note 68 above.
    \327\ As discussed in Section III.A.2.a., synthetic 
securitization transactions do not qualify for the ABS regime we 
adopt today. If a registration and disclosure framework is developed 
for synthetic securitizations, the approach for valuing and 
disclosure required regarding a swap or a derivative in that 
transaction may differ from either of these two approaches.
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i. Forms of Enhancement and Support Other Than Certain Derivative 
Instruments
    Accordingly, with the exception of the derivative instruments as 
discussed above, we are adopting our proposed disclosure item for other 
methods of enhancement or support substantially as

[[Page 1549]]

proposed.\328\ As proposed, the final item will encompass disclosure, 
to the extent material, regarding any of the following: \329\
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    \328\ See Item 1114 of Regulation AB.
    \329\ As we stated in the Proposing Release, 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.
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     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 whose primary purpose is to provide credit 
enhancement related to pool assets or the asset-backed securities; 
\330\ and
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    \330\ Instruction to both Item 1114(a) and Item 1115 of 
Regulation AB provide that those items should not be construed as 
allowing anything other than an asset-backed security whose payment 
is based primarily by reference to the performance of the 
receivables or other financial assets in the asset pool. 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 67 and the 
accompanying text.
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     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 the agreement to provide such 
enhancement or support is 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 regarding substitution of 
enhancement also must be disclosed. The agreement relating to the 
material enhancement or support must be filed as an exhibit to the 
filing.
    If an entity or group of affiliated entities providing enhancement 
or other support as listed above 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, will be required. In addition to the 
identity of the enhancement provider, the descriptive information 
includes its organizational form and the general character of its 
business.
    Regarding the level of financial information required, we are 
adopting the proposed 10% and 20% breakpoints currently used. In 
particular, if any entity or group of affiliated entities that provided 
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 offered class of the 
asset-backed securities, selected financial data required by Item 301 
of Regulation S-K must be provided. If the entity or group of 
affiliated entities is liable or contingently liable to provide 
payments representing 20% or more of the cash flow supporting any 
offered class of the asset-backed securities, audited financial 
statements meeting the requirements of Regulation S-X are required. As 
with financial disclosure regarding significant obligors, Section 
III.B.10. discusses alternative methods that may be available to 
incorporate the information by reference. We also are adopting 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.\331\
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    \331\ We also are providing separate instructions in Items 1114 
and 1115, similar to the instruction for significant obligors, if 
the enhancement provider is a foreign business.
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    In response to comment, we also are adopting an instruction if the 
enhancement provider is a guarantee agency under the Higher Education 
Act of 1965 for student loans under the Federal Family Education Loan 
Program (FFELP).\332\ Due to the structure of the FFELP program, 
including reinsurance by the U.S. Department of Education, alternate 
statistical information about a significant guarantee agency has been 
permitted by the staff in lieu of the financial information discussed 
above. Accordingly, the instruction provides that if the pool assets 
are FFELP student loans and the enhancement provider for the pool 
assets is a guarantee agency under the Higher Education Act, the 
following information may be provided instead: \333\
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    \332\ See, e.g., Letter of Sallie Mae.
    \333\ Of course, as with other parties, to the extent disclosure 
of additional information about the guarantee agency would be 
necessary to make the required disclosure, in the light of the 
circumstances under which they are made, not misleading, such 
disclosure also would be required. See note 252 above.
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     The number of pool assets and aggregate outstanding 
principal balance of pool assets guaranteed by the guarantee agency 
(both by number and percentage of the asset pool as of the cut-off date 
or other applicable date).
     Disclosure of the following with respect to the guarantee 
agency, as applicable, including a brief description regarding the 
method of calculation, covering at least five federal fiscal years:
     Aggregate principle amount of all student loans 
guaranteed.
     Reserve ratio.
     Recovery rate.
     Loss rate.
     Claims rate.
ii. Derivative Instruments Whose Primary Purpose Is Not To Provide 
Credit Enhancement
    As discussed above, we are adopting a separate disclosure item for 
derivatives, such as interest rate and currency swaps, that are used to 
alter the payment characteristics of the cashflows from the issuing 
entity and whose primary purpose is not to provide credit 
enhancement.\334\ For all such instruments, basic information about the 
derivative counterparty is required, including the name of the 
counterparty, its organizational form and the general character of its 
business. Disclosure of the material terms of the instrument is 
required, including any limits on the timing or amount of payments or 
any conditions to payments. Provisions regarding substitution of the 
instrument also must be disclosed. The agreement relating to derivative 
instrument must be filed as an exhibit.
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    \334\ See Item 1115 of Regulation AB.
---------------------------------------------------------------------------

    With respect to determining whether additional financial 
information is required regarding the derivative counterparty, several 
commenters noted that participants in the derivatives markets routinely 
evaluate the maximum probable exposure of a counterparty, such as in 
order to make a credit decision as to counterparty risk or set required 
collateral levels.\335\ These commenters believed that a similar 
approach should be used for measuring the financial significance of 
derivatives subject to our new disclosure item. Such an approach, these 
commenters argued, would be more consistent with how the market 
estimates the significance of such instruments.
---------------------------------------------------------------------------

    \335\ See, e.g., Letter of ABA; ASF; and BMA.
---------------------------------------------------------------------------

    We are adopting this approach. The measurement of the significance 
of the derivative is to be determined based on a reasonable good-faith 
estimate of maximum probable exposure, made in substantially the same 
manner as that

[[Page 1550]]

used in the sponsor's internal risk management process in respect of 
similar instruments. The resulting estimate is to be measured against 
the aggregate principal balance of the pool assets. However, if the 
derivative only relates to one or more ABS classes, the estimate is to 
be measured against the aggregate principal balance of those classes.
    For all such instruments, disclosure will be required regarding 
this significance measurement. At a minimum, disclosure is required as 
to whether the resulting significance percentage is less than 10%, at 
least 10% but less than 20%, or 20% or more. Further, if the 
significance percentage is 10% or more, we continue to believe that 
additional financial information should be provided, consistent with 
the approach for other third parties that may provide support for the 
ABS cashflows. In particular, if the significance percentage is at 
least 10%, but less than 20%, selected financial data required by Item 
301 of Regulation S-K must be provided. If the significance percentage 
is 20% or more, audited financial statements meeting the requirements 
of Regulation S-X are required. As with disclosure for enhancement 
providers, alternative methods discussed in Section III.B.10. may be 
available to incorporate the information by reference.
9. Other Basic Disclosure Items
a. Tax Matters
    Consistent with our proposal and existing practice, a brief, clear 
and understandable summary will be required of: \336\
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    \336\ See Item 1116 of Regulation AB.
---------------------------------------------------------------------------

     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 must 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.

As we explained in the Proposing Release, the filing and disclosure of 
tax opinions is a frequent topic of staff comment. The requirements 
with respect to tax opinions in ABS transactions have long been 
generally consistent with the requirements for non-ABS 
transactions.\337\ For example, when using a ``short form'' tax opinion 
where disclosure in the prospectus or prospectus supplement is to 
constitute counsel's opinion, the tax opinion filed as an exhibit to 
the registration statement or filed on a Form 8-K and incorporated by 
reference 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.\338\
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    \337\ See also note 133.
    \338\ See Item 601(b)(8) of Regulation S-K.
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b. Legal Proceedings
    In lieu of Item 103 of Regulation S-K, we are adopting, 
substantially as proposed, a more tailored disclosure item for material 
legal proceedings with respect to asset-backed securities.\339\ Under 
the final disclosure item, a brief description will be required 
regarding any legal proceedings pending against the sponsor, depositor, 
trustee, issuing entity, servicer meeting the thresholds of Item 
1108(a)(3) of Regulation AB \340\ or 20% or more originator, or of 
which any property of the foregoing is the subject, that is material to 
security holders. Consistent with longstanding requirements under 
existing Item 103 of Regulation S-K, similar information will be 
required as to any such proceedings known to be contemplated by 
governmental authorities.
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    \339\ See Item 1117 of Regulation AB.
    \340\ I.e., master servicer, each affiliated servicer, each 
unaffiliated servicer that services 20% or more of the pool assets 
and any other servicer that performs a material aspect of the 
servicing of the pool assets.
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c. Affiliations and Certain Relationships and Related Transactions
    As we explained in the Proposing Release, there often can be 
several affiliations between parties in an ABS transaction. For 
example, the servicer is often an affiliate of the sponsor. We are 
adopting as proposed a requirement to describe whether, and if so, how, 
the sponsor, depositor or issuing entity is an affiliate of any of the 
following parties: Servicer meeting the thresholds of Item 1108(a)(3) 
of Regulation AB, trustee, originator of at least 10% of the pool 
assets, significant obligor, significant provider of enhancement or 
other support or other material party identified with respect to the 
transaction. Disclosure also will be required, to the extent known and 
material, of any affiliate relationships among any of the parties 
listed above.\341\
---------------------------------------------------------------------------

    \341\ For the definition of affiliate, see note 147 above and 
accompanying text.
---------------------------------------------------------------------------

    We also are adopting disclosure requirements regarding material 
related party transactions between the sponsor, depositor or issuing 
entity and the above-referenced entities.\342\ As under the proposal, 
two aspects of disclosure in this area are required. First, disclosure 
is required 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 item clarifies that what is required is information material to 
an investor's understanding of the asset-backed securities, not a 
detailed description or itemized listing of all commercial 
relationships among the parties. 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.
---------------------------------------------------------------------------

    \342\ See Item 1119 of Regulation AB.
---------------------------------------------------------------------------

    We have revised the disclosure item to clarify further the second 
aspect of the related party disclosure that we proposed and that will 
be required under the Item, which is disclosure regarding specific 
material relationships involving or related to the current ABS 
transaction and the pool assets. Unlike non-ABS or pool asset specific 
relationships the general character of which only need be described if 
outside the ordinary course of business or not on arm's length terms, 
there is no such limiter for relationships specific to the transaction, 
other than materiality. An ABS or pool asset specific transaction with 
a related party may still be material even if made in the ordinary 
course of business or on arm's length terms. For any ABS or pool asset 
specific transaction, the material terms and approximate dollar amount 
involved

[[Page 1551]]

will need to be described, to the extent material.\343\
---------------------------------------------------------------------------

    \343\ Some of these relationships may be disclosed already under 
other Regulation AB items. Duplicate disclosure is not required.
---------------------------------------------------------------------------

    We are not including a reference to underwriters in this disclosure 
item, including the proposed example of material credit arrangements 
relating to the pool assets provided by an underwriter, because 
existing Item 508 of Regulation S-K \344\ already requires disclosure 
of material relationships with such parties.\345\ We would expect 
comparable disclosure of relationships and transactions between the 
sponsor, depositor and issuing entity and an underwriter, where 
material, in connection with that information.
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    \344\ 17 CFR 229.508.
    \345\ We note that the requirement in Item 508 of Regulation S-K 
for material relationships is also not limited to transactions 
outside the ordinary course or not on arm's length terms. Where 
material, such relationships are to be described.
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d. Ratings
    We are adopting our disclosure Item regarding ratings as 
proposed.\346\ As proposed, the Item codifies 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.\347\ 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 is required.
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    \346\ See Item 1120 of Regulation AB. For additional information 
regarding the Commission's current 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, see note 137 
above and accompanying text.
    \347\ As proposed, we are not codifying 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.
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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 are adopting our proposed requirement for disclosure of 
the reporting investors can expect to receive and be able to 
access.\348\ This disclosure is 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.
---------------------------------------------------------------------------

    \348\ See Item 1118 of Regulation AB.
---------------------------------------------------------------------------

    We also are adopting our proposed requirement to disclose whether 
Web site access will be provided to Commission and transaction 
reports.\349\ Commenters supported this proposal.\350\ Disclosure is to 
be provided 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 Web site 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.\351\ In 
addition, disclosure will be required regarding:
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    \349\ ``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.
    \350\ See, e.g., Letter of ABA.
    \351\ 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 and other reports 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 and other reports 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, will be equally applicable to this disclosure.\352\ In 
addition, the inclusion of the Web site address in response to the 
disclosure requirement will 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.\353\ Similarly, the 
disclosure requirement 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 will not separately create or otherwise 
affect any duty to update prior statements.
---------------------------------------------------------------------------

    \352\ Id.
    \353\ 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. See also Section III.B.4. and note 282 
above.
---------------------------------------------------------------------------

10. Alternatives to Present Third Party Financial Information
    As discussed in Sections III.B.7. and 8., there are instances both 
today and under our final rules when additional financial information 
regarding third parties is 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 certain unrelated 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 proposed 
codifying both of these alternatives.
    Commenters expressed support for the flexibility provided by these 
proposed alternatives,\354\ and we are adopting both substantially as 
proposed. As stated in the Proposing Release, both alternatives 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

[[Page 1552]]

significant obligors or the enhancement in the case of an enhancement 
provider, will still be required as is the case today.
---------------------------------------------------------------------------

    \354\ See, e.g., Letters of ABA and BMA.
---------------------------------------------------------------------------

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.\355\ We are codifying an 
expansion of these positions substantially as proposed 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 
are met: \356\
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    \355\ See Financial Security Assurance, Inc. (Jul. 16, 1993); 
MBIA Insurance Corp. (Sep. 6, 1996); and AMBAC Indemnity Corp. (Dec. 
19, 1996).
    \356\ If the conditions are not met, the required information 
will 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;
     The third party or entity that consolidates the third 
party in its financial statements is current with its Exchange Act 
reporting for the past twelve months (or such shorter period that it 
has been required to file reports); \357\
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    \357\ An instruction provides that, if 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 ABS transaction, and neither the third party nor any 
of its affiliates is an affiliate of the sponsor, depositor, issuing 
entity or underwriter of the ABS transaction, then this condition is 
qualified by the knowledge of the ABS registrant.
---------------------------------------------------------------------------

     The reports to be incorporated by reference include (or 
properly incorporate by reference) the financial statements of the 
third party; and \358\
---------------------------------------------------------------------------

    \358\ An instruction provides that, if incorporation by 
reference is being used with respect to information about a 
significant obligor that is an asset-backed issuer and the pool 
assets relating to the significant obligor are asset-backed 
securities, then the term ``financial statements'' means the 
information about the asset-backed securities discussed in Section 
III.B.7 (e.g., Item 3.(a) of Item 1112 of Regulation AB for a 
registration statement or Rule 424 prospectus, and Item 3.(b) of 
Item 1112 of Regulation AB for a Form 10-K or 10-D). The instruction 
also provides that information required by Instruction 3.a. of Item 
1112 may be incorporated by reference from a prospectus included in 
an effective Securities Act registration statement or filed pursuant 
to Rule 424.
---------------------------------------------------------------------------

     If incorporated by reference into 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.

As proposed, this option also is available under the same conditions to 
include the information required of any significant obligor.
    Because we are expanding the basic definition of asset-backed 
security to registered offerings on Form S-1, we also are permitting 
incorporation by reference of third party financial information for ABS 
offerings registered on that form, as proposed. 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.\359\ For example, if the registrant is relying on the 
incorporation by reference alternative for third party financial 
information, it will 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,\360\ 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.
---------------------------------------------------------------------------

    \359\ See, e.g., amendments to Items 10 and 512 of Regulation S-
K and Securities Act Rule 411.
    \360\ See, e.g., Item 512(c) of Regulation S-K.
---------------------------------------------------------------------------

    As proposed, we also are adding three instructions to remind 
registrants of our other existing incorporation by reference and 
updating requirements. The first instruction reminds ABS issuers that 
in addition to the conditions above, any information incorporated by 
reference must comply with any other applicable Commission rules 
pertaining to incorporation by reference.\361\ The second instruction 
reminds 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 applies to the 
material incorporated by reference.\362\ These consent requirements 
reflect the application of longstanding requirements under the 
Securities Act.\363\ The third instruction reminds issuers that any 
undertakings set forth in Item 512 of Regulation S-K apply to any 
material incorporated by reference in a registration statement or 
prospectus.
---------------------------------------------------------------------------

    \361\ 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).
    \362\ See, e.g., Securities Act Rule 439 (17 CFR 230.439).
    \363\ See, e.g., Section 7 of the Securities Act (15 U.S.C. 
77g).
---------------------------------------------------------------------------

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.\364\ 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.
---------------------------------------------------------------------------

    \364\ See, e.g., Morgan Stanley & Co., Inc. (Jun. 24, 1996). 
This letter related to non-ABS 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 final rules, 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 file number) in lieu of providing the 
required financial information in the filing, if the following 
conditions are met: \365\
---------------------------------------------------------------------------

    \365\ Like the incorporation by reference alternative, the 
reference alternative will 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

[[Page 1553]]

of the asset-backed securities transaction; \366\ and
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    \366\ 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 reference 
alternative is not available with respect to information about the 
issuer of the underlying securities if registration is required 
pursuant to Securities Act Rule 190.
---------------------------------------------------------------------------

     To the knowledge of the registrant, the significant 
obligor meets at least one of the eligibility categories discussed 
below.
    The first condition clarifies that the significant obligor must be 
unaffiliated and otherwise not involved with the ABS transaction.\367\ 
While some commenters suggested expanding existing practice to allow 
the reference alternative for all third parties, regardless of their 
affiliation or involvement with the transaction, we are not persuaded 
that it is appropriate at this time to expand existing practice.\368\ 
As we explained in the Proposing Release, 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 reference alternative will continue to be unavailable for 
financial information regarding such parties, including significant 
enhancement providers due to their involvement in the transaction. 
Instead, the information must either be included in the filing or, if 
the conditions in Section III.B.10.a. are met, incorporated by 
reference.
---------------------------------------------------------------------------

    \367\ Of course, if the registrant is in possession of material 
nonpublic information about the third party being referenced, such 
information must be disclosed. The absence of such material 
nonpublic information was a determining factor in the original staff 
no-action letters on this topic.
    \368\ See, e.g., Letters of ABA and NYCBA.
---------------------------------------------------------------------------

    The second condition refers to the categories of significant 
obligors eligible for the reference alternative. Consistent with 
existing staff positions and market practice, the eligible categories 
relate to the existing Form S-3 eligibility requirements of the 
significant obligor. For example, the first category is 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.\369\ A second 
category is a significant obligor 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 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 \370\ and applicable Form S-3 or Form F-3 eligibility 
requirements (such as General Instruction I.C.3 of Form S-3) are met.
---------------------------------------------------------------------------

    \369\ 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.
    \370\ 17 CFR 210.3-10.
---------------------------------------------------------------------------

    A fifth category relates 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 securitizations of the securities issued or 
guaranteed by these entities so long as the GSE's 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. As proposed, the final Item clarifies 
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. As proposed, 
reference is permitted in this instance if the significant obligor is 
filing Exchange Act reports and is 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 also 
are adding an instruction that if the reference alternative is being 
used for purposes of a registration statement under the Securities Act 
or the Exchange Act or a prospectus to be filed pursuant to Rule 424, a 
reference also must be included to the final prospectus or effective 
registration statement for the third party asset-backed securities that 
contains the information about the asset-backed securities discussed in 
Section III.B.7.\371\
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    \371\ E.g., the information required by Item 3.(a) of Item 1112 
of Regulation AB.
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    As we noted in the Proposing Release, because of the possibility 
that corporate debt issuers can suspend their Exchange Act reporting 
requirements, the staff has acceded to the requests of ABS issuers 
securitizing such debt to include a provision that, if an ABS issuer is 
unable or unwilling to provide the significant obligor's financial 
information, the transaction, or the portion of the transaction, will 
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 was suggested by market 
participants who believed that the alternative of including the 
necessary information in the ABS filing might become impractical or 
impossible. Consistent with this practice, our proposal would have 
allowed termination as an alternative to providing the information.
    Several commenters objected to codifying this position.\372\ 
However, many of these commenters appeared to be under the belief that 
the existing option to terminate the transaction was a staff 
requirement that was proposed to be codified. The underlying 
requirement has been and remains that because of the concentration of 
the significant obligor in the asset pool, financial information about 
that significant obligor is required. The reference alternative, like 
the incorporation by reference alternative, represents an alternative 
that may be available to present that disclosure. Each alternative is 
subject to conditions, including that the third party is reporting 
under the Exchange Act. If the third party ceases to report, the 
reference or incorporation by reference alternative will no longer be 
available because the obligor will no longer file reports with the 
Commission, but the requirement to provide the financial information 
about the significant obligor remains.\373\ Through the course of 
reviews of registration statements by the staff, ABS issuers decided to 
include termination provisions in their transaction

[[Page 1554]]

structures to address their unwillingness to provide the information if 
the reference alternative was no longer available.
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    \372\ See, e.g., Letters of ABA; ASF; BMA; and NYCBA.
    \373\ For example, if the information is available from another 
source (e.g., a Web site), while the incorporation by reference or 
reference alternative would not be available, the ABS issuer could 
physically include the information in its Exchange Act report.
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    To avoid confusion, we are not codifying the proposed undertaking 
that references the termination option in lieu of providing the 
information if the reference alternative is not available. As before, 
issuers can still structure their securities to provide for termination 
if they are unwilling or unable to provide the required financial 
information.\374\ However, we are not providing an exception to the 
requirement to provide the required financial information if the 
underlying issuer ceases reporting. The need for the information about 
the underlying issuer in the reports for the asset-backed securities 
does not change due to a change in the reporting status of the 
underlying issuer.
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    \374\ Disclosure of such provisions should be made clear to 
investors. In addition, as we stated in the Proposing Release, 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 the 
required information, just as such delays would not be available 
with respect to providing the required information itself.
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C. Communications During the Offering Process

1. ABS Informational and Computational Material
a. Current Requirements
    As we explained in the Proposing Release, the Securities Act 
currently restricts the types of offering communications that a 
registrant or other parties subject to the Act's provisions (such as 
underwriters) may use during a registered public offering.\375\ The 
nature of the restrictions depends on the period during which the 
communications are to occur. Before the registration statement is 
filed, all offers, in whatever form, are prohibited.\376\ Between the 
filing of the registration statement and its effectiveness, offers made 
in writing (including by e-mail or Internet), by radio or by television 
are limited to a ``statutory prospectus'' that conforms to the 
information requirements of Section 10 of the Securities Act.\377\ As a 
result, the only written material that is permitted 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.\378\ Even after the registration statement is 
declared effective, offering participants may still make written offers 
only through a statutory prospectus, except that they may use 
additional written offering materials, if a final prospectus that meets 
the requirements of Section 10(a) of the Securities Act precedes or 
accompanies those materials.\379\
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    \375\ See Section 5 of the Securities Act (15 U.S.C. 77e). For 
more information on the background and current operation of 
Securities Act communication requirements, as well as our recent 
proposals in this area, see the Offering Process Release.
    \376\ See Section 5(c) of the Securities Act (15 U.S.C. 77e(c)).
    \377\ 15 U.S.C. 77j. See Section 5(b)(1) of the Securities Act 
(15 U.S.C. 77e(b)(1)).
    \378\ Oral offers are allowed during this period and do not have 
to satisfy the informational requirements of Section 10. See note 
375 above.
    \379\ 15 U.S.C. 77j(a). See Section 2(a)(10) (15 U.S.C. 
77b(a)(10)) and Section 5(b)(1) of the Securities Act.
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    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. These factors may vary from 
transaction to transaction. Given the important focus on tranching and 
pool characteristics, including potential cash flow patterns, sponsors 
or underwriters may 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 had the computer resources 
to prepare these analytics themselves.
    Following a series of staff no-action letters from the mid-1990's, 
issuers of Form S-3 ABS have been 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.\380\ 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.
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    \380\ See note 34 above.
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    All of 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 after 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 after 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.
    Commenters confirmed our understanding that where they are used, 
term sheets and computational material often represent the primary, if 
not the only, written materials that currently are used to offer asset-
backed securities.\381\ As we stated in the Proposing Release, we also 
understand that advances in technology over the decade 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.\382\ 
There had been some concern over whether the existing no-action letters 
would have permitted 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

[[Page 1555]]

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 had raised questions over 
what information should be filed with the Commission under the no-
action letters where such services are used.
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    \381\ See, e.g., Letter of ABA.
    \382\ See, e.g., ``Investors Gain Clout, Urge Specifics,'' 
Asset-Backed Alert, Jun. 6, 2003.
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b. Exemptive Rule
    We proposed 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 Form S-3 registration statement for an 
offering of asset-backed securities but before delivery of the final 
Section 10(a) prospectus. Commenters overall supported the proposals, 
although several commenters representing primarily issuers and their 
representatives requested several expansions beyond the existing no-
action letter positions.\383\ For example, these commenters requested 
expanding the type of materials that may be used, expanding the ability 
to use materials to Form S-1 ABS offerings, allowing the use of 
materials before effectiveness of the registration statement and 
excluding underwriter-prepared material from filing and Securities Act 
liability requirements.
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    \383\ See, e.g., Letters of ABA; ASF; BMA; FSR; and NYCBA.
---------------------------------------------------------------------------

    As discussed previously, we recently issued expansive proposals to 
revise the Securities Act regulatory process for all securities 
offerings.\384\ These proposals directly address matters such as the 
appropriate use, filing and liability requirements for communications 
during the offering process, including whether communications prepared 
by separate parties should be treated differently. As we indicated in 
the Proposing Release, requests for further relaxation of the 
communications restrictions in the ABS context raise broad issues that 
also are implicated by the proposals in the Offering Process Release. 
Given the current evaluation of these broader issues in that release, 
we do not think it would be appropriate at this time to make 
substantial changes to our proposed approach with respect to ABS 
communications. The existing staff no-action letters already permit ABS 
Form S-3 offerings to use significantly more material outside of the 
statutory prospectus than non-ABS Form S-3 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 the Offering Process Release. Therefore, 
our approach here remains codifying the longstanding existing allowance 
for additional materials in the ABS context. We will evaluate the 
comments we received regarding ABS communications in connection with 
the Offering Process Release. We also encourage ABS market participants 
to comment specifically on the proposals in that release.
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    \384\ See note 33 above.
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    Accordingly, today we are adopting, as proposed, an exemption from 
Section 5(b)(1) of the Securities Act for the use of ABS informational 
and computational materials in offerings of Form S-3 ABS after the 
effectiveness of a registration statement but before delivery of the 
final Section 10(a) prospectus.\385\ As we stated in the Proposing 
Release, given 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 during such period is appropriate in the public interest and 
consistent with the protection of investors under the conditions 
discussed below, including the filing conditions.\386\ However, as we 
stated in the Proposing Release and similar to our existing 
communications exemptions regarding business combination transactions, 
the rule makes clear that the exemption is not available to 
communications that may technically comply with the rule, 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.\387\
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    \385\ See 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 are adopting a general Securities Act Rule 
that sets forth the basic exemption and its conditions (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 (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].
    \386\ As is the case under the existing no-action letters, such 
material can be used regardless of whether a preliminary prospectus 
is prepared and used.
    \387\ For similar provisions, see Securities Act Rules 165 and 
166 (17 CFR 230.165 and 17 CFR 230.166). We also proposed similar 
provisions in the Offering Process Release.
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    As proposed, the exemption continues to include filing requirements 
for such material and only will 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, which is 
consistent with the existing staff no-action letters. As discussed 
above, we do not believe it is appropriate at this time to either 
expand the exemption to additional offerings or alter the basic filing 
requirements under the letters, except as discussed below regarding 
consolidating those requirements, as proposed.
c. Definition of ABS Informational and Computational Material
    We explained in the Proposing Release that there is an overlap in 
the existing no-action letters 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 must be filed given the overlapping 
descriptions.
    We proposed consolidating the descriptions of the materials that 
may be used under a single definition of ``ABS informational and 
computational material.'' Although we were proposing to consolidate the 
descriptions, we specifically noted that we were not intending to 
change the scope of materials that may be used. Nevertheless, several 
commenters were concerned that the proposed consolidated definition 
could possibly be read as somehow more restrictive than the no-action 
letters and suggested revisions to more closely track the descriptions 
of such material in the existing no-action letters to avoid any 
confusion.\388\
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    \388\ See, e.g., Letters of ABA; ASF; BMA; CMSA; FSR; and NYCBA.
---------------------------------------------------------------------------

    We believe many of the examples provided by commenters of 
information used today were already covered by the proposed 
consolidated definition. However, in response to these comments and to 
clarify further that we are not intending to change current practice, 
we are revising the definition of ``ABS informational and computational 
material'' to more closely track the descriptions in the existing staff 
no-action letters. We also are adding several non-exclusive examples 
provided by commenters of information provided today that may not have 
been otherwise clear from the descriptions of the materials in the no-
action letters, such as information on key parties to the transaction, 
to clarify the scope of

[[Page 1556]]

materials that can be used. Finally, we are expanding the scope of the 
definition in response to comment to include certain basic factual 
information about the offering process.\389\
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    \389\ Note we also proposed to add these items to Rule 134 in 
the Offering Process Release.
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    As a result, ABS informational and computational material will be 
defined as a written communication consisting solely of one or some 
combination of the following:
     Factual information regarding the asset-backed securities 
being offered and the structure and basic parameters of the securities, 
such as the number of classes, seniority, payment priorities, terms of 
payment, the tax, ERISA and other legal conclusions of counsel, and 
descriptive information relating to each class (e.g., principal amount, 
coupon, minimum denomination, anticipated price, yield, weighted 
average life, credit enhancements, anticipated ratings, and other 
similar information relating to the proposed structure of the 
offering);
     Factual information regarding the pool assets underlying 
the asset-backed securities,\390\ including origination, acquisition 
and pool selection criteria, information regarding any prefunding or 
revolving period applicable to the offering, information regarding 
significant obligors, data regarding the contractual and related 
characteristics of the underlying pool assets (e.g., weighted average 
coupon, weighted average maturity, delinquency and loss information and 
geographic distribution) and other factual information concerning the 
parameters of the asset pool appropriate to the nature of the 
underlying assets, such as the type of assets comprising the pool and 
the programs under which the loans were originated;
---------------------------------------------------------------------------

    \390\ We note this may include graphical material regarding the 
pool assets, such as photographs, maps and site plans in CMBS 
transactions.
---------------------------------------------------------------------------

     Identification of key parties to the transaction, such as 
servicers, trustees, depositors, sponsors, originators and providers of 
credit enhancement or other support, including a brief description of 
each such party's roles, responsibilities, background and experience;
     Static pool data, as discussed previously, such as for the 
sponsor's and/or servicer's portfolio, prior transactions or the asset 
pool itself; \391\
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    \391\ Such information could be provided through a Web site 
address for inclusion in the ABS informational and computational 
material under the same conditions specified in Section III.B.4.b. 
In addition, disclosure required by Item 1105(e) of Regulation AB is 
to be provided in ABS informational and computational material, if 
applicable.
---------------------------------------------------------------------------

     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 include:
     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;
     Statistical information showing the cash flows that would 
be associated with a particular class of asset-backed securities at a 
specified prepayment speed; and
     Statistical information reflecting the financial impact of 
losses based on a variety of loss or default experience, prepayment, 
interest rate and related assumptions.
     The names of underwriters participating in the offering of 
the securities, and their additional roles, if any, within the 
underwriting syndicate;
     The anticipated schedule for the offering (including the 
approximate date upon which the proposed sale to the public will begin) 
and a description of marketing events (including the dates, times, 
locations and procedures for attending or otherwise accessing them); 
and
     A description of the procedures by which the underwriters 
will conduct the offering and the procedures for transactions in 
connection with the offering with an underwriter or participating 
dealer (including procedures regarding account-opening and submitting 
indications of interest and conditional offers to buy).

As we stated in the Proposing Release, the definition of ABS 
informational and computational material is intended to include 
existing structural term sheets, collateral term sheets and 
computational materials and also to clarify that several additional 
items are permitted, such as static pool data and basic information 
about the offering process. Consistent with the unified filing rule we 
are adopting for these materials discussed below, 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.\392\
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    \392\ As a result, the definition subsumes 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 34 above.
---------------------------------------------------------------------------

    We also are reiterating several clarifications from the Proposing 
Release regarding the scope of the materials. First, and as noted 
above, some had 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 was already 
consistent with the no-action letters and is permitted under the 
exemptive rule. However, we again note, as we did in the Proposing 
Release, that in providing such detail 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 had 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 
exemptive rule, 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. 
As we stated in the Proposing Release, 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 exemptive rule.\393\
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    \393\ 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 was the case under the 
no-action letters, under the final 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.

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[[Page 1557]]

    Some also had 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 that already existed in 
the no-action letters and which will continue in the exemptive 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. As we 
stated in the Proposing Release, 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.\394\ As is the case today, issuers and underwriters should 
contact the staff with any specific questions regarding the filing of 
particular materials.
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    \394\ See, e.g., Rule 106 of Regulation S-T (17 CFR 232.106).
---------------------------------------------------------------------------

d. Conditions for Use
    As proposed, the final rule requires two conditions for ABS 
informational and computational material, both of which are consistent 
with the existing no-action letters:
     The communications shall be filed to the extent required 
under new Rule 426 (discussed in Section III.C.1.e.); and
     The communication shall include prominently on the cover 
page:
     The issuing entity's name and depositor's name;
     The Commission file number for the related registration 
statement;
     A statement that the communication is ABS informational 
and computational material used in reliance on the exemptive rule; and
     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 shall 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.
    As we stated in the Proposing Release, we are not conditioning use 
on providing 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.\395\ Instead, the legend we are adopting is designed 
to alert investors of the documents filed or to be filed with the 
Commission. We also are not requiring the condition in the no-action 
letters that any required filings must be made before an Exchange Act 
Rule 10b-10 confirmation of sale may be sent.\396\ As we explained in 
the Proposing Release, the filing requirement discussed below is a 
separate condition under Commission rules, and thus conditioning the 
exemption on filing before sending of the Rule 10b-10 confirmation does 
not appear to be warranted as an additional incentive for filing.
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    \395\ As we stated in the Proposing Release, one of the reasons 
such statements do not appear applicable is that not all of the 
information--particularly the computational material--is included or 
updated in subsequent materials or the final prospectus. In 
addition, and as discussed subsequently in the text, there are 
additional problems with such statements. For more information, see 
the Offering Process Release.
    \396\ See 17 CFR 240.10b-10.
---------------------------------------------------------------------------

    We also explained in the Proposing Release that, in addition to the 
legends discussed above, some issuers and other users of these 
materials have been including legends or disclaimers in the materials 
that are inappropriate. As discussed more fully below, the materials 
are considered prospectuses and in many instances also must be filed 
with the Commission and incorporated by reference into the registration 
statement. Thus, as we stated in the Proposing Release, disclaimers of 
responsibility or liability that are not appropriate for a prospectus 
or registration statement also are not appropriate for these materials.
    Examples of inappropriate legends or disclaimers that we identified 
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.\397\ Language 
indicating that the communication is neither a prospectus nor an offer 
to sell or a solicitation or an offer to buy also is 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 are inappropriate.
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    \397\ Such disclaimers of responsibility by the issuer are also 
inappropriate.
---------------------------------------------------------------------------

    Several commenters indicated that they wish to include additional 
legends in their materials and requested an instruction clarifying that 
the prescribed legend in the exemptive rule is not exclusive and other 
legends may be included.\398\ We do not believe such an instruction is 
necessary. However, some of the legends suggested by commenters also 
would be inappropriate. For example, as explained in the Offering 
Process Release, we interpret Section 12(a)(2) and Section 17(a)(2) as 
not taking into account information conveyed only after the date of 
sale, which includes the date of a contract for sale (e.g., the date of 
the investment decision). As such, it would be inappropriate to include 
a legend that information contained in ABS informational and 
computational material will be superceded or changed by the final 
prospectus, even if limited to the extent the information was included 
in the final prospectus, if the final prospectus is not delivered until 
after the date of the contract for sale.
---------------------------------------------------------------------------

    \398\ See, e.g., Letters of ASF; BMA; and FSR.
---------------------------------------------------------------------------

    Apart from the two conditions for the exemption, we also are 
clarifying, as proposed and consistent with a similar provision in our 
communications exemptions for business combination transactions,\399\ 
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. As 
we explained in the Proposing Release, this ensures that affiliates, 
underwriters, dealers and others acting on behalf of the parties to the 
transaction are permitted to rely on the exemption if necessary. While 
we realize that in many circumstances the exemptions will 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.
---------------------------------------------------------------------------

    \399\ See, e.g., Securities Act Rule 165(d) (17 CFR 230.165(d)).
---------------------------------------------------------------------------

    We also are codifying as requested a provision in the existing no-
action letters that failure by a particular underwriter to cause the 
filing of materials in connection with an offering will not affect the 
ability of any other underwriter who has complied with the procedures 
to rely on the exemption.

[[Page 1558]]

While this position was mentioned in the text of the Proposing Release, 
several commenters wished to codify the provision to avoid any 
potential confusion.\400\ We are including it in the final rule as it 
appears in the existing no-action letters.
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    \400\ See, e.g., Letters of ABA; ASF; FSR; and NYCBA.
---------------------------------------------------------------------------

    We are adding another provision in response to comment that 
currently exists in the communications exemptions for business 
combination transactions \401\ that an immaterial or unintentional 
failure to file or delay in meeting the filing requirements will not 
result in a loss of protection under the exemption, so long as a good 
faith and reasonable effort was made to comply with the filing 
requirement and the material is filed as soon as practicable after 
discovery of the failure to file.\402\ Several commenters believed that 
the absence of this provision in the existing no-action letters, which 
were issued before the communications exemptions for business 
combination transactions were adopted, has had a chilling effect on the 
use of materials due to concerns over filing errors and the harsh 
consequences of a potential Section 5 violation as a result.\403\ 
Commenters particularly stressed the need for such a provision if 
underwriter communications continue to be included in the filing 
requirements. As discussed in our adopting release for the business 
combination communication exemptions, this provision is similar to the 
good faith standard in Rule 508(a) of Regulation D.\404\ Although an 
immaterial or unintentional failure to file or delay in filing is a 
violation of the filing requirement, it will not render the exemption 
unavailable.
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    \401\ See, e.g., Securities Act Rule 165(e) (17 CFR 230.165(e)).
    \402\ A similar provision has been proposed in connection with 
written communications in the Offering Process Release.
    \403\ See, e.g., Letters of ABA and ASF.
    \404\ 17 CFR 230.508(a).
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e. Filing Requirements
    As noted above, there are multiple filing requirements under the 
staff no-action letters depending on the type of materials used and the 
circumstances in which they are used. As proposed, we are streamlining 
these requirements into a unified filing rule that applies regardless 
of the type of materials used. We believe a unified filing requirement 
will result in a more consistent approach and ease compliance without a 
significant drop in investor protection.
    As proposed, under new Rule 426 the following ABS informational and 
computational material must be filed:
     If a prospective investor has indicated to the issuer or 
an 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 or have been provided to such 
prospective investor; \405\ and
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    \405\ This provision applies 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.

As under the existing no-action letters, these materials must be filed 
on Form 8-K (under new 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 
after first use.
    The cover page of the Form 8-K must 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 issuer or an underwriter 
its intention to purchase the asset-backed securities need not be 
filed.
    The final rule clarifies, as did the letters and our proposal, 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,\406\ Exchange 
Act Rule 10b-10 \407\ confirmations, prospectuses filed under 
Securities Act Rule 424 and research reports relying on one of our safe 
harbors discussed below.\408\
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    \406\ 17 CFR 230.134; 17 CFR 230.135; and 17 CFR 230.135c.
    \407\ 17 CFR 240.10b-10.
    \408\ Similar clarifying provisions exist in our existing 
communications exemptions for business combination transactions.
---------------------------------------------------------------------------

    Under the final rule, as was the case under the existing no-action 
letters, 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 and the Proposing Release, 
ABS informational and computational material are not being excluded 
from the definition of ``offer,'' ``offer to sell,'' ``offer for sale'' 
or ``prospectus'' under the Securities Act.\409\ We continue to believe 
the Securities Act standard of liability is appropriate for materials 
that are used to offer the asset-backed securities. The flexibility to 
use offering materials outside the statutory prospectus does not mean 
that the materials should not have liability as offering materials. 
Accordingly and as proposed, to the extent these communications 
constitute offers, they will continue to be subject to liability under 
Section 12(a)(2) of the Securities Act, as is the case today with oral 
offers and statutory prospectuses.\410\ In addition, the final rule 
specifies, as proposed, that material used in reliance on the exemption 
will be considered ``prospectuses'' and thus subject to Section 
12(a)(2) liability, even if not filed. Further, consistent with the 
existing no-action letters and our proposal, the materials that are 
filed on Form 8-K will be incorporated by reference into the 
registration statement, which is subject to liability under Section 11 
of the Securities Act.
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    \409\ See 15 U.S.C. 77b(a)(3) and 15 U.S.C. 77b(a)(10).
    \410\ 15 U.S.C. 77l(a)(2). Such information also will remain 
subject to the general antifraud provisions of the Securities Act 
and Exchange Act. See Section 17(a) of the Securities Act; Section 
10(b) of the Exchange Act and Exchange Act Rule 10b-5.
---------------------------------------------------------------------------

    As we explained in the Proposing Release, the staff no-action 
letters were

[[Page 1559]]

issued when electronic filing on EDGAR was still in its relative 
infancy. At that time, EDGAR only accepted submissions in ASCII format, 
and ABS market 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.\411\ 
Instead, such materials can currently be filed in paper under cover of 
a Form SE.\412\
---------------------------------------------------------------------------

    \411\ See Rule 311(j) of Regulation S-T (17 CFR 232.311(j)).
    \412\ 17 CFR 239.64.
---------------------------------------------------------------------------

    We proposed eliminating the electronic filing exemption. There have 
been many 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.
    Two commenters suggested delaying electronic filing until the 
ability to file material in additional formats, such as PDF, is 
allowed.\413\ However, we continue to believe that even under the 
current system, the filing of ABS informational and computational 
material no longer needs an electronic filing exemption. As we stated 
in the Proposing Release, filing in paper form is of little practical 
use to investors as the material cannot be retrieved electronically. By 
treating these materials consistently with nearly all other material 
filed with the Commission, we seek to realize the same investor 
benefits and efficiencies in information transmission, dissemination, 
retrieval and analysis achieved since we began mandating EDGAR filing 
in 1993. Accordingly, as proposed, we are eliminating the electronic 
filing exemption.\414\
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    \413\ See, e.g., Letters of ASF and BMA.
    \414\ As electronically filed documents, ABS informational and 
computational material are 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 is not 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 
qualifies for a continued hardship exemption.
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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.\415\ In particular, such a report may 
constitute an offer to sell the securities and thus constitute an 
illegal offer if published or distributed before a 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.
---------------------------------------------------------------------------

    \415\ For more information about research reports and recent 
Commission proposals in this area, see the Offering Process Release. 
The Commission's existing 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 in this release 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 does our new 
safe harbor in new Rule 139a 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. For more information, again see the Offering 
Process Release.
---------------------------------------------------------------------------

    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.
    As we explained in the Proposing Release, 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, 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.\416\ The no-action letter contained conditions for the safe 
harbor adapted from Rules 137, 138 and 139 and modified for ABS. We 
proposed codifying this safe harbor with several minor adjustments to 
add it to our existing research report safe harbors.
---------------------------------------------------------------------------

    \416\ See note 35 above.
---------------------------------------------------------------------------

b. ABS Research Report Safe Harbor
    Commenters were mixed about our proposal to codify the no-action 
letter. One commenter believed the 1997 no-action letter provides a 
workable compromise to address the issues discussed above.\417\ 
However, this commenter and several others also suggested extending the 
proposal in several ways beyond the current no-action letter, such as 
extending the safe harbor to Form S-1 ABS, eliminating one or more of 
the letter's conditions or suggesting alternative sets of conditions 
that would have the same practical effect of eliminating conditions in 
the letter.\418\
---------------------------------------------------------------------------

    \417\ See Letter of ABA.
    \418\ See, e.g., Letters of ABA; ASF; BMA; and NYCBA.
---------------------------------------------------------------------------

    However, another commenter objected to codifying the no-action 
letter and instead urged a 30-day quiet period on research for ABS 
offerings.\419\ This commenter believed permitting research during this 
period is unlikely to provide any benefits to the institutional 
investors which make up most of the market but could have a harmful 
impact if retail investors take a more active role. The commenter also 
thought permitting research could lead to structures designated as ABS 
but that are, in effect, equity securities to avoid other research 
rules.
---------------------------------------------------------------------------

    \419\ See Letter of CFAI.
---------------------------------------------------------------------------

    After evaluating these comments, we are adopting the safe harbor 
along the lines of the existing no-action letter as proposed.\420\ We 
are not persuaded that one or more of the existing conditions in the 
no-action letter should be relaxed to expand the safe harbor beyond its 
current contours. The reasons expressed for the expansions do not 
sufficiently relate to whether the proposed research is separate enough 
from offering

[[Page 1560]]

material such that it should be excluded from the definition of 
``offer'' in its entirety.
---------------------------------------------------------------------------

    \420\ See Securities Act Rule 139a. As we noted in the Proposing 
Release, the safe harbor is a non-exclusive safe-harbor the same as 
existing Rules 137, 138 and 139. In addition, each of the existing 
safe harbors in Rules 137, 138 and 139 remain available with respect 
to asset-backed securities if the conditions for the particular safe 
harbor are met.
---------------------------------------------------------------------------

    In addition, consistent with our proposal and the existing no-
action letter, the safe harbor will be available only with respect to 
ABS offerings registered on Form S-3. That is, it is only 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 rules for ABS informational and computational material 
and existing Rule 139, we believe offerings of securities meeting the 
requirements for Form S-3 registration represent the appropriate 
categories of offerings for the safe harbor.
    Under the safe harbor, 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:\421\
---------------------------------------------------------------------------

    \421\ Consistent with the existing no-action letter, in the case 
of a multi-tranche registered offering of asset-backed securities, 
each tranche is to be treated as a different security.
---------------------------------------------------------------------------

     The broker or dealer shall 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 shall not:
     Identify those securities;
     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; \422\ or
---------------------------------------------------------------------------

    \422\ Consistent with the staff no-action letter, this condition 
does 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).
---------------------------------------------------------------------------

     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 shall 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 shall explain in 
reasonable detail the reasons for such preference.

As proposed, not included in the list 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.'' As we 
explained in the Proposing Release, because these types of disclosures 
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 retain 
this condition to the safe harbor does not affect any other requirement 
that would require disclosure of such relationships.
    As part of the Offering Process Release, we proposed revisions to 
the existing research report safe harbors of Rules 137, 138 and 
139.\423\ To the extent these existing safe harbors are modified, we 
also will consider similar modifications to the ABS safe harbor. We 
also encourage ABS market participants to comment specifically on the 
proposals in that release regarding any appropriate changes to the 
existing safe harbors or the ABS safe harbor.
---------------------------------------------------------------------------

    \423\ For example, we proposed to remove a similar prohibition 
in existing Rule 139 on a broker or dealer making a more favorable 
recommendation than the one it made in the last publication.
---------------------------------------------------------------------------

3. Other Communications During the Offering Process
    In response to a request for comment, several commenters 
recommended revising Securities Act Rule 134 \424\ to provide 
additional items for purposes of ABS offerings.\425\ Rule 134 deems 
certain limited communications announcing an offering (often called 
``tombstone'' announcements) not a prospectus so long as the 
communication is limited to the items specified in that rule. In the 
Offering Process Release, we proposed several expansions to Rule 134 
that would address in part these commenters' requests. Some of the 
remaining items requested by commenters may be beyond the proper scope 
of Rule 134.\426\ As we stated in the Offering Process Release, we have 
not proposed to amend Rule 134 in a manner that would permit detailed 
term sheets for offerings under the rule, which is consistent with Rule 
134 for offerings generally. We encourage ABS market participants to 
comment specifically on the proposals in that release. In the meantime, 
we note that the scope of the detailed items requested by commenters 
for Rule 134 are generally subsumed already within the scope of 
permitted ABS informational and computational material.
---------------------------------------------------------------------------

    \424\ 17 CFR 230.134.
    \425\ See, e.g., Letters of ABA; ASF; BMA; and FSR.
    \426\ E.g., more detailed class or pool level information, even 
if on a summary characteristic basis, such as LTV ratio, weighted 
average FICO, grace and forbearance percentages, delinquencies, 
losses and asset concentrations.
---------------------------------------------------------------------------

    Finally, one commenter requested clarification regarding issuer or 
underwriter involvement with pre-sale reports by rating agencies.\427\ 
Whether information prepared and distributed by third parties that are 
not offering participants is attributable to an issuer or underwriter 
depends upon whether the issuer or underwriter has involved itself in 
the preparation of the information or explicitly or implicitly endorsed 
or approved the information. The courts and we have referred to the 
first line of inquiry as the ``entanglement'' theory and the second as 
the ``adoption'' theory.\428\ We think these theories are equally 
applicable with respect to ABS issuer or

[[Page 1561]]

underwriter involvement regarding rating agency pre-sale reports. For 
example, if an issuer or underwriter distributed the pre-sale report in 
connection with an offering of the securities, it would be appropriate 
to conclude that such party has adopted that report and should be 
liable for its contents. Liability under the ``entanglement'' theory 
depends upon the level of pre-publication involvement in the 
preparation of the information.
---------------------------------------------------------------------------

    \427\ See Letter of ABA.
    \428\ For a fuller discussion of these theories, see Release No. 
33-7856 (Apr. 28, 2000) [65 FR 24843], at fn. 48 and accompanying 
text.
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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.\429\ 
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 \430\ and file reports 
pursuant to Section 13(a) of the Exchange Act.\431\ 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.\432\
---------------------------------------------------------------------------

    \429\ See Section III.B.9.e. See also Hema B. Oza, 
``Surveillance--The Truth * * * Told by Investors,'' Asset 
Securitization Report, Sep. 27, 2004.
    \430\ 15 U.S.C. 78l.
    \431\ 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.
    \432\ 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). Our rules do not 
affect Form 15 filing requirements. In addition, we are not 
addressing at this time the definition of ``held of record,'' as 
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 
suspend if those securities subsequently meet the 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 Web sites, although some still 
require registration and pre-approval before permitting access to such 
important information. Third party services continue to evolve to 
provide post-issuance performance data, although again such services 
often charge a fee and 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.\433\
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    \433\ As 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. It also is a 
longstanding requirement under the modified reporting system that 
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 reporting 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 
consideration of the existing requirement in the modified reporting 
system for an accountant attestation as to an assertion of compliance 
with servicing criteria, the Commission exempted asset-backed issuers 
from the reporting requirements regarding internal control over 
financial reporting.\434\ However, asset-backed issuers must include a 
certification

[[Page 1562]]

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.\435\ 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.
---------------------------------------------------------------------------

    \434\ See note 41 above.
    \435\ 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)).
---------------------------------------------------------------------------

    Commenters supported our proposal to codify the basic modified 
reporting system for asset-backed securities.\436\ We describe the 
final rules and forms with respect to the system, as modified in 
response to comment, in more detail below. In addition and as noted in 
Section III.A.4., we are not creating a separate Exchange Act reporting 
system for foreign ABS. As a result, foreign ABS will report on Forms 
10-K, 10-D and 8-K, the same as domestic ABS. Commenters also supported 
this approach.\437\
---------------------------------------------------------------------------

    \436\ See, e.g., Letters of ABA; ASF; FSR; and ICI.
    \437\ See, e.g. Letter of A&O.
---------------------------------------------------------------------------

2. Determining the ``Issuer'' and Operation of the Section 15(d) 
Reporting Obligation
    First, we are adopting our proposed 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 statutory definition of 
``issuer'' under the Exchange Act are identical to the Securities Act 
definition.\438\ Accordingly, we are adopting a corollary Exchange Act 
rule for clarifying the definition of ``issuer'' for ABS similar to our 
new rule discussed in Section III.A.3.d. regarding the Securities Act. 
In particular, the Exchange Act rule clarifies 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.\439\ Like our similar 
definition for the Securities Act, the Exchange Act definition 
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 will 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.\440\ Like our Securities Act rule, our 
Exchange Act rule will apply regardless of the issuing entity's form of 
organization.
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    \438\ See Section 3(a)(8) of the Exchange Act (15 U.S.C. 
77c(a)(8)).
    \439\ See Exchange Act Rule 3b-19 (17 CFR 240.3b-19). The rule 
in the Exchange Act is identical to Securities Act Rule 191. See 
Section III.A.3.d. As proposed, we also are defining 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.
    \440\ Likewise, any applicable exemptions from reporting that 
the person acting as depositor may have with respect to its own 
securities will not be applicable to the asset-backed securities.
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    This approach addresses the reality of ABS offerings that 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 new definition, we are identifying who must 
sign Exchange Act reports. The particular signature requirements for 
each Exchange Act report are discussed below in connection with the 
discussions of the requirements for each report. However, our basic 
principle remains the same as in the Proposing Release that the 
depositor is to sign Exchange Act reports, although an authorized 
representative of the servicer will be permitted 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 
access 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. As proposed 
and consistent with longstanding staff and prevalent industry practice, 
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 are clarifying, 
as proposed, several interpretive positions regarding the operation of 
the Section 15(d) reporting obligation with respect to asset-backed 
securities, which commenters supported.\441\ 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 are codifying the longstanding 
interpretive position that no annual or other reports need be filed 
pursuant to Section 15(d) for ABS until the first bona fide sale in a 
takedown of securities under the registration statement.\442\ For 
example, if an ABS Form S-3 shelf registration statement was declared 
effective on October 1, 2004 but no takedown occurred until February 1, 
2005, no reports will need to be filed until after the first takedown. 
The first reporting obligation is triggered by the first takedown of 
asset-backed securities.\443\
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    \441\ See, e.g., Letters of ABA and ASF. As proposed, these new 
rules only are applicable with respect 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 is not applicable while a class 
of securities is reporting pursuant to Section 13(a).
    \442\ See Exchange Act Rule 15d-22(a).
    \443\ 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). While not all commenters agreed (See, 
e.g., Letters of Am. Bankers and ASF), we continue to believe that, 
even if the period is short, information regarding the servicing and 
administration of the asset pool for the period (particularly the 
servicer compliance statement and assessment of compliance with 
servicing criteria) is still important information to provide to 
investors in an annual report, even if no distributions were made to 
investors prior to the fiscal year end. For example, such 
information is not otherwise required to be part of or filed in 
connection with the filing of the final prospectus. Accordingly, as 
proposed, the accommodation in those letters will no longer be 
available.

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[[Page 1563]]

    We also are codifying 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.\444\ 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 is 
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 will be suspended.\445\ Of 
course, the suspension of that reporting obligation has 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.
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    \444\ See Exchange Act Rule 15d-22(b).
    \445\ An annual report on Form 10-K for the 2004 fiscal period 
with respect to the classes in the 2004 takedown will still be 
required, although the report is not required until 90 days after 
the end of the 2004 fiscal period.
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    We requested comment on whether the ability to suspend reporting 
under Section 15(d) should be revisited. For example, we requested 
comment on whether it should be a condition or required undertaking for 
registration statement form eligibility or for any of our other 
proposals that Exchange Act reporting must continue for the life of the 
security. One commenter primarily representing investors recommended 
conditioning ABS shelf registration upon an issuer agreeing either to 
continue filing reports under Section 15(d) or to make publicly 
available on their Web sites copies of reports that contain the 
information required by proposed Form 10-D.\446\ Under the current 
system, the commenter argued, most investors remain dependent on 
sponsors voluntarily providing ongoing disclosures after the Section 
15(d) suspension, and some issuers refuse to issue ongoing disclosures 
after their Exchange Act reporting obligation has been suspended.
---------------------------------------------------------------------------

    \446\ See, e.g., Letter of ICI.
---------------------------------------------------------------------------

    Many other commenters did not believe the ability to suspend the 
Section 15(d) reporting obligation should be revised.\447\ These 
commenters generally argued that there is no reason to treat ABS 
issuers differently from other securities that can suspend reporting 
under Section 15(d). In addition, such a change would be costly and the 
commenters believed ABS investors, which are mostly institutional, 
already have sufficient access to information through proprietary and 
third party Web sites.
---------------------------------------------------------------------------

    \447\ See, e.g., Letters of ABA; Am. Bankers; ASF; Capital One; 
CMSA; and Wells Fargo.
---------------------------------------------------------------------------

    We are not at this time revisiting the statutory framework of 
Section 15(d) regarding the suspension of reporting obligations. 
Modifying the obligation would raise broad issues regarding the 
treatment of other non-ABS issuers that do not have public common 
equity. However, the concerns raised by investors do confirm the 
importance to investors of post-issuance reporting of information 
regarding an ABS transaction in understanding transaction performance 
and in making ongoing investment decisions.
    Finally, we are adopting a separate rule, as proposed, 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.\448\ 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.
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    \448\ See Exchange Act Rule 15d-23. This rule is not applicable 
with respect to underlying securities that do not meet its 
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.
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    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 are providing that no separate annual and 
other reports need be filed with respect to the intermediate financial 
asset's reporting obligation, if the following conditions are met: 
\449\
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    \449\ As with note 441 above, these amendments are only 
applicable with respect to the reports filed pursuant to Section 
15(d) for the intermediate financial asset. They do 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 and 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.
    As proposed, the new rule does not affect any reporting obligation 
applicable with respect to the asset-backed securities, nor does it 
affect any obligation to provide information regarding the financial 
asset or the underlying asset pool in the ABS reports.\450\
---------------------------------------------------------------------------

    \450\ See Item 1100(d) of Regulation AB.
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3. Reporting on EDGAR
    Registration statements and annual and other periodic and current 
reports are filed in electronic format on EDGAR.\451\ As proposed, we 
are not fundamentally changing how documents regarding asset-backed 
securities are to be filed on EDGAR. However, there have been and 
continue to be inconsistencies by ABS issuers with respect to filing of 
registration statements and 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 reiterating the 
following guidance from the Proposing Release on how to submit

[[Page 1564]]

documents on EDGAR that will enable investors and others to locate 
material information about particular asset-backed securities more 
efficiently.
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    \451\ See Rule 101 of Regulation S-T (17 CFR 232.101).
---------------------------------------------------------------------------

    This guidance clarifies existing practice regarding how documents 
are to be submitted on EDGAR. In addition, we are planning programming 
changes to the EDGAR system to permit the generation of new EDGAR 
access codes for an issuing entity before the Securities Act Rule 
424(b) prospectus is filed. We believe such changes should 
significantly reduce some of the technical and compliance issues 
involved in establishing new transactions under the EDGAR system. We or 
the staff will issue additional instructive guidance once these 
programming changes are made to update and clarify further EDGAR 
reporting processes for ABS.
    Under our EDGAR system, 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.\452\ The depositor must include 
the complete name of the new entity as part of the serial tag.\453\ 
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.\454\
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    \452\ As we explained in the Proposing Release, 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 (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. Until the programming changes discussed in the 
text 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.
    \453\ 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 the problems we have 
seen in the past regarding inconsistent abbreviation of names.
    \454\ 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. See Release No. 33-8410 (Apr. 21, 2004). As noted in 
the text, we are considering EDGAR programming changes to streamline 
this process for ABS.
---------------------------------------------------------------------------

    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.\455\ 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 Web site.
---------------------------------------------------------------------------

    \455\ 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, does not affect 
the incorporation by reference of these documents into the 
registration statement originally filed under the depositor's CIK 
code.
---------------------------------------------------------------------------

    As we explained in the Proposing Release, the creation of new 
issuing entities by identifying the serial tag in the Rule 424 filing 
header effectively identifies the reporting obligation of the depositor 
from that of the new entities. While not all commenters agreed,\456\ we 
continue to believe that 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 
increases 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.
---------------------------------------------------------------------------

    \456\ See, e.g., Letters of ASF and Sallie Mae.
---------------------------------------------------------------------------

    Conversely, we continue to believe that 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 inconsistent with these 
objectives.\457\ 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.
---------------------------------------------------------------------------

    \457\ We understand the staff in a few isolated instances has 
previously allowed combined reporting for a limited number of 
trusts. 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. 
Combined reporting is not the prevalent industry practice, even for 
issuers that frequently access the public securitization market, and 
the position in these letters is no longer applicable.
---------------------------------------------------------------------------

4. Distribution Reports on Form 10-D
a. New Form 10-D and Deadline for Filing
    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 are adopting our

[[Page 1565]]

proposal for one new form type for asset-backed securities, Form 10-D, 
to act as the report for the periodic distribution and pool performance 
information.\458\ Commenters supported a new form type for such 
reports.\459\ Under the final rule, every asset-backed issuer subject 
to Exchange Act reporting requirements will be required to make such 
reports on Form 10-D.\460\
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    \458\ See 17 CFR 249.312. Like our other Exchange Act reports, 
Form 10-D will 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 will be required to be submitted in 
electronic form in accordance with the EDGAR rules set forth in 
Regulation S-T.
    \459\ See, e.g., ABA; ASF; Aus. SF; ICI; JPMorganChase; MBNA; 
and Wells Fargo.
    \460\ See Exchange Act Rules 13a-17 and 15d-17.
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    Consistent with our proposal and the existing modified reporting 
system, these reports will 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. Commenters 
generally supported codifying the existing deadline.\461\ As proposed, 
a report will 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.
---------------------------------------------------------------------------

    \461\ See, e.g., Letters of ABA; ASF; JPMorganChase; MBNA; and 
Wells Fargo.
---------------------------------------------------------------------------

    We also are providing the ability to obtain a five calendar day 
filing extension under Exchange Act Rule 12b-25 for Form 10-D filings, 
similar to the process available today for Form 10-Q filings by non-ABS 
issuers.\462\ Commenters supported extending Rule 12b-25 to Form 10-D 
filings, particularly if we continued an approach that linked Exchange 
Act reporting compliance with Form S-3 eligibility requirements.\463\ 
Under Rule 12b-25, the issuer must file a Form 12b-25 no later than one 
business day after the due date for the Form 10-D filing if all or any 
portion of the Form 10-D report is not filed in a timely manner. To 
obtain the filing extension, the Form 12b-25 must contain certain 
representations by the registrant, including why the inability to file 
timely could not be eliminated without unreasonable effort or expense 
and that the subject Form 10-D filing will be made not later than the 
fifth calendar day following its original due date. The related Form 
10-D filing must then be made not later than five calendar days after 
its original due date.\464\ If the issuer timely provides the proper 
notice on Form 12b-25 filing and subsequently makes the related Form 
10-D filing within the required five calendar day period, the Form 10-D 
filing will be deemed to be filed on its original due date, including 
for purposes of Form S-3 eligibility.\465\
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    \462\ A 15 calendar day filing extension for Form 10-K already 
exists under Exchange Act Rule 12b-25.
    \463\ See, e.g., Letters of ABA; ASF; Capital One; CMSA; 
JPMorganChase; and U.S. Bank.
    \464\ The filing extension procedure in Rule 12b-25 is not 
available more than once for any particular Form 10-D filing.
    \465\ Note, however, that Exchange Act Rule 12b-25(d) provides 
that ``a registrant will not be eligible to use any registration 
statement form under the Securities Act of 1933 the use of which is 
predicated on timely filed reports until the subject report is 
actually filed'' pursuant to Rule 12b-25.
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b. Signatures
    As we stated in the Proposing Release, it is our understanding that 
in many ABS transactions, the trustee is the recipient and not 
necessarily the preparer of the Form 10-D 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 signature requirements for Form 10-D 
reflected 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 (or 
master servicer if multiple servicers were involved). We did not 
propose to permit the trustee to sign the report as an alternative to 
the depositor or the servicer.
    Commenters were mixed on these proposals. While some commenters 
supported the proposals,\466\ others believed additional parties should 
be able to sign, including the trustee.\467\ Some of these commenters 
believed any party should be permitted to sign an Exchange Act report 
for asset-backed securities, if the transaction parties so agreed.
---------------------------------------------------------------------------

    \466\ See, e.g., Letters of JPMorganChase and Wells Fargo.
    \467\ See, e.g., Letters of ABA; Am. Bankers; ASF; BMA; and U.S. 
Bank.
---------------------------------------------------------------------------

    We are not persuaded that additional parties should be permitted to 
sign the Form 10-D. While the final rule will result in a change in 
practice for some issuers from the inconsistent practice under the 
modified reporting system, we continue to believe it is more 
appropriate for the reports to be signed by either the depositor, or 
the servicer in the alternative. In the various scenarios presented by 
commenters who argued for the ability of additional parties to sign, in 
each case either the depositor or the servicer would still be in a 
position to sign. We also do not believe it is appropriate to permit 
any transaction party to sign a required report under the Exchange 
Act.\468\ Accordingly, we are adopting our signature requirements as 
proposed.\469\
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    \468\ This approach is consistent with non-ABS, including other 
structured securities.
    \469\ Several commenters requested clarification on the use of a 
power of attorney to sign Exchange Act reports. See, e.g., Letters 
of ASF; BMA; JPMorganChase; and U.S. Bank. Existing Item 601(b)(24) 
of Regulation S-K addresses the procedural requirements for the use 
of a power of attorney if any name is signed to an Exchange Act 
report pursuant to a power of attorney. Manually signed copies of 
such power of attorney must be filed. In addition, if the name of 
any officer signing on behalf of the registrant (e.g., for ABS, 
either the officer of the depositor signing on behalf of the 
depositor or the officer of the servicer signing on behalf of the 
issuing entity by the servicer) is signed pursuant to a power of 
attorney, certified copies of a resolution of the registrant's board 
of directors authorizing such signature shall also be filed (e.g., 
by the depositor's board of directors). A power of attorney filed 
relating to an Exchange Act report must relate to a specific filing 
or amendment. A power of attorney that confers general authority 
shall not be filed. A power of attorney is to be for an individual 
person. Note that a power of attorney cannot be used for signing a 
certification pursuant to Exchange Act Rule 13a-14 or 15d-14. See 
Exchange Act Rule 13a-14(c) and 15d-14(c). In addition, even in 
instances where a power of attorney may be used, the use of the 
power of attorney does not affect the responsibility of the 
principal whose signature is being signed pursuant to the power of 
attorney.
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c. Content
    Consistent with our proposal and the longstanding requirements 
under the modified reporting system, the disclosure content for Form 
10-D will consist of both the distribution and pool performance 
information for the distribution period, and certain non-financial 
disclosures, similar to those required by Part II of Form 10-Q, that 
occurred during the period. Some commenters requested a change from 
this longstanding practice by limiting the Form 10-D to only 
distribution and pool performance information and moving the other 
disclosures from the modified reporting system to Form 8-K disclosure 
requirements, albeit with longer deadlines than current Form 8-K 
requirements.\470\ Given our other amendments to Form 8-K disclosure 
requirements for ABS, discussed below, we do not believe it is 
necessary at this time to deviate further from the established 
requirements of the ABS modified reporting system.
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    \470\ See, e.g., Am. Bankers; ASF; CMSA; and Sallie Mae.
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    The menu of disclosure items for Form 10-D is presented in the 
following table:

[[Page 1566]]



                        Disclosure for Form 10-D
------------------------------------------------------------------------
              Form items and source of disclosure required
-------------------------------------------------------------------------
Item 1. Distribution and Pool Performance Information (Item 1121 of
 Regulation AB).
Item 2. Legal Proceedings (Item 1117 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 (Item 1112(b) of Regulation
 AB).
Item 7. Significant Enhancement Provider Information (Items 1114(b)(2)
 and 1115(b) 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 requires the registrant to provide the information required 
by Item 1121 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 will be required by Item 1121 of Regulation AB, any information 
required by that Item that was included in the attached distribution 
report need not be repeated in the Form 10-D.\471\ 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 is included in the attached distribution report. However, 
taken together, the attached distribution report and the information 
provided in the Form 10-D must contain the information required by Item 
1121 of Regulation AB.
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    \471\ While we make this point specifically in Item 1 of Form 
10-D with respect to distribution and pool performance information, 
the same is true regarding any of the other Items of Form 10-D. See, 
e.g., General Instruction D. of Form 10-D. In addition, 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 had been previously reported by 
the asset-backed issuer, an additional report of the information on 
Form 10-D need not be made. See General Instructions C.3 an C.4 of 
Form 10-D and the definition of ``previously reported'' in Exchange 
Act Rule 12b-2.
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    Item 1121 of Regulation AB, as proposed, requires 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 did not propose and we are not adopting a standardized format for 
the presentation of either the information required by Item 1121 of 
Regulation AB or the distribution report prepared under the transaction 
agreements. Commenters overall supported this decision.\472\ However, 
while the material characteristics will vary depending on the nature of 
the transaction, we continue to believe that, similar to asset pool 
disclosure for the registration statement prospectus, there are certain 
broad categories of disclosure and examples of common characteristics 
that can be identified as illustrative examples. Therefore, Item 1121 
of Regulation AB continues to set forth non-exclusive examples of such 
information, as revised in response to comment. As we stressed in the 
Proposing Release, and consistent with our discussion above regarding 
prospectus disclosure, the actual disclosure to be provided will need 
to be tailored to the material characteristics of the asset pool and 
transaction involved. As with the item for prospectus asset pool 
disclosure, we recognize that not all of the characteristics identified 
will be applicable or material to the particular asset class and 
transaction involved. As proposed, appropriate introductory and 
explanatory information should be provided to introduce material terms, 
parties and abbreviations used (or a cross-reference to a Commission 
filing where such information may be found), and statistical 
information should be presented in tabular and graphical formats, if 
such presentations will aid understanding.
---------------------------------------------------------------------------

    \472\ See, e.g., Letter of ABA; ASF; and PWC.
---------------------------------------------------------------------------

    Commenters representing investors in particular supported our 
proposed disclosure for the distribution and pool performance 
information.\473\ As adopted, examples of illustrative characteristics 
in Item 1121 of Regulation AB include:
---------------------------------------------------------------------------

    \473\ See, e.g., Letters of CFAI and ICI.
---------------------------------------------------------------------------

     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 and disposition of excess cash 
flow.\474\
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    \474\ For example, excess cash flow released to the residual 
holder or other disposition, such as deposit into a transaction 
account.
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     Interest rates applicable to the assets and the asset-
backed securities, as applicable. Registrants should consider providing 
interest rate information for pool assets in appropriate distributional 
groups or incremental ranges.
     Beginning and ending principal balances of the asset-
backed securities.
     Beginning and ending balances of transaction accounts, 
such as reserve accounts, and material account activity during the 
period.
     Amounts drawn on any credit enhancement or other support, 
as applicable,\475\ and amounts still available, if known and 
applicable.
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    \475\ For example, for internal credit enhancement or other 
support, this would not include application of subordination among 
classes, but would include use of reserve accounts.
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     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 and prepayment amounts.\476\
---------------------------------------------------------------------------

    \476\ For asset-backed securities backed by leases where a 
portion of the securitized pool balance is attributable to 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.\477\
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    \477\ This item, like the other listed items in Item 1121(a) of 
Regulation AB, is based on materiality. We have deleted the 
reference in this item to Item 1100(b) of Regulation AB. We included 
the reference as general guidance on presenting delinquency and loss 
information. We understand that such information in distribution 
reports typically is less expansive than the full delinquency and 
loss information presented in the final Rule 424 prospectus for the 
offering. However, we would expect any material changes to how 
delinquencies, charge-offs and uncollectable accounts are defined or 
determined, including re-aging policies, would be disclosed in the 
Form 10-D report.
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     The amount, terms and general purpose of any advances made 
or reimbursed during the period.
     Material modifications, extensions or waivers to pool 
asset terms, fees, penalties or payments during the distribution period 
or that have cumulatively become material over time.
     Material breaches of pool asset representations or 
warranties or transaction covenants.
     Information on ratio, coverage or other tests used for 
determining any early amortization, liquidation or other

[[Page 1567]]

performance trigger and whether the trigger was met.
    As explained in the Proposing Release, in part because we are 
expanding the availability of prefunding periods, revolving periods and 
master trusts, we also are expanding related periodic disclosure to 
include information regarding any new issuance of asset-backed 
securities backed by the same asset pool and any pool asset changes 
(other than in connection with a pool asset converting into cash in 
accordance with its terms), such as additions or removals in connection 
with a prefunding or revolving period and pool asset substitutions and 
repurchases. Such information includes any material changes in 
solicitation, credit-granting, underwriting, origination, acquisition 
or pool selection criteria or procedures. While comments on this aspect 
of the proposal were mixed between investors who desired such 
information and issuers and their representatives who generally 
objected to providing information that is not already provided 
today,\478\ we continue to believe it is important to provide 
transparency in those instances where the pool is changing not as a 
result of the assets converting into cash in accordance with their 
terms, but instead through external administration via an exception to 
the basic principle that the asset pool is discrete.
---------------------------------------------------------------------------

    \478\ Compare, e.g., Letters of CFAI and ICI; with Letters of 
ABA and ASF.
---------------------------------------------------------------------------

    In addition, we proposed that if the addition, substitution or 
removal of pool assets had materially changed the composition of the 
asset pool as a whole, full updated pool composition information 
required by Items 1110, 1111 and 1112 of Regulation AB would be 
required to the extent such information had not been provided 
previously. Several commenters representing primarily issuers and their 
representatives objected to the proposal, generally arguing that 
disclosure of the parameters of the possible pool changes in the 
prospectus should be sufficient and updated pool disclosure reflecting 
actual changes, even if the pool has materially changed, should not be 
required because such disclosure is not publicly provided today.\479\ 
We continue to believe that, with respect to changes to the asset pool 
that occur not as a result of the assets converting into cash in 
accordance with their terms but rather as a result of external 
administration, updated disclosure about the effects of such external 
changes should be required. We understand that the proposal, which 
would have triggered new pool composition information at any time a 
material change in pool composition occurred, could create 
administrative burdens in assessing on an ongoing basis whether the 
pool composition has materially changed. To ease these burdens and 
difficulties associated with the proposal, our final requirement will 
require such updated pool composition information at set times, but 
only where a prefunding or revolving period is in effect or new 
issuances have occurred from a master trust and, in each instance, only 
if the information has materially changed from that previously 
provided.
---------------------------------------------------------------------------

    \479\ See, e.g., Letters of ABA; ASF; BMA; and Wells Fargo.
---------------------------------------------------------------------------

    Under the final requirement, during a prefunding or revolving 
period (including for asset classes where an unlimited revolving period 
is permitted), or if there has been a new issuance of ABS backed by the 
same pool under a master trust during the fiscal year of the issuing 
entity, updated pool composition information will be required in the 
Form 10-D report for the last required distribution of the fiscal year 
of the issuing entity. In addition, such updated pool composition 
information also will be required in the first Form 10-D report filed 
for the period in which the prefunding or revolving period ends (if 
applicable).\480\ Consistent with the proposal, such updated pool 
composition information will include information required by Items 
1110, 1111 and 1112 of Regulation AB applied taking the revised pool 
composition into account.\481\
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    \480\ In most instances, due to the fact most ABS issuers 
suspend reporting obligations under Section 15(d) after the end of 
their first fiscal year after the takedown occurs, the operation of 
these requirements will most likely result in the disclosure being 
provided once, if applicable.
    \481\ See Item 1121(b) of Regulation AB. The original proposal 
also would have required information required by Item 1108 of 
Regulation AB (proposed Item 1107) to address new servicers not 
previously described. However, as new servicer disclosure already 
will be covered by Item 6.02 of Form 8-K, we are not including it 
separately with this disclosure requirement.
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    Consistent with our proposal, no information will be required, 
however, if the information has not materially changed from that 
provided previously in an Exchange Act report, 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. For example, if a takedown related to an ABS transaction 
with a revolving period occurred in October and the revised pool as of 
the end of the issuing entity's fiscal year in December while the 
revolving period was still in effect had not materially changed from 
the pool described in the prospectus supplement for the takedown, 
updated pool composition information would not be required. Similarly, 
if a new issuance from a master trust occurred in October and the 
revised pool as of the end of the issuing entity's fiscal year in 
December was substantially similar to the pool described in the 
prospectus supplement for the takedown, updated pool composition 
information would not be required.
    Regarding the other disclosure items for Form 10-D, the 
requirements regarding disclosure of legal proceedings, sales of 
securities, use of proceeds, submission of matters to a vote of 
security holders, defaults on senior securities and other information 
are consistent with the longstanding non-financial disclosures in Form 
10-Q required under the modified reporting system.\482\ For legal 
proceedings, we reference as proposed the tailored ABS disclosure in 
Item 1117 of Regulation AB. As with legal proceedings disclosure in 
Form 10-Q, a proceeding only will need to be reported for the 
distribution period in which it first became a reportable event and in 
subsequent periods where there have been material developments. The 
other disclosure items contain cross-references to similar items in 
Form 10-Q. For disclosure regarding the issuance of additional 
securities, we are providing, in response to comment, that information 
regarding consideration required by Item 701(c) of Regulation S-K \483\ 
need not be provided with respect to securities that were not 
registered under the Securities Act.\484\
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    \482\ 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 are incorporated into the similar disclosure required 
for Form 10-D.
    \483\ 17 CFR 229.701(c).
    \484\ See, e.g., Letter of ASF.
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    As proposed, Items 6 and 7 of Form 10-D will require updated 
financial information about significant obligors and providers of 
enhancement, to the extent updated information is required. As has long 
been the case under the modified reporting system and consistent with 
the practice for non-ABS issuers, we continue to believe that such 
information should be provided on an ongoing basis in addition to in 
the initial prospectus while the asset-backed securities are reporting 
under the Exchange Act. As proposed, such information only will need to 
be included in the first distribution report for the period in which 
updated

[[Page 1568]]

financial information regarding the third party is required under 
Regulation S-X. As discussed in Section III.B.10., 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.
    Regarding providing updated financial information for third 
parties, several commenters requested clarification as to when the 
percentage concentration tests should be measured for determining 
significant obligors.\485\ The suggestions by commenters were mixed. 
Some commenters believed determinations should be made at closing and 
not change over time as a result of pool fluctuations, arguing that to 
monitor changes on an ongoing basis would be burdensome.\486\ In 
addition, some of these commenters argued that it is typical to 
contract with known significant obligors at closing that additional 
information is to be provided for securitization reporting, and new 
significant obligors that arise as the pool pays down would not have 
such provisions negotiated into their agreements. Other commenters, 
however, thought the tests should be recalculated with pool 
fluctuations.\487\ One commenter believed the tests should be measured 
as of the date the significant obligor is initially added to the 
transaction, but not change as the pool pays down.\488\
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    \485\ We are adopting our proposed Form 8-K requirement for the 
addition and loss of material providers of credit enhancement or 
other support. Therefore, we do not believe separate accommodations 
are necessary for such entities.
    \486\ See, e.g., Letters of ASF and CMSA.
    \487\ See, e.g., Letter of NYCBA.
    \488\ See, e.g., Letter of ABA.
---------------------------------------------------------------------------

    We are clarifying in an instruction to the definition of 
significant obligor that the determination of significant obligors is 
to be made as of the designated cut-off date for the transaction, 
provided, that, in the case of master trusts, the determination is to 
be made as of the cut-off date (or issuance date if there is not a cut-
off date) for each issuance of asset-backed securities backed by the 
same asset pool.\489\ We also are noting, however, that if the 
percentage concentration drops below 10% subsequent to the dates 
discussed above, then the entity no longer need be considered a 
significant obligor.
---------------------------------------------------------------------------

    \489\ As noted in Section III.D.8.c., we also are clarifying 
that separate determinations of significant obligors must be made 
for disclosure required by Item 6.05 of Form 8-K if the actual asset 
pool differs materially from that described in the prospectus. 
Separate determinations also must be made if disclosure is required 
by Item 1121(b) of Regulation AB. See note 481 above and 
accompanying text.
---------------------------------------------------------------------------

    Similar to recent revisions to Form 10-Q, we are requiring, as 
proposed, 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.\490\ Like Form 10-Q, this requirement 
applies 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.\491\ 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).
---------------------------------------------------------------------------

    \490\ See also Section III.D.8.d.
    \491\ 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.
---------------------------------------------------------------------------

5. Annual Reports on Form 10-K
    Similar to our new general instructions for Forms S-1 and S-3, we 
are adopting 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.\492\ As proposed, under the instruction the 
depositor's name and sponsor's name also will need to be listed on the 
cover page of the Form 10-K.\493\
---------------------------------------------------------------------------

    \492\ See General Instruction J. to Form 10-K. We also are 
codifying as proposed the 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.
    \493\ While we are requiring 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 instruction also clarifies who is to sign the Form 10-K. 
Consistent with our proposal and the existing requirements for who must 
sign the Sarbanes-Oxley Section 302 certification, the report must 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 is to sign the report on behalf of the issuing 
entity and multiple servicers are 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 function) must 
sign. For the same reasons as the Form 10-D, we are not persuaded that 
additional parties, such as the trustee, should be permitted to sign 
the report as an alternative to the depositor or the servicer.\494\
---------------------------------------------------------------------------

    \494\ Regarding the potential use of a power of attorney, see 
note 469 above.
---------------------------------------------------------------------------

    Substantially as proposed, the general instruction identifies the 
existing items in the form that may be omitted as well as substitute 
items from Regulation AB that are required. Any other applicable items 
specified in Form 10-K will continue to be required.\495\ As we 
explained in the Proposing Release, the requirements specified are 
consistent with the modified reporting system, and commenters overall 
agreed.\496\ The application of the disclosure items for Form 10-K is 
presented in the following table: \497\
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    \495\ As is the case today for Form 10-K, 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).
    \496\ See, e.g., Letters of ABA and ASF.
    \497\ In response to comment and given our revisions to the 
assessment and attestation proposal, we have moved Items 5 and 9 of 
Form 10-K to the list of Items that may be omitted. See, e.g., 
Letters of ABA and ASF.

                    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...................  ............     

[[Page 1569]]

 
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        ............   \1\
 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 1112(b) of Regulation AB, Significant          ............
 Obligor Financial Information..............
Items 1114(b)(2) and 1115(b) of Regulation          ............
 AB, Significant Enhancement Provider
 Financial Information......................
Item 1117 of Regulation AB, Legal                   ............
 Proceedings................................
Item 1119 of Regulation AB, Affiliations and        ............
 Certain Relationships and Related
 Transactions...............................
Item 1122 of Regulation AB, Compliance with         ............
 Applicable Servicing Criteria..............
Item 1123 of Regulation AB, Servicer                ............
 Compliance Statement.......................
------------------------------------------------------------------------
\1\ If the issuing entity does not have any executive officers or
  directors.

    As noted in the table above, if the issuing entity has its own 
executive officers, board of directors or persons performing similar 
functions, Items 401, 402, 403 and 404 of Regulation S-K, will be 
required.\498\ As discussed in Section III.B.1., we are not requiring 
audited financial statements for the issuing entity, nor are we adding 
reporting requirements regarding internal control over financial 
reporting.
---------------------------------------------------------------------------

    \498\ Otherwise, all of Item 403 of Regulation S-K, including 
Item 403(a) of Regulation S-K, may be omitted.
---------------------------------------------------------------------------

    Regarding the items to be included from Regulation AB, information 
about legal proceedings required by Item 1117 of Regulation AB will 
need to be provided, as well as information on affiliate relationships 
and related party transactions required by Item 1119 of Regulation AB. 
Regarding the latter, no information will be required, however, if 
substantially the same information had been provided previously in an 
annual report on Form 10-K for the asset-backed securities or in an 
effective registration statement under the Securities Act or prospectus 
timely filed pursuant to Securities Act Rule 424 under the same CIK 
code as the current annual report on Form 10-K. Updated financial 
information regarding significant obligors and enhancement providers 
also will be required,\499\ 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. The reporting requirement regarding an assessment 
of compliance with servicing criteria is discussed in Section III.D.7.
---------------------------------------------------------------------------

    \499\ See text accompanying note 489 above regarding when 
determinations of significant obligors must be made.
---------------------------------------------------------------------------

    As proposed, we are codifying the longstanding requirement in the 
modified reporting system that a servicer compliance statement must be 
filed as an exhibit to the Form 10-K.\500\ 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 the assessment of and 
attestation regarding compliance with servicing criteria, which is 
against a single set of criteria applicable to all ABS transactions, 
and the Section 302 certification, which is related to disclosure in 
Commission reports.
---------------------------------------------------------------------------

    \500\ See Item 1123 of Regulation AB. Amendments to Item 601 of 
Regulation S-K specify that servicer compliance statements are to be 
filed as Exhibit 35 to the Form 10-K.
---------------------------------------------------------------------------

    Like the existing requirement under the modified reporting system, 
the servicer compliance statement is 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 are involved in servicing the pool assets, separate 
compliance statements are required from each servicer that meets the 
criteria in Item 1108(a)(2)(i) through (iii) of Regulation AB (i.e., 
master servicer, each affiliated servicer and each unaffiliated 
servicer that services 10% or more of the pool assets). As we explained 
in the Proposing Release, we believe this is consistent with general 
practice and should result in coverage of the material aspects of the 
primary servicing function.
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.\501\ As proposed, 
we are amending Item 601 of Regulation S-K to add the specific form and 
content of the required ABS Section 302 certification to the exhibit 
filing requirements.\502\
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    \501\ See Release No. 33-8238 (Jun. 5, 2003) [68 FR 36636].
    \502\ See 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 
amendments to Item 601 of Regulation S-K 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 (required by paragraph (d) of Exchange Act Rules 
13a-14 and 15d-14). In both instances, Section 302 certifications 
still must be filed under Exhibit 31. We also are revising Exchange 
Act Rules 13a-14(d) and 15d-14(d) as proposed to delete from those 
paragraphs the detailed description of the contents of the ABS 
Section 302 certifications. We are making several other technical 
amendments to the rules regarding certifications, as proposed, 
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.

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[[Page 1570]]

    As we explained in the Proposing Release, in specifying the form of 
the ABS Section 302 certification, we are making several amendments to 
the form provided in the revised staff statement to reflect our other 
substantive Exchange Act amendments.\503\ Other changes reflect the 
approach, as proposed and consistent with the approach for non-ABS 
issuers, 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. Commenters generally agreed with our proposed revisions to the 
form of the certification.\504\ The new form of certification, as 
modified from the proposal, is as follows: \505\
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    \503\ We believe the combination of these and other amendments 
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).
    \504\ See, e.g., Letters of ABA and ASF.
    \505\ 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 are not requiring that ABS reports on 
Form 10-K must contain the ABS issuer's financial statements. Thus, 
a Section 906 certification requirement will not be triggered.
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Certifications

    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] (the ``Exchange 
Act periodic reports'');
    2. Based on my knowledge, the Exchange Act periodic reports, taken 
as a whole, do 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 with respect to 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 the Exchange Act periodic 
reports;
    4. [I am responsible for reviewing the activities performed by the 
servicer(s) and based on my knowledge and the compliance review(s) 
conducted in preparing the servicer compliance statement(s) required in 
this report under Item 1123 of Regulation AB, and except as disclosed 
in the Exchange Act periodic reports, the servicer(s) [has/have] 
fulfilled [its/their] obligations under the servicing agreement(s); 
and]
    [Based on my knowledge and the servicer compliance statement(s) 
required in this report under Item 1123 of Regulation AB, and except as 
disclosed in the Exchange Act periodic reports, the servicer(s) [has/
have] fulfilled [its/their] obligations under the servicing 
agreement(s); and]
    5. All of the reports on assessment of compliance with servicing 
criteria for asset-backed securities and their related attestation 
reports on assessment of compliance with servicing criteria for asset-
backed securities required to be included in this report in accordance 
with Item 1122 of Regulation AB and Exchange Act Rules 13a-18 and 15d-
18 have been included as an exhibit to this report, except as otherwise 
disclosed in this report. Any material instances of noncompliance 
described in such reports have been disclosed in this report on Form 
10-K.
    [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]
    As we explained in the Proposing Release, paragraphs 1 and 3 have 
been changed from the revised staff statement to reflect the addition 
of Form 10-D and the fact that the certification covers the information 
filed in those distribution reports rather than Form 8-K.\506\ 
Paragraph 4 refers to the servicer compliance statement explicitly 
required by our rules. In addition and consistent with the revised 
staff statement, two alternatives are provided for paragraph 4 
depending on who is signing the Form 10-K report. The first version is 
to be used when the servicer signs the report on behalf of the issuing 
entity. The second version is to be used when the depositor is signing 
the report. Paragraph 5 of the certification has been amended from the 
revised staff statement and our proposal to refer specifically to our 
revised requirements regarding assessment of compliance with servicing 
criteria, discussed more fully in Section III.D.7.
---------------------------------------------------------------------------

    \506\ In addition, we are making conforming revisions to 
paragraph 2 of the certification to track similar changes made in 
the June 2003 certification release, which was issued after the 
revised staff statement.
---------------------------------------------------------------------------

    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 our proposal and the revised staff statement, the final 
rules specify who must sign the certification. 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.\507\ 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 function) must 
sign if a representative of the servicer is to sign, and references in 
the certification 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.
---------------------------------------------------------------------------

    \507\ See amendments to paragraph (e) of Exchange Act Rules 13a-
14 and 15d-14.
---------------------------------------------------------------------------

    As proposed, these signature requirements are consistent with our 
final rules for who must sign the Form 10-K. The same person that signs 
the Form 10-K must sign the Section 302 certification. Although 
comments in this area were mixed, we are not persuaded that a 
representative of the trustee should be permitted to sign the Section 
302 certification, especially given that the trustee is not the party 
signing the report itself.\508\
---------------------------------------------------------------------------

    \508\ Compare, e.g., Letters of Aus. SF and Wells Fargo; with 
Letters of ABA; ASF; and BMA.
---------------------------------------------------------------------------

    Consistent with our proposal and the revised staff statement, we 
are including 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

[[Page 1571]]

co-servicers have provided. As is the case today, if the signer does 
so, it must provide an additional statement in the certification 
identifying the unaffiliated parties on which the signer reasonably 
relied. Commenters supported retaining this instruction.\509\ Like the 
revised staff statement, we are not specifying the manner in which 
reasonable reliance may be established. As proposed, the reasonable 
reliance instruction for the Section 302 certification is not 
applicable with respect to affiliated parties, nor is it applicable 
with respect to information from any registered public accounting firm 
or firms performing an attestation on an assessment of compliance with 
servicing criteria for an affiliated party.
---------------------------------------------------------------------------

    \509\ See, e.g., Letters of ABA and ASF.
---------------------------------------------------------------------------

7. Report on Assessment of Compliance With Servicing Criteria and 
Accountant's Attestation
a. Background
    As noted above, the modified reporting system has not required 
audited financial statements for the issuing entity in the annual 
report on Form 10-K, but has instead generally required an assertion by 
the servicer and an attestation by an independent public accountant 
regarding compliance with servicing criteria. This longstanding 
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.
    However, the types of assessments and attestations, and the 
criteria that servicing compliance was assessed against, historically 
have varied significantly. The most common example involves an 
assertion on and disclosure regarding compliance with criteria set 
forth in the Uniform Single Attestation Program for Mortgage Bankers, 
or USAP, developed by the Mortgage Bankers Association.\510\ The 
accountant's report attesting to the assertion under the USAP is 
prepared in accordance with SSAE No. 10.\511\ The servicer's assertion 
as to compliance and the accompanying accountant's report are commonly 
referred to as a ``USAP Report.''
---------------------------------------------------------------------------

    \510\ Mortgage Bankers Association of America, Uniform Single 
Attestation Program for Mortgage Bankers (last rev. 1995).
    \511\ Statements on Standards for Attestation Engagements No. 10 
(SSAE No. 10), Attestation Standards: Revision and Recodification 
(Jan. 2001). 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.
---------------------------------------------------------------------------

    As we noted in the Proposing Release, the USAP was created early in 
the 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 makes 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 evaluates the 
servicer's assertion regarding compliance with the minimum servicing 
criteria.\512\
---------------------------------------------------------------------------

    \512\ 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.''
---------------------------------------------------------------------------

    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 may be 
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. As a result, the 
current system potentially leaves gaps in servicing compliance 
reporting.
b. Our Proposal and Overview of Revised Approach
    Our proposal sought to retain the assessment and attestation 
approach as well as improve and add consistency to the approach by 
providing a specified manner for making assertions and associated 
attestations. These improvements were largely facilitated by the 
introduction of a single uniform set of servicing criteria that covers 
all aspects of the servicing function and that could be used in the 
context of multiple asset classes.
    We continue to believe that for asset-backed securities, an 
assessment and attestation regarding servicing compliance provides 
material information to investors in monitoring transactions and thus 
their investments more directly and efficiently than an audit of 
financial statements or reporting on internal control over financial 
reporting. As we stated in the Proposing Release, the performance of 
the servicing function 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 1572]]

to assess compliance with controls and processes.\513\ A disclosure-
based assessment and attestation system identifies for investors those 
aspects of the standard servicing criteria that are in material 
compliance. Investors will thus 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.
---------------------------------------------------------------------------

    \513\ See, e.g., note 59 above.
---------------------------------------------------------------------------

    As we noted in the Proposing Release, 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 significant inconsistencies in the type of reporting 
provided, diminishing its usefulness, relevance and comparability.\514\
---------------------------------------------------------------------------

    \514\ See, e.g., ``SEC Filings Reveal Little ABS Reporting 
Consistency,'' Asset Securitization Report, Sep. 23, 2002, at 10.
---------------------------------------------------------------------------

    Accordingly, we are retaining the basic approach set forth in our 
original proposal, although we are making certain modifications, 
discussed in more detail below. Specifically, we are modifying our 
original proposal to remove the requirement for a single responsible 
party to make an assertion regarding servicing compliance covering the 
entire servicing function, which was the primary area of comment on the 
proposals.\515\ Instead, we are adopting a revised approach suggested 
by many commenters that will require reports on assessments of 
compliance with servicing criteria from each party participating in the 
servicing function as specified, with associated attestation reports 
from registered public accountants, to be filed as exhibits to the Form 
10-K report.\516\ As an additional aspect of this revised approach, we 
are revising paragraph 5 of the ABS Section 302 certification, as 
discussed further below in response to comment, to require a 
certification that, except as otherwise disclosed, required reports 
from all parties participating in the servicing function as specified 
have been included as an exhibit to the Form 10-K report.
---------------------------------------------------------------------------

    \515\ See, e.g., Letters of ABA; AICPA; ASF; BMA; CMSA; Dewey 
Ballantine (``Dewey); E&Y JPMorganChase; MBA; MBNA; U.S. Bank; and 
Wells Fargo.
    \516\ See, e.g., Letters of AICPA; ASF; BMA; CMSA; E&Y 
JPMorganChase; MBA; and Wells Fargo.
---------------------------------------------------------------------------

    As proposed, a material instance of noncompliance identified in the 
reports will not by itself have regulatory restrictions on market 
access, such as an effect on continued form eligibility under the 
Securities Act for additional ABS transactions.\517\ Rather, the 
assessment and reporting on the criteria is designed to operate within 
a disclosure-based framework.
---------------------------------------------------------------------------

    \517\ However one of the proposed criteria relates to reporting 
with the Commission. If reports are not filed in accordance with our 
reporting rules, this may have an effect on continued form 
eligibility. See Section III.A.3.
---------------------------------------------------------------------------

c. Assessment and Attestation of Servicing Compliance
    As discussed above, our revised approach will require that the 
annual report on Form 10-K must include as exhibits reports from each 
party participating in the servicing function that assesses compliance 
with the servicing criteria that we are adopting in Item 1122 of 
Regulation AB.\518\ Item 1122 of Regulation AB also specifies the 
format for each of the assessment reports and requires them to include: 
\519\
---------------------------------------------------------------------------

    \518\ See Exchange Act Rules 13a-18 and 15d-18. Item 601 of 
Regulation S-K specifies that the assessment reports will need to be 
filed under Exhibit 33 to the Form 10-K.
    \519\ See Item 1122(a) of Regulation AB.
---------------------------------------------------------------------------

     A statement of the party's responsibility for assessing 
compliance with the servicing criteria applicable to it.
     A statement that the party used the servicing criteria to 
assess compliance with the applicable servicing criteria.
     The party's assessment of compliance with the applicable 
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 
party.
     A statement that a registered public accounting firm has 
issued an attestation report on the party's assessment of compliance 
with the applicable servicing criteria as of and for the period ending 
the end of the fiscal year covered by the report on Form 10-K.
    As discussed further in Section III.D.7.d, our revised approach 
also requires the attestation report of a registered public accounting 
firm to be filed as an exhibit to the Form 10-K report.\520\
i. Responsible Party
---------------------------------------------------------------------------

    \520\ See Item 1122(b) of Regulation AB. Item 601 of Regulation 
S-K specifies that each attestation report of a registered public 
accounting firm will need to be filed under Exhibit 34 to the Form 
10-K. As proposed, the substitution of another type of accountant's 
report or opinion, such as a USAP report or an agreed-upon 
procedures report, will 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 the report called 
for by this rule.
---------------------------------------------------------------------------

    Our proposal contemplated that a single ``responsible party,'' 
defined 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, would make an assertion regarding compliance 
with the servicing criteria. The proposal contemplated that the 
responsible party's assertion would cover the entire servicing function 
and that the responsible party would, in certain instances, have to 
place reasonable reliance upon third parties in making its assertion.
    As discussed above, this was the primary focus of comment on our 
assessment and attestation proposals. Many of the commenters, in 
responding to our specific requests for comment on this point, believed 
that instead of a single ``responsible party,'' there should be 
separate assessments of compliance by each entity responsible for the 
particular criteria and separate accompanying auditor 
attestations.\521\ These commenters believed the responsibility for 
assessing compliance with the criteria should be placed solely, in each 
case, with the individual party whose servicing activities are being 
evaluated. As stated by one of these commenters, individual assessments 
can be performed by each party at a platform level consistent with the 
proposal and these reports could be filed as exhibits to the Form 10-K 
report along with the responsible party's assessment of its own 
servicing compliance, as applicable.\522\ Several commenters also 
supported as an addition to this alternative a requirement that a 
single party would either confirm that an assessment and attestation 
covering each unaffiliated party with material servicing or 
administration responsibilities has been received, or disclose that an 
entity with such responsibilities has failed to deliver its required 
assessment and attestation.\523\
---------------------------------------------------------------------------

    \521\ See note 515 above.
    \522\ See Letter of ASF.
    \523\ See, e.g., Letters of AICPA; ASF; BMA; CMSA; E&Y 
JPMorganChase; MBA; and Wells Fargo.
---------------------------------------------------------------------------

    These alternatives still achieve our proposed objective of covering 
the entire servicing function. We continue to believe it is important 
that the investor receives notice as to whether reports evidencing all 
aspects of the servicing function are in fact provided. As discussed in 
Section III.B.3.d., the

[[Page 1573]]

delegation of servicing and administration functions in an ABS 
transaction can vary significantly among different parties, even in the 
same asset class. The investor likely will not be in the best position 
to determine whether the reports that are ultimately attached to the 
Form 10-K report collectively cover all aspects of the servicing 
criteria.
    Thus, we are adopting a revised approach in response to these 
comments that does not require an assertion by a single responsible 
party, but instead requires that the person that signs the Section 302 
certification certify in paragraph 5 of the certification that 
assertions prepared by all parties participating in the servicing 
function as specified, and associated attestation reports from 
registered public accountants, have been included as exhibits to the 
report on Form 10-K, except as otherwise disclosed in the report.\524\ 
In addition, the certifying person must certify that all material 
instances of noncompliance with the servicing criteria described in the 
reports have been disclosed in the report on Form 10-K. In order to 
make this certification, reports will need to be accumulated from all 
parties participating in the servicing function as specified, along 
with associated attestation reports from registered public accounting 
firms, and filed as exhibits. Disclosure will be required in the Form 
10-K if any of those reports are missing, along with an associated 
explanation, and disclosure also will be required of material instances 
of noncompliance described in the reports, if any.
---------------------------------------------------------------------------

    \524\ See Item 601(b)(31)(ii) of Regulation S-K; Item 1122 of 
Regulation AB; and Exchange Act Rules 13a-18 and 15d-18.
---------------------------------------------------------------------------

    The revised approach we are adopting requires coordination among 
the various parties participating in the servicing function to be able 
to comply with the filing requirements; however, we believe that the 
amount of required coordination is reduced from our original proposal 
and, as discussed above, meets the regulatory objective of providing 
investors insight into the operation of the entire servicing function. 
We expect that such coordination is possible and, as confirmed to us by 
commenters, issuers can obtain the reports that must be filed as 
exhibits.
ii. Scope: Period Covered
    We proposed that the assessment of the servicing function would be 
for a full fiscal period, rather than just at a point in time. We 
continue to believe that an assessment and attestation for the entire 
period covered by the report on Form 10-K is the appropriate approach 
in this context, and commenters generally agreed.\525\ This approach is 
consistent with the USAP approach commonly followed today. Accordingly, 
we are adopting this approach without modification.
---------------------------------------------------------------------------

    \525\ Compare, e.g., Letters of ASF and E&Y with Letter of ABA.
---------------------------------------------------------------------------

iii. Scope: Level of Reporting
    In light of current practice and servicers' focus on overall 
compliance with standards at the platform level, we proposed to accept 
a ``platform'' level assessment for purposes of assessing servicing 
compliance. This means an assessment of compliance with respect to all 
asset-backed securities transactions involving the asserting 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 was 
proposed to permit a single assessment and assertion regarding 
compliance for entities involved in multiple ABS transactions, as 
compared to requiring separate assessments for each individual 
transaction, which would be more costly and might be administratively 
burdensome. Commenters generally supported an assessment at the 
platform, rather than transaction, level.\526\ We are adopting this 
approach as we continue to believe a platform level assessment provides 
an appropriate level of information to investors and does not result in 
substantial increased cost to issuers. As commenters confirmed to us, 
we believe that platform level assessments can be performed by all 
parties participating in the servicing function to allow an issuer to 
meet its requirements to file the resulting assessment and related 
attestation reports as exhibits to the Form 10-K report.
---------------------------------------------------------------------------

    \526\ See, e.g., Letters of AICPA; ASF; E&Y MBNA; PWC; and 
Wells Fargo.
---------------------------------------------------------------------------

iv. Scope: Entire Servicing Function
    As we explained in the Proposing Release, 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 entire servicing function may be performed by a 
single party or different aspects may be performed 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 
calculating 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 report covering only a limited subset of the servicing function. 
As we explained in the Proposing Release, 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 may 
lead 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 these concerns, we proposed that the responsible party 
would assess material compliance with the servicing criteria covering 
the entire servicing function, based on reasonable reliance upon third-
parties where necessary. We continue to believe that the entire 
servicing function should be subject to an assessment of compliance. As 
noted above, we believe the revised approach we are adopting requiring 
separate reports regarding compliance by each party participating in 
the servicing function as specified also achieves this objective while 
eliminating many of the concerns or potential complexities raised by 
commenters regarding a single ``responsible party'' approach.
    Some commenters thought that, in the event that we pursued a 
multiple report approach, we should set a specific threshold for which 
reports should be required as some parties may be providing servicing 
activities for only a minor portion of the assets included in a 
transaction.\527\ Other commenters thought that providing a threshold 
for reporting may result in very few reports being included in 
instances where there

[[Page 1574]]

are multiple parties each servicing a minor portion of the assets 
included in the transaction, such as may be the case in residential 
mortgage ABS transactions.\528\
---------------------------------------------------------------------------

    \527\ See, e.g., Letters of AICPA; ASF; BMA; Dewey; and E&Y.
    \528\ See, e.g., Letter of Wells Fargo.
---------------------------------------------------------------------------

    To address this issue, we are specifying that reports will be 
required by any ``party participating in the servicing function,'' 
which is defined as any entity that is performing activities that 
address the servicing criteria, unless such entity's activities relate 
only to 5% or less of the pool assets. For example, if a party is 
servicing individual pool assets that comprise only 4% of the pool, a 
report from that party will not be required. However, some servicing 
functions cover all assets included in a transaction. For example, a 
single party, such as a trustee or an administrator, may calculate the 
amount due to investors in a transaction. In those cases, an assessment 
from that party and a related attestation report from a registered 
public accounting firm will be required to be filed as an exhibit to 
the Form 10-K for the transaction.
    As proposed, the revised approach we are adopting does not 
distinguish which parties should file reports based on the respective 
role played by the party in the servicing function. Any party 
participating in the servicing function, including trustees, may be 
required to provide an assessment and related attestation report to the 
extent that the assets covered by their activities relates to more than 
5% of the pool assets. However, the fact that a party, such as a 
trustee, may perform an aspect of the servicing function covered by the 
criteria for purposes of requiring an assessment and attestation report 
does not mean that the party is included in the definition of 
``servicer'' in Regulation AB for purposes of other requirements, such 
as disclosure regarding servicers and servicer compliance statements.
v. Servicing Criteria
    As we explained in the Proposing Release, 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.
    In the absence of other suitable criteria, we proposed to establish 
disclosure-based servicing criteria to be used by those making an 
assertion regarding servicing compliance and by registered public 
accounting firms in assessing servicing compliance. Our proposal 
illustrated our belief that a single set of servicing criteria that is 
publicly available would enhance the quality of the assessment of 
compliance, promote the comparability of reports of different issuers, 
and provide value in establishing market-wide benchmarks with respect 
to assessing the servicing function.
    Most commenters commended the initiative to enunciate a consistent 
set of criteria.\529\ As explained by one of these commenters, 
substantial modifications to the existing criteria under the USAP were 
in order and the proposed modifications were appropriate.\530\
---------------------------------------------------------------------------

    \529\ See, e.g., Letters of ASF; CMSA; MBA; U.S. Bank; and Steve 
Walls. One of these commenters noted that while market participants 
could develop suitable uniform criteria if given enough time, the 
proposed criteria, if revised to give effect to the commenter's 
comments on specific items, would be an acceptable set of criteria 
that could be applied across asset types. See Letter of ASF.
    \530\ See Letter of Steve Walls.
---------------------------------------------------------------------------

    With certain minor clarifying revisions in response to comment, we 
are adopting the uniform set of servicing criteria substantially in the 
form proposed. As we explained in the Proposing Release, no other set 
of uniform servicing criteria exists for purposes of this type of 
compliance assessment today, nor are we aware of any that are under 
development in the market. A few commenters believed that our final 
rules should permit the use of criteria established by a private body 
or group that followed due-process procedures.\531\ If other sets of 
criteria were developed by market participants in the future that were 
subject to appropriate due process, we would be willing to consider, at 
that time, their applicability in a separate rulemaking action. As we 
explained in the Proposing Release, in order for a set of servicing 
criteria to be considered in the future, the criteria 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.\532\ In 
addition, the set of criteria would need to address all material 
aspects of the servicing function with respect to an asset-backed 
securities transaction.
---------------------------------------------------------------------------

    \531\ See, e.g., Letters of AICPA; E&Y and PWC.
    \532\ See AT Sec.  101, paragraph 24.
---------------------------------------------------------------------------

    As proposed, the disclosure-based servicing criteria we are 
adopting are designed to be incremental to the current criteria in the 
USAP. Accordingly, and as commenters confirmed to us, many of the 
criteria are not new.\533\ Criteria that we proposed that included 
specific timeframes, such as two business days, mirrored for the most 
part the current criteria in the USAP. The servicing criteria we 
proposed that were 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. Commenters suggested several minor clarifying 
revisions to the proposed criteria, and as discussed above we have made 
clarifying revisions to the final criteria in response.
---------------------------------------------------------------------------

    \533\ See, e.g., Letter of MBA.
---------------------------------------------------------------------------

    While certain of the proposed servicing criteria referred to 
specific timeframes as adapted from the USAP, others relied upon 
transaction agreements to set forth specific details regarding that 
aspect of the servicing function. The few commenters that commented on 
this aspect of the proposal were mixed. One commenter preferred more 
reliance on transaction agreements instead of specific timeframes to 
provide flexibility, while another commenter preferred specific 
timeframes in the criteria instead of reliance on transaction 
agreements to promote consistency.\534\ To balance these objectives, we 
are maintaining our proposed references to specific timeframes in the 
criteria, which as noted above were adapted from the current USAP. 
However, we are also providing in those criteria that transaction 
agreements can expressly provide an alternate timeframe. Under this 
approach, the specific timeframes in the criteria will continue to 
apply in the event that the transaction agreements happen to be silent 
on those timeframes. We believe this approach appropriately leaves the 
responsibility for determining the details of the servicing functions 
with investors and ABS issuers while still providing default benchmarks 
that are generally consistent with the existing USAP. Further, as ABS 
transaction agreements are required to be filed with the Commission, 
disclosure of these details for individual transactions will be readily 
available.
---------------------------------------------------------------------------

    \534\ Compare the Letter of ABA with the Letter of MBA.
---------------------------------------------------------------------------

    Regarding another commenter's concern that the assessment and 
related attestation regarding servicing compliance will be performed at 
the platform level while the servicing criteria refer to transaction

[[Page 1575]]

agreements,\535\ in many instances we do not expect this will be a 
major issue because it is our understanding that many transaction 
agreements, particularly in the same asset class, contain the same or 
nearly the same specific servicing-related requirements.
---------------------------------------------------------------------------

    \535\ See Letter of Wells Fargo.
---------------------------------------------------------------------------

    The criteria, as proposed, consist of four broad categories: 
general servicing considerations; cash collection and administration; 
investor remittances and reporting; and pool asset administration. As 
we explained in the Proposing Release, these categories describe major 
components of the servicing function, and 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 Item 
1122 of Regulation AB. As noted in Section III.D.7.c.vi., some 
servicing criteria may be more or less applicable depending on the type 
of asset underlying the ABS transactions.
    The 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. As we explained in the Proposing Release, 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 continue to 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 (as applicable) and reconciled such cash for investors and 
maintained transaction accounts as set forth in the transaction 
agreements. As we explained in the Proposing Release, the servicing 
criteria included within this section are comparable to those set forth 
in the USAP, although the USAP does not have specific criteria to 
address the maintenance of transaction accounts. We continue to 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. These 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. As we explained in the Proposing 
Release, 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 remains our 
understanding that oversight of the flow of funds calculations can 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.
    As we explained in the Proposing Release, 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.
vi. Identification of Inapplicable Criteria
    Because of the unique and fluid nature of the ABS market, our 
proposal provided discretion to the responsible party to exclude those 
servicing criteria that were inapplicable to the servicing of a 
particular asset class, so long as the excluded criteria were 
identified in the responsible party's and the registered public 
accounting firm's reports. We also requested comment on an alternative 
approach that would allow for a 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.
    One commenter thought it critical to permit exclusion of criteria 
that was inapplicable to the asset class and did not object to 
requiring each assessing party to identify either all of the 
inapplicable criteria, or, alternatively, only the criteria that were 
applicable.\536\ One commenter supported our alternative approach and 
believed a servicer should be able to exclude any particular criterion, 
even if it cannot conclude that the criterion is not applicable to the 
asset class, as long as it discloses the exclusion in the assessment 
(e.g., the criterion is not required by the transaction 
documents).\537\
---------------------------------------------------------------------------

    \536\ See, e.g., Letter of ASF.
    \537\ See, e.g., Letter of TMCC.
---------------------------------------------------------------------------

    As noted above, we continue to believe all applicable servicing 
criteria should be covered. However, with our revised approach 
requiring reports from multiple parties that participate in the 
servicing function, we also recognize that it may be necessary for a 
particular party to exclude a particular criterion from its assessment 
not because it is inapplicable to the asset class, but because that 
particular party does not perform it. As a result, we are revising our 
proposal to allow for the exclusion in a party's assessment report of 
those specific servicing criteria that are not applicable to the 
asserting party based on the activities it performs with respect to 
asset-backed securities transactions taken as a whole involving such 
party and that are backed by the same asset type backing the class of 
asset-backed securities. For example, a servicer may exclude a 
particular criterion either because in its servicing platform it does 
not participate in that element of the servicing function or the 
criterion is broadly inapplicable in the context of the asset class 
being serviced. However, a party may not voluntarily select to exclude 
specific servicing criteria if they are otherwise applicable to that 
party.
    In the event that servicing criteria are excluded for those reasons 
that are permitted, the inapplicability of the criteria must be 
disclosed in both the asserting party's assertion and the

[[Page 1576]]

related registered public accounting firm's report. However, while the 
individual asserting parties will be permitted to exclude criteria they 
do not perform, it will be incumbent on the person making the Section 
302 certification to certify whether all required reports covering the 
entire servicing function, including all the criteria applicable to the 
asset class, are included with the Form 10-K report.
    One commenter requested the ability to exclude certain servicing 
criteria that are inapplicable in certain foreign jurisdictions, as 
some of the proposed criteria do not apply to non-U.S. issuers given 
there is not a corresponding concept in the home jurisdiction.\538\ We 
do not believe it is necessary to create a separate ability to exclude 
certain criteria for foreign ABS transactions. The approach we have 
adopted provides those parties who participate in servicing foreign ABS 
transactions the ability to exclude certain criteria if those criteria 
are not applicable to the asserting party based on the activities it 
performs. For example, if there are certain activities that are 
necessary for the servicing of a mortgage loan in the U.S. that are not 
applicable for the servicing of a mortgage loan in a foreign 
jurisdiction because of regulatory or other structural reasons, the 
approach we have adopted would permit the inapplicable criteria for the 
foreign asset class to be excluded from the assertion and related 
attestation with appropriate disclosure in each of those reports.
---------------------------------------------------------------------------

    \538\ See, e.g., Letter of A&O.
---------------------------------------------------------------------------

vii. Disclosure of Material Instances of Non-Compliance
    Our proposal contemplated that the responsible party's report on an 
assessment of compliance with servicing criteria would identify any 
material instance of noncompliance with the criteria, and that the same 
party would be required to disclose in the report on Form 10-K any 
material impacts or effects as a result of the material instances of 
noncompliance 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. We continue to 
believe it is important for material instances of noncompliance that 
are reported in each of the reports prepared by parties participating 
in the servicing function to be identified by the person preparing the 
Form 10-K in the report on Form 10-K.
    However, we are not adopting a specific line item requirement to 
disclose any material impacts or effects as a result of the material 
instances of noncompliance. Commenters were mixed on whether and to 
what extent there should be such a specific disclosure 
requirement.\539\ Even in the absence of a specific line item 
disclosure requirement, whether any such disclosure is required will 
depend on the particular facts and circumstances.\540\
---------------------------------------------------------------------------

    \539\ Compare, e.g., Letter of ASF; with Letters of AICPA; E&Y 
and Wells Fargo.
    \540\ See note 252 above.
---------------------------------------------------------------------------

    Consistent with our proposal, the period to be covered by the 
report on Form 10-K is consistent with the common practice today under 
the USAP of assessing compliance as of and for the period ending on a 
particular date. As we explained in the Proposing Release, 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, consistent with our proposal and 
general practice today, disclosure will be required of material 
instances of noncompliance during the reporting period, even if such 
noncompliance was subsequently corrected in the period. We continue to 
believe this approach is consistent with our approach 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.
d. Attestation Report on Assessment of Compliance
    We proposed that a registered public accounting firm would be 
required to attest to, and report on, the assessment of compliance made 
by the single responsible party through performance of an examination 
engagement. As our proposal would be in lieu of audited financial 
statements and Sarbanes-Oxley Section 404 reporting, we believed that 
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, and thereby increase investor 
confidence in the reliability of the compliance assessment.
    Our revised approach does not require an assertion by a single 
responsible party covering the entire servicing function, but instead 
contemplates that assertions will be made by each party participating 
in the servicing function as specified and that each party will be 
responsible for having an attestation engagement performed by a 
registered public accounting firm. The attestation would not cover 
servicing criteria properly excluded by the servicing party and 
disclosed as described above. Further, the revised approach requires 
that each registered public accounting firm's report be filed as an 
exhibit to the report on Form 10-K.\541\ As proposed, the attestation 
examination must 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.\542\ The Attestation Standards for Compliance Attestation 
(AT Sec.  601) in those interim auditing and attestation standards 
should be used in performing this examination engagement.
---------------------------------------------------------------------------

    \541\ 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.
    \542\ See Release No. 33-8222 (Apr. 25, 2003) [68 FR 23335]. See 
also Release No. 34-50495 (Oct. 5, 2004) [69 FR 60913] (Notice of 
Filing of Proposed Rules on Conforming Amendments to PCAOB Interim 
Standards Resulting from the Adoption of PCAOB Auditing Standard No. 
2, ``An Audit Of Internal Control Over Financial Reporting Performed 
In Conjunction With An Audit of Financial Statements''); and Release 
No. 34-50688 (Nov. 17, 2004) [69 FR 68434] (Order Approving Proposed 
Conforming Amendments to PCAOB Interim Standards Resulting from the 
Adoption of PCAOB Auditing Standard No. 2, ``An Audit Of Internal 
Control Over Financial Reporting Performed In Conjunction With An 
Audit of Financial Statements'').
---------------------------------------------------------------------------

    We are adopting conforming amendments to Regulation S-X, 
substantially as proposed, 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 amendments, a new ``Attestation report on assessment of 
compliance with servicing criteria for asset-backed securities'' is 
defined as a report in which a registered public accounting firm 
expresses an opinion, or states that an opinion cannot be expressed, 
concerning an asserting party's assessment of compliance with servicing 
criteria, as required under the revised approach, in accordance with 
standards on attestation engagements.\543\ When an overall opinion 
cannot be expressed, the registered public accounting firm must state 
why it was unable to express such an opinion. As proposed, the report 
must be dated, signed manually, identify the period covered by the 
report and clearly state the opinion of the accountant as to

[[Page 1577]]

whether the 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.\544\
---------------------------------------------------------------------------

    \543\ See Rule 1-02(a)(3) of Regulation S-X.
    \544\ See Rule 2-02(g) of Regulation S-X.
---------------------------------------------------------------------------

    Consistent with our proposal, the report issued by the registered 
public accounting firm must be available for general use and not 
contain restricted use language. We believe that the servicing criteria 
we have adopted as part of Item 1122 of Regulation AB are suitable 
criteria, as that term is defined in the SSAE No. 10, and are available 
to enable a registered public accounting firm to issue a report on a 
party's assertion without restricted use language.
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.\545\ The amendments 
also shortened 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 were responsive to the ``real time 
disclosure'' mandate in Section 409 of the Sarbanes-Oxley Act and were 
intended to provide investors with better and faster disclosure of 
important events.\546\ As we stated in the Proposing Release, we 
believe the objectives of those amendments are equally applicable with 
respect to asset-backed securities. Accordingly, we are clarifying 
application of the Form 8-K reporting items for asset-backed 
securities. As proposed, the result of the existing amendments and our 
clarifying amendments 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.
---------------------------------------------------------------------------

    \545\ See the Form 8-K Release.
    \546\ 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 are adding a new 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 instruction permits either 
the depositor or the servicer to sign Form 8-K reports. The depositor's 
name and sponsor's name will need to be listed on the cover page of the 
Form 8-K.\547+\ As proposed, the instruction also identifies which of 
the existing items may be omitted. Any other applicable items specified 
in Form 8-K will continue to be applicable under the new reporting 
deadlines adopted in the Form 8-K Release. While some commenters did 
not agree, we continue to believe the same Form 8-K reporting deadlines 
that apply to non-ABS issuers should apply to ABS issuers.\548\ We also 
are adopting several proposed ABS-specific items under Section 6 of 
Form 8-K, with modifications in response to comment, which are 
discussed further below.
---------------------------------------------------------------------------

    \547\ See note 493 above.
    \548\ See, e.g., Letters of Am. Bankers; JPMorganChase; and 
Wells Fargo.
---------------------------------------------------------------------------

    The resulting application of the Form 8-K items for ABS is 
presented in the following table: \549\
---------------------------------------------------------------------------

    \549\ In response to comment and given our revisions to the 
assessment and attestation proposal, we have moved Items 2.02 and 
4.01 of Form 8-K to the list of Items that may be omitted. See, 
e.g., Letters of ABA and ASF.

                     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 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. Securities Act Updating              ............
     Disclosure.............................
------------------------------------------------------------------------


[[Page 1578]]

b. Clarifying Amendments to Existing Items
    As proposed, we are adopting several clarifying instructions to the 
existing items that remain applicable for ABS. For example, we are 
clarifying that a reportable event under Items 1.01 and 1.02 also 
includes the entry into, modification of or termination of a material 
transaction agreement, even if the issuing entity is not a party to the 
transaction, such as a servicing agreement involving a servicer 
discussed in Item 1108(a)(3) of Regulation AB. A new instruction to 
Item 1.03 clarifies that disclosure also is 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 new instruction to 
Item 2.04 clarifies that a reportable event also includes 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. Finally, for Item 5.03 regarding amendments to governing 
documents, a new instruction clarifies, as proposed, 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 will trigger disclosure under that Item. Not only do we 
believe this requirement is appropriate given the critical role these 
governing documents serve for the transaction, the requirement is 
consistent with the same requirement for non-ABS under Item 5.03.
c. New Items
    As proposed, we are adding several new ABS-specific reportable 
events to Form 8-K. These new items are grouped under Section 6 to the 
Form. As with the existing Form 8-K items, we believe that, with the 
exception of the new Item regarding ABS informational and computational 
material, which is designed to facilitate the categorization of Form 8-
K disclosures, these new Items represent events that unquestionably or 
presumptively have such significance that timely disclosure should be 
required. In response to comment, we are not adopting the proposed Form 
8-K item relating to sales of additional securities in lieu of similar 
disclosure on Form 10-D.\550\
---------------------------------------------------------------------------

    \550\ See, e.g., Letters of ABA and ASF.
---------------------------------------------------------------------------

    As proposed, all of the new Items, except Item 6.01, will have a 
four business day reporting deadline similar to other Form 8-K 
reportable events. Filing deadlines with respect to Item 6.01 are 
pursuant to our new rule for filing ABS informational and computational 
material, as discussed in Section III.C.1.
    The following is a discussion of the new items, as modified in 
response to comment.\551\
---------------------------------------------------------------------------

    \551\ In the Form 8-K Release, 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 item provides a Form 8-K item to report any ABS informational 
and computational material filed pursuant to new Securities Act Rule 
426.\552\ It does not otherwise create an obligation to file such 
material.
---------------------------------------------------------------------------

    \552\ See Section III.C.1.
---------------------------------------------------------------------------

Item 6.02. Change of Servicer or Trustee

    If a servicer that met the thresholds for disclosure in Item 
1108(a)(2) 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 will 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 Item 
1108(d) of Regulation AB, will 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 will be required.
    In response to concerns by commenters regarding obtaining the 
required information within the four business day deadline,\553\ we are 
providing an instruction similar to Instruction 2 to existing Item 5.02 
of Form 8-K regarding new executive officers that, to the extent that 
information called for by Item 6.02 is not determined or is unavailable 
at the time of the required Form 8-K filing, the registrant must 
include a statement to this effect in the filing and then must file an 
amendment to the Item 6.02 Form 8-K filing containing the information 
within four business days after the information is determined or 
becomes available.
---------------------------------------------------------------------------

    \553\ See, e.g., Letter of ABA.
---------------------------------------------------------------------------

Item 6.03. Change in Credit Enhancement or Other External Support

    This item requires disclosure of the loss, addition or material 
modification of any material credit enhancement or other support 
provided by a third party.\554\ If any such enhancement or support is 
terminated other than by expiration of the contract on its stated 
termination date or as a result of all parties completing their 
obligations, disclosure will be required of the date of termination, 
identity of the parties to the agreement, a brief description of the 
terms of the enhancement or support, 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 or support is added, disclosure specified in Items 
1114 or 1115 of Regulation AB will be required, as applicable, 
regarding the new enhancement or support. If any existing material 
enhancement or support has been materially modified, a brief 
description of the material terms and conditions of the amendments will 
be required. An instruction to the new Item specifies that disclosure 
under this Form 8-K item will be required whether or not the issuing 
entity was a party to any agreement regarding the enhancement or 
support if the loss, addition or modification of such enhancement or 
support materially affects, directly or indirectly, the asset-backed 
securities, the pool assets or the cash flows underlying the asset-
backed securities. Similar to Item 6.02 discussed above, we are 
providing an instruction to Item 6.03 that, to the extent that 
information called for by the Item regarding the enhancement or support 
is not determined or is unavailable at the time of the required Form 8-
K filing, the registrant must include a statement to this effect in the 
filing and then must file an amendment to the Form 8-K filing 
containing the information within four business days after the 
information is determined or becomes available.
---------------------------------------------------------------------------

    \554\ An instruction to the item clarifies that disclosure 
regarding changes to material enhancements are to be reported under 
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 is not made as of the required distribution date under the 
transaction documents, and such failure is material, disclosure will be 
required of the failure and the nature of the failure. Accelerated 
disclosure

[[Page 1579]]

under this item will not replace the requirement to file a report on 
Form 10-D with respect to the related distribution period (e.g., to 
include pool performance information).

Item 6.05. Securities Act Updating Disclosure

    As proposed, the last 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 
longstanding staff position, if, with respect to a takedown off of a 
shelf registration statement on Form S-3, any material pool 
characteristic of the asset pool at the time of issuance of the asset-
backed securities differs by 5% or more (other than as a result of the 
pool assets converting into cash in accordance with their terms) \555\ 
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 will be required, including disclosure regarding 
any new significant obligors, servicers or significant 
originators.\556\ As proposed, no report will 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.
---------------------------------------------------------------------------

    \555\ If a revolving period was in effect, while this proviso 
would exclude asset paydowns, it would not exclude additional assets 
acquired into the pool with the proceeds of the paydowns.
    \556\ This reportable event only will be applicable with respect 
to offerings registered on Form S-3. For registered offerings on 
Form S-1, due to current 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 
will 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 such that a filing on Form 8-K would not be the 
appropriate means to address the changes.
---------------------------------------------------------------------------

    We continue to believe that if the actual pool backing the 
investor's securities differs materially from that offered and 
described to the investor in the prospectus (and hence was to reflect 
the basis for the investor's investment decision), the investor is 
entitled to disclosure of the actual asset pool that the investor is 
primarily dependent on for repayment. We note that the requirement in 
Item 6.05 only relates to the situation where the actual asset pool at 
issuance differs materially from that described in the prospectus, 
other than as a result of the pool assets converting into cash in 
accordance with their terms.
d. Safe Harbor and Eligibility To Use Form S-3
    In the March amendments to Form 8-K, 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.\557\ 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.
---------------------------------------------------------------------------

    \557\ 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.
---------------------------------------------------------------------------

    In the Proposing Release, we proposed extending the safe harbor to 
proposed Item 6.03, Change in Credit Enhancement or Other External 
Support, as this Item appears to meet the criteria of the existing 
subset of Form 8-K items to which the safe harbor applies. In addition, 
as discussed in Section III.D.4., because asset-backed securities will 
be excluded from quarterly reporting on Form 10-Q, we are requiring 
that disclosure prescribed by a required but not filed item of Form 8-K 
must 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).
    While a few commenters did not believe the Form 8-K safe harbor 
should be conditioned on Form 10-D disclosure, arguing that the Form 
10-D should be limited to remittance reporting,\558\ we continue to 
believe that tying the safe harbor to the next periodic report, which 
the Form 10-D would be, is appropriate and consistent with the 
application of the safe harbor to non-ABS issuers. The alternative of 
extending the term of the safe harbor to the next annual report on Form 
10-K would not be consistent with the objective of Exchange Act Section 
13(l) in promoting real time issuer disclosures.
---------------------------------------------------------------------------

    \558\ See, e.g., Letters of Am. Bankers and Wells Fargo.
---------------------------------------------------------------------------

    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.\559\ 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 are adopting a requirement that reporting 
obligations regarding other asset-backed securities transactions by the 
depositor or an affiliated depositor involving the same asset class 
must be complied with for continued Form S-3 eligibility for new 
transactions. Consistent with the March amendments, we are clarifying, 
as proposed, 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 will 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. As noted in 
Section III.A.3., we also are adding Items 6.01 and 6.05 to the Form S-
3 eligibility safe harbor, although we are not adding them to the 
Section 10(b) and Rule 10b-5 safe harbor.
---------------------------------------------------------------------------

    \559\ Similar amendments were made with respect to Form S-2 and 
Securities Act Rule 144 (17 CFR 230.144).
---------------------------------------------------------------------------

9. Other Exchange Act Amendments

a. Exclusion From Form 10-Q

    As noted above, we are codifying 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 
will be required in Form 10-D. As with 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, as proposed, we are 
excluding asset-backed securities from quarterly reporting on Form 10-
Q.\560\
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    \560\ See amendments to Exchange Act Rule 13a-13 and Rule 15d-
13.

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[[Page 1580]]

b. 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 requests 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.
    As proposed, we are exempting asset-backed securities from Section 
16 in its entirety.\561\ 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 is appropriate in the public 
interest and consistent with the protection of investors.
---------------------------------------------------------------------------

    \561\ See amendments to Exchange Act Rule 3a12-12.
---------------------------------------------------------------------------

c. 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 amending our transition report rules to clarify their 
application to asset-backed issuers.\562\ Under the amendments, an 
asset-backed issuer that changed its fiscal year end will 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.\563\ The asset-backed issuer 
must provide all information required in response to proposed General 
Instruction J. of Form 10-K, including filing any servicer compliance 
statements and assessments of compliance and attestation reports 
regarding compliance with servicing criteria. The servicer compliance 
statements and assessment reports must reflect the same transition 
period covered by the transition report. Of course, any obligation to 
file distribution reports under Form 10-D will continue to apply 
regardless of a change in fiscal year.
---------------------------------------------------------------------------

    \562\ See amendments to Exchange Act Rules 13a-10 and 15d-10.
    \563\ 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 will 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 are applicable to transition reports on Form 10-K.
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E. Other Miscellaneous Amendments

    In addition to our more substantive amendments, we also are 
adopting several minor and technical amendments to our rules and forms 
to address the regulatory treatment of ABS. These include:
     Updating references to reflect new definitions and 
references; \564\
---------------------------------------------------------------------------

    \564\ See, e.g., 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 
Rule 434; Exchange Act Rules 10A-3, 13a-15 and 15d-15; and Rule 100 
of Regulation M.
---------------------------------------------------------------------------

     Removing instructions and references that will no longer 
be applicable; \565\
---------------------------------------------------------------------------

    \565\ See, e.g., amendments to Items 308 and 406 of Regulation 
S-B and Items 308 and 406 of Regulation S-K. The amended forms 
required for ABS 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 Regulation AB that clarify their application 
for asset-backed securities;\566\
---------------------------------------------------------------------------

    \566\ See, e.g., amendments to Items 202, 501 and 503 of 
Regulation S-K.
---------------------------------------------------------------------------

     Clarifying that an ABS issuer is not eligible for the 
disclosure system for ``small business issuers'' with respect to asset-
backed securities because that disclosure system, like most of the 
basic Regulation S-K disclosure system, is not applicable to asset-
backed securities;\567\ and
---------------------------------------------------------------------------

    \567\ See, e.g., 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 \568\ is not applicable to 
any acquisition or disposition of an asset-backed security.\569\
---------------------------------------------------------------------------

    \568\ 17 CFR 245.101 through 245.104.
    \569\ See amendments to 17 CFR 245.101.
---------------------------------------------------------------------------

F. Transition Period

    We received a number of comments urging us to adopt an extended 
transition period for compliance with the new rules.\570\ In 
particular, these commenters argued that compliance will require 
changes in procedures and systems, which in some cases may involve 
multiple parties. Existing master trusts also present difficulties as 
changes to transaction documents and procedures necessarily will affect 
prior outstanding ABS because the prior and future ABS are backed by 
the same asset pool and often are governed by the same transaction 
documents. As a result of the above, the majority of commenters 
suggested a twelve month delay before compliance.
---------------------------------------------------------------------------

    \570\ See, e.g., Letters of ABA; ASFA; AICPA; Am. Bankers; ASF; 
Auto Group; BMA; BOA; Capital One; CMSA; FSR; JPMorganChase; MBA; 
NYCBA; Sallie Mae; TMCC; and Wells Fargo.
---------------------------------------------------------------------------

    Further, asset-backed securities that have been publicly offered 
and issued before the effective date of the new rules are subject to 
additional complications due to the fact that such transactions were 
not undertaken in contemplation of the new rules or the required 
changes. Because of any of a number of considerations, which could 
include fee levels, ABS issuers may have less leverage to amend 
existing contracts with various transaction participants regarding such 
securities.
    We have decided to delay the compliance date beyond that discussed 
in the Proposing Release so that market participants will have ample 
time to prepare and satisfy the new requirements. While most of our 
final amendments codify existing staff and market practice, we 
recognize that we are adopting several changes that may require 
implementation time. We believe the extension ultimately will benefit 
investors because it will help ensure that issuers and market 
participants have the time to plan for and implement appropriate 
disclosure processes, including improved Exchange Act reporting 
processes and more meaningful and relevant disclosure documents. We 
continue to believe it is appropriate in order to establish consistency 
and ensure an orderly transition to the new regulatory regime that 
takedowns off of existing

[[Page 1581]]

registration statements pursuant to Rule 415(a)(1)(x) also must comply 
after the designated transition period. At the same time, however, we 
are grandfathering ABS that become subject to Exchange Act reporting 
obligations before the end of our extended transition period.
    Under the compliance dates we are adopting today, any registered 
offering of asset-backed securities commencing with an initial bona 
fide offer after December 31, 2005, and the asset-backed securities 
that are the subject of that registered offering, must comply with the 
new rules and forms. For any such offerings that rely on Rule 
415(a)(1)(x), Securities Act registration statements filed after August 
31, 2005 related to such offerings must be pre-effectively or post-
effectively amended, as applicable, to make the prospectus included in 
Part I of the registration statement compliant and to make any required 
undertakings or other changes for Part II of the registration 
statement.\571\ For Securities Act registration statements that were 
filed on or before August 31, 2005, the prospectus and prospectus 
supplement, taken together, relating to such offerings that rely on 
Rule 415(a)(1)(x) must comply,\572\ provided, that, the Securities Act 
registration statement will need to be post-effectively amended if any 
new undertakings are required to be made with respect to such offerings 
in Part II of the registration statement. In addition, these Securities 
Act registration statements will need to be post-effectively amended to 
make the prospectus included in Part I of the registration statement 
compliant, as well as to make changes, if any, to Part II of the 
registration statement with respect to any registered offering of 
asset-backed securities under such registration statement commencing 
with an initial bona fide offer after March 31, 2006.
---------------------------------------------------------------------------

    \571\ In addition, for existing shelf registration statements, 
any prior fee associated with any unsold securities under that 
registration statement may be offset against the total filing fee 
due for a subsequent registration statement filed by the registrant. 
Registrants electing this option should so indicate by adding a note 
to the ``Calculation of Registration Fee'' table in the subsequent 
registration statement providing the information specified in 
Securities Act Rule 457(p) (17 CFR 230.457(p)).
    \572\ For Form S-3 registration statements, exhibits may be 
filed on Form 8-K and incorporated by reference. Existing Securities 
Act Rule 462(d) also provides immediate effectiveness for a post-
effective amendment filed solely to add exhibits. Notwithstanding 
this accommodation, changes requiring post-effective amendments 
other than to provide disclosure complying with the new rules--for 
example changes in credit enhancements or structural features since 
the time of effectiveness--will continue to require post effective 
amendments.
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IV. Paperwork Reduction Act

A. Background

    Our amendments contain ``collection of information'' requirements 
within the meaning of the Paperwork Reduction Act of 1995 (PRA).\573\ 
We published a notice requesting comment on the collection of 
information requirements in the Proposing Release, and we submitted 
these requirements to the Office of Management and Budget (OMB) for 
review in accordance with the PRA.\574\
---------------------------------------------------------------------------

    \573\ 44 U.S.C. 3501 et seq.
    \574\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

    We did not receive any comments on the PRA analysis contained in 
the Proposing Release. As discussed in Part III, we have made several 
changes to the proposed rules in response to comments on the substance 
of the proposals. These changes are designed to avoid potential 
unintended consequences and reduce possible additional costs or burdens 
pointed out by commenters. After evaluating the comments and our 
responsive revisions to address them, we have decided not to change our 
initial PRA estimates described in the Proposing Release and submitted 
to OMB.
    However, as part of our changes to reduce potential additional 
burdens, we are extending the availability of filing extensions under 
Exchange Act Rule 12b-25 to new Form 10-D. Filing extensions under Rule 
12b-25 already are available for several other required Exchange Act 
reports, and we requested comment in the Proposing Release as to 
whether we should extend the rule to Form 10-D. Filing extensions under 
Rule 12b-25 are contingent on filing a Form 12b-25 to provide notice to 
the Commission and the marketplace that registrants will be unable to 
file a required report in a timely manner. Form 12b-25 is a separate 
``collection of information'' under the PRA, and accordingly we are 
revising our burden estimates for Form 12b-25 to reflect our amendments 
and new filings for Form 10-D late filings. We are submitting these 
revised burden estimates for Form 12b-25 to OMB for review in 
accordance with the PRA, and in this release we are publishing notice 
and requesting comment on the revised Form 12b-25 ``collection of 
information'' requirement.
    In sum, the titles for all the collections of information affected 
by these amendments are:
    (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);
    (6) ``Regulation S-K'' (OMB Control No. 3235-0071);
    (7) ``Form 10-D'' (a new collection of information); and
    (8) ``Form 12b-25'' (OMB Control No. 3235-0058).
    As we explained in the Proposing Release, 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 represents 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. As noted above, Form 12b-25 provides notice to the Commission and 
the marketplace that a registrant will be unable to file a required 
report in a timely manner and is a condition to a filing extension for 
the underlying Exchange Act report. 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.

B. Summary of Amendments

    We are addressing 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. As we explained in the Proposing Release, 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

[[Page 1582]]

developed taking into account evolving industry practices.
    With a few exceptions, the amendments consolidate and codify 
current staff positions and industry practice. We are adopting a new 
principles-based set of disclosure items, ``Regulation AB,'' as a sub-
part of Regulation S-K that will 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 \575\ 
and Form 12b-25) 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. As noted above, our amendments to Form 12b-25 extend the 
availability of filing extensions under Exchange Act Rule 12b-25 to new 
Form 10-D.
---------------------------------------------------------------------------

    \575\ We are moving all Securities Act registrations of ABS 
offerings to Form S-1 or Form S-3. Correspondingly, we reduced our 
estimate of responses on Form S-11.
---------------------------------------------------------------------------

    The amendments are designed to establish a tailored registration, 
disclosure and reporting system for asset-backed securities offerings. 
Compliance with the revised disclosure requirements will be mandatory. 
There will be no mandatory retention period for the information 
disclosed (except with respect to registrants that elect to avail 
themselves of the Web site filing accommodation for static pool data in 
prospectuses, which entails a five year record retention requirement), 
and responses to the disclosure requirements will not be kept 
confidential.

C. Summary of Comment Letters on the PRA Analysis and Revisions to 
Proposals

    As noted above, we received no comments in response to our request 
for comment on the PRA analysis in the Proposing Release. We have made 
several changes in response to comments on the substance of the 
proposals that are designed to avoid potential unintended consequences 
and reduce possible additional costs or burdens pointed out by 
commenters. For example, in response to comment regarding potential 
additional disclosure burdens regarding the proposed static pool 
disclosure requirement, we have made responsive revisions to clarify 
the disclosure required and to provide alternate means to provide the 
disclosure, including through Internet Web sites. As another example, 
we have revised the tests for determining financial significance 
regarding certain derivative instruments in response to comment that 
the proposed tests would lead to potential additional disclosure 
burdens. We have revised our proposal regarding an assessment and 
attestation of compliance with servicing criteria in response to 
comment that the proposed approach may also result in unintended 
additional burdens. We also have made several changes to the proposed 
disclosure items for prospectus and distribution report disclosure to 
further tailor and clarify the disclosure required, particularly in the 
areas where we proposed additional disclosure, such as that regarding 
the background, roles and experience of various transaction parties. As 
discussed above, we are revising our burden estimates for Form 12b-25 
to reflect amendments to extend filing extensions to Form 10-D made in 
response to comment. These revisions are discussed below.

D. Revisions to PRA Reporting and Cost Burden Estimates

    As discussed in the Proposing Release, the existing PRA burden 
estimates before these amendments 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 
are codifying recognizes that information relevant to ABS differs 
substantially from that relevant to other securities.
    For purposes of the PRA collection of information requirements 
discussed in the Proposing Release, we first estimated the average 
number of hours that an ABS issuer currently spends to complete one of 
the listed forms.\576\ We then estimated the incremental burden change 
that would result from the amendments. Our final rules include 
disclosure options for providing static pool information in 
prospectuses, including through an Internet Web site under certain 
conditions. These conditions include Web site availability and record 
retention requirements. We have evaluated these disclosure options and 
their respective requirements in the context of the collections of 
information to which they relate (Forms S-1 and S-3), and they are 
incorporated into the estimates discussed below.
---------------------------------------------------------------------------

    \576\ 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.
---------------------------------------------------------------------------

    Further, and as discussed in the Proposing Release, we understand 
that some issuers may experience costs in excess of our average 
estimates in the first year of compliance, such as revising their 
systems and practices to adjust to the new rules, but that costs should 
decrease in subsequent years. The burden also will vary among issuers 
based on the complexity of the ABS transaction, the number of parties 
involved (especially parties participating in the servicing function in 
the case of Form 10-K), the disclosure option they choose for static 
pool information (in the case of Forms S-1 and S-3), and the nature and 
level of initial development of their compliance procedures. We 
considered all of these factors in evaluating our estimates. As 
discussed above, after evaluating the comments received and our changes 
to the proposals, we are not revising our estimates overall for each 
collection of information.
    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. As we explained in the Proposing Release, 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 were based on 
filings made during the Commission's 2003 fiscal year: October 1, 2002 
through September 30, 2003.
1. Form S-3
    We revised our current burden estimate for Form S-3 for ABS issuers 
to take into account that ABS issuers do not principally rely on 
incorporation by reference from separately required Exchange Act 
reports to provide their disclosure, which is the practice for most 
non-ABS issuers that use Form S-3. As a result, for ABS we used the 
same burden estimate for Form S-3 as we estimated for Form S-1 for ABS 
issuers, which we estimated to be an average of 1,000 hours. We then 
estimated that completing and filing a Form S-3 under the new 
disclosure requirements will result in an average increase of 
approximately 25% to our estimate of the current Form S-3 reporting 
burden imposed on ABS issuers, or 250 hours per form. We estimated 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

[[Page 1583]]

hour.\577\ During our 2003 fiscal year, we received 168 Form S-3 
filings related to asset-backed securities. Using our estimates of the 
percentages of the burden prepared by the issuer and outside 
professionals, we thus estimated that the amendments will 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).
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    \577\ 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.
---------------------------------------------------------------------------

2. Form S-1 and Form S-11
    As discussed above, we estimated 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 estimated that completing and filing a 
Form S-1 under the new disclosure requirements will result in an 
increase of approximately 25% over the amount of time currently spent 
by ABS issuers to complete and file the form, resulting in an increase 
of 250 hours per response over the current reporting burden. As with 
Form S-3, we estimated 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.
    During our 2003 fiscal year, we received 7 Form S-1 filings related 
to asset-backed securities. In addition, we received 18 filings on Form 
S-11 related to asset-backed securities. As we explained in the 
Proposing Release, we are moving 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 estimated 
that these filings would instead be made on Form S-1. Thus, we 
estimated there would be 25 ABS offerings registered on Form S-1, and 
we correspondingly reduced our estimate of responses on Form S-11 by 18 
responses. Using our estimates of the percentages of the Form S-1 
burden prepared by the issuer and outside professionals, we estimated 
that the amendments will 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
    As with our burden estimates for Securities Act registration 
statements, we first derived a reporting burden estimate to reflect the 
substantially different and more limited disclosures ABS issuers 
provide under the existing modified reporting system. We estimated that 
currently it takes an ABS issuer an average of 90 hours to prepare a 
Form 10-K. As we explained in the Proposing Release, the most 
significant difference between the amendments and the existing system 
is with respect to the assessment of compliance with servicing 
criteria. We estimated that completing and filing a Form 10-K under the 
amendments will result in an average increase of approximately 33% over 
the amount of time currently spent by entities completing the form, or 
30 hours per response. We estimated that 25% of the reporting 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.
    Based on filings in our 2003 fiscal year, we estimated 1,200 Form 
10-K filings related to asset-backed securities.\578\ Using our 
estimates of the percentages of the burden prepared by the issuer and 
outside professionals, we thus estimated that the amendments will 
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).
---------------------------------------------------------------------------

    \578\ This estimate was 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 used the Rule 424(b) 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.
---------------------------------------------------------------------------

4. Form 8-K
    As we explained in more detail in the Proposing Release, ABS 
issuers under the existing modified reporting system use Form 8-K to 
file periodic distribution and pool performance information in addition 
to reporting current events. To separate this reporting from the 
disclosure of current events, we proposed and are creating 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 
will continue to prescribe certain reportable events that require 
current disclosure by ABS issuers. Form 8-K also continues 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. We estimated 9,500 of these filings 
will instead appear as Form 10-D filings under the amendments.\579\ 
Accordingly, we estimated a 9,500 decrease in the total number of Form 
8-K filings.
---------------------------------------------------------------------------

    \579\ This estimate also reflected the approximate number of 
distribution report filings that would have been made by ABS issuers 
in the absence of combined reporting.
---------------------------------------------------------------------------

    With respect to the use of Form 8-K for required reportable events, 
we estimated that the time it takes to prepare a Form 8-K for a 
required reportable event does not vary between an ABS and a non-ABS 
issuer. Thus, we estimated that an ABS issuer spends, on average, 
approximately 5 hours completing the form. As with our estimates for 
non-ABS issuers, we estimated 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 estimated that our amendments to the required reportable events 
on Form 8-K applicable to ABS issuers will 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 estimated 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 
estimated that the amendments will 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. Form 10-D
    As discussed above, we estimated there will be 9,500 Form 10-D 
filings per year. We estimated that, on average, completing and filing 
a Form 10-D under the amendments will result in a burden of 30 hours 
per filing. As with our other estimates for Exchange Act reports by 
non-ABS issuers, we estimated 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 
estimated that 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

[[Page 1584]]

$21,375,000 (9,500 filings x 30 hours x .25 x $300 per hour).\580\
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    \580\ We noted that this reflection of the burden predominantly 
consists of codifying the already existing requirements applicable 
under 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 will 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 disclosure changes include changes to items under Regulation S-K 
and the addition of a new subpart to Regulation S-K--Regulation AB--
that provides disclosure items particularly tailored to asset-backed 
securities.\581\ However, as noted in the Proposing Release, the filing 
requirements themselves are included in Forms S-1, S-3, 10-K, 10-D and 
8-K, and we reflected the burden for the new requirements in the burden 
estimates for those forms. The items in Regulation S-K, including 
Regulation AB, do not impose any separate burden. Consistent with 
historical practice, 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.
---------------------------------------------------------------------------

    \581\ We also are adopting, as proposed, 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.
---------------------------------------------------------------------------

7. Form 12b-25
    As discussed above, we are extending Exchange Act Rule 12b-25 and 
Form 12b-25 to Form 10-D filings. The amendments permit ABS issuers to 
use Form 12b-25 for the purpose of obtaining a filing extension with 
respect to a Form 10-D filing. Form 10-D filings previously have been 
made under Form 8-K, which is not eligible for filing extensions under 
Rule 12b-25. Hence, we do not have experience with filing extensions or 
Form 12b-25 filings for the types of reports that will constitute Form 
10-D filings. We do know that, based on filings in our 2003 fiscal 
year, Form 12b-25 filings were made for approximately 20% of Form 10-K 
and 10-KSB filings and approximately 12% of Form 10-Q and 10-QSB 
filings. After considering factors such as the frequency, disclosure 
requirements and relative administrative complexity of Form 10-D 
filings compared to these other filings, we are estimating that Form 
12b-25 filings will be made for approximately 20% of Form 10-D filings. 
Based on our estimate of 9,500 Form 10-D filings, we thus estimate an 
increase of 1,900 Form 12b-25 filings. We estimate the time it takes 
for an ABS issuer to prepare a Form 12b-25 will not vary from that 
required by a non-ABS issuer, which we have estimated to be, on 
average, approximately 2.5 hours per form, all of which is borne by the 
issuer. Accordingly, we estimate that the amendments will result in an 
added annual burden of 4,750 hours (1,900 filings x 2.5 hours).

E. Request for Comment

    We request comment on our amendments to the collection of 
information requirements for Form 12b-25 in order to (a) evaluate 
whether the collection of information is 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 collection 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 collection 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 amendments to Form 12b-25 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 the Form 12b-25 burden estimates and any suggestions 
for reducing the burdens. Persons who desire to submit comments on the 
Form 12b-25 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

A. Background and Summary of the Final Rules

    The final rules and Regulation AB provide definitive rules for 
public offerings of asset-backed securities registered under the 
Securities Act as well as ongoing reporting by asset-backed issuers 
under the Exchange Act. They mostly codify staff and industry practice 
for ABS offerings with some incremental changes and responsive changes 
made to comments on the proposals. The rules and this release also 
should resolve a number of ambiguities and potential misconceptions 
regarding application of the federal securities laws to asset-backed 
securities. We are sensitive to the cost and benefits that result from 
our rules. In this section, we examine the benefits and costs of our 
rules.
    As discussed in the Proposing Release, 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. 
Before the Proposing Release, many issuers, investors and other market 
participants had requested a defined set of regulatory 
requirements.\582\ 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 of entry into the market. As a 
result, the final rules to codify staff position and industry practice 
with incremental changes and responsive changes should clarify and 
simplify the process of registering an ABS offering. This should lower 
the overall costs of complying with the federal securities

[[Page 1585]]

laws, promote more efficient capital markets, and potentially lower the 
cost of capital. There also may be secondary effects relating to more 
efficient securitizations, such as the opportunity for lowered 
borrowing costs for obligors of the underlying assets, such as 
consumers.
---------------------------------------------------------------------------

    \582\ See note 57 above.
---------------------------------------------------------------------------

    In order to improve an investor's understanding of an ABS offering, 
we are adopting incremental enhancements, with modifications in 
response to comment, to disclosure regarding the participants involved 
in an 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. In addition, we intend to improve 
the current framework for reporting on compliance with servicing 
criteria that will operate within a disclosure-based framework and 
cover the entire spectrum of the servicing function in an ABS 
transaction. We are retaining the basic approach set forth in our 
original proposal with a uniform set of criteria, although we are 
adopting a modification in response to comment that instead of a single 
``responsible party,'' reports of compliance with servicing criteria 
from each party participating in the servicing function, with 
associated attestation reports from registered public accountants, must 
be provided.
    We also are adopting incremental changes to current staff and 
industry practice to allow certain lease-backed asset-backed securities 
immediate access to shelf registration through Form S-3 eligibility, 
along with disclosure to address the different nature of these 
offerings. In addition, we are allowing additional asset types to be 
securitized through master trusts or through transactions using a 
revolving period, again with 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 for asset-
backed securities and codifying alternatives to refer to third party 
filings to provide more cost-effective options to provide required 
information. We also are granting foreign ABS issuers access to shelf 
offerings and Form S-3. Finally, we are providing interpretive guidance 
in a number of areas in addition to the final rules, 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.
    Commenters on the proposals overwhelmingly supported establishing a 
separate framework for the registration and reporting of asset-backed 
securities.\583\ We did not receive any specific comments on our cost-
benefit analysis contained in the Proposing Release. Some commenters 
suggested as a general matter that we should carefully consider each 
incremental step beyond current market practice to ensure that the 
perceived benefit to investors is outweighed by the additional burdens 
that would be imposed, and whether the benefits sought can be achieved 
in a less intrusive manner.\584\ Another commenter also noted on a 
general matter that, because of the limited recourse special purpose 
nature of most ABS transactions, the costs of compliance burdens are 
likely to be passed through to the investor who owns the residual or 
junior cash flows in the ABS transaction.\585\
---------------------------------------------------------------------------

    \583\ See note 27 above.
    \584\ See Letters of ABA and ASF.
    \585\ See Letter of AFGI.
---------------------------------------------------------------------------

    As discussed in the Proposing Release, we are aware of potential 
costs and burdens associated with the incremental changes that we 
proposed to the existing current market practices for ABS transactions 
and requested comments on these potential burdens. We have carefully 
evaluated the concerns expressed by commenters and have made several 
measured changes in response to comments on the substantive discussion 
of the proposals that are designed to alleviate potential unintended 
consequences and reduce possible additional costs or burdens pointed 
out by commenters. For example, in response to comment regarding 
potential additional disclosure burdens regarding the proposed static 
pool disclosure requirement, we have made responsive revisions to 
clarify the scope of the disclosure required and to provide alternative 
means to provide disclosure, including through Internet Web sites. We 
have revised our proposal regarding an assessment and attestation of 
compliance with servicing criteria in response to comment that the 
proposed approach may also result in unintended administrative burdens. 
We also have made several changes to the proposed disclosure items for 
prospectus and distribution report disclosure to further tailor and 
clarify the disclosure required. Cumulatively, we believe the final 
rules, as revised from the proposal, will achieve clearer and more 
transparent regulatory requirements for both issuers and investors in a 
less intrusive manner to issuers.
    We also have delayed the compliance date beyond that discussed in 
the Proposing Release in response to requests for an extended 
transition period. A longer transition period will help to alleviate 
the immediate impact of any costs and burdens imposed on issuers. We 
expect investors to benefit from the additional time that we are 
affording issuers and market participants to implement appropriate 
disclosure processes, including improved Exchange Act reporting 
processes and more meaningful and relevant disclosure documents. In 
addition, we are grandfathering ABS offerings that become subject to 
Exchange Act reporting obligations before the end of our extended 
transition period. These allowances should assist various transaction 
participants in planning for compliance with the new regulatory regime 
for future ABS offerings, which may reduce uncertainty and support more 
effective pricing of those asset-backed securities.

B. Parties Eligible To Use the New Regulatory Structure

    We continue to take a principles-based approach to the definiton of 
asset-backed security that allows broad flexibility as to asset types 
and structures that we believe should be subject to the alternative 
regulatory regime that we are creating for such securities. The 
definition of an asset-backed security will 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 definition. This is intended to 
bring all ABS transactions and issuers into an appropriate 
registration, disclosure and reporting system regardless of what 
Securities Act form they are eligible to use.
    Our amendments 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 will be 
incorporated into the definition of an asset-backed security. We have 
made revisions in response to comment to take a disclosure-based 
approach to delinquent assets as a less burdensome way to incorporate 
the current staff position on delinquency into the definition of an 
asset-backed security. We are adopting, with certain modifications in 
response to comment, proposed expansions of certain staff positions to 
allow additional asset types and transaction features to be included. 
For example, the definition of asset-backed security will be expanded 
so

[[Page 1586]]

that more lease-backed ABS will be eligible to use Form S-3. The rules 
we are adopting will 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. In response to 
comment, we have even further expanded the revolving period. We believe 
these expansions will result in increased flexibility in structuring 
transactions that meet market demands. The rules we are adopting will 
require more disclosure to provide greater transparency of the 
operations of these structures and changes to pool composition over 
time.
    As discussed in Section III.A., commenters were mixed on our 
approach to the definition of an asset-backed security. On the one 
hand, commenters representing investors expressed concern in expanding 
access to the alternative regulatory regime for asset-backed securities 
in recognition of the fact that investment decisions on these 
transactions are being made under more compressed time frames and with 
less access to information through shelf registration. On the other 
hand, commenters representing primarily issuers and their 
representatives would have preferred, in lieu of our approach of 
codifying exceptions to the definition of an asset-backed security, 
abandoning many of the core principles of the definition, such as 
deleting the ``discrete pool'' requirement, which would permit 
unlimited use of master trusts structures and revolving periods, in 
order to encourage further innovation. While we recognize that there 
are instances where some limited exceptions to these general principles 
would be appropriate and consistent for access to the ABS regulatory 
regime, and these are reflected in the modifications adopted in the 
final rules, we agree with the concerns of investors that lack of a 
``discrete'' requirement in the definition of an asset-backed security 
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, in response to comment, we made several minor 
revisions to the proposed limits as well as modifications to staff 
positions relating to delinquent and non-performing assets to reduce 
the potential costs raised by commenters and to be more consistent with 
current market practice.
    The definition and interpretations we are adopting are intended to 
establish parameters for the types of securities that are appropriate 
for our alternative regulatory regime for ABS. The definition does 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 specifically designed for 
those securities. Such securities would need to rely on non-ABS form 
eligibility for registration and additional or alternative disclosures 
would be required.
    Commenters also noted that some securities, most notably synthetic 
securitizations, may not necessarily meet all of the core principles in 
the definition of an ``asset-backed security,'' but nonetheless argued 
it would make it more difficult for market participants to develop such 
products without continued discussions with the staff if they were not 
included in our new regulatory regime. We continue to believe the ABS 
regulatory regime that we are adopting should be appropriately limited 
to a definable group of asset-backed securities. However, we also 
recognize that the default application of the existing disclosure 
regime for corporate issuers might not be most appropriate for 
synthetic securitization. We encourage issuers and promoters of such 
securities to continue their interaction with the staff. In addition, 
we request additional comment about these securities and whether an 
appropriate alternative regime should be established for these kinds of 
securities with respect to registration, disclosure and ongoing 
reporting.

C. Securities Act Registration

    We are adopting rules to allow domestic and foreign issuers to use 
either Form S-1 or Form S-3 to register an offering of asset-backed 
securities. Some transactions backed by lease pools also will be 
allowed to use Form S-3 under the final rules. This will provide the 
benefit of delayed offerings to foreign issuers and many issuers of ABS 
backed by pools of leases that currently are not S-3 eligible. We 
believe this will make the offering process less costly for these 
issuers. We are adopting, substantially as proposed, disclosure 
requirements for these two types of offerings to provide investors with 
a clear understanding of the unique issues these offerings raise, which 
commenters generally supported.
    The rules codify current staff position that the depositor is 
considered the issuer for Securities Act purposes and should sign the 
registration statement. To remove regulatory uncertainty for issuers, 
we are codifying 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 are codifying, as proposed, the basic 
concept in existing staff no-action letters 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. We believe these rules we are adopting for Securities Act 
registration will 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.
    We are adopting general instructions for Form S-1 and Form S-3 for 
registered asset-backed offerings substantially as proposed to clarify 
those items under Regulation S-K that an issuer will be required to 
disclose, if applicable, and list the items that an issuer may omit due 
to the different nature of the ABS transactions. The instructions for 
Form S-1 and Form S-3 also specify the additional disclosure items to 
be required under Regulation AB, which is a new set of principles-based 
disclosure requirements for ABS discussed in the next section. We 
believe the 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.
    As discussed above, we are adopting limits on the amounts and 
duration on the codified exceptions to the ``discrete'' requirement in 
the definition of an ``asset-backed security.'' However, in response to 
comments describing the current market practice of prefunding accounts 
and the commercial reality of the use of revolving periods, we are not 
adopting the proposed additional restrictions for prefunding accounts 
and revolving periods for Form S-3 eligibility.
    As noted in Section III.A., issuers and their representatives 
generally objected to the proposals requiring Exchange Act reporting 
compliance for Form S-3 eligibility as being more restrictive than 
necessary. While recognizing there have been compliance problems with 
Exchange Act reporting as well as the need to fix the problem with the 
current staff position, which simply allows a sponsor to establish a 
new special purpose depositor, most commenters nevertheless requested 
flexibility and less restrictive alternatives. In response to several 
commenter suggestions, we are revising the proposal to limit the focus 
to transactions established by affiliated depositors involving the same

[[Page 1587]]

asset class. We believe this revision, while maintaining an emphasis on 
Exchange Act reporting and proper disclosure for investors, reduces the 
potential breadth of the proposed application of the reporting 
compliance requirement for Form S-3 eligibility across all asset 
classes and avoids commenter concerns about inadvertently linking a 
person's Form S-3 eligibility to an unrelated party's reporting 
history. We also are providing several additional accommodations to 
assist issuers with the requirement, including an extensive transition 
period to allow issuers to improve their reporting practices from the 
present state, instituting Rule 12b-25 filing extensions for Form 10-D 
filings, modifying several Regulation AB disclosure items that could 
potentially require third party information, and expanding the number 
of Form 8-K items that need only be current and not timely for Form S-3 
eligibility.
    The Proposing Release discussed what needs to be included in a 
market-making prospectus when a broker-dealer is an affiliate of the 
servicer. As discussed in Section III.A., we received many comments 
requesting that the Commission revisit staff interpretations regarding 
the registration of market-making transactions in the ABS context given 
the costs involved in meeting the market-making prospectus delivery 
requirements and the limited investor benefits as a result. We are 
persuaded that the affiliation issue in ABS is not the same as a 
broker-dealer affiliated with a corporation, such as through 
significant ownership or board representation, and we will no longer 
interpret a requirement to register market-making transactions for 
asset-backed securities. As pointed out by many commenters on this 
topic, this should result in reduced compliance expenses and risk of 
shelf disqualification, all without materially affecting investor 
protections.

D. Disclosure

    The disclosure items in Regulation AB that we are adopting provide 
a disclosure structure tailored to the different nature of ABS. This 
requirement will assist issuers and investors by clarifying the 
disclosure requirements. We have made revisions to the proposed 
disclosure structure as suggested by commenters in recognition of 
market practice. We continue to provide several illustrative examples 
for a limited number of disclosure items in response to comment for 
additional guidance by issuers. In addition, the final rules:
     Confirm that financial statements of the issuing entity 
are not required for ABS transactions;
     Clarify and revise in response to comment when third party 
financial information and other descriptive information is required; 
and
     Codify when third party financial information may be 
incorporated by reference or referred to in registration statements.
    As we noted in Section III.B., commenters generally agreed that the 
disclosure required under Regulation AB is largely based on market 
driven disclosure that appears in public filings today. One commenter 
representing investors believed Regulation AB represents a major step 
in improving disclosures provided to investors and includes many of the 
items investors have previously recommended as critical to 
investors.\586\ Most commenters also supported principles-based 
disclosure requirements in lieu of an exhaustive list of disclosure 
items for each asset-class. We continue to believe a principles-based 
approach fosters clarity and comparability for investors without being 
overly rigid and burdensome for issuers. The emphasis on a materiality-
based standard for the new disclosure items attempts to mitigate the 
possibility that immaterial information may overwhelm the disclosure. 
The new principles-based set of disclosure based on materiality in 
Regulation AB 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. As 
we stated in the Proposing Release, whether they will take advantage of 
this opportunity is largely their decision.
---------------------------------------------------------------------------

    \586\ See Letter of ICI. See also Letter of CFAI.
---------------------------------------------------------------------------

    The disclosure rules require increased disclosure regarding the 
roles and qualifications of parties involved in the offering and on-
going activities of the ABS transaction. As discussed more fully in 
Section III.B., commenters generally endorsed increasing disclosure 
beyond current market practice to increase transparency in this area. 
In particular, investors supported increased disclosure regarding the 
servicer and its servicing practices. However, commenters representing 
issuers and their representatives were also concerned with the 
potential breadth of the disclosure, and we have made responsive 
revisions to these concerns. In recognition of the importance of the 
servicer to the ongoing performance of the ABS transaction, we are 
retaining our proposed approach for a principles-based definition of 
``servicer'' that captures the multiple entities that may perform one 
or more material aspects of the entire servicing function. We believe 
it would be impractical and ineffective to create separate definitions 
to describe the many entities used to perform different servicing 
functions across all classes. However, to reduce potential disclosure 
burdens regarding unrelated third parties, we have revised the 
percentage breakpoint for determining when more detailed disclosure 
would be required for unaffiliated servicers that service individual 
pool assets from 10 percent to 20 percent. We have made similar changes 
for required disclosure for unaffiliated originators. Similarly, we 
have significantly revised the test for determining financial 
significance for certain derivative instruments in response to comment 
that the proposed tests would lead to potential additional disclosure 
burdens. The revised test to determine the maximum probable exposure 
for these derivatives will reduce the potential burden while still 
providing disclosure to investors regarding such instruments, including 
when their financial significance to the transaction increases.
    As discussed in Section III.B., investors uniformly supported the 
proposed requirement for static pool information, emphasizing the 
importance of the information to them in making informed investment 
decisions. Further, as we stated in the Proposing Release, we 
understand many issuers already have static pool information available, 
although it may have to be subjected to additional procedures and 
diligence before it is included in the disclosure documents. The most 
common concern for issuers was the lack of guidance on the scope of the 
requirement might result in unnecessary and excessive disclosure. These 
commenters provided a number of suggestions to clarify the scope of the 
request and tailor it to reduce the issuer's burden.
    To provide clarity in determining the material information to be 
disclosed by issuers, we are adopting separate starting points for 
disclosure depending on whether the ABS transaction involves an 
amortizing asset pool or a revolving asset master trust. These flexible 
starting points should help guide issuers in determining the scope of 
the static pool data, while still promoting comparability of 
information across issuers. At the same time, we are revising the 
requirement in response to comment to include several additional 
features. For example, we are increasing the amount of data to a 
minimum of five

[[Page 1588]]

years, to the extent material, based upon commenter concerns that the 
proposed three year requirement may not be sufficient for a meaningful 
evaluation of trends by asset type. We also are adding prepayment 
information and, for prior pools and information about the sponsor's 
portfolio, summary characteristics. These additional features, some of 
which were suggested by issuers themselves, may impose certain 
additional marginal costs, but commenters agreed they will 
significantly increase the usefulness of the data and the resultant 
benefits to investors and the efficiency of the ABS market. However, we 
are not adopting several other proposed items as specific line items in 
the disclosure requirement in response to comment that their potential 
breadth would be too burdensome and to tailor the disclosure that is 
material to the transaction. We also are providing a limited safe 
harbor for static pool data that relate to certain pools and periods 
before the compliance date to encourage disclosure of such information 
and minimize the amount of time before investors can begin to 
incorporate static pool information into their investment decisions.
    In response to comment on making the disclosure more functional by 
taking advantage of the technological advancements of the Internet to 
enable investors to access and analyze the information, we are 
providing a filing accommodation that permits issuers to provide the 
information through an Internet Web site. Commenters confirmed that 
many issuers already provide performance data through an Internet Web 
site. Under this accommodation, investors could be assured access to 
accurate and reliable information since the information provided 
through the specific Internet Web site is deemed to be a part of the 
prospectus included in the registration statement for the asset-backed 
securities. The functionality of this alternative method will assist 
investors in analyzing the information and remove the burden to issuers 
of duplicating the information in each prospectus and should ease 
updating such information. Despite the potential benefits of being able 
to provide the disclosure in the manner most desirable to investors, 
issuers electing the Web-based option will incur cost in maintaining 
and retaining information to satisfy the record retention requirement. 
There also may be start-up costs in creating or modifying Web sites for 
disclosure through this accommodation consistent with its required 
conditions.
    Even with the responsive revisions to clarify and tailor the 
disclosure requirements, we recognize the disclosure under Regulation 
AB may increase the costs to issuers of asset-backed securities. The 
final rules are 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 by investors, 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 and Exchange Act reports under the new ABS disclosure regime.
    We also estimate that issuers may, at least initially, need extra 
time to prepare the information or obtain such information from the 
respective parties to the ABS transaction. However, we continue to 
believe that parties already provide much of this information to rating 
agencies during the process of obtaining a rating on the offering based 
on comments we received, and thus such information should be readily 
available. In addition, we are providing an extended transition period 
for compliance with the disclosure requirements in Regulation AB to 
allow issuers additional time to implement processes and procedures to 
adapt to the new disclosure structure. Therefore, we do not anticipate 
that issuers should incur significant long-term costs in complying with 
the new disclosure regime.
    For purposes of the Paperwork Reduction Act, we estimated 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 estimated 
the incremental PRA hour-burden would translate into an approximate 
cost of $12,967,275.\587\ We did not receive any comments on the PRA 
analysis contained in the Proposing Release and none of the commenters 
provided any comments to the estimates of increased compliance costs. 
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.
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    \587\ We estimated 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.
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E. Communications During the Offering Process

    In codifying as proposed the existing ability to use written 
communications outside of the statutory prospectus, we recognize the 
current beneficial information these communications provide to 
potential investors in an ABS offering. Under the final rules, issuers 
and underwriters can communicate with potential investors through 
additional communications apart from the statutory prospectus to 
structure the offering. The rules we are adopting clarify further the 
definition of the written communications that an issuer may use to 
avoid uncertainty and incrementally expand it by allowing the use of 
static pool data, the identification of key parties and information 
about the offering process. The rules also clarify that the scope of 
the written communications permitted includes 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. As we explain in Section III.C., commenters overall 
supported the proposals although some requested expansion. We are 
addressing whether additional accommodations to the communications 
restrictions would be appropriate in connection with the Offering 
Process Release.
    The rules adopted today streamline the filing requirements for the 
communications allowed by providing that all types of ABS informational 
and computational material are to be filed in the same timeframe, thus 
reducing the regulatory uncertainty for issuers as to when to file 
written communications. The rules eliminate the hardship exemption for 
filing these materials in paper rather than on EDGAR. While two 
commenters suggested delaying the electronic filing requirement until 
the ability to file material in additional format, such as PDF, is 
allowed,\588\ we

[[Page 1589]]

continue to believe that even under our current system, the filing of 
ABS information and computational material no longer needs an 
electronic filing exemption. The rules should increase the uniformity 
and timeliness of information received by investors as well as 
disseminated to the marketplace. Since all investors almost uniformly 
access offering information electronically, these rules should 
significantly benefit them.
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    \588\ See, e.g., Letters of ASF and BMA.
---------------------------------------------------------------------------

    As proposed, we are not changing the scope or liability 
requirements of the material that may be used from the present state, 
so our rules should not result in incremental costs from existing 
requirements. At the request of commenters and in order to provide 
certainty, we have codified in the final rules our discussion in the 
Proposing Release that failure by a particular underwriter to cause the 
filing of materials in connection with an offering will not affect the 
ability of any underwriter who has complied with the procedures to rely 
on the exemptions. In addition, we are adding another provision in 
response to comment that an immaterial or unintentional failure to file 
will not result in a loss of protection under the exemption. As 
commenters explained, both of these provisions should further encourage 
an appropriate free flow of information.
    We also are codifying as proposed an existing staff safe harbor 
regarding the use of research reports published or distributed by a 
broker or dealer involving ABS. Our rule recognizes the different 
nature of ABS by providing tailored conditions for ABS research 
reports. Given that the rule we are adopting is consistent with the 
existing staff safe harbor, it too should not result in incremental 
costs.

F. Ongoing Reporting Under the Exchange Act

    We are adopting our proposals 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, which received general support from 
commenters. The final rules clarify who has the reporting obligation 
under the Exchange Act and who must file and sign the annual, periodic 
and current reports. Although the comments we received on this point 
were mixed, we continue to believe that either the depositor, or the 
servicer in the alternative, should sign the Exchange Act reports 
because either the depositor or servicer is the party most able to 
monitor the ongoing Exchange Act reporting requirements of the ABS 
transaction. In addition, the final rules provide clarifying guidance 
on when the reporting obligation begins and when it can be suspended, 
which commenters overall supported. This will provide certainty to 
issuers as to when their reporting obligation is suspended as well as 
provide notice to investors as to when issuers may cease post-issuance 
reporting under the Exchange Act.
    The final rules outline the required disclosure in the Exchange Act 
reports to ensure uniform reporting by issuers while reducing 
information asymmetry between issuers and investors. We are codifying 
the longstanding requirements that periodic information be disclosed 
based on the periodicity of distributions on the securities and the 
periodic reports contain the non-financial disclosures in Form 10-Q. 
Rather than filing these reports on Form 8-K, as they are currently, we 
are adopting our proposal that issuers use a new form type for ABS, 
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, which 
commenters supported. We believe the use of the new form will not 
result in additional costs beyond minimal one-time transition costs. We 
have made several measured amendments to the disclosure for Form 10-D 
in response to comment to focus more on statistical disclosures than 
disclosures that require analysis, which we understand is more 
consistent with current practice and should ease preparation burden. We 
do continue to support some additional disclosure to investors, which 
may be incremental to what is typically provided today, such as 
disclosure regarding asset pool changes where those changes are the 
result of external administration instead of the pool converting into 
cash in accordance with their terms. Here again, however, we have made 
measured modifications in an attempt to ease administrative complexity. 
To further remove regulatory uncertainty for issuers, we also clarify 
when periodic disclosure for significant obligors is required. For 
purposes of the Paperwork Reduction Act, we continue to 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 estimated the incremental PRA hour-
burden would translate into an approximate cost of $19,593,750.\589\
---------------------------------------------------------------------------

    \589\ We estimated 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.
---------------------------------------------------------------------------

    The final rules also provide the ability for issuers to obtain a 
five calendar day filing extension under Exchange Act Rule 12b-25 for 
Form 10-D filings, similar to the current process available for Form 
10-Q filings by corporate issuers. The ability to use the Rule 12b-25 
extension, if necessary, should help issuers with the implementation 
process and with staying timely with their Exchange Act reporting, 
which is important in order to maintain Form S-3 eligibility for new 
registration statements. To use the exemption, an issuer must file a 
Form 12b-25 with respect to the subject report, although we believe the 
burden is minimal. For purposes of the Paperwork Reduction Act, we 
estimate that the burden in preparing these Form 12b-25 filings would 
be an average 2.5 hours of in-house staff time. Based on our estimated 
cost of in-house staff time, we estimate the incremental PRA hour 
burden would translate into an approximate cost of $831,250.\590\
---------------------------------------------------------------------------

    \590\ We estimate that the additional Form 12b-25 filings would 
result in 4,750 internal burden hours. Assuming a cost of $175/hour 
for in-house professional staff, the total cost of the internal 
burden hours would be $831,250.
---------------------------------------------------------------------------

    We are adopting instructions, substantially as proposed, to specify 
which of the existing items of Form 8-K will be applicable to ABS 
issuers. We also are adopting several ABS-specific reportable events 
for Form 8-K disclosure, again with certain modifications from the 
proposal to reduce potential additional disclosure burdens pointed out 
by commenters. 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 estimated that the proposals may 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 estimated the PRA

[[Page 1590]]

hour-burden will translate into an approximate cost of $2,475,000.\591\
---------------------------------------------------------------------------

    \591\ We estimated 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 an assertion of compliance with servicing 
criteria. Under this approach, audited financial statements of the 
issuing entity and reporting regarding internal control over financial 
reporting are not required. We are adopting the basic approach set 
forth in our original proposal, with the one primary modification 
discussed below, because we continue to believe the costs to provide 
audited financial statements and reporting regarding internal control 
over financial reporting are not justified by any minimal benefits 
obtained from these requirements, which commenters generally supported. 
We believe the approach we are adopting today is more cost-effective to 
issuers and beneficial to investors and the market in monitoring ABS 
transactions.
    We are modifying our original assessment and attestation proposal 
to remove the requirement for a single responsible party in response to 
comment that such a requirement would be more costly and might be 
administratively burdensome. Instead, we are adopting a revised 
approach suggested by commenters that reports on assessments of 
compliance with servicing criteria from each party participating in the 
servicing function, along with associated attestation reports from a 
registered public accountant, be filed as exhibits to the Form 10-K 
report. To ensure that the investor receives notice as to whether 
reports evidencing all aspects of the servicing function are in fact 
provided, we also are requiring that the person who signs the Section 
302 certification must certify the required reports from all parties 
participating in the servicing function have been included as an 
exhibit to the Form 10-K report, or explain why. The revised approach 
resolves several concerns and potential complexities raised by 
commenters regarding a single responsible party approach while still 
achieving our proposed objective of covering the entire servicing 
function and clarifying to the investor whether all aspects of the 
servicing function are covered. When multiple parties are participating 
in the servicing function, we are providing that no report need be 
filed for a party that is servicing individual pool assets that 
comprise only 5% or less of the asset pool. This allowance should 
reduce time and cost in obtaining reports.
    We are adopting, substantially in the form proposed, a single set 
of transparent and comprehensive servicing criteria regarding an ABS 
transaction, which should enhance the current framework for reporting 
on compliance. As discussed in the Proposing Release, the framework 
generally used today is limited to a specific asset class, covers only 
limited servicing functions and represents minimum standards. We have 
attempted to provide flexibility by utilizing servicing criteria that 
clarify the transaction agreements can expressly provide an alternative 
timeframe for those servicing criteria that refer to specific 
timeframes. We continue to believe that the disclosure-based criteria 
will improve the quality of the assessment of compliance and elicit 
disclosure that is comparable among different issuers. As we explained 
in Section III.D., most commenters on this aspect of the proposal 
commended our initiative to put forward a consistent set of criteria 
that could be applied across asset types.
    As we noted in the Proposing Release, the servicing criteria are 
designed to be incremental to the current framework and several 
commenters confirmed that many of the criteria are not new. The 
servicing criteria is designed to cover the full spectrum of servicing 
asset-backed securities, thereby facilitating an evaluation of all 
relevant servicing activities by each party involved in the servicing 
function. For example, one of the additional components of the 
servicing criteria that we continue to believe to be critical to the 
servicing function is the calculation of the payments on the 
securities, also referred to as the ``flow of funds.'' This improved 
assessment will enable investors, other parties participating in 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.
    The assessment and reporting on the servicing criteria will 
continue to operate within a disclosure-based framework. For example, 
because our revised approach requires reports from multiple parties 
that participate in the servicing function, we have revised the 
proposed approach to allow a party to exclude a particular criterion 
from its assessment if it is not applicable to the asserting party 
based on the types of activities it performs. Disclosure also will be 
required of any material instances of noncompliance in the reports, if 
any. The revised approach continues to have the benefit of alerting 
investors whether all relevant reports covering the entire servicing 
function have been filed as exhibits to the Form 10-K as well as 
informing investors of any potential problems regarding a participating 
party's servicing function. As proposed, disclosure of material non-
compliance in the Form 10-K would not result in regulatory restrictions 
on market access such as Form S-3 eligibility.
    We estimate that the servicing criteria may impose new disclosure 
requirements on compliance assessments that do not presently utilize 
the current framework. Since the 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. To 
the extent that parties involved in servicing do not maintain 
compliance with the servicing criteria and do not wish to publicly 
disclose this fact, the disclosure-based criteria could lead to these 
parties instituting appropriate procedures to comply with the criteria 
and thus incur implementation costs. We also understand that additional 
time and cost may be required to obtain reports from all appropriate 
parties, including those that may not have provided such reports 
previously. The extended transition period for compliance with the 
applicable servicing criteria should help mitigate transition to the 
new requirements. In addition, we are maintaining the proposed approach 
of requiring platform level assessments, which as noted in Section 
III.D., commenters supported as less costly.
    Consistent with the modified reporting system, we are adopting the 
requirement that a registered public accounting firm attest to the 
assessment of compliance with servicing criteria. As discussed above, 
each party participating in the servicing function will engage its own 
independent accountant for the attestation of the party's assessment 
and the attestation will be required to be filed as an exhibit to the 
Form 10-K. As we stated in the Proposing Release, the engagement of an 
independent accountant improves investor confidence by establishing an 
independent check on the party's assessment of servicing compliance. In 
addition, the attestation by the independent accountant may detect

[[Page 1591]]

material instances of noncompliance with the servicing criteria that 
may provide early warning signals to investors. As with the assessments 
themselves, the attestation of the entire servicing function may 
increase the accounting costs for those criteria that are incremental 
to the current framework.
    In addition to the assessment of compliance with servicing 
criteria, we will continue requiring issuers to file a servicer 
compliance statement regarding compliance with material aspects of the 
servicing agreement. This rule generally codifies current practice and 
should not by itself result in any additional costs. The final rules, 
as proposed, also specify the form and content of the Sarbanes-Oxley 
Section 302 certification for ABS issuers consistent with existing 
staff practice, with the one primary modification discussed above 
regarding the revised assessment of compliance. As proposed, the 
language of the certification is not to be revised 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 estimated that the 
incremental burden in preparing the Form 10-K, including the assessment 
of compliance with servicing criteria, will be on average 30 hours per 
response. Based on our estimated costs, we estimated the PRA hour-
burden will translate into an approximate cost of $9,675,000.\592\ We 
continue to believe this increased burden will 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. Taken together, the total increased cost using PRA estimates 
is approximately $45,542,275. As noted above, we did not receive any 
comments on the PRA analysis contained in the Proposing Release and 
none of the commenters provided any comments to the estimates of 
increased compliance costs.
---------------------------------------------------------------------------

    \592\ We estimated 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.
---------------------------------------------------------------------------

    Finally, we reiterate the 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.\593\ While not all commenters agreed, we continue to believe 
this facilitates access to information relevant to the particular 
securities involved, which increases transparency of such information 
for investors as well as the market for these securities. We anticipate 
that some issuers may incur additional costs by preparing separate 
Exchange Act reports for each issuing entity because these issuers 
currently provide combined reports. However, we continue to 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.
---------------------------------------------------------------------------

    \593\ We also are planning programming changes to the EDGAR 
system that should significantly reduce some of the technical and 
compliance issues involved in establishing new transactions under 
the EDGAR system.
---------------------------------------------------------------------------

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

    Section 23(a)(2) of the Exchange Act \594\ 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 
\595\ and Section 3(f) of the Exchange Act \596\ 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.
---------------------------------------------------------------------------

    \594\ 15 U.S.C. 78w(a)(2).
    \595\ 15 U.S.C. 77b(b).
    \596\ 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    The final rules are intended to increase transparency by codifying 
informal industry and staff practices, along with incremental changes 
and responsive changes, 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 rules will 
enhance capital formation by simplifying the process of registering an 
offering of asset-backed securities, thereby allowing parties not fully 
immersed in the ABS market to ascertain and understand the offering and 
disclosure requirements. Establishing clear and transparent 
requirements also should remove barriers to entry for securitizations, 
thus promoting efficiency and competitiveness of the U.S. capital 
markets for asset-backed offerings. Commenters overwhelmingly supported 
our proposed separate framework for the registration and reporting of 
asset-backed securities due to the growth of the market and inherent 
differences between asset-backed securities and other securities.\597\
---------------------------------------------------------------------------

    \597\ See note 27 above.
---------------------------------------------------------------------------

    The principles-based disclosure requirements we are adopting will 
allow great flexibility in implementation for all asset classes while 
enhancing the quality of disclosure for ABS transactions. Similarly, 
the servicing criteria we are adopting are intended to provide a 
comprehensive assessment to evaluate the overall servicing function for 
the ABS transaction. We anticipate these rules, that have been modified 
in response to comment, 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. 
Enhanced disclosure should raise investors' expectations regarding 
material information that issuers must make available to the public. We 
anticipate this will 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.
    In addition, the rules are designed to improve the current 
framework for reporting on compliance with servicing criteria that will 
operate within a disclosure-based framework and cover the entire 
spectrum of the servicing function. We believe the servicing criteria 
will provide value to the ABS industry in establishing market-wide 
disclosure benchmarks and promote market efficiency by providing 
meaningful disclosure regarding each party participating in the 
servicing function that is attested to by the respective party's 
independent public accountant. The disclosure-based framework of the 
servicing criteria will provide information about the entire servicing 
function to be publicly available for investors, as well as to the

[[Page 1592]]

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 servicing criteria will promote the 
comparability of reports of different issuers, thus promoting investor 
analysis as well as competition among such issuers.
    We requested comment on whether the proposals, if adopted, would 
promote efficiency, competition and capital formation or have an impact 
or burden on competition. We received no comments on this subject but a 
few of the comments on other areas touched on these issues. Two 
commenters thought the requirement to disclose the policies and 
procedures of the servicer is too broad and would require servicers to 
disclose competitive information to the public.\598\ We have emphasized 
in the release the materiality-based standard for the new disclosure 
items in Regulation AB, including disclosure regarding the servicer. 
This should mitigate the possibility that detailed information about 
the servicer's operational practices would not subsume the disclosure. 
However, we continue to believe enhanced material disclosure about the 
servicer's business practices provides more certainty to investors that 
they are making investment decisions in a transparent market. All 
material parties that meet the definition of ``servicer'' will be 
required to make available to the public the same level of disclosure 
on their business practices. To reduce potential disclosure burdens 
regarding unrelated third parties, we have raised the percentage 
breakpoint for determining when more detailed disclosure would be 
required for unaffiliated servicers thereby decreasing the number of 
times disclosure is required.
---------------------------------------------------------------------------

    \598\ See Letters of JPMorganChase and MBA.
---------------------------------------------------------------------------

    Commenters also believed there was no compelling reason to propose 
different bright-line limits for ABS transactions using a prefunding 
period or revolving period if the transaction is filed on Form S-1 or 
Form S-3.\599\ One group of commenters suggested increasing the 
proposed limit for revolving periods to an unlimited three-year 
revolving period would improve efficiency in structuring 
transactions.\600\ In response to comment, we have eliminated the 
different bright-line percentage tests for ABS offerings utilizing a 
prefunding period or revolving period and registered on either Form S-1 
or Form S-3. We also have further expanded the revolving period to 
allow an unlimited revolving period for up to three years so long as 
added assets are of the same general character as the original pool 
assets. These expansions should allow similar treatment in structuring 
transactions that meet market demands.
---------------------------------------------------------------------------

    \599\ See, e.g., Letters of ASF, Citigroup, and MBNA.
    \600\ See Letter of Auto Group.
---------------------------------------------------------------------------

    We have made several measured changes in the final rules after 
carefully balancing issuer concerns of potential burdens with the need 
for investor protection and market efficiency. For example, we made 
responsive revisions to the final rules and Regulation AB to assist 
issuers meet the eligibility requirements to register an offering on 
Form S-3 to quickly access the ABS market. We are supporting an 
alternative method of providing disclosure through publicly available 
Internet Web sites to limit the potential burden of the static pool 
disclosure requirement for issuers while increasing the efficiency of 
the disclosure for investors and the market. We also are extending the 
transition period to assist various transaction participants plan for 
compliance with the new regulatory regime for future ABS offerings and 
ensure orderly transition of the alternative disclosure regime for 
existing ABS transaction with minimal disruption to the ABS market.
    The rules could have certain indirect negative effects. For 
example, if transactions in the private market for ABS or in foreign 
markets do not result in similar disclosures, issuers could, all things 
being equal, migrate to those markets to avoid such disclosures. A few 
commenters mentioned such concerns generally.\601\ Conversely, some 
commenters believed practices in the public markets would influence 
disclosures in the private market as well.\602\ We have made responsive 
revisions to the proposals to address commenter concerns about 
potentially adverse unintended consequences from the new requirements. 
Moreover, there may be limitations on the ability to migrate to other 
markets given the large size of the U.S. registered ABS market and 
potential regulatory or investment restrictions on the ability of 
investors to purchase non-registered ABS. In addition, competitors and 
markets not subject to the new alternative disclosure regime for asset-
backed securities may suffer from decreased investor confidence if the 
asset-backed offerings lack the transparency of asset-backed offerings 
that do comply with the new regime. The possibility of these effects 
and their magnitude if they were to occur are difficult to quantify.
---------------------------------------------------------------------------

    \601\ See, e.g., Letter of ABA; Jones Day; and NYCBA.
    \602\ See, e.g., Letter of A&O.
---------------------------------------------------------------------------

    Our specific rules relate only to transactions that meet the 
definition for an asset-backed security under the Securities Act. The 
definition and interpretations that we are adopting are intended to 
establish parameters for the types of securities that are appropriate 
for our new regulatory regime for ABS. Although the definition for an 
asset-backed security is flexible as to capture most asset-backed 
structures, there may be transactions that are fundamentally different 
from the principles-based definition. However, we continue to believe 
transactions that do not fit the parameters of the definition will 
still be able to access the capital markets. These transactions will 
need to rely on non-ABS form eligibility for registration, and 
additional disclosures, depending on the type of offering and 
transaction, will be required.

VII. Regulatory Flexibility Analysis Certification

    Under Section 605(b) of the Regulatory Flexibility Act,\603\ we 
certified that, when adopted, the proposals would not have a 
significant economic impact on a substantial number of small entities. 
We included this certification in Part VII of the Proposing Release. 
While we encouraged written comment regarding this certification, none 
of the commenters responded to this request.
---------------------------------------------------------------------------

    \603\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

VIII. Statutory Authority and Text of Rule and Form Amendments

    We are adopting the new rules, forms and amendments contained in 
this document under the authority set forth in Sections 6, 7, 8, 10, 19 
and 28 of the Securities Act,\604\ Sections 3, 10A, 12, 13, 14, 15, 16, 
23 and 36 of the Exchange Act,\605\ and Sections 3, 302, 306, 404, 406 
and 407 of the Sarbanes-Oxley Act.\606\
---------------------------------------------------------------------------

    \604\ 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77q, 77s and 77z-3.
    \605\ 15 U.S.C. 78c, 78j, 78j-1, 78l, 78m, 78n, 78o, 78p, 78w 
and 78mm.
    \606\ 15 U.S.C. 7202, 7241, 7244, 7262, 7264 and 7265.
---------------------------------------------------------------------------

Text of the Amendments

List of Subjects

17 CFR Part 210

    Accountants, Accounting, Reporting and recordkeeping requirements, 
Securities.

[[Page 1593]]

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.

0
In accordance with the foregoing, Title 17, Chapter II of the Code of 
Federal Regulations is 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

0
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.


0
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, 
as required by Sec.  240.13a-18(c) or 240.15d-18(c) of this chapter, 
expresses an opinion, or states that an opinion cannot be expressed, 
concerning an asserting party's assessment of compliance with servicing 
criteria, as required by Sec.  240.13a-18(b) or 240.15d-18(b) 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.
* * * * *

0
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:
0
a. In the introductory text of Sec.  210.2-01(c)(7); and
0
b. In the introductory text of Sec.  210.2-07(a).

0
4. Amend Sec.  210.2-02 by:
0
a. Revising the section heading; and
0
b. Adding paragraph (g).
    The addition and revision 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.  240.13a-18(c) or 240.15d-18(c) 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 asserting 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

0
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.

* * * * *

0
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
* * * * *

0
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]

0
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]

0
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

0
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-11, and 7201 et seq.; and 18 
U.S.C. 1350, unless otherwise noted.

* * * * *

0
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.* * *
* * * * *

0
12. Amend Sec.  229.202 by:
0
a. Removing the authority citation following the section; and
0
b. Adding Instruction 6 to the ``Instructions to Item 202''.
    The addition reads as follows.

[[Page 1594]]

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

* * * * *
    Instructions to Item 202: * * *
    6. For asset-backed securities, see also Item 1113 of Regulation AB 
(Sec.  229.1113).

0
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]

0
14. Amend Sec.  229.401 by removing the phrase ``(as defined in Sec.  
240.13a-14(g) and Sec.  240.15d-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)''.


Sec.  229.406  [Amended]

0
15. Amend Sec.  229.406, ``Instructions to Item 406,'' by removing 
Instruction 3.

0
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).

0
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).

0
18. Amend Sec.  229.512 by:
0
a. Adding a paragraph after the paragraph that begins ``Provided, 
however,'' after paragraph (a)(1)(iii); and
0
b. Adding paragraphs (k) and (l).
    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.
    (l) Filings regarding asset-backed securities that provide certain 
information through an Internet Web site. Include the following if the 
registration statement is to provide information required by Item 1105 
of Regulation AB (Sec.  229.1105) through an Internet Web site in 
accordance with Rule 312 of Regulation S-T (Sec.  232.312 of this 
chapter):
    The undersigned registrant hereby undertakes that, except as 
otherwise provided by Item 1105 of Regulation AB (17 CFR 229.1105), 
information provided in response to that Item pursuant to Rule 312 of 
Regulation S-T (17 CFR 232.312) through the specified Internet address 
in the prospectus is deemed to be a part of the prospectus included in 
the registration statement. In addition, the undersigned registrant 
hereby undertakes to provide to any person without charge, upon 
request, a copy of the information provided in response to Item 1105 of 
Regulation AB pursuant to Rule 312 of Regulation S-T through the 
specified Internet address as of the date of the prospectus included in 
the registration statement if a subsequent update or change is made to 
the information.

0
19. Amend Sec.  229.601 by:
0
a. Revising the exhibit table;
0
b. Redesignating the text of paragraph (b)(31) as paragraph (b)(31)(i);
0
c. Adding paragraph (b)(31)(ii); and
0
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

* * * * *
BILLING CODE 8010-01-P

[[Page 1595]]

[GRAPHIC] [TIFF OMITTED] TR07JA05.000


[[Page 1596]]


[GRAPHIC] [TIFF OMITTED] TR07JA05.001

BILLING CODE 8010-01-C

[[Page 1597]]

    (b) Description of exhibits. * * *
    (31)(i) * * *
    (ii) Rule 13a-14(d)/15d-14(d) Certifications. If an asset-backed 
issuer (as defined in Sec.  229.1101), 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\

    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] (the ``Exchange 
Act periodic reports'');
    2. Based on my knowledge, the Exchange Act periodic reports, taken 
as a whole, do 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 with respect to 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 the Exchange Act periodic 
reports;
    4. [I am responsible for reviewing the activities performed by the 
servicer(s) and based on my knowledge and the compliance review(s) 
conducted in preparing the servicer compliance statement(s) required in 
this report under Item 1123 of Regulation AB, and except as disclosed 
in the Exchange Act periodic reports, the servicer(s) [has/have] 
fulfilled [its/their] obligations under the servicing agreement(s); 
and]
    [Based on my knowledge and the servicer compliance statement(s) 
required in this report under Item 1123 of Regulation AB, and except as 
disclosed in the Exchange Act periodic reports, the servicer(s) [has/
have] fulfilled [its/their] obligations under the servicing 
agreement(s); and] \2\
    5. All of the reports on assessment of compliance with servicing 
criteria for asset-backed securities and their related attestation 
reports on assessment of compliance with servicing criteria for asset-
backed securities required to be included in this report in accordance 
with Item 1122 of Regulation AB and Exchange Act Rules 13a-18 and 15d-
18 have been included as an exhibit to this report, except as otherwise 
disclosed in this report. Any material instances of noncompliance 
described in such reports have been disclosed in this report on Form 
10-K.\3\
    [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].] \4\
 Date:-----------------------------------------------------------------
-----------------------------------------------------------------------
[Signature]
[Title]

    \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 function) 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.
    \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.
    \3\ The certification refers to the reports prepared by parties 
participating in the servicing function that are required to be 
included as an exhibit to the Form 10-K. See Item 1122 of Regulation 
AB (Sec.  229.1122) and Rules 13a-18 and 15d-18 (Sec. Sec.  240.13a-
18 and 240.15d-18 of this chapter). If a report that is otherwise 
required to be included is not attached, disclosure that the report 
is not included and an associated explanation must be provided in 
the Form 10-K report.
    \4\ 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.
* * * * *
    (33) Report on assessment of compliance with servicing criteria for 
asset-backed securities. Each report on assessment of compliance with 
servicing criteria required by Sec.  229.1122(a).
    (34) Attestation report on assessment of compliance with servicing 
criteria for asset-backed securities. Each attestation report on 
assessment of compliance with servicing criteria for asset-backed 
securities required by Sec.  229.1122(b).
    (35) Servicer compliance statement. Each servicer compliance 
statement required by Sec.  229.1123.
    (36) through (98) [Reserved]
* * * * *


Sec.  229.701  [Amended]

0
20. Amend 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.  249.308, 249.308b, 
249.308a, 249.310b, 249.310 or 249.312)''.

0
21. Add subpart 229.1100 consisting of Sec. Sec.  229.1100 through 
229.1123 to read as follows:

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

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) Static pool information.
229.1106 (Item 1106) Depositors.
229.1107 (Item 1107) Issuing entities.
229.1108 (Item 1108) Servicers.
229.1109 (Item 1109) Trustees.
229.1110 (Item 1110) Originators.
229.1111 (Item 1111) Pool assets.
229.1112 (Item 1112) Significant obligors of pool assets.
229.1113 (Item 1113) Structure of the transaction.
229.1114 (Item 1114) Credit enhancement and other support, except 
for certain derivatives instruments.
229.1115 (Item 1115) Certain derivatives instruments.
229.1116 (Item 1116) Tax matters.
229.1117 (Item 1117) Legal proceedings.
229.1118 (Item 1118) Reports and additional information.
229.1119 (Item 1119) Affiliations and certain relationships and 
related transactions.
229.1120 (Item 1120) Ratings.
229.1121 (Item 1121) Distribution and pool performance information.
229.1122 (Item 1122) Compliance with applicable servicing criteria.
229.1123 (Item 1123) 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 229.1123) is the source of various disclosure items 
and requirements 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.). Unless otherwise specified, definitions to be used 
in this Regulation AB,

[[Page 1598]]

including the definition of ``asset-backed security,'' 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 or 31 day increments, as 
applicable, beginning at least with assets that are 30 or 31 days 
delinquent, as applicable, 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 and cumulative 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) In a registration statement under the Securities Act or the 
Exchange Act or in a prospectus to be filed pursuant to Sec.  230.424, 
describe how delinquencies, charge-offs and uncollectable accounts are 
defined or determined, addressing the effect of any grace period, re-
aging, restructure, partial payments considered current or other 
practices on delinquency and loss experience.
    (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 
1112(b) of this Regulation AB (Information regarding significant 
obligors) or Items 1114(b)(2) or 1115(b) of this Regulation AB 
(Information regarding significant provider of enhancement or other 
support), such information, in lieu of including 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).
    (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.
    (iv) If incorporated by reference into 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.
    4. If 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 ABS transaction, 
and neither the third party nor any of its affiliates is an affiliate 
of the sponsor, depositor, issuing entity or underwriter of the ABS 
transaction, then paragraph (c)(1)(ii) of this section is qualified by 
the knowledge of the registrant.
    5. If you are relying on paragraph (c)(1) of this section to 
provide information required by Item 1112 of this Regulation AB 
regarding a significant obligor that is an asset-backed issuer and the 
pool assets relating to such significant obligor are asset-backed 
securities, then for purposes of paragraph (c)(1)(iii) of this section, 
the term ``financial statements'' means the information required by 
Instruction 3 of Item 1112 of this Regulation AB. Such information 
required by Instruction 3.a. of Item 1112 of this Regulation AB may be 
incorporated by reference from a prospectus that contains such 
information and is included in an effective Securities Act registration 
statement or filed pursuant to Sec.  230.424 of this chapter.
    (2) Reference information for significant obligors. If the third 
party information relates to a significant obligor and the following 
conditions are met, you may 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 file number, if applicable (See, e.g., Item 1118 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) To the knowledge of the registrant, any of the following is 
true:
    (A) The third party is eligible to use Form S-3 or F-3 (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

[[Page 1599]]

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 paragraph 
(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 paragraph (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 
229.1123).
    Instruction to Item 1101(c)(2). If you are relying on paragraph 
(c)(2)(ii)(E) of this section because the pool assets relating to such 
third party are asset-backed securities, then for purposes of a 
registration statement under the Securities Act or the Exchange Act or 
a prospectus to be filed pursuant to Sec.  230.424 for your securities, 
you also must include a reference (including Commission reporting 
number and filing date) to the prospectus for the third party asset-
backed securities that: (a) Is either included in an effective 
Securities Act registration statement or filed pursuant to Sec.  
230.424 of this chapter; and
    (b) Contains the information required by Instruction 3.a. of Item 
1112 of this Regulation AB.
    (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.
    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 1123 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 or support contemplated by Items 1114 or 1115 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 1110 of this Regulation AB regarding origination and 
securitization practices, Item 1107 of this Regulation AB regarding the 
sale or transfer of the pool assets, bankruptcy remoteness and 
collateral protection, Item 1108 of this Regulation AB regarding 
servicing, Item 1109 of this Regulation AB regarding the rights, duties 
and responsibilities of the trustee, Item 1111 of this Regulation AB 
regarding the terms, nature and treatment of the pool assets and Items 
1114 or 1115 of this Regulation AB, as applicable, 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 in the applicable 
home jurisdiction 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 Securities Act 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 229.1123), unless specified otherwise:
    (a) ABS informational and computational material means a written

[[Page 1600]]

communication consisting solely of one or some combination of the 
following:
    (1) Factual information regarding the asset-backed securities being 
offered and the structure and basic parameters of the securities, such 
as the number of classes, seniority, payment priorities, terms of 
payment, the tax, Employment Retirement Income Security Act of 1974, as 
amended, (29 U.S.C. 1001 et seq.) (``ERISA'') or other legal 
conclusions of counsel, and descriptive information relating to each 
class (e.g., principal amount, coupon, minimum denomination, 
anticipated price, yield, weighted average life, credit enhancements, 
anticipated ratings, and other similar information relating to the 
proposed structure of the offering);
    (2) Factual information regarding the pool assets underlying the 
asset-backed securities, including origination, acquisition and pool 
selection criteria, information regarding any prefunding or revolving 
period applicable to the offering, information regarding significant 
obligors, data regarding the contractual and related characteristics of 
the underlying pool assets (e.g., weighted average coupon, weighted 
average maturity, delinquency and loss information and geographic 
distribution) and other factual information concerning the parameters 
of the asset pool appropriate to the nature of the underlying assets, 
such as the type of assets comprising the pool and the programs under 
which the loans were originated;
    (3) Identification of key parties to the transaction, such as 
servicers, trustees, depositors, sponsors, originators and providers of 
credit enhancement or other support, including a brief description of 
each such party's roles, responsibilities, background and experience;
    (4) Static pool data, as referenced in Item 1105 of this Regulation 
AB, such as for the sponsor's and/or servicer's portfolio, prior 
transactions or the asset pool itself;
    (5) 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 include:
    (i) 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;
    (ii) Statistical information showing the cash flows that would be 
associated with a particular class of asset-backed securities at a 
specified prepayment speed; and
    (iii) Statistical information reflecting the financial impact of 
losses based on a variety of loss or default experience, prepayment, 
interest rate and related assumptions.
    (6) The names of underwriters participating in the offering of the 
securities, and their additional roles, if any, within the underwriting 
syndicate;
    (7) The anticipated schedule for the offering (including the 
approximate date upon which the proposed sale to the public will begin) 
and a description of marketing events (including the dates, times, 
locations, and procedures for attending or otherwise accessing them); 
and
    (8) A description of the procedures by which the underwriters will 
conduct the offering and the procedures for transactions in connection 
with the offering with an underwriter or participating dealer 
(including procedures regarding account-opening and submitting 
indications of interest and conditional offers to buy).
    (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.) nor 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 asset pool as of the 
measurement date.
    (iv) Delinquent assets do not constitute 50% or more, as measured 
by dollar volume, of the asset pool as of the measurement date.
    (v) With respect to securities that are backed by leases, the 
portion of the securitized pool balance attributable to the residual 
value of the physical property underlying the leases, as determined in 
accordance with the transaction agreements for the securities, does not 
constitute:
    (A) For motor vehicle leases, 65% or more, as measured by dollar 
volume, of the securitized pool balance as of the measurement date.
    (B) For all other leases, 50% or more, as measured by dollar 
volume, of the securitized pool balance as of the measurement date.
    (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 future issuances of asset-backed 
securities backed by such pool. The offering related to the securities 
also may contemplate additions to the asset pool, to the extent 
consistent with paragraphs (c)(3)(ii) and (c)(3)(iii) of this section, 
in connection with maintaining minimum pool balances in accordance with 
the transaction agreements for master trusts with revolving periods or 
receivables or other financial assets that arise under revolving 
accounts.
    (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 the duration of the prefunding period does not extend 
for more than one year from the date of issuance of the securities and 
the portion of the proceeds for such prefunding account does not 
involve in excess of:
    (A) For master trusts, 50% of the aggregate principal balance of 
the total asset pool whose cash flows support the securities; and
    (B) For other offerings, 50% of the proceeds of the offering.

[[Page 1601]]

    (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 
securities backed by receivables or other financial assets that do not 
arise under revolving accounts, the revolving period does not extend 
for more than three years from the date of issuance of the securities 
and the additional pool assets are of the same general character as the 
original pool assets.
    Instructions to Item 1101(c).
    1. For purposes of determining non-performing, delinquency and 
residual value thresholds, the ``measurement date'' means either:
    a. The designated cut-off date for the transaction (i.e., the date 
on and after which collections on the pool assets accrue for the 
benefit of asset-backed security holders), if applicable; or
    b. In the case of master trusts, the date as of which delinquency 
and loss information or securitized pool balance information, as 
applicable, is presented in the prospectus for the asset-backed 
securities to be filed pursuant to Sec.  230.424(b) of this chapter.
    2. Non-performing and delinquent assets that are not funded or 
purchased by proceeds from the securities and that are not considered 
in cash flow calculations for the securities need not be considered as 
part of the asset pool for purposes of determining non-performing and 
delinquency thresholds.
    3. For purposes of determining non-performing, delinquency and 
residual value thresholds for master trusts, calculations are to be 
measured against the total asset pool whose cash flows support the 
securities.
    4. For purposes of determining residual value thresholds, residual 
values need not be included in measuring against the thresholds to the 
extent a separate party is obligated for such amounts (e.g., through a 
residual value guarantee, residual value insurance or where the lessee 
is obligated to cover any residual losses).
    (d) Delinquent, for purposes of determining if a pool asset is 
delinquent, means if a pool asset is more than 30 or 31 days or a 
single payment cycle, as applicable, past due from the contractual due 
date, as determined in accordance with any of the following:
    (1) The transaction agreements for the asset-backed securities;
    (2) The delinquency recognition policies of the sponsor, any 
affiliate of the sponsor that originated the pool asset or the servicer 
of the pool asset; or
    (3) The delinquency recognition policies applicable to such pool 
asset established by the primary safety and soundness regulator of any 
entity listed in paragraph (d)(2) of this section or the program or 
regulatory entity that oversees the program under which the pool asset 
was originated.
    (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:
    (1) The pool asset would be treated as wholly or partially charged-
off under the requirements in the transaction agreements for the asset-
backed securities;
    (2) The pool asset would be treated as wholly or partially charged-
off under the charge-off policies of the sponsor, an affiliate of the 
sponsor that originates the pool asset or a servicer that services the 
pool asset; or
    (3) The pool asset would be treated as wholly or partially charged-
off under the charge-off policies applicable to such pool asset 
established by the primary safety and soundness regulator of any entity 
listed in paragraph (g)(2) of this section or the program or regulatory 
entity that oversees the program under which the pool asset was 
originated.
    (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 securitized 
pool balance is attributable to 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.
    4. The determination of significant obligors is to be made as of 
the designated cut-off date for the transaction (i.e., the date on and 
after which collections on the pool assets accrue for the benefit of 
asset-backed security holders), provided, that, in the case of master 
trusts, the determination is to be made as of the cut-off date (or 
issuance date if there is not a cut-off date) for each issuance of 
asset-backed securities backed by the same asset pool. In addition, if 
disclosure is required pursuant to either Item 6.05 of Form 8-K (17 CFR 
249.308) or in a Form 10-D (17 CFR 249.312) pursuant to Item

[[Page 1602]]

1121(b) of this Regulation AB, the determination of significant 
obligors is to be made against the asset pool described in such report. 
However, if the percentage concentration regarding an obligor falls 
below 10% subsequent to the determination dates discussed in this 
Instruction, the obligor no longer need be considered a 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. If 
information regarding multiple classes cannot appear on the cover page 
due to space limitations, include the information in the summary or in 
an immediately preceding separate table.
    (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 
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 or other support for 
the transaction and identify any enhancement or support provider 
referenced in Items 1114(b) or 1115 of this Regulation AB.
    Instruction to Item 1102. Also see Item 1113(f)(2) of this 
Regulation AB regarding the title of any class of securities with an 
optional 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, trustee and servicers contemplated 
by Item 1108(a)(2) of this Regulation AB, and their respective roles. 
Describe the roles briefly if they are not apparent from the title of 
the role. Identify any originator contemplated by Item 1110 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 Items 1114(a) and 1115 of this Regulation 
AB, and briefly describe what protection or support is provided by the 
enhancement. Identify any enhancement provider referenced in Items 
1114(b) and 1115 of this Regulation AB. Summarize how losses not 
covered by credit enhancement or support 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) If the transaction will include prefunding or revolving 
periods, 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, if applicable.
    (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, if applicable.
    (v) Any limitation on the ability to add pool assets.

[[Page 1603]]

    (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, to the extent material, 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. Include to the extent 
material 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.
    (d) Describe the sponsor's material 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 sponsor's participation in 
structuring the transaction.


Sec.  229.1105  (Item 1105) Static pool information.

    (a) For amortizing asset pools, unless the registrant determines 
that such information is not material:
    (1) Provide static pool information, to the extent material, 
regarding delinquencies, cumulative losses and prepayments for prior 
securitized pools of the sponsor for that asset type.
    (2) If the sponsor has less than three years of experience 
securitizing assets of the type to be included in the offered asset 
pool, consider providing instead static pool information, to the extent 
material, regarding delinquencies, cumulative losses and prepayments by 
vintage origination years regarding originations or purchases by the 
sponsor, as applicable, for that asset type. A vintage origination year 
represents assets originated during the same year.
    (3) In providing the information required by paragraphs (a)(1) and 
(a)(2) of this section:
    (i) Provide the requested information for prior pools or vintage 
origination years, as applicable, relating to the following time 
period, to the extent material:
    (A) Five years, or
    (B) For so long as the sponsor has been either securitizing assets 
of the same asset type (in the case of paragraph (a)(1) of this 
section) or making originations or purchases of assets of the same 
asset type (in the case of paragraph (a)(2) of this section) if less 
than five years.
    (ii) Present delinquency, cumulative loss and prepayment data for 
each prior securitized pool or vintage origination year, as applicable, 
in periodic increments (e.g., monthly or quarterly), to the extent 
material, over the life of the prior securitized pool or vintage 
origination year. The most recent periodic increment for the data must 
be as of a date no later than 135 days of the date of first use of the 
prospectus.
    (iii) Provide summary information for the original characteristics 
of the prior securitized pools or vintage origination years, as 
applicable and material. While the material summary characteristics may 
vary, these characteristics may include, among other things, the 
following: number of pool assets; original pool balance; weighted 
average initial pool balance; weighted average interest or note rate; 
weighted average original term; weighted average remaining term; 
weighted average and minimum and maximum standardized credit score or 
other applicable measure of obligor credit quality; product type; loan 
purpose; loan-to-value information; distribution of assets by loan or 
note rate; and geographic distribution information.
    (b) For revolving asset master trusts, unless the registrant 
determines that such information is not material, provide, to the 
extent material, data regarding delinquencies, cumulative losses, 
prepayments, payment rate, yield and standardized credit scores or 
other applicable measure of obligor credit quality in separate 
increments based on the date of origination of the pool assets. While 
the material increments may vary, consider presenting such data at a 
minimum in 12-month increments through the first five years of the 
account's life (e.g., 0-12 months, 13-24 months, 25-36 months, 37-48 
months, 49-60 months and 61 months or more).
    (c) If the information that would otherwise be required by 
paragraph (a)(1), (a)(2) or (b) of this section is not material, but 
alternative static pool information would provide material disclosure, 
provide such alternative information instead. Similarly, information 
contemplated by paragraph (a)(1), (a)(2) or (b) of this section 
regarding a party or parties other than the sponsor may be provided in 
addition to or in lieu of such information regarding the sponsor if 
appropriate to provide material disclosure. In addition, other 
explanatory disclosure, including disclosure explaining the absence of 
any static pool information, may be provided.
    (d) The following information provided in response to this section 
shall not be deemed to be a prospectus or part of a prospectus for the 
asset-backed securities nor shall such information be deemed to be part 
of the registration statement for the asset-backed securities:
    (1) With respect to information regarding prior securitized pools 
of the sponsor that do not include the currently offered pool, 
information regarding prior securitized pools that were established 
before January 1, 2006; and
    (2) With respect to information regarding the currently offered 
pool, information about the pool for periods before January 1, 2006.
    (e) For prospectuses to be filed pursuant to Sec.  230.424 of this 
chapter that include information specified in paragraph (d)(1) or 
(d)(2) of this section, the prospectus shall disclose that such 
information is not deemed to be part of that prospectus or the 
registration

[[Page 1604]]

statement for the asset-backed securities.
    (f) If any of the information identified in paragraph (d)(1) or 
(d)(2) of this section that is to be provided in response to this 
section is unknown and not available to the registrant without 
unreasonable effort or expense, such information may be omitted, 
provided the registrant provides the information on the subject it 
possesses or can acquire without unreasonable effort or expense, and 
the registrant includes a statement in the prospectus showing that 
unreasonable effort or expense would be involved in obtaining the 
omitted information.


Sec.  229.1106  (Item 1106) 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) of Item 1104 of this Regulation AB, and, to the 
extent the information would be material and materially different from 
the sponsor, paragraphs (c) and (d) of Item 1104 of this Regulation AB. 
In addition, provide the following information:
    (a) The ownership structure of the depositor.
    (b) 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) 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.  229.1107  (Item 1107) 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 and 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 allowing 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 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, 403 and 404 of Regulation S-K 
(Sec. Sec.  229.401, 229.402, 229.403 and 229.404) 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) If the pool assets are securities, as defined under the 
Securities Act, state the market price of the securities and the basis 
on which the market price was determined.
    (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 contemplated by Item 1108(a)(2) of 
this Regulation AB, depositor, issuing entity, originator contemplated 
by Item 1110 of this Regulation AB, 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.  229.1108  (Item 1108) Servicers.

    Provide the following information for the servicer.
    (a) Multiple servicers. Where servicing of the pool assets utilizes 
multiple servicers (e.g., 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):
    (1) Provide a clear introductory description of the roles, 
responsibilities and oversight requirements of the entire servicing 
structure and the parties involved. In addition to an appropriate 
narrative discussion of the allocation of servicing responsibilities, 
also consider presenting the information graphically if doing so will 
aid understanding.
    (2) Identify:
    (i) Each master servicer;
    (ii) Each affiliated servicer;
    (iii) Each unaffiliated servicer that services 10% or more of the 
pool assets; and
    (iv) Any other material servicer responsible for calculating or 
making distributions to holders of the asset-backed securities, 
performing work-outs or foreclosures, or other aspect of the servicing 
of the pool assets or the asset-backed securities upon which the 
performance of the pool assets or the asset-backed securities is 
materially dependent.
    (3) Provide the information in paragraphs (b), (c) and (d) of this

[[Page 1605]]

section, as applicable depending on the servicer's role, for each 
servicer identified in paragraphs (a)(2)(i), (ii) and (iv) of this 
section and each unaffiliated servicer identified in paragraph 
(a)(2)(iii) of this section that services 20% or more of the pool 
assets
    (b) Identifying information and experience. (1) State the 
servicer's name and describe the servicer's form of organization.
    (2) State how long the servicer has been servicing assets. Provide, 
to the extent material, 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 the 
servicing function it will perform in the current transaction for 
assets of the type included in the current transaction. Include to the 
extent material information regarding the size, composition and growth 
of the servicer's portfolio of serviced assets of the type included in 
the current transaction and information on factors related to the 
servicer that may be material to an analysis of the servicing of the 
assets or the asset-backed securities, as applicable.
    (3) Describe any material changes to the servicer's policies or 
procedures in the servicing function it will perform in the current 
transaction for assets of the same type included in the current 
transaction during the past three years.
    (4) Provide information regarding the servicer's financial 
condition to the extent that there is a material risk that the effect 
on one or more aspects of servicing resulting from such financial 
condition could have a material impact on pool performance or 
performance of the asset-backed securities.
    (c) 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 to the extent material the manner in which collections 
on the assets will be maintained, such as through a segregated 
collection account, and the extent of commingling of funds that occurs 
or may occur from the 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 
current transaction, such as subprime assets, and the servicer's 
processes and procedures designed to address such factors.
    (4) Describe to the extent material 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 to the extent material 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 to the extent material any ability of the servicer to 
waive or modify any terms, fees, penalties or payments on the assets 
and the effect of any such ability, if material, on the potential cash 
flows from the assets.
    (7) If the servicer has custodial responsibility for the assets, 
describe material arrangements regarding the safekeeping and 
preservation of the assets, such as the physical promissory notes, and 
procedures to reflect the segregation of the assets from other serviced 
assets. If no servicer has custodial responsibility for the 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 limitations on the servicer's liability under the 
transaction agreements regarding the asset-backed securities 
transaction.
    (d) Back-up servicing. Describe the material 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 
assets and the identity of any such back-up servicer.


Sec.  229.1109  (Item 1109) Trustees.

    Provide the following information for each trustee:
    (a) State the trustee's name and describe the trustee's form of 
organization.
    (b) Describe to what extent the trustee has had prior experience 
serving as a trustee for asset-backed securities transactions involving 
similar pool assets, if applicable.
    (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 under the 
transaction agreements 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.
    Instruction to Item 1109. If multiple trustees are involved in the 
transaction, provide a description of the roles and responsibilities of 
each trustee.


Sec.  229.1110  (Item 1110) Originators.

    (a) Identify any originator or group of affiliated originators, 
apart from the sponsor or its affiliates, that originated, or is 
expected to originate, 10% or more of the pool assets.
    (b) Provide the following information for any originator or group 
of affiliated originators, apart from the sponsor or its affiliates, 
that originated, or is expected to originate, 20% or more of the pool 
assets:
    (1) The originator's form of organization.
    (2) 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.

[[Page 1606]]

Sec.  229.1111  (Item 1111) Pool assets.

    Describe the pool assets, including the information required by 
this Item 1111. 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 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, to the extent material, such as, average balance, weighted 
average coupon, average age and remaining term, average loan-to-value 
or similar ratio and weighted average standardized 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 information 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 1111(a)(6). Unless a material concentration of 
assets exists, it is not necessary to provide details of the laws in 
each jurisdiction. Even in that case, 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, the methodology used in 
determining or calculating the characteristics and any terms or 
abbreviations used. While the material characteristics will vary 
depending on the nature of the pool assets, such characteristics may 
include, among other things:
    (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.
    (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 distribution, 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).
    (8) If a receivable or other financial asset that arises under a 
revolving account, such as a credit card receivable:
    (i) Monthly payment rate.
    (ii) Maximum credit lines.
    (iii) Average account balance.
    (iv) Yield percentages.
    (v) Type of asset.
    (vi) Finance charges, fees and other income earned.
    (vii) Balance reductions granted for refunds, returns, fraudulent 
charges or other reasons.
    (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) For all commercial mortgages:
    (A) The location and present use of each mortgaged property.
    (B) Net operating income and net cash flow information, as well as 
the components of net operating income and net cash flow, for each 
mortgaged property.
    (C) Current occupancy rates for each mortgaged property.
    (D) The identity, square feet occupied by and lease expiration 
dates for the three largest tenants at each mortgaged property.
    (E) The nature and amount of all other material mortgages, liens or 
encumbrances against such properties and their priority.
    (ii) For each commercial mortgage that represents, by dollar value, 
10% or more of the asset pool, as measured as of the cut-off date:
    (A) 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.
    (B) The general competitive conditions to which such properties are 
or may be subject.
    (C) Management of such properties.
    (D) Occupancy rate expressed as a percentage for each of the last 
five years.
    (E) Principal business, occupations and professions carried on in, 
or from the properties.
    (F) 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.
    (G) The average effective annual rental per square foot or unit for 
each of the last three years prior to the date of filing.
    (H) Schedule of the lease expirations for each of the ten years 
starting with the year in which the registration statement is filed (or 
the year in which the prospectus supplement is dated, as applicable), 
stating:
    (1) The number of tenants whose leases will expire.
    (2) The total area in square feet covered by such leases.
    (3) The annual rental represented by such leases.
    (4) The percentage of gross annual rental represented by such 
leases.
    Instruction to Item 1111(b)(9). What is required is information 
material to an investor's understanding of the asset-backed securities. 
Detailed descriptions

[[Page 1607]]

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) 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, describe any 
economic or other factors specific to such state or region that may 
materially impact the pool assets or pool asset cash flows.
    Instruction to Item 1111(b)(14). For most assets, such as credit 
card accounts, motor vehicle 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.
    (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 securitized pool balance is 
attributable to the residual value of the underlying physical property 
underlying the leases, 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 1119(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) To the extent material, 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, as applicable. 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 or a breach of a pool asset representation or warranty:
    (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, if applicable.
    (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, if applicable.
    (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.

[[Page 1608]]

    (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 whether or not 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.
    (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 whether, and if so, how, investors will be 
notified of changes to the asset pool.


Sec.  229.1112  (Item 1112) 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 and 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, provided, 
however, that for a significant obligor under Item 1101(k)(2) of this 
Regulation AB, only net operating income for the most recent fiscal 
year and interim period is required.
    (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 1112(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 from a Commission 
filing 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 following information in lieu of the 
information required by paragraph (b) of this section:
    a. For a registration statement under the Securities Act or the 
Exchange Act or a prospectus to be filed pursuant to Sec.  230.424 of 
this chapter, the information required by Items 1104 through 1115, 1117 
and 1119 of this Regulation AB regarding such asset-backed securities; 
and
    b. For an Exchange Act report on Form 10-K or Form 10-D (Sec.  
249.310 or 249.312 of this chapter), the information required by 
General Instruction J. of Form 10-K regarding such asset-backed 
securities for the period for which the last Form 10-K of the asset-
backed securities was due (or would have been due if such asset-backed 
securities are not required to file reports with the Commission 
pursuant to section 13(a) or 15(d) of the Exchange Act (15 U.S.C. 
78m(a) or 78o(d)).
    4. If the significant obligor is a foreign business (as defined 
Sec.  210.1-02 of this chapter):
    a. Paragraph (b)(1) of this section may be complied with by 
providing the information required by Item 3.A. of Form 20-F (Sec.  
249.220f of this chapter). If a reconciliation to U.S. generally 
accepted accounting principles called for by Instruction 2. to Item 
3.A. of Form 20-F is unavailable or not obtainable without unreasonable 
cost or expense, at a minimum provide a narrative description of all 
material variations in accounting principles, practices and methods 
used in preparing the non-U.S. GAAP financial statements used as a 
basis for the selected financial data from those accepted in the U.S.
    b. Paragraph (b)(2) of this section may be complied with by 
providing financial statements meeting the requirements of Item 17 of 
Form 20-F for the periods specified by Item 8.A. of Form 20-F.


Sec.  229.1113  (Item 1113) 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 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

[[Page 1609]]

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 
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 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 should 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, such as any restrictions 
or limits on fees or whether the estimate may change in certain 
instances, such as in an event of default (and how the fees would 
change in such an instance or the factors that would affect the 
change). 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 and any 
restrictions on the ability to change a fee or expense amount, such as 
due to a change in transaction party.
    (d) Excess cash flow. (1) Describe the disposition of residual or 
excess cash flows. Identify who owns any residual or retained interests 
to the cash flows if such person is affiliated with the sponsor, 
depositor, issuing entity or any entity identified in Item 1119(a) of 
this Regulation AB or if such person has rights that may alter the 
transaction structure beyond receipt of residual or excess cash flows. 
Describe such rights, as material.
    (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 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.
    (5) Which party has the authority to determine whether such 
additional securities may be issued. In addition, if there are 
conditions to such additional issuance, disclose whether or not there 
will be an independent verification of such person's exercise of 
authority or determinations.
    (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 identity of the party that holds the redemption or 
termination option or obligation, as well as whether such party is an 
affiliate of the sponsor, depositor, issuing entity or any entity 
identified in Item 1119(a) of this Regulation AB.
    (iii) The amount of the redemption or repurchase price or formula 
for determining such amount.
    (iv) The procedures for redemption or termination, including any 
notices to security holders.
    (v) 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 
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,'' provided, however, that 
in the case of a master trust, a title of a class of securities must 
include the word ``callable'' when an optional redemption or 
termination feature may be exercised when 25% or more of the original 
principal balance of the particular series in which the class was 
issued is still outstanding.
    (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),

[[Page 1610]]

and describe the 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.  229.1114  (Item 1114) Credit enhancement and other support, 
except for certain derivatives instruments.

    (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 whose primary purpose is to provide credit 
enhancement related to pool assets or the asset-backed securities.
    (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.
    Instructions to Item 1114(a).
    1. Include a description of the material terms of any enhancement 
or support described, including any limits on the timing or amount of 
the enhancement or support or any conditions that must be met before 
the enhancement or support can be accessed. The enhancement or support 
agreement is to be filed as an exhibit. Also describe any provisions 
regarding the substitution of enhancement or support.
    2. This Item should not be construed as allowing anything other 
than an asset-backed security whose payment is based primarily by 
reference to the performance of the receivables or other financial 
assets in the asset pool
    (b) Information regarding significant enhancement providers--(1) 
Descriptive information. If an entity or group of affiliated entities 
providing enhancement or other support described in paragraph (a) of 
this section 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 described in paragraph 
(a) of this section is liable or contingently liable to provide 
payments representing 10% or more, but less than 20%, of the cash flow 
supporting any offered class of the asset-backed securities, provide 
financial data required by Item 301 of Regulation S-K (Sec.  229.301) 
for each such entity or group of affiliated entities.
    (ii) If any entity or group of affiliated entities providing 
enhancement or other support described in paragraph (a) of this section 
is liable or contingently liable to provide payments representing 20% 
or more of the cash flow supporting any offered 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 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 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 1114.
    1. The requirements in paragraph (b) of this section apply to all 
providers of external credit enhancement or other support, other than 
those described in Item 1115 of this Regulation AB. 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 from a Commission filing in lieu of providing 
the financial information required pursuant to paragraph (b)(2) of this 
section.
    4. If the pool assets are student loans originated under the 
Federal Family Education Loan Program of the Higher Education Act of 
1965 (20 U.S.C. 1001 et seq.)) and the enhancement provider for the 
pool assets is a guarantee agency as defined under the Higher Education 
Act, then the following information may be provided in lieu of 
providing financial information required pursuant to paragraph (b)(2) 
of this section:
    a. The number of pool assets and aggregate outstanding principal 
balance of pool assets guaranteed by the guarantee agency (both by 
number and percentage of the asset pool as of the cut-off date or other 
applicable date).
    b. Disclosure of the following with respect to the guarantee 
agency, as applicable, including a brief description regarding the 
method of calculation, covering at least five federal fiscal years:
    i. Aggregate principal amount of all student loans guaranteed.
    ii. Reserve ratio.
    iii. Recovery rate.
    iv. Loss rate.
    v. Claims rate.
    5. If the enhancement provider is a foreign business (as defined 
Sec.  210.1-02 of this chapter):
    a. Paragraph (b)(2)(i) of this section may be complied with by 
providing the information required by Item 3.A. of Form 20-F (Sec.  
249.220f of this chapter). If a reconciliation to U.S. generally 
accepted accounting principles called for by Instruction 2. to Item 
3.A. of Form 20-F is unavailable or not obtainable without unreasonable 
cost or expense, at a minimum provide a narrative description of all 
material variations in accounting principles, practices and methods 
used in preparing the non-U.S. GAAP financial statements used as a 
basis for the selected financial data from those accepted in the U.S.
    b. Paragraph (b)(2)(ii) of this section may be complied with by 
providing financial statements meeting the requirements of Item 17 of 
Form 20-F for the periods specified by Item 8.A. of Form 20-F.


Sec.  229.1115  (Item 1115) Certain derivatives instruments.

    This item relates to derivative instruments, such as interest rate 
and

[[Page 1611]]

currency swap agreements, that are used to alter the payment 
characteristics of the cashflows from the issuing entity and whose 
primary purpose is not to provide credit enhancement related to the 
pool assets or the asset-backed securities. For purposes of this 
section, the ``significance estimate'' of the derivative instrument is 
to be determined based on a reasonable good-faith estimate of maximum 
probable exposure, made in substantially the same manner as that used 
in the sponsor's internal risk management process in respect of similar 
instruments. The ``significance percentage'' is the percentage that the 
amount of the significance estimate represents of the aggregate 
principal balance of the pool assets, provided, that if the derivative 
instrument relates only to one or more classes of the asset-backed 
securities, the ``significance percentage'' is the percentage that the 
amount of the significance estimate represents of the aggregate 
principal balance of such classes.
    (a) Descriptive information. (1) Describe the following regarding 
the external counterparty:
    (i) The name of the derivative counterparty.
    (ii) The organizational form of the derivative counterparty.
    (iii) The general character of the business of the derivative 
counterparty.
    (2) Describe the operation and material terms of the derivative 
instrument, including any limits on the timing or amount of payments or 
any conditions to payments.
    (3) Describe any material provisions regarding substitution of the 
derivative instrument.
    (4) At a minimum, disclose whether the significance percentage, as 
calculated in accordance with this section, is less than 10%, at least 
10% but less than 20%, or 20% or more.
    (5) File the agreement relating to the derivative instrument as an 
exhibit.
    (b) Financial information. (1) If the aggregate significance 
percentage related to any entity or group of affiliated entities 
providing derivative instruments contemplated by this section is 10% or 
more, but less than 20%, provide financial data required by Item 301 of 
Regulation S-K (Sec.  229.301) for such entity or group of affiliated 
entities.
    (2) If the aggregate significance percentage related to any entity 
or group of affiliated entities providing derivative instruments 
contemplated by this section is 20% or more, 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 such entity or group of 
affiliated entities. Financial statements of such entity and its 
subsidiaries consolidated (as required by Sec.  240.14a-3(b) of this 
chapter) shall be filed under this item.
    Instructions to Item 1115.
    1. Instructions 2, 3 and 5 to Item 1114 of this Regulation AB apply 
to the information contemplated by paragraph (b) of this item.
    2. This Item should not be construed as allowing anything other 
than an asset-backed security whose payment is based primarily by 
reference to the performance of the receivables or other financial 
assets in the asset pool.


Sec.  229.1116  (Item 1116) 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.  229.1117  (Item 1117) Legal proceedings.

    Describe briefly any legal proceedings pending against the sponsor, 
depositor, trustee, issuing entity, servicer contemplated by Item 
1108(a)(3) of this Regulation AB, originator contemplated by Item 
1110(b) of this Regulation AB, or other party contemplated by 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.  229.1118  (Item 1118) Reports and additional information.

    (a) Reports required under the transaction documents.
    Describe the reports or other documents provided 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 
under which reports about the asset-backed securities will be filed 
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 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 and other reports 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 and other reports free of charge upon 
request.


Sec.  229.1119  (Item 1119) 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.  230.405 of this chapter) of 
any of the following parties as well as, to the extent known and 
material, if so, and how, any of the

[[Page 1612]]

following parties are affiliates of any of the other following parties:
    (1) Servicer contemplated by Item 1108(a)(3) of this Regulation AB.
    (2) Trustee.
    (3) Originator contemplated by Item 1110 of this Regulation AB.
    (4) Significant obligor contemplated by Item 1112 of this 
Regulation AB.
    (5) Enhancement or support provider contemplated by Items 1114 or 
1115 of this Regulation AB.
    (6) Any other material parties related to the asset-backed 
securities contemplated by Item 1100(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)(6) 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 1119(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 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.
    (c) Notwithstanding paragraph (b) of this section, describe, to the 
extent material, any specific relationships involving or relating to 
the asset-backed securities transaction or the pool assets, including 
the material terms and approximate dollar amount involved, between the 
sponsor, depositor or issuing entity and any of the parties in 
paragraphs (a)(1) through (a)(6) of this section, or any affiliates of 
such parties, that currently exists or that existed during the past two 
years.
    Instruction to Item 1119. With respect to disclosure in an annual 
report on Form 10-K, information required by this Item 1119 may be 
omitted to the extent that substantially the same information had been 
provided previously in an annual report on Form 10-K (Sec.  249.310) 
for the asset-backed securities or 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 as the current annual report on Form 10-K.


Sec.  229.1120  (Item 1120) 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.  229.1121  (Item 1121) Distribution and pool performance 
information.

    (a) 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 (or a 
cross-reference to a Commission filing where such information may be 
found). 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, such information 
may include, among other things:
    (1) Any applicable record dates, accrual dates, determination dates 
for calculating distributions and actual distribution dates for the 
distribution period.
    (2) Cash flows received and the sources thereof for distributions, 
fees and expenses (including portfolio yield, if applicable).
    (3) Calculated amounts and distribution of the flow of funds for 
the period itemized by type and priority of payment, including:
    (i) Fees or expenses accrued and paid, with an identification of 
the general purpose of such fees and the party receiving such fees or 
expenses.
    (ii) Payments accrued or paid with respect to enhancement or other 
support identified in Item 1114 of this Regulation AB (such as 
insurance premiums or other enhancement maintenance fees), with an 
identification of the general purpose of such payments and the party 
receiving such payments.
    (iii) 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.
    (iv) The amount of excess cash flow or excess spread and the 
disposition of excess cash flow.
    (4) Beginning and ending principal balances of the asset-backed 
securities.
    (5) Interest rates applicable to the pool assets and the asset-
backed securities, as applicable. Consider providing interest rate 
information for pool assets in appropriate distributional groups or 
incremental ranges.
    (6) Beginning and ending balances of transaction accounts, such as 
reserve accounts, and material account activity during the period.
    (7) Any amounts drawn on any credit enhancement or other support 
identified in Item 1114 of this Regulation AB, as applicable, and the 
amount of coverage remaining under any such enhancement, if known and 
applicable.
    (8) 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 and prepayment amounts. For asset-backed securities backed 
by leases where a portion of the securitized pool balance is 
attributable to residual values of the physical property underlying the 
leases, this information also would include turn-in rates and residual 
value realization rates.
    (9) Delinquency and loss information for the period. In addition, 
describe any material changes to the information specified in Item 
1100(b)(5) of this Regulation AB regarding the pool assets.
    (10) Information on the amount, terms and general purpose of any 
advances made or reimbursed during the period, including the general 
use of funds advanced and the general source of funds for 
reimbursements.
    (11) Any material modifications, extensions or waivers to pool 
asset terms, fees, penalties or payments during the distribution period 
or that have cumulatively become material over time.
    (12) Material breaches of pool asset representations or warranties 
or transaction covenants.
    (13) Information on ratio, coverage or other tests used for 
determining any early amortization, liquidation or other performance 
trigger and whether the trigger was met.
    (14) Information regarding any new issuance of asset-backed 
securities backed by the same asset pool, any pool asset changes (other 
than in connection with a pool asset converting into cash in accordance 
with its terms), such as additions or removals in connection with a 
prefunding or revolving period and pool asset substitutions and

[[Page 1613]]

repurchases (and purchase rates, if applicable), and cash flows 
available for future purchases, such as the balances of any prefunding 
or revolving accounts, if applicable. Disclose any material changes in 
the solicitation, credit-granting, underwriting, origination, 
acquisition or pool selection criteria or procedures, as applicable, 
used to originate, acquire or select the new pool assets.
    (b) During a prefunding or revolving period, or if there has been a 
new issuance of asset-backed securities backed by the same pool under a 
master trust during the fiscal year of the issuing entity, provide the 
information required by Items 1110, 1111 and 1112 of this Regulation AB 
applied taking the revised pool composition into account in the Form 
10-D report (Sec.  249.312 of this chapter) for the last required 
distribution of the fiscal year of the issuing entity. In addition, 
provide such updated information in the first Form 10-D report for the 
period in which the prefunding or revolving period ends (if 
applicable). However, no disclosure need be provided by this paragraph 
if the information has not materially changed from that previously 
provided in an Exchange Act report relating to the asset-backed 
securities or 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.  229.1122  (Item 1122) Compliance with applicable servicing 
criteria.

    (a) Reports on assessment of compliance with servicing criteria for 
asset-backed securities. As required by paragraph (b) of Sec.  240.13a-
18 or 240.15d-18 of this chapter, provide as an exhibit from each party 
participating in the servicing function a report on an assessment of 
compliance with the servicing criteria set forth in paragraph (d) of 
this section that contains the following:
    (1) A statement of the party's responsibility for assessing 
compliance with the servicing criteria applicable to it;
    (2) A statement that the party used the criteria in paragraph (d) 
of this section to assess compliance with the applicable servicing 
criteria;
    (3) The party's assessment of compliance with the applicable 
servicing criteria as of and for the period ending the end of the 
fiscal year covered by the Form 10-K report (Sec.  249.310 of this 
chapter). This discussion must include disclosure of any material 
instance of noncompliance identified by the party; and
    (4) A statement that a registered public accounting firm has issued 
an attestation report on the party's assessment of compliance with the 
applicable servicing criteria as of and for the period ending the end 
of the fiscal year covered by the Form 10-K report.
    (b) Registered public accounting firm attestation reports. Provide 
the registered public accounting firm's attestation report required by 
paragraph (c) of Sec.  240.13a-18 or 240.15d-18 of this chapter on the 
party's assessment of compliance with the applicable servicing criteria 
as an exhibit.
    (c) Additional disclosure for the Form 10-K report.
    (1) If any party's report on assessment of compliance with 
servicing criteria required by paragraph (a) of this section, or 
related registered public accounting firm attestation report required 
by paragraph (b) of this section, identifies any material instance of 
noncompliance with the servicing criteria, identify the material 
instance of noncompliance in the report on Form 10-K.
    (2) If any party's report on assessment of compliance with 
servicing criteria required by paragraph (a) of this section, or 
related registered public accounting firm attestation report required 
by paragraph (b) of this section, is not included as an exhibit to the 
Form 10-K report, disclosure that the report is not included and an 
associated explanation must be provided in the report on Form 10-K.
    (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 party participating in the servicing function 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, or 
such other number of days specified in the transaction agreements.
    (ii) Disbursements made via wire transfer on behalf of an obligor 
or to an 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 depository 
institution'' with respect to a foreign financial institution means a 
foreign financial institution that meets the requirements of Sec.  
240.13k-1(b)(1) of this chapter.
    (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, or such other number of days specified in the transaction 
agreements;
    (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, or such other number of days specified in the 
transaction agreements.
    (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:
    (A) Are 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;

[[Page 1614]]

    (C) Are filed with the Commission as required by its rules and 
regulations; and
    (D) Agree with investors' 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 servicer's investor records, or such other number 
of days specified in the transaction agreements.
    (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 servicer's obligor records maintained no more than two 
business days after receipt, or such other number of days specified in 
the transaction agreements, 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 
servicer's records with respect to an obligor's 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., forbearance plans, 
modifications and deeds in lieu of foreclosure, foreclosures and 
repossessions, as applicable) are initiated, conducted and concluded in 
accordance with the timeframes or other requirements established by the 
transaction agreements.
    (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, or such other period specified in the transaction 
agreements, 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, or such other period 
specified in the transaction agreements;
    (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, or such other number of 
days specified in the transaction agreements.
    (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, or such other 
number of days specified in the transaction agreements.
    (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, 
or such other number of days specified in the transaction agreements.
    (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 
1114(a)(1) through (3) or Item 1115 of this Regulation AB, is 
maintained as set forth in the transaction agreements.
    Instructions to Item 1122.
    1. If certain servicing criteria are not applicable to the 
asserting party based on the activities it performs with respect to 
asset-backed securities transactions taken as a whole involving such 
party and that are backed by the same asset type backing the class of 
asset-backed securities, the inapplicability of the criteria must be 
disclosed in that asserting party's and the related registered public 
accounting firm's reports.
    2. If multiple parties are participating in the servicing function, 
a separate assessment report and attestation report must be included 
for each party participating in the servicing function. A party 
participating in the servicing function means any entity (e.g., master 
servicer, primary servicers, trustees) that is performing activities 
that address the criteria in paragraph (d) of this section, unless such 
entity's activities relate only to 5% or less of the pool assets.
    3. 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 and depositor, see also Item 1100(d)(2) of this 
Regulation AB.


Sec.  229.1123  (Item 1123) Servicer compliance statement.

    Provide as an exhibit 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 failure to fulfill any such obligation in any material 
respect, specifying each such failure known to such officer and the 
nature and status thereof.
    Instruction to Item 1123. 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 
1108(a)(2)(i) through (iii) of this Regulation AB.

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

0
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(d),

[[Page 1615]]

78mm, 79t, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-37, unless 
otherwise noted.
* * * * *

0
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 if 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 shall 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 shall 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; or
    (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 shall 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 shall 
explain in reasonable detail the reasons for such preference.

0
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. 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 shall be filed to the extent required 
pursuant to Sec.  230.426.
    (2) Every communication used pursuant to this section shall 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 shall 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) Failure by a particular underwriter to cause the filing of a 
prospectus described in this section will not affect the ability of any 
other underwriter who has complied with the procedures to rely on the 
exemption.
    (e) An immaterial or unintentional failure to file or delay in 
filing a prospectus described in this section will not result in a 
violation of section 5(b)(1) of the Act (15 U.S.C. 77e(b)(1)), so long 
as:
    (1) A good faith and reasonable effort was made to comply with the 
filing requirement; and
    (2) The prospectus is filed as soon as practicable after discovery 
of the failure to file.
    (f) Terms used in this section have the same meaning as in Item 
1101 of Regulation AB (Sec.  229.1101 of this chapter).

0
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

[[Page 1616]]

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 and 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
    (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.

0
26. Amend Sec.  230.411 by:
0
a. Removing the authority citation following the section; and
0
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. ***
* * * * *

0
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.

[[Page 1617]]

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) If a prospective investor has indicated to the issuer or an 
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 or have been provided to such 
prospective investor; and
    (ii) For any other prospective investor, all materials 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 after 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 issuer or an 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.


Sec.  230.434  [Amended]

0
28. Amend Sec.  230.434 by removing the phrase ``General Instruction 
1.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

0
29. The authority citation for Part 232 is revised to read 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, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *


Sec.  232.311  [Amended]

0
30. Amend Sec.  232.311 by removing paragraph (j).

0
31. Add Sec.  232.312 to read as follows:


Sec.  232.312  Accommodation for certain information in filings with 
respect to asset-backed securities.

    (a) For filings with respect to asset-backed securities filed on or 
before December 31, 2009, the information provided in response to Item 
1105 of Regulation AB (Sec.  229.1105 of this chapter) may be provided 
under the following conditions on an Internet Web site for inclusion in 
the prospectus for the asset-backed securities, and will be deemed to 
be included in the prospectus included in the registration statement, 
in lieu of reproducing the information in the electronically filed 
version of that document. Terms used in this section have the same 
meaning as in Item 1101 of Regulation AB (Sec.  229.1101 of this 
chapter).
    (1) The prospectus in the registration statement at the time of 
effectiveness shall disclose the intention to provide such information 
through a Web site and the prospectus to be filed pursuant to Sec.  
230.424 of this chapter shall provide the specific Internet address 
where the information is posted.
    (2) Such information shall be provided through the Web site 
unrestricted as to access and free of charge.
    (3) Such information shall remain available on the Web site for a 
period of not less than five years. If a subsequent update or change is 
made to the information, the date of such update or change shall be 
clearly indicated on the Web site.
    (4) The registrant shall retain all versions of such information 
provided through the Web site for a period of not less than five years 
in a form that permits delivery to an investor or the Commission. Upon 
request, the registrant shall furnish to the Commission or its staff a 
copy of any or all information retained pursuant to this requirement.
    (5) The registration statement shall contain the undertakings 
required by Item 512(l) of Regulation S-K (Sec.  229.512(l) of this 
chapter) that:
    (i) Except as otherwise provided by this section, such information 
provided through the specified Internet address is deemed to be a part 
of the prospectus included in the registration statement for the asset-
backed securities.
    (ii) The registrant shall provide to any person without charge, 
upon request, a copy of such information provided through the specified 
Internet address as of the date of the prospectus included in the 
registration statement if a subsequent update or change is made to that 
information.

    Note to paragraph (a). With respect to paragraphs (a)(3) and 
(a)(4) of this section, the five-year period shall commence from the 
filing date of the prospectus filed pursuant to Sec.  230.424 of 
this chapter, or the date of first use of the prospectus, whichever 
is earlier.

    (b) This section does not affect any obligation to provide any 
other information in the filing electronically on EDGAR.

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

0
32. 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.
* * * * *

0
33. Amend Form S-1 (referenced in Sec.  239.11) by adding General 
Instruction VI. to read as follows:


[[Page 1618]]


    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).
    A. Items That May Be Omitted.
    Such registrants may omit the information called for by Item 11, 
Information with Respect to the Registrant.
    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 1120 of Regulation AB (17 CFR 229.1102 through 
229.1120).
    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.
* * * * *

0
34. 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.

0
35. 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.
* * * * *

0
36. Amend Sec.  239.13 by:
0
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), 6.01, 6.03 or 6.05 of Form 8-K''; 
and
0
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 securities 
described in paragraph (b)(5) of this section. However, for such 
offerings of asset-backed securities, to the extent the depositor or 
any issuing entity previously established, directly or indirectly, by 
the depositor or any affiliate of the depositor (as defined in Sec.  
229.1101 of this chapter) are or were 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 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 involving 
the same asset class, 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), 6.01, 6.03 or 6.05 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. Regarding an affiliated 
depositor that became an affiliate as a result of a business 
combination transaction during such period, the filing of any material 
prior to the business combination transaction relating to asset-backed 
securities of an issuing entity previously established, directly or 
indirectly, by such affiliated depositor is excluded from this section, 
provided such business combination transaction was not part of a plan 
or scheme to evade the requirements of the Securities Act or the 
Exchange Act. See the definition of ``affiliate'' in Sec.  230.405 of 
this chapter.
* * * * *
    (b) * * *
    (5) Offerings of investment grade asset-backed securities. (i) 
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; and
    (ii) Securities relating to an offering of asset-backed securities 
registered in accordance with paragraph (b)(5)(i) of this section where 
those securities represent an interest in or the right to the payments 
of cash flows of another asset pool and meet the requirements of Sec.  
230.190(c)(1) through (4) of this chapter.
* * * * *

0
37. Amend Form S-3 (referenced in Sec.  239.13) by:
0
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), 6.01, 6.03 or 6.05 of 
Form 8-K'';
0
b. Revising General Instructions I.A.4. and I.B.5.; and
0
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 securities described in I.B.5 below. 
However, for such offerings of asset-backed securities, to the extent 
the depositor or any issuing entity previously established, directly or 
indirectly, by the depositor or any affiliate of the depositor (as 
defined in Item 1101 of Regulation AB (17 CFR 229.1101)) are or were 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 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 involving the same asset class, such depositor and each

[[Page 1619]]

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), 6.01, 
6.03 or 6.05 of Form 8-K (17 CFR 249.308). 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. Regarding an affiliated depositor that became an affiliate 
as a result of a business combination transaction during such period, 
the filing of any material prior to the business combination 
transaction relating to asset-backed securities of an issuing entity 
previously established, directly or indirectly, by such affiliated 
depositor is excluded from this section, provided such business 
combination transaction was not part of a plan or scheme to evade the 
requirements of the Securities Act or the Exchange Act. See the 
definition of ``affiliate'' in Securities Act Rule 405 (17 CFR 
230.405).
* * * * *
    B. Transaction Requirements. * * *
    5. Offerings of Investment grade Asset-backed Securities.
    (a) Asset-backed securities (as defined in 17 CFR 229.1101) to be 
offered for cash, provided:
    (i) The securities are ``investment grade securities,'' as defined 
in I.B.2 above (Primary Offerings of Non-convertible Investment Grade 
Securities);
    (ii) Delinquent assets do not constitute 20% or more, as measured 
by dollar volume, of the asset pool as of the measurement date; and
    (iii) With respect to securities that are backed by leases other 
than motor vehicle leases, the portion of the securitized pool balance 
attributable to the residual value of the physical property underlying 
the leases, as determined in accordance with the transaction agreements 
for the securities, does not constitute 20% or more, as measured by 
dollar volume, of the securitized pool balance as of the measurement 
date.
    Instruction. For purposes of making the determinations required by 
paragraphs (a)(ii) and (a)(iii) of this General Instruction I.B.5, 
refer to the Instructions to Item 1101(c) of Regulation AB (17 CFR 
229.1101(c)).
    (b) Securities relating to an offering of asset-backed securities 
registered in accordance with paragraph (a) of this General Instruction 
I.B.5 where those securities represent an interest in or the right to 
the payments of cash flows of another asset pool and meet the 
requirements of Securities Act Rule 190(c)(1) through (4) (17 CFR 
240.190(c)(1) through (4)).
* * * * *

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.
    1. 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 1120 of 
Regulation AB (17 CFR 229.1102 through 229.1120).
    2. 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. For both separate asset 
classes and jurisdictions of origin or property, a separate base 
prospectus and form of supplement is not required for transactions that 
principally consist of a particular asset class or jurisdiction which 
also describe one or more potential additional asset classes or 
jurisdictions, so long as the pool assets for the additional classes or 
jurisdictions in the aggregate are below 10% of the pool, as measured 
by dollar volume, for any particular takedown. When a preliminary 
prospectus is required under this Form pursuant to Securities Act Rule 
190(b)(7) (17 CFR 230.190(b)(7)), the information to be included in the 
base prospectus and prospectus supplement is to be substantially 
similar to that which would be included if the preliminary prospectus 
was required under Form S-1 (17 CFR 239.11) pursuant to such rules.
    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.
* * * * *

0
38. 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.

0
39. 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. Rule 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.
* * * * *

0
40. 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.
* * * * *

0
41. 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
* * * * *

[[Page 1620]]

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.
* * * * *

0
42. 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.

0
43. 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 17 CFR 229.1101.
* * * * *

0
44. 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.
* * * * *

0
45. 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 securities, as defined in 17 CFR 229.1101.
* * * * *

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

0
46. 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.
* * * * *r

0
47. 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).

0
48. 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]

0
49. 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)''.


Sec.  240.12b-2  [Amended]

0
50. 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
* * * * *

0
51. 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. * * *

0
52. Amend Sec.  240.12b-25 by revising the section heading and 
paragraphs (a) and (b)(2)(ii) to read as follows:


Sec.  240.12b-25  Notification of inability to timely file all or any 
required portion of a Form 10-K, 10-KSB, 20-F, 11-K, N-SAR, N-CSR, 10-
Q, 10-QSB or 10-D.

    (a) If all or any required portion of an annual or transition 
report on Form 10-K, 10-KSB, 20-F or 11-K (17 CFR 249.310, 249.310b, 
249.220f or 249.311), a quarterly or transition report on Form 10-Q or 
10-QSB (17 CFR 249.308a or 249.308b), or a distribution report on Form 
10-D (17 CFR 249.312) required to be filed pursuant to section 13 or 
15(d) of the Act (15 U.S.C. 78m or 78o(d)) and rules thereunder, or if 
all or any required portion of a semi-annual, annual or transition 
report on Form N-CSR (17 CFR 249.331; 17 CFR 274.128) or Form N-SAR (17 
CFR 249.330; 17 CFR 274.101) required to be filed pursuant to section 
13 or 15(d) of the Act or section 30 of the Investment Company Act of 
1940 (15 U.S.C. 80a-29) and the rules thereunder, is not filed within 
the time period prescribed for such report, the registrant, no later 
than one business day after the due date for such report, shall file a 
Form 12b-25 (17 CFR 249.322) with the Commission which shall contain 
disclosure of its inability to file the report timely and the reasons 
therefor in reasonable detail.
    (b) * * *
    (2) * * *
    (ii) The subject annual report, semi-annual report or transition 
report on Form 10-K, 10-KSB, 20-F, 11-K, N-SAR, or N-CSR, or portion 
thereof, will be filed no later than the fifteenth calendar day 
following the prescribed due date; or the subject quarterly report

[[Page 1621]]

or transition report on Form 10-Q or 10-QSB or distribution report on 
Form 10-D, or portion thereof, will be filed no later than the fifth 
calendar day following the prescribed due date; and
* * * * *

0
53. 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 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.  240.13a-17 will continue to apply regardless 
of a change in the asset-backed issuer's fiscal closing date.
* * * * *


Sec.  240.13a-11  [Amended]

0
54. 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''.

0
55. Amend Sec.  240.13a-13 by:
0
a. Removing the authority citation following Sec.  240.13a-13;
0
b. Removing the period at the end of paragraph (b)(2) and adding, in 
its place, ``; and''; and
0
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.
* * * * *

0
56. Amend Sec.  240.13a-14 by:
0
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)'';
0
b. Revising the reference to ``paragraph (a) or (b)'' in paragraph (c) 
to read ``paragraph (a), (b) or (d)'';
0
c. Revising paragraphs (d) and (e); and
0
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 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. Terms used in paragraphs (d) and (e) of this section have the 
same meaning as in Item 1101 of Regulation AB (Sec.  229.1101 of this 
chapter).
    (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 function) must 
sign if a representative of the servicer is to sign the report on 
behalf of the issuing entity.


Sec.  240.13a-15  [Amended]

0
57. 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).

0
58. Amend Sec.  240.13a-16 by:
0
a. Removing the word ``or'' at the end of paragraph (a)(2);
0
b. Removing the period at the end of paragraph (a)(3) and adding, in 
its place, ``; or''; and
0
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.
* * * * *

0
59. 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) of the Act (15 
U.S.C. 78m(a)). Terms used in this section have the same meaning as in 
Item 1101 of Regulation AB (Sec.  229.1101 of this chapter).
    (b) Reports on assessments of compliance with servicing criteria 
for asset-backed securities required. With regard to a class of asset-
backed securities subject to the reporting requirements of section 
13(a) of the Act, the annual report on Form 10-K (Sec.  249.308 of this 
chapter) for such class must include from each party participating in 
the servicing function a report regarding its assessment of compliance 
with the servicing criteria specified in paragraph (d) of Item 1122 of 
Regulation AB (Sec.  229.1122(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 party 
participating in the servicing function 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).
    (c) Attestation reports on assessments of compliance with servicing 
criteria for asset-backed securities required. With respect to each 
report included pursuant to paragraph (b) of this section, the annual 
report on Form 10-K must also include a report by a registered public 
accounting firm that attests to, and reports on, the assessment made by 
the asserting party. The attestation report on assessment of compliance 
with servicing criteria for asset-backed securities must be made in 
accordance with standards for attestation engagements issued or adopted 
by the Public Company Accounting Oversight Board.


[[Page 1622]]


    Note to Sec.  240.13a-18. If multiple parties are participating 
in the servicing function, a separate assessment report and 
attestation report must be included for each party participating in 
the servicing function. A party participating in the servicing 
function means any entity (e.g., master servicer, primary servicers, 
trustees) that is performing activities that address the criteria in 
paragraph (d) of Item 1122 of Regulation AB (Sec.  229.1122(d) of 
this chapter), unless such entity's activities relate only to 5% or 
less of the pool assets.


0
60. Amend Sec.  240.15c2-8 by:
0
a. Removing the phrase ``paragraphs (b) through (g)'' in paragraph (a) 
and adding, in its place, the phrase ``paragraphs (b) through (h)'' and
0
b. Adding a sentence to the end of paragraph (b).
    The revisions read as follows.


Sec.  240.15c2-8  Delivery of prospectus.

    (a) ***
    (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).
* * * * *

0
61. 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]

0
62. 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''.
0
63. Amend Sec.  240.15d-13 by:
0
a. Removing the authority citation following Sec.  240.15d-13;
0
b. Removing the period at the end of paragraph (b)(2) and adding, in 
its place, ``; and''; and
0
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.
* * * * *

0
64. Amend Sec.  240.15d-14 by:
0
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)'';
0
b. Revising the reference to ``paragraph (a) or (b)'' in paragraph (c) 
to read ``paragraph (a), (b) or (d)'';
0
c. Revising paragraphs (d) and (e); and
0
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 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. Terms used in paragraphs (d) and (e) of this section have the 
same meaning as in Item 1101 of Regulation AB (Sec.  229.1101 of this 
chapter).
    (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 function) must 
sign if a representative of the servicer is to sign the report on 
behalf of the issuing entity.


Sec.  240.15d-15  [Amended]

0
65. 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).
0
66. Amend Sec.  240.15d-16 by:
0
a. Removing the period at the end of paragraph (a)(2) and adding, in 
its place, ``; or''; and
0
b. 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.
* * * * *

0
67. 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.

0
68. 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 15(d) of the Act (15 
U.S.C. 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) Reports on assessments of compliance with servicing criteria 
for asset-backed securities required. With regard to a class of asset-
backed securities subject to the reporting requirements of section 
15(d) of the Act, the annual report on Form 10-K (Sec.  249.308 of this 
chapter) for such class must include from each party participating in 
the servicing function a report regarding its assessment of compliance 
with the servicing criteria specified in paragraph (d) of Item 1122 of 
Regulation AB (Sec.  229.1122(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 party 
participating in the servicing function and that are backed by the same 
asset

[[Page 1623]]

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).
    (c) Attestation reports on assessments of compliance with servicing 
criteria for asset-backed securities required. With respect to each 
report included pursuant to paragraph (b) of this section, the annual 
report on Form 10-K must also include a report by a registered public 
accounting firm that attests to, and reports on, the assessment made by 
the asserting party. The attestation report on assessment of compliance 
with servicing criteria for asset-backed securities must be made in 
accordance with standards for attestation engagements issued or adopted 
by the Public Company Accounting Oversight Board.
    Note to Sec.  240.15d-18. If multiple parties are participating in 
the servicing function, a separate assessment report and attestation 
report must be included for each party participating in the servicing 
function. A party participating in the servicing function means any 
entity (e.g., master servicer, primary servicers, trustees) that is 
performing activities that address the criteria in paragraph (d) of 
Item 1122 of Regulation AB (Sec.  229.1122(d) of this chapter), unless 
such entity's activities relate only to 5% or less of the pool assets.

0
69. 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) Paragraph (a) or (b) of this section does 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 and 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 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, SHO, ATS, AND AC AND CUSTOMER MARGIN 
REQUIREMENTS FOR SECURITY FUTURES

0
70. 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.


0
71. 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 (Regulation BTR--
Blackout Trading Restriction)

0
72. The authority citation for part 245 continues to read in part as 
follows:

    Authority: 15 U.S.C. 78w(a), unless otherwise noted.
* * * * *

0
73. Amend Sec.  245.101 by:
0
a. Removing the period at the end of paragraph (c)(2) and in its place 
adding a semi-colon;
0
b. Removing ``and'' at the end of paragraph (c)(9);
0
c. Removing the period at the end of paragraph (c)(10) and in its place 
adding ``; and''; and
0
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

0
74. 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.
* * * * *

0
75. Amend Form 8-K (referenced in Sec.  249.308) by:
0
a. Adding General Instruction G.;
0
b. Adding Instruction 3 to Item 1.01;
0
c. Adding Instruction 3 to Item 1.02;
0
d. Revising the phrase ``Instruction'' in Item 1.03 to read 
``Instructions'', redesignating the existing Instruction as Instruction 
1, and adding Instruction 2;
0
e. Adding Instruction 5 to Item 2.04;
0
f. 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

[[Page 1624]]

0
g. 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 2.02, Results of Operations and Financial Condition;
    (c) Item 2.03, Creation of a Direct Financial Obligation or an 
Obligation under an Off-Balance Sheet Arrangement of a Registrant;
    (d) Item 2.05, Costs Associated with Exit or Disposal Activities;
    (e) Item 2.06, Material Impairments;
    (f) Item 3.01, Notice of Delisting or Failure to Satisfy a 
Continued Listing Rule or Standard; Transfer of Listing;
    (g) Item 3.02, Unregistered Sales of Equity Securities;
    (h) Item 4.01, Changes in Registrant's Certifying Accountant;
    (i) Item 4.02, Non-Reliance on Previously Issued Financial 
Statements or a Related Audit Report or Completed Interim Review;
    (j) Item 5.01, Changes in Control of Registrant;
    (k) Item 5.02, Departure of Directors or Principal Officers; 
Election of Directors; Appointment of Principal Officers;
    (l) Item 5.04, Temporary Suspension of Trading Under Registrant's 
Employee Benefit Plans; and
    (m) 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 function) 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 1108(a)(3) of 
Regulation AB (17 CFR 229.1108(a)(3)).

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 agreement with a servicer contemplated by Item 
1108(a)(3) of Regulation AB (17 CFR 229.1108(a)(3)).
* * * * *

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 of any instances described in paragraph (a) or 
(b) of this Item with respect to the sponsor, depositor, servicer 
contemplated by Item 1108(a)(3) of Regulation AB (17 CFR 
229.1108(a)(3)), trustee, significant obligor, enhancement or support 
provider contemplated by Items 1114(b) or 1115 of Regulation AB (17 CFR 
229.1114(b) or 229.1115) or other material party contemplated by Item 
1101(d)(1) of Regulation AB (17 CFR 1101(d)(1)). Terms used in this 
Instruction 2 have the same meaning as in Item 1101 of Regulation AB 
(17 CFR 229.1101).
* * * * *

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 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).

[[Page 1625]]

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 1108(a)(2) of Regulation AB (17 
CFR 229.1108(a)(2)) or a trustee has resigned or has been removed, 
replaced or substituted, or if a new servicer contemplated by Item 
1108(a)(2) 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 1108(d) of 
Regulation AB (17 CFR 229.1108(c)), as applicable, regarding the 
servicer or trustee change. If a new servicer contemplated by Item 
1108(a)(3) of this Regulation AB or a new trustee has been appointed, 
provide the information required by Item 1108(b) through (d) of 
Regulation AB regarding such servicer or Item 1109 of Regulation AB (17 
CFR 229.1109) regarding such trustee, as applicable.
    Instruction. To the extent that any information called for by this 
Item regarding such servicer or trustee is not determined or is 
unavailable at the time of the required filing, the registrant shall 
include a statement to this effect in the filing and then must file an 
amendment to its Form 8-K filing under this Item 6.02 containing such 
information within four business days after the information is 
determined or becomes available.

Item 6.03 Change in Credit Enhancement or Other External Support.

    (a) Loss of existing enhancement or support. 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 or 
support specified in Item 1114(a)(1) through (3) of Regulation AB (17 
CFR 229.1114(a)(1) through (3)) or Item 1115 of Regulation AB (17 CFR 
229.1115) 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 or support;
    (3) A brief description of the terms and conditions of the 
enhancement or support 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 or support. 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 1114(a)(1) through (3) of Regulation AB (17 CFR 
229.1114(a)(1) through (3)) or Item 1115 of Regulation AB (17 CFR 
229.1115) 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 or support and the disclosure required by Items 1114 or 
1115 of Regulation AB, as applicable, with respect to such new 
enhancement or support.
    (c) Material change to enhancement or support. 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 or support specified in Item 1114(a)(1) through (3) of 
Regulation AB or Item 1115 of Regulation AB 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 or support 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 or support if the loss, addition or modification of such 
enhancement or support materially affects, directly or indirectly, the 
asset-backed securities, the pool assets or the cash flow underlying 
the asset-backed securities.
    2. To the extent that any information called for by this Item 
regarding the enhancement or support is not determined or is 
unavailable at the time of the required filing, the registrant shall 
include a statement to this effect in the filing and then must file an 
amendment to its Form 8-K filing under this Item 6.03 containing such 
information within four business days after the information is 
determined or becomes available.
    3. The instructions to Items 1.01 and 1.02 of this Form apply to 
this Item.
    4. Notwithstanding Items 1.01 and 1.02 of this Form, disclosure 
regarding changes to material enhancement or support is 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, and such failure is material, identify the 
failure and state the nature of the failure to make the timely 
distribution.

Item 6.05 Securities Act Updating Disclosure.

    Regarding an offering of asset-backed securities registered on Form 
S-3 (17 CFR 239.13), if any material pool characteristic of the actual 
asset pool at the time of issuance of the asset-backed securities 
differs by 5% or more (other than as a result of the pool assets 
converting into cash in accordance with their terms) 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 1111 and 1112 of Regulation AB (17 CFR 
229.1111 and 17 CFR 229.1112) regarding the characteristics of the 
actual asset pool. If applicable, also provide information required by 
Items 1108 and 1110 of Regulation AB (17 CFR 229.1108 and 17 CFR 
229.1110) 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 Securities Act Rule 424 (17 CFR 230.424).
* * * * *

0
76. Amend Sec.  249.220f by revising paragraph (a) 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 (15 U.S.C. 78l) of the 
Securities Exchange Act of 1934 (the

[[Page 1626]]

``Exchange Act'') (15 U.S.C. 77a et seq.) or as an annual or transition 
report filed under section 13(a) or 15(d) of the Exchange Act (15 
U.S.C. 78m(a) or 78o(d)).
* * * * *

0
77. Amend Form 20-F (referenced in Sec.  249.220f) by:
0
a. Adding the phrase ``, other than an asset-backed issuer (as defined 
in 17 CFR 229.1101),'' after the phrase ``foreign private issuer'' in 
the first sentence of paragraph (a) of General Instruction A;
0
b. Revising the heading ``Instructions to Item 15'' to read 
``Instruction to Item 15'';
0
c. Removing Instruction 2 to Item 15;
0
b. Removing Instruction 4 to Item 16A;
0
c. Removing Instruction 4 to Item 16B;
0
d. Redesignating Instructions 5, 6 and 7 to Item 16B as Instructions 4, 
5 and 6 to Item 16B;
0
g. Revising the heading ``Instructions to Item 16C'' to read 
``Instruction to Item 16C''; and
0
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.


0
78. Amend Form 10-K (referenced in Sec.  249.310) by:
0
a. Removing ``and'' at the end of General Instruction I.(1)(b);
0
b. Removing the period at the end of General Instruction I.(1)(c) and 
in its place adding ``; and'';
0
c. Adding paragraph (d) to General Instruction I.(1);
0
d. Adding General Instruction J.;
0
e. Adding an Instruction to Item 9B; and
0
f. 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:
    (a) Item 1, Business;
    (b) Item 2, Properties;
    (c) Item 3, Legal Proceedings;
    (d) Item 4, Submission of Matters to a Vote of Security Holders;
    (e) Item 5, Market for Registrant's Common Equity and Related 
Stockholder Matters;
    (f) Item 6, Selected Financial Data;
    (g) Item 7, Management's Discussion and Analysis of Financial 
Condition and Results of Operations;
    (h) Item 7A, Quantitative and Qualitative Disclosures About Market 
Risk;
    (i) Item 8, Financial Statements and Supplementary Data;
    (j) Item 9, Changes in and Disagreements With Accountants on 
Accounting and Financial Disclosure;
    (k) Item 9A, Controls and Procedures;
    (l) If the issuing entity does not have any executive officers or 
directors, Item 10, Directors and Executive Officers of the Registrant, 
Item 11, Executive Compensation, Item 12, Security Ownership of Certain 
Beneficial Owners and Management, and Item 13, Certain Relationships 
and Related Transactions; and
    (m) 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 1112(b) of Regulation AB;
    (c) Items 1114(b)(2) and 1115(b) of Regulation AB;
    (d) Item 1117 of Regulation AB;
    (e) Item 1119 of Regulation AB;
    (f) Item 1122 of Regulation AB; and
    (g) Item 1123 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 function) 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).
* * * * *

0
79. 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.

0
80. Amend Form 40-F (referenced in Sec.  249.240f) by:
0
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;
0
b. Removing Note 4 of the Notes to Paragraph (8) of General Instruction 
B;
0
c. Removing Note 4 of the Notes to Paragraph (9) of General Instruction 
B;
0
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
0
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.


0
81. 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 240.15d-17 of this 
chapter. A distribution report on this form pursuant to Sec.  240.13a-
17 or 240.15d-17 of this chapter 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.

    Note: The text of Form 10-D does not, and this addition will 
not, appear in the Code of Federal Regulations.


[[Page 1627]]



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: ``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 function) 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 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

[[Page 1628]]

accordance with Regulation S-T Rule 302(c) (17 CFR 232.302(c)).
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[[Page 1629]]

[GRAPHIC] [TIFF OMITTED] TR07JA05.002


[[Page 1630]]



Part I--Distribution Information

Item 1. Distribution and Pool Performance Information.

    Provide the information required by Item 1121 of Regulation AB (17 
CFR 229.1121), 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 1121 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 the information required by Item 1121 of Regulation AB.

Part II--Other Information

Item 2. Legal Proceedings.

    Provide the information required by Item 1117 of Regulation AB (17 
CFR 229.1117). 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.

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:
    (a) 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.
    (b) Also provide the information required by paragraph (e) of Item 
1113 of Regulation AB (17 CFR 229.1113(e)) regarding such securities.
    (c) No information required by Item 701(c) of Regulation S-K need 
be provided with respect to securities which were not registered under 
the Securities Act.

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 1112(b) of Regulation AB 
(17 CFR 229.1112(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 1112(b) of Regulation AB. 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 Items 1114(b)(2) and 1115(b) of 
Regulation AB (17 CFR 229.1114(b)(2) and 229.1115(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 enhancement provider is required pursuant to 
Items 1114(b)(2) or 1115(b) of Regulation AB. 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.
-----------------------------------------------------------------------
(Depositor)

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

-----------------------------------------------------------------------
(Signature)**

[or]

-----------------------------------------------------------------------
(Issuing entity)

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

By:
(Servicer)

-----------------------------------------------------------------------
(Signature)**

    *See General Instruction E to Form 10-D.
    **Print the name and title of each signing officer under his or 
her signature.


0
82. Amend Sec.  249.322 by revising paragraph (a) to read as follows:


Sec.  249.322  Form 12b-25--Notification of late filing.

    (a) This form shall be filed pursuant to Sec.  240.12b-25 of this 
chapter by issuers who are unable to file timely all or any required 
portion of an annual or transition report on Form 10-K and Form 10-KSB, 
20-F, or 11-K (Sec.  249.310, 249.310b, 249.220f or 249.311), a 
quarterly or transition report on Form 10-Q and Form 10-QSB (Sec. Sec.  
249.308a and 249.308b), or a distribution report on Form 10-D (Sec.  
249.312) pursuant to section 13 or 15(d) of the Act (15 U.S.C. 78m or 
78o(d)) or a semi-annual, annual, or transition report on Form N-SAR 
(Sec. Sec.  249.330; 274.101) or Form N-CSR (Sec. Sec.  249.331; 
274.128) pursuant to section 13 or 15(d) of the Act or section 30 of 
the Investment Company Act of 1940 (15 U.S.C. 80a-29). The filing shall 
consist of a signed original and three conformed copies, and shall be 
filed with the Commission at Washington, DC 20549, no later than one 
business day after the due date for the periodic report in question. 
Copies of this form may be obtained from ``Publications,'' Securities 
and Exchange Commission, 450 5th Street, NW., Washington, DC 20549 and 
at our Web site at http://www.sec.gov.
* * * * *

0
83. Amend Form 12b-25 (referenced in Sec.  249.322) by:
0
a. Revising the preamble;
0
b. Revising paragraph (b) of Part II; and
0
c. Revising Part III.
    The revisions read as follows.

    Note: The text of Form 12b-25 does not, and this amendment will 
not, appear in the Code of Federal Regulations.


[[Page 1631]]



United States Securities and Exchange Commission

Washington, DC 20549

Form 12b-25
Notification of Late Filing
(Check One):----Form 10-K----Form 20-F----Form 11-K----Form 10-Q----
Form 10-D----Form N-SAR----Form N-CSR
* * * * *

Part II--Rules 12b-25(b) and (c)

* * * * *
    (b) The subject annual report, semi-annual report, transition 
report on Form 10-K, Form 20-F, Form 11-K, Form N-SAR or Form N-CSR, or 
portion thereof, will be filed on or before the fifteenth calendar day 
following the prescribed due date; or the subject quarterly report or 
transition report on Form 10-Q or subject distribution report on Form 
10-D, or portion thereof, will be filed on or before the fifth calendar 
day following the prescribed due date; and
* * * * *

Part III--Narrative

    State below in reasonable detail why Forms 10-K, 20-F, 11-K, 10-Q, 
10-D, N-SAR, N-CSR, or the transition report or portion thereof, could 
not be filed within the prescribed time period.
* * * * *

    By the Commission.

    Dated: December 22, 2004.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 05-53 Filed 1-6-05; 8:45 am]
BILLING CODE 8010-01-P