Shearman & Sterling LLP | FinReg | UK Government Publishes Financial Services and Markets Bill
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  • UK Government Publishes Financial Services and Markets Bill

    The U.K. government has published the much anticipated Financial Services and Markets Bill. Following its exit from the EU, the U.K. has undertaken a fundamental review of how financial regulation policy and rules should be made, reviewed and established in law, particularly in light of the return of the U.K.'s sovereignty. Furthermore, there has been a substantial assessment of the U.K.'s financial services rules and regulations, with some areas warranting further consideration.

    The Bill implements the outcomes of the Future Regulatory Framework Review, which assessed whether the U.K. financial services regulatory framework is fit for purpose and able to support future growth, particularly in light of challenges such as Brexit and climate change. On the same day, HM Treasury published its response to the final consultation in the FRF Review. The FSM Bill establishes a revised blueprint for financial services regulation by revamping the existing model under the Financial Services and Markets Act 2000 and revoking retained EU law in financial services. The regulators will be delegated powers for detailed rulemaking, and as a result, become subject to enhanced Parliamentary oversight.

    To maintain the U.K.'s position as a leading financial services center, HM Treasury will be able to change legislation to ensure that mutual recognition agreements can be properly implemented, including bestowing powers on the relevant regulators to give effect to the MRAs. Innovation in payments will be encouraged by regulating the issuing of stablecoins used for payment. Systemic stablecoin firms will be subject to additional requirements, however, those measures are still subject to consultation and not included in the FSM Bill. The Bill allows for the development of pioneering technology in financial services by creating a framework for financial market infrastructure firms to explore new technologies in temporary pilot schemes that will protect the financial sector from any unforeseen adverse impact.

    Consumer protection measures in the Bill will secure access to cash, improve the financial promotions regime and provide for greater protection of victims of authorized push payment scams. The Bill also brings welcome relief for those acting in the wholesale markets by removing or adjusting some of more burdensome requirements across a raft of areas regulated under the U.K.'s Markets in Financial Instruments package (as inherited from the EU).