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Third-Party Due Diligence Reports (Section 932)

In August 2014, the SEC approved final rules implementing Section 932 of the Dodd-Frank Act that, among other things, adopt new requirements for issuers, underwriters and third-party due diligence service providers to promote the transparency of the findings and conclusions of third-party due diligence as it relates to asset-backed securities ("ABS"). These new requirements include:

The portions of the final rules relating to ABS third-party due diligence reports will be effective 9 months after publication of the new rules in the Federal Register.

In addition to the rules described above, which are specially aimed at regulating the ratings process for ABS, the final rules also adopt requirements that are generally applicable to NRSROs, including rules addressing internal controls, conflicts of interest, disclosure of credit rating performance statistics, procedures to protect the integrity and transparency of rating methodologies, disclosures to promote the transparency of credit ratings and standards for training, experience and competence of credit analysts. The final rules also provide for an annual certification by the CEO of an NRSRO as to the effectiveness of internal controls and additional certifications to accompany credit ratings attesting that the rating was not influenced by other business activities.

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