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pdfSUPPORTING STATEMENT FOR PROPOSED RULES UNDER THE
SECURIITES EXCHANGE ACT OF 1934
This supporting statement is part of a submission under the Paperwork Reduction Act
of 1995, 44 U.S.C. §3501, et seq.
We request that OMB review the following information collections for consideration.
Based on the proposed rule 33-9117, which was published in the federal register on April 10,
2010, (75 FR 23328), the Commission is seeking new OMB Control Numbers for previously
submitted pre-approved information collections: Form SF-1 (3235-0665), Privately-Issued
Structured Finance Products Disclosure (3235-0660), Waterfall Computer Program (32350663), Form 144A-SF (3235-0661), Asset Data File (3235-0664) and requesting a Notice of
Action disposition of “Comment filed on proposed rule”, so that we may revise the
supporting statement that will be submitted to OMB when the final rule is adopted.
In addition, the Commission is requesting a Notice of Action of “Comment filed on
proposed rule and continue” for the following information collections submitted in
connection with proposed rules 33-9117: Form 10-K (201006-3235-024) and Form 8-K
(3235-0060). This rulemaking submission for these specific information collections was
delayed at the time based on the prioritized implementation of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (“Dodd-Frank Act”). The Commission is now moving
forward with finalizing proposed rules 33-9117 and will need to have a “comment filed and
continue” disposition for the collections so that the correct proposed rule submission is
associated with the final rule submission.
A. JUSTIFICATION
1. NECESSITY OF INFORMATION COLLECTION
In Release No. 33-9117,1 the Securities and Exchange Commission (the
“Commission”) proposed amendments to several rules and form requirements under the
Securities Act of 1933 and the Securities Exchange Act of 1934 relating to asset-backed
securities (“ABS” or “asset-backed securities” or “structured finance products”). The
proposals are designed to enhance investor protection in the ABS market, in light of the role
that ABS played in the recent financial crisis. The proposals are intended to provide
investors with timely and sufficient information, including information in and about the
private market for asset-backed securities, reduce the likelihood of undue reliance on credit
ratings, and help restore investor confidence in the representations and warranties regarding
the assets. Although these revisions are comprehensive and therefore would impose new
burdens, the Commission believes that they would protect investors and promote efficient
capital formation.2
1
2
Asset-Backed Securities, Release No. 33-9117 (April 7, 2010) [75 FR 23328].
See Section I.A. of Release No. 33-9117.
1
The proposed amendments contain “collection of information” requirements within
the meaning of the Paperwork Reduction Act of 1995. The titles for the collections of
information contained by the proposed amendments are:
“Form S-1” (OMB Control No. 3235-0065);
“Form 10-K” (OMB Control No. 3235-0063);
“Form 8-K” (OMB Control No. 3235-0060);
“Regulation S-T” (OMB Control No. 3235-0424);
“Form D” (OMB Control No. 3235-0076);
“Form SF-1” (a proposed new collection of information);
“Asset Data File” (a proposed new collection of information);
“Waterfall Computer Program” (a proposed new collection of information);
“Form 144A-SF” (a proposed new collection of information); and
“Privately-Issued Structured Finance Products” (a proposed new collection of
information).3
“Form SF-1” is a new collection of information created by the proposed amendments.
Because of the registered process, criteria, and disclosure would differ from offerings of
other types of securities, the Commission proposed that non-shelf ABS offerings be
registered on new form, “Form SF-1.” The Commission is proposing to add this form in
order to distinguish the ABS registration system from the registration system for other
securities. Because ABS issuers would register non-shelf offerings on this new registration
form, the number of respondents for existing registration form, Form S-1, will decrease.
“Form 10-K” and “Form 8-K” are collections of information related to the periodic
and current reports that are filed on an ongoing basis under the Exchange Act. As part of the
proposed new shelf registration requirements, issuers will be required to file Exchange Act
reports for the life of the security. Currently, because the record holders of ABS issuers are
typically much lower than three hundred, ABS issuers’ reporting obligations under Section
15(d) of the Exchange Act are typically suspended after they file the first Form 10-K. The
proposed new requirements would provide important transparency for investors on an
ongoing basis.
“Asset Data File” and “Waterfall Computer Program” are new collections of
information that would require filing of asset level disclosure and a computer program that
gives effect to the cash flow provisions for a securitization. They provide investors of ABS
securities with important information that issuers currently are not required to provide to
investors. This information must be filed in eXtensible Markup Language (XML) format
because that would make the information more useful to investors. The Waterfall Computer
3
As noted in Section X. of Release No. 33-9117 and also below (#12 and #13), we believe that the
proposed amendments would not change the burden hours and costs associated with Regulation S-T and Form
D.
2
Program must also be filed in the Python programming language which is open source and
interpretive.
“Form 144A-SF” and “Privately-Issued Structured Finance Product Disclosure” are
new collections of information for offerings of privately-issued structured finance products
that are made in reliance on a Commission safe harbor.4 In light of the role that
collateralized debt obligations (CDOs) and other typically privately-issued ABS securities
played in the financial crisis, the Commission is proposing to require that information be
provided to investors. The Form 144A-SF is a notice of an initial placement of structure
finance products that contain basic information about an offering made in reliance on Rule
144A under the Securities Act that would be filed with the Commission.
2. PURPOSE FOR THE INFORMATION COLLECTION
The purpose of the proposed collections of information is to provide enhanced
disclosure and transparency to participants and investors in the asset-backed securities
market.
3. ROLE OF IMPROVED TECHNOLOGY AND OBSTACLES TO REDUCING
BURDEN
Except for the Privately-Issued Structured Finance Products Disclosure, the
information in each of the collections of information discussed above is filed electronically
with the Commission using Commission’s Electronic Data Gathering and Retrieval
(EDGAR) system. Privately-Issued Structured Finance Products Disclosure is not required
to be filed with the Commission.
4. DUPLICATION
We are not aware of any rules that conflict with or substantially duplicate the
proposed rules.
5. METHODS USED TO MINIMIZE BURDEN ON SMALL BUSINESSES
The proposed amendments would not impact a significant number of small entities.
Rules in the Securities Act and Exchange Act define an issuer, other than an investment
company, to be a “small business” or a “small organization” if it had total assets of $5
million or less on the last day of its most recent fiscal year. As the depositor and issuing
entity are most often limited purpose entities in an ABS transaction, we focused on the
4
The Commission is also proposing to amend Form D to collect the same type of information for
structured finance products that rely on Regulation D for a safe harbor for an exemption from registration as
would be required to be provided in proposed new Form 144A-SF. However, for reasons below, we do not
believe that the changes will impact the collection of information requirements for Form D.
3
sponsor in analyzing the potential impact on small entities. Based on our data, we only found
one sponsor that could meet the definition of a small broker-dealer.
6. DESCRIPTION OF CONSEQUENCES OF LESS FREQUENT COLLECTION
The objectives of offering disclosure requirements under the Securities Act and the
ongoing disclosure requirements under the Exchange Act could not be met with less frequent
collection of this information for asset-backed securities.
7. EXPLANATION OF SPECIAL CIRCUMSTANCES/INCONSISTENCIES
WITH GUIDELINES IN 5 CFR 1320.5(d)(2)
None.
8. CONSULTATION OUTSIDE THE AGENCY
The Commission has issued a release soliciting comment on the new “collection of
information” requirements and associated paperwork burdens. A copy of the release is
attached. Comments on the Commission releases are generally received from registrants,
investors, and other market participants. In addition, the Commission and staff participate in
ongoing dialogue with representatives of various market participants through public
conferences, meetings and informal exchanges. The Commission will consider all comments
received.
9. PAYMENT OR GIFT TO RESPONDENTS
Not applicable.
10. ASSURANCE OF CONFIDENTIALITY
Except for the Privately-Issued Structured Finance Products Disclosure, the
information in each of the collections of information discussed above would be made
publicly available. Privately-Issued Structured Finance Products Disclosure is not filed with
the Commission; such disclosure would be provided to investors of the issuer’s securities
(and potential investors of the securities, upon the request of the security holder).
11. SENSITIVE QUESTIONS
Not applicable.
12. AND 13. ESTIMATES OF HOUR AND BURDEN COSTS
The paperwork burden estimates associated with the proposal include the burdens
attributable to preparing, reviewing and reporting information to the Commission and
4
retaining records. In most cases, the burden also includes filing the information with the
Commission on EDGAR, and for a few cases, we are proposing to require that the
information be filed in a tagged, eXtensible Markup Language format.
Our PRA burden estimates for each of the existing collections of information are
based on an average of the time and cost incurred by all types of public companies, not just
ABS issuers, to prepare a particular collection of information. In 2004, we codified
requirements for ABS issuers in these regulations and forms, recognizing that the
information relevant to asset-backed securities differs substantially from that relevant to
other securities.
Our PRA burden estimates for the proposed amendments are based on information
that we receive on entities assigned to Standard Industrial Classification Code 6189, the code
used with respect to asset-backed securities, as well as information from outside data
sources.5 When possible, we base our estimates on an average of the data that we have
available for years 2004, 2005, 2006, 2007, 2008, and 2009.
a. Form S-1 and Form SF-1
We are proposing to move the requirements for asset-backed issuers into new forms
that would be solely for the registration of asset-backed issuers. Proposed Form SF-1 would
be the non-shelf equivalent form of existing Form S-1 under our proposal. As noted above,
for purposes of our calculation, we estimate that the new proposals for shelf eligibility and
new shelf procedures would cause small movement in the number of filers from the shelf
system to the non-shelf system. For purposes of the PRA, we estimate three ABS issuers will
move from the shelf system to the non-shelf system of proposed Form SF-1.6 From 2004
through 2009, an average of four Form S-1s were filed annually by ABS issuers.
Correspondingly, we estimate that the number of filings on Form SF-1 will be seven, which
is the sum of the four average filings per year and the estimated incremental three filings
from shelf to Form SF-1.
For ABS filings on Form S-1, we have used the same estimate of burden per response
that we used for Form S-3, because the disclosures in both filings are similar.7 Even under
the proposals, the disclosures would continue to be similar for shelf registration statements
and non-shelf registration statements. The burdens for the proposed requirements for the
5
We rely on two outside sources of ABS issuance data. We use the ABS issuance data from AssetBacked Alert on the initial terms of offerings, and we supplement that data with information from Securities
Data Corporation (SDC).
6
We estimate in the section above that the proposals relating to shelf eligibility and new shelf
procedures would cause a ten percent movement in the number of filers out of the shelf system. We assume, for
the purposes of our PRA estimates, that the other filers that do not move to Form SF-1 would utilize the private
markets or offshore offerings for offerings of ABS.
7
See Section IV.B.2 of the 2004 ABS Proposing Release.
5
asset data file and the waterfall computer program to be filed as exhibits to Form SF-1 are
included in the newly proposed collections of information discussed below rather than in this
section for Form SF-1. Thus, we estimate that an ABS Form SF-1 filing will impose an
incremental burden of 100 hours per response, which is equal to the incremental burden to
file Form SF-3. We estimate the total number of hours to prepare and file each Form SF-1 at
1,350, the total annual burden for the issuer at 2362.5 hours and added costs for professional
expenses at $2,835,000.8 This would result in a corresponding decrease in Form S-1 burden
hours of 1,250 and $1,500,000 in professional costs.9
b. Form 10-K
The ongoing periodic and current reporting requirements applicable to operating
companies differ substantially from the reporting that is most relevant to investors in assetbacked securities. For asset-backed issuers, in addition to a limited menu of Form 10-K
disclosure items, the issuer must file a servicer compliance statement, a servicer’s assessment
of compliance with servicing criteria, and an attestation of an independent public accountant
as exhibits to the Form 10-K.
One of our proposed ABS shelf eligibility conditions (i.e., criteria that must be met in
order to be eligible to register ABS on Form SF-3) would require the issuer to undertake to
file Exchange Act reports as long as non-affiliates hold any of its securities that were sold in
registered transactions. Except for master trust issuers, the requirement to file Form 10-K for
ABS issuers is typically suspended after the year of initial issuance because the issuer has
fewer than 300 security holders of record.10 Therefore, the incremental impact to the number
of Forms 10-K filed by ABS issuers would increase each year after the proposal is adopted
by the number of ABS shelf offerings. The yearly average of ABS registered shelf offerings
with the Commission over the period from 2004 to 2009 was 929.11 In the first year after
implementation, we use 958, which is the average number of all offerings over 2004-2009, as
an estimate for the number of Forms 10-K we expect to receive. In the second year after
8
The total burden hours to file Form SF-1 are calculated by adding the existing burden hours of 1,250
and the incremental burden of 100 hours imposed by our proposals for a total of 1,350 hours. To calculate the
annual internal and external costs, we first multiply the total burden hours per Form SF-1 (1,350) by the number
of Form SF-1s expected under the proposal (7), resulting in 9,450 total burden hours. Then, we allocate 25
percent of these hours to internal burden, resulting in 2,362.5 hours. We allocate the remaining 75 percent of
the total burden hours to related professional costs and use a rate of $400 per hour to calculate the external
professional costs of $2,835,000.
9
To calculate these values, we first multiply the total burden hours per Form S-1 (1,250) by the average
number of Form S-1s filed during 2004-2009 (4), resulting in 5,000 total burden hours. Then, we allocate 25
percent of these hours to internal burden, resulting in 1,250 hours. We allocate the remaining 75 percent of the
total burden hours to related professional costs and use a rate of $400 per hour to calculate the external
professional costs of $1,500,000.
10
See Exchange Act Section 15(d).
11
The 929 ABS registered shelf offerings is 97 percent of the average yearly number of ABS offerings
from 2004 through 2009.
6
implementation, we increase our estimate of the number of Forms 10-K expected by 929 to a
total of 1,887. In the third year after implementation, the addition of another 929 brings the
total to 2,817. The average number of Forms 10-K over three years would, therefore, be
1,887. As a result, for PRA purposes, we estimate an increase in Form 10-K filings of 929
filings.
We estimate that, for Exchange Act reports, 75% of the burden of preparation is
carried by the company internally and that 25% of the burden is carried by outside
professionals retained by the registrant at an average cost of $400 per hour. In 2004, we
estimated that 120 hours would be needed to complete and file a Form 10-K for an ABS
issuer. We estimate that our proposals relating to Form 10-K would not increase the estimate
for the time needed to complete and file Form 10-K for an ABS issuer.
However, our proposed amendments may have a limited impact on the preparation of
Form 10-K for the sponsor of the ABS issuer, if the sponsor is a company that is required to
report under the Exchange Act. Though we are not proposing changes to Form 10-K
disclosure requirements for sponsors, our proposals may impact the work that sponsors
would have to do to disclose in their Form 10-K the securities they are required to hold as a
result of the proposals and the investments they make to manage risks associated with the
new requirements. We estimate that our proposals will cause an increase in the number of
hours the sponsor will incur to prepare, review and file Form 10-K by 10 hours. From 2004
to 2009, the number of unique ABS sponsors was 343, for an average of 57 unique sponsors
per year. Therefore, we estimate that, for PRA purposes, the total annual increase in the
number of hours to prepare, review, and file Form 10-K would be 112,050.12 We allocate
75% of those hours (84,038 hours) to internal burden and the remaining 25% to external
costs totaling $11,205,000 using a rate of $400 per hour.13
c. Form 8-K
Our current PRA estimate for Form 8-K is based on the use of the report to disclose
the occurrence of certain defined reportable events, some of which are applicable to assetbacked securities.
The number of ABS issuers filing Form 8-Ks on an annual basis may be affected by
our proposal to require an ABS issuer that wishes to be shelf-eligible to undertake to file
Exchange Act reports on an ongoing basis. In addition, our proposal to revise existing Item
6.05 of Form 8-K, which currently requires disclosure for any change in the actual asset pool
over five percent from the description in the prospectus, by instead requiring an ABS issuer
to instead provide information for any change equal to or greater than one percent in the asset
12
The 112,050 total burden hours are calculated by adding the impact on ABS issuers, which equals 929
incremental Forms 10-K times 120 burden hours per filing, and the impact on sponsors of ABS issuers, which
equals 57 sponsors times 10 incremental burden hours. [(929*120) + (57*10) = 112,050]
13
112,050 *0.25 *$400 = $11,205,000.
7
pool from the prospectus description, may lead to an increase of Form 8-K filings.14 We are
also proposing to add a requirement that the sponsor provide disclosure on Form 8-K for a
material change in its interest in the transaction.15
In 2004, we estimated that the new items added to Form 8-K to address ABS
disclosure would cause an increase of two reports on Form 8-K per ABS issuer per year.16
We estimate that our proposals would cause an increase of 1.5 reports on Form 8-K per ABS
issuer per year, or a total of approximately 1,437 additional reports per year.17
In 2004, we estimated that an average ABS issuer would spend about five hours
completing the form.18 We estimate that the average burden for the disclosure per Form 8-K
would remain relatively the same. Accordingly, we estimate the total annual increase in the
number of hours to prepare, review, and file Form 8-K would be 7,185, with 75% of those
hours (5,389) allocated to internal burden and the remaining 25% allocated to external costs
of $718,500 using a rate of $400 per hour.19
d. Regulation S-T
As noted above, Regulation S-T contains the requirements that govern the electronic
submission of documents. The proposed changes would make revisions to Regulation S-T.
The collection of information requirements, however, are reflected in the burden hours
estimated for the various Securities Act and Exchange Act forms related to ABS issuers. The
rules in Regulation S-T do not impose any separate burden. Consistent with historical
practice, we have retained an estimate of one burden hour to Regulation S-T for
administrative convenience.
14
Our estimate here does not include an increase that would result in filing Item 6.06 or Item 6.07 Forms
8-K which are instead included in the our burden estimate for the newly proposed collection of information
requirements for asset-level data and the waterfall computer program.
15
See existing Item 6.03 of Form 8-K.
16
See 2004 ABS Adopting Release.
17
The number of ABS offerings is based on the average number of ABS deals issued annually over 2004
through 2009.
18
See 2004 ABS Adopting Release.
19
The total burden hours are calculated by multiplying the expected number of Form 8-K reports per
year (1,437) times the estimated hours per filing (5) for a total of 7,185. Then, we allocate 75 percent of these
hours to internal burden, resulting in 5,389 hours. We allocate the remaining 25 percent of the total burden
hours to related professional costs and use a rate of $400 per hour to calculate the external professional costs of
$718,500.
8
e. Asset Data File
This new collection of information corresponds to asset data file information
requirements that we are proposing to add to proposed Form SF-1, proposed Form SF-3,
Form 10-D, and Form 8-K. They would be required to appear in exhibits to these forms.
Our proposed standard definitions for asset-level information are similar to, and in part based
on, other standards that have been developed by the industry, such as those developed under
ASF’s Project RESTART and those developed by the CRE Finance Council (formerly
CMSA). These proposed standard definitions employ widely used metrics relating to assetlevel information and, based on discussions with the industry, we believe that much of assetlevel information may already be available for collection, although the format of such
information may not be the one that we propose to require. We also believe that first year
implementation costs may be much more significant than ongoing implementation costs.
An ABS issuer filing on proposed Form SF-1 or proposed Form SF-3 would be
required to provide this new information. For the most part, this new information would be
provided at the time that the newly proposed Rule 424(h) filing is required to be filed, at the
time the final prospectus is required to be filed, and after there are certain changes to the
pool, such as the substitution or addition of assets. Certain information would be required to
be filed on an ongoing basis. We believe the information is currently available to the ABS
issuer but additional time and expense will be involved in including the information in
registration statements in the format that we are proposing.
The requirements are tailored by asset class. All asset classes except credit card
receivables and stranded costs are required to provide asset-level information on each asset in
the pool. Information relating to the performance of the assets would be required to be filed
on an ongoing basis. Credit card ABS issuers would be required to provide grouped asset
data, both at the time of securitization and on an ongoing basis. The grouped asset data could
be incorporated by reference (from a previously filed Form 10-D).
We believe that the costs of implementation would include software costs, costs to tag
the required data, costs of maintaining the required information, and costs of filing. The
number of unique ABS sponsors over 2004-2009 was 343, for an average of 57 unique
sponsors per year. We estimate that there are 10 unique sponsors of credit card
securitizations over a three-year period (or three unique sponsors per year). We base our
burden estimates for this collection of information on the assumption that most of the costs of
implementation of the proposed asset-level data filing requirements would be incurred before
the sponsor files its first asset-level data filing in compliance with the proposed rules.
Because asset-backed issuers are currently required by Regulation AB to file pool-level
information on the assets in the underlying pool,20 we assume, for purposes of our PRA
estimates, that much of the information that is required to be provided by the new disclosure
requirements should be accessible from existing sponsor data systems.
20
Also, some registered issuers may be providing asset-level information to investors, although such
information is not standardized.
9
Because of the number of fields involved, our estimates for the proposed asset-level
requirements are based on EDGAR data on RMBS and CMBS issuers. We estimate that, for
purposes of the PRA burden estimate for the asset-level disclosure requirements,
approximately two percent of the proposed asset-level data fields that are required at the time
of securitization and approximately two percent of the asset-level data fields that are required
on an ongoing basis would require the sponsor to adjust its systems and procedures for
collecting information on each asset. We estimate that, for purposes of an initial filing of
asset-level information at the time of securitization, a sponsor would be required to expend at
least 18 minutes for each item where adjustments must be made for each asset in a pool. We
estimate that an RMBS sponsor would incur a one-time setup cost for the initial filing of
3,194 hours to adjust its existing systems to provide the required information at the time of
securitization for each asset in the initial filing, 86 hours for a CMBS sponsor, and 2,010
hours for a credit card receivables sponsor.21 After a sponsor has made the necessary
adjustments to its systems and after an initial filing of asset-level data has been made, we
estimate that subsequent filings for asset-level data will take approximately ten hours to
prepare, review, and file. For credit card ABS sponsors, grouped asset data may be
incorporated by reference, as proposed, and therefore, we are not including additional costs
for subsequent filings by a credit card master trust.
Similarly, we estimate that for purposes of an initial filing of asset-level ongoing
information, a sponsor would be required to expend at least 18 minutes for each item where
adjustments must be made for each asset in a pool. We estimate that an RMBS sponsor
would incur a one-time set-up cost of 3,811 hours to adjust its existing systems to provide the
required ongoing information for each asset in the initial filing, 92 hours for a CMBS
sponsor, while a credit card receivables sponsor would not incur additional setup costs for
ongoing information.22 After a sponsor has made the necessary adjustments to its systems in
connection with the proposed rule and, after an initial filing of asset-level ongoing
information has been made, we estimate that subsequent filings for asset-level ongoing
information by a sponsor will take approximately ten hours to prepare, review, and file. We
estimate that filings of grouped asset data for credit card ABS issuers would take
approximately ten hours to prepare, review and file.
21
For RMBS and CMBS issuers, this is based on an average pool size for RMBS of 3,317 assets and an
average pool size for CMBS of 165 assets and also includes ten hours for tagging and filing the required assetlevel disclosure. Because we believe that the information that is required by the proposed grouped asset data
requirement would be information that a credit card ABS sponsor already collects in its existing systems, we
believe the initial set-up costs for a sponsor would not include expenses necessary to adjust systems to collect
new information. However, a sponsor may expend some additional effort for other adjustments due to the
requirement and therefore, we estimate that the initial filing of grouped asset data would require 2000 hours for
a credit card ABS sponsor, plus an added ten hours for tagging and filing the information.
22
For RMBS and CMBS issuers, this is based on an average pool size for RMBS of 3,317 assets and an
average pool size for CMBS of 165 assets and also includes ten hours for tagging and filing the required assetlevel disclosure. We do not believe that sponsors credit card receivables would incur additional setup costs for
filing grouped asset data information on an ongoing basis since the information that is filed on an ongoing basis
is the same information that is required at the time of securitization
10
Based on the number of loans that may be securitized in a particular offering and the
asset-level requirements for each of the asset classes, and the number of offerings for each of
the asset classes, we estimate that the total annual burden hours for preparing, tagging and
filing asset-level disclosure or grouped asset data at the time of securitization will be
151,368.23 We allocate 25% of those hours (37,842.04) to internal burden hours for all ABS
issuers and 75% of the hours to out-of pocket expenses for software consulting and filing
agent costs at a rate of $250 per hour totaling $28,381,527.95. We estimate that the average
annual hours for preparing, tagging and filing asset-level disclosure or grouped asset data on
an ongoing basis with the Form 10-D will be 207,009 hours for all ABS issuers.24 We
allocated 75% of those hours (155,256.5 hours) to internal burden hours and 25% of those
hours for out-of-pocket expenses for software consulting and filing agent costs at a rate of
$250 per hour totaling $12,938,042.83. Thus, we estimate the total annual incremental
burden for the asset-level disclosure requirements or grouped asset data at 193,098.6 hours25
and the added total amount of out-pocket expenses for software and filing agent costs at
$41,319,570.78.26
f. Waterfall Computer Program
While the proposed requirement that ABS issuers file machine-readable computer
code detailing the waterfall of the ABS securities issued would be a new collection of
information, we believe issuers already produce such a code to structure the ABS deal.
However, issuers would bear the costs of converting the code that they typically create into
code that meets our proposed requirements. We believe that a substantial portion of those
costs will be incurred for each sponsor at the time of implementation of the rule to set up
mechanisms to convert the typical program used for waterfall purposes.
Some examples of the need for such mechanisms are: (i) waterfall programs written
in languages not directly portable to Python that will have to be adapted to the Python
language, (ii) code within the waterfall program that is not required by the rule or necessary
23
We apportion the burden according to the proportion of offerings in each asset class using the
following asset classes: (1) CMBS, (2) Credit Cards, (3) RMBS and other. We believe that using the RMBS
estimates to represent the burden for other asset classes offers a conservative burden estimate because of the
number of data items necessary for RMBS. To calculate the proportions, we divide the average number of
offerings per year for each asset class (79 for credit cards, 43 for CMBS, and 836 for RMBS or other asset
classes) by the average number of offerings for all asset classes (958).
24
Again, we apportion the burden according to the proportion of offerings in each asset class using the
following asset classes: (1) CMBS, (2) Credit Cards, (3) RMBS and other. We believe that using the RMBS
estimates to represent the burden for other asset classes offers a conservative burden estimate because of the
number of data items necessary for RMBS. To calculate the proportions, we divide the average number of
offerings per year for each asset class (79 for credit cards, 43 for CMBS, and 836 for RMBS or other asset
classes) by the average number of offerings for all asset classes (958).
25
193,098.6 = 37,842.04 + 155,256.5
26
$41,319,570.78 = $28,381,527.95 + $12,938,042.83.
11
for investors to use and understand the waterfall may need to be removed or adapted for the
program to run as required by the rule, (iii) and additional functionality of the program, such
as a user interface to input assumptions or to input the asset data file, not currently used by
sponsors will have to be incorporated. We estimate that issuers will incur a one-time setup
cost of 672 hours to create such mechanisms to meet this filing requirement.27 Additionally,
we estimate a two-hour burden at the time of filing for each ABS deal for which a waterfall
program is required to be filed to verify that the mechanisms worked properly and that the
program meets the requirements of the rule.
As noted above, the number of unique ABS sponsors over 2004-2009 was 343, for an
average of 57 unique sponsors per year. Therefore, we estimate that it would take a total of
38,304 hours for ABS issuers to set up the mechanisms to file the waterfall computer
program.28 We allocate 25 percent of these hours (9,576 hours) to internal burden for all
sponsors. For the remaining 75 percent of these hours (28,728 hours), we use an estimate of
$250 per hour for the costs of computer programmers to derive an external cost of
$7,182,000.29
The yearly burden at the time of filing for each deal is estimated to be 1,916 hours.30
For PRA purposes we allocate 25% of these hours (479 hours) to internal burden hours and
75% for out-of-pocket expenses for professional costs totaling $574,800 using a rate of $400
per hour. Therefore, the total internal burden hours are 10,055 and the total external costs are
$7,756,800.31
g. Form 144A-SF and Form D
Form 144A-SF is a new collection of information that would cover the notice of sales
of asset-backed securities that would be required under the proposed revisions to Rule 144A.
This notice would contain information related to major participants in the securitization, the
date of the offering, the type of securities offered, the basic structure of the securitization and
27
The value of 672 hours for setup costs is based on staff experience and is calculated using an estimate
of two computer programmers for two months, which equals 21 days per month times two employees times two
months times eight hours per day.
28
The burden of 38,304 hours to set up mechanisms to file the waterfall program is calculated by
multiplying the average number of unique sponsors (57) by the estimated set up hours per sponsor (672).
29
Multiplying the 28,728 external cost hours by the $250 per hour estimate results in the external cost of
$7,182,000.
30
Multiplying the average number of ABS issues per year (958) by the burden hours at the time of filing
each deal (2.0) results in 1,916 hours.
31
We sum the internal burden hours from setup of the waterfall code mechanisms (9,576) and the peroffering internal filing burden hours (479) to get the total internal burden of 10,055. The total external cost of
$7,756,800 is calculated by adding the cost from setup ($7,182,000) and the cost from filing each waterfall at
the time of offering ($574,800).
12
the principal amount of the securities offered. Over the period 2004-2009, the annual
average number of Rule 144A ABS offerings was 716.32
We believe that the burden assigned to Form 144A-SF should reflect the cost of
preparing the notice and the cost of filing the notice. We estimate that preparing, tagging,
and filing the Form 144A-SF will require approximately 2.0 hours per response. Using the
annual average of 716 Rule 144A offerings, the total burden hours equals 1,432. We allocate
25% as a burden to the seller and 75% as costs of counsel utilized for the preparation and
filing of the form. Therefore, the incremental annual impact of Form 144A-SF will be 358
hours and $429,600 in professional costs using an hourly rate of $400.
Form D is an existing collection of information under the PRA. Form D is a notice of
sales for offerings made under Regulation D. Currently, we estimate that the burden hours of
Form D to be approximately 4.0 hours per response, of which one hour is borne internally
and three hours are borne externally. Under the proposal, Form D would be revised to
collect, in addition to the information that the form currently collects, the same information
as proposed Form 144A-SF when filed in connection with an ABS offering. We are aware of
only one Form D filed for an ABS offering in 2009.33 Thus, we believe that the change to
this collection of information should be very small. For PRA purposes, we estimate that the
Form D filing burden would not increase. Therefore, we continue to estimate that the burden
hours for Form D will be 4.0 hours.
h. Privately-Issued Structured Finance Product Disclosure
This new collection of information relates to proposed disclosure requirements for
structured finance product issuers that wish to take advantage of the safe harbors provided by
Rule 144A, Regulation D and Rule 144. Under the proposed amendments, such issuers
would be required to provide the purchaser or prospective purchaser with the same
information that would be required if the offering were registered with the Commission.
Some of the information that is required for registered offerings, we believe, is being
provided to investors who purchase structured finance products in the private markets.34 For
purposes of the PRA, we are assuming that the hours that private structured finance product
issuers expend to provide information to investors are approximately the same hours that
would be required to prepare information in the registered context. Therefore, our estimate
for this new collection of information will be based on the incremental costs that the
32
This is based on ABS issuance data from Asset-Backed Alert and information from Securities Data
Corporation (SDC).
33
We believe typically private offerings of ABS are conducted pursuant to Section 4(2) of the Securities
Act without reliance on the safe harbor of Regulation D and are followed by resale(s) of the securities in
reliance on Rule 144A.
34
Because of the lack of transparency in the private structured finance product market, we do not have
estimates regarding the amount of information and completion time that a typical private structured finance
product issuer will need in order to provide investors offering and ongoing information nor estimates of the cost
of such information. As discussed below, we are requesting comment on this information.
13
proposed amendments in this release would include. Although information for a private ABS
issuer is not required to be filed with the Commission, the cost of preparing such information
should be relatively the same as the estimated burdens for preparing and filing information
required in the registered context. We estimate that it will take approximately 300 hours per
offering to prepare additional offering information that would be required under the proposed
amendments. This is based on the incremental cost of the proposed amendments to ABS
issuers that register their offerings with the Commission, along with the cost estimates for the
asset data file that would be filed at the time of securitization and the waterfall computer
program that we are proposing to require be filed for each ABS offering. Under our
proposal, ABS issuers that relied on the safe harbors would be required to provide the same
ongoing information that would be required in registered offerings. We estimate that it will
take an issuer approximately 18 hours to complete a distribution report accompanied by
asset-level and grouped asset data ongoing information for the distribution period. This is
based on the incremental costs of providing Form 10-K, Form 10-D, and Form 8-K reports,
which would comprise of the cost estimates for the asset data file that is required to be filed
on an ongoing basis, as proposed.
As noted above, the average number of private offerings of ABS per year pursuant to
Rule 144A over the period 2004-2009 was 716. Based on that number, we estimate an
average number of 8,592 ongoing reports containing distribution information and ongoing
asset data file information would be provided to investors each year,35 and a total of 716
annual reports that would be provided to investors each year. Therefore, at the time of
securitization, we estimate that the proposed collection of information will impose a total
annual burden of 214,791 hours,36 with 25% of the cost borne internally (53,698 hours) and
the remainder of hours paid to outside professionals or software consulting and programming
costs ($48,328,318).37 For information that is provided on an ongoing basis, we estimate that
the proposed collection of information will impose a total annual burden of 157,067 hours,38
with 75% of the cost borne internally (117,800 hours) and the remainder paid to outside
35
This is based on an average number of such ongoing reports that we estimate private structured finance
product issuers would provide to investors over the three years after implementation. Consistent with our
estimates in the registered context, we estimate that issuers would provide such ongoing reports at a multiple of
six times the number of offerings per year.
36
We calculate the total annual burden of 214,791 hours by multiplying the expected number of filings
per year (716) times the burden hours per securitization filing (300).
37
We estimate that hours related to providing asset-level information and the waterfall computer
program is allocated to software consulting or other labor costs ($22,621,125) at a cost of $250 per hour and
hours related to providing other types of information is allocated to costs of outside professionals ($21,480,000)
at a cost of $400 per hour.
38
We calculate the total annual burden of 157,067 hours by adding the total number of hours we believe
it would take to provide ongoing asset-level information (18 hours*8,592 reports).
14
professionals or software consulting costs ($9,816,658).39 Thus, the total estimate for
internal burden hours is 171,498,40 and the total estimate for outside costs is $58,144,976.41
i. Summary of Proposed Changes to Annual Burden Compliance in
Collection of Information
The table below illustrates the changes in annual compliance burden in the collection
of information in hours and costs for existing reports and registration statements and for the
proposed new registration statements for asset-backed issuers. Below, the asset data file is
annotated as “Asset Data,” the waterfall computer formula is annotated as “WCP”, and
privately-issued structured-finance disclosure is annotated as “P-SF.” Bracketed numbers
indicate a decrease in the estimate.
Current
Annual
Response
s
Proposed
Annual
Response
s
Decrease
or Increase
in Burden
Hours
Proposed
Burden Hours
Current
Professional
Costs
Decrease or
Increase in
Professional
Costs
Proposed
Professional
Costs
S-1
1,168
1,164
247,982
[1,250]
246,732
297,578,400
[1,500,000]
296,078,400
SF-1
--
7
--
2,363
2,363
--
2,835,000
2,835,000
10-K
14,296
15,225
21,430,988
84,038
21,515,026
2,857,465,000
11,205,000
2,868,670,000
8-K
118,387
119,824
507,665
5,389
513,054
67,688,700
718,500
68,407,200
Asset
Data
--
16,534
--
193,099
193,099
--
41,319,571
41,319,571
WCP
--
958
--
10,055
10,055
--
7,756,800
7,756,800
144A
-SF
--
716
--
358
358
--
429,600
429,600
P-SF
--
9,308
--
171,498
171,498
--
58,144,976
58,144,976
Form
Current
Burden
Hours
14. ESTIMATE OF COST TO FEDERAL GOVERNMENT
We estimate annualized cost to the government will be $200,000 per year for the
collections of information changes discussed above.
15. EXPLANATION OF CHANGES IN BURDEN
39
We estimate that hours relating to asset-level information paid to software consultants or other labor
costs would be paid at cost of $250 per hour.
40
171,498 = 53,698 + 117,800
41
$58,144,976 = $9,816,658 + $48,328,318
15
See Question 12 and 13 (including the table in paragraph (k)).
16. INFORMATION COLLECTIONS PLANNED FOR STATISTICAL
PURPOSES
Not applicable.
17. EXPLANATION AS TO WHY EXPIRATION DATE WILL NOT BE
DISPLAYED
Not applicable.
18. EXCEPTIONS TO CERTIFICATION
Not applicable.
B. COLLECTION OF INFORMATION EMPLOYING STATISTICAL METHODS
Not applicable.
16
| File Type | application/pdf |
| Author | hsuk |
| File Modified | 2013-09-30 |
| File Created | 2013-09-30 |