The Managed Funds Association has sent a letter to the UK Financial Conduct Authority proposing improvements to the UK regulatory framework for securitisations that it says would expand capital investment in the UK and optimise risk management on behalf of UK investors.
The Managed Funds Association (MFA) has sent a letter to the UK Financial Conduct Authority (FCA) proposing improvements to the UK regulatory framework for securitisations that is says would expand capital investment in the UK and optimise risk management on behalf of UK investors.
The MFA’s letter encourages the FCA to address regulatory redundancies and enhance compatibility with the rules governing other jurisdictions with thriving securitisation markets, such as the US.
The MFA’s letter is in anticipation of the repeal of the UK Securitisation Regulation (Sec Reg), inherited from the EU, in the third quarter of 2023 and subsequent consultation on the next iteration of the Sec Reg. In the letter, MFA encourages the FCA to set the scope of the consultation as widely as possible to maximise the ability to create a more agile regulatory framework.
The MFA’s letter emphasises that the general due diligence requirements under the Sec Reg are redundant and ultimately inhibit alternative investment fund managers’ (AIFMs) global investment strategies. MFA calls on the FCA to remove AIFMs from the scope of due diligence requirements altogether as they are already subject to robust requirements under the Alternative Investment Fund Managers Directive (AIFMD). From the letter:
The letter also notes how the risk retention due diligence requirement prevents AIFMs from investing in many US securitisations, even though the US regulations have similar risk retention rules.
“FCA has an opportunity to empower UK investors to better engage in global securitisation 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 asset managers have the tools they need to manage risk and deliver reliable returns for their investors, including UK pensions. MFA appreciates the FCA’s industry engagement and commitment to improving the regulatory framework for securitisations and solidifying the UK as a leading financial centre.”