UK Law and Practice Contributed by: Guy O’Keefe, Richard Jones, Oliver Wicker and Kate Patane, Slaughter and May
sation special purpose entity (SSPE) of a secu - ritisation. Between the end of the Brexit transition peri - od and 1 November 2024, the assimilated EU Securitisation Regulations applied in Britain, with some modifications (the UK Securitisation Regulations). The UK Securitisation Regulations set out the following: • standards for simple, transparent and stand - ardised (STS) securitisations; • risk retention rules where originators are required to maintain a material economic interest in the risk of the assets; and • disclosure and reporting requirements to ensure investors have sufficient information. Since 1 November 2024, the new UK Securiti - sation Regulation Framework has largely repli - cated the UK Securitisation Regulations, albeit with some technical improvements with respect to (but not limited to) due diligence, risk reten - tion and transparency requirements. It is likely, however, that further changes will be made over time (and, indeed, the new UK rules have been constructed in a manner that facilitates future changes). Bear in mind, though, that even if the UK rules themselves do not change, there remains the possibility that the EU Securitisation Regulations will diverge over time, resulting in a dual compliance burden for UK issuers market - ing into both the UK and the EU (as is almost always the case). There are also currently other relevant areas of the FCA and PRA rules that include regulations on the capital treatment for banks and invest - ment firms, and the Financial Services and Mar - kets Act 2000 (FSMA 2000) provides the over - arching framework for financial regulation.
For securitisations involving residential mort - gages, the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 requires specific authorisations for mortgage lending and administration. Consumer credit laws will also apply in secu - ritisations involving consumer loans, governing the conduct of the servicer. In particular, a wide- ranging consumer duty applies in the UK, which includes a requirement for consumer lenders to provide good customer outcomes. Investor due diligence will typically involve assessing the extent to which the originator and servicer have complied with applicable consumer legis - lation when originating and servicing loans, the risk being that non-compliance could reduce the amounts recoverable and ultimately reduce amounts available to pay and repay investors. Lastly, international standards like Basel III (implemented in the UK and undergoing regula - tory review) impact the securitisation market by setting out risk-based capital requirements for banking institutions that may hold securitised assets. 1.4 Special Purpose Entity (SPE) Jurisdiction SPEs can be incorporated in a variety of jurisdic - tions, depending on the goals of the securitisa - tion, the originator’s location, tax considerations, regulatory concerns and investor preferences. United Kingdom (England and Wales) SPEs incorporated in the UK are frequently seen. The UK has a clear legal framework, including for corporate establishment and tax. Using an SPE established in the UK is often the simplest choice where a securitisation relates to UK assets.
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