The consultation considers what a potential regulatory regime would look like, and its proposed scope.

By Nicola Higgs, Paul A. Davies, Becky Critchley, Anne Mainwaring, Ella McGinn, and Charlotte Collins

On 30 March 2023, HM Treasury published a consultation on regulating ESG ratings providers, which ties in with and was published alongside the UK government’s latest Green Finance Strategy paper.

The government announced as part of the Edinburgh Reforms last year that HM Treasury would consult on a potential regulatory regime for ESG ratings providers. Now HM Treasury is seeking views on whether such a regime should be introduced, and what its potential scope should be. The government is not proposing to regulate ESG data providers for the time being. The consultation is open until 30 June 2023; no further timetable has been set at this stage but it could take a couple of years for any new regime to be finalised and take effect.

The tone of the papers suggests that a fundamental reform of the Regime will be unlikely.

By Rob Moulton, David Berman, Jonathan Ritson-Candler, and Charlotte Collins

On 30 March 2023, the PRA and the FCA published a joint Discussion Paper (FCA DP23/3 and PRA DP1/23) seeking feedback on the Senior Managers and Certification Regime (SMCR). In parallel, HM Treasury published a Call for Evidence on the Regime. The Discussion Paper focuses on the operational aspects of the SMCR, whereas the Call for Evidence looks at the legislative aspects. Together, the papers seek comments on the SMCR’s performance, effectiveness, scope, and proportionality. The closing date for responses is 1 June 2023.

A consultation that will remain open until 11 April 2023 offers further clarity on the proposals to regulate buy-now-pay-later products.

By Rob Moulton, Becky Critchley, Ella McGinn, and Dianne Bell

On 14 February 2023, HM Treasury published its consultation and accompanying draft legislation on the regulation of buy-now-pay-later (BNPL) lending. The consultation follows the proposals in HM Treasury’s prior publications released in October 2021 and June 2022, since the government announced its intention to bring currently unregulated BNPL products within scope of the regulatory perimeter. This latest consultation provides some welcome clarity on the approach to this upcoming sea change for firms operating in the BNPL space.

The key changes will be effected by amending the current fixed-sum interest-free credit exemption in Article 60F(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO). BNPL lending usually falls within this exemption as such agreements meet the conditions as interest-free loans repayable in under 12 months and in 12 or fewer instalments. Article 60F(3), which provides an exemption for running-account credit, will remain unchanged.

A reminder of the ongoing reforms to implement recommendations from the Lord Hill and Kalifa Reviews.

By James Inness, Anna Ngo, and Johannes Poon

The outcome of the UK Secondary Capital Raising Review, launched on 12 October 2021 to improve further capital raising processes for UK publicly traded companies, was published by HM Treasury on 19 July 2022. (For further details, please see this Latham blog post).

Below is a recap on the other key developments on reforming the UK capital markets following the Lord Hill and Kalifa Reviews.

The landmark UK Secondary Capital Raising Review Report takes a holistic approach in making bold and comprehensive recommendations to improve the UK secondary capital raising processes and ecosystem.

By James Inness, Anna Ngo, Ryan Benedict, and Johannes Poon

On 19 July 2022, HM Treasury published the UK Secondary Capital Raising Review Report (the Report) that sets out a series of recommendations to improve further capital raising processes for publicly listed companies in the UK.

The consultation response heralds innovation-friendly reform to the UK wholesale capital markets regime.

By Rob Moulton and Dianne Bell

On 1 March 2022, HM Treasury published its response to the July 2021 consultation on the Wholesale Markets Review after considering the feedback received. The consultation response sets out changes that are expected to “liberate businesses from unwieldy and stifling rules that hold back their ability to grow and innovate”, according to Economic Secretary to the Treasury John Glen.

The changes indicate a more dynamic and flexible UK prospectus regime with the FCA to play a central role through enhanced rule-making powers.

By Chris Horton, James Inness, Anna Ngo, and Johannes Poon

On 1 March 2022, the UK government (through HM Treasury (HMT)) announced the outcome of its consultation to reform the UK prospectus regime. The consultation was published in response to recommendations from Lord Hill’s UK Listing Review to enhance the competitiveness of the UK capital markets. Broadly, the announced changes indicate a more dynamic and flexible UK prospectus regime with the FCA to play a central role through enhanced rule-making powers.

The HMT’s announcement essentially indicates a direction of travel. The impact of these changes will not be fully understood until the publication of the legislative changes and the FCA’s consultation papers. HMT states that the government will legislate to replace the existing prospectus regime when parliamentary time allows.

HM Treasury has confirmed that it will bring certain unregulated cryptoassets within scope of the financial promotions regime.

By Stuart Davis, Rob Moulton, and Charlotte Collins

On 18 January 2022, the UK government confirmed its intention to bring the promotion of certain cryptoassets into scope of regulation. HM Treasury has been considering for some time whether, and if so how, to bring unregulated cryptoassets within the regulatory perimeter, having originally consulted on these proposals in 2020.

UK regulators are considering how they can strengthen the regime to enhance standards and reduce risk.

By Nicola Higgs and Charlotte Collins

On 3 December 2021, the FCA published a Consultation Paper (CP21/34) on changes to its rules regarding the Appointed Representatives (AR) regime. HM Treasury simultaneously published a Call for Evidence, seeking views on how market participants use the AR regime, how effectively the regime works in practice, potential challenges associated with the regime, and possible future legislative reforms.

The FCA’s proposed rule changes are wide-ranging and would significantly increase the compliance burden for firms that use ARs as part of their business model. Both papers will be of interest to businesses across all sectors that use, or may consider using, the AR framework.

Recent publications come in light of UK’s “greater autonomy” in setting AML and CTF regulations following Brexit.

By Jon Holland, Rob Moulton, and Jonathan Ritson-Candler

Background to the review

On 22 July 2021, HM Treasury published both a Call for Evidence on a review of the UK’s anti-money laundering (AML) and counter-terrorist financing (CTF) regulatory and supervisory regime and a Consultation Paper on amendments, to be made via statutory instrument in Spring 2022 (the SI), to the UK’s key piece of AML and CTF legislation, the Money Laundering Regulations 2017, as amended (MLRs 2017). Despite both papers being published concurrently, they are “separate documents with distinct purposes”. The planned amendments to the MLRs 2017 by virtue of the SI are either “time-sensitive” or “relatively minor” and were proposals for change that were already in development. The SI will, therefore, be unaffected by the findings of the Call for Evidence and any amendments to the MLRs 2017 resulting from the Call for Evidence will be made separately.