As a result of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) on July 21, 2010, Rule 436(g) of the Securities Act of 1933, as amended (the “Securities Act”) was automatically repealed on July 22, 2010. The immediate impact of such repeal has been forestalled for the next six months, however, due to the publication of a no-action letter by the Securities and Exchange Commission (the “Commission”) on July 22, 2010, providing additional time for the securities industry and rating agencies to develop a feasible approach in light of the altered landscape created by the repeal of Rule 436(g).

Section 939G of the Act repealed Rule 436(g) of the Securities Act, which had provided that security ratings assigned by nationally recognized statistical rating organizations (“NRSROs”) were not deemed part of a registration statement prepared or certified by an expert for purposes of Sections 7 and 11 of the Securities Act. Under Rule 436(g), NRSROs were therefore not required to provide consent to the inclusion of ratings in registration statements and, accordingly, were not subject to increased liability under Section 11 of the Securities Act in connection with such ratings. As of July 22, 2010, each NRSRO must now provide such consent as an expert if its ratings are included in a registration statement. In light of the potential exposure to liability under the Securities Act that may accompany such consent, sources have reported that rating agencies are currently taking the position that they will not consent in connection with the inclusion of ratings in registration statements. Concerns have been raised within the securities industry with respect to the implications of the repeal of Rule 436(g), given the stance taken by the rating agencies, as Items 1103(a)(9) and 1120 of Regulation AB require ratings information and the identity of each relevant rating agency, among other items, to be included in registration statements in the event that the issuance of securities is contingent upon the rating of the securities.

In response to the repeal of Rule 436(g), a request was submitted to the Commission on behalf of Ford Motor Credit Company LLC and Ford Credit Auto Receivables Two LLC, seeking assurance that enforcement action would not be recommended if registration statements did not include the identities of NRSROs and their ratings. On July 22, 2010, the Commission issued a no-action position, stating that in light of the refusal by several NRSROs to provide consent at this time, and “[i]n order to facilitate a transition for asset-backed issuers, the Division [of Corporation Finance] will not recommend enforcement action to the Commission if an asset-backed issuer … omits the ratings disclosure required by Item 1103(a)(9) and 1120 of Regulation AB from a prospectus that is part of a registration statement.” The Commission indicated that its no-action position is applicable to offerings that commence prior to January 24, 2011.