From 1 April 2022, UK originators, sponsors and securitisation special purpose entities (SSPEs) may no longer use the EU reporting templates instead of the UK reporting templates for securitisations, and UK investors in securitisations with such entities will need to ensure that the UK templates are provided.
At the end of the Brexit transition period (which ended at 11:00 pm on 31 December 2020), the EU Securitisation Regulation (Regulation (EU) 2017/2402) was adopted as part of UK law as “retained EU law,” in the form that applied at that time, and was then amended by way of UK regulations to ensure that it would operate effectively in the United Kingdom (as so amended, the UK Securitisation Regulation).
The same process applied to other EU legislation that was directly effective in the United Kingdom at such time. This included the regulatory technical standards in relation to certain information and details of a securitisation that are required to be made available pursuant to Article 7 of the EU Securitisation Regulation (the EU RTS) and the implementing technical standards with regard to the standardised reporting templates for the information on the underlying exposures and the investor reports and, for securitisations that fall within the meaning of a “public” securitisation, templates with respect to inside information and significant events (the EU ITS). Consequently, the EU RTS and EU ITS were amended by way of certain UK technical standards which were put in place in the United Kingdom following the end of the Brexit transition period.
Article 7 of each of the EU Securitisation Regulation and the UK Securitisation Regulation requires certain information to be disclosed by the originator, sponsor and SSPE of a securitisation to the holders of a securitisation position, competent authorities, and, upon request, potential investors. One of the originator, sponsor and SSPE is required to be designated to provide such information. The required information is as follows:
There are corresponding obligations on investors to ensure that the required information is provided. Under Article 5(1)(e) of the UK Securitisation Regulation, certain institutional investors are required to verify, before holding a securitisation position, that if the originator, sponsor or SSPE is established in the United Kingdom, it has, where applicable, made available the information required by Article 7 of the UK Securitisation Regulation in accordance with the frequency and modalities provided therein.
While the UK Securitisation Regulation regime has been in place from the end of the Brexit transition period, the “Temporary Transitional Power” (TTP) allowed the UK regulators to put in place certain transitional provisions enabling UK regulated entities to choose whether to comply with certain rules under the UK Securitisation Regulation regime or to continue complying with the equivalent rules under the EU Securitisation Regulation regime for a temporary period (the TTP Period). As a result, UK regulated entities have had time to adjust to the new UK rules and have been able to continue using the EU reporting templates instead of the UK reporting templates, if they so wished, during the TTP Period.
The TTP Period came to an end on 31 March 2022. This means that UK institutional investors investing in a securitisation with an originator, sponsor or SSPE established in the United Kingdom will need to obtain the required information from UK originators, sponsors and SSPEs in the form of the relevant UK reporting templates, and UK originators, sponsors and SSPEs will need to ensure that the relevant UK reporting templates are now used. The FCA securitisation webpage provides XML schemas and validation rules with respect to the UK templates.
The situation is more complicated where any of the originator, sponsor or SSPE is not established in the United Kingdom. Under Article 5(1)(f) of the UK Securitisation Regulation, where the originator, sponsor or SSPE is established in a third country (i.e., not in the United Kingdom), a UK institutional investor will need to verify that such entity has made available information that is substantially the same as that which it would have made available in accordance with Article 5(1)(e) if it had been established in the United Kingdom, with the same frequency and modalities. It is unclear how the words “substantially the same” should be interpreted. However, it seems very likely that the provision of the relevant EU reporting templates would currently be sufficient to meet this requirement, as the form and content of the required information are very similar.
In some transactions, one or more parties may be bound by the EU Securitisation Regulation regime while one or more other parties are subject to the UK Securitisation Regulation regime, meaning that dual compliance will be required. Care will need to be taken to ensure that the various parties comply with the relevant provisions of the applicable regime.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the author, Merryn Craske, or any of the following Morgan Lewis lawyers:
Chicago
Patrick J. Lampe
Philip W. Russell
Jeffrey D. Weinstein
London
Merryn Craske
Julian Goodman
Theresa Kradjian
New York
Reed D. Auerbach
Steven H. Becker
Harlyn Bohensky
Matthew P. Joseph
Keith L. Krasney
Steve Levitan
Edmond Seferi
Washington, DC
Asa J. Herald
Cory E. Barry
Jeffrey R. Johnson
Mark R. Riccardi
Paul R. St. Lawrence
Charles A. Sweet
Alex Velinsky