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Financial Services and Markets Act 2023

Type Public General Act

Publication 2023-06-29

Last updated 2026-04-06

State In force

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Source legislation.gov.uk

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PART 1 — Regulatory framework

CHAPTER 1 — Revocation of assimilated law

Revocation of retained EU law relating to financial services and markets

1

(1) The legislation referred to in Schedule 1 is revoked.

(2) In that Schedule—

(a) Part 1 refers to assimilated direct principal legislation;

(b) Part 2 refers to subordinate legislation;

(d) Part 4 refers to primary legislation;

(e) Part 5 refers to other EU-derived legislation not covered by Parts 1 to 3.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The revocation of any legislation in accordance with this section does not affect the continued effect of any amendments to other legislation made by that revoked legislation (as those amendments had effect immediately before the revocation).

(5) The Treasury may by regulations provide for specified subordinate legislation, or for subordinate legislation of a specified description, otherwise falling within Part 5 of Schedule 1, not to fall within that Part.

(6) Regulations under subsection (5) are subject to the negative procedure.

Transitional amendments

2

(1) Schedule 2 amends particular legislation referred to in Schedule 1 in relation to the transitional period.

(2) In this Chapter “the transitional period”, in relation to any legislation, means the period ending with the revocation of that legislation.

(3) The amendments in Schedule 2 do not restrict the power in section 3 to modify legislation as amended by that Schedule.

Power to make further transitional amendments

3

(1) The Treasury may by regulations modify legislation referred to in Schedule 1 in relation to the transitional period.

(2) The power under subsection (1) is exercisable only by making such modifications as the Treasury consider necessary or desirable for or in connection with one or more of the following purposes—

(a) protecting and enhancing the integrity or stability of the financial system operating in the United Kingdom;

(b) promoting the safety and soundness of persons providing financial services;

(d) promoting effective competition in the interests of consumers in financial services and markets or persons who use, or are likely to use, services provided by payment systems in the course of business carried on by those persons;

(e) facilitating the international competitiveness of the economy of the United Kingdom and its growth in the medium to long term;

(f) protecting consumers and those who are, or may become, insurance policyholders;

(g) providing for efficient and effective arrangements in relation to the exercise of functions under the Banking Act 2009 or Part 4 of this Act;

(h) protecting public funds;

(i) implementing, or making changes to reflect, developments in international standards and practices relating to, or applied for the purposes of, the provision of financial services or the operation of financial markets;

(j) providing for efficient and effective regulatory, enforcement, investigatory and supervisory arrangements in relation to the provision of financial services or the operation of financial markets;

(k) removing provisions that are yet to be commenced or changing the timing of their commencement.

(3) In subsection (2)—

(a) the integrity of the financial system operating in the United Kingdom includes the matters listed in section 1D(2) of FSMA 2000;

(b) references to financial markets include references to financial exchanges;

(d) “payment system” has the same meaning as in Part 5 of the Financial Services (Banking Reform) Act 2013 (see section 41 of that Act);

(e) the reference to regulatory arrangements includes (among other things) a reference to arrangements for the making of rules.

(4) In modifying legislation for or in connection with a purpose mentioned in subsection (2) regulations under this section may—

(a) confer powers on the Treasury or on a regulator;

(b) authorise the making of subordinate legislation by the Treasury;

(d) provide for fees to be charged by a regulator in connection with the carrying out of its functions;

(e) apply (with or without modifications), or make equivalent or similar provision to, provisions made by or under FSMA 2000 (including criminal offences created by that Act).

(5) The power under section 84(2)(c) to make supplementary, incidental, consequential, transitional, transitory or saving provision includes, in relation to regulations under this section, power to restate legislation in a clearer or more accessible way.

(6) Before making regulations under this section the Treasury must consult the regulators.

(7) The duty under subsection (6), so far as relating to the Bank of England or the Payment Systems Regulator, applies only if, and to the extent that, the Treasury think it appropriate to consult that regulator in view of the modifications being made by the regulations.

(8) The power under subsection (1) to modify legislation does not include power to modify—

(a) primary legislation referred to in Part 4 of Schedule 1;

(b) technical standards of the kind mentioned in section 138P(2)(a) of FSMA 2000;

(9) Regulations under this section that modify only the following kinds of legislation referred to in Schedule 1 are subject to the negative procedure—

(a) EU tertiary legislation;

(b) subordinate legislation that was not subject to affirmative resolution on being made.

(10) Regulations under this section to which subsection (9) does not apply are subject to the affirmative procedure.

Power to restate and modify saved legislation

4

(1) The power under section 86(5) to make saving provision in connection with the revocation of any legislation referred to in Schedule 1 includes power to restate that legislation (as it has effect immediately before its revocation)—

(a) by amending primary legislation or subordinate legislation, or

(b) by making new subordinate legislation.

(2) Regulations made by virtue of subsection (1) may make such modifications of the legislation being restated as the Treasury consider necessary or desirable for or in connection with—

(a) the purpose of making the law clearer or more accessible, or

(b) any of the purposes mentioned in section 3(2).

(3) Legislation restated by virtue of subsection (1) is not assimilated law.

(4) Where legislation is restated by virtue of subsection (1), the Treasury may by regulations make such further modifications of that legislation as they consider necessary or desirable for or in connection with a purpose referred to in subsection (2)(a) or (b).

(5) Subsection (4) of section 3 applies to regulations made under, or by virtue of, this section as it applies to regulations made under that section.

(6) The power conferred by virtue of subsection (1) to restate legislation may be exercised in relation to the entirety of that legislation or in relation to such parts of it as the Treasury consider appropriate.

(7) The power conferred by virtue of subsection (1) to restate legislation does not include power to restate—

(a) technical standards of the kind mentioned in section 138P(2)(a) of FSMA 2000, or

(b) EU tertiary legislation of the kind mentioned in section 138P(2)(b) of FSMA 2000.

(8) Regulations made by virtue of this section that do not amend primary legislation and contain provision restating only the following kinds of legislation referred to in Schedule 1 are subject to the negative procedure—

(a) EU tertiary legislation;

(b) subordinate legislation that was not subject to affirmative resolution on being made;

(9) Regulations made by virtue of this section to which subsection (8) does not apply are subject to the affirmative procedure.

Power to replace references to EU directives

5

(1) The Treasury may by regulations modify legislation for or in connection with the purpose of replacing any reference (however expressed) to an EU directive referred to in Part 3 of Schedule 1 with such other provision (if any) as the Treasury consider appropriate.

(2) The power under subsection (1) is exercisable only if the Treasury consider it necessary or desirable to replace the reference for or in connection with—

(a) the purpose of making the law clearer or more accessible, or

(b) any of the purposes mentioned in section 3(2).

(3) Regulations under this section are subject to the affirmative procedure if they amend primary legislation.

(4) Regulations under this section to which subsection (3) does not apply are subject to the negative procedure.

Restatement in rules: exemption from consultation requirements etc

6

(1) A relevant requirement does not apply to the making of rules by a regulator if and to the extent that—

(a) the proposed rules make excluded provision in relation to provisions of legislation referred to in Schedule 1, and

(b) those provisions of legislation are specified, or fall within a description of provisions specified, in relation to the making of rules by the regulator in regulations made by the Treasury for the purposes of this section.

(2) A relevant requirement does not apply to the making of rules by a regulator if and to the extent that—

(a) the proposed rules make excluded changes to provision of existing rules made by the regulator containing an assimilated obligation, and

(b) the assimilated obligation is specified, or falls within a description of obligations specified, in relation to the making of rules by the regulator in regulations made by the Treasury for the purposes of this section.

(3) A relevant requirement does not apply to the revocation of rules by a regulator if and to the extent that—

(a) the rules being revoked make provision containing an assimilated obligation, and

(b) the rules are revoked without being replaced by other rules made by the regulator.

(4) For the purposes of subsection (1), rules make excluded provision in relation to provisions of legislation if, in the opinion of the regulator making the rules, the rules reproduce those provisions—

(a) without any changes that are material, or

(b) with changes that are material but their effect is to reduce a regulatory burden without having any other effects that are material.

(5) For the purposes of subsection (2), rules make excluded changes to provision of existing rules if, in the opinion of the regulator making the rules—

(a) the effect of the changes is to reduce a regulatory burden, and

(b) the changes have no other effects that are material.

(6) In this section references to a “regulatory burden” include (among other things) references to—

(a) a financial cost;

(b) an administrative inconvenience;

(d) an obstacle to efficiency, productivity or profitability.

(7) Where a relevant requirement does not apply to the making or revocation of rules by virtue of subsection (1), (2) or (3), the requirement also does not apply to any rules that contain incidental, supplemental, consequential or transitional provision so far as made in connection with provision made by virtue of that subsection.

(8) “Relevant requirement” means—

(a) in relation to rules made by the FCA, the requirements imposed by—

(i) section 138I of FSMA 2000, except for subsection (1)(a), and

(ii) section 138K of FSMA 2000;

(b) in relation to rules made by the PRA, the requirements imposed by—

(i) section 138J of FSMA 2000, except for subsection (1)(a), and

(ii) section 138K of FSMA 2000;

(c) in relation to rules made by the Bank of England, the requirements imposed by paragraph 10(1)(i) of Schedule 17A to FSMA 2000;

(d) in relation to rules made by the Payment Systems Regulator, the requirements imposed by section 104 of the Financial Services (Banking Reform) Act 2013, except for subsection (2)(a).

(9) Where a regulator makes or revokes rules without complying with a relevant requirement by virtue of subsection (1), (2) or (3), the regulator must publish a statement which must—

(a) in a case falling within subsection (1), list the provisions of legislation that have been restated by the rules;

(b) in a case falling within subsection (2), specify or describe the assimilated obligations in relation to which changes have been made by the rules;

(c) in a case falling within subsection (3), specify or describe the assimilated obligations that have been removed by the revocation of the rules.

(10) Where the statement relates to the making of rules that include provision of a kind mentioned in subsection (4)(b) or (5)(a) and (b), the statement must—

(a) if made by the FCA, include an explanation of the FCA’s reasons for believing that making the proposed rules is compatible with its duties under section 1B(1), (4A) and (5)(a) of FSMA 2000;

(b) if made by the PRA, include an explanation of the PRA’s reasons for believing that making the proposed rules is compatible with its duties under—

(i) section 2B(1) or, as the case requires, section 2C(1) or 2D(3) of FSMA 2000, and

(ii) section 2H of FSMA 2000;

(c) if made by the Bank of England, include an explanation of the Bank’s reasons for believing that making the proposed rules is compatible with—

(i) the Bank’s financial stability objective under section 2A of the Bank of England Act 1998, and

(ii) the Bank’s duties under section 30D(1)(a) of that Act;

(d) if made by the Payment Systems Regulator, include an explanation of the Regulator’s reasons for believing that making the proposed rules is compatible with its duties under section 49 of the Financial Services (Banking Reform) Act 2013.

(11) The statement must be published in the way appearing to the regulator to be best calculated to bring the statement to the attention of the public.

(12) Regulations under this section are subject to the affirmative procedure.

(13) In this section “rules”—

(a) in relation to the Payment Systems Regulator, means—

(i) generally applicable requirements within the meaning of Part 5 of the Financial Services (Banking Reform) Act 2013 (as amended by Schedule 7 to this Act), or

(ii) directions of general application imposed under any other enactment;

(b) in relation to any other regulator, means rules made by that regulator under FSMA 2000 or any other enactment.

Interpretation of Chapter

7

(1) In this Chapter—

“EU directive” means a directive within the meaning of Article 288 of the Treaty on the Functioning of the European Union;

“EU tertiary legislation” has the same meaning as in the European Union (Withdrawal) Act 2018 (see section 20(1));

“legislation” means primary legislation, assimilated direct legislation or subordinate legislation;

“regulator” means—the FCA,the PRA,the Bank of England, orthe Payment Systems Regulator;

“the transitional period” has the meaning given in section 2(2).

(2) For the purposes of this Chapter, references to legislation do not include references to rules made by a regulator.

(3) For the purposes of this Chapter, subordinate legislation was subject to affirmative resolution on being made if it was made with approval given by a resolution of each House of Parliament (whether before or after it was made).

(4) References in this Chapter to the revocation of legislation are, in relation to the legislation referred to in Part 4 of Schedule 1, to be read as references to its repeal.

CHAPTER 2 — New regulatory powers

Designated activities regime

Designated activities

8

(1) FSMA 2000 is amended as follows.

(2) After Part 5 insert—

(71K) (1) The Treasury may by regulations provide for an activity of a specified description to be a designated activity for the purposes of this Act. (2) Regulations under this section are referred to in this Act as designated activity regulations. (3) Designated activity regulations may provide for an activity to be a designated activity only if the activity relates or is connected to— (a) the financial markets or exchanges of the United Kingdom, or (b) financial instruments, financial products or financial investments that are (or are proposed to be) issued or sold to, or by, persons in the United Kingdom. (4) The description of an activity as a designated activity may be framed by reference to— (a) the way in which the activity is carried on, or (b) the description of persons who carry on the activity. (5) Schedule 6B contains examples of activities that may be specified as designated activities. (6) Nothing in Schedule 6B limits the powers conferred by subsection (1). (7) The financial instruments, financial products and financial investments mentioned in subsection (3)(b) may include cryptoassets. (71L) (1) A person must not carry on a designated activity if, or to the extent that, designated activity regulations prohibit the carrying on of that activity. (2) A person carrying on a designated activity that is not prohibited by virtue of subsection (1) must comply with— (a) designated activity rules relating to that activity, and (b) any other requirements imposed in relation to that activity by designated activity regulations. (3) For the purposes of this Act designated activity rules are rules made under section 71N. (71M) (1) Designated activity regulations may make provision generally in relation to the carrying on of designated activities. (2) The following are examples of provision that may be made by designated activity regulations— (a) provision about cases in which the restrictions imposed by section 71L are to apply to persons carrying on a designated activity outside the United Kingdom; (b) provision supplementing, or in connection with, any requirements relating to a designated activity under designated activity rules. (3) Designated activity regulations may— (a) provide for exemptions (including exemptions that are subject to specified conditions); (b) confer powers on the Treasury or the FCA. (71N) (1) The FCA may make rules relating to designated activities. (2) The power under subsection (1) is only exercisable in so far as designated activity regulations provide for the FCA to make rules— (a) relating to the designated activity, or (b) relating to specified matters relating to designated activities. (3) The FCA may by notice suspend any rules made under subsection (1) for such period as it considers appropriate. (4) Rules under subsection (1) may include provision enabling requirements imposed by the rules to be dispensed with, or modified, in such cases or circumstances as may be determined by the FCA under the rules (subject to subsection (5)). (5) The powers under subsections (3) and (4) are only exercisable in such circumstances as may be specified in designated activity regulations. (6) Before suspending any rules in accordance with subsection (3), the FCA must consult the PRA. (7) A notice under subsection (3) must be published by the FCA in the way appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it. (8) The reference in section 137T(a) (supplementary powers) to “authorised persons” includes, in relation to rules made under this section, a reference to any persons to whom the rules under this section apply. (71O) (1) The FCA may by directions impose such requirements on a person, or such description of persons, relating to the carrying on of designated activities as the FCA considers appropriate. (2) The power under subsection (1) is only exercisable in so far as designated activity regulations provide for the FCA to make directions relating to the designated activity. (3) A requirement may, in particular, be imposed so as to require the person concerned— (a) to take specified action, or (b) to refrain from taking specified action. (4) A requirement may extend to activities which are not designated activities. (5) A direction under this section— (a) may specify the way in which, and the time by which, a thing is to be done; (b) may be varied; (c) may be expressed to have effect during a specified period or until revoked. (6) The FCA may at any time revoke a direction under this section by notice. (7) The revocation of a direction does not affect the validity of anything previously done in accordance with it. (8) A direction or notice under this section must be given in writing to the person or persons to whom it applies. (9) But if in the circumstances the FCA considers it appropriate, the FCA may, in addition to, or instead of, proceeding under subsection (8), publish the direction or notice in the way appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it. (10) Designated activity regulations may make provision for the exercise of the power under subsection (1) to be subject to such conditions as may be specified in the regulations. (11) Provision under subsection (10) may (among other things) require, where the exercise of the power relates to a PRA-authorised person, consultation with the PRA. (12) The imposition of a requirement that expires at the end of a specified period does not affect the FCA’s power to impose a new requirement. (71P) (1) Designated activity regulations may make provision about liability and compensation in connection with this Part. (2) A contravention of a requirement under designated activity regulations or designated activity rules— (a) does not, except as provided by designated activity regulations under section 71Q or by regulations under section 71R, make a person guilty of an offence; (b) does not, except as provided by designated activity regulations— (i) make any transaction void or unenforceable, or (ii) give rise to any action for breach of statutory duty. (3) Designated activity regulations may in particular— (a) in cases where the regulations make provision for liability, make provision excluding civil liability (whether generally or to such extent as may be specified), (b) make provision for liability to be determined in accordance with designated activity rules, (c) make provision so that a person being subject to a liability includes another person being entitled as against that person to rescind or repudiate an agreement, and (d) make provision for the purposes of subsection (1) by applying provisions of this Act with or without modifications. (71Q) (1) Designated activity regulations may make provision about enforcement in connection with this Part. (2) Provision about enforcement includes (among other things) provision— (a) requiring the supply of information; (b) about investigations (including the making of reports); (c) conferring powers of entry; (d) conferring powers of inspection, search and seizure; (e) conferring powers of censure; (f) imposing monetary penalties; (g) about appeals; (h) conferring functions (including functions involving the exercise of a discretion) on a person. (3) Designated activity regulations may in particular make provision for the purposes of subsection (1) by applying provisions of this Act with or without modifications, including any criminal offences created by this Act (and modifications made by virtue of this subsection may widen the scope of any such offences). (4) The power under this section includes power to amend or repeal provisions of this Act. (71R) (1) The Treasury may by regulations make such modifications to provision made by or under this Act or any other enactment as the Treasury consider appropriate for purposes of, or connected with, any designated activity regulations or designated activity rules. (2) The power under subsection (1) may in particular be exercised for the purpose of removing or varying any requirement imposed by or under this Act so far as applying to the carrying on of any designated activity. (3) The power under subsection (1) includes power to modify any criminal offence created by this Act (including by widening the scope of any such offence). (4) In this section— - “enactment” includes— an enactment comprised in subordinate legislation (within the meaning given by section 21 of the Interpretation Act 1978), an enactment comprised in, or in an instrument made under, a Measure or Act of Senedd Cymru, an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament, and an enactment comprised in, or in an instrument made under, Northern Ireland legislation; - “modify” includes amend, repeal or revoke. (71S) (1) This section applies to regulations which contain provision made under section 71K which provides for an activity of a specified description to be a designated activity. (2) A statutory instrument containing regulations to which this section applies, other than regulations to which subsection (3) applies, may not be made unless a draft of the instrument has been laid before Parliament and approved by a resolution of each House. (3) This subsection applies to regulations which contain a statement made by the Treasury that they are of the opinion that, by reason of urgency, it is necessary to make the regulations without a draft of the statutory instrument containing the regulations being laid and approved under subsection (2). (4) Where subsection (3) applies to regulations, a statutory instrument containing the regulations must be laid before Parliament after being made. (5) Regulations contained in a statutory instrument laid before Parliament under subsection (4) cease to have effect at the end of the period of 28 days beginning with the day on which the instrument is made unless, during that period, the instrument is approved by a resolution of each House of Parliament. (6) In calculating the period of 28 days, no account is to be taken of any whole days that fall within a period during which— (a) Parliament is dissolved or prorogued, or (b) either House of Parliament is adjourned for more than four days. (7) If regulations cease to have effect as a result of subsection (5), that does not— (a) affect the validity of anything previously done under the regulations, or (b) prevent the making of new regulations.

(3) The following amendments are related to the new Part 5A of FSMA 2000 inserted by subsection (2).

(4) In section 3E (memorandum of understanding), in subsection (2) after paragraph (g) insert—

(ga) directions under section 71O (designated activities: directions);

(5) In section 3I (power of PRA to require the FCA to refrain from specified action), in subsection (3) in paragraph (a)—

(a) the words from “its powers in relation to the” to the end become sub-paragraph (i), and

(b) after that sub-paragraph insert

, or (ii) its powers in relation to designated activities under Part 5A;

(6) In section 138D (actions for damages), in subsection (5) after paragraph (za) insert—

(zaa) rules under Part 5A;

(7) In section 417 (definitions), at the appropriate place insert—

“designated activity” has the meaning given in section 71K;

(8) In section 429 (Parliamentary control of statutory instruments)—

(a) in subsection (2B), after paragraph (a) insert—

(aa) provision made under section 71Q which amends or repeals a provision of this Act; (ab) provision made under section 71R which amends, repeals or revokes a provision of this Act or another Act of Parliament, an Act of the Scottish Parliament, an Act or Measure of Senedd Cymru, or Northern Ireland legislation;

;

(b) in subsection (8), in the list of sections beginning with “22B,”, insert at the appropriate place “, 71S”;

(c) in subsection (9) (as inserted by the Financial Services Act 2021), for the words from “which” to the end substitute “which is subject to a procedure before Parliament for the approval of the instrument in draft before it is made or its approval after it is made.”

(9) After Schedule 6A insert the Schedule 6B set out in Schedule 3 to this Act.

Financial market infrastructure: general rules and requirements

Rules relating to central counterparties and central securities depositories

9

(1) FSMA 2000 is amended as follows.

(2) After section 300E (power to disallow excessive regulatory provision: supplementary) insert—

(300F) (1) The Bank of England may make such rules applying to FMI entities— (a) with respect to the carrying on by them of relevant regulated activities, or (b) with respect to the carrying on by them of an activity which is not a relevant regulated activity, as appear to the Bank to be necessary or expedient for the purpose of advancing its Financial Stability Objective. (2) Each of the following is an “FMI entity” for the purposes of this section— (a) a recognised central counterparty; (b) a recognised CSD; (c) a third country central counterparty; (d) a third country CSD. (3) The power to make rules under subsection (1), so far as applying to a third country central counterparty or a third country CSD, is subject to section 300G. (4) In this section “relevant regulated activity”— (a) in relation to a recognised central counterparty, means a regulated activity described in section 285(3A); (b) in relation to a recognised CSD, means a regulated activity described in section 285(3D); (c) in relation to a third country central counterparty, means a regulated activity described in section 285(3C); (d) in relation to a third country CSD, means a regulated activity described in section 285(3G). (5) Rules under this section may include— (a) provision applying to an FMI entity even though there is no relationship between the entity to which the rules will apply and the persons whose interests will be protected by the rules; (b) requirements which take into account, in the case of an FMI entity which is a member of a group, any activity of another member of the group. (300G) (1) The power to make rules under section 300F, so far as applying to an FMI entity of the kind mentioned in subsection (2)(c) or (d) of that section (an “overseas FMI entity”), is exercisable— (a) only by the application of corresponding rules, and (b) except in the case of systemic third country CCPs (see subsection (6)), only so far as authorised by regulations made by the Treasury. (2) The reference in subsection (1)(a) to “corresponding rules” is— (a) in relation to rules that would apply to a third country central counterparty, rules under section 300F that apply to a recognised central counterparty; (b) in relation to rules that would apply to a third country CSD, rules under section 300F that apply to a recognised CSD. (3) Rules may be applied in accordance with subsection (1)(a)— (a) by applying all corresponding rules or only such corresponding rules as the Bank considers appropriate; (b) with such modifications as the Bank considers appropriate for the purpose of ensuring the effectiveness of the rules in their application to the overseas FMI entities concerned (having regard in particular to the establishment of such entities in countries other than the United Kingdom). (4) Regulations under subsection (1)(b) may authorise the making of rules generally in respect of overseas FMI entities or only in respect of overseas FMI entities which— (a) are specified or described in the regulations, or (b) satisfy conditions specified in the regulations. (5) Regulations under subsection (1)(b) may— (a) provide for the power to make rules under section 300F, so far as applying to an overseas FMI entity, to be subject to such limitations or conditions as may be specified in the regulations; (b) make provision by reference to matters to be determined by the Bank; (c) provide for exemptions. (6) The restriction imposed by subsection (1)(b) does not apply in the case of systemic third country CCPs (and accordingly references to overseas FMI entities in subsections (4) and (5) do not include references to systemic third country CCPs). (7) A “systemic third country CCP” means any third country central counterparty that the Bank has determined is systemically important, or is likely to become systemically important, to the financial stability of the United Kingdom. (8) The Bank must publish notice of any determination made under subsection (7). (9) A determination under subsection (7) must be made in accordance with such criteria of general application as are set out in regulations made by the Treasury for the purposes of this section. (10) In making a determination under subsection (7) the Bank must also have regard to any statement of policy prepared and published by the Bank for the purposes of providing further specification of the criteria of general application mentioned in subsection (9). (11) The Bank— (a) may alter or replace a statement of policy prepared for the purposes of this section; (b) must publish a statement as altered or replaced. (12) Publication under this section is to be made in such manner as the Bank considers best designed to bring the publication to the attention of the public. (13) The Treasury must consult the Bank before making regulations under subsection (9). (14) The Treasury may by regulations provide for other provisions of this Act to apply in relation to third country central counterparties, or third country CSDs, to which rules under section 300F apply, with such modifications as may be specified in the regulations.

(3) In section 165 (regulators’ power to require information: authorised persons etc) omit subsection (8A).

(4) In section 165A (PRA’s power to require information: financial stability) omit subsection (7A).

(5) In section 293 (notification requirements)—

(a) in subsection (7A) at the end insert “and a third country central counterparty”;

(b) in subsection (8) for “or an overseas clearing house” substitute “, an overseas clearing house or a third country central counterparty”.

(6) In section 417(1) (definitions), at the appropriate place insert—

“Financial Stability Objective” means the objective set out in section 2A of the Bank of England Act 1998;

Central counterparties and central securities depositories: other requirements

10

In Schedule 17A to FSMA 2000 (further provision in relation to exercise of Part 18 functions by Bank of England), before paragraph 10 (and the heading before it) insert—

(9B) (1) The powers conferred by section 55L(3) (FCA own-initiative power to impose requirements on authorised persons) are exercisable by the Bank to impose requirements on a relevant FMI entity. (2) In this paragraph “relevant FMI entity” means— (a) a recognised central counterparty, (b) a recognised CSD, or (c) a systemic third country CCP as defined by section 300G(7). (3) The power under sub-paragraph (1) is exercisable only if it appears to the Bank that either (or both) of the following conditions is met. (4) The first condition is that it is desirable to exercise the power in order to advance the Financial Stability Objective. (5) The second condition is that the relevant FMI entity— (a) has failed, or is likely to fail, to satisfy the recognition requirements, or (b) has failed to comply with any other obligation imposed on it by or under this Act. (6) The power conferred by sub-paragraph (1) may not be exercised so as to restrict or prohibit discretionary payments to employees or shareholders of a recognised central counterparty (and for this purpose “discretionary payment” has the meaning given by paragraph 13(11) of Schedule 11 to the Financial Services and Markets Act 2023 and “employee” has the meaning given by paragraph 154 of that Schedule). (7) The powers conferred by section 55L(5) (FCA power to impose requirements on application of authorised persons with Part 4A permission) are exercisable by the Bank to impose requirements on a relevant FMI entity on the application of that entity. (8) A power conferred by this paragraph is exercisable whether or not there is a relationship between the entity in relation to which it is exercised and the persons whose interests will be protected by its exercise. (9) The following provisions apply in relation to requirements imposed by the Bank under this paragraph as they apply in relation to requirements imposed by the FCA under section 55L, with the modifications in sub-paragraph (10)— (a) section 55L(6) (power to refuse application to impose etc requirements); (b) section 55N (further provision in relation to requirements); (c) section 55P (prohibitions and restrictions); (d) section 55Q (exercise of power in support of overseas regulator); (e) section 55R(1) (persons connected with applicant); (f) section 55U(3) to (8) (applications for requirement to be imposed etc); (g) section 55V(1) to (6) (determination of applications); (h) section 55X(2) and (4)(f) (warning and decision notices on refusal of applications); (i) section 55Y (exercise of own-initiative power: procedure); (j) section 55Z3(1) and (2) (right to refer matters to the Tribunal). (10) The modifications are— (a) any reference to the FCA is to be read as a reference to the Bank; (b) any references to own-initiative powers are to be read as references to the power conferred by sub-paragraph (1); (c) any references to an authorised person are to be read as references to relevant FMI entities; (d) in section 55L(6), the reference to the FCA’s operational objectives is to be read as a reference to the Bank’s Financial Stability Objective; (e) section 55N has effect as if the reference to regulated activities in subsection (2) were a reference to activities in respect of which a recognition order is in force.

Rules relating to investment exchanges and data reporting service providers

11

(1) FSMA 2000 is amended as follows.

(2) After section 300G (section 300F: rules in relation to overseas FMI entities) (inserted by section 9) insert—

(300H) (1) The FCA may make such rules applying to recognised UK investment exchanges or data reporting service providers— (a) with respect to the carrying on by them of relevant activities, or (b) with respect to the carrying on by them of an activity which is not a relevant activity, as appear to the FCA to be necessary or expedient for the purpose of advancing one or more of its operational objectives. (2) In this section “relevant activity”— (a) in relation to a recognised UK investment exchange, means a regulated activity described in section 285(2); (b) in relation to a data reporting service provider, means providing a data reporting service. (3) Rules under this section may include— (a) provision applying to a recognised UK investment exchange or data reporting service provider even though there is no relationship between that person and the persons whose interests will be protected by the rules; (b) requirements which take into account, in the case of a recognised UK investment exchange or data reporting service provider which is a member of a group, any activity of another member of the group. (4) Rules under this section may not modify, amend or revoke any retained direct EU legislation (except retained direct EU legislation which takes the form of FCA rules). (5) In this section— - “data reporting service” and “data reporting service provider” have the meanings given by regulation 2 of the Data Reporting Services Regulations 2017 (S.I. 2017/699); - “recognised UK investment exchange” means a recognised investment exchange that is not an overseas investment exchange as defined in section 313(1).

(3) In section 166A (appointment of skilled person to collect and update information), after subsection (9) insert—

(9A) The powers conferred by this section may also be exercised by the FCA in relation to a recognised investment exchange (and references to an authorised person are to be read accordingly).

(4) In section 168 (appointment of persons to carry out investigations in particular cases), in subsection (4)(ca), at the end insert “or a rule made by the FCA under section 300H”.

(5) In section 312E (public censure)—

(a) in subsection (1)—

(i) after “recognised body” insert “or data reporting service provider”;

(ii) after “the body” insert “or provider”;

(b) in subsection (2)(a) after “exchange” insert “or data reporting service provider”;

(4) In this Chapter “data reporting service provider” has the meaning given by regulation 2 of the Data Reporting Services Regulations 2017 (S.I. 2017/699).

(6) In section 312F (financial penalties), in subsection (1)—

(a) after “recognised body” insert “or data reporting service provider”;

(b) after “the body”, in both places, insert “or provider”.

(7) In section 312G (proposal to take disciplinary measures), in subsection (1)—

(a) in paragraph (a), after “recognised body” insert “or data reporting service provider”;

(b) in the words after paragraph (b), after “body” insert “, provider”.

(8) In section 312H (decision notice)—

(a) in subsection (1)—

(i) in paragraph (a), after “recognised body” insert “or data reporting service provider”;

(ii) in the words after paragraph (b), after “body” insert “, provider”;

(b) in subsection (4)—

(i) in paragraph (a), after “recognised body” insert “or data reporting service provider”;

(ii) in the words after paragraph (b), after “body” insert “, provider”.

(9) In section 312I(a) (publication), after “recognised body” insert “, data reporting service provider”.

Treasury directions to Bank of England: restrictions

12

(1) Section 4 of the Bank of England Act 1946 (Treasury directions to the Bank) is amended as follows.

(2) In subsection (1), after paragraph (b) insert—

(c) the exercise by the Bank of its functions under any enactment in relation to the following bodies— (i) recognised central counterparties; (ii) recognised CSDs; (iii) third country central counterparties; (iv) third country CSDs.

(3) After subsection (1) insert—

(2A) Expressions used in subsection (1)(c) have the same meaning as in section 285 of the Financial Services and Markets Act 2000 (exemption for recognised bodies etc).

Financial market infrastructure: piloting powers

Testing of FMI technologies or practices

13

(1) The Treasury may by regulations make provision for the purposes of—

(a) testing, for a limited period, the efficiency or effectiveness of the carrying on of FMI activities in a particular way, and

(b) assessing whether or how relevant enactments should apply in relation to FMI activities carried on in that way.

(2) The reference in subsection (1)(a) to FMI activities being carried on in a particular way includes a reference to—

(a) the use of developing technology in the carrying on of FMI activities;

(b) the adoption of new or different practices in the carrying on of FMI activities.

(3) Provision made in regulations under subsection (1) is referred to in this group of sections as an FMI sandbox.

(4) An FMI sandbox must specify or otherwise provide for—

(a) the FMI activities to which the FMI sandbox arrangements relate;

(b) the description—

(i) of FMI entities eligible to participate in the FMI sandbox arrangements, and

(ii) of any other persons (including in particular the users of services provided by FMI entities) eligible to so participate;

(5) An FMI sandbox may confer functions on the appropriate regulator in connection with the implementation and operation of the FMI sandbox arrangements.

(6) An FMI sandbox may—

(a) provide for a relevant enactment not to apply for the purposes of the FMI sandbox arrangements;

(b) provide for modifications in the application of a relevant enactment for those purposes;

but provision under this subsection may not amend, repeal or revoke a relevant enactment.

(7) In the case of a relevant enactment that is a rule or another instrument made by an appropriate regulator, provision under subsection (6) may provide for the powers under that subsection to be exercisable by that regulator.

(8) Schedule 4 contains further examples of types of provision that an FMI sandbox may make.

(9) An FMI sandbox—

(a) may be replaced by another FMI sandbox of the same or similar effect;

(b) may have effect at the same time as one or more other FMI sandboxes.

(10) Regulations under this section are subject to the negative procedure.

(11) For the purposes of this group of sections—

(a) “FMI entity” means—

(i) a recognised investment exchange that is not an overseas investment exchange;

(ii) a recognised CSD;

(iii) the operator of a multilateral trading facility;

(iv) the operator of an organised trading facility;

(v) such other persons as may be specified in regulations under this section as eligible to participate in the FMI sandbox arrangements concerned;

(b) “FMI activities” are any activities carried on as part of the business of an FMI entity;

Permanent implementation of arrangements tested under an FMI sandbox

14

(1) This section applies where the Treasury make regulations under section 13 implementing FMI sandbox arrangements.

(2) The Treasury must prepare and publish a report on the FMI sandbox arrangements.

(3) The report must be prepared by a date no later than the date specified in the regulations.

(4) The report must contain—

(a) a description of the FMI sandbox arrangements;

(b) an assessment of the efficiency or effectiveness of those arrangements;

(c) whether, and if so how, the Treasury propose exercising the power under section 15 in relation to those arrangements.

(5) The Treasury must consult the appropriate regulator in preparing the report.

(6) The appropriate regulator must provide to the Treasury such information or other assistance as the Treasury may require for the purposes of preparing the report.

(7) The Treasury must lay a copy of the report before Parliament.

Permanent implementation of arrangements tested under an FMI sandbox

15

(1) This section applies where, after testing the efficiency or effectiveness of FMI sandbox arrangements implemented under an FMI sandbox, the Treasury determine that arrangements of the same or similar effect should have effect after the expiry of the FMI sandbox.

(2) The Treasury may by regulations make provision implementing the FMI sandbox arrangements—

(a) as tested under the FMI sandbox, or

(b) with such variations as the Treasury consider appropriate.

(3) Regulations under this section that implement FMI sandbox arrangements may be made before (as well as after) the expiry of the FMI sandbox concerned.

(4) Regulations under this section may include provision that amends, repeals or revokes a relevant enactment.

(5) Regulations under this section that amend, repeal or revoke any provision of primary legislation are subject to the affirmative procedure.

(6) Regulations under this section to which subsection (5) does not apply are subject to the negative procedure.

Regulations

16

(1) A power to make regulations under this group of sections includes power conferring a discretion on an appropriate regulator, or another specified person, to do anything under, or for the purposes of, the regulations.

(2) Before making regulations under this group of sections the Treasury must consult—

(a) the appropriate regulators;

(b) such other persons as the Treasury consider appropriate.

Interpretation

17

(1) This section applies for the purposes of this section and sections 13 to 16.

(2) The “appropriate regulator”, in relation to an FMI sandbox, means the regulator specified in that sandbox as the appropriate regulator (and both of the regulators may be specified); and for this purpose “regulator” means—

(a) the FCA, or

(b) the Bank of England.

(3) “Relevant enactment” means any provision made by or under—

(a) FSMA 2000;

(b) the Companies Act 2006;

(ba) the Stock Transfer (Gilt-edged Securities) (CGO Service) Regulations 1985 (S.I. 1985/1144);

(d) the Uncertificated Securities Regulations 2001 (S.I. 2001/3755);

(e) the Financial Collateral Arrangements (No. 2) Regulations 2003 (S.I. 2003/3226);

(ea) the Government Stock Regulations 2004 (S.I. 2004/1611);

(eb) the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692);

(f) Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation);

(g) Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments;

(h) Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories;

(i) Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive;

(j) Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC.

(4) The following terms are defined as follows—

“FMI activities” has the meaning given by section 13(11)(b);

“FMI entity” has the meaning given by section 13(11)(a);

“FMI sandbox” has the meaning given by section 13(3);

“FMI sandbox arrangements” has the meaning given by section 13(11)(c);

“this group of sections” means the sections referred to in subsection (1).

(5) The following terms have the same meanings as in Part 18 of FSMA 2000—

“multilateral trading facility”;

“organised trading facility”;

“overseas investment exchange”;

“recognised investment exchange”;

“recognised CSD”.

(6) The Treasury may by regulations amend subsection (3) so as to add to the list of relevant enactments.

(7) Regulations under subsection (6) are subject to the affirmative procedure.

Powers in relation to critical third parties

Critical third parties: designation and powers

18

(1) FSMA 2000 is amended as follows.

(2) In the heading to Part 18, for “and CSDs” substitute “, CSDs and other parties”.

(3) After section 312K (statement of policy: procedure) insert—

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