The sponsor should, based on the representations received from seller(s) and all other parties responsible for originating and servicing the asset pools, make representations and warranties to investors that:

1. 1.The various criteria defined at the level of each underlying transaction are met, and explain how; and
2. 2.The seller’s (or sellers’) policies, procedures and risk management controls are well documented, adhere to good market practices and comply with the relevant regulatory regimes; and that strong systems and reporting capabilities are in place to ensure appropriate origination and servicing of the underlying assets.

The sponsor should be able to demonstrate expertise in providing liquidity and credit support in the context of ABCP conduits, and that it is supported by a management team with extensive industry experience.

The sponsor should at all times act in accordance with reasonable and prudent standards. The policies, procedures and risk management controls of the sponsor should be well documented, and the sponsor should adhere to good market practices and relevant regulatory regime. There should be strong systems and reporting capabilities in place at the sponsor.

The party or parties with fiduciary responsibility should act on a timely basis in the best interests of the investors.

The sponsor should ensure that it receives representations from the seller(s) and all other parties responsible for originating and servicing the asset pools that they:

1. 1.Have well documented procedures and policies in place to ensure appropriate servicing of the underlying assets;
2. 2.Have expertise in the origination of assets that are the same as or similar to those in the asset pools;
3. 3.Have extensive servicing and workout expertise, thorough legal and collateral knowledge and a track record in loss mitigation for the same or similar assets;
4. 4.Have expertise in the servicing of the underlying credit claims or receivables; and
5. 5.Are supported by a management team with extensive industry experience.

To help provide full transparency to investors and to assist them in the conduct of their due diligence, the sponsor should ensure that the contractual obligations, duties and responsibilities of all key parties to the conduit, both those with a fiduciary responsibility and the ancillary service providers, are defined clearly both in the initial offering and in any relevant underlying documentation²⁰ of the conduit and the ABCP program it issues.

The sponsor should also make representations and warranties to investors that the duties and responsibilities of all key parties are clearly defined at the transaction level.

The sponsor should ensure that the initial offering documentation disclosed to investors contains adequate provisions regarding the replacement of key counterparties of the conduit (e.g. bank account providers and derivatives counterparties) in the event of failure or non-performance or insolvency or deterioration of creditworthiness of any such counterparty.

The sponsor should also make representations and warranties to investors that provisions regarding the replacement of key counterparties at the transaction level are well documented.

The sponsor should provide sufficient information to investors about the liquidity facility and credit support provided to the ABCP program for them to understand its functioning and key risks.

The sponsor should conduct due diligence with respect to the transactions on behalf of the investors.

To assist the sponsor in meeting its fiduciary and contractual obligations, the duties and responsibilities of all key parties to all transactions (both those with a fiduciary responsibility and the ancillary service providers) should be defined clearly in all the documentation underlying these transactions and made available to the sponsor.

The sponsor should ensure that provisions regarding the replacement of key counterparties (in particular, the servicer or liquidity provider) in the event of failure or nonperformance or insolvency or other deterioration of any such counterparty for the transactions are well documented (in the documentation of these individual transactions).

To enhance the transparency and visibility of all receipts, payments and ledger entries at all times, the sponsor should ensure that, for all transactions, the performance reports include all of the following: the transactions’ income and disbursements, such as scheduled principal, redemption principal, scheduled interest, prepaid principal, past due interest and fees and charges, and delinquent, defaulted, restructured and diluted amounts; and accurate accounting for amounts attributable to principal and interest deficiency ledgers.