Addendum to CP23/17: Rules relating to Securitisation [pdf]

In view of the ongoing consultation (CP23/17) as regards new FCA securitization rules to replace firm-facing provisions in current retained EU legislation (REUL) for securitizations (please see EventID 22589 in this context), the Financial Conduct Authority (FCA) has published a related addendum. The addendum corrects some of the proposed new provisions in relation to the application of due diligence requirements and the delegation of responsibilities by institutional investors.
Specifically, in the CP document, references are made to Occupational Pension Schemes (OPS) to indicate that such schemes will remain under the regulation of The Pensions Regulator (TPR) as far as securitizations are concerned. Thus, OPS‘ are excluded from the institutional investor due diligence requirements of the FCA.
The CP further outlines that institutional investors subject to FCA regulation are exempt from due diligence obligations when delegating investment management decisions to a third party. This exemption, however, does not apply where such decisions are delegated to an OPS. Thus, when an OPS performs investment decisions on behalf of an institutional investor supervised by the FCA, the institutional investor still remains responsible for fulfilling its due diligence obligations; so the responsibility remains with the (legal) person regulated by the FCA and not the OPS.
The addendum makes corresponding changes to the draft provisions to reflect and make clear this position.
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To conclude, the FCA notes that – although the policy intention and the cost-benefit analysis detailed in the CP remain unchanged – it will extend the consultation period by three weeks to allow respondents to review the amendments introduced by this addendum. Consequently, the consultation period for Chapter 4, which addresses due diligence requirements for institutional investors, has been extended until November 20, 2023. Otherwise, the consultation period for CP23/17 will conclude on October 30, 2023.