Status of a loan agreement—letter regarding implications of the decision in Fons HF (in liquidation) v Pillar Securitisation

A letter to HM Treasury from the City of London Law Society (CLLS) asks for clarification on whether 'loan agreement' falls within the meaning of 'debenture', following a recent Court of Appeal case which the CLLS has noticed has caused uncertainty in the law and seems to be causing confusion in the loan market. The CLLS is seeking clarification that HM Treasury is not treating loan agreements as debentures, and that lending is not intended to be a regulated activity.

The decision in Fons HF (in Liquidation) v Pillar Securitisation in the Court of Appeal on 20 March 2014 has very significant implications for what falls within the regulated investment of a ‘contract that creates or acknowledges indebtedness'. The letter points out that the implication, if this is correct, is that loan agreements, secondary loans, and servicing structured finance transactions as in a securitisation transaction, could all become regulated activities under the Financial Services and Markets Act 2000 (FSMA 2000) and the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, falling within the remit of FSMA 2000 regulation.

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