The Financial Services and Markets Act 2000 (Benchmarks) Regulations 2018

Made: 1st February 2018

Laid before Parliament: 5th February 2018

Coming into force in accordance with regulation 1(2)

The Treasury are designated for the purposes of section 2(2) of the European Communities Act 1972 in relation to financial services.

The Treasury make the following Regulations in exercise of the powers conferred by section 2(2) of the European Communities Act 1972.

PART 1 — Introductory provisions

Citation and commencement

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• (1) These Regulations may be cited as the Financial Services and Markets Act 2000 (Benchmarks) Regulations 2018.

• (2) These Regulations come into force on 27th February 2018 except for—

• (a) regulation 57 (amendments to the Consumer Credit (Disclosure of Information) Regulations 2010) which comes into force on 1st July 2018; and

• (b) regulations 37(c) and (d), 39, 43(b), 49(2)(c) and (d), 50 and 53 which come into force on 1st May 2020.

Interpretation

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• (1) In these Regulations—

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

• “the EU Benchmarks Regulation 2016” means Regulation EU 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 as it forms part of assimilated law;

• “benchmark administrator” means a person who acts as an administrator of a benchmark within the meaning of Article 3 of the EU Benchmarks Regulation 2016;

• “competent authority” means an authority designated under Article 40 of the EU Benchmarks Regulation 2016;

• “the FCA” means the Financial Conduct Authority;

• “non-authorised person” means a person who is not an authorised person;

• “the RAO” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ;

• “relevant requirement” means a requirement imposed by or under these Regulations or by or under the EU Benchmarks Regulation 2016; and

• “third country” means a country other than the United Kingdom.

• (2) In Part 2 of these Regulations—

• “overseas regulator” means an authority in a country or territory outside the United Kingdom which has functions corresponding to those of the FCA under the EU Benchmarks Regulation 2016;

• “own-initiative requirement powers” means the FCA's powers in regulation 6(2); and

• “senior management” has the meaning given in Article 4.1.37 of Directive 2014/65/EU off the European Parliament and of the Council of 16 April 2014 on Markets in Financial Instruments (recast) as it had effect immediately before IP completion day.

• (3) Except as provided by paragraphs (1) and (2)—

• (a) any expression used in these Regulations which is defined for the purposes of the EU Benchmarks Regulation 2016 has the meaning which it has in the EU Benchmarks Regulation 2016; and

• (b) any other expression used in these Regulations which is defined for the purposes of the Act has the meaning given by the Act.

Directly applicable EU regulations

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In these Regulations, a reference to an Article of the EU Benchmarks Regulation 2016 includes a reference to any assimilated direct legislation made under that Article.

Designation of competent authority

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PART 2 — FCA powers over Miscellaneous BM persons

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• (1) The FCA has the powers conferred on it by this Part of the Regulations in respect of Miscellaneous BM persons.

• (2) A “Miscellaneous BM person” is a person who is not an authorised person and is—

• (a) involved in the provision of, or contribution of input data to, a benchmark;

• (b) a service provider to whom functions or any relevant services and activities in the provision of a benchmark have been outsourced;

• (c) a person who is not the service provider but who is or has been party to a contract in relation to the outsourcing of functions or any relevant services and activities in the provision of a benchmark;

• (d) a legal representative of a benchmark administrator located in a third country which has obtained or has applied for prior recognition as referred to in Article 32(1) and as provided for in Article 32(3) of the EU Benchmarks Regulation 2016;

• (e) a person who administers a benchmark relying on Article 46(8) or Article 51(4) of the EU Benchmarks Regulation 2016; or

• (f) a supervised entity.

FCA’s power to impose requirements

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• (1) The FCA may exercise its power under paragraph (2) in relation to a Miscellaneous BM person if it appears to the FCA that—

• (a) the Miscellaneous BM person has contravened or is likely to contravene a relevant requirement;

• (b) it is desirable for the FCA to exercise its powers in order to advance any of its operational objectives but only in respect of a Miscellaneous BM person coming within regulation 5(2)(d) or (e); or

• (c) it is desirable for the FCA to exercise its powers order to facilitate the performance of its functions under the EU Benchmarks Regulation 2016.

• (2) The FCA's power under this paragraph is a power to—

• (a) impose a requirement that the FCA considers appropriate;

• (b) vary a requirement already imposed under this paragraph; or

• (c) cancel such a requirement.

• (3) The FCA may, on the application of the Miscellaneous BM person—

• (a) impose a requirement that the FCA considers appropriate;

• (b) vary a requirement already imposed by the FCA; or

• (c) cancel such a requirement.

• (4) The FCA may refuse an application under paragraph (3) if it appears to the FCA that—

• (a) the Miscellaneous BM person has contravened or is likely to contravene a relevant requirement;

• (b) it is desirable to do so in order to advance any of the FCA's operational objectives; or

• (c) it is desirable to do so in order to facilitate the performance of the FCA's functions under the EU Benchmarks Regulation 2016.

• (5) Where the FCA refuses an application under paragraph (3), section 55X of the Act (determination of applications: warning notices and decision notices) applies as if—

• (a) the reference in section 55X(2) to “an application made under this Part” included applications made under paragraph (3) of this regulation;

• (b) the reference to section 55X(4) to “an application under this Part” included applications made under paragraph (3) of this regulation; and

• (c) each reference to a “regulator” were a reference to the FCA.

• (6) Where the FCA proposes to impose or vary a requirement or imposes or varies a requirement under paragraph (2), section 55Y of the Act (exercise of own-initiative power: procedure) applies as if—

• (a) each reference to either regulator's own-initiative requirement power were a reference to the FCA's power to impose a requirement under this regulation;

• (b) each reference to the regulator were a reference to the FCA, and each reference to either regulator were a reference to the FCA only;

• (c) each reference to an authorised person were a reference to a Miscellaneous BM person;

• (d) each reference to a variation of permission, or the imposition or variation of a requirement, were a reference to a restriction imposed on a Miscellaneous BM person under paragraph (2); and

• (e) the reference in subsection (12) to section 391(8) were a reference to section 391(8) as applied by these Regulations.

Right to refer matters to the Tribunal

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A Miscellaneous BM person who is aggrieved by the exercise of the FCA's powers under regulation 6 may refer the matter to the Tribunal.

Exercise of power in support of overseas regulator

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• (1) The FCA's own-initiative requirement powers may be exercised in respect of a Miscellaneous BM person at the request of, or for the purpose of, assisting an overseas regulator.

• (2) If a request to the FCA for the exercise of its own-initiative requirement powers has been made by an overseas regulator, the FCA must, in deciding whether or not to exercise those powers in response to the request, consider whether it is necessary to do so in order to comply with an assimilated obligation.

• (3) In deciding whether or not to do so, in any case in which the FCA does not consider that the exercise of its own-initiative requirement powers is necessary in order to comply with an assimilated obligation, it may take into account in particular—

• (a) whether in the country or territory of the overseas regulator concerned, corresponding assistance would be given to a United Kingdom regulatory authority;

• (b) whether the case concerns the breach of a law, or other requirement, which has no close parallel in the United Kingdom or involves the assertion of a jurisdiction not recognised by the United Kingdom;

• (c) the seriousness of the case and its importance to persons in the United Kingdom;

• (d) whether it is otherwise appropriate in the public interest to give the assistance sought.

• (4)

• (a) The FCA may decide not to exercise its own-initiative requirement powers in response to a request unless the overseas regulator concerned undertakes to make such contribution towards the cost of their exercise as the FCA considers appropriate.

• (b) in subparagraph (a) “request” means a request of a kind mentioned in paragraph (1).

• (5) Paragraph (4) does not apply if the FCA decides that it is necessary for it to exercise its own-initiative requirement powers in order to comply with an assimilated obligation.

Reporting requirements

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• (1) A Miscellaneous BM person must provide the FCA with such information in respect of its compliance or non-compliance with any relevant requirement as the FCA may direct.

• (2) Such information must be provided at such times, in such form, and verified in such manner, as the FCA may direct.

• (3) If at any time a Miscellaneous BM person considers that it is unable to comply with a relevant requirement, it must as soon as reasonably practicable notify the FCA of that fact, including the reasons why it is unable to comply.

Public censure

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If the FCA considers that—

• (a) a Miscellaneous BM person has contravened a relevant requirement;

• (b) a member of the management body of a Miscellaneous BM person is responsible for the contravention by the Miscellaneous BM person of a relevant requirement; or

• (c) another member of the senior management of a Miscellaneous BM person is responsible for the contravention by the Miscellaneous BM person of a relevant requirement;

the FCA may publish a statement to that effect.

Financial penalties

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• (1) If the FCA considers that a Miscellaneous BM person has contravened a relevant requirement, it may impose a penalty of such amount as it considers appropriate on—

• (a) the Miscellaneous BM person;

• (b) a member of the management body of the Miscellaneous BM person if the FCA considers the member is responsible for the contravention;

• (c) another member of the senior management of the Miscellaneous BM person if the FCA considers the member is responsible for the contravention.

• (2) A penalty imposed under this regulation is payable to the FCA and may be recovered as a debt owed to the FCA.

Warning notice

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• (1) If the FCA proposes to—

• (a) publish a statement in respect of a person under regulation 10 (public censure); or

• (b) impose a penalty on a person under regulation 11 (financial penalties);

it must give the person a warning notice.

• (2) A warning notice about a proposal to publish a statement must set out the terms of the statement.

• (3) A warning notice about a proposal to impose a penalty must state the amount of the penalty.

Decision notice

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• (1) If, having considered any representations made in response to the warning notice, the FCA decides to—

• (a) publish a statement under regulation 10 (public censure) (whether or not in the terms proposed); or

• (b) impose a penalty under regulation 11 (financial penalties) (whether or not of the amount proposed);

it must without delay give the person concerned a decision notice.

• (2) In the case of a statement, the decision notice must set out the terms of the statement.

• (3) In the case of a penalty, the decision notice must state the amount of the penalty.

• (4) If the FCA decides to—

• (a) publish a statement in respect of a person under regulation 10 (public censure); or

• (b) impose a penalty on a person under regulation 11 (financial penalties);

the person may refer the matter to the Tribunal.

• (5) After a statement under regulation 10 (public censure) is published, the FCA must send a copy of it to the person concerned and to any person to whom a copy of the decision notice was given under section 393(4) of the Act (third party rights) (as applied by regulation 23 (application of Part 26 of the Act (notices)).

Statements of policy

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• (1) The FCA must prepare and issue a statement of policy with respect to—

• (a) the imposition of penalties under regulation 11 (financial penalties); and

• (b) the amount of penalties under that regulation.

• (2) The policy must require the FCA, in determining the amount of penalties, to have regard to—

• (a) the gravity and duration of the infringement;

• (b) the criticality of the benchmark to financial stability and the real economy;

• (c) the degree of responsibility of the responsible person;

• (d) the financial strength of the responsible person, as indicated, in particular, by the total annual turnover of the responsible legal person or the annual income of the responsible natural person;

• (e) the level of the profits gained or the losses avoided by the responsible person, insofar as they can be determined;

• (f) the level of cooperation of the responsible person with the FCA, without prejudice to the need to ensure disgorgement of profits gained or losses avoided by that person;

• (g) previous infringements by the person concerned;

• (h) measures taken, after the infringement, by a responsible person to prevent a repetition of the infringement;

• (i) the seriousness of the contravention in question in relation to the nature of the requirement contravened.

• (3) The FCA may at any time alter or replace a statement issued by it under this regulation.

• (4) If a statement issued under this regulation is altered or replaced by the FCA, the FCA must issue the altered or replacement statement.

• (5) The FCA must, without delay, give the Treasury a copy of any statement which it issues under this regulation.

• (6) A statement issued under this regulation by the FCA must be published by the FCA in the way appearing to the FCA to be best calculated to bring it to the attention of the public.

• (7) The FCA may charge a reasonable fee for providing a person with a copy of the statement.

• (8) In exercising, or deciding whether to exercise, its power under regulation 11 (financial penalties) in the case of any particular contravention, the FCA must have regard to any statement of policy published by it under this regulation and in force at the time when the contravention in question occurred.

Statements of policy: procedure

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• (1) Before the FCA issues a statement under regulation 14 (statements of policy), the FCA must publish a draft of the proposed statement in a way appearing to the FCA to be best calculated to bring it to the attention of the public.

• (2) The draft must be accompanied by a notice that representations about the proposed statement may be made to the FCA within a specified time.

• (3) Before issuing the proposed statement the FCA must have regard to any representations made to it in accordance with paragraph (2).

• (4) If the FCA issues the proposed statement it must publish an account, in general terms, of—

• (a) the representations made to it in accordance with paragraph (2); and

• (b) its response to them.

• (5) If the statement differs from the draft published under paragraph (1) in a way which is, in the opinion of the FCA, significant, the FCA must (in addition to complying with paragraph (4)) publish details of the difference.

• (6) The FCA may charge a reasonable fee for providing a person with a copy of a draft published by it under paragraph (1).

• (7) This regulation also applies to a proposed statement made by way of an alteration to or a replacement of a previous statement.

Misleading the FCA

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• (1) A person must not, for the purposes of compliance or purported compliance with a requirement under these Regulations, knowingly or recklessly give the FCA information which is false or misleading in a material particular.

• (2) A person must not provide information to another person—

• (a) knowing; or

• (b) being reckless as to whether;

the information is false or misleading in a material particular and knowing that the information is to be provided to, or to be used for the purpose of providing information to, the FCA in connection with the discharge of its functions under this Part.

• (3) A person who contravenes paragraph (1) or (2) is guilty of an offence.

• (4) A person guilty of an offence under this regulation is liable—

• (a) on summary conviction—

• (i) in England and Wales, to a fine;

• (ii) in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum; or

• (b) on conviction on indictment, to a fine.

Restriction on penalties

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