Regulation AB
Registration. Disclosure. Reporting.
The NDB Alliance of Firms is a trusted leader in providing audit and compliance services tailored to meet the complex and evolving regulatory landscape of Regulation AB.
Regulation AB, with its extensive set of rules and amendments, significantly impacts the asset-backed securities (ABS) market by introducing rigorous registration, disclosure, and reporting requirements. Our firm's specialized expertise and comprehensive approach ensure that our clients are well-prepared and fully compliant with these critical regulations.
What is Regulation AB?
Regulation AB is a comprehensive set of new rules and amendments that address the registration, disclosure, and reporting requirements for asset-backed securities (ABS) under the Securities Act of 1933 and the Securities Exchange Act of 1934. Because the ABS market is a relatively new and fast-growing component of the U.S. capital markets, regulators and industry professionals alike sought to bring about transparency and clarity regarding registration, disclosure, and reporting requirements for asset backed securities.
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The Importance of 1122
Item 1122, titled Report on Assessment of Compliance with Servicing Criteria [for asset-backed securities] and Accountant’s Attestation, also commonly called “section 1122 or Item 1122” by many in the industry, consists of a number of activities that must be undertaken by servicers for ensuring they meet compliance for Regulation AB. Item 1122 should not be regarded as a simple, standalone process, rather it is a multi-faceted, collaborative effort by servicers that yields a number of deliverables throughout various stages of the 1122 roadmap to compliance. Because of the sheer growth of asset backed securities, the Securities and Exchange Commission (SEC) clearly recognized the important role servicers play, stating that “…one of the most important elements affecting an investor’s assessment of a particular asset-backed security is the performance of the servicer…” (1)
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Item 1122 puts forth several requirements that must be undertaken and achieved, culminating with two deliverables that are to be included with Form 10-K filings. These two deliverables, one a collection of statements and a brief assessment, the other, an actual attestation report, are collectively known as Form 10-K Report(s) on Assessments of Compliance with Servicing Criteria and Accountant's Attestation. These two reports should be looked upon as the final deliverables in the overall Item 1122 roadmap to compliance for servicers.
Item 1122 Servicing Criteria
At the heart of item 1122 is the newly adopted servicing criteria put forth by the SEC. These new servicing criteria guidelines consist of four key areas for asset-backed securities:
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General Servicing Considerations
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Cash Collection and Administration
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Investor Remittances and Reporting
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Pool Asset Administration
Comprehensive Regulation AB Services & Solutions
Audit and Attestation Services:
Our seasoned audit professionals are well-versed in the nuances of Regulation AB and offer audit and attestation services that focus on the accuracy and completeness of information disclosed in ABS offerings. We assess compliance with the regulation's requirements related to asset-level data, credit risk, and compliance reports. Our rigorous examination procedures provide assurance to issuers, underwriters, and investors that the ABS transactions adhere to the specified regulatory standards.
Compliance Program Development:
We assist our clients in developing and enhancing compliance programs specifically designed for Regulation AB. Our experts work closely with organizations to establish robust internal controls, policies, and procedures that align with the regulation's requirements. We guide firms through the process of identifying, addressing, and mitigating compliance risks, ensuring they maintain a proactive and structured approach to compliance management.
Data Validation and Reporting:
Our firm places a strong emphasis on data accuracy & reporting. We provide comprehensive data validation services that scrutinize the asset-level data disclosed in compliance with Regulation AB. Our team employs advanced data analytics tools to identify discrepancies and inconsistencies, allowing organizations to rectify any data quality issues promptly. We also assist in the preparation and filing of the necessary reports, prospectus supplements, and Form 10-D filings, ensuring timely and compliant submissions.
Training and
Education:
The NDB Alliance of Firms offers specialized training and educational programs to equip financial professionals and organizations with the knowledge and skills essential for navigating Regulation AB effectively. Our training sessions cover the latest regulatory updates, industry best practices, and compliance methodologies, empowering our clients to stay informed and confident in their compliance efforts.
