Financial Services and Markets Bill and the path for UK regulation

Background

HM Treasury has laid the Financial Services and Markets Bill 2022-23 before Parliament. The Bill is a keystone for delivering the Government’s plans for the UK’s future regulatory framework and should be examined by regulated firms.

The Bill includes provisions for:

• Implementing proposals from the future regulatory framework review, including delegating greater rule-making powers to the UK regulators, thus giving them a secondary objective for growth and international competitiveness
• Revoking EU financial services regulation
• Advancing proposals from the Wholesale Markets Review
• Potentially allowing for stablecoins to be used as a means of payment to be brought into the scope of regulation
• The empowerment of regulators to oversee the resilience of third parties providing critical services to the financial sector
• Protecting access to cash
• Enabling the Payment Systems Regulator to require firms to reimburse victims of authorised push payment fraud
  
  

Key points

1. Future Regulatory Requirements
   
   

• The revocation of MiFIR, CRR, EMIR and MAR with control being passed to HMT following drafting and consultation with the regulators and enforceability capabilities
• The introduction of the Designated Activities Regime “DAR” regarding rules applying to non-financial businesses without requiring those businesses to be authorised
• Enhancing FSMA with the overall aim of the long-term growth and international competitiveness of the UK economy
• The Bill starts the initiation of a multi-year programme for the transference of regulatory requirements to rulebooks
  
  

2. Wholesale Markets
   
   

• Transitional amendments to UK MiFID regime
• The above will involve anticipated numerous consultations and rulemaking from the FCA in response to the Wholesale Market Review (a process initiated in the consultation on improving equity markets (July 2022) previously addressed in this update)
  
  

3. Crypto-assets and FMI sandbox
   
   

• The introduction of a new concept to UK law – Digital Settlement Assets (“DSA”) with the intention of regulating stablecoins to be used as a means of payment
• Creating a regulatory regime around Digital Settlement Assets
• Financial Market Infrastructure (“FMI”) to test distributed ledger technology
• The stated intention to be a global hub for crypto-asset technology
  
  

4. Additional points to note
   
   

• Critical Third Parties. The bill anticipates a discussion paper by HMT allowing the designation of a third party to a regulated firm as a ‘critical third party’ should disruption by service from that party pose a risk to UK financial stability or confidence
• Financial Promotions. With the focus mainly around authorised firms approving financial promotions for unauthorised firms and the need for permission to do so from the FCA
• Consultation on Authorised Push Payment Fraud reimbursement in Autumn 2022
• Access to cash. With the use of cash decreasing, the bill implements proposals to ensure cash withdrawal and debit facilities along with the wider cask infrastructure remain sustainable in the UK over the long term
  
  

5. Omissions

There are, as would be expected, omissions from the bill in its existing form. Examples of other relevant aspects not currently addressed are:

• UK Taxonomy
• Sustainability disclosure requirements
• The use of the UK’s overseas framework
• Controversial ‘call in’ powers (government intervention in financial regulation in the interest of the public) are excluded but are said to be under consideration

 

The Future

The Bill clearly sets out a multitude of changes to a myriad of issues within UK Financial Regulation and should be looked at as to the effect it may have on your individual regulated activities.