This post was written by Joanna Peasland
The UK Government has launched an open consultation on the regulation and policy surrounding financial services in the UK. It marks the second phase of the Government’s Future Regulatory Framework (“FRF”) Review, which considers how the regulatory framework for financial services must adapt to be fit for the future, with a particular focus on the post-Brexit climate.
While the first phase of the review concentrated on coordination between the UK’s regulatory authorities, this next phase will focus on the regulatory framework more broadly. This second consultation proposes a blueprint for the post-EU framework in the UK, building on the strengths of the model under the Financial Services and Markets Act 2000. The consultation proposes this will be achieved in three key ways:
1 – The framework should provide for a clear division of responsibilities as originally envisaged by the FSMA model.
- Parliament should set the regulatory framework through legislation and regulators should ordinarily be responsible for designing and implementing the regulatory standards that apply to financial services firms and markets, using the rule-making powers in FSMA.
- This would allow any retained EU law provision within scope of the FSMA rule-making powers that is taken off the statute book to become the responsibility of the appropriate regulator.
- The consultation notes that some elements of legislation would not be appropriate to become the responsibility of the regulators (e.g. the scope of regulated activities) and should remain on the statute book.
2 – FSMA should include policy framework legislation for key areas of regulated activity.
- The view is that FSMA provides for high-level principles but falls short of giving the Government and Parliament the powers to set policy in specific areas of regulation.
- New policy framework legislation covering key areas of regulation would achieve this.
3 - Existing FSMA transparency requirements should be updated to reflect new activity-specific policy framework legislation.
- The Government proposes placing additional obligations on regulators to explain how proposals meet the purposes established in statute for a particular regime and how they have considered regulatory principles specific to the activity in question.
The stated aim of the FRF Review is to “achieve an agile and coherent approach to financial services regulation in the UK, with appropriate democratic policy input to support a stable, innovative and world leading FS sector”.
Consultation responses should be submitted to FRF.Review@hmtreasury.gov.uk. The consultation closes on 19 January 2021 and will be followed by second consultation, which will cover a final package of specific proposals for the delivery of a future framework.