The following posts provide a snapshot of selected UK, EU and global financial regulatory developments of interest to banks, investment firms, broker-dealers, market infrastructures, asset managers and corporates.
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Bank of England Consults on Revisions to Statement of Policy on Enforcement
04/15/2024
On March 28, 2024, the Bank of England published a consultation paper on revisions to its Statement of Policy and Procedure on its approach to enforcement, published in January 2024, to reflect enhancements to the BoE's enforcement powers granted under the Financial Services and Markets Act 2023.
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HM Treasury Publishes Policy Statement on Next Phase of Smarter Financial Services Regulatory Framework
03/21/2024
On March 21, 2024, HM Treasury published a paper on the next phase of its Smarter Financial Services Regulatory Framework, the U.K.’s program of post-Brexit regulatory reforms for financial services. The original policy statement on the smarter regulatory framework was published in December 2022 as part of the so-called Edinburgh Reforms (discussed in our client note, “UK Government Publishes Edinburgh Reforms for Financial Services”). This described the U.K.'s new model for regulation and set out how the U.K. would prioritize the repeal and reform of retained EU law for financial services. In July 2023, HM Treasury published a further policy statement, dividing the review of REUL into tranches, and detailing anticipated dates for reform. Further details of the U.K.'s future financial regulatory framework can be found on our website, Future of Financial Services Regulation in the UK.
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UK Conduct Authority Consults on New Approach to Enforcement and Publication of Enforcement Investigations
02/27/2024
On February 27, 2024, the U.K. Financial Conduct Authority published a consultation on revisions to its Enforcement Guide, setting out proposals which aim to simplify the guidance and increase transparency around the FCA's enforcement actions. Responses to the consultation may be submitted until April 30, 2024.
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Fourth Commencement Regulations Under Financial Services and Markets Act 2023 Published
01/18/2024
The Fourth Commencement Regulations - the Financial Services and Markets Act 2023 (Commencement No. 4 and Transitional and Saving Provisions) (Amendment) Regulations 2023 - under the Financial Services and Markets Act 2023 were made on December 14, 2023. The Fourth Commencement Regulations provide, among other things, for:- The repeal of HM Treasury’s obligation to review legislation in various financial services legislation, including but not limited to, the Short Selling Regulation, the Securitization Regulation, the Alternative Investment Fund Managers Regulations and the U.K. version of the European Market Infrastructure Regulation. These repeals took effect on December 15, 2023.
- The revocation from April 5, 2024 of the Data Reporting Services Regulations 2017 and related implementing legislation such as (i) the provisions in the onshored Markets in Financial Instruments Regulations that provide HM Treasury and the regulators with powers to specify further detail relating to data reporting services; and (ii) the provisions in the MiFIR Delegated Regulation on the provision of data on reasonable commercial basis. The revocation of these provisions on this date aligns with HM Treasury's aim of the draft Data Reporting Services Regulations 2023 entering into force on April 5, 2024. The draft Data Reporting Services Regulations 2023 will replace the Data Reporting Services Regulations 2017, restating with modifications some of the 2017 content. The FCA has confirmed the final framework for a consolidated tape for bonds, which will also enter into force on April 5, 2024.
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UK Financial Conduct Authority Publishes Rule Review Framework
01/16/2024
The U.K. Financial Conduct Authority has published its Rule Review Framework, setting out how it will set, measure and monitor the outcomes of its Handbook rules. The Rule Review Framework was mandated under the Financial Services and Markets Act 2023 (discussed in our client note, A Boost for UK Financial Services). The FSM Act 2023 transferred responsibility for making detailed rules to the U.K.'s regulators, significantly increasing their powers. To ensure proper oversight of the use of those powers, the FSM Act 2023 provides for an enhanced regulatory accountability framework, which includes requiring the FCA (and the Prudential Regulation Authority, which consulted on its proposed in 2023) to keep their rules under review and publish a statement of policy on how they conduct those reviews.
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Retained EU Law and EU Interpretive Principles Revoked from UK Statute Book
01/03/2024
The Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendment) Regulations 2023 (with related Explanatory Memorandum) came into force on January 1, 2024, clarifying that certain changes provided for under the Retained EU Law (Revocation and Reform) Act 2023 have come into effect.
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First Commencement Regulations under UK's REUL Act Published
12/12/2023
The Retained EU Law (Revocation and Reform) Act 2023 (Commencement No. 1) Regulations 2023 were made on December 12, 2023. These Regulations brought into force from January 1, 2024, provisions of the Retained EU Law (Revocation and Reform) Act to the effect that:- From January 1, 2024, the legislation set out in Schedule 1 of the REUL Act 2023 is revoked. The revocation of financial services legislation is being implemented under the Financial Services and Markets Act 2023.
- All remaining references to “retained EU law” (and related terms) are replaced with the term "assimilated law" (or a similar term). Assimilated law is U.K. law that was previously retained EU law or "REUL". The REUL Act provides that from January 1, 2024, REUL (and related terms) will be known as assimilated law.
- References to the recognition of EU rights that were retained under the European Union (Withdrawal) Act 2018 are removed. The REUL Act repealed the principle of the supremacy of EU law from January 1, 2024, meaning there is no supremacy for assimilated law over other pieces of U.K. statute.
- References to general principles of EU law (established by the Court of Justice of the European Union) are removed.
Topic : Brexit for Financial Services -
Draft Legislation Published for Implementing UK's Retained EU Law (Revocation and Reform) Act 2023
10/20/2023
The draft Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendment) Regulations 2023, laid before Parliament on October 16, 2023, will implement certain aspects of the Retained EU Law (Revocation and Reform) Act 2023 (which we discuss in our client note, "UK Government Publishes Brexit Freedoms Bill Setting Deadline for Revocation of EU Law"). The aim of the draft Regulations is to provide enhanced legal certainty in U.K. statutes.
The draft Regulations make provision for amending U.K. primary legislation (listed in the schedule to the draft Regulations) by replacing references to "retained EU law" with the term "assimilated law." This implements section 5 of the REUL Act, which provides that in-force REUL will become "assimilated law" or "assimilated case law" from January 1, 2024.
Read more.Topic : Brexit for Financial Services -
Revocation of the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 is Postponed
09/14/2023
The Financial Services and Markets Act 2023 (Commencement No. 3) (Amendment) Regulations 2023 were made on August 25, 2023, postponing the revocation of the Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013.
The Commencement No. 3 Regulations amend the Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023, which were made on July 10, 2023 and provide for the entry into force of certain provisions of the Financial Services and Markets Act 2023 (which we discuss in our client note, A Boost for UK Financial Services: The UK Financial Services and Markets Act 2023). This included provisions revoking retained EU legislation relating to financial services, including the CITS Regulations. The CITS Regulations establish a fund vehicle for the U.K. investment management industry which makes U.K. domiciled funds for collective investment in transferable securities more competitive. The CITS Regulations will now be revoked on a day appointed by the Treasury in a later instrument. -
HM Treasury Publishes Response to Payments Regulation and Systemic Perimeter Consultation
08/14/2023
HM Treasury has published a response to its consultation on payments regulation and the systemic perimeter. The consultation was prompted by the U.K. government's Payments Landscape Review and HM Treasury's concern that some payments services operators were not subject to systemic supervision but may pose systemic risks to the U.K. financial system.
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UK Financial Conduct Authority Consults on Securitization Rules
08/14/2023
The U.K. Financial Conduct Authority is consulting on its proposed rules for securitization markets, which will replace many of the firm-facing requirements under the existing U.K. Securitization Regulation. The U.K. Prudential Regulation Authority is separately consulting on its own equivalent rules for PRA-authorized firms, which together with the FCA's rules will create a coherent regime for securitizations. The regulators are being handed the power to make these rules under HM Treasury's proposed reforms to the U.K. securitization regime, which will repeal the existing U.K. Securitization Regulation, keeping part of the regime in new legislation and the remainder in the regulators' rulebooks.
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HM Treasury Consults on First Financial Market Infrastructure Sandbox – the Digital Securities Sandbox
08/07/2023
HM Treasury has published a consultation on the establishment of a financial market infrastructure sandbox, known as the Digital Securities Sandbox. The sandbox will be established using new powers granted by the U.K. Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for UK Financial Services"), empowering HM Treasury to set up individual FMI sandboxes. The sandboxes are designed to enhance understanding of the use cases for emerging digital asset technologies, including distributed ledger technology. HM Treasury can modify or disapply legislation and rules within the sandbox to permit different technologies to be tested that would not be possible under the existing legislative and regulatory framework, with the potential to make permanent changes to legislation based on the findings of the sandbox.
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HM Treasury Publishes Response on UK Retail Disclosure Consultation
08/07/2023
HM Treasury has published a response to its consultation on the future of U.K. retail disclosures. HM Treasury's consultation (which we discussed in our client note, "UK Government Publishes Edinburgh Reforms for Financial Services") identified various problems with the Packaged Retail and Insurance-Based Investment Products Regulation which currently governs disclosures for complex retail investment products. These included that the PRIIPs regime could be overly prescriptive and potentially misleading in its attempts to make PRIIPs products comparable and that the rules were spread across a mixture of legislation and regulatory rules which led to a complex environment for firms.
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HM Treasury Consults on UK Future of Payments Review
08/04/2023
HM Treasury has published a Call for Input on the U.K. Future of Payments Review, an investigation into how future payments are likely to be made and how the U.K. can offer world-leading retail payments. The review is focused on consumer needs — specifically, those of individuals and businesses processing retail payments. Input is sought on the following issues:- What are the most important consumer retail payment journeys, both today and in the next five years?
- How does the experience of these journeys by U.K. consumers (individuals and businesses) compare with those of other leading countries?
- How likely are the existing plans and initiatives across the payments landscape to deliver world-leading payment journeys for U.K. consumers?
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UK Government Consults on Revised Securitization Regime
08/04/2023
HM Treasury has published a near-final draft statutory instrument and related Policy Note setting out its proposed reforms to the U.K. securitization regime. Comments on the draft S.I. can be submitted until August 21, 2023. The final S.I. will be laid before Parliament before the end of 2023.
The PRA is separately consulting on proposed rules to replace its retained EU law securitization requirements for PRA-authorized firms. Responses to the PRA's consultation should be submitted by October 30, 2023. The FCA will publish a consultation on its securitization rules on August 7, 2023.
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UK Regulator Issues Statement on New Growth and International Competitiveness Objective
08/03/2023
The U.K. Financial Conduct Authority has published a statement setting out how its work to support the 'key drivers' of productivity will facilitate delivery of its new secondary objective and how it intends to report on progress embedding the new objective. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") introduces a new secondary statutory objective, obliging the FCA and U.K. Prudential Regulation Authority in carrying out their functions to support the long-term growth and international competitiveness of the U.K.'s economy in the medium and long term. This obligation enters into force on August 29, 2023, under Commencement Regulations made on July 10, 2023. Each regulator must report at two intervals to HM Treasury setting out how it has complied with its duty to advance the new objective. The reports are due 12 and 24 months after the new objective applies (August 29, 2024 and August 29, 2025 respectively). -
UK Regulator Proposes Framework for a Consolidated Tape
08/03/2023
On July 5, 2023, the U.K. Financial Conduct Authority launched a consultation on a proposed U.K. consolidated tape for bonds. MiFID II introduced requirements for a "consolidated tape" for transactions in equity and non-equity instruments. It requires a consolidated tape provider to collect post-trade information published by trading venues and approved publication arrangements and to consolidate this into a continuous live data stream made available to the public. No consolidated tape has yet been set up in either the U.K. or the EU. The EU announced at the end of June 2023 that political agreement had been reached on the proposals to introduce an EU consolidated tape.
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First Commencement Regulations Under UK Financial Services and Markets Act 2023
08/03/2023
The Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023 were made on July 10, 2023 and will bring into force provisions under the Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023") from either July 11, 2023, August 29, 2023 or January 1, 2024.
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UK Government Sets Out Plan for Revoking EU Financial Services Laws
08/02/2023
Following finalization of the Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023"), HM Treasury published a Delivery Plan for the Building a Smarter Financial Services Regulatory Framework for the UK. The Delivery Plan compliments the Policy Paper published as part of the Edinburgh Reforms (discussed in our client note, "UK Government Publishes Edinburgh Reforms for Financial Services").
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UK Prudential Regulation Authority Consults on Approach to Reviewing Rules
08/02/2023
The U.K. Prudential Regulation Authority opened a consultation on June 30, 2023, on its proposed approach to reviewing its rules, including a proposed statement of policy. The Financial Services and Markets Act 2023 transfers responsibility for making detailed rules to the U.K.'s regulators, significantly increasing their powers, and provides for an enhanced regulatory accountability framework, subjecting the regulators to additional oversight by Parliament and HM Treasury. One of those regulatory accountability measures requires the PRA and Financial Conduct Authority to keep their rules under review and to publish a statement of policy on how they conduct such reviews.
The PRA's consultation sets out its proposed framework for conducting rule reviews, stakeholder engagements, transparency and communicating the outcomes of reviews. Responses to the consultation may be submitted until September 29, 2023.
The FCA has also published a draft Rule Review Framework, for which feedback may be submitted until September 15, 2023. -
UK Financial Conduct Authority Seeks Comment on Draft Rule Review Framework
08/02/2023
The U.K. Financial Conduct Authority launched a consultation on July 14, 2023, on its proposed Rule Review Framework. The Financial Services and Markets Act 2023 transfers responsibility for making detailed rules to the U.K.'s regulators, significantly increasing their powers. To ensure proper oversight of the use of those powers in practice, the FSM Act provides for an enhanced regulatory accountability framework, subjecting the regulators to additional oversight by Parliament and HM Treasury. Among other things, the FCA and Prudential Regulation Authority must keep their rules under review and publish a statement of policy on how they conduct such reviews.
The FCA is proposing a draft Rule Review Framework based on the use of data to assess the effects of a rule change. The draft Framework sets out three types of review that the FCA could conduct, describing their purpose. The three types of review are an evidence assessment, a post-implementation review and an ex post impact evaluation. The FCA's draft Framework also describes the steps it could take if the data shows that a rule is not working as had been intended. Comments on the FCA's draft Rule Review Framework may be submitted until September 15, 2023.
The PRA is also consulting on its proposed approach to reviewing its rules, including a proposed statement of policy. Responses to the PRA's consultation may be submitted until September 29, 2023. -
UK Government Consults on Revised UK Short Selling Regime
08/02/2023
HM Treasury has published its response to the Short Selling Regulation Review, which sought views on the proposed U.K. short selling regime. Once the new U.K. regime for short selling is finalized, the retained EU Short Selling Regulation will be revoked under the revocation framework established by the U.K. Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023"). A draft statutory instrument for the new U.K. regime is expected to be published before the end of 2023, with the final S.I. being delivered during the course of 2024. The U.K. Financial Conduct Authority will also consult on proposed rules for the new framework in 2024.
The proposed regime is intended to represent a "lighter-touch" approach that will facilitate short selling and its benefits while managing the associated risks. The changes will: (i) increase the net short position disclosure threshold from 0.1% to 0.2%; (ii) replace the current requirement to disclose all short positions over 0.5% with a new disclosures model, whereby the FCA will publish aggregated short positions in each company's shares (removing the need to reveal the identity of individual sellers); and (iii) empower the FCA to make rules on areas such as exempt share arrangements, the market maker exemption requirements and prohibitions on uncovered short selling.
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UK Financial Services and Markets Act 2023
08/02/2023
Following rigorous debate in Parliament, the U.K.'s latest Financial Services and Markets Act (FSM Act) received royal assent on June 29, 2023. The FSM Act significantly changes the U.K.'s regulatory framework for financial services, implementing the government's post-Brexit Future Regulatory Framework Review and the Edinburgh Reforms. The existing regulatory model under the Financial Services and Markets Act 2000 has been enhanced with the introduction of a new "Designated Activities Regime" for the regulation of activities related to the financial markets, transfer to the U.K. regulators of responsibility for making and reviewing detailed firm rules, subject to enhanced oversight by Parliament and HM Treasury, and the establishment of a regulatory framework for oversight of third parties that provide critical services to financial institutions.
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UK Government and Regulators Consult on Revised UK Prospectus Regime
08/02/2023
HM Treasury has published a near-final draft statutory instrument and related Policy Note setting out its proposed reforms to the U.K. prospectus regime. The U.K. Financial Conduct Authority has also published a series of six Engagement Papers seeking views on its proposed rules under the new regime.
Once the new U.K. regime is finalized, the retained EU Prospectus Regulation will be repealed under the revocation framework established by the U.K. Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023").
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EU and UK Sign Memorandum of Understanding on Financial Services Cooperation
07/11/2023
On June 27, 2023, the EU and U.K. signed a Memorandum of Understanding on Financial Services Cooperation, a high-level agreement on future cooperation in the regulation of financial services. The MoU provides for:- exchange of views between the EU and U.K. on regulatory developments and other issues of common interest;
- transparency and communication in adopting, suspending and withdrawing equivalence decisions;
- exchange of views between the EU and U.K. on market developments and financial stability; and
- enhanced cooperation and coordination, including in international bodies.
Read more.Topic : Brexit for Financial Services -
EU EMIR 3 Proposals Published
01/19/2023
The European Commission published proposals to amend the EU's European Market Infrastructure Regulation (EMIR) in December 2022 (EMIR 3). According to the Commission, some of these measures are aimed at improving the competitiveness of EU CCPs and of EU clearing activities, and to reduce existing reliance by EU counterparties on U.K. CCPs. Since the Brexit referendum, the EU has been grappling with the bloc's continued reliance on U.K. CCPs. The most controversial aspect is a new mandate for EU counterparties to hold "active accounts" at EU CCPs for all products, and to use such accounts for some products.
EMIR 3 would also bring in several technical changes relating to the clearing thresholds and how these operate for non-EU exchange trade derivatives (ETDs) and the exemption for certain intragroup transactions. Other proposals seek to mitigate some of the issues arising from the strain on the energy market, in particular the difficulties in fulfilling margin obligations.
Our client note, "Clearing in the EU After EU EMIR 3" describes the EMIR 3 proposals in more detail. -
Edinburgh Reforms: Changes to the Laws of the UK Financial Services Sector
12/09/2022
The U.K. Government has announced on a series of initiatives, billed as the Edinburgh Reforms, to reform the laws for the U.K. financial services sector. The proposals cover:- Reforms to Ring-Fencing Regime;
- Implementation of Post-Brexit Financial Regulatory Framework;
- Growth and Competitiveness Remit for U.K. Regulators;
- Reforms to Wholesale Markets;
- Faster Settlement;
- Senior Manager's and Certification Regime;
- Changes to Promote Investment and Growth in Financial Services;
- Sustainable Finance;
- FinTech and Digital Assets; and
- Consumer Credit.
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UK Government Publishes Financial Services and Markets Bill
07/20/2022
The U.K. government has published the much anticipated Financial Services and Markets Bill. Following its exit from the EU, the U.K. has undertaken a fundamental review of how financial regulation policy and rules should be made, reviewed and established in law, particularly in light of the return of the U.K.'s sovereignty. Furthermore, there has been a substantial assessment of the U.K.'s financial services rules and regulations, with some areas warranting further consideration. The Bill implements the outcomes of the Future Regulatory Framework Review, which assessed whether the U.K. financial services regulatory framework is fit for purpose and able to support future growth, particularly in light of challenges such as Brexit and climate change. On the same day, HM Treasury published its response to the final consultation in the FRF Review. The FSM Bill establishes a revised blueprint for financial services regulation by revamping the existing model under the Financial Services and Markets Act 2000 and revoking retained EU law in financial services. The regulators will be delegated powers for detailed rulemaking, and as a result, become subject to enhanced Parliamentary oversight.
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HM Treasury Publishes Final Policy Following Financial Services Future Regulatory Framework Review
07/20/2022
HM Treasury has published its final response to the Financial Services Future Regulatory Framework Review in which it sets out the government's policy approach to reforming the U.K.’s regulatory architecture post-Brexit. The response is published on the same day as the Financial Services and Markets Bill is introduced to Parliament, which will implement in legislation these significant reforms.
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Final UK Policy on Regulation of Central Counterparties and Central Securities Depositories Post-Brexit
07/20/2022
HM Treasury has published its final policy approach to the regulation of central counterparties and central securities depositories under the Financial Services Future Regulatory Framework Review. The response is published on the same day as the Financial Services and Markets Bill is introduced to Parliament, which will implement these changes as well as the reforms to the U.K.’s regulatory architecture post-Brexit. HM Treasury has also published its final response to the Financial Services Future Regulatory Framework Review in which it sets out the government's final policy approach to reforming the U.K.’s regulatory architecture post-Brexit.
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Government Details Proposed Financial Services and Markets Bill
05/10/2022
Following the Queen's speech yesterday, the government has published a briefing pack setting out details of the bills that it intends to introduce, including the so-called Brexit Freedoms Bill as well as key legislation relevant to financial services. The government will introduce a Financial Services and Markets Bill, which will, among other things:- Introduce new statutory objectives for the financial services regulators to support growth and international competitiveness.
- Implement the changes to the wholesale markets arising out of the Wholesale Markets Review. HM Treasury confirmed in March of this year that the changes that will be made by legislation and where powers will be delegated to the financial services regulators for rules to be made. Among the changes are the removal of the share trading obligation and the double volume cap, changes to the derivatives trading obligation, taking OTC derivatives that are economically equivalent to exchange traded commodity derivatives out of the position limits regime, and the establishment of a consolidated tape.
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Queen’s Speech Confirms Government Will Proceed with Brexit Freedoms Bill
05/10/2022
Prince Charles, Prince of Wales, delivered the Queen’s speech in which he announced that the government will be introducing the so-called Brexit Freedoms Bill, which was first announced by Prime Minister Boris Johnson on January 31, 2022, and is intended to make it easier to amend or remove retained EU laws to better suit the U.K.’s circumstances and policies. The Brexit Freedoms Bill will work in tandem with a government drive to reform, repeal and replace EU laws that are seen as outdated, cumbersome or otherwise not in the U.K.’s national interest.
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HM Treasury Publishes Responses to Review of UK Funds Regime
02/10/2022
HM Treasury has published a summary of responses to its consultation on the U.K. funds regime. The consultation forms part of the U.K. Government's plans to make the U.K. a more attractive location for asset management.
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EU Grants Further Time-Limited Equivalence for UK CCPs
02/09/2022
An EU Commission Implementing Decision extending the equivalence of U.K. CCPs to June 2025 has been published in the Official Journal of the European Union. The equivalence decision applies to U.K. CCPs already established and authorized in the U.K. on December 31, 2020 and will apply from July 1, 2022, which is when the existing equivalence decision expires. Andrew Bailey, in his speech at TheCityUK Annual Dinner in February 2022, questioned why the equivalence decisions are time-limited. Most equivalence decisions for CCPs in other jurisdictions are not time-limited, although the EU is able to revoke a decision if a jurisdiction is deemed not to maintain equivalence with the EU regime.
The Decision follows the announcement yesterday by the Commission on the extension and the launch of a targeted consultation on the review of the central clearing framework in the EU. The consultation is seeking views on ways to improve the competitiveness of EU CCPs and clearing activities while also ensuring the appropriate supervision of their risks. The consultation closes on March 8, 2022. -
UK Government Announces "Brexit Freedoms Bill"
01/31/2022
U.K. Prime Minister Boris Johnson has announced that a "Brexit Freedoms Bill" will be put before Parliament. Upon Brexit taking effect, all then in force EU Regulations were "on-shored" automatically into U.K. laws, pursuant to the European Union (Withdrawal) Act 2018, and then subject to (mostly only technical) amendments. The new bill is intended to make it easier to amend or remove retained EU laws, to better suit the U.K.'s circumstances and policies. The EUWA also replicated the then-status quo, that EU laws prevailed over conflicting national laws. The government is now also seeking to remove the supremacy of EU laws. At the same time, the government published a policy paper on the benefits of Brexit.
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UK Government Consultation on Regulation of Central Counterparties and Central Securities Depositories
01/17/2022
HM Treasury has released a further consultation under the Future Regulatory Framework Review concerning the regulation of central counterparties and central securities depositories. The Future Regulatory Framework Review is designed to assess whether the U.K. financial services regulatory framework is fit for purpose, considering the U.K.'s exit from the EU, climate change and other global and technological challenges. HM Treasury has published a series of consultations on different aspects of the future framework, including the Phase II consultation in October 2020 and the Proposals for Reform paper published in November 2021. Responses to HM Treasury's latest consultation on CCPs and CSDs may be submitted until February 28, 2022.
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HM Treasury Publishes Amendments to UK Capital Requirements Regulation
09/23/2021
HM Treasury has made certain amendments under the U.K. Capital Requirements Regulation (Amendment) Regulations 2021 to the U.K. Capital Requirements Regulation. The UK CRR is the U.K. version of the corresponding EU regulation, as applicable after Brexit. The new regulations introduce some new provisions and revoke certain others. The related explanatory memorandum describes the changes in further detail. The changes will come into force on January 1, 2022.
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UK Financial Services Act 2021 Published
04/29/2021
The U.K. Financial Services Bill has received Royal Assent from Her Majesty the Queen and has become an Act of Parliament, the Financial Services Act 2021. Some provisions of the Act came into force on the date of Royal Assent, with a limited number following on June 29, 2021. The majority of the Act will come into force on a date specified in regulations yet to be made by HM Treasury.
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HM Treasury Published Response to Phase I of UK's Financial Services Future Regulation Framework Review
03/11/2021
HM Treasury has published its response to the call for evidence on Phase I of the U.K. Financial Services Future Regulatory Framework Review. The FRF Review was announced in March 2019 and will assess whether the U.K. financial services regulatory framework is fit for purpose, taking into account the U.K.'s exit from the EU, climate change and other global and technological challenges. The call for evidence on Phase I of the Review focussed on how the Government and regulators work together to ensure the best outcome for the financial services sector.
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UK Listings Review Recommends Major Overhaul of the UK’s Listing and Capital Markets Rules
03/03/2021
The U.K. Government has published the report by Lord Hill on the U.K. Listings Review. The report assesses how, following Brexit, the existing U.K. listing regime could be reformed to attract more companies, particularly innovative technology and life sciences companies, to raise capital in London. In the context of Brexit, the U.K. is considering the challenges to London's position as a global capital markets hub. The Review makes 14 specific recommendations to address these challenges, including changes to the Financial Conduct Authority's premium and standard segment listing rules on which the FCA will be asked to consult and more general changes in relation to prospectuses on which HM Treasury will need to consult. In addition, the Review identifies longer- term areas for reform, such as secondary capital raises and the greater empowerment of retail investors.
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European Securities and Markets Authority Consults on 2021 Supervisory Fees for EU Trade Repositories
02/22/2021
The European Securities and Markets Authority has published a consultation on its proposals for recalibrating the 2021 annual supervisory fees to be charged by ESMA to EU trade repositories. ESMA's annual fees are intended to cover its costs for supervising EU trade repositories, and to be proportionate to the turnover of the trade repository concerned.
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EU Delays Derivatives Margin for Brexit Novations
02/17/2021
An EU Commission Delegated Regulation amending Regulatory Technical Standards on the application of EU bilateral margining requirements under the European Market Infrastructure Regulation has been published in the Official Journal of the European Union. The amendments to the RTS further extend the temporary exemptions from bilateral margining requirements for the following products and transactions.
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EU Delays Clearing Obligation for Third-Country Intragroup Derivatives and Brexit Novations
02/17/2021
An EU Commission Delegated Regulation delaying the clearing obligation under the European Market Infrastructure Regulation has been published in the Official Journal of the European Union. The Delegated Regulation amends the three Regulatory Technical Standards on the clearing obligation, which provide for the application of the clearing obligation to interest rate swaps and credit default swaps. In particular, for intra-group derivatives transactions conducted with a third-country entity, the exemption from the clearing obligation will be extended until June 30, 2022. The EU has failed to determine whether many third countries are "equivalent" for these purposes, meaning that another delay is necessary to avoid penal charges on intra-group exposures of EU financial groups.
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UK Conduct Regulator Publishes Approach to International Firms
02/03/2021
The U.K. Financial Conduct Authority has published its final Approach to international firms, setting out its approach to authorization and supervision of international firms providing or seeking to provide financial services that require authorization in the U.K. The FCA has also published a feedback statement summarizing its response to the submissions received in response to its consultation last year. The Approach Document sets out the conditions against which a firm will be assessed and discusses the circumstances in which firms may present higher risks and how the risks could be mitigated. It generally proposes that U.K.-authorized firms should have a U.K. place of business, so would not result in any new regime for EU firms which are currently using the "temporary permissions regime".
The FCA's Approach Document is not relevant to firms that are operating in the U.K., but do not need authorization to do so, for example, those firms using the Overseas Persons Exclusion. It is not also not relevant for payment services firms, e-money institutions, depositaries, trustees and managers of U.K. authorized funds, international alternative investment fund managers and international benchmark administrators.
Firms that are or would be subject to dual regulation, should also consider the approach of the Prudential Regulation Authority to the supervision and authorization of firms.
View the FCA's Approach to International Firms.
View the FCA's feedback statement.
View details of the PRA's consultation on its approach to supervising international banks. -
UK Equivalence Decision for Swiss Exchanges Enters into Force
02/03/2021
The U.K.'s Swiss share trading obligation equivalence decision has entered into force. The equivalence decision has been made under the U.K.'s Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021, which came into force on February 3, 2021, and means that U.K. investment firms will be able to comply with the share trading obligation under the U.K. Markets in Financial Instruments Regulation by trading shares on BX Swiss AG and SIX Swiss Exchange AG.
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EU Authority Issues Statement on Reverse Solicitation under MiFID II
01/13/2021
The European Securities and Markets Authority has issued a statement reminding firms of the rules on reverse solicitation under the Markets in Financial Instruments Directive and Regulation. MiFID II provides that EU retail or professional clients may reach outside the EU and acquire services and products from non-EU investment banks (known as "reverse solicitation") and that in these circumstances the third-country firm is exempt from the requirement to establish an EU branch. ESMA has issued the statement following what it describes as "questionable practices" materializing following the end of the Brexit transition period, where firms have purported to opt clients into "reverse solicitation" through either generic terms and conditions amendments or click-through "I agree" boxes online. It is clear from this guidance that ESMA's view is that more is needed than this to invoke the reverse solicitation regime. Notably, the ESMA report does not criticise more robust reverse solicitation protocols that are currently being seen in the market, such as a termination notice by the U.K. service provider of the existing agreement, sometimes with a covering note that the client could at its initiative reach out afresh to request entry into of a new agreement should it so desire.
View ESMA's statement on reverse solicitation.
You may like to view our client note, "On the Existence of a Pan-European Reverse Solicitation Regime Under MiFID II, and its Importance on a 'Hard' Brexit". -
UK Grants Equivalence to Swiss Exchanges for Purpose of UK Share Trading Obligation
01/13/2021
U.K. legislation has been made granting equivalence to Swiss exchanges under the U.K.'s Markets in Financial Instruments Regulation. The Markets in Financial Instruments (Switzerland Equivalence) Regulations 2021, which enter into force on February 3, 2021, grant equivalence to two Swiss exchanges - BX Swiss AG and SIX Swiss Exchange AG. U.K. MiFIR requires U.K. investment firms to ensure that the trades they undertake in shares admitted to trading on a regulated market or traded on a trading venue take place on a regulated market, multilateral trading facility, systematic internaliser or equivalent third-country trading venue. U.K. investment firms will be able to comply with the U.K. MiFIR share trading obligation by trading shares on these Swiss exchanges.
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UK Government Proposes Extending Regulatory Perimeter to Capture Stablecoins
01/07/2021
HM Treasury has opened a consultation on the proposed U.K. approach to crypto-assets and stablecoins, in particular a proposal to bring stablecoins into the U.K. regulatory perimeter. Responses to the consultation may be submitted until March 21, 2021. The government will consider the responses to the consultation and publish a response with further details on how the approach would be implemented in law. If the policy approach is followed, the regulators would consult further on rules for firms.
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UK Prudential Regulator Publishes Final Rules on Implementation of CRD V
12/28/2020
The U.K. Prudential Regulation Authority has published its final Policy Statement setting out the final rules for implementing CRD V in the U.K. The Policy Statement confirms the final rules set out in the PRA's near-final Policy Statement, published on December 9, 2020. The Policy Statement also confirms the PRA's proposed approach to enforcing compliance with consolidated prudential requirements for U.K. banking consolidation groups, as proposed in the PRA's consultation paper published on December 9, 2020. The Supervisory Statements and Statements of Policy attached to the Policy Statement should be read together with the PRA's Supervisory Statement, "Non-binding PRA materials: The PRA's approach after the UK's withdrawal from the EU", for guidance on how to interpret the materials after the end of the transition period.
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UK Government Seeks Input on UK Framework for Cross-Border Financial Services
12/15/2020
HM Treasury has launched a call for evidence on the U.K.'s framework for cross-border financial services. HM Treasury is considering policy approaches for ensuring the U.K. framework is fit for the future given the U.K.'s exit from the EU, including consideration of how effective and proportionate regulation can support attracting investment and liquidity to the U.K. Responses to the consultation may be submitted until March 11, 2021.
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