CFM44035 | Deemed loan relationships: alternative finance: regulated electronic system facilitated arrangements and home purchase plan providers

Regulated electronic system facilitated arrangements and home purchase plan providers

In the case of purchase and resale arrangements (CFM44050) and diminishing shared ownership arrangements (CFM44070) one of the parties must be a financial institution or the arrangement must be a ‘regulated electronic system facilitated arrangement’.

The definition of diminishing shared ownership arrangements is further extended to include arrangements where one of the parties is a ‘regulated home purchase plan provider’.

Definition of regulated electronic system facilitated arrangement

A regulated electronic system facilitated arrangement is defined in CTA09/S503(2A) for the purpose of purchase and resale arrangement and CTA09/S504(1A) for the purpose of diminishing shared ownership arrangements.

With respect to a purchase and resale agreement, the arrangement must meet the following conditions:

• The arrangement must substantially consist of an article 36(H) agreement in relation to the deferral of all or part of the second purchase price. An article 36H agreement is defined in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

• The first purchaser would be regarded as the lender for the purposes of the agreement.

• The second purchaser would be regarded as the borrower for the purposes of the agreement.

• The arrangement is facilitated by an electronic system operated by a person who has permission under FISMA200/PART4 to carry on, in relation to that system, the regulated activity specified in article 36H(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

With respect to a diminishing shared ownership agreement, the arrangement must meet the following conditions:

• The arrangement must substantially consist of an article 36(H) agreement in relation to the enjoyment by the eventual owner of the rights to occupy or otherwise use the asset and to be entitled to any income, profit or gain arising from the asset before the eventual owner’s acquisition of the first owner’s beneficial interest.

• The eventual owner would be regarded as the lender for the purposes of the agreement.

• The second purchaser would be regarded as the borrower for the purposes the agreement.

• The arrangement is facilitated by an electronic system operated by a person who has permission under FISMA200/PART4 to carry on, in relation to that system, the regulated activity specified in article 36H(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

Definition of regulated home purchase plan provider

A regulated home purchase plan provider is defined at CTA09/S504(7) as a person who:

• is carrying on the regulated activity specified in article 63F(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001

• has permission under FISMA2000/PART4 to do so.