The Malta Financial Services Authority (‘MFSA’) is proposing a new regulation on securitisation cell companies. The draft regulation was launched as part of a consultation process on 4 September 2014. The consultation runs through until 24 September 2014.

The draft regulations establish a new legal entity, the Securitisation Cell Company (‘SCC’), being a single legal entity having the ability establish one or more cells for the purpose of securitisation transactions. In terms of the draft regulations, a securitisation cell company may either be established as a securitisation vehicle or as a reinsurance special purpose vehicle suggesting that SCCs may be ideally suited for programmes of asset-backed securities and insurance-linked securities respectively. Prior MFSA authorisation would only apply in the case of a securitisation cell company used as a reinsurance special purpose vehicle. Each cell of a securitisation cell company would constitute a separate patrimony with the assets of a cell only available to satisfy liabilities of creditors of the relevant cell. Assets of a cell include the proceeds of any issue of financial instruments in respect of the relevant cell.

In an explanatory document accompanying the draft regulations, the MFSA explained that “by uniting the highly sophisticated frameworks [for securitisation vehicles and reinsurance special purpose vehicles] with the cell company concept, the proposed Regulations now provide a legally entrenched framework for the segregation of different sets of assets and risk instruments within a single special purpose vehicle, the SCC, thus allowing for the launch of multiple asset-backed or insurance-linked securities without incurring any risk of cross-contamination between the different sets of creditors and investors.”

The proposals mark the first attempt of a European Union state to legislate for the use of cell companies as securitisation vehicles. The proposals leverage on Malta’s established reputation as a cell domicile in the funds and insurance sectors. Sixteen cell companies have established a total of 27 cells in the insurance sector only.

The consultation runs through until 24 September 2014.

More details of the consultation may be obtained by clicking here.

 

For more information on the draft regulations contact:

Dr Max Ganado

Dr Matthew Mizzi