SEC Regulation FD-Day, June 2, 2010 Amendments to Rule 17g-5 of the Securities Exchange Act of 1934

A recent third party preferences study surveyed hundreds of M&A professionals globally who use multiple Virtual Data Room (VDR) providers and asked them a series of questions to understand both their criteria for selecting their VDR before deals, as well as understanding how they felt about the different providers’ offerings. The survey showed not only that Intralinks beats the competition in every category, but also just how important it is to M&A professionals to have the right VDR provider in place.

5 May 2010

Recent amendments to SEC rules relating to Nationally Recognized Statistical Rating Organizations (NRSRO) will require anyone seeking a rating of a structured finance product or security to maintain a password-protected website containing all information provided to an NRSRO that is hired to provide a rating. This password-protected information must be made accessible to other NRSROs in order to further the SEC’s goal of maximizing the number of credit rating agencies able to cover each structured finance product and to promote the issuance of ratings by NRSROs that are not hired or retained by an arranger or issuer.

We’ve been fielding dozens of calls from issuers and arrangers inquiring about the disclosure requirements and our potential solution. As a result, we’ve had the opportunity to discuss the disclosure requirements with numerous market participants as well as with the SEC.

The new disclosure rules require that an issuer or arranger make all information that is pertinent to obtaining a rating from one or more of the NRSROs, available to non-hired NRSROs at the same time and in the same manner as they do to the hired Rating Agencies. Additionally, throughout the life of a structured finance deal, any information relevant to the monitoring of the rating also needs to be made available to the non-hired NRSROs.

According to the SEC rules, in the event the non-hired NRSROs access information on ten or more structured finance transactions in any calendar year period, the non-hired NRSRO will be required to rate at least one of every 10 transactions for which it accessed ratings-related information.

This requirement to monitor the deal-rating activity of non-hired NRSROs measured against the deal information access activity of the non-hired NRSROs is a major complication for issuers and arrangers. The non-hired NRSROs need to certify to issuers and arrangers that they are in compliance with the requirements to rate 10 percent of the deals they’ve accessed.

How will issuers, arrangers and hired Rating Agencies comply with these revised rules? What audit or compliance standard will need to be met? How potentially disruptive and costly will compliance with the amended disclosure rules be to the structured finance and asset-backed securities market?

Intralinks, a long-standing leader in providing secure document management and collaboration solutions to the debt capital markets, offers a comprehensive solution to address these new disclosure requirements:

Secure, reliable and accessible: We’re proud of our long history working with companies engaged in syndicated loans, asset-backed securities transactions, real estate finance, private placements, mergers and acquisitions and alternative investments, to help them maintain secure document collaboration and ensure compliance monitoring. Our debt capital markets community of almost 100,000 users representing over 2,600 organizations is a reflection of our proven reliability, security and usability.

Immediate operational readiness: Our SaaS based system, which requires limited set-up time and no software installation, should alleviate any concerns that structured finance arrangers and issuers currently have about being ready to meet the new SEC disclosure rules immediately. Our platform can accept any file format, including audio-video files, and can be pre-configured to conform to the information requirements of any deal, user group or individual and has robust audit and reporting capabilities.

Automatic alerts and easily controllable manager/viewer status: Our clients have full control over access to deal information or specific documents by individuals or groups of users. They can upload information and “publish” to authorized viewers simultaneously and can provide automatic email alerts relating to new information, a valuable feature set for meeting the new requirements.

Monitor and report on document access: Issuers and arrangers can monitor and record document access (date, time, name of reviewer, number of views and even download or print status) to evidence compliance with information access requirements and to ascertain NRSROs’ compliance and certification that the minimum number of deals required by SEC rules have been rated.

Cost effective: Any business is always happy to save time and money. Using the Intralinks® platform means that you don’t have to worry about website development or maintenance costs. We provide secure online exchanges for any number of deals under individual transactional contracts or multi-deal subscription arrangements.

Ed. note: Intralinks does not provide compliance, investment or legal advice.