EG 19.38 UK Securitisation Regulations

1The UK Securitisation Regulations implement the Securitisation Regulation. The FCA has investigative and enforcement powers in relation to both criminal and non-criminal breaches of the UK Securitisation Regulations, Securitisation Regulation and any directly applicable EU regulation made under the Securitisation Regulation.

1The Securitisation Regulation and the UK Securitisation Regulations seek to make the securitisation market work more effectively. They aim to address some of the harms to investors identified in these markets following the financial crisis, including the lack of adequate disclosure, and the misalignment between issuers’ and investors’ interests. The new framework consolidates existing requirements and strengthens the legislation on securitisation. The Securitisation Regulation and the UK Securitisation Regulations promote transparency and appropriate due diligence by investors for securitisation investments. They create a framework for simple, transparent and standardised (STS) securitisations. This framework will help to reduce the harm from investors making badly-informed decisions because they fail to understand and appropriately analyse the risks in their securitisation investments.

1The FCA’s approach to enforcement under the UK Securitisation Regulations, whether the person is authorised or not, will mirror our general approach to enforcing the Act, as set out in EG 2. We will seek to exercise our enforcement powers in a manner that is transparent, proportionate, responsive to the issue and consistent with our publicly stated policies. We will also seek to ensure fair treatment when exercising our enforcement powers. Finally we will aim to change the behaviour of the person who is the subject of our action in order to:

1. (1)

   deter future non-compliance by others;

2. (2)

   eliminate any financial gain or benefit from non-compliance; and

3. (3)

   remedy the harm caused by the non-compliance.

1The regulatory powers which the UK Securitisation Regulations provide to the FCA include the power:

1. (1)

   to require information and appoint investigators;

2. (2)

   of entry and inspection;

3. (3)

   to publicly censure;

4. (4)

   to impose financial penalties;

5. (5)

   to apply for an injunction or restitution order;

6. (6)

   to require restitution;

   3
7. (7)

   to impose temporary prohibitions on individuals holding management functions3; and

8. (8)

   3to impose a suspension, condition, limitation or other restriction.

1In addition, the UK Securitisation Regulations provide the power for the FCA to take criminal or non-criminal action for misleading the FCA.

1The UK Securitisation Regulations, for the most part, mirror the FCA’s investigative, sanctioning and regulatory powers under the Act. The FCA has decided to adopt procedures and policies in relation to the use of those powers akin to those we have under the Act. Key features of the FCA’s approach are described below.

1The UK Securitisation Regulations apply much of Part 11 of the Act. The effect of this is to apply the same procedures under the Act for appointing investigators and requiring information when investigating breaches of the Securitisation Regulation and the UK Securitisation Regulations.

1The FCA will notify the subject of the investigation that we have appointed investigators to carry out an investigation under the UK Securitisation Regulations and the reasons for the appointment, unless notification is likely to prejudice the investigation or otherwise result in it being frustrated. The FCA expects to carry out a scoping visit early on in the enforcement process in most cases. The FCA’s policy in non-criminal investigations under the UK Securitisation Regulations is to use powers to compel the provision of information in the same way as we would in the course of an investigation under the Act.

1The decision-making procedures for those decisions under the UK Securitisation Regulations requiring the giving of a warning notice, decision notice or a supervisory notice are dealt with in DEPP.

1The UK Securitisation Regulations do not require the FCA to have published procedures for commencing criminal prosecutions. However, in these situations the FCA expects that we will normally follow our decision-making procedures for the equivalent decisions under the Act, as set out in EG 12.

1The UK Securitisation Regulations do not require the FCA to have published procedures to apply to the court for an injunction or restitution order. However, the FCA will normally follow our decision-making procedures for the equivalent decisions under the Act, as set out in EG 10 and EG 11.

1The UK Securitisation Regulations require the FCA to give third party rights as set out in section 393 of the Act and to give access to certain material as set out in section 394 of the Act as applied by the UK Securitisation Regulations.

1Certain FCA decisions may be referred to the Tribunal by an aggrieved party.

1When determining whether to take action to impose a penalty or to issue a public censure under the UK Securitisation Regulations the FCA’s policy includes having regard to the relevant factors in DEPP 6.2 and DEPP 6.4. The FCA’s policy in relation to determining the level of a financial penalty includes having regard, where relevant, to DEPP 6.5 to DEPP 6.5B and DEPP 6.5D.

1As with cases under the Act, the FCA may settle or mediate appropriate cases involving non-criminal breaches of the UK Securitisation Regulations to assist us to exercise our functions under the UK Securitisation Regulations in the most efficient and economic way. See DEPP 5, DEPP 6.7 and EG 5 for further information on the settlement process and the settlement discount scheme.

1The FCA may impose under the UK Securitisation Regulations a temporary prohibition in respect of an individual holding an office or position involving responsibility for taking decisions about the management of an originator, sponsor or SSPE. When determining whether to impose a temporary prohibition and what the length of any temporary prohibition would be the FCA will have regard to the factors set out in DEPP 6A.

1The UK Securitisation Regulations apply section 169 of the Act which requires the FCA to publish a statement of policy on the conduct of certain interviews in response to request from overseas regulators. For the purposes of the UK Securitisation Regulations the FCA will follow the procedures described in DEPP 7.