While the securitization markets did not get the bifurcation of single-party certification initially sought, a minor victory was won in the newly released revisions to the Sarbanes-Oxley Act. The statement, released Feb. 21, now includes a provision allowing for indemnification to whichever entity - depositor, servicer or trustee - acts as the single-party certifier on documents filed with the Securities & Exchange Commission.
The addition of a reasonable-reliance provision to the staff guidance means that none of the aforementioned parties involved in a particular securitization will have to certify the validity of information provided by another. The specific form of indemnification was not specified, but the SEC said "it does not object to parties obtaining back-up certifications from the unaffiliated parties on which it is relying."
"Because the required information in these reports for asset-backed issuers differs significantly from that provided by other issuers, and because of the structure of these issuers, the requirements for complying with certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 must be tailored specifically for asset-backed issuers," the SEC said in its comment letter announcing the change in its stance.
As for which of the three parties will eventually take on the responsibility of single-party certifier, "it is too early for one party to have emerged" noted Nadine Cancell, Vice President and Assistant General Counsel at The Bond Market Association. She speculated that determining which of the three certifies largely depends on the asset class.
Although the market began its quest seeking split certifications late last year, after being voted into law, "This is a good compromise," according to American Securitization Forum Executive Director, Dwight Jenkins. "Even though there isn't bifurcation of certification, under this situation, trustees are responsible only for bondholder liabilities and aren't libel for collateral performance certification," he added.
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