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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

Department Statute Law Database

Source legislation.gov.uk

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Reform history JSON API

(33A) Paragraph 21A of Schedule 1ZB (other reports by PRA) applies in relation to the Bank, but as if— (a) the reference in sub-paragraph (1)(a) to paragraphs (a) to (f) of paragraph 19(1) were a reference to those paragraphs as substituted in relation to the Bank under paragraph 33 of this Schedule; (b) the reference in sub-paragraph (1)(b) to such other matters were a references to such other matters so far as relating to the exercise of the Bank’s FMI functions; (c) the reference in sub-paragraph (5)(b) to section 348 were a reference to that section as it applies in relation to the Bank under paragraph 23 of this Schedule. (33B) (1) Paragraph 36 of Schedule 1ZB (PRA engagement with Parliamentary Committees) applies in relation to the Bank, but as if— (a) in sub-paragraph (2)(a), the reference to section 138J were a reference to that section as it applies in relation to the Bank under paragraph 10(1) of this Schedule; (b) in sub-paragraph (2)(b), the reference to a proposal were to a proposal so far as relating to the exercise of the Bank’s FMI functions; (c) in sub-paragraph (2)(c), the reference to general functions were a reference to the Bank’s FMI functions; (d) in sub-paragraph (4)(a), the reference to the PRA’s objectives were a reference to the Financial Stability Objective and the Bank’s secondary innovation objective (see section 30D(2) of the Bank of England Act 1998); (e) in sub-paragraph (4)(b), the reference to section 3B were a reference to section 30E of the Bank of England Act 1998; (f) in sub-paragraph (4)(c), the reference to section 138EA were a reference to that section as it applies in relation to the Bank under paragraph 10(1) of this Schedule; (g) in sub-paragraph (5A)(b)(ii) and (c)(ii), the references to the PRA being notified were references to the Bank being notified. (2) Paragraph 37 of Schedule 1ZB applies in relation to the Bank, but as if, in sub-paragraph (2), after “the draft of any proposals” there were inserted “so far as relating to the exercise by the Bank of its FMI functions”.

Payment Systems Regulator

51

Schedule 7 makes provision corresponding or similar to provision made by preceding provisions of this Chapter relating to the accountability of the Payment Systems Regulator.

Chair of the Payment Systems Regulator as member of FCA Board

52

(1) FSMA 2000 is amended as follows.

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

“the Payment Systems Regulator” means the body established under section 40(1) of the Financial Services (Banking Reform) Act 2013;

(3) Schedule 1ZA (FCA: constitution etc) is amended as follows.

(4) In paragraph 2—

(a) in sub-paragraph (2), after paragraph (c) insert—

(ca) the Chair of the Payment Systems Regulator,

;

(b) in sub-paragraph (3), after “(c)” insert “, (ca)”.

(5) In paragraph 3—

(a) in sub-paragraph (6) after “PRA” insert “or of the Payment Systems Regulator”;

(b) in sub-paragraph (7) for “the Bank’s Deputy Governor for prudential regulation” substitute “a person holding an office mentioned in paragraph 2(2)(c) or (ca)”.

(6) In paragraph 5(a) for “or (c)” substitute “, (c) or (ca)”.

(7) After paragraph 6 insert—

(6A) (1) The Chair of the Payment Systems Regulator must not take part in any discussion by or decision of the FCA which relates to— (a) the exercise of the FCA’s functions in relation to a particular person, or (b) a decision not to exercise those functions. (2) Sub-paragraph (1) does not apply at any time when the person who is the Chair of the Payment Systems Regulator also holds the office mentioned in paragraph 2(2)(a).

Consultation on rules

53

(1) In section 138I of FSMA 2000 (consultation by the FCA), after subsection (4) insert—

(4A) The FCA must include, in the account mentioned in subsection (4), a list of the respondents who made the representations, where those respondents have consented to the publication of their names. (4B) The duty in subsection (4A) is not to be read as authorising or requiring such processing of personal data as would contravene the data protection legislation (but the duty is to be taken into account in determining whether particular processing of data would contravene that legislation). (4C) For the purposes of this section, the exemption relating to functions conferred on the FCA mentioned in paragraph 11 of Schedule 2 to the Data Protection Act 2018 (exemption from application of listed GDPR provisions) does not apply. (4D) Where representations are made to the FCA by a Committee of the House of Commons or the House of Lords or a Joint Committee of both Houses in accordance with subsection (2)(e), the FCA’s account mentioned in subsection (4) must also describe how the FCA has considered the representations made by that Committee in making the proposed rules.

(2) In section 138J of FSMA 2000 (consultation by the PRA), after subsection (4) insert—

(4A) The PRA must include, in the account mentioned in subsection (4), a list of the respondents who made the representations, where those respondents have consented to the publication of their names. (4B) The duty in subsection (4A) is not to be read as authorising or requiring such processing of personal data as would contravene the data protection legislation (but the duty is to be taken into account in determining whether particular processing of data would contravene that legislation). (4C) For the purposes of this section, the exemption relating to functions conferred on the PRA mentioned in paragraph 9 of Schedule 2 to the Data Protection Act 2018 (exemption from application of listed GDPR provisions) does not apply. (4D) Where representations are made to the PRA by a Committee of the House of Commons or the House of Lords or a Joint Committee of both Houses in accordance with subsection (2)(e), the PRA’s account mentioned in subsection (4) must also describe how the PRA has considered the representations made by that Committee in making the proposed rules.

(3) In section 104 of the Financial Services (Banking Reform) Act 2013 (consultation requirements), after subsection (5) insert—

(5A) The Payment Systems Regulator must include, in the account mentioned in subsection (5), a list of the respondents who made the representations, where those respondents have consented to the publication of their names. (5B) The duty in subsection (5A) is not to be read as authorising or requiring such processing of personal data as would contravene the data protection legislation (but the duty is to be taken into account in determining whether particular processing of data would contravene that legislation). (5C) In this section “data protection legislation” has the same meaning as in the Data Protection Act 2018 (see section 3 of that Act). (5D) Where representations are made to the Payment Systems Regulator by a Committee of the House of Commons or the House of Lords or a Joint Committee of both Houses in accordance with subsection (3)(d), the Payment Systems Regulator’s account mentioned in subsection (5) must also describe how the Payment Systems Regulator has considered the representations made by that Committee in making the proposed requirement.

PART 2 — Access to cash

Cash access services

54

Schedule 8 makes provision about the provision of cash deposit and withdrawal services in the United Kingdom or a part of the United Kingdom.

Wholesale cash distribution

55

Schedule 9 makes provision about persons involved in wholesale cash distribution (as that term is defined in the Schedule).

PART 3 — Performance of functions relating to financial market infrastructure

Recognised bodies: senior managers and certification

56

Schedule 10 amends FSMA 2000 to make provision about the performance, by senior managers and others, of functions in relation to activities carried on by recognised bodies (within the meaning of Part 18 of that Act) of types specified by the Treasury.

PART 4 — Central counterparties in financial difficulties

Central counterparties in financial difficulties

57

Schedule 11 makes provision for a special resolution regime for central counterparties where all or part of its business has encountered, or is likely to encounter, financial difficulties.

PART 5 — Insurers in financial difficulties

Insurers in financial difficulties

58

(1) Schedule 12 makes provision about the powers of the court in relation to liabilities of an insurer that is, or is likely to become, unable to pay its debts (an order made in exercise of these powers is a “write-down order”).

(2) Schedule 13 makes provision about the enforcement of contracts to which an insurer is a party, where the insurer is subject to a write-down order or to certain insolvency proceedings.

PART 6 — Miscellaneous

Amendments to FSMA 2000

Application of provisions to regulatory functions under this Act

59

(1) FSMA 2000 is amended as follows.

(2) In section 1A (the FCA), in subsection (6) after paragraph (czb) insert—

(czc) the Financial Services and Markets Act 2023,

(3) In section 2AB (functions of the PRA), in subsection (3) after paragraph (c) insert—

(ca) the Financial Services and Markets Act 2023,

Formerly authorised persons

60

(1) FSMA 2000 is amended as follows.

(2) In section 404C after “(which” insert “, subject to section 415AA(1),”.

(3) After section 415A insert—

(415AA) (1) A power in the following provisions may be exercised in relation to persons who were at any time authorised persons (in addition to persons who are authorised persons at the time when the power is exercised)— (a) section 168 (appointment of investigators in certain cases); (b) section 205 (public censure); (c) section 206 (financial penalties); (d) section 384 (power to require restitution). (2) Accordingly, references in the provisions listed in subsection (1), and in sections 207 to 209, to an authorised person are (so far as appropriate) to be read as including a person who was at any time an authorised person but who has ceased to be an authorised person.

(4) The amendments made by this section have effect only in relation to persons who cease to be authorised persons on or after 20 July 2022.

Control over authorised persons

61

In Part 12 of FSMA 2000 (control over authorised persons), in section 187 (approval with conditions), in subsection (2)—

(a) at the end of paragraph (a) omit “or”, and

(b) after that paragraph insert—

(aa) it appears to that regulator that it is desirable to impose those conditions in order to advance any of that regulator’s objectives (subject to section 185(2)(c)), or

Financial instruments

62

(1) FSMA 2000 is amended as set out in subsections (2) and (3).

(2) In section 212 (the scheme manager), in subsection (3)(aa) omit the words “(who is to be the accounting officer)”.

(3) Omit section 218B (Treasury’s power to receive information).

(4) Omit section 15 of the Financial Services (Banking Reform) Act 2013 (which inserted section 218B of FSMA 2000).

The Ombudsman scheme

63

(1) FSMA 2000 is amended as follows.

(2) In section 429 (Parliamentary control of statutory instruments), in subsection (2B) after paragraph (c) insert—

(d) provision made under paragraph 15(3) of Schedule 17.

(3) Paragraph 15 of Schedule 17 (the Ombudsman scheme: power of scheme operator to charge fees) is amended as set out in subsections (4) and (5).

(4) In sub-paragraph (1) after “respondent” insert “or other persons of a specified description”.

(5) After sub-paragraph (2) insert—

(3) The reference in sub-paragraph (1) to persons of a specified description is a reference to such descriptions of persons as may be specified in regulations made by the Treasury. (4) The power conferred by sub-paragraph (3) to specify descriptions of persons may not be exercised so as to provide for eligible complainants to fall within a specified description of persons. (5) The reference in sub-paragraph (4) to “eligible complainants” is a reference to complainants who are eligible in relation to the compulsory or voluntary jurisdiction of the ombudsman scheme (see section 226(6) and 227(7)). (6) Before making regulations under sub-paragraph (3) the Treasury must consult the scheme operator.

Unauthorised co-ownership AIFs

64

(1) FSMA 2000 is amended as follows.

(2) In section 261E (authorised contractual schemes: holding of units)—

(a) before subsection (1) insert—

(A1) This section sets out requirements for the purposes of section 261D(1)(a) (authorisation orders).

;

(b) in subsection (1) for “a contractual” substitute “the”.

(3) After section 261Z5 insert—

(261Z6) (1) The Treasury may by regulations make provision about unauthorised co-ownership AIFs that corresponds or is similar to, or applies with modifications, any of sections 261M to 261O and section 261P(1) and (2) (rights and liabilities of participants in authorised co-ownership schemes). (2) Regulations under subsection (1) may make provision about unauthorised co-ownership AIFs generally, or about unauthorised co-ownership AIFs of a description specified in the regulations. (3) In this section “unauthorised co-ownership AIF” means a co-ownership scheme that— (a) is an AIF, and (b) is not authorised for the purposes of this Act by an authorisation order in force under section 261D(1).

Power to amend enactments in consequence of rules

65

(1) FSMA 2000 is amended as follows.

(2) After section 141A insert—

(141B) (1) The Treasury may by regulations make provision amending an enactment that is consequential on rules. (2) In this section— - “enactment” includes— an enactment comprised in subordinate legislation, retained direct EU legislation, 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; - “subordinate legislation” has the same meaning as in the Interpretation Act 1978 (see section 21 of that Act) but does not include rules of either regulator.

(3) Omit section 144F (power to consequentially amend enactments).

(4) In section 429 (Parliamentary control of statutory instruments), in subsection (2), in the list of sections beginning with “90B”—

(a) insert at the appropriate place “141B,”;

(b) omit “144F,”.

Ambulatory references

66

(1) FSMA 2000 is amended as follows.

(2) In section 137T (regulator rules: general supplementary powers), after paragraph (a) insert—

(aa) may make provision for any reference in the rules to an enactment (including an enactment comprised in subordinate legislation) to be read as a reference to that enactment as it has effect from time to time,

(3) In section 428 (regulations and orders)—

(a) in subsection (3) before paragraph (a) insert—

(za) make provision by reference to any rules or other instruments as they have effect from time to time;

;

(b) after subsection (3) insert—

(4) In subsection (3)(za) “rules” includes rules made by the Bank of England under this Act.

Power to amend or repeal certain provisions of FSMA 2000

67

(1) The Treasury may by regulations amend or repeal the following provisions in Part 9C of FSMA 2000—

(a) section 143C (duty to make rules applying to FCA investment firms);

(b) section 143D (duty to make rules applying to parent undertakings);

(2) In consequence of provision made in regulations under subsection (1), the Treasury may by regulations amend or repeal other provisions of FSMA 2000.

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

Power under FSMA 2000 to make transitional provisions

68

(1) FSMA 2000 is amended as follows.

(2) In section 427 (transitional provisions)—

(a) in subsection (2)(a) to (c), for “the Authority”, in each place, substitute “a regulator”;

(b) in subsection (2)(f), for “the Authority’s” substitute “the FCA’s”;

(3) In Schedule 17A, after paragraph 31A (inserted by section 50), insert—

(31B) Section 427 (transitional provisions), so far as it relates to an order under section 426 which makes provision in connection with this Part of this Act, applies in relation to the Bank.

Cryptoassets

69

(1) FSMA 2000 is amended as follows.

(2) In section 21 (restrictions on financial promotion), in subsection (14) at end insert “(including where an asset, right or interest is, or comprises or represents, a cryptoasset)”.

(3) In section 22 (regulated activities), in subsection (4) at end insert “(including where an asset, right or interest is, or comprises or represents, a cryptoasset)”.

(4) In section 417 (definitions)—

(a) in subsection (1), insert at the appropriate place—

“cryptoasset” means any cryptographically secured digital representation of value or contractual rights that— can be transferred, stored or traded electronically, and that uses technology supporting the recording or storage of data (which may include distributed ledger technology).

;

(b) at end insert—

(5) The Treasury may by regulations amend the definition of “cryptoasset” in subsection (1).

(5) In section 429 (Parliamentary control of statutory instruments), in subsection (2) leave out “or 333T” and insert “, 333T or 417(5)”.

Bank of England levy

70

(1) The Bank of England Act 1998 is amended as follows.

(2) Omit section 6 and Schedule 2 (cash ratio deposits).

(3) Before section 7 insert—

(6A) Schedule 2ZA makes provision for the Bank to impose a charge on financial institutions in connection with the pursuit of its financial stability and monetary policy objectives.

(4) Before Schedule 2A (financial policy committee) insert—

SCHEDULE 2ZA (1) (1) The Bank may impose a charge on eligible institutions in accordance with this Schedule. (2) The charge is to be known as the Bank of England levy (and is referred to in this Schedule as “the levy”). (2) (1) For the purposes of this Schedule, an “eligible institution” is a person who, at any time during a levy year, is an authorised deposit-taker. (2) An “authorised deposit-taker” for these purposes is a person who has permission under Part 4A of the Financial Services and Markets Act 2000 to accept deposits, other than— (a) a credit union; (b) a friendly society; (c) a person who has such permission only in the course of effecting or carrying out contracts of insurance in accordance with that permission. (3) In this paragraph— - “credit union” has the meaning given by section 31(1) of the Credit Unions Act 1979 or Article 2(2) of the Credit Unions (Northern Ireland) Order 1985; - “friendly society” means a society that is registered within the meaning of the Friendly Societies Act 1974 or incorporated under the Friendly Societies Act 1992; - “levy year” has the meaning given by paragraph 3. (4) The Treasury may by regulations— (a) amend the foregoing provisions of this paragraph; (b) amend any other provision of this Schedule in consequence of provision made under paragraph (a). (3) (1) For the purposes of this Schedule, a “levy year” is— (a) the period of 12 months beginning on such day as the Bank may determine, and (b) each subsequent period of 12 months. (2) The day determined under sub-paragraph (1)(a) may not be before the day on which the Financial Services and Markets Act 2023 is passed. (4) (1) The Bank must, in respect of a levy year— (a) determine which of its policy functions it intends to fund (in whole or in part) by means of the levy; (b) determine the total amount of the levy it reasonably considers it requires in connection with the funding of those functions (“the anticipated levy requirement”). (2) The Bank may add to the anticipated levy requirement for a levy year such amount (if any) that— (a) was required in connection with the funding of policy functions in the previous levy year, and (b) was in excess of the total amount of the levy that it received in respect of that previous levy year. (3) For the purposes of this Schedule, a function of the Bank is a “policy function” if it is exercised in pursuit of— (a) the Financial Stability Objective (see section 2A), or (b) its objectives in relation to monetary policy (see section 11). (4) In making a determination in accordance with sub-paragraph (1), the Bank must take account of any other amounts which are, or are likely to be, available in the levy year to fund policy functions (for example, amounts of the levy received in respect of a previous levy year or amounts available from sources other than the levy). (5) The Bank must publish a determination made in accordance with sub-paragraph (1)— (a) at such time before or during the levy year to which the determination relates as the Bank considers appropriate, and (b) in such manner as the Bank considers appropriate. (6) The reference in sub-paragraph (3) to the exercise of a function includes anything done in preparation for, to facilitate, or otherwise in connection with, the exercise of the function. (5) (1) The amount of the levy that an eligible institution is liable to pay in respect of a levy year is to be determined by the Bank in accordance with regulations made by the Treasury. (2) Regulations under sub-paragraph (1) may— (a) make provision by reference to the Bank’s anticipated levy requirement in respect of the levy year (see paragraph 4); (b) make provision by reference to specified liabilities of an eligible institution; (c) make provision for cases in which no amount of the levy or a reduced amount of the levy is payable. (3) Regulations made by virtue of sub-paragraph (2)(b) may include (among other things) provision— (a) specifying types of liability that may or may not be taken into account for specified purposes; (b) about how and when liabilities of a specified type are to be taken into account for specified purposes; (c) about how the amount of a liability of a specified type is to be determined, including specifying times, or periods of time, by reference to which the amount is to be determined; (d) for an amount of a liability of a specified type to be treated as reduced by the amount of assets of a specified type. (4) Regulations under sub-paragraph (1) may include provision conferring a discretion on the Bank to determine specified matters (including matters mentioned in sub-paragraph (2)(b) or (3)). (5) Regulations made by virtue of sub-paragraph (4) may, in particular, confer a discretion— (a) to determine the method used to determine a matter, and (b) to determine different methods to be used in relation to different eligible institutions. (6) In this section, “specified” means specified in the regulations. (6) (1) The Bank must notify each eligible institution that is liable to pay the levy in respect of a levy year of the following matters— (a) the levy year in respect of which the levy is payable; (b) the amount of the levy the institution is liable to pay; (c) the time by which the levy must be paid (or, if the Bank determines that the levy may be paid in instalments, the times by which each instalment must be paid); (d) the methods by which the levy may be paid. (2) A time notified in accordance with sub-paragraph (1)(c) (or if more than one time is notified, the earliest of them) may not be before the end of the period of 30 days beginning with the day on which the notification is given. (3) Notification may be given in such form or in such manner as the Bank considers appropriate (and may be given in a different form or manner to different eligible institutions or eligible institutions of a different description). (7) The levy is recoverable as a civil debt due to the Bank. See also paragraph 8 (interest on unpaid amounts of the levy). (8) (1) This paragraph applies where an eligible person has been notified— (a) of an amount of the levy that is payable, and (b) the time by which the amount must be paid. (2) Interest is payable, at the rate mentioned in sub-paragraph (3), on any part of the amount mentioned in sub-paragraph (1)(a) which remains unpaid after the time mentioned in sub-paragraph (1)(b). (3) The rate mentioned in this sub-paragraph is the rate equivalent to an annual percentage rate of 4% above the benchmark rate. (4) The “benchmark rate” is— (a) the percentage rate announced from time to time by the Monetary Policy Committee of the Bank as the official dealing rate, or (b) where an order under section 19 (Treasury reserve powers) is in force, any equivalent percentage rate determined by the Treasury under that order. (5) The Treasury may by regulations amend this paragraph so as to change the rate of interest payable on an unpaid amount of the levy. (9) (1) The Bank may, by written notice, require an eligible institution to provide information or documents in connection with the levy. (2) The notice must specify— (a) the information required; (b) the form or manner in which the information must be provided; (c) the time at which, or period within which, the information must be provided; (d) the period to which the information must relate. (10) (1) Before making regulations under this Schedule the Treasury must consult— (a) the Bank, and (b) such other persons who appear to the Treasury to be representative of persons who are likely to be affected by the regulations. (2) When making regulations under this Schedule the Treasury must have regard to the financial needs of the Bank. (3) Regulations under this Schedule are to be made by statutory instrument. (4) Regulations under this Schedule may— (a) make different provision for different purposes; (b) make incidental, supplemental, consequential, saving or transitional provision. (5) A statutory instrument containing (whether alone or with other provision) regulations under paragraphs 2(4) or 5(1) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament. (6) A statutory instrument containing only regulations under paragraph 8(5) is subject to annulment in pursuance of a resolution of either House of Parliament.

Bank of England levy: consequential amendments

71

(1) The Bank of England Act 1998 is amended as follows in consequence of provision made by section 70.

(2) In section 37 (restriction on disclosure of information), for “cash ratio deposit” substitute “Bank of England levy”.

(3) In section 38 (offences in relation to supplying information to the Bank), in each of subsections (1) and (3), for “paragraph 9 of Schedule 2” substitute “paragraph 9 of Schedule 2ZA”.

(4) In section 40 (orders)—

(a) in subsection (2)—

(i) after “section 17(4) or (5),” insert “or”;

(ii) omit “paragraph 1(2) or 5 of Schedule 2, or”;

(b) in subsection (3) omit “paragraph 2(2) or 8 of Schedule 2,”.

(5) Schedule 7 (restriction on disclosure of information) is amended in accordance with subsections (6) to (8).

(6) In paragraph 1(1)(a), for “paragraph 9 of Schedule 2” substitute “paragraph 9 of Schedule 2ZA”.

(7) In paragraph 2(1)(c), for “Schedule 2” substitute “Schedule 2ZA”.

(8) In paragraph 5(a), for “Schedule 2 (payment in lieu of cash ratio deposit)” substitute “Schedule 2ZA (Bank of England levy)”.

Other miscellaneous provisions

Liability of payment service providers for fraudulent transactions

72

(1) The Payment Systems Regulator must prepare and publish a draft of a relevant requirement for reimbursement in such qualifying cases of payment orders as the Regulator considers should be eligible for reimbursement.

(2) A case is a “qualifying case” for the purposes of this section if—

(a) the case relates to a payment order executed over the Faster Payments Scheme, and

(b) the payment order was executed subsequent to fraud or dishonesty.

(3) The draft of the relevant requirement must—

(a) be published in the way appearing to the Payment Systems Regulator to be best calculated to bring it to the attention of the public;

(b) be accompanied by notice that representations about the proposed relevant requirement may be made to the Payment Systems Regulator within a specified time.

(4) The duty imposed by subsection (1) must be carried out before the end of two months beginning with the day on which this section comes into force.

(5) The Payment Systems Regulator must impose a relevant requirement, in whatever way and to whatever extent it considers appropriate, for reimbursement to be made in qualifying cases of payment orders.

(6) In complying with the duty imposed by subsection (5) the Payment Systems Regulator must have regard to any representations made in accordance with subsection (3)(b).

(7) The duty imposed by subsection (5) must be carried out before the end of 6 months beginning with the day on which this section comes into force.

(8) The duty under subsections (1) to (3), and under section 104(2) of the Financial Services (Banking Reform) Act 2013 in the application of that section to a relevant requirement imposed under subsection (5) of this section, may be satisfied by things done before (as well as after) this section comes into force.

(9) Nothing in subsections (1) to (8) is to be taken as limiting the power of the Payment Systems Regulator—

(a) to vary or revoke a relevant requirement imposed under the duty imposed by subsection (5), or

(b) to impose further relevant requirements (after that duty is complied with) in connection with reimbursement of payment orders executed subsequent to fraud or dishonesty.

(10) In subsections (1) to (9)—

“the Faster Payments Scheme” means the payment system, known as the Faster Payments Scheme, designated as a regulated payment system for the purposes of Part 5 of the Financial Services (Banking Reform) Act 2013 by order made by the Treasury in exercise of the power conferred by section 43(1) of that Act;

“relevant requirement” means a requirement imposed by or under section 54 or 55 of the Financial Services (Banking Reform) Act 2013 (or by or under a combination of those sections).

(11) In regulation 90 of the Payment Services Regulations 2017 (S.I. 2017/752) (liability of payment service providers for incorrect unique identifiers), after paragraph (5) insert—

(6) Nothing in this regulation affects the liability of a payment service provider under a relevant requirement in a case where the payment order is executed subsequent to fraud or dishonesty (and the requirements imposed by this regulation are subject to any such relevant requirements). (7) In this regulation, a “relevant requirement” means a requirement imposed by or under— (a) a direction given under regulation 125, (b) a direction given under section 54 of the Financial Services (Banking Reform) Act 2013, (c) a rule made under section 55 of that Act, (d) an order made under section 56(3) of that Act, or (e) a variation of an agreement under section 57(2) of that Act.

Credit unions

73

Schedule 14 amends the Credit Unions Act 1979 to make provision about additional financial activities credit unions may choose to carry on.

Reinsurance for acts of terrorism

74

(1) The Reinsurance (Acts of Terrorism) Act 1993 is amended as follows.

(2) After section 2, insert—

(2A) (1) A relevant person must comply with any directions given to it by the Treasury under this section. (2) For the purposes of this section, a “relevant person” means— (a) a person who— (i) has entered into arrangements to which this Act applies (see section 2(1)) (whether before or after the passing of this Act), and (ii) has been classified as a public sector body by the Office for National Statistics (whether before or after the passing of this Act), or (b) a group undertaking of a person falling within paragraph (a) (within the meaning of section 1161 of the Companies Act 2006). (3) The Treasury may direct a relevant person to appoint a person to perform the functions of an accounting officer. (4) The Treasury may give a direction to a relevant person under this subsection if the Treasury consider it necessary for the purpose of ensuring compliance with any requirements associated with the classification, as mentioned in subsection (2)(a)(ii), of a person falling within subsection (2)(a). (5) Directions under subsection (4) may include provision about compliance with requirements relating to— (a) auditing; (b) accounting; (c) budgeting; (d) arm’s length bodies; (e) public sector bodies. (6) Before giving a direction under this section the Treasury must consult the relevant person to whom the Treasury intend to give a direction. (7) A direction under this section must be accompanied by a notice that— (a) states when the direction takes effect (see subsection (8)), and (b) gives the Treasury’s reasons for giving the direction. (8) A direction may, if the Treasury reasonably consider it necessary, take effect— (a) immediately it is given to the relevant person, or (b) on a later date specified in the direction. (9) A direction may be given so as to have effect— (a) for a specified period, or (b) until the occurrence of a specified event. (10) A direction under this section must be given in writing. (11) A direction under this section must— (a) be published in whatever manner the Treasury consider appropriate, and (b) be laid before Parliament. (12) A direction under this section may be varied or revoked by another direction under this section. (2B) (1) Compliance with a direction given under section 2A is enforceable— (a) by injunction, or (b) in Scotland, by interdict or by an order for specific performance under section 45 of the Court of Session Act 1988. (2) Proceedings under subsection (1) may be brought only by the Treasury.

Banking Act 2009: miscellaneous amendments

75

(1) The Banking Act 2009 is amended as follows.

(2) In section 7A (effect on other group members, financial stability in UK etc)—

(a) in subsection (1), for “(4)(b)(ii)” substitute “(4), (4B)(b),”;

(b) after subsection (1) insert—

(1A) Subsection (1) does not apply in relation to a requirement under section 3A(4) for a person to maintain (but not issue) a particular kind of bail-in liability.

(3) In section 83ZD (appointment of person to carry out investigations in particular cases), in subsection (3)(a), for “83ZN” substitute “83ZR”.

(4) In section 89H (recognition of third-country resolution actions), in subsection (7), in the definition of “third-country resolution action”—

(a) in the words before paragraph (a), for “, third country parent undertaking or a bank, building society, credit union or investment firm” substitute “or third-country parent undertaking”;

(b) in paragraph (a), omit “or a bank, building society, credit union or investment firm”.

(5) In section 182 (interpretation: “payment system”)—

(a) in subsection (1), after “arrangements” insert “, or proposed arrangements,”;

(b) in subsection (5), after “operates” insert “, or is intended to operate,”.

(6) In section 244 (immunity), in subsection (2)(c) after “2000,” insert “of its functions under, or as a result of regulations made under, the Financial Services and Markets Act 2023,”.

Arrangements for the investigation of complaints

76

(1) The Financial Services Act 2012 is amended in accordance with subsections (2) and (3).

(2) In section 84 (arrangements for the investigation of complaints)—

(a) omit the “and” at the end of subsection (1)(a);

(b) omit subsection (1)(b);

(1A) The Treasury must appoint an independent person (“the investigator”) to be responsible for the conduct of investigations in accordance with the complaints scheme.

;

(d) omit subsection (4);

(e) in subsection (5), in the opening words, for “regulators” substitute “Treasury”.

(3) In section 87 (investigation of complaints)—

(a) in subsection (9A), after paragraph (b) insert—

(ba) for the regulator’s response under paragraph (b) to include a summary of— (i) the cases in which the regulator decided not to follow any relevant recommendations, and (ii) the reasons for not following those recommendations;

;

(b) in subsection (9B), after paragraph (e) insert—

(f) such other matters as the Treasury may from time to time direct.

;

(9C) In subsection (9A)(ba) the reference to “relevant recommendations”, in relation to the regulator’s response in respect of an annual report, is a reference to— (a) any recommendations to the regulator contained in that annual report, and (b) any recommendations to the regulator contained in final reports relating to individual complaints given during the period to which that annual report relates.

Politically exposed persons: money laundering and terrorist financing

77

(1) The Treasury must exercise the power conferred by section 49 of the Sanctions and Anti-Money Laundering Act 2018 (power of appropriate Minister to make regulations about money laundering etc) for the purpose mentioned in subsection (2).

(2) The purpose is to make provision amending Part 3 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692) (“the 2017 Regulations”) (customer due diligence) so as to secure the result required by subsection (3).

(3) The result required by this subsection is that, where a customer is a domestic PEP, or a family member or a known close associate of a domestic PEP—

(a) the starting point for the relevant person’s assessment under regulation 35(3) of the 2017 Regulations is that the customer presents a lower level of risk than a non-domestic PEP, and

(b) if no enhanced risk factors are present, the extent of enhanced customer due diligence measures to be applied in relation to that customer is less than the extent to be applied in the case of a non-domestic PEP.

(4) In this section—

(a) “customer” includes a potential customer;

(b) “domestic PEP” means a politically exposed person entrusted with prominent public functions by the United Kingdom;

(c) “enhanced risk factors”, in relation to a customer who is a domestic PEP or a family member or a known close associate of that domestic PEP, mean risk factors other than the customer’s position as a domestic PEP or as a family member or known close associate of that domestic PEP;

(d) “non-domestic PEP” means a politically exposed person who is not a domestic PEP;

(e) the following terms have the same meaning as in regulation 35(12) of the 2017 Regulations—

“politically exposed person” or “PEP”;

“family member”;

“known close associate”.

(5) Section 55 of the Sanctions and Anti-Money Laundering Act 2018 (Parliamentary procedure for regulations) does not apply to regulations made in compliance with the duty imposed by subsection (1).

(6) Regulations made in compliance with the duty imposed by subsection (1)—

(a) are subject to the negative procedure, and

(b) must be laid before Parliament in accordance with paragraph (a) before the end of 12 months starting with the day on which this section comes into force.

(7) The Treasury must, before the end of 6 months starting with the day on which this section comes into force, lay before Parliament a statement setting out what progress has been made towards making the regulations in compliance with the duty imposed by subsection (1).

(8) The duty in subsection (7) does not apply where the regulations have been laid before Parliament in accordance with subsection (6)(a) before the end of 6 months starting with the day on which this section comes into force.

Politically exposed persons: review of guidance

78

(1) The FCA must review its guidance on politically exposed persons (“PEPs”) given under section 139A of FSMA 2000 and in compliance with the requirements under regulation 48 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692) (“the 2017 Regulations”).

(2) The review required under subsection (1) must include—

(a) an assessment of the extent to which the guidance is followed by those persons to whom it is given under regulation 48 of the 2017 Regulations, and

(b) in the light of that assessment, consideration as to whether the guidance remains appropriate or whether it should be revised.

(3) The FCA must—

(a) before the end of 3 months beginning with the day on which this section comes into force, publish an update on the FCA’s plan for the review required under subsection (1), and

(b) before the end of 12 months beginning with the day on which this section comes into force—

(i) publish the conclusions of the review, and

(ii) where the FCA concludes that the guidance should be revised, publish draft revised guidance for consultation.

(4) Publication as required by subsection (3) must be in the way appearing to the FCA to be best calculated to bring the publication to the attention of persons likely to be affected by it.

(5) The FCA is not required under this section to publish any information whose publication would be against the public interest.

(6) In this section—

(a) “domestic PEP” means a politically exposed person entrusted with prominent public functions by the United Kingdom;

(b) the following terms have the same meaning as in regulation 35(12) of the 2017 Regulations—

“politically exposed person” or “PEP”;

“family member”;

“known close associate”.

Forest risk commodities: review

79

(1) The Treasury must carry out a review to assess the extent to which regulation of the UK financial system is adequate for the purpose of eliminating the financing of the use of prohibited forest risk commodities.

(2) In subsection (1) the reference to “prohibited” forest risk commodities is a reference to forest risk commodities, or products derived from forest risk commodities, the use of which is prohibited by paragraph 2 of Schedule 17 to the Environment Act 2021.

(3) Having carried out a review the Treasury must lay before Parliament, and publish, a report stating—

(a) the conclusions of the review, and

(b) the steps the Treasury consider it appropriate to take to improve the effectiveness of the regulation of the UK financial system for the purpose stated in subsection (1).

(4) Subsection (3) must be complied with before the end of 9 months beginning with the day on which the first regulations under paragraph 1 of Schedule 17 to the Environment Act 2021 are made.

(5) In this section—

“forest risk commodities” has the same meaning as in Schedule 17 to the Environment Act 2021;

“UK financial system” has the same meaning as in FSMA 2000 (see section 1I of that Act).

PART 7 — General

Interpretation

80

(1) In this Act—

“domestic law” means the law of England and Wales, Scotland or Northern Ireland;

“enactment” means an enactment whenever passed or made and includes—an enactment contained in any Order in Council, order, rules, regulations, scheme, warrant, byelaw or other instrument made under an Act,an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament,an enactment contained in, or in an instrument made under, a Measure or Act of Senedd Cymru,an enactment contained in, or in an instrument made under, Northern Ireland legislation, andany assimilated direct legislation;

“FCA” means the Financial Conduct Authority;

“FSMA 2000” means the Financial Services and Markets Act 2000;

“modify” includes amend, repeal or revoke (and related expressions are to be read accordingly);

“Payment Systems Regulator” means the body established under section 40(1) of the Financial Services (Banking Reform) Act 2013;

“PRA” means the Prudential Regulation Authority;

“primary legislation” means—an Act of Parliament,an Act of the Scottish Parliament,an Act or Measure of Senedd Cymru, orNorthern Ireland legislation;

“subordinate legislation” means—any Order in Council, order, rules, regulations, scheme, warrant, byelaw or other instrument made under any Act, orany instrument made under an Act of the Scottish Parliament, a Measure or Act of Senedd Cymru or Northern Ireland legislation,and includes any Order in Council, order, rules, regulations, scheme, warrant, byelaw or other instrument made on or after IP completion day under any assimilated direct legislation.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pre-commencement consultation

81

(1) Subsection (2) applies to a duty to consult, so far as applying to or in connection with, or otherwise arising in consequence of, a provision of an enactment as modified or made—

(a) by or under this Act, or

(b) by or under another Act as amended by this Act.

(2) The duty to consult may be satisfied by things done before the commencement date (as well as by things done on or after that date).

(3) The “commencement date”, in relation to a provision of an enactment as modified or made—

(a) by or under this Act, or

(b) by or under another Act as amended by this Act,

means the date on which the modification or making of that provision comes into force.

Financial provision

82

There is to be paid out of money provided by Parliament any expenditure incurred by the Treasury for any purpose in connection with this Act.

Power to make consequential provision

83

(1) The Treasury may by regulations make provision that is consequential on this Act or on any provision made under it.

(2) The power to make regulations under this section may (among other things) be exercised by modifying any provision made by or under an enactment (including this Act).

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

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

Regulations

84

(1) Any power to make regulations under this Act is exercisable by statutory instrument.

(2) Any power to make regulations under this Act includes power—

(a) to make provision by reference to any rules or other instruments as they have effect from time to time;

(b) to make different provision for different purposes;

(3) Where regulations under this Act are subject to “the affirmative procedure”, the regulations may not be made unless a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, each House of Parliament.

(4) Where regulations under this Act are subject to “the negative procedure”, the statutory instrument containing them is subject to annulment in pursuance of a resolution of either House of Parliament.

(5) Any provision that may be made by regulations under this Act, or under any other enactment, subject to the negative procedure may be made in regulations, made under or by virtue of this Act, subject to the affirmative procedure.

(6) If an instrument, or a draft of an instrument, containing regulations under this Act would, apart from this subsection, be treated as a hybrid instrument for the purposes of the standing orders of either House of Parliament, it is to proceed in that House as if it were not a hybrid instrument.

(7) This section does not apply to regulations under section 86, except so far as making provision by virtue of section 4(1).

Extent

85

(1) This Act extends to England and Wales, Scotland and Northern Ireland except as provided by subsection (2).

(2) The following extend to England and Wales and Scotland only—

(a) section 73;

(b) section 74.

(3) The power under section 430(3) of FSMA 2000 may be exercised so as to extend to any of the Channel Islands or the Isle of Man any amendment or repeal made by or under this Act of any part of that Act (with or without modifications).

Commencement

86

(1) The following come into force on the day on which this Act is passed—

(a) this Part;

(b) Part 5 of Schedule 2, and section 2 so far as relating to that Part;

(d) section 24;

(e) section 56 and Schedule 10, so far as conferring power to make regulations;

(f) section 77;

(g) section 78.

(2) The following provisions come into force two months after Royal Assent—

(a) section 22;

(b) section 52;

(d) section 55;

(e) section 58;

(f) section 60;

(g) section 61;

(h) section 62;

(i) section 72;

(j) section 74.

(3) The rest of this Act comes into force on such day as the Treasury may by regulations appoint.

(4) Different days may be appointed for different purposes.

(5) The Treasury may by regulations make transitional or saving provision in connection with the coming into force of any provision of this Act.

(6) The power to make regulations under subsection (5) includes power to make different provision for different purposes.

(7) Regulations under this section are to be made by statutory instrument.

Short title

87

This Act may be cited as the Financial Services and Markets Act 2023.

SCHEDULE 1

PART 1 — Assimilated direct principal legislation

PART 2 — Subordinate legislation

PART 3 — EU tertiary legislation etc

Any provision made under any of the following EU directives—

Any provision made under an instrument listed in Part 1 (including any such instrument as it had effect in EU law before IP completion day).

Any provision made under an instrument listed in Part 2.

Any technical standards to which Chapter 2A of Part 9A of FSMA 2000 applies.

PART 4 — Primary legislation

In FSMA 2000—

PART 5 — Other EU-derived legislation

EU-derived legislation not falling within Parts 1 to 3 so far as relating to financial services or markets (other than instruments excluded from this Part by regulations under section 1(5)).

For this purpose—

SCHEDULE 2

PART 1 — Amendments to the Markets in Financial Instruments Regulation

Introductory

1

Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments is amended in accordance with this Part of this Schedule.

Transparency requirements for equities

2

In Article 3 (pre-trade transparency requirements), after paragraph 3 insert—

(4) The FCA may make technical standards to specify— (a) the range of bid and offer prices, or designated market-maker quotes, to be made public for each class of financial instrument concerned in accordance with paragraph 1, and (b) the depth of trading interest at those prices. (5) In making technical standards under paragraph 4 the FCA must take into account the necessary calibration for the different types of trading systems referred to in paragraph 2.

3

For Article 4 substitute—

(1) The FCA may by rules provide for the obligation for market operators and investment firms operating a trading venue to make public the information referred to in Article 3(1) to be waived in such cases as the rules may specify. (2) The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA. (3) Rules under paragraph 1 may impose whatever conditions on the application of the waiver the FCA considers appropriate. (4) The FCA must monitor the application of waivers conferred by rules under paragraph 1 (in particular the effect of such waivers on price formation and compliance with any conditions imposed under paragraph 3). (5) The FCA may by notice given to a market operator, or an investment firm operating a trading venue, withdraw a waiver granted by rules made under this Article if the FCA considers that the waiver is being used— (a) in a way that deviates from its original purpose, or (b) to avoid requirements imposed by the rules.

4

After Article 4 insert—

(1) The FCA may direct that a waiver provided for by Article 4 is suspended (whether entirely or to such an extent as may be specified in the direction) if it considers that continued use of the waiver would unduly harm price formation. (2) The suspension of a waiver by virtue of a direction under paragraph 1 may not have effect for a period longer than six months, but this does not prevent the giving of a further direction under that paragraph by which the suspension is renewed for a period no longer than six months. (3) The FCA may give a direction under paragraph 1 only if it considers that the direction is necessary to advance the FCA’s integrity objective under section 1D of FSMA. (4) In deciding whether to give a direction under paragraph 1 to suspend (or renew the suspension of) a waiver the FCA must have regard to— (a) its consumer protection objective under section 1C of FSMA and its competition objective under section 1E of FSMA, (b) relevant information produced under Article 3, or under equivalent pre-trading transparency requirements in other jurisdictions, about the use of the waiver in the United Kingdom, or under equivalent waiver arrangements in any other country, in relation to the financial instrument concerned, and (c) any other relevant information available in relation to trading volumes in the financial instrument concerned, whether in the United Kingdom or elsewhere. (5) The FCA must consult the Treasury before giving a direction under paragraph 1. (6) The requirement to consult under paragraph 5 does not apply if the FCA considers it necessary by reason of urgency to give the direction before such consultation can be carried out in order to protect— (a) the transparency of the price formation process, or (b) the interests of consumers (within the meaning of section 1G of FSMA).

5

Omit Article 5 (volume cap mechanism).

6

(1) Article 14 (obligation for systematic internalisers to make public firm quotes in respect of shares etc) is amended as follows.

(2) In paragraph 6A, omit “referred to in Article 5(3A)”.

(3) After paragraph 6C insert—

(6D) The reference in paragraph 6A to the “transitional period” is a reference to— (a) the period of four years beginning with IP completion day; or (b) the period ending on such day as the Treasury may direct, if that period ends earlier than the period mentioned in sub-paragraph (a). (6E) In deciding whether to issue a direction under paragraph 6D(b), the Treasury must take into account whether the FCA is able to carry out its functions relating to transparency under this Regulation and its implementing measures.

Transparency requirements for fixed income instruments and derivatives etc

7

For Articles 8 to 11 substitute—

(1) The FCA must by rules impose pre-trade transparency requirements on relevant persons in respect of the trading of such relevant instruments as the FCA determines should be subject to the requirements for the purposes of furthering— (a) efficient price formation, and (b) the fair evaluation of financial assets. (2) The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA. (3) In making rules under paragraph 1 the FCA must (in particular) have regard to the impact that requirements imposed by the rules will have on market liquidity. (4) The reference in paragraph 1 to “pre-trade transparency requirements” is a reference to whatever kinds of requirements relating to transparency before trading that the rules may specify, for example— (a) requirements to make public matters specified in the rules in respect of the trading of relevant instruments; (b) requirements about the means by which, and the times at which, such matters are to be made public; (c) requirements for the giving of access to the arrangements employed for the making of such matters public; (d) requirements in respect of relevant instruments that are traded in a standardised and frequent way, if not subject to disclosure requirements of the kind mentioned in sub-paragraph (a). (5) Rules under paragraph 1 may— (a) impose requirements by reference to the types of trading system used; (b) impose different requirements in relation to different types of trading system; (c) provide for the criteria by which the determination referred to in that paragraph is to be made. (6) In this Article and in Article 9— - “relevant instruments” means bonds, structured finance products, emission allowances, derivatives and instruments included within package orders; - “relevant persons” means market operators and investment firms operating a trading venue. (1) Rules under Article 8 may include provision for any requirements imposed by the rules to be waived in such cases, and to such extent, as may be determined by or under the rules. (2) Rules that include provision under paragraph 1 may impose whatever conditions on the application of a waiver the FCA considers appropriate. (3) The FCA may by notice given to a relevant person withdraw a waiver granted by virtue of paragraph 1 if the FCA considers that the waiver is being used— (a) in a way that deviates from its original purpose, or (b) to avoid requirements provided for in the rules. (4) The FCA may by notice suspend requirements imposed by rules under Article 8 in the case of such relevant instruments, or class of relevant instruments, as may be specified in the notice. (5) A notice under paragraph 4 suspending requirements— (a) may be given subject to conditions; (b) must specify the period for which the suspension has effect; (c) must be published in the manner appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it; (d) may be varied or withdrawn by the giving of a further notice (and sub-paragraph (c) applies to any such notice). (6) The power under paragraph 4 to suspend requirements is exercisable only if the FCA considers that it is necessary to do so to advance the FCA’s integrity objective under section 1D of FSMA. (7) In deciding whether to exercise the power under paragraph 4 to suspend requirements the FCA must also have regard to— (a) its consumer protection objective under section 1C of FSMA, and (b) its competition objective under section 1E of FSMA. (1) The FCA must by rules impose post-trade transparency requirements on relevant persons in respect of the trading of such relevant instruments as the FCA determines should be subject to the requirements for the purposes of furthering— (a) efficient price formation, and (b) the fair evaluation of financial assets. (2) The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA. (3) In making rules under paragraph 1 the FCA must (in particular) have regard to the impact that requirements imposed by the rules will have on market liquidity. (4) The reference in paragraph 1 to “post-trade transparency requirements” is a reference to whatever kinds of requirements relating to transparency after the execution of trades that the rules may specify, for example— (a) requirements to make public matters specified in the rules in respect of the trading of relevant instruments (including the price, volume and time of transactions); (b) requirements about the means by which, and the times at which, such matters are to be made public; (c) requirements for the giving of access to the arrangements employed for the making of such matters public. (5) Rules under paragraph 1 may— (a) impose requirements by reference to the types of trading system used; (b) impose different requirements in relation to different types of trading system; (c) provide for the criteria by which the determination referred to in that paragraph is to be made. (6) In this Article and in Article 11— - “relevant instruments” means bonds, structured finance products, emission allowances, derivatives and instruments included within package transactions; - “relevant persons” means market operators and investment firms operating a trading venue. (1) Rules under Article 10 may include provision authorising relevant persons to defer complying with requirements imposed by the rules in such cases and to such extent as the rules may specify. (2) Rules made by virtue of paragraph 1 may impose whatever conditions on the application of a deferral the FCA considers appropriate. (3) The FCA may by notice suspend any requirements imposed by rules under Article 10 in the case of such relevant instruments, or class of relevant instruments, as may be specified in the notice. (4) A notice under paragraph 3 suspending requirements— (a) may be given subject to conditions; (b) must specify the period for which the suspension has effect; (c) must be published in the manner appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it; (d) may be varied or withdrawn by the giving of a further notice (and sub-paragraph (c) applies to any such notice). (5) The power under paragraph 3 to suspend requirements is exercisable only if the FCA considers that it is necessary to do so to advance the FCA’s integrity objective under section 1D of FSMA. (6) In deciding whether to exercise the power under paragraph 3 to suspend requirements the FCA must also have regard to— (a) its consumer protection objective under section 1C of FSMA, and (b) its competition objective under section 1E of FSMA.

Systematic internalisers and other investment firms

8

In Article 2(1) (definitions), for points (12) and (12A) substitute—

(12) “systematic internaliser” means an investment firm which deals on own account when executing client orders outside a UK regulated market, UK MTF or UK OTF without operating a multilateral system and which— (a) does so on an organised, frequent, systematic and substantial basis, or (b) has chosen to opt in to the systematic internaliser regime; (12A) for the purposes of point (12), whether dealing is taking place on a basis that is organised, frequent, systematic and substantial is to be determined in accordance with rules made by the FCA (but the power to make such rules is subject to any provision contained in regulations in respect of point (12) under paragraph 2 of this Article);

9

In Article 17a (tick sizes), in the second paragraph, omit “large in scale”.

10

For Article 18 substitute—

(1) The FCA may by rules impose pre-trade transparency requirements on systematic internalisers in respect of the trading of such relevant instruments as the FCA determines should be subject to the requirements for the purposes of furthering— (a) efficient price formation, and (b) the fair evaluation of financial assets. (2) The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purposes of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA. (3) In making rules under paragraph 1 the FCA must (in particular) have regard to the impact that requirements imposed by the rules will have on market liquidity. (4) The reference in paragraph 1 to “pre-trade transparency requirements” is a reference to whatever kinds of requirements relating to transparency before trading that the rules may specify, for example— (a) requirements to make public matters specified in the rules in respect of the trading of relevant instruments (for example, quotes); (b) requirements about the means by which, and the times at which, such matters are to be made public or otherwise disclosed; (c) requirements relating to the determination of quotes in relation to relevant instruments; (d) requirements in relation to the entering of transactions on the basis of such quotes. (5) Rules under paragraph 1 may include provision for quotes issued by systematic internalisers to be updated or withdrawn in such cases as the rules may determine. (6) In this Article and in Article 18a “relevant instruments” means bonds, structured finance products, emission allowances, derivatives and instruments included within package orders. (1) Rules under Article 18 may include provision for any requirements imposed by those rules to be waived in such cases, and to such extent, as may be determined by or under the rules. (2) Rules that include provision under paragraph 1 may impose whatever conditions on the application of a waiver as the FCA considers appropriate. (3) The FCA may by notice given to a systematic internaliser withdraw a waiver granted by virtue of paragraph 1 if the FCA considers that the waiver is being used— (a) in a way that deviates from its original purpose, or (b) to avoid requirements imposed by the rules. (4) The FCA may by notice suspend requirements imposed by rules under Article 18 in the case of such relevant instruments, or class of relevant instruments, as may be specified in the notice. (5) A notice under paragraph 4 suspending requirements— (a) may be given subject to conditions; (b) must specify the period for which the suspension has effect; (c) must be published in the manner appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it; (d) may be varied or withdrawn by the giving of a further notice (and sub-paragraph (c) applies to any such notice). (6) The power under paragraph 4 to suspend requirements is exercisable only if the FCA considers that it is necessary to do so to advance the FCA’s integrity objective under section 1D of FSMA. (7) In deciding whether to exercise the power under paragraph 4 to suspend requirements the FCA must also have regard to— (a) its consumer protection objective under section 1C of FSMA, and (b) its competition objective under section 1E of FSMA. (1) Firms meeting the definition of systematic internaliser must notify the FCA of that fact in accordance with rules made by the FCA. (2) The FCA must publish, and keep up to date, a list of the systematic internalisers for which it has received notification under paragraph 1.

11

For Article 21 substitute—

(1) The FCA must by rules impose post-trade transparency requirements on relevant persons in respect of the trading of such relevant instruments as the FCA determines should be subject to the requirements for the purposes of furthering— (a) efficient price formation, and (b) the fair evaluation of financial assets. (2) The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA. (3) In making rules under paragraph 1 the FCA must (in particular) have regard to the impact that requirements imposed by the rules will have on market liquidity. (4) The reference in paragraph 1 to “post-trade transparency requirements” is a reference to whatever kinds of requirements relating to transparency after the conclusion of trades that the rules may specify, for example— (a) requirements to make public matters specified in the rules in respect of the trading of relevant instruments (including the price, volume and time of transactions); (b) requirements about the means by which, and the times at which, such matters are to be made public. (5) Rules under paragraph 1 may— (a) provide for the criteria by which the determination referred to in that paragraph is to be made; (b) in cases where both parties to a transaction are relevant persons, provide for which of those parties is to comply with the requirements imposed by the rules. (6) Rules under paragraph 1 may include provision authorising relevant persons to defer complying with requirements imposed by the rules in such cases and to such extent as the rules may specify. (7) Rules made by virtue of paragraph 6 may impose whatever conditions on the application of a deferral as the FCA considers appropriate. (8) The FCA may by notice suspend requirements imposed by rules under paragraph 1 in the case of such relevant instruments, or class of relevant instruments, as may be specified in the notice. (9) A notice under paragraph 8 suspending requirements— (a) may be given subject to conditions; (b) must specify the period for which the suspension has effect; (c) must be published in the manner appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it; (d) may be varied or withdrawn by the giving of a further notice (and sub-paragraph (c) applies to any such notice). (10) The power under paragraph 8 to suspend requirements is exercisable only if the FCA considers that it is necessary to do so to advance the FCA’s integrity objective under section 1D of FSMA. (11) In deciding whether to exercise the power under paragraph 8 to suspend requirements the FCA must also have regard to— (a) its consumer protection objective under section 1C of FSMA, and (b) its competition objective under section 1E of FSMA. (12) In this Article— - “relevant instruments” means bonds, structured finance products, emission allowances, derivatives and instruments included within package transactions; - “relevant persons” means investment firms which, either on own account or on behalf of clients, conclude transactions in relevant instruments.

12

In Article 22 (providing information for the purposes of transparency and other calculations), in paragraph 1 omit “and for determining whether an investment firm is a systematic internaliser”.

13

(1) Article 23 (trading obligation for investment firms) is amended as follows.

(2) Omit paragraphs 1, 1A, 3, 4, 5 and 6.

(3) In the title, for “Trading obligation for investment firms” substitute “Investment firms operating internal matching systems”.

14

In Article 1(2E), omit “Article 23,”.

Derivatives trading obligation

15

In Article 1(3) (subject matter and scope), for “financial counterparties” to the end substitute “counterparties that are relevant financial counterparties, or relevant non-financial counterparties, for the purposes of Article 28 (see paragraph 1A of that Article)”.

16

(1) Article 28 (obligation to trade on regulated markets, MTFs or OTFs) is amended as follows.

(2) In paragraph 1, for the words from the beginning to “Article 10(1)(b) of Regulation (EU) No 648/2012” substitute “Relevant financial counterparties and relevant non-financial counterparties shall conclude transactions which are neither intragroup transactions as defined in Article 3 of Regulation (EU) No 648/2012 nor transactions covered by the transitional provisions in Article 89 of that Regulation with other relevant financial counterparties or other relevant non-financial counterparties”.

(3) After paragraph 1 insert—

(1A) For the purposes of this Article— (a) “financial counterparty” and “non-financial counterparty” have the same meanings as in Regulation (EU) No 648/2012 (see Article 2(8) and (9) of that Regulation); (b) a financial counterparty is a “relevant” financial counterparty if it is subject to the clearing obligation referred to in Article 4 of Regulation (EU) No 648/2012; (c) a non-financial counterparty is a “relevant” non-financial counterparty in respect of derivative contracts pertaining to any asset classes if it is subject to that clearing obligation in respect of derivative contracts pertaining to those asset classes.

17

After Article 28 insert—

(1) The FCA may direct that the trading obligation imposed by Article 28(1) and (2) (the “DTO”) is suspended or modified in accordance with the direction if it considers that the suspension or modification— (a) is necessary for the purpose of preventing or mitigating disruption to financial markets, and (b) advances one or more of the FCA’s operational objectives referred to in section 1B(3) of FSMA. (2) A direction under this Article may provide for the DTO to be suspended or modified— (a) in the case of all persons to whom the DTO applies or only to such persons or descriptions of persons as are specified in the direction; (b) in the case of all derivatives to which the DTO applies or only to such derivatives, or classes of derivatives, as are specified in the direction; (c) by reference to the venues on which derivative transactions are concluded under the DTO; (d) subject to conditions. (3) In giving a direction under this Article the FCA must have regard to its competitiveness and growth objective in section 1EB of FSMA. (4) Before giving a direction under this Article the FCA must consult— (a) the Bank of England, and (b) the PRA, if the PRA has an interest in the proposed direction. The PRA has an interest in a proposed direction if the direction— (a) might affect the PRA’s discharge of its functions conferred by or under FSMA or any other enactment, or (b) would apply to a PRA-authorised person or to a person connected with a PRA-authorised person (and for this purpose “PRA authorised person” has the same meaning as in FSMA and “connected” is to be read in accordance with section 165(11) of FSMA). (5) A direction under this Article may be given only with the consent of the Treasury. The Treasury must notify the FCA in writing whether or not consent is given before the end of four weeks beginning with the day on which the proposed direction is submitted to the Treasury for consent (and if the notice is not given before the end of that period the Treasury are deemed to have consented). (6) Where the FCA gives a direction under this Article it must also prepare a statement setting out— (a) an explanation of the purpose of the direction, including (where relevant) the ways in which the direction will further the purpose mentioned in paragraph 1(a) and advance one or more of the objectives mentioned in paragraph 1(b), and (b) such guidance in connection with the direction that the FCA considers appropriate. (7) The FCA must publish a direction given under this Article together with the statement mentioned in paragraph 6. (8) The Treasury must lay before Parliament a copy of a direction given under this Article and the statement mentioned in paragraph 6. (9) If a direction under this Article has effect for a period lasting longer than 6 months, the FCA must publish, as soon as reasonably practicable after the end of each applicable 6 month period, a statement with an explanation as to why the conditions in paragraph 1(a) and (b) continue to be met. The reference to each “applicable 6 month period” is to— (a) the period of 6 months beginning with the day on which the direction is given, and (b) each subsequent 6 month period during which the direction continues in effect. (10) Publication under paragraph 7 or 9 is to be in whatever way appears to the FCA to be best calculated to bring the publication to the attention of the public. (11) A direction under this Article may be varied or revoked by the giving of a further direction under this Article. (12) For the purposes of this Article— (a) the variation of a direction by virtue of paragraph 11 is not to be treated as the giving of a new direction for the purposes of paragraph 9; (b) paragraphs 6(b) and 9 do not apply to the revocation of a direction by virtue of paragraph 11. (13) The functions of the FCA under this Article are not “relevant functions” for the purposes of section 84 of the Financial Services Act 2012 (arrangements for the investigation of complaints relating to exercise of relevant functions of regulators).

18

For Article 31 substitute—

(1) The FCA may by rules provide for one or more relevant obligations not to apply— (a) in relation to activities or transactions of a specified description carried out as part of a risk reduction service, or (b) to persons of a specified description in the provision of such services. (2) The power to make rules under paragraph 1 is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of FSMA. (3) The risk reduction services to which the rules relate may only be post-trade services that do not give rise to any transactions that contribute to the price discovery process. (4) The rules— (a) may describe the risk reduction services to which they relate in whatever way the FCA considers appropriate (subject to paragraph 3); (b) may provide for whatever conditions or exceptions the FCA considers appropriate. (5) Before making rules under paragraph 1 the FCA must consult the Bank of England. (6) In this Article— - “relevant obligation” means—the best execution obligation in section 11.2A of the Conduct of Business sourcebook;the obligation in rule 5AA.1.1 in the Market Conduct sourcebook;the trading obligation imposed by Article 28 of this Regulation; - “risk reduction service” means a service provided to two or more counterparties to derivatives transactions for the purpose of reducing non-market risks in derivatives portfolios (including, for example, portfolio compression); - “specified” means specified in the rules.

Consequential amendments relating to this Part

19

In Article 2(1) (definitions), in point (17) (“liquid market”)—

(a) omit paragraph (a);

(b) in paragraph (b), for “Articles 4, 5 and 14” substitute “Article 14”.

20

In Article 12(1) after “accordance with” insert “, or with rules made under,”.

21

In Article 13(1) after “accordance with” insert “, or with rules made under,”.

22

Omit Article 19.

23

In Article 26(3), omit “and Article 21(5)(a)”.

24

In Article 47(1A)(a), after “Regulation” insert “or in rules made by the FCA under this Regulation”.

25

In Article 50B (FCA directions), omit “Article 5, Article 9 or”.

26

(1) Article 50C (other FCA directions) is amended as follows.

(2) In paragraph 2 after “Article” insert “4a or”.

(3) In paragraph 3 after “Article” insert “4a or”.

(4) In paragraph 4 after “Article” insert “4a or”.

27

(1) Article 50D (FCA rules) is amended as follows.

(2) In paragraph 1—

(a) for “Article 46(6B) or 48A” substitute “this Regulation”;

(b) for “modification in paragraph 3” substitute “modifications in paragraphs 2A and 3”.

(3) In paragraph 2(b) after “damages)” insert “and section 138EA (matters to consider when making rules)”.

(4) After paragraph 2 insert—

(2A) In its application to rules made under Article 31, section 138I has effect as if the reference to the PRA in subsection (1)(a) were a reference to the Bank of England.

(5) In paragraph 3, for the words after “authorised persons” substitute “included a reference to persons who are not authorised persons but to whom any of the rules made by the FCA under this Regulation apply”.

PART 2 — Amendments to the European Market Infrastructure Regulation

28

Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade repositories is amended in accordance with this Part of this Schedule.

29

After Article 6a insert—

(1) The Bank of England may by rules provide for the clearing obligation referred to in Article 4(1) in respect of a class or classes of OTC derivatives not to apply— (a) in relation to activities or transactions of a specified description carried out as part of a risk reduction service, or (b) to persons of a specified description in the provision of such services. (2) The power to make rules under paragraph 1 is exercisable only if the Bank of England considers that the rules are necessary or expedient for the purpose of advancing the financial stability objective under section 2A of the Bank of England Act 1998. (3) The risk reduction services to which the rules relate may only be post-trade services that do not give rise to any transactions that contribute to the price discovery process. (4) The rules— (a) may describe the risk reduction services to which they relate in whatever way the Bank of England considers appropriate (subject to paragraph 3); (b) may provide for whatever conditions or exceptions the Bank of England considers appropriate. (5) In this Article— - “risk reduction service” means a service provided to two or more counterparties to derivatives transactions for the purpose of reducing non-market risks in derivatives portfolios (including, for example, portfolio compression); - “specified” means specified in the rules.

30

After Article 84b insert—

(1) The provisions of Part 9A of FSMA (rules and guidance) listed in paragraph 2 apply in relation to rules made by the Bank of England under Article 6b, subject to the modifications in paragraphs 3 to 5. (2) The provisions are— (a) section 137T (general supplementary powers); (b) sections 138A and 138B (modification or waiver of rules), but with the omission of subsection (4)(b) of section 138A and subsection (4) of section 138B; (c) section 138C (evidential provisions); (d) section 138E (limits on effect of contravening rules); (e) section 138F (notification of rules); (f) section 138G (rule-making instruments); (g) section 138H (verification of rules); (h) section 138J (consultation by the PRA), but with the omission of subsections (2)(c) and (5)(b); (i) section 138L (consultation: general exceptions), but with the omission of subsection (1). (3) Any reference in any of those provisions to an authorised person is to be read as a reference to a person to whom the clearing obligation referred to in Article 4(1) applies. (4) Section 138J(2)(d) has effect in relation to rules proposed to be made by the Bank of England as if the reference to the compatibility of the proposed rules with the provisions mentioned in section 138J(2)(d) were a reference to their compatibility with the Bank of England’s financial stability objective under section 2A of the Bank of England Act 1998. (5) Section 138L(2) has effect as if for paragraphs (a) and (b) there were substituted “be prejudicial to financial stability”.

PART 3 — Amendments to the EU Securitisation Regulation

Introductory

31

Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation, and amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012 (“the EU Securitisation Regulation 2017”) is amended in accordance with this Part of this Schedule.

STS equivalent non-UK securitisations

32

(1) Article 2 (definitions) is amended as follows.

(2) Omit point (A8) (definition of “third country”).

(3) Before point (1) insert—

(A9) ‘STS equivalent non-UK securitisation’ means a securitisation of a description in relation to which a country or territory outside the United Kingdom is designated by regulations under Article 28A; (A10) ‘territory’ includes the European Union and any other international organisation or authority comprising countries or territories;

(4) In point (5) (definition of “sponsor”), for “third country” substitute “country or territory outside the United Kingdom”.

33

After Article 28 (third party verifying STS compliance) insert—

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