On 27 November, HM Treasury laid the Securitisation Regulations 2023 before the House of Commons and House of Lords.  This Statutory Instrument (SI) creates a new framework within which the FCA and the PRA can make rules in relation to securitisation.  Specifically:

• The SI provides the FCA with powers to make rules for certain activities, products, or conduct for facilitating securitisations, including for firms not authorised by the FCA and PRA.  
• It also provides the FCA with a specific rule-making power for small registered UK Alternative Investment Fund Managers (AIFMs), particularly so that it can make due diligence requirements for these AIFMs.
• The SI makes some changes to the regulatory perimeter, including scoping out non-UK AIFMs from the definition of institutional investor.  This means that non-UK AIFMs will not be subject to UK due diligence requirements, which may remove a disincentive for them from investing in UK securitisations.
• The SI also places an obligation on the FCA and PRA to make due diligence rules for certain types of institutional investors.  Due diligence requirements for occupational pension schemes will remain in legislation and be supervised by The Pensions Regulator.  These requirements will be restated as part of a further SI in 2024 to ensure clarity in legislation as to which firms should be subject to due diligence requirements.
• The SI modifies HM Treasury’s existing power to recognise STS-equivalent non-UK securitisations under a refreshed ‘overseas simple, transparent and standardised securitisations regime’.  It also requires the FCA and PRA to have regard to the coherence of the overall framework for the regulation of securitisation when making their rules for different firms.

This SI is currently undergoing parliamentary approval and will come fully into force alongside new FCA and PRA rules and the commencement of the repeal of retained EU law in relation to securitisation.  HM Treasury also highlighted that the outcomes of the FCA’s and PRA’s (to which AIMA/ACC responded) consultations are expected to be published by Q2 2024.

For further information, please contact Guillermo Pérez Molina, Private Credit Associate.