Disclosure of Repurchase Requests and Issuer Review of Assets in ABS Offerings: SEC Adopts Rules under Dodd-Frank Sections 943 and 945 on Disclosure of Repurchase Requests and Issuer Review of Assets in Offerings of Asset-Backed Securities

Sullivan & Cromwell LLP - January 31, 2011

On January 20, 2011, the SEC adopted rules proposed last October and required by Sections 943 and 945 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to be adopted within 180 days of the law’s enactment. New Rule 15Ga-1 under the Securities Exchange Act of 1934 and related amendments to Regulation AB will require “securitizers” to disclose detailed information about fulfilled and unfulfilled repurchase demands, including demands upon trustees, for “asset-backed securities,” as such terms are defined in the Exchange Act as amended by the Dodd-Frank Act, if the underlying transaction agreements contain a covenant to repurchase or replace an underlying security for breach of a representation or warranty. These requirements will apply to both prospectuses for ABS offerings and disclosure reports on Form 10-D with respect to outstanding asset-backed securities. Securitizers will also have to make quarterly filings on a new Form ABS-15G for all assets securitized by the securitizer that were subject to a demand during the reporting period.

New Rule 17g-7 under the Exchange Act will require each NRSRO to include in any report accompanying a credit rating with respect to an asset-backed security a description of the representations, warranties and enforcement mechanisms available to investors and how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities.

New Rule 193 under the Securities Act of 1933 will require an issuer of an asset-backed security offering and selling such security pursuant to a registration statement to perform a review of the pool assets underlying the asset-backed security. Related revisions to Regulation AB will require the disclosure in the prospectus for the asset-backed security of the nature of the review of the assets required by the rule, including whether the issuer engaged a third party for purposes of performing the review, and the findings and conclusions of the review, as well as information about deviations from the disclosed underwriting criteria and which entity or entities determined that those assets should be included in the pool. At a minimum, the review must be designed and effected to provide reasonable assurance that the disclosure regarding the pool assets is accurate in all material respects. If the findings and conclusions of the review are attributed to a third party, the third party must be named in the registration statement and consent to being named as an expert in accordance with Rule 436 under the Securities Act.