Shearman & Sterling LLP | FinReg | Government Details Proposed Financial Services and Markets Bill
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  • Government Details Proposed Financial Services and Markets Bill

    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.
    • Implement the changes to Solvency II that HM Treasury has announced.
    • Protect direct access to cash across the U.K. by introducing geographic requirements on retail banks and safeguarding the U.K. wholesale cash infrastructure by giving the Bank of England powers to oversee the wholesale cash industry.
    • Provide for the safe adoption of investments in cryptocurrencies, which is likely to include provisions that bring the issuing or facilitating the use of stablecoins used as a means of payment into the U.K. regulatory perimeter. HM Treasury has said that it will consult later in the year on regulating other types of cryptocurrencies, such as Bitcoin. The Bill should also cover the changes to the U.K. financial promotion regime to give the Financial Conduct Authority powers to regulate advertising of cryptocurrencies.
    • Reform the U.K.'s prospectus regime, which follow from Lord Hill's Listing Review recommendations to change the existing listing regime to attract more companies to raise capital in London. HM Treasury confirmed in early March this year its approach (discussed in our client note, "UK Prospectus Reform Inches Forward"), which includes changes to the measures on admissions to trading on regulated markets, a new regime for public offers, changes to the requirements on the contents for prospectuses, and a new regime for offers made by private companies.
    • Introduce a requirement for banks to compensate victims of authorized push payment fraud, which will be supervised by the Payment Systems Regulator.

    In addition, an Economic Crime and Corporate Transparency Bill will overhaul and enhance the Registrar of Companies' powers with a view to improving the transparency and accuracy of the Companies House Register; a follow up to the recent Economic Crime (Transparency and Enforcement) Act 2022, which strengthened the U.K. sanctions regime, introduced the new obligations for overseas entities that own U.K. real property to register their beneficial owners with Companies House and reformed some of the measures for Unexplained Wealth Orders. The Economic Crime and Corporate Transparency Bill will provide powers for seizing and recovering crypto-assets more easily and introduce the ability for financial institutions to share information to prevent and detect economic crime, particularly money laundering.

    Furthermore, a Data Reform Bill will overhaul the U.K.'s data protection legislation, which is based on the retained EU law version of the EU's General Data Protection Regulation. The changes are intended to boost innovation, competition and growth by reducing many of the burdensome requirements, while also ensuring personal data is protected to a high standard.

    The Brexit Freedoms Bill 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. This is linked to the reviews begun by former Brexit Minister, Lord Frost, of retained EU laws. The first is on the substance of retained EU laws and is being handled by government departments. The second review is on the legal status of retained EU laws. Several EU concepts that still affect the U.K. have been identified, including:
    • the interpretation of retained EU laws according to the EU's "purposive approach" to interpretation;
    • the obligation on U.K. courts to apply the findings of the Court of Justice of the European Union;
    • the way in which retained EU law has been incorporated into U.K. laws and given a special status, which is mostly as primary legislation, including the need to amend that status for the purpose of swift amendment or repeal; and
    • the supremacy of retained EU law.

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