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Regulation AB and Related Rules

Oct. 12, 2017

Last Update: August 30, 2023

These Compliance and Disclosure Interpretations (“C&DIs”) comprise the Division’s interpretations of the rules adopted under Regulation AB and the Securities Act and the Exchange Act. They replace the interpretations published in the Regulation AB Manual of Publicly Available Telephone Interpretations (“Reg AB Telephone Interpretations”) and have been revised in some cases. The bracketed date following each C&DI is the latest date of publication or revision.

The following Reg AB Telephone Interpretations have been withdrawn: 2.01, 5.01, 5.02, 5.03, 11.03, 13.01, 14.01, 15.01, and 15.02.

Section 100. Securities Act Rules [Reserved]

Section 101-Section 109 [Reserved]

Section 110. Securities Act Forms [Reserved]

Section 111. Form SF-3

111.01 Form SF-3 Eligibility Requirements, Timely Transaction Documents

Question: In order to use Form SF-3 for an offering of asset-backed securities, a registrant must meet the eligibility requirements in General Instruction I. A. of the form. General Instruction I.A.1. requires, in part, that specified documents and transaction agreements must have been filed on a timely basis. When must the required documents and agreements be filed to be considered timely for purposes of Form SF-3 eligibility?

Answer: Item 1100(f) of Regulation AB specifies that final agreements must be filed and made part of the registration statement no later than the date the final prospectus is required to be filed under Rule 424. Instruction to Paragraph (b) of Rule 424, which applies only to asset-backed securities offerings, specifies that a prospectus filed pursuant to Rule 424(b)(2) or Rule 424(b)(5) must be filed no later than the second business day following the date it is first used. For purposes of this instruction only, “first use” of the final prospectus in asset-backed securities offerings would include its use at time of sale to satisfy an issuer’s obligations under Securities Act Section 5(b) to provide a Section 10(a) prospectus at or prior to the time of sale. Accordingly, the required documents and agreements would be considered timely if filed no later than the second business day following first use of the final prospectus.

For example, if the date of sale of a tranche of securities in an asset-backed securities offering under Rule 415(a)(vii) or (xii) is Tuesday, May 2, then the requirements of Rule 424(b)(2) or Rule 424(b)(5), and the conditions of Securities Act Rule 172, would be met if the registrant filed the final prospectus no later than Thursday, May 4. Therefore, the required documents and agreements must also be filed no later than Thursday, May 4, to be deemed timely under General Instruction I.A.1 of Form SF-3. [August 30, 2023]

Section 112. Form SF-1 [Reserved]

Section 113-Section 120 [Reserved]

Section 200. Exchange Act Rules

200.01 Rule 12b-25

Rule 12b-25(d) prohibits a registrant from using a Securities Act registration statement the use of which is predicated on timely filed reports until the subject report is actually filed pursuant to Rule 12b-25(b)(3). A depositor as defined in Item 1101(e) may create a new issuing entity and conduct a takedown off an effective Form SF-3 between the filing of a 12b-25 notice and the 12b-25 extended due date of the periodic report. [12/09/14] (Reg AB Telephone Interpretation 16.01)

200.02 Rules 13a-18 and 15d-18, Servicing Function Participant

If an asset-backed issuer has a trustee or bond administrator that calculates the waterfall, that party is participating in the servicing function and therefore pursuant to Rules 15d-18 and 13a-18 the issuer’s Form 10-K must include a Report on Assessment of Compliance with Servicing Criteria from the trustee or bond administrator along with the related attestation report. If the trustee or bond administrator does not calculate the waterfall but only receives allocations or distributions from a servicer and makes allocations and distributions to holders of the asset-backed securities out of the calculated amounts, and does not otherwise perform the functions of a servicer, the Form 10-K would not need to include a Report on Assessment of Compliance with Servicing Criteria from the trustee or bond administrator nor an attestation report. [12/30/05] (Reg AB Telephone Interpretation 17.01)

200.03 Rules 13a-18 and 15d-18, Servicer’s Assessment of Compliance

Pursuant to Rule 13a-18 and Rule 15d-18, a Form 10-K must include from each party participating in the servicing function (even parties participating for only a portion of the year) a report regarding its assessment of compliance with the servicing criteria specified in Item 1122(d) of Regulation AB as of and for the period ending the end of each fiscal year. A report must be included for every person participating in the servicing function except that the notes to Rules 13a-18 and 15d-18 provide a de minimis exception. If a servicer’s activities relate to only 5% or less of the pool assets no report is required. Since the report is for the fiscal year, the measurement for this de minimis threshold must take into account the servicing function for the entire period covered by the Form 10-K and not a particular point in time. For example, assets are transferred to an issuing entity with a calendar year end in a closing on March 1st, so that the trust has a reporting obligation for 10 months of the year. The trust has three servicers. Servicer A serviced 50% of the assets for the entire 10 months, Servicer B serviced 40% of the assets for the same length of time and Servicer C serviced 10% of the assets for the first two months. On May 1st Servicer C is replaced by Servicer D. Servicer C serviced only 10% of the pool for only one fifth of the year. As such, Servicer C serviced 2% of the assets for the period and falls below the de minimis requirements in Item 1122 and no report is required. Servicer D serviced 8% of the assets for the period and Servicer’s D report must be included in the Form 10-K. [12/09/14] (Reg AB Telephone Interpretation 17.02)

200.04 Rules 13a-18 and 15d-18, Scope of Item 1122 Platform

Pursuant to Rules 13a-18 and 15d-18, an annual report on Form 10-K must include a report from each party participating in the servicing function regarding its assessment of compliance with servicing criteria specified in Item 1122 of Regulation AB. For the purposes of this assessment, a servicer’s platform may, but is not required to, include transactions registered before compliance with Regulation AB was required or that involved an offer and sale of asset-backed securities that were not required to be registered. Absent changes in circumstances, such as a merger between servicers, it is expected that the grouping of transactions included in a platform should remain constant from period to period. Suspension of Exchange Act reporting obligations for a transaction that was subject to Regulation AB does not result in the exclusion of that transaction from the platform. The servicer must use the criteria contained in Item 1122(d) of Regulation AB to assess the servicing of any transaction in the platform. [12/09/14] (Reg AB Telephone Interpretations 17.03 and 17.04)

200.06 Vendors Engaged by Servicers

A vendor engaged by a servicer to perform specific and limited activities or to perform activities prescribed by the servicer would not be viewed as a party participating in the servicing function separate and apart from the servicer engaging such vendor, and would not need to submit separate assessment and attestation reports for inclusion in the related asset-backed issuer’s Form 10-K report if:

  • The vendor is not a “servicer” as defined in Item 1101(j) of Regulation AB;
  • The servicer engaging and monitoring the vendor elects to take responsibility for assessing compliance with the servicing criteria applicable to that vendor in the servicer’s report regarding assessment of compliance with servicing criteria;
  • The servicer engaging the vendor has policies and procedures in place designed to provide reasonable assurance that the vendor’s activities comply in all material respects with the servicing criteria applicable to the vendor; and
  • The servicer’s report on assessment of compliance discloses:
    • the servicing criteria or portion of servicing criteria applicable to the vendor’s activities for which the servicer is assuming responsibility;
    • any material instance of noncompliance by the vendor that the servicer identifies or of which it is aware; and
    • any material deficiency that is identified in the servicer’s policies and procedures to monitor the vendor’s compliance.

In this situation, consistent with Item 1122(d)(1)(ii) of Regulation AB and Instruction 2 to Item 1122 of Regulation AB, the requirement to assess compliance with the servicing criteria applicable to a vendor’s activities is satisfied if the servicer has instituted policies and procedures to monitor whether such vendor’s activities comply in all material respects with such criteria. Compliance with the applicable servicing criteria is achieved if those policies and procedures are designed to provide reasonable assurance that such vendor’s activities comply with such criteria and those policies and procedures are operating effectively. [12/09/14] (Reg AB Telephone Interpretation 17.06)

200.07 Rule 15Ga-1

For purposes of Rule 15Ga-1, an “originator” is, as defined in Section 15G(a)(4) of the Exchange Act, the person who, through the extension of credit or otherwise, creates a financial asset that collateralizes an asset-backed security, and sells an asset directly or indirectly to a securitizer. [12/09/14]

Section 201-Section 209 [Reserved]

Section 210. Exchange Act Forms

Section 211. Form 10-K

211.01 Form 10-K

The Form 10-K must be signed either by the depositor or by the servicer on behalf of the issuing entity. If the servicer is signing and multiple servicers are involved in servicing the assets, the master servicer must sign. A trustee that is a servicer may not sign an Exchange Act report for the depositor unless it is the master servicer. [12/09/14] (Reg AB Telephone Interpretation 18.01)

Section 212. Form 10-D

212.01 Form 10-D, Items 6 and 7

Item 7 of Form 10-D refers to Items 1114 and 1115 of Regulation AB and requires updated information regarding a provider of a credit enhancement or derivative instrument supplier. Therefore, if at the end of the period for which the Form 10-D is filed either provider meets the thresholds of those items, disclosure is required, even if the provider did not previously meet such threshold. Item 6 of Form 10-D refers to Item 1112 of Regulation AB and requires updated information regarding significant obligors. Instruction 4 to the definition of significant obligor in Item 1101(k) of Regulation AB specifically notes that, if an obligor falls below 10% subsequent to the cut-off date, the obligor would no longer be considered a significant obligor. This would be the case even if the obligor subsequently moves back above the 10%. There is no similar provision related to the Item 7 requirements, so the determination as to whether or not the disclosure is required must be made at the end of the period, even if the provider or source has previously fallen below the threshold. See also Item 6.03 of Form 8-K. [12/30/05] (Reg AB Telephone Interpretation 19.01)

Section 213-Section 220 [Reserved]

Section 300. Item 1100 of Regulation AB

300.01 Item 1100(b)

Item 1100(b) provides requirements for presentation of historical delinquency and loss information that is called for by provisions in Regulation AB. For this information the delinquency experience must be presented in 30 or 31 day increments, as applicable, through the point that assets are written off or charged off as uncollectible. For instance, Item 1111(c) of Regulation AB requires disclosure of delinquency and loss information for the asset pool being securitized. This delinquency or loss information required by Item 1111(c) regarding the pool being securitized must be disclosed in the increments outlined in Item 1100(b) through the point that the assets are written-off or charged-off as uncollectible. Many issuers choose to include information not required by 1111(c), such as historical delinquency information for an asset group other than the asset pool (such as a managed or total portfolio, servicer portfolio, etc.). Where such additional information is not called for by a specific Item requirement of Regulation AB, the information may be disclosed in a manner other than that provided in Item 1100(b). [12/09/14] (Reg AB Telephone Interpretation 1.01)

Section 301. Item 1101 of Regulation AB

301.01 Item 1101(j)

The definition of servicer in Regulation AB is a principles-based definition that looks to the functions that the entity performs. See SEC Release No. 33-8518 Section V.D. An entity falls within the definition of servicer if it is responsible for the management or collection of the pool assets or making allocations or distributions to holders, regardless of the entity’s title (vendor, trustee, etc.). [12/09/14] (Reg AB Telephone Interpretation 3.01)

301.02 Item 1101(l)

Whether a party is considered a “sponsor” involves a facts and circumstances analysis of whether its actions bring it within the definition in Item 1101(l) of Regulation AB. There are circumstances where more than one originator acts as a “sponsor,” such as in the case of a “rent-a-shelf” where more than one originator offers to sell the underlying assets to back the asset-backed securities. [12/30/05] (Reg AB Telephone Interpretation 4.01)

301.03 Item 1101(c)

Question: An insurance company creates a special purpose vehicle to issue a single series of notes. The insurance company enters into a funding agreement with the special purpose vehicle. Principal and interest payments on the notes consist exclusively of cash flows from the funding agreement. The transaction has the following characteristics:

  • The funding agreement is an insurance product and the direct liability of the insurance company. Payments on the funding agreement are backed by the general account of the insurance company.
  • The terms of the notes exactly match the terms of the underlying funding agreement. There are no other credit enhancements for the notes, and only a nominal residual interest in the special purpose vehicle is created for purposes of complying with formation requirements of local law.
  • Only one series of notes is created with the backing of a particular funding agreement. While the special purpose vehicle may issue multiple series of notes, each series will be backed by one distinct funding agreement.
  • Amounts paid by the insurance company to the special purpose vehicle under the funding agreement are used solely for making payments due under the notes. Any fees and expenses payable by the special purpose vehicle are reimbursed through a separate agreement with the insurance company.

Would such funding agreement-backed notes be an "asset-backed security" as defined under either Item 1101(c) of Regulation AB or Section 3(a)(79) of the Exchange Act?

Answer: No. The definition of "asset-backed security" under Item 1101(c) of Regulation AB requires, in relevant part, that a security meeting the definition be serviced by the cash flows of a discrete pool of receivables or other financial assets. Similarly, the definition of "asset-backed security" under Section 3(a)(79) of the Exchange Act requires, in relevant part, that a security meeting that definition be collateralized by a self-liquidating financial asset.

Under these facts, we would not consider the funding agreement to be a separate financial asset servicing payments on the notes. Rather, an assessment of the cash flows servicing the payments on the notes requires looking through the funding agreement to the general account of the insurance company for the following reasons:

  • The structure of the funding agreement-backed notes is meant to replicate payments made by the insurance company under the funding agreement;
  • The funding agreement is a direct liability of the insurance company; and
  • Payments on the funding agreement-backed notes are based solely on the ability of the insurance company to make payments on the funding agreement.

Therefore, we would not consider the funding agreement-backed notes to be asset-backed securities under either Item 1101(c) of Regulation AB or Section 3(a)(79) of the Exchange Act. [09/06/16]

Section 302. Item 1102 of Regulation AB [Reserved]

Section 303. Item 1103 of Regulation AB [Reserved]

Section 304. Item 1104 of Regulation AB [Reserved]

Section 305. Item 1105 of Regulation AB [Reserved]

Section 306. Item 1106 of Regulation AB [Reserved]

Section 307. Item 1107 of Regulation AB [Reserved]

Section 308. Item 1108 of Regulation AB

308.01 Item 1108 General Guidance

Under Item 1108, an issuer must include disclosure regarding any party, including third-party vendors, that meets the definition of a servicer (i.e., is involved in the management or collection of the pool assets or is making allocations or distributions to holders of the asset-backed securities) and meets the 20% threshold test. The disclosure required, however, only extends to information material to the servicing function the party performs for the pool assets. For example, some of the disclosure requirements for a primary servicer, such as experience in servicing payments for a particular asset type, may not be material for a third-party vendor that solely provides the lockbox function for payments received on 100% of the assets located in the asset pool. Thus, disclosure under each category of information for each servicer may not be required. [12/09/14] (Reg AB Telephone Interpretation 6.01)

308.02 Item 1108 General Guidance

The disclosure of a servicer’s procedures under Item 1108 should be 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 asset-backed securities. The description of servicers’ operating procedures should not include immaterial or technical data that obscures the material disclosure. [12/09/14] (Reg AB Telephone Interpretation 6.02)

308.03 Item 1108(a)

Item 1108(a) of Regulation AB requires disclosure of certain information if an unaffiliated servicer services 10% or 20% or more of the pool assets. The disclosure required by this item must be included in the registration statement. The calculation of the 10% and 20% thresholds in Item 1108(a) should be made as of the designated cut-off date for the transaction. [12/30/05] (Reg AB Telephone Interpretation 7.01)

308.04 Item 1108(a)(2)

A change in the servicer for a particular servicing function from the entity that was disclosed in the initial registration statement must be disclosed if the new servicer meets the criteria of Item 1108(a)(2). The issuer must disclose the change and related disclosure regarding the new servicer on a current report on Form 8-K within the time period allowed by that Form, or under Item 8 of Form 10-D, as appropriate. If there is a material change in the servicer’s procedures from the disclosure provided in the prospectus, there is no requirement that the revised servicing procedures be disclosed in the Exchange Act periodic or current reports unless the information relates to the distribution and pool performance information that Form 10-D requires or if the disclosure is of a material fact necessary to make the rest of the disclosure not misleading. [12/09/14] (Reg AB Telephone Interpretation 7.02)

308.05 Item 1108(b)(4)

Item 1108(b)(4) requires disclosure of 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. Where disclosure is required, the type and extent of information regarding the servicer’s financial condition would depend upon the particular facts. Information does not have to include the financial statements of the servicer, unless the financial statements are necessary for investor understanding of the servicer’s condition. [12/30/05] (Reg AB Telephone Interpretation 8.01)

Section 309. Item 1109 of Regulation AB [Reserved]

Section 310. Item 1110 of Regulation AB [Reserved]

Section 311. Item 1111 of Regulation AB

311.01 Item 1111(c)

Historical delinquency information for the subject asset pool is always required under this item. If an issuer determines that historical delinquency information for another asset group (such as the managed or serviced portfolio, or all prior securitized pools) is necessary to make the information not misleading, then that information should also be included. General principles of materiality and not Item 1100(b) govern the disclosure of such additional information. See Rule 12b-20 and the interpretation above regarding Item 1100(b). [12/30/05] (Reg AB Telephone Interpretation 9.01)

311.02 Item 1111(h) Asset-Level Disclosure Compliance Date

The amendments to Regulation AB, among other things, require asset-level disclosure for offerings of asset-backed securities backed by residential mortgages, commercial mortgages, auto loans, auto leases and debt securitizations (including resecuritizations). The asset-level data requirements are applicable only to securitizations in which the initial bona fide offer occurs on or after November 23, 2016. A registrant that makes an initial bona fide offer on or after November 23, 2016 must provide asset-level disclosure in accordance with the requirements of Regulation AB in the prospectus at the time of the offering and then on an ongoing basis with each Form 10-D filing. Securitizations for which offers are made prior to November 23, 2016 are not required to provide asset-level disclosures in the prospectus or on an ongoing basis with each Form 10-D. [09/16/15]

Section 312. Item 1112 of Regulation AB [Reserved]

Section 313. Item 1113 of Regulation AB [Reserved]

Section 314. Item 1114 of Regulation AB

314.01 Item 1114 General Guidance

Credit enhancements, to the extent material, must be described pursuant to Item 1114 of Regulation AB. The underlying obligor’s arrangements in connection with the original extension of loan level mortgage insurance, hazard insurance, or homeowner’s insurance would not be considered credit enhancement. [12/30/05] (Reg AB Telephone Interpretation 10.01)

Section 315. Item 1115 of Regulation AB [Reserved]

Section 316. Item 1116 of Regulation AB [Reserved]

Section 317. Item 1117 of Regulation AB [Reserved]

Section 318. Item 1118 of Regulation AB [Reserved]

Section 319. Item 1119 of Regulation AB [Reserved]

Section 320. Item 1120 of Regulation AB [Reserved]

Section 321. Item 1121 of Regulation AB [Reserved]

Section 322. Item 1122 of Regulation AB

322.01 Item 1122(d)

In preparing their reports required under Items 1122(a) and 1122(b), servicers must assess compliance with the servicing criteria exactly as set forth in Item 1122(d). If a servicer’s process differs from one or more criteria in Item 1122(d), the servicer must disclose that it is not in compliance with those particular criteria. The servicer may disclose why the servicer’s process is different from the servicing criteria in the report. [12/09/14] (Reg AB Telephone Interpretation 11.01)

322.02 Item 1122(d)(3)(i)

The servicing criterion in Item 1122(d)(3)(i) requires an assessment of whether “[r]eports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements.” Application of this criterion, as with any Item 1122(d) criterion, depends on the role of the particular servicer. This criterion relates to the servicing activity of compiling and aggregating the information and timely filing or providing reports, which may or may not include preparing the underlying calculations depending on the role of the servicer. For example, if Servicer A calculates the waterfall and Servicer B compiles and files the Forms 10-D with the Commission but does not calculate the waterfall, Item 1122(d)(3)(i) requires only an assessment by Servicer B with respect to the waterfall of whether the information about the amount of distributions provided to Servicer B from Servicer A was appropriately included and timely filed on Form 10-D. It does not require that Servicer B assess whether Servicer A correctly calculated the information it gave to Servicer B. Other criteria within Item 1122(d) will govern the assessment from the appropriate servicer of the information contained in the reports. For example, Servicer A will assess the calculation of the waterfall under the next subsection of Item 1122(d)(3), Item 1122(d)(3)(ii), in its own report on assessment of compliance with servicing criteria. If, however, one servicer prepares all of the disclosure contained in the Form 10-D rather than compiling it from other sources, Item 1122(d)(3)(i) would require that servicer to assess whether the disclosure was calculated in accordance with the terms of the transaction agreements and prepared and filed in accordance with the time frames specified in the transaction agreements and Commission rules. [08/08/06] (Reg AB Telephone Interpretation 11.02)

322.03 Item 1122(d)(4)(i)

The servicing criterion in Item 1122(d)(4)(i) requires an assessment of whether the mortgage and related documents, rather than the physical properties underlying the mortgages, are maintained as required by the transaction agreements or related pool asset documents. Moreover, an auditor attesting to an assertion regarding the Item 1122(d)(4)(i) criterion is only required to verify that the mechanics of performing the loan perfection or loan defeasance prescribed in the transaction agreements or related pool asset documents have been performed. The auditor is not required for this or any other criterion to make a legal determination, such as whether the loan perfection and loan defeasance were successfully performed. [08/08/06] (Reg AB Telephone Interpretation 11.04)

Section 323. Item 1123

323.01 Item 1123 General Guidance

A trustee calculating the distribution amounts paid to investors is a party participating in the servicing function for purposes of Rules 13d-18 and 15d-18 and Item 1122 of Regulation AB. However, the Instruction to Item 1123 of Regulation AB clarifies that if multiple servicers are involved, a servicer compliance statement is required only of each servicer that meets the criteria in Item 1108(a)(2)(i) through (iii) of Regulation AB. A trustee that only calculates the distribution amounts paid to investors and performs no other servicing function falls within Item 1108(a)(iv) and therefore is not required to provide an Item 1123 servicer compliance statement. [12/30/05] (Reg AB Telephone Interpretation 12.01)

323.02 Item 1123

Reports on assessment of compliance with servicing criteria under Item 1122 of Regulation AB do not have to include instances of noncompliance with the servicing criteria if the instances of noncompliance are not material to the servicing platform. However, a servicer may need to disclose in the Item 1123 servicer compliance statement an instance of noncompliance with servicing criteria that is material to the servicing of the specific asset pool covered by the report on Form 10-K, even if the instance of noncompliance is not disclosed in the Item 1122 report. Further, if known to the filing party, the instance of noncompliance may need to be disclosed in the issuer’s Exchange Act reports. [08/08/06] (Reg AB Telephone Interpretation 17.05)

Section 324. Item 1124 of Regulation AB [Reserved]

Section 325. Item 1125 of Regulation AB [Reserved]

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