USA Law and Practice Contributed by: Bjorn Bjerke, Corey Reis and Joshua Kopel, A&O Shearman
4.2 General Disclosure Laws or Regulations
Registered ABS offerings are subject to addi - tional disclosure requirements as set forth in Regulation AB, which was significantly revised and updated in 2014 (“Reg, AB II”) to address a number of perceived shortcomings in prior prac - tices and to enhance investor protection in the ABS market. In particular, Reg, AB II includes expanded asset-level disclosure requirements for registered offerings of securities backed by specified asset classes that reflects a sig - nificant departure from the pool-level informa - tion that historically has been given and that is still the dominant form of disclosure in private placements. The information must be published at least three days prior to bringing a covered securitisation to market. Reg, AB II enables the SEC to extend the asset- level disclosure requirements to 144A private placements and to additional asset classes. However, the SEC has to date not done so, and the Treasury has recommended against such expansion. Reg, AB II introduced new ABS-specific regis - tration statement forms, Forms SF-1 and SF-3, to reflect the additional disclosure requirements and shelf-eligibility requirements under Reg, AB II. The required asset-level disclosure must be provided in a standardised format in a tagged XML format and filed on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Reg, AB II deviates from the typical shelf regis - tration practice of using a base prospectus and a supplemental prospectus, and instead requires the filing of one integrated prospectus.
The general construct of the Securities Act is that an offer or sale of securities has to be registered unless made pursuant to an available exemp - tion – ie, a private placement. A security that has been issued in a private placement will typically be subject to resale limitations that may restrict the liquidity of the issued securities. However, transactions that comply with Rule 144A and Regulation S permit “qualified institutional buy - ers” and foreign persons to freely sell to other “qualified institutional buyers” or other foreign persons. Only a small minority of new ABS issuances are made in SEC registered form. About 90% of the US securitisation market consists of mortgage- backed securities that were issued or guaran - teed by Ginnie, Mae, Fannie, Mae and Freddie, Mac, and are expressly exempt from registra - tion pursuant to the relevant congressional act by which such entities were formed. Most of the remaining ABS are issued in private placements, typically in a manner that permits resales in com - pliance with Rule 144A. Agency securities and private placements are not subject to ABS-specific disclosure require - ments other than the disclosure requirements relating to risk retention, repurchase requests, the third-party due diligence disclosure and rat - ing agency communication requirements. How - ever, such securities offerings generally will look to, and to the extent practicable seek to comply with, the disclosure requirements applicable to registered offerings. However, asset-level disclo - sures of the level of detail required in Reg, AB II offerings are not commonly included in private placements.
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