Article 7 Additional Exposure Constituted by the Structure of a Transaction


The structure of a transaction shalll not constitute an additional exposure if the transaction meets both of the following conditions:

  1. (a) the legal and operational structure of the transaction is designed to prevent the manager of the transaction or a third party from redirecting any cash flows which result from the transaction to persons who are not otherwise entitled under the terms of the transaction to receive these cash flows;
  2. (b) neither the issuer nor any other person can be required, under the transaction, to make a payment to the institution in addition to, or as an advance payment of, the cash flows from the underlying assets.


The condition in point (a) of paragraph 1 shall be considered to be met where the transaction is one of the following:

  1. (a) a UK UCITS (as defined in section 237 of FSMA);
  2. (b) an undertaking established in a third country that carries out activities similar to those carried out by a UCITS and which is subject to supervision pursuant to legislation of a third country which applies supervisory and regulatory requirements which are at least equivalent to those applied in the UK to UK UCITS.

[Note: This rule corresponds to Article 7 of Part 2 of Regulation (EU) No 1187/2014 as it applied immediately before revocation by the Treasury.]