On 12 October 2018, the FCA published Consultation Paper 18/30: EU Securitisation Regulation Implementation (DEPP and EG) (CP18/30).
The EU Securitisation Regulation (EU SR) comes into effect on 1 January 2019. To implement the EU SR in the UK, HM Treasury will lay an implementing statutory instrument (draft SI) before Parliament. The SI will give the FCA supervisory, disciplinary and investigatory powers over persons subject to the EU SR. A draft of the SI is expected to be laid before Parliament in early December 2018. Among other things, HM Treasury has confirmed its intention to name the FCA as the competent authority for the UK and as such it will be responsible for authorising Third Party Verification Agents (TPVs) from 1 January 2019.
A TPV can be used by a sponsor, originator and securitisation vehicle to check whether a securitisation is compliant with simple, transparent and standardised criteria, as set out in the EU SR.
In addition, earlier this year the FCA published Consultation Paper 18/22: Handbook changes to reflect the application of the EU SR and the amendment to the Capital Requirement Regulation (CP18/22). In CP18/22 the FCA set out proposed changes to its Handbook in order to keep it consistent with the EU SR. In particular, the FCA set out in CP18/22 the new application and periodic fees for the authorisation of TPVs.
In CP18/30 the FCA sets out proposals to amend its Decision Procedure and Penalties manual (DEPP) and Enforcement Guide (EG) due to the changes that the EU SR will introduce.
In summary the FCA’s proposals include:
- applying its existing policy and procedure in the exercise of disciplinary and investigatory powers over originators, sponsors, original lenders, securitisation special purpose entities (SSPEs) and other persons subject to the EU SR that are already FCA or PRA authorised firms; and
- a decision-making procedure for authorising TPVs, the temporary withdrawal of a TPV’s authorisation and the cancellation of a TPV’s authorisation.
The FCA also proposes decision-making procedures to:
- exercise investigatory and disciplinary powers over TPVs and originators, sponsors, original lenders, SSPEs and other persons subject to the EU SR that are not authorised by the FCA or the PRA under the Financial Services and Markets Act 2000 and that fail to adhere to certain obligations set out in the draft SI;
- impose a temporary disciplinary prohibition preventing an individual holding an office or position involving responsibility for taking decisions about the management of an originator, sponsor, or SSPE if the individual has contravened a requirement; and
- impose a temporary ban on simple, transparent and standardised notifications.
The deadline for comments on CP18/30 is 2 November 2018.