The SR introduces an EU-wide set of uniform measures regulating the securitisation market. This marks a significant piece of the EU's Capital Markets Union ("CMU") reform measures.
In an investment funds context, the SR impacts both AIFs and UCITS and significant points of note are:
- This marks a shift whereby originators / sponsors / lenders will be directly obliged to meet the requirements of the SR rather than (as is currently the case under Directive 2011/61/EU ("AIFMD")) requiring the AIFM, as the investor, to determine that the originators / sponsors / lenders have complied.
- While key differences remain between US and EU risk retention requirements for securitisations, this development more closely aligns the two regimes insofar as both regimes now seek to regulate the originators / sponsors / lenders.
- Current due diligence, transparency and risk retention requirements in AIFMD, with respect to investment in securitisation positions will be repealed. Article 17 of AIFMD is replaced with a new provision stating that where AIFMs are exposed to securitisation positions which do not meet the requirements of the SR, the AIFM shall take corrective action.
- The anomaly whereby UCITS were not subject to due diligence, transparency and risk retention requirements with respect to investment in securitisation positions has been rectified. Article 50a of the UCITS Directive is replaced with a new provision stating that where UCITS are exposed to securitisation positions which do not meet the requirements of the SR, the UCITS shall take corrective action.
- The risk retention rules have been changed but the requirement that the originator / sponsor / lender retain an economic interest of not less than 5% in the securitisation has been retained.
- There are transitional provisions for positions issued prior to the effective date of the SR (i.e. 1 January 2019).