Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 190 -- Registration of Underlying Securities in Asset-Backed Securities Transactions.

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1. In an offering of asset-backed securities where the asset pool includes securities of another issuer (“underlying securities”), unless the underlying securities are themselves exempt from registration under section 3 of the Act, the offering of the relevant underlying securities itself must be registered as a primary offering of such securities in accordance with paragraph (b) of this section unless all of the following are true. Terms used in this section have the same meaning as in Item 1101 of Regulation AB (Rule 229.1101 of this chapter).
   
   
   1. Neither the issuer of the underlying securities nor any of its affiliates has a direct or indirect agreement, arrangement, relationship or understanding, written or otherwise, relating to the underlying securities and the asset-backed securities transaction;
      
   2. Neither the issuer of the underlying securities nor any of its affiliates is an affiliate of the sponsor, depositor, issuing entity or underwriter of the asset-backed securities transaction; and
      
      
   3. The depositor would be free to publicly resell the underlying securities without registration under the Act. For example:
      
      
      1. If the underlying securities are restricted securities, as defined in Rule 144(a)(3), the underlying securities must meet the conditions set forth in Rule 144(k) for the sale of restricted securities; and
         
         
      2. The offering of the asset-backed security does not constitute part of a distribution of the underlying securities. An offering of asset-backed securities with an asset pool containing underlying securities that at the time of the purchase for the asset pool are part of a subscription or unsold allotment would be a distribution of the underlying securities. For purposes of this section, in an offering of asset-backed securities involving a sponsor, depositor or underwriter that was an underwriter or an affiliate of an underwriter in a registered offering of the underlying securities, the distribution of the asset-backed securities will not constitute part of a distribution of the underlying securities if the underlying securities were purchased at arm’s length in the secondary market at least three months after the last sale of any unsold allotment or subscription by the affiliated underwriter that participated in the registered offering of the underlying securities.
         
         
2. If all of the conditions in paragraph (a) of this section are not met, the offering of the relevant underlying securities itself must be registered as a primary offering of such securities in accordance with the following:
   
   
   1. If the offering of asset-backed securities is registered on Form S-3, the offering of the underlying securities itself must be eligible to be registered under Form S-3 or F-3 as a primary offering of such securities;
      
      
   2. The plan of distribution in the registration statement for the offering of the underlying securities contemplates this type of distribution at the time of the commencement of the offering of the asset-backed securities;
      
      
   3. The prospectus for the asset-backed securities offering describes the plan of distribution for both the underlying securities and the asset-backed securities;
      
      
   4. The prospectus relating to the offering of the underlying securities is delivered simultaneously with the delivery of the prospectus relating to the offering of the asset-backed securities, and the prospectus for the asset-backed securities includes disclosure that the prospectus for the offering of the underlying securities will be delivered along with, or is combined with, the prospectus for the offering of the asset-backed securities;
      
      
   5. The prospectus for the asset-backed securities offering identifies the issuing entity, depositor, sponsor and each underwriter for the offering of the asset-backed securities as an underwriter for the offering of the underlying securities;
      
      
   6. Neither prospectus disclaims or limits responsibility by the issuing entity, sponsor, depositor, trustee or any underwriter for information regarding the underlying securities; and
      
      
   7. If the offering of the asset-backed securities and the underlying securities is not made on a firm commitment basis, the issuing entity or the underwriters for the offering of the asset-backed securities must distribute a preliminary prospectus for both the underlying securities offering and the asset-backed securities offering that identifies the issuer of the underlying securities and the expected amount of the issuer’s underlying securities that is to be included in the asset pool to any person who is expected to receive a confirmation of sale of the asset-backed securities at least 48 hours prior to sending such confirmation.
      
      
3. Notwithstanding paragraphs (a) and (b) of this section, if the asset pool for the asset-backed securities includes a pool asset representing an interest in or the right to the payments or cash flows of another asset pool, then that pool asset is not considered an “underlying security” for purposes of this section (although its distribution in connection with the asset-backed securities transaction may need to be separately registered) if the following conditions are met:
   
   1. Both the issuing entity for the asset-backed securities and the entity issuing the pool asset were established under the direction of the same sponsor and depositor;
      
   2. The pool asset is created solely to satisfy legal requirements or otherwise facilitate the structuring of the asset-backed securities transaction;
      
      
   3. The pool asset is not part of a scheme to avoid registration or the requirements of this section; and
      
      
   4. The pool asset is held by the issuing entity and is a part of the asset pool for the asset-backed securities.
      
      

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