Earlier this week, the UK Treasury published a draft statutory instrument on securitisation. For our readers less well versed in the British constitutional arrangements, a statutory instrument is a secondary piece of legislation passed by the government pursuant to an Act of Parliament (pace my British legal friend, I know but we are summarising here…). In Brussels it would be known as Level 2 and in many European jurisdictions as a “decree”.
This draft is designed to fill in gaps left by the post-Brexit repeal of EU legislation, including the Securitisation Regulation. As assidous followers of PCS’ news items know, the key change made by the UK in its approach to the regulation of securitisation is to push down most of what appears in the Brussels’ levels 1 and 2 rules to the PRA and the FCA rulebooks.
For reasons too technical to set out here, this delegation to regulatory authorities still left a few gaps which this statutory instrument is designed to fill.
Unless you are a British lawyer, there is little here to get your blood flowing and certainly no dramatic surprises or changes of direction.
Interesting titbits are the proposed due diligence rules for pension funds. These are the result of a highly technical legislative issue that neither the PRA nor the FCA are mandated and therefore allowed to make rules for pension funds. So, if a pension fund is an investor, it is not bound by the PRA or FCA rule books and therefore would, absent any other rules, not have any obligations qua investor. To plug that gap, the draft statutory instrument lays down the "Article 5" obligations of UK pension funds. Now, assuming HMT, the PRA and the FCA are on speaking terms, these rules for pension fund due diligence should be either identical or very close to those scheduled to appear in the PRA and FCA rules books. So this might be a good preview. But, then again....
Another interesting point is that the statutory instrument (still in draft) is supposed to come into force on November 1st. Since it repeals the EU rules and it is pretty inconceivable that the Treasury would leave securitisation with no regulatory regime, we can deduce that the “drop dead” date for the PRA and FCA to publish their securitisation rulebooks is end of September. But then again…
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