Written by Brandon Wong
On 29 April 2021, the long-awaited Financial Services Act 2021 (the "Act") received Royal Assent.
The Act makes extensive amendments to the legislative and regulatory framework of the UK's post-Brexit financial services landscape, including various amendments to the Financial Services and Markets Act 2000 ("FSMA") and onshored EU financial services regimes, as well as providing the FCA with a range of new powers and obligations.
Non-exhaustively, key areas within the Act include:
- Changes to access around financial services markets – the Act makes amendments to FSMA to establish the legislative framework for the Overseas Funds Regime (including extending the UK's temporary marketing permissions regime from three years to five years) and the Gibraltar Authorisation Regime; the Act also makes amendments to the retained EU law version of the Markets in Financial Instruments Regulation (UK MiFIR) regarding the equivalence regime for third country investment firms, in addition to clarifying the scope of the reverse solicitation exception;
- Prudential regulation of investment firms and credit institutions – the Act includes amendments to FSMA in order to establish the legislative framework for the Investment Firms Prudential Regime and the UK's implementation of the final Basel III standards;
- A new consumer "duty of care" – the Act requires the FCA to consult on whether it should make rules providing that authorised persons owe a duty of care to consumers and requires the FCA to publish its analysis of the responses to the consultation before 1 January 2022, followed by the publication of "general rules about the level of care that must be provided to consumers, or particular classes of consumer, by authorised persons as it considers appropriate, having
regard to that analysis" before 1 August 2022;
- Part 4A permissions - the Act contains new powers for the FCA which will allow the UK regulator to expedite cases where it appears that an authorised firm is no longer carrying on regulated activities, and cancel or vary their authorisation as appropriate;
- Buy-now pay-later ("BNPL") – the Act provides HM Treasury with the power to bring interest-free BNPL products within the scope of FCA regulation.
- UK PRIIPs Regulation - the Act includes a power for the FCA to clarify the scope of the on-shored PRIIPs Regulation through its rules;
- UK Benchmarks Regulation– the Act makes amendments to the on-shored UK Benchmarks Regulation to provide the FCA with additional powers to manage an orderly wind-down of a critical benchmark (such as LIBOR) and extends the transitional period for third country benchmarks; and
- Insider dealing and money laundering – the Act also makes amendments to the UK's on-shored Market Abuse Regulation, the Criminal Justice Act 1993 and the Financial Services Act 2012, including increases in the maximum sentences for various insider dealing and financial services offences.
"[The Act] marks a major milestone in our plans to develop a regulatory regime that works for the UK and helps us seize new opportunities in the global economy." John Glen, Economic Secretary to the Treasury