Shearman & Sterling LLP | FinReg | UK Financial Services and Markets Act 2023
Financial Regulatory Developments Focus
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Financial Regulatory Developments Focus
  • UK Financial Services and Markets Act 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.

    Importantly, the FSM Act triggers the process for revocation of retained EU law (REUL) in financial services, which is separate from the process for the revocation or replacement of other areas of EU law provided for in the Retained EU Law (Revocation and Reform) Act 2023. Under the FSM Act's framework, many EU Regulations and U.K. subordinated legislation that implemented EU Directives are set to be revoked, restated and amended. These cover the full range of financial services regulation of investment sales and trading, derivatives, sustainability, settlement finality, recovery and resolution and payment services. HM Treasury will be prioritizing the Prospectus Regulation, the Securitisation Regulation, the Data Reporting Service Regulations (for establishing a consolidated tape) and the Solvency II Directive.

    The FSM Act also contains provisions on a broad range of issues, such as regulatory accountability, sustainability and environmental matters, an overhaul of the U.K.'s legacy MiFID II and securitization rules, a new regulatory framework for stablecoins and cryptoassets, the setting up of financial market infrastructure sandboxes, insurance and alternative investment fund regulation and consumer protection rules, including on access to cash at ATMs.

    You may like to see our client note, "A Boost for U.K. Financial Services: The U.K. Financial Services and Markets Act 2023", in which we discuss the FSM Act and catch up on developments since publication of the Act.

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