Part 2: Financial Services Section 31: Transformer vehicles
Subsections (1) and (2) of this section insert new section 284A into FSMA. The new section is concerned with "transformer vehicles" which are used as a risk mitigation technique by companies and financial institutions, and particularly by insurers and reinsurers. It enables the Treasury to make regulations facilitating and regulating transformer vehicles, and the activities carried out and the trading of investments issued by transformer vehicles.
	Subsections (1) and (2) of new section 284A define "transformer vehicle". Subsection (1) provides that a transformer vehicle is an undertaking which is established to carry out the activities mentioned in subsection (2) or which carries out those activities. The activities mentioned in subsection (2) are assuming risk from another undertaking ("B") and fully funding the vehicle’s exposure to that risk by issuing investments where the repayment rights of the investors are subordinated to the vehicle’s obligations to B in respect of the risk. Subsection (10) defines "investment", "primary legislation" and "subordinate legislation" for the purposes of section 284A.
	Subsection (3) of new section 284A confers a broad regulation making power on the Treasury, as described above.
	Subsections (4) to (6) set out non-exhaustive lists of the type of matters about which regulations may be made under subsection (3). Subsection (4) is mainly concerned with the creation and functioning of corporate bodies. Subsection (5) provides that the list in subsection (4) applies equally to the constituent parts of a body as it does to the body as a whole. Subsection (6) specifies a range of matters, including the creation of criminal offences, the conferral of functions on the financial regulators and the modification and amendment of primary and secondary legislation which may be dealt with in the regulations. Subsections (7) to (9) and (11) make further provision about the regulations which may be made under subsection (3), including a requirement for any regulations which permit the regulators to require the Council of Lloyd's to exercise any functions on their behalf to be made only with the consent of the Council.
	Subsection (3) of this section amends section 429(2) of FSMA, so that regulations under the new section 284A must be approved by both Houses of Parliament before they are made.