First Commencement Regulations Under UK Financial Services and Markets Act 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.

Examples of provisions entering into force from August 29, 2023, include the:

• Amendments to the Financial Services Act 2012 to bolster the powers of the Financial Regulators Complaints Commissioner.
• New designated activities regime under which HM Treasury is empowered to designate activities relating to financial markets and exchanges, and to designate instruments, products or investments, bringing them into the remit of the relevant U.K. regulator.
• HM Treasury powers to designate an entity as a “critical third party” if it provides critical services to authorized firms, their service providers and financial market infrastructures and its failure would pose financial stability or confidence risk to the U.K.
• Regulators' new growth and international competitiveness objective.
• Provisions making certain activities in cryptoassets regulated activities, allowing other cryptoasset activities to fall within the DAR and subjecting cryptoassets to the financial promotion restriction.

The FSM Act creates the framework for implementing the government's post-Brexit policy of revoking financial services retained EU legislation. The revocation mechanism is only effective upon regulations being made. The Commencement Regulations revoked, from July 11, 2023, the Money Market Funds Regulations 2018 and certain provisions of the Sustainable Investment Regulation that require HM Treasury to make regulations. The Commencement Regulations also provide for the repeal of 98 statutory instruments on August 29, 2023, although many of these are regulations that were passed to amend separate U.K. legislation or REUL to ensure they remain operable post-Brexit. Accordingly, that legislation has achieved its purpose already and therefore the legal effect of these revocations is limited. Further revocations are provided for from January 1, 2024, including the European Long-Term Investment Funds Regulation (and related SI and tertiary legislation) and a provision from the Capital Requirements Regulation so as to allow the Bank of England more flexibility to set internal Minimum Requirements for Own Funds and Eligible Liabilities for U.K. subsidiaries of non-U.K. global systemically important banks.

In addition, entering into force from August 29, 2023, are some of the changes made through a transitional regime rather than the revocation route to the U.K.’s onshored Markets in Financial Instruments Regulation, European Market Infrastructure Regulation and Securitization Regulation.

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