ABS issues are structured to avoid application of the Investment Company Act of 1940 (1940 Act)

• Generally, absent an exception, most ABS issuers would be investment companies under the 1940 Act
• Subject to onerous substantive regulation disclosure requirements

Investment Company Act § 3

Defines investment company

• Investment Company Act § 2(a)(36)
  Defines investment security

Most ABS issues rely on the exception provided by Rule 3a-7

Issuers of asset-backed securities

Text of Rule 

Final release IC-19105 1992

• Proposal release IC-18736 1992
• Adopted Investment Company Act Rule 3a-7
• Includes explanation of how the Investment Company Act applies to ABS transactions

I. Background

II. Discussion

A. Rule 3a-7

B. Amending Section 3(c)(5)

III - VI

VII. Text of Adopted Rule

Asset-Backed Securities