November 19, 2018

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FCA Consults on Changes to DEPP and EG in Its Handbook to Reflect EU Securitization Regulation Implementation

On October 12, the UK Financial Conduct Authority (FCA) published a consultation paper (October Consultation Paper) setting out its proposals to amend the Decision Procedure and Penalties (DEPP) manual and Enforcement Guide (EG) of the FCA Handbook. The FCA explains that the amendments are needed because of the changes introduced by the statutory instrument (SI), which will be given to the UK Parliament by HM Treasury, implementing the EU Securitization Regulation (SR) that goes into effect on January 1, 2019.

The October Consultation Paper should be read alongside the FCA’s consultation paper that it published on August 1 (August Consultation Paper), which sets out other changes that will be needed to the FCA Handbook to implement the SR.

Proposed amendments by the FCA in the October Consultation Paper include the following:

  1. changing the decision-making procedure in DEPP for applications for the temporary withdrawal of and the cancellation of authorization of entities wishing to act as third-party verifiers (TPVs);

  2. extending the FCA’s existing policy and procedure in the exercise of its disciplinary and investigatory powers to cover firms already authorized by the FCA and the UK Prudential Regulation Authority (PRA), when those firms are acting as sponsors, originators, original lenders or securitization special purpose entity (SSPEs) in a securitization or other persons subject to the SR;

  3. exercising investigatory and disciplinary powers over TPVs and originators, sponsors, original lenders, SSPEs and other persons subject to the EU SR that are not authorized by the FCA or the PRA, and that fail to adhere to certain obligations set out in the SI;

  4. imposing a temporary disciplinary prohibition preventing an individual from holding an office or position involving responsibility for taking decisions about the management of an originator, sponsor or SSPE if the individual has contravened a requirement; and

  5. imposing a temporary ban on simple, transparent and standardized notifications.

The FCA’s proposals are based on the expectation that the SI will give the FCA supervisory, disciplinary and investigatory powers over persons subject to the SR. If the SI differs from this understanding, then the FCA may need to change its approach.

The deadline for comments on the proposals in the October Consultation Paper is November 2.

The October Consultation Paper is available here.

The August Consultation Paper is available here.

©2018 Katten Muchin Rosenman LLP

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John Ahern, Financial Attorney, London, Katten Law Firm
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John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
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Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
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Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
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Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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