New Financial Services and Markets Bill in Parliament

The Government has introduced the Financial Services and Markets Bill into Parliament. The Bill was introduced on 20 July and had its first reading, but no date was set for the second reading. In his first Mansion House speech, Nadim Zahawi described the Bill as a “landmark piece of legislation”. Key elements it addresses are:

• revocation of retained EU laws: the Bill revokes a number of retained laws and provides rule making and regulatory powers in order to allow the adaptation of UK laws. The list of repealed laws includes several FMI and wholesale markets laws, the CRR and other legislation relating to prudential requirements, EU MAR, MiFIR (which is amended rather than completely revoked), the PRIIPS Regulation and a raft of UK legislation originally derived from EU measures. The explanatory notes accompanying the Bill explain that all direct laws such as Regulations will be repealed as well as relevant secondary legislation, all EU tertiary regulation and, as a consequence, some parts of primary legislation. It says the process of revocation will  be smooth and no piece of retained regulation will be revoked until replacement laws are ready;
• the introduction of the new “designated activities” regime for FMI participants and providers and the FMI sandbox. A schedule contains a list of activities which may be included in the designation, relating to derivatives, securitisations, financial market offerings, and use of benchmarks;
• powers in relation to critical third parties;
• introducing the financial promotion gateway for permitted approvals;
• digital settlement assets, providing regulatory powers for Treasury to make appropriate regulations to regulate payments involving digital settlement assets, and their providers and service providers – so implementing the decision to bring stablecoins within regulation;
• mutual recognition agreements;
• new regulatory objectives and principles around competitiveness and growth and the net zero emissions target, and additional rule making powers (with appropriate requirements for consultation, cooperation and engagement with Parliament) for the financial regulators and the PSR, and the introduction of new panels;
• access to cash requiring Treasury to publish a statement of policy on cash deposit and withdrawal services and enabling designation of persons involved in the services, and giving powers to BoE to oversee persons involved in wholesale cash distribution;
• introduction of the SMCR for recognised bodies;
• provisions on CCPs and insurers in financial difficulties; and
• miscellaneous amendments including on the Bank of England levy and giving wider regulatory powers to impose conditions on changes in control.

The Bill also specifically provides that where the introduction of a measure is subject to pre-consultation, consultation that occurred before commencement of the relevant provision will count.

The Bill is accompanied by the Government’s response on its proposals for reform to the regulatory framework. Generally, respondents agreed with the proposals, which have in the main now been included in the Bill.