Abstract
On February 9 at the ABS Vegas 2015 conference in Las Vegas, a panel of experts discussed some of the latest thinking on Regulation AB II as it relates to the commercial mortgage-backed securities (CMBS) market. The panel primarily addressed three specific provisions of the Reg AB II shelf registration requirements and the unique effects these provisions have on CMBS: the chief executive officer certification, the asset reviewer requirement, and dispute resolution provisions. The extensive language of the CEO certification creates significant liability for the CEO that did not exist prior to Reg AB II, which could be mitigated through measures such as extra-careful review of cash flows, waterfalls, and other prospectus details; a “disclosure committee”; and certifications from third parties. In the event investors invoke the asset-reviewer provisions, a clear list of representations and warranties that should be tested and specific testing procedures may be helpful in aligning an asset reviewer’s and an issuer’s criteria for breaches of reps and warrants that should be considered material. How effective arbitration or mediation provisions will be is difficult to determine because CMBS have never experienced any significant level of put-back claims, but the Commercial Real Estate Finance Council’s model remediation language could be a useful reference in developing and interpreting provisions for Reg AB II implementation.
Published Version
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