The Securitisation Regulations 2024

Made: 29th January 2024

Coming into force in accordance with regulation 2

In accordance with sections 71S(2) and 429(2) and (9) of the Financial Services and Markets Act 2000[^f00003] and section 4(9) of the Financial Services and Markets Act 2023[^f00004], a draft of these Regulations has been laid before, and approved by a resolution of, each House of Parliament.

PART 1 — Introductory

Citation and extent

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• (1) These Regulations may be cited as the Securitisation Regulations 2024.

• (2) These Regulations extend to England and Wales, Scotland and Northern Ireland.

Commencement

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• (1) The following provisions come into force on the day after that on which these Regulations are made—

• (a) this Part,

• (b) Part 2 (designated activities),

• (c) regulation 8 (matters to which FCA and PRA must have regard when making rules relating to securitisation),

• (d) regulation 13 (designation of country or territory in relation to securitisations), for the purpose only of enabling the Treasury to make regulations, and

• (e) the remaining provisions, for the purposes only of enabling the FCA or the PRA—

• (i) to make rules,

• (ii) to give directions or guidance, or

• (iii) to issue statements of policy.

• (2) So far as not already in force by virtue of paragraph (1), these Regulations come into force on 1st November 2024 (“the main commencement day”).

Interpretation

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• (1) In these Regulations—

• “ABCP programme” means a programme of securitisations the securities issued by which predominantly take the form of asset-backed commercial paper with an original maturity of one year or less;

• “ABCP transaction” means a securitisation within an ABCP programme;

• “authorised person” has the meaning given in section 31(2) of FSMA 2000;

• “the Capital Requirements Regulation” means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012[^f00006];

• “credit institution” means an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credits for its own account;

• “designated activity rules” means rules made under section 71N of FSMA 2000[^f00007];

• “EMIR” means Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories[^f00008];

• “established in the United Kingdom” means constituted under the law of a part of the United Kingdom—with a registered office in any part of the United Kingdom, orif the person does not have a registered office, with a head office in any part of the United Kingdom;

• “the EU Securitisation Regulation 2017” means Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisations, and amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012[^f00009];

• “FSMA 2000” means the Financial Services and Markets Act 2000;

• “institutional investor” means an investor which is one of the following—an insurance undertaking as defined in section 417(1) of FSMA 2000[^f00010];a reinsurance undertaking as defined in section 417(1) of FSMA 2000[^f00011];the trustees or managers of an occupational pension scheme;a fund manager of an occupational pension scheme appointed under section 34(2) of the Pensions Act 1995[^f00012] that, in respect of activity undertaken pursuant to that appointment, is authorised for the purposes of section 31 of FSMA 2000;an AIFM (as defined in regulation 4 of the Alternative Investment Fund Managers Regulations 2013[^f00013])—with permission under Part 4A of FSMA 2000[^f00014] in respect of the activity specified by article 51ZC of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001[^f00015] (managing an AIF), andwhich markets or manages an AIF (as defined in regulation 3 of the 2013 Regulations) in the United Kingdom,and for the purposes of sub-paragraph (ii), an AIFM markets an AIF when the AIFM makes a direct or indirect offering or placement of units or shares of an AIF managed by it to or with an investor domiciled or with a registered office in the United Kingdom, or when another person makes such an offering or placement at the initiative of, or on behalf of, the AIFM;a small registered UK AIFM;a management company as defined in section 237(2) of FSMA 2000[^f00016];a UCITS, as defined in section 236A of FSMA 2000[^f00017], which is an authorised open ended investment company as defined in section 237(3) of FSMA 2000;a CRR firm as defined in Article 4(1)(2A) of the Capital Requirements Regulation[^f00018];an FCA investment firm as defined in Article 4(1)(2AB) of the Capital Requirements Regulation[^f00019];

• “investor” means a person holding a securitisation position;

• “main commencement day” has the meaning given in regulation 2(2);

• “occupational pension scheme” means an occupational pension scheme as defined in section 1(1) of the Pension Schemes Act 1993[^f00020] that has its main administration in the United Kingdom;

• “original lender”, in relation to a securitisation, means an entity which, itself or through related entities, directly or indirectly, concluded the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposures being securitised;

• “originator”, in relation to a securitisation, means an entity which—itself or through related entities, directly or indirectly, was involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposures being securitised, orpurchases a third party’s exposures on its own account and then securitises them;

• “overseas STS securitisation” has the meaning given in regulation 12(2);

• “PRA-authorised person” has the meaning given in section 2B(5) of FSMA 2000[^f00021];

• “securitisation” means a transaction or scheme, whereby the credit risk associated with an exposure or a pool of exposures is tranched, having all of the following characteristics—payments in the transaction or scheme are dependent upon the performance of the exposure or of the pool of exposures,the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme, andthe transaction or scheme does not create exposures which possess all of the following characteristics—the exposure is to an entity which was created specifically to finance or operate physical assets or is an economically comparable exposure;the contractual arrangements give the lender a substantial degree of control over the assets and the income that they generate;the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise;

• “securitisation position” means an exposure to a securitisation;

• “securitisation repository” means a body corporate that centrally collects and maintains the records of securitisations;

• “securitisation special purpose entity” or “SSPE” means a corporation, trust or other entity, other than an originator or sponsor, established for the purpose of carrying out one or more securitisations, the activities of which are limited to those appropriate to accomplishing that objective and the structure of which is intended to isolate the obligations of the securitisation special purpose entity from those of the originator;

• “small registered UK AIFM” has the meaning given in regulation 2(1) of the Alternative Investment Fund Managers Regulations 2013[^f00022];

• “sponsor” means a credit institution or an investment firm as defined in paragraph 1A of Article 2 of Regulation 600/2014/EU[^f00023], whether located in the United Kingdom or in a country or territory outside the United Kingdom, which—is not an originator, andeither—establishes and manages an ABCP programme or other securitisation that purchases exposures from third party entities, orestablishes an ABCP programme or other securitisation that purchases exposures from third party entities and delegates the day-to-day active portfolio management involved in that securitisation to an entity which is authorised to manage assets belonging to another person in accordance with the law of the country or territory in which the entity is established;

• “STS criteria” has the meaning given in regulation 9(1)(a);

• “STS notification” means a notification under regulation 10(1);

• “STS securitisation” has the meaning given in regulation 9;

• “territory” includes the European Union and any other international organisation or authority comprising countries or territories;

• “third party verifier” has the meaning given in regulation 24;

• “tranche” means a contractually established segment of the credit risk associated with an exposure or a pool of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in another segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments;

• “the Tribunal” means the Upper Tribunal;

• “trustees or managers”, in relation to an occupational pension scheme, means—in relation to a scheme established under a trust, the trustees, andin relation to any other scheme, the persons responsible for the management of the scheme;

• “working day” means any day other that a Saturday, a Sunday, Christmas Day, Good Friday or a day which is a bank holiday under the Banking and Financial Dealings Act 1971[^f00024] in any part of the United Kingdom.

• (2) In these Regulations, references to rules made by the FCA or the PRA are to those rules as they have effect from time to time.

PART 2 — Designated activities

Activities specified as designated activities for purposes of FSMA 2000

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• (1) The following activities are specified under section 71K of FSMA 2000[^f00025] as designated activities for the purposes of that Act, where those activities are carried out by a person that is established in the United Kingdom—

• (a) acting as one of the following in a securitisation—

• (i) an originator,

• (ii) a sponsor,

• (iii) an original lender, or

• (iv) a securitisation special purpose entity;

• (b) selling a securitisation position to a retail client located in the United Kingdom.

• (2) In this regulation “retail client” has the meaning given in rules made by the FCA.

FCA rules

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• (1) The FCA may make designated activity rules relating to the activities specified in regulation 4.

• (2) Rules made by virtue of paragraph (1) may not impose requirements on a PRA-authorised person with respect to—

• (a) due diligence in relation to any securitisation, including monitoring, stress-testing and risk management,

• (b) the retention of any interest or risk in any securitisation or the selection of the assets for the securitisation,

• (c) the provision of information in relation to any securitisation,

• (d) the inclusion of securitisation positions in the underlying exposures that may be used in a securitisation, or

• (e) arrangements concerning the granting of credit applying to exposures to be securitised, or verification of the making of such arrangements where the originator purchases exposures from a third party on its own account.

• (3) Paragraph (2) does not apply to the imposition of requirements with respect to STS criteria or STS notifications.

• (4) The FCA must consult the PRA before making rules by virtue of paragraph (1) imposing a requirement on a PRA-authorised person.

• (5) The FCA may by notice suspend any rules made by virtue of paragraph (1) for such period as it considers appropriate (and see section 71N(6)[^f00026] which imposes a duty to consult the PRA beforehand).

• (6) Rules made by virtue of paragraph (1) may include provision—

• (a) enabling requirements imposed by the rules to be dispensed with, modified, or reimposed (with or without modification) in such cases or circumstances as may be determined by the FCA under the rules;

• (b) enabling publication of any decision made under sub-paragraph (a) in the way appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it.

Power of FCA to give directions

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• (1) The FCA may give directions under section 71O of FSMA 2000[^f00027] imposing on a person or a description of persons such requirements as the FCA considers appropriate in relation to the carrying on of an activity specified in regulation 4.

• (2) In the following provisions of this regulation “a direction” means a direction given under section 71O of FSMA 2000 by virtue of paragraph (1).

• (3) The FCA may give a direction only if it appears to the FCA—

• (a) in the case of a direction given to a person, that in carrying on the activity the person is failing, or is likely to fail, to comply with a requirement imposed—

• (i) by designated activity rules made by virtue of regulation 5, ...

• (ia) by regulation 8A (restriction on establishment of an SSPE), or

• (ii) by Part 4 (simple, transparent and standardised securitisations), or

• (b) in the case of a direction given to a person or a description of persons, that it is desirable to exercise the power—

• (i) in order to reduce risks, including reputational risks, arising from participation in securitisations or investment in securitisations, or

• (ii) in order to advance any of the FCA’s operational objectives set out in section 1B(3) of FSMA 2000[^f00028].

• (4) Subject to paragraph (5), the power to give a direction includes (among other things) power—

• (a) to prohibit a person from selling a securitisation position to retail clients;

• (b) to impose requirements with respect to—

• (i) due diligence in relation to any securitisation, including monitoring, stress-testing and risk management,

• (ii) the retention of any interest or risk in any securitisation or the selection of the assets for the securitisation,

• (iii) the provision of information in relation to any securitisation,

• (iv) the inclusion of securitisation positions in the underlying exposures that may be used in a securitisation, or

• (v) arrangements concerning the granting of credit applying to exposures to be securitised, or verification of the making of such arrangements where the originator purchases exposures from a third party on its own account.

• (5) A direction may not impose requirements on a PRA-authorised person with respect to any of the matters mentioned in paragraph (4)(b).

• (6) Paragraph (5) does not apply to the imposition of requirements with respect to STS criteria or STS notifications.

• (7) Before giving, varying or revoking a direction where the exercise of the power relates to a PRA-authorised person, the FCA must consult the PRA.

Directions: procedure

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• (1) This regulation applies to an exercise by the FCA of the power to give a direction under section 71O of FSMA 2000[^f00029] by virtue of regulation 6 unless—

• (a) the direction is given to a description of persons, and

• (b) the FCA considers it appropriate to publish the direction under subsection (9) of section 71O instead of proceeding under subsection (8) of that section.

• (2) If the FCA proposes to give a direction, or gives a direction with immediate effect, the FCA must give written notice to the person concerned (“P”).

• (3) A direction takes effect—

• (a) immediately, if the notice under paragraph (2) states that this is the case,

• (b) on such other date as may be specified in the notice, or

• (c) if no date is specified in the notice, when the matter to which the notice relates is no longer open to review.