Now that the controversial Sarbanes-Oxley Act has taken effect and 1Q03 financial reports are due at the end of the quarter, the trustee community is banding together to clear the hurdles of single-party certification. Along with the American Banker Association, four of the largest trustees - Citibank, Deutsche Bank, JPMorgan and Wells Fargo - have approached the Securities & Exchange Commission to reduce the onus on them in certifying financial statements.
Their joint efforts seem to have resulted in the role as an arraigner of backup certifications from any third-party information providers, sources said. The role of signing on the dotted line, which is a responsibility completely foreign to the trustee community, will more likely fall to either the issuer of the securitization or the primary servicer.
While the subject of much debate toward the tail end of last year, single-party certification has yet to really give the ABS and MBS market the migraine headaches feared. "Single-party certification is a prospective law," noted Bill Berls, a senior vice president at JPMorgan Institutional Trust Services. "Right now the trustee community is working on assuring that we can provide the backup certifications, so that the single-party can accurately certify transactions for the upcoming first-quarter reporting period."
Under the guidelines, transactions issued prior to the Jan. 1, 2003 effective date are exempt from the new reporting certifications. But any securitization that takes place from now on will need a single-party to certify quarterly financial statements on a quarterly basis.
While trustees may be in good shape, there is still some debate as to the status of so-called "split" certifications, in which parties only certify data that they can accurately vouch for. Issuers and servicers still hope a reasonable-reliance provision will be amended into Sarbanes-Oxley to protect against discrepancies in data passed along by third-party information providers.