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SEC to Vote on Regulation AB Feb. 5


The Securities and Exchange Commission will vote next week on whether to adopt rules revising the disclosure, reporting, and offering process for asset-backed securities.

The open meeting will take place Feb. 5 at 3 p.m., according to a notice published Wednesday.

The revisions to Regulation AB, which were first proposed in 2010 and then re-proposed in 2011, would require asset-backed issuers to provide enhanced disclosures, including information for certain asset classes about each asset in the underlying pool in a standardized, tagged format and to revise the shelf offering process and eligibility criteria for asset-backed securities.

The rules are designed to give investors enough information about asset-backed securities to understand them and value them correctly, reducing reliance on ratings agencies, and to better align the interests of sponsors and investors.

One of the most controversial proposals would require issuers to prepare and disclose, in addition to the pool-level data they already provide, a voluminous amount of information for every asset in the underlying pool. Issuers would be required to create and file an interactive payment waterfall computer program that would allow investors to vary underlying pool performance assumptions, in order to better understand the allocation of cash flows in the ABS transaction.

Last week, former SEC Chairman Christopher Cox predicted that the Commission would soften this part of Reg AB. Cox told participants at an industry conference that the waterfall computer program will be left out and likely re-proposed as a separate rule further down the road.


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