SECN 4.2 Before holding a securitisation position

Prior to holding a securitisation position, an institutional investor, other than the originator, sponsor or original lender, shall verify that:

1. (a)

   where the originator or original lender is established in the United Kingdom and is not a CRR firm or FCA investment firm, the originator or original lender grants all the credits giving rise to the underlying exposures (unless they are trade receivables not originated in the form of a loan) on the basis of:

   1. (i)

      sound and well-defined criteria; and

   2. (ii)

      clearly established processes for approving, amending, renewing and financing those credits,

1and has effective systems in place to apply those criteria and processes, in accordance with SECN 8.2 (or equivalent PRA rules);

1. (b)

   where the originator or original lender is not established in the United Kingdom, the originator or original lender grants all the credits giving rise to the underlying exposures (unless they are trade receivables not originated in the form of a loan) on the basis of:

   1. (i)

      sound and well-defined criteria; and

   2. (ii)

      clearly established processes for approving, amending, renewing and financing those credits,

1and has effective systems in place to apply those criteria and processes, to ensure that credit granting is based on a thorough assessment of the obligor’s creditworthiness;

1. (c)

   if established in the United Kingdom, the originator, sponsor or original lender retains on an ongoing basis a material net economic interest in accordance with SECN 5 (or equivalent PRA rules) and the risk retention is disclosed to the institutional investor in accordance with SECN 6, SECN 11 and SECN 12 (or equivalent PRA rules);

2. (d)

   if not established in the United Kingdom, the originator, sponsor or original lender retains on an ongoing basis a material net economic interest which, in any event, must not be less than 5%, determined in accordance with SECN 5 (or equivalent PRA rules), and discloses the risk retention to institutional investors; and

3. (e)

   the originator, sponsor or SSPE has made available sufficient information to enable the institutional investor independently to assess the risks of holding the securitisation position, and has committed to make further information available on an ongoing basis, as appropriate. That information must include at least the following:

   	Information	Frequency
   11	In the case of a securitisation which is not an ABCP programme or an ABCP transaction, details of the underlying exposures.	At least quarterly.
   2	In the case of an ABCP programme or an ABCP transaction, information on the underlying receivables or credit claims.	At least monthly.
   3	Investor reports providing periodic updates on: (i) the credit quality and performance of the underlying exposures; (ii) any relevant financial or other triggers contained in the transaction documentation, including information on events which trigger changes to the priority of payments or a substitution of any counterparty to the transaction; (iii) data on the cash flows generated by the underlying exposures and by the liabilities of the securitisation; and (iv) the calculation and modality of retention of a material net economic interest in the transaction by the originator, sponsor or original lender.	(i) At least quarterly in the case of a securitisation which is not an ABCP programme or an ABCP transaction. (ii) At least monthly in the case of an ABCP programme or an ABCP transaction.
   4	All information on the legal documentation needed to understand the transaction, including detail of the legal provisions governing the structure of the transaction, any credit enhancement or liquidity support features, the cash flows and loss waterfalls, investors’ voting rights, and any triggers or other events that could result in a material impact on the performance of the securitisation position.	In the case of primary market investments: (i) before pricing or commitment to invest in draft or initial form; (ii) no later than 15 days after closing of the transaction in final form; and (iii) an updated version as soon as practicable following any material change. In the case of secondary market investments: (i) before a commitment to invest in final form; and (ii) an updated version as soon as practicable following any material change.
   5	Information describing any changes or events materially affecting the transaction, including breaches of obligations under the transaction documents.	As soon as practicable following that material change or event.
   6	Any approved prospectus or other offering or marketing document prepared with the cooperation of the originator or sponsor.	In the case of primary market investments: (i) before pricing or commitment to invest in draft or initial form; and (ii) no later than 15 days after closing of the transaction in final form. In the case of secondary market investments, before a commitment to invest in final form.
   7	If there is an STS notification or a notification falling within regulation 12(3)(b) of the Securitisation Regulations 2024 in respect of the transaction, that STS notification or that notification falling within regulation 12(3)(b) of the Securitisation Regulations 2024.	In the case of primary market investments: (i) before pricing or commitment to invest in draft or initial form; (ii) no later than 15 days after closing of the transaction in final form; and (iii) an updated version as soon as practicable following any material change. In the case of secondary market investments: (i) before a commitment to invest in final form; and (ii) an updated version as soon as practicable following any material change.