On 6 June 2019, the FCA published Policy Statement 19/15: Securitisation (Amendment) (EU Exit) Regulations 2019 and Securitisation Regulations 2018 (near final and final rules) (PS19/15).
The Securitisation (Amendment) (EU Exit) Regulations 2019 (the Brexit SI) will come into force on the day the UK leaves the EU in a hard Brexit scenario, and will transfer powers for the regulation of Securitisation Repositories (SRs) from the European Securities and Markets Authority (ESMA) to the FCA.
The EU Securitisation Regulation came into effect on 1 January 2019 and is directly applicable in the UK. To implement this EU Regulation in the UK HM Treasury has made an implementing statutory instrument, the Securitisation Regulations 2018 (2018 Regulations). This gives the FCA supervisory, disciplinary and investigatory powers over persons subject to the EU Regulation.
In PS19/15 the FCA sets out near final rules to implement the Brexit SI. The FCA also sets out final rules to reflect the additional powers given to it by the 2018 Regulations.
To accommodate the changes arising from the Brexit SI, the FCA has set out near final rules amending the Decision Procedure and Penalties Manual (DEPP) and the Enforcement Guide (EG) so that it can apply its existing enforcement processes in its new role as regulator of securitisation repositories (SRs). The changes to DEPP and EG are discussed in chapter 3 of PS19/15.
As regards the changes made by the Brexit SI, amendments to DEPP set out the decision-making procedure for:
- determining whether registration for a SR is to be refused: the FCA will use its executive procedures when deciding whether to refuse an application for registration as a SR;
- determining whether registration for a SR is to be withdrawn: the regulatory decisions committee (RDC) procedure will be used;
- determining whether an application from a SR to withdraw its registration should be rejected: The FCA will use its executive procedures when deciding whether to reject an application from an SR to withdraw its registration. If representations are made in response to the written notice setting out the FCA’s decision, a review of the decision will be made under RDC procedures;
- determining when to publish a statement about a contravention of the Brexit SI by an SR: the RDC will take the decision to impose a public censure in contested cases. The settlement decision makers will take the decision in settled cases; and
- determining when to impose a financial penalty on a SR: the RDC will take the decision to impose a financial penalty in contested cases. The settlement decision makers will take the decision in settled cases.
The FCA has also added a new section in chapter 19 of EG which sets out how it will exercise its enforcement powers over SRs. The FCA’s approach will mirror its approach to enforcement under the Financial Services and Markets Act 2000.
As regards the changes being made by the 2018 Regulations, the FCA notes that it will apply its existing sanctioning policies as set out in DEPP 6A when deciding whether to impose a suspension, condition, limitation or other restrictions on an individual or authorised person. However, the FCA has amended DEPP 2 Annex 1 so that it sets out that the RDC will be the decision-maker for:
- imposing a suspension, condition or limitation on an individual for a breach of a requirement imposed by or under the 2018 Regulations; and
- imposing a suspension, limitation or other restriction on an authorised person for a breach of a requirement imposed by or under the 2018 Regulations.
Additionally in relation to the 2018 Regulations, Chapter 19.38 4 of the Enforcement Guide have been amended to add the additional powers to impose a suspension, condition, limitation or other restrictions on persons for a breach of a requirement imposed by or under the 2018 Regulations.