REGULATORY REQUIREMENTS APPLICABLE TO SECURITISATION VEHICLES IN MALTA

Transcription

1 REGULATORY REQUIREMENTS APPLICABLE TO SECURITISATION VEHICLES IN MALTA CREATING LIQUIDITY: TRENDS IN INTERNATIONAL SECURITISATION SEMINAR, 30 SEPTEMBER 2016 DR MICHELLE MIZZI BUONTEMPO - DIRECTOR, CONDUCT SUPERVISORY UNIT

2 INTRODUCTION LEGAL FRAMEWORK APPLICABLE TO SECURITISATION VEHICLES IN MALTA 2

3 INTRODUCTION LEGAL FRAMEWORK: AN OVERVIEW MAIN LEGISLATION Securitisation Act, Chapter 484 of the Laws of Malta, 2006 SUBSIDIARY LEGISLATION Securitisation Cell Companies Regulations, Legal Notice 411 of 2014 Reinsurance Special Purpose Vehicles Regulations, Legal Notice 452 of

4 SECURITISATION ACT 4

5 SECURITISATION ACT PART I GENERAL the competent authority the Malta Financial Services Authority securitisation a transaction or an arrangement whereby a securitisation vehicle, directly or indirectly: [a] acquires securitisation assets from an originator by any means, or [b] assumes any risk from an originator by any means, or [c] grants secured loan or other secured facility of facilities to an originator and finances any or all of the above, directly or indirectly, in whole or in part, through the issue of financial instruments 5

6 SECURITISATION ACT [CONT.] PART II SECURITISATION VEHICLES Article 3 Legal form A securitisation vehicle may be a: [a] company; [b] commercial partnership; [c] trust; or [d] any other legal structure. Its objects and purposes shall be limited to such matters which are necessary to carry out all or any transactions intended or required to implement or participate in a securitisation transaction and all related and ancillary acts. Its constitutive document shall state expressly that it is a vehicle established subject to the provisions of the Securitisation Act. Article 6 Securitisation vehicles shall not be considered to be collective investment schemes. 6

7 SECURITISATION ACT [CONT.] PART II SECURITISATION VEHICLES Article 7 Securitisation Vehicle separate and independent from the Originator No proceedings taken in relation to the Originator shall have any effect on: [a] the securitisation vehicle, [b] the securitisation assets or risks assumed by the vehicle, or [c] other assets of the vehicle, including any payments due by the underlying debtors, cash-flows or other proceeds owing to the vehicle in connection with the securitised assets. Article 8 Delegation of administrative duties Delegation of the management responsibility for the day to day administration of the vehicle or of the assets or risks thereof, to any third party including the Originator. 7

8 SECURITISATION ACT [CONT.] PART III THE TRANSFER OF SECURITISATION ASSETS Article 9 Transfer of securitisation assets The Originator and the vehicle are at liberty of selecting any method of transferring the securitisation assets; Such transfer is valid and enforceable and shall not be subject to re-characterisation for any reason whatsoever. Article 10 Assignments When a securitisation asset is assigned to a securitisation vehicle such assignment shall be treated as final, absolute and binding on the originator, the securitisation vehicle and on all third parties. Article 15 The assumption of risks The vehicle may assume and securitise any and all risks by acquiring assets, guaranteeing or assuming obligations, entering into derivative contracts or by committing itself in any other way. Article 16 Priority Claim Over Assets special privilege & limited recourse First ranking privilege of securitisation creditors over all the assets held by the securitisation vehicle; any person, who is not a securitisation creditor, is prohibited from applying to the court for the issuance of enforcement of any precautionary act or warrant against the vehicle unless it is shown to the satisfaction of the court that there has been fraud on the part of the vehicle. 8

9 SECURITISATION ACT [CONT.] PART IV REGULATION OF SECURITISATION VEHICLES Article 18 Notification of Securitisation Vehicles to the competent authority Any vehicle established under the laws of Malta shall not commence business as a securitisation vehicle in or from within Malta unless it has given notice on the appropriate form to the competent authority. Article 19 Public Securitisation Vehicles A vehicle which issues or which is desirous of issuing financial instruments to the public on a continuous basis; requires a licence from the competent authority, prior to issuing financial instruments to the public; However no current licensing regime in place! Article 20 Rules The competent authority may, issue rules in connection with securitisation transactions which shall be binding on securitisation vehicles / creditors / other persons as may be specified therein. 9

10 SECURITISATION ACT [CONT.] PART V MISCELLANEOUS Article 23 Power to make regulations The Minister, may make regulations as may be required for carrying into effect any provisions of the Securitisation Act. [E.g. Securitisation Cell Companies Regulations, Legal Notice 411 of 2014] Article 24 Applicability of the Securitisation Act The Securitisation Act shall be applicable to securitisation transactions or financial instruments issued by a securitisation vehicle whose value exceeds 1,000,

11 SECURITISATION CELL COMPANIES REGULATIONS,

12 SECURITISATION CELL COMPANIES REGULATIONS, 2014 PART I GENERAL cell created by a cell company for the purpose of segregating and protecting the cellular assets of the company "cellular assets" the assets of the securitisation cell company attributable to any cell of the company "non-cellular assets" the assets of the company which are not cellular assets 12

13 SECURITISATION CELL COMPANIES REGULATIONS, 2014 [CONT.] PART I GENERAL Securitisation Cell Company [ SCC ]: a single legal entity structured in two parts, the core and an unlimited number of cells; able to limit its liability in respect of a particular transaction to a specified pool of assets rather than exposing all of the assets of the SCC; each cell constitute distinct and segregated patrimonies, which are ring-fenced from each other; can be established solely for the purpose of either carrying on the business of a securitisation vehicle in accordance with the Securitisation Act or assuming risks as a reinsurance special purpose vehicle in accordance with the RSPV Regulations; Its name shall, include the expression Securitisation Cell Company or SCC and its constitutive documents must state that the company it is an SCC. 13

14 SECURITISATION CELL COMPANIES REGULATIONS, 2014 [CONT.] PART I GENERAL COMMON FEATURES CREATION OF CELLS may only be created by means of a resolution of its board of directors, a copy of which shall be delivered to the Registrar of Companies for registration within 14 days from the date of the said resolution [Regulation 6 & 22]; each cell must have its own distinct name which shall include the word cell [Regulation 6]; an SCC shall not commence business in respect of any cell unless it has given notice on the appropriate form to the competent authority [Regulation 22]. ISSUANCE OF FINANCIAL INSTRUMENTS LINKED TO A CELL an SCC may issue financial instruments in one or more tranches, in respect of any of its cells; the proceeds of the issue are comprised in the cellular assets attributable to the cell, in respect of which the financial instruments were issued; financial instruments issued in respect of a cell may be denominated in different currencies. [Regulation 13] CELL SHARES & CELL SHARE CAPITAL An SCC may create and issue cell shares, in respect of any of its cells, the proceeds of the issue of which are comprised in the cellular assets attributable to the cell in respect of which the cell shares were issued [Regulation 8]. 14

15 SECURITISATION CELL COMPANIES REGULATIONS, 2014 [CONT.] PART I GENERAL COMMON FEATURES NO ACTIVITIES AT THE CORE Securitisation transactions or activities may not be carried out through its non-cellular assets. DUTIES OF DIRECTORS keep cellular assets separate and separately identifiable from non-cellular assets; keep cellular assets attributable to each cell separate and separately identifiable from cellular assets attributable to other cells; and keep separate records, accounts, statements and other documents as may be necessary to evidence the assets and liabilities of each cell as distinct and separate from the assets and liabilities of other cells in the same company, and as distinct and separate from the non cellular assets and liabilities of the SCC. [Regulation 7] 15

16 SECURITISATION CELL COMPANIES REGULATIONS, 2014 [CONT.] PART I GENERAL COMMON FEATURES POSITION OF CREDITORS A creditor of a cell has rights to the assets of that particular cell only and has no recourse to the assets of other cells or the non-cellular assets [Regulation 11]. ACCOUNTS An SCC shall draw up its annual accounts in either the currency of its non-cellular share capital or the base currency of one of its cells [Regulation 15]. WINDING UP OF INDIVIDUAL CELLS Winding up of individual cells separately from the SCC itself as a whole; The winding up proceedings as prescribed under the Companies Act [Cap. 386 of the Laws of Malta] apply mutatis mutandis to a cell as though it were a distinct legal entity. 16

17 SECURITISATION CELL COMPANIES REGULATIONS, 2014 [CONT.] PART II SECURITISATION CELL COMPANIES CARRYING ON BUSINESS OF SECURITISATION VEHICLES Notice* / Licensing Non-Public vs. Public *of the vehicle as per Article 18 of the Securitisation Act & also of each and every cell as per Regulation 22 of the SCC Regulations. Activities The SCC may enter into one or more securitisation transactions in respect of a cell. PART III SECURITISATION CELL COMPANIES CARRYING ON BUSINESS AS RSPV Licensing [in terms of the RSPV Regulations] and a cell may only be created with the prior approval of the competent authority. Activities The SCC may enter into one or more risk transfer arrangements in respect of a cell. Use by multiple originators provided that the securitisation assets deriving from different originators are attributed to different cells. Use by multiple ceding undertakings Provided that all risk transfer arrangements attributable to an individual cell shall originate from a single ceding undertaking or from ceding undertakings belonging to the same group. Conversions A vehicle originally set up as a limited liability company may convert into an SCC. Every cell needs to be fully funded in its own right in view of the relevant provisions of the RSPV Regulations directly to the individual cells of an SCC. 17

18 ROLE OF THECOMPETENT AUTHORITY THE MFSA 18

19 ROLE OF THECOMPETENT AUTHORITY THE MFSA with respect to securitisation vehicles entering into securitisation transactions, other than the assumption of risks as a reinsurance special vehicle, falling under the requirements of Article 18 of the Securitisation Act and Regulation 22 of the SCC Regulations! AT INCORPORATION Review the Memorandum & Articles of Association of the company. UPON RECEIPT OF THE NOTIFICATION REQUEST An acknowledgement letter is issued by the MFSA. Note: this acknowledgement letter is NOT an approval of the Securitisation Vehicle by the MFSA, but merely an acknowledgment of the Notification in terms of Article 18 of the Securitisation Act and Regulation 22 of the SCC Regulations. Incomplete notifications will be rejected! ON GOING Maintains an updated List of Notified Securitisation Vehicles on its website. The MFSA expects to be duly advised of any modifications from the information provided upon submission of the respective Notice. 19

20 ROLE OF THECOMPETENT AUTHORITY THE MFSA Notifications received by the MFSA in terms of Article 18 of the Securitisation Act and Regulation 22 of the SCC Regulations Notified Vehicles Securitisation Total processed notifications at end 2014 Total processed notifications at end 2015 Total processed notifications as at June Of which: notified SCC And cells

21 ROLE OF THECOMPETENT AUTHORITY THE MFSA Notifications received by the MFSA in terms of Article 18 of the Securitisation Act and Regulation 22 of the SCC Regulations Jun Securitisation Vehicles Securitisation Cell Companies Cells 21

22 CONCLUDING REMARKS PRACTICAL CONSIDERATIONS 22

23 CONCLUDING REMARKS PRACTICAL CONSIDERATIONS Which securitisation vehicles should be notified to the competent authority? Any vehicle established under the laws of Malta who shall commence business as a securitisation vehicle in or from within Malta. From where can the Notices which need to be submitted to the competent authority in terms of Article 18 of the Securitisation Act and Regulation 22 of the SCC Regulations be downloaded? From the MFSA website. What should the target investor base be? Definitely NOT RETAIL! Professional Investors, being investors which are considered to be professional clients or may, on request, be treated as professional clients within the meaning of Annex II to Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments. Possibility of listing on the European Wholesale Securities Market [ EWSM ], a regulated market for wholesale debt securities. EWSM Listing Rules regulate the admissibility to listing on the EWSM. Regulation (EC) No 2013/40 of the European Central Bank A securitisation vehicle [both regulated and unregulated] shall inform the CBM of its existence within one week from the date on which it commences business. 23

24 Dr Michelle Mizzi Buontempo Director, Conduct Supervisory Unit, MFSA Thank you! Contact Details Note: This presentation has been designed for information purposes to assist persons considering setting up securitisation vehicles. It does not purport to provide legal advice thereon. Readers interested inobtaining more information about securitisation vehicles or any related topic are invited to make contact with the MFSA or visit the MFSA website: