Background:

On June 24, the UK Treasury released a “call for evidence” inviting comments from the securitization industry to assist with its preparation of a report to the UK Parliament regarding proposed securitization regulations in the UK. On September 2, SFA submitted a response to the call for evidence following collaboration with the Association for Financial Markets in Europe, UK Finance, and the Australian Securitisation Forum.  SFA and its global partners were aligned in our concerns regarding ambiguity around the geographical scope of the requirements and how this has impeded investments in third-country securitization transactions.

Key Points:

• SFA’s response focuses on the scope of due diligence obligations required of EU investors with respect to non-EU issuance and advocates that UK institutional investors should conduct due diligence that is proportionate to the risk profile of a securitization position.
• Such a “proportionate due diligence” approach would include an obligation to ensure the investor obtains sufficient information to have an appropriate understanding of both the transaction and the underlying assets.
• Investors should receive guidance from UK regulators such as the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) in a way that is responsive to market needs.