Ongoing Reporting Under the Exchange Act
ABS issuers are not required to file the same Form 10-Qs and 10-Ks that operating companies must file. As a result of the Exchange Act, the SEC allowed ABS issuers to file distribution date statements, monthly, via Form 8-K and a statement regarding underlying asset services and cumulative distribution information, annually, via Form 10-K. ABS issuers are also required to utilize a new form, Form 10-D, for periodic distribution and pool performance reports.
Form 10-D (periodic reports)
Form 10-D requires disclosure of cash flows received, updated pool composition information, material modifications, extensions or waivers to pool asset terms and any breaches of material pool representations or pacts. This form is also concerned with legal proceedings, sales and use of securities and their proceeds, defaults on senior securities, the submission of matters to a security holders vote, and updated financial information on significant obligors and significant enhancers, as described in the section labeled, "Disclosure."
Form 10-K (annual reports)
This form is to be signed by depositors or servicers, and reflects Sarbanes-Oxley certifications for ABS issuers and additional disclosure items.
Servicer Compliance Statement
The SEC has proposed a required compliance statement by the servicer to be filed in conjunction with Form 10-K. In the case that multiple servicers are involved in an agreement, then the master servicer, each affiliated servicer, each unaffiliated servicer who services more than 10% of the pool of assets, special servicers and every person materially involved will be required to submit the compliance statement.
Servicing criteria compliance and accountant's attestation
In addition, Form 10-K will be filed with an exhibit provided by a responsible party (a group elected to provide the compliance assessment of adherence to the SEC's compliance criteria) and an attestation report from a certified public accounting firm. The responsible party must be the group that initially signs the Form 10-K. The SEC intends this to be a disclosure-based system, and if material servicer non-compliance is recognized, then the SEC will take no further action. This exhibit must include all functions performed by multiple parties, and since the responsible party is not typically involved in every facet of servicing, then the responsible party must "reasonably rely" on the information received from unaffiliated parties when completing the assessment report. There are four categories contained in the servicing criteria, and they include: general service considerations, cash collection/administration, investor remittances, reporting and pool asset administration.
Any non-compliance that results from the report needs to identify whether or not this non-compliance will affect the performance of the ABS.
ABS issuers are expected to comply with Sarbanes-Oxley requirements. The proposed rules state that certification can be achieved by submission of both the compliance statement provided by the servicer, and an official compliance review of the servicer and processes. The certification needs to be signed by the senior securitization officer, and either the depositor or senior officer in charge of the servicer.
Form 8-K (current report)
The SEC contends that in addition to the normal reporting items included on the Form 8-K, new reportable events must be included as well. These events include: early amortization, and event triggers, including the event of default that would alter the payment structure, cash distribution or amortization schedule for an ABS. The form must also include ABS informational and computational information filing materials, any changes to servicer, trustee, credit enhancer or external support, and the failure to make distributions to security holders.
If the pool of assets at time of issuance differs by more than 5% from the original market plan, and if this is in conjunction with shelf registration on Form S-3, then disclosure of the final pool will be required.
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