Shearman & Sterling LLP | Financial Regulatory Developments Focus | UK Conduct Regulator Consults on Enforcement Powers under the Securitization Regulation
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  • UK Conduct Regulator Consults on Enforcement Powers under the Securitization Regulation
    10/12/2018
    The U.K. Financial Conduct Authority has published a further consultation on implementation of the EU Securitization Regulation. The Securitization Regulation (also known as the STS Regulation) and a related amendment to the Capital Requirements Regulation came into effect on January 17, 2018. The majority of the provisions of the Securitization Regulation and the related amendment to the CRR will apply directly across the EU from January 1, 2019. While the Securitization Regulation is directly applicable, HM Treasury must make certain legislative amendments to align provisions of U.K. law with the Regulation. The FCA must also align its Handbook and launched a first consultation in August 2018 on its proposals for Handbook amendments.

    In this further consultation, the FCA is consulting on proposed amendments to its Decision Procedure and Penalties manual (DEPP) and to its Enforcement Guide, to reflect the expected provisions of a Statutory Instrument which is expected to be laid before Parliament by HM Treasury in December 2018.

    It is expected that the Statutory Instrument will: (a) empower the FCA to address contraventions of the Securitization Regulation by authorized firms; (b) empower the FCA to sanction third-party verification agents (TPVs) and unauthorized entities; (c) set out a procedure for authorizing TPVs and for cancelling and temporarily withdrawing their authorization; and (d) give the FCA additional powers relating to contraventions of the Securitization Regulation. The new powers include a power to impose temporary disciplinary prohibitions on individuals and a power to impose a temporary ban on simple, transparent and standardized notifications.

    In the consultation, the FCA also proposes changes to its decision-making procedures in DEPP to reflect the provisions of the SI. Finally, it proposes to add a new section into its Enforcement Guide, setting out how it will exercise its powers against individuals, TPVs, authorized entities and unauthorized entities that are alleged to have contravened the Securitization Regulation.

    The consultation proposals will affect entities wishing to act as TPVs, originators, sponsors, securitization special purpose entities, sellers of securitization positions and unauthorized entities participating in securitizations that are subject to the Securitization Regulation. The proposals also affect individuals holding offices or positions involving responsibility for taking management decisions at originators, sponsors or SSPEs.

    Comments on the consultation are invited by November 2, 2018. The shorter than usual three-week consultation period is due to the proposed changes being either consequential or involving an extension of the FCA's existing approach. The short consultation will also enable the FCA to publish its planned Policy Statement in December 2018. The changes to DEPP and EG will take effect in line with the commencement date that will be set for the SI.

    View the consultation (FCA CP 18/30).

    View details of the FCA's August 2018 consultation.

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    TOPIC: Securities