MFA Proposes Reforms To The UK Securitisation Regulation

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MFA Proposes Reforms to the UK Securitisation Regulation PlatoBlockchain Data Intelligence. Vertical Search. Ai.

The Managed Funds Association (MFA) has written to
the Financial Conduct Authority (FCA) in the UK, proposing improvements to the securitization
regulation. In the letter, MFA proposed amendments aimed at expanding capital investment and optimizing risk management on behalf of investors.

MFA’s letter comes ahead
of the repeal of the UK Securitization Regulation expected
in the third quarter of 2023. In the document, the association urged the
financial regulator to address regulatory redundancies in the securitization
market and to ensure there is compatibility with the other markets, including the US.

“FCA has an
opportunity to empower UK
investors to better
engage in global securitization markets and compete on the global stage,”
said Jennifer Han, MFA Chief Counsel and Head of Global Regulatory Affairs. “Addressing the current regulation’s duplicative requirements will ensure
alternative managers have the tools they need to manage risk and deliver
reliable returns to investors, including UK pensioners.”

Specifically, MFA urges
the UK’s regulator to remove alternative investment fund managers from the scope of
due diligence requirements. According to the association, Alternative Investment Fund Managers (AIFMs) are already subjected to a broad set of requirements under the
Alternative Investment Fund Manager Directive (AIFMD).

Risk Retention Due
Diligence

Furthermore, MFA said
the risk retention due diligence requirement under the securitization market
laws prevented AIFMs from investing in many US securitizations. This, according
to the association, is despite the fact that US regulations have risk retention
rules similar to those of the FCA. Besides, the group said the requirements for risk retention include criteria difficult for AIFMs to meet.

“MFA members have
found that, in their experience, US securitizations that are compliant with the
risk retention requirements under the SEC Reg and EU SR are in the minority, in
spite of the fact that US originators/sponsors are required to retain
an interest in transactions, but they are able to do so through different
prescribed modalities, which can make it challenging for an AIFM to verify on a
deal-by-deal basis,” MFA said.

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