USA Law and Practice Contributed by: Bjorn Bjerke, Corey Reis and Joshua Kopel, A&O Shearman
4. Laws and Regulations Specifically Relating to Securitisation 4.1 Specific Disclosure Laws or Regulations
3.9 Derivatives Outside synthetic derivatives, the most com - monly used derivatives are interest and currency exchange derivatives in various forms used to hedge interest and currency risk. For synthetic securitizations, various forms of credit derivative swaps (CDS) are used to transfer the credit risk of the relevant reference portfolio. 3.10 Offering Memoranda Public offerings of securities: The Securities Act requires the filing with and approval by the SEC of a registration statement and delivery of a written prospectus to potential investors that satisfies the disclosure requirements discussed under 4.1 Specific Disclosure Laws or Regula - tions . Private placements of securities: While not legally required, market practice (and the internal policy of many arrangers) is to deliver an offer - ing memorandum to potential investors that to the extent practicable seeks to comply with, the disclosure requirements applicable to registered offerings, other than asset-level disclosures. See also 4.2 General Disclosure Laws or Regula- tions . Exceptions: Offering memoranda are not typi - cally prepared in securitisations where the SPE’s obligations are in the form of loans, or where the securities are privately placed to a small number of sophisticated investors, typically in conjunc - tion with a more bespoke transaction.
Securitisation disclosure requirements are in part governed by generally applicable secu - rities laws, and in part by some ABS-specific requirements. The principal laws that govern securities-related disclosures are the Securi - ties Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Securi - ties Act is the principal law governing the offer and sale of securities, and the Exchange Act provides the SEC with broad powers to regulate various market participants and prohibit certain types of conduct in the market, and empowers the SEC to require certain periodic reporting. Following the 2007–08 financial crisis (the “Glob - al Financial Crisis”), the Exchange Act has been amended to require certain additional disclosure requirements that apply to all ABS, including: • disclosure of the form and determination of retained risk as specified in the risk retention rules; • reporting of repurchases and replacements of securitised assets in connection with breach - es of representations and warranties and of the conclusions and findings of third-party due diligence reports; and • disclosure requirements for communications with rating agencies, which, among oth - ers, require all information provided to hired Nationally Recognized Statistical Ratings Organizations (NRSROs) in relation to the ini - tial credit rating or any ongoing credit surveil - lance to be posted to a password-protected website, referred to as the 17g-5 website.
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