Equivalence decisions for EEA states, green finance and fintech initiatives are at the forefront of the UK government’s priorities.

By Rob Moulton, Anne Mainwaring, and Anna Lewis-Martinez

On 9 November 2020, the UK Chancellor of the Exchequer, Rishi Sunak, delivered a statement setting out plans for the start of a new chapter for UK financial services to ensure that the UK remains “an open, attractive international financial centre” post-Brexit. These plans include the announcement of a set of equivalence decisions for EEA states, as well as proposals for a greener financial services industry, reforming access to the UK’s markets, and growing and investing in fintech.

However, ESMA’s proposed changes are less sweeping than required to achieve this aim.

By Rob Moulton and Anne Mainwaring

Should the Brexit transition period end without a UK equivalence decision, ESMA has issued guidance to limit the impact on the trading obligation for shares by assuming the following:

— All EU shares (EU Member State, Iceland, Liechtenstein, and Norway ISINs) will be within the scope of the EU STO. GB ISINs will be outside the scope of the EU STO.

— The trading of shares with an EEA ISIN on a UK trading venue in GBP by EU investment firms (which encompasses a narrow subset of total EU trading activity) will be outside the scope of the EU STO.

— Other ISINs should continue to determine STO application in accordance with the previous ESMA guidance published in November 2017.

The UK government has proposed amendments to the UK PRIIPs regime with performance information in the KID to differ from the EU “performance scenario” requirement.

By Nicola Higgs and Anna Lewis-Martinez

On 30 July 2020, HM Treasury published a policy statement on amendments to the Packaged Retail Investment and Insurance-based Products (PRIIPs) Regulation. The policy statement provides an update on HM Treasury’s previously announced intention to bring forward amendments to the onshored PRIIPs Regulation to improve the functioning of the UK PRIIPs regime.

Industry has widely condemned the PRIIPs standardised disclosure document, known as the Key Information Document (KID), as being potentially misleading to ordinary consumers with regards to the products it is intended to describe. The European Supervisory Authorities carried out a recent review of the KID but failed to agree on proposals to amend it following the outcome of the review, which was published on 20 July 2020.

The UK government clarifies its legislative plans for financial services regulatory reforms post-Brexit.

By Rob Moulton and Anna Lewis-Martinez

On 23 June 2020, the House of Commons published a written statement from Rishi Sunak, Chancellor of the Exchequer, on the UK’s approach to implementing financial services regulatory reforms before the end of the Brexit transition period, to ensure relevant regulations remain appropriate for the UK financial sector.

The statement outlines several areas, discussed below, in which the UK is looking to amend the implementation of EU financial regulation.

The government sets out a bold and ambitious arrangement for financial services, including free market access and a new Financial Services Committee.

By Rob Moulton and Anna Lewis-Martinez

On 19 May 2020, the UK government published draft legal texts of 12 documents, and an accompanying letter, setting out its approach to the UK’s future relationship with the European Union, including its outline of a UK-EU Free Trade Agreement (FTA). The proposed FTA is nearly 300 pages long and includes a chapter on financial services. The European Commission published its version of an agreement two months ago, and the UK’s draft FTA seems only to highlight the significant differences between the two sides.

The financial services section of the proposed FTA is contained in Chapter 17 and marks the first time that the government has spelt out clearly its expectations for financial services in the UK’s future relationship with the EU. Key financial services elements to note in the draft FTA include:

Financial Services Regulatory Initiatives Forum and the Regulatory Initiatives Grid to be introduced this summer.

By: Anna Lewis-Martinez and Rob Moulton

On 11 March 2020, HM Treasury published its response to the Call for Evidence on Regulatory Coordination.

In the summer of 2019, the government launched HM Treasury’s Financial Services Future Regulatory Framework Review to consider how the UK’s regulatory framework needs to adapt to be fit for the future, particularly in light of Brexit. The first phase of this review focused on the coordination between the UK regulators responsible for financial services regulation. On 19 July 2019, the government published a Call for Evidence on this issue which closed in October 2019.

The HM Treasury response document summarises the responses received to the Call for Evidence, and sets out how the financial services regulators, working with government, propose to improve regulatory coordination through the introduction of the Financial Services Regulatory Initiatives Forum and the Regulatory Initiatives Grid. The response document also explains the next phase of the Financial Services Future Regulatory Framework Review.

A Call for Input reveals that the FCA is planning for a post-EU future and examining ethics with regard to MAR.

By Rob Moulton

On 9 March 2020, the Financial Conduct Authority (FCA) issued a Call for Input on the way that wholesale market participants access and use data in the UK. A Call for Input is an opportunity for the FCA to raise whatever questions it likes without having to commit to a view, in order to enable it (at a later stage) to make policy proposals without surprising market participants. This paper largely covers matters already subject to review at the European level, and therefore indicates that the FCA is preparing to make its own policies after the end of the current transitional period.

By David BermanCarl Fernandes  Nicola Higgs, Rob Moulton and Charlotte Collins

In our January publication, we highlighted what we were seeing as the top regulatory focus areas for our clients during the year ahead, focusing on wholesale market structures and conduct risk.

In a series of 10 blog posts, we will take a closer look at the key areas highlighted, mapping developments from the first half of 2019, and looking ahead to the remainder of the year.

Call for evidence on regulatory cooperation marks the first phase of the planned review.

By Carl Fernandes, Nicola Higgs, Rob Moulton, and Charlotte Collins

The Chancellor announced in the Spring Statement that HM Treasury would undertake the Financial Services Future Regulatory Framework Review — examining the long-term effectiveness of the UK regulatory regime and considering where change might be necessary, particularly in light of Brexit.

The Review will take stock of the overall approach to regulating the UK financial services sector, including how the regulatory framework may need to adapt in the future. The Review will seek to address the following four key challenges:

The “Dear CEO” letter underlines the FCA’s open and pragmatic approach in the context of Brexit.

By Nicola Higgs and Charlotte Collins

The FCA has published a “Dear CEO” letter to firms, advising them of its position in relation to the use of cross-border booking models in the context of Brexit. Firms commonly use remote and back-to-back booking models, but these arrangements have come under closer scrutiny recently as firms prepare their businesses for Brexit.

European supervisors have cautioned against the use of such models, and warned against firms potentially seeking to set up “empty shell” companies in the EU. For example, the European Central Bank (ECB) (which carries out a supervisory role in relation to Eurozone banks) has set out fairly detailed expectations for banks wishing to relocate to the Eurozone. In particular, the ECB expects that EU products and transactions with EU clients are booked in the EU, and that risk management capabilities related to such products are located in the EU.