UK Chancellor launches consultation on the proposed Private Intermittent Securities and Capital Exchange System (PISCES) as part of the Spring Budget.

By Mark Austin, Rob Moulton, Anna Ngo, Frederick Gardner, Charlotte Collins, and Johannes Poon

On 6 March 2024, HM Treasury published a consultation paper seeking industry feedback on the UK’s proposed new regulated crossover market, the Private Intermittent Securities and Capital Exchange System (PISCES). PISCES would allow private companies to trade their securities in

This annual publication explores some of the core focus areas for UK-regulated financial services firms in the year ahead. 2023 saw significant progress on the regulatory reform agenda, and many measures consulted on or reviewed as part of the Edinburgh Reforms will be finalised and/or implemented in the course of 2024.

We also saw the passing of the Financial Services and Markets Act 2023, many provisions of which have already come into effect and have made important changes to the

Businesses relying on exemptions for high net worth individuals and self-certified sophisticated investors should ensure they are prepared to comply with the updated requirements.

By Rob Moulton, Nicola Higgs, and Charlotte Collins

On 7 November 2023, HM Treasury published the response to its consultation on reforming the financial promotion exemptions for high net worth individuals and self-certified sophisticated investors. These exemptions are set out in Articles 48 and 50A of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the FPO), respectively. They enable financial promotions for unlisted companies to be made to individuals who satisfy the relevant conditions, and were originally designed to assist unlisted companies with raising capital.

HM Treasury and the FCA are concerned that the exemptions, which have not been updated since 2005, are outdated as the financial thresholds have not been raised. This has meant that more individuals have been able to qualify for the exemptions. HM Treasury and the FCA have also been concerned that some businesses have been inappropriately using the exemptions to market investments to ordinary retail investors, including by coaching individuals to self-certify.

Government plans to add more flexibility to the regime, but its long-term future remains undecided.

By Rob Moulton and Charlotte Collins

On 28 September 2023, HM Treasury published further papers in relation to the planned reform of the UK bank ring-fencing regime, which was announced as part of the Edinburgh Reforms (see this Latham article). The ring-fencing regime requires banks over a certain size threshold to separate out their retail deposit-taking operations into a ring-fenced entity.

HM Treasury has published a consultation on short-term reforms to the regime, aiming to implement (and, in some cases, go beyond) recommendations made in 2022 by the independent review of ring-fencing. The proposed reforms include raising the ring-fencing threshold from £25 billion to £35 billion of core deposits, and expanding the activities that a ring-fenced bank may carry on. HM Treasury has also published a response to its Call for Evidence on aligning the ring-fencing and resolution regimes in the longer term.

The proposals would give the Bank of England wide-ranging powers to deal with acute failure scenarios, treating policyholder liabilities as loss-absorbing.

By Victoria Sander and Tim Scott

HM Treasury is proposing a new UK resolution regime for insurers that would appoint the Bank of England as resolution authority with sweeping powers to resolve insurers through transfer or bail-in, and to make resolution plans and assess resolvability in advance. The regime would share many similarities with the Banking Act 2009 (BA09).

FSMA 2023 includes a court procedure for failing insurers to temporarily write-down liabilities, with implications for counterparties.

By Victoria Sander and Tim Scott

The recently passed Financial Services and Markets Act 2023 (FSMA 2023) provides for a new write-down procedure under which failing insurers can apply to court to have their insurance liabilities written down. Write-downs are intended to be temporary (though no period is specified), followed by a subsequent write-up, which is a transfer of the business or application

As the pace of reform increases, we take a look at key developments and the timeline ahead.

Significant progress has been made on the Edinburgh Reforms since they were announced in December 2022, with developments gathering pace before the summer break. Given the breadth and speed of the reforms, now is a good time to take stock of where things stand and what we can expect in the months ahead. In this publication, we highlight some of the key developments and set out expected dates for future progress.

The Review recommends scrapping research unbundling, but also proposes a range of other changes to the UK research landscape.

By Rob Moulton, Chris Horton, Sean Wells, Charlotte Collins, and Johannes Poon

On 10 July 2023, HM Treasury published the final report produced by the independent UK Investment Research Review (Review). The Review was launched on 9 March 2023 to examine the link between levels of research and the UK’s attractiveness as a destination for companies to access capital (please see Latham’s previous blog post for the background to the Review).

The report makes seven recommendations which the government has committed to taking forward. While the recommendation to remove the research unbundling requirements was expected, the Review has taken a more holistic approach and the report puts forward wide-ranging suggestions for improving the UK investment research landscape. The recommendations are summarised below.

The consultation sets out four potential models for reform, and also considers reform to sanctions supervision.

By Rob Moulton, Jonathan Ritson-Candler, Thomas F. Lane, and Charlotte Collins

On 30 June 2023, HM Treasury published a consultation on reforms to anti-money laundering (AML) and counter-terrorism financing (CTF) supervision in the UK. HM Treasury is consulting on structural reforms to how AML and CTF requirements on firms are supervised and enforced, but is not consulting on changes to the AML and CTF requirements themselves at this stage. A separate consultation on changes to the Money Laundering Regulations is expected in late 2023.

One of the options HM Treasury has proposed could significantly impact the way in which financial services firms are supervised for AML/CTF purposes, and so firms should read and consider the proposals carefully.

The tone of the Call for Evidence indicates the controversial research unbundling rules could be primed for reform.

By Rob Moulton, Gary Whitehead, and Charlotte Collins

On 3 April 2023, HM Treasury published a Call for Evidence as the first step in the independent review of investment research and its contribution to the competitiveness of the UK’s capital markets.

The review has the stated key objectives of:

  • Assessing the link between levels of research and the attractiveness of the UK as a destination to list
  • Evaluating options to improve the UK market for investment research and to provide recommendations to this effect

The review was announced as part of the Edinburgh Reforms in December 2022. The Chancellor noted at the time that “the review is part of the government’s wider commitment to enhance the UK’s ability to attract companies to list and grow”.