The Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019

• (e) omit subsections (5A) and (6);

• (8) In section 168 (appointment of persons to carry out investigations in particular cases)—

• (a) for subsection (1) substitute—

(1) Subsection (3) applies if it appears to the FCA that there are circumstances suggesting that a person— (a) may be guilty of an offence under section 398, as applied by regulation 77 of the 2019 Regulations; (b) may be guilty of an offence under section 177, as applied by regulation 75 of the 2019 Regulations; (c) may have contravened a requirement imposed by or under— (i) this Act as applied by Part 4 of the 2019 Regulations; (ii) Part 4 of the 2019 Regulations; or (ii) the EMIR regulation.

• (b) omit subsections (2), (4) and (5);

• (c) for subsection (6) substitute—

(6) “Investigating authority” means the FCA.

• (9) In section 169 (investigations etc. in support of overseas regulator)—

• (a) omit subsection (2A);

• (b) for subsection (13) substitute—

(13) “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 EMIR regulation and Part 4 of the 2019 Regulations.

• (10) In section 170 (investigations: general)—

• (a) each reference to the investigating authority is a reference to the FCA;

• (b) in subsection (1), omit “or (5)”;

• (c) for subsection (3) substitute—

(3) Subsections (2) and (9) do not apply if the investigator is appointed as a result of section 168(1) and the FCA believes that the notice required by subsection (2) or (9) would be likely to result in the investigation being frustrated.

• (d) omit subsection (10).

• (11) In section 171 (powers of persons appointed under section 167) omit subsections (3A) and (7);

• (12) In section 172 (additional power of persons appointed as a result of section 168(1) or (4)) omit “or (4)” both in the heading and in subsection (4).

• (13) In section 174 (admissibility of statements made to investigators)—

• (a) in subsection (2), omit “or in proceedings in relation to action to be taken against that person under section 123 to which this section applies”;

• (b) omit subsection (3A);

• (c) in subsection (4), omit the words from “or (5),” to the end;

• (d) in subsection (5), omit “,173”.

• (14) In section 175 (information and documents: supplemental provisions), in subsection (8), omit “or (5)”.

• (15) In section 176 (entry of premises under warrant)—

• (a) for subsection (1) substitute—

(1) A justice of the peace may issue a warrant under this section if satisfied on information on oath given by or on behalf of the FCA or an investigator that there are reasonable grounds for believing that the first, second or third set of conditions is satisfied.

• (b) in subsection (3)(a), omit “or an appointed representative”;

• (c) in subsection (10), omit “or (5)”;

• (d) in subsection (11)—

• (i) in paragraph (a), omit “87C, 87J,” and “,165A, 169A”;

• (ii) in paragraph (b), omit “,173”.

Application of Part 26 of the FSMA (notices)

76

• (1) Part 26 of the FSMA (notices), other than sections 391A, 391B, 391C, 391D and 391E, applies with respect to the giving of notices under this Part, under the FSMA as applied by this Part and under the EMIR regulation as it applies with respect to the giving of notices under the FSMA but with the following modifications.

• (2) In Part 26—

• (a) each reference to the FSMA includes a reference to this Part and the EMIR regulation;

• (b) each reference to a section of the FSMA is a reference to that section as applied by this Part;

• (c) each reference to a regulator or to the regulator concerned is a reference to the FCA;

• (d) omit references to the PRA.

• (3) Before section 387 insert—

(386A) In this Part, “the 2019 Regulations” means the Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019.

• (4) In section 387 (warning notices) omit subsections (1A) and (3A).

• (5) In section 388 (decision notices) omit subsections (1A) and (2).

• (6) In section 391 (publication)—

• (a) in subsection (1) the reference to a warning notice falling within subsection (1ZB) is to a warning notice given under regulation 65;

• (b) omit subsections (1ZA), (1ZB), (4A), (5A), (6A), (7A), (7B), (8A), (8B), (8C), (8D) and (8E);

• (c) for subsection (11) substitute—

(11) Section 425A (meaning of “consumers”) applies for the purposes of this section as if— (a) subsection (2)(c) were omitted; (b) for subsection (3) there were substituted— (3) The services within this subsection are trade repository activities within the meaning given in Part 4 of the 2019 Regulations. (c) subsection (7) were omitted.

• (7) In section 392 (application of sections 393 and 394)—

• (a) for paragraph (a) substitute—

(a) a warning notice given in accordance with regulation 65(1) of the 2019 Regulations;

• (b) for paragraph (b) substitute—

(b) a decision notice given in accordance with regulation 66(1) of the 2019 Regulations.

• (8) In section 395 (the FCA's and PRA's procedures)—

• (a) for subsection (1) substitute—

(1) The FCA must determine the procedure that it proposes to follow in relation to a decision which gives rise to an obligation for it to give— (a) a supervisory notice, warning notice or decision notice; or (b) a decision under section 391(1)(c), to publish information about the matter to which a warning notice relates.

• (b) in subsection (2)(a), for “any of paragraphs (a) to (c)”, substitute “ paragraph (a) ”;

• (c) in subsection (2)(b) for “(d)” substitute “ (b) ”;

• (d) in subsection (2)(c)—

• (i) for “(d)” substitute “ (b) ”;

• (ii) for “(b) or (c)” substitute “ (a) ”;

• (e) omit subsections (3)(b) and (4);

• (f) in subsection (9), omit “other than a warning notice or decision notice relating to a decision of the PRA that is required by a decision of the FCA of the kind mentioned in subsection (1)(b)(ii)”;

• (g) omit subsection (9A);

• (h) for subsection (13) substitute —

(13) “Supervisory notice” means a supervisory notice given in accordance with paragraph 6 or 10 of Article 71a of the EMIR regulation.

Application of Part 27 of the FSMA (offences)

77

• (1) Part 27 of the FSMA applies with respect to the discharge by the FCA of its functions under—

• (a) that Act as applied by this Part;

• (b) this Part; and

• (c) the EMIR regulation,

as it applies with respect to the discharge by it of its functions under the FSMA but with the following modifications.

• (2) In section 398, in subsection (1A), after paragraph (i) insert—

(j) the Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2019; (k) the EMIR regulation.

Application of Schedule 1ZA to the FSMA (the Financial Conduct Authority)

78

• (1) Paragraphs 19 to 21 (penalties) of Schedule 1ZA to the FSMA apply with respect to the discharge by the FCA of its functions under that Act as applied by this Chapter of this Part as they apply with respect to the discharge by it of its functions under the FSMA but with the following modifications.

• (2) In those paragraphs—

• (a) each reference to penalties imposed under the FSMA includes a reference to penalties imposed under this Part;

• (b) each reference to a section or Part of the FSMA includes a reference to that section or Part as applied by this Part;

• (c) each reference to the functions of the FCA includes a reference to its functions under this Part, the EMIR regulation or the TRATP Regulations.

• (3) In paragraph 20, the references to the FCA's enforcement powers include references to—

• (a) its powers under this Part, under Part 26 of the FSMA as applied by this Part;

• (b) its powers in relation to the investigation of offences under this Part or under the FSMA as applied by this Part;

• (c) its powers in England and Wales or Northern Ireland in relation to the prosecution of offences under this Part or under the FSMA as applied by this Part.

• (4) In paragraph 21, the references to regulated persons includes references to trade repositories.

PART 5 — TRANSITIONAL PROVISIONS: INTRAGROUP TRANSACTIONS

Interpretation

79

• (1) In this Part—

• “Regulation 2015/2205” means Commission Delegated Regulation (EU) 2015/2205 of 6 August 2015 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation ;

• “Regulation 2016/592” means Commission Delegated Regulation (EU) 2016/592 of 1 March 2016 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation ;

• “Regulation 2016/1178” means Commission Delegated Regulation (EU) 2016/1178 of 10 June 2016 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on the clearing obligation ;

• “Regulation 2016/2251” means Commission Delegated Regulation (EU) 2016/2251 of 4 October 2016 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards for risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty ;

• “clearing obligation” means the obligation imposed on counterparties by paragraph 1 of Article 4;

• “counterparty” means—a financial counterparty within the meaning given in point (8) of Article 2; ora non-financial counterparty within the meaning given in point (9) of Article 2;

• “equivalence determination” means a determination made by the Treasury in relation to a third country under paragraph 2 of Article 13;

• “intragroup transaction” means a transaction referred to in paragraph 1 or 2 of Article 3;

• “non-UK counterparty” means a counterparty which is established in a third country in respect of which there is no equivalence determination;

• “OTC derivative contract” has the meaning given in point (7) of Article 2;

• “risk-management obligation” means the obligation imposed on counterparties by paragraph 3 of Article 11;

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

• “UK counterparty” means a counterparty which is established in the United Kingdom.

• (2) References in this Part to numbered Articles, except in regulations 80(1)(c) and 82(5)(a) and (b), are to the Articles of the EMIR regulation bearing that number.

• (3) References in this Part to the EMIR regulation, except in regulations 80(2)(c) and 82(6), are to that Regulation as in force after IP completion day.

Continuation of exemptions from certain clearing obligations and risk-management obligations

80

• (1) This regulation applies to an OTC derivative contract—

• (a) where one of the counterparties is a UK counterparty;

• (b) where the other counterparty is neither a UK counterparty nor established in a member State; and

• (c) which immediately before exit day was exempt from—

• (i) the clearing obligation by virtue of—

• (aa) paragraph 2 of Article 3 of Regulation 2015/2205 as it had effect immediately before 21 December 2020;

• (bb) paragraph 2 of Article 3 of Regulation 2016/592 as it had effect immediately before 21 December 2020; or

• (cc) paragraph 2 of Article 3 of Regulation 2016/1178 as it had effect immediately before 21 December 2020; ...

• (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) This regulation also applies to an OTC derivative contract—

• (a) where one of the counterparties is a UK counterparty;

• (b) where the other counterparty is established in a member State; and

• (c) which immediately before IP completion day—

• (i) was exempt from the clearing obligation by virtue of paragraph 2(a) of Article 4 as it had effect immediately before IP completion day; or

• (ii) was exempt from, or was partially exempt from, certain requirements of the risk management obligation by virtue of paragraph 6, 7 or 10 of Article 11 (as read with Chapter 3 of Regulation 2016/2251) as they had effect immediately before IP completion day.

• (3) Where this regulation applies, the exemptions or partial exemptions specified in paragraph (1)(c) or, as the case may be, (2)(c) continue to apply in relation to the relevant contract, subject to regulation 84, until the relevant day specified in regulation 81.

Relevant day for the purposes of regulation 80

81

• (1) In relation to the clearing obligation, the relevant day referred to in regulation 80(3) is the earlier of—

• (a) the day which is 2 months after the day on which an equivalence determination in relation to the third country in which the non-UK counterparty is established comes into force; or

• (b) in respect of any third country in which a non-UK counterparty is established, 31st December 2026.

• (2) In relation to the risk-management obligation, the relevant day referred to in regulation 80(3) is the earlier of—

• (a) the day which is 4 months after the day on which an equivalence determination in relation to the third country in which the non-UK counterparty is established comes into force; or

• (b) in respect of any third country in which a non-UK counterparty is established, 31st December 2026.

New exemptions from certain clearing obligations and risk-management obligations

82

• (1) This regulation applies to an OTC derivative contract where—

• (a) one of the counterparties is a UK counterparty;

• (b) the other counterparty is a non-UK counterparty; and;

• (c) the contract would be an intragroup transaction if the Treasury were to make an equivalence determination in respect of the third country in which the non-UK counterparty is established.

• (2) Where this regulation applies, the UK counterparty may after IP completion day—

• (a) apply to the FCA for; or

• (b) notify the FCA of its intention to apply,

an exemption in accordance with the provision of the EMIR regulation to which the exemption relates as if the Treasury had made an equivalence determination in respect of the third country in which the non-UK counterparty is established.

• (3) Notwithstanding—

• (a) paragraph 2(b) of Article 4; and

• (b) paragraphs 8 and 9 of Article 11,

the FCA may authorise or, as the case may be, object to, the exemptions specified in those provisions (as read with Chapter 3 of Regulation 2016/2251) pursuant to the application or notification referred to in paragraph (2).

• (4) The exemptions mentioned in paragraph (3) apply, subject to regulation 84, until the relevant day specified in regulation 83.

• (5) Paragraph (8) applies where one or both of the counterparties—

• (a) in relation to an exemption from an obligation as specified in paragraph (6)—

• (i) has applied before 21 December 2020 to a competent authority for an exemption; or

• (ii) has before 21 December 2020 notified a competent authority of its intention to apply an exemption; or

• (b) in relation to an exemption from an obligation as specified in paragraph (7)—

• (i) has applied before IP completion day to a competent authority for an exemption; or

• (ii) has before IP completion day notified a competent authority of its intention to apply an exemption.

• (6) The obligations specified in this paragraph are—

• (a) the clearing obligation in a case where the application or notification relates to an exemption which would apply by virtue of—

• (i) paragraph 2 of Article 3 of Regulation 2015/2205 as it had effect immediately before 21 December 2020;

• (ii) paragraph 2 of Article 3 of Regulation 2016/592 as it had effect immediately before 21 December 2020; or

• (iii) paragraph 2 of Article 3 of Regulation 2016/1178 as it had effect immediately before 21 December 2020; ...

• (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (7) The obligations specified in this paragraph are—

• (a) the clearing obligation in a case where the application or notification relates to an exemption which would apply by virtue of paragraph 2(a) of Article 4 as it had effect immediately before IP completion day; or

• (b) certain requirements of the risk management obligation in a case where the application or notification relates to an exemption which would apply by virtue of paragraph 6, 7 or 10 of Article 11 as they had effect immediately before IP completion day.

• (8) Where this paragraph applies, the application or notification to the competent authority is to be treated after IP completion day as if it were an application or, as the case may be, a notification to the FCA by the UK counterparty for the purposes of paragraph (2).

• (9) Where it appears to the FCA that the application or notification referred to in paragraph (5) does not meet the requirements of the EMIR regulation and Chapter 3 of Regulation 2016/2251 to which the exemption relates, the FCA may request that the UK counterparty provides such further information as is necessary to enable the FCA to ascertain whether those requirements are complied with.

• (10) Paragraphs 11 and 12 of Article 11 have effect for the purposes of the exemptions, or partial exemptions, applying by virtue of paragraph (3)(b) as they have effect in relation to exemptions or partial exemptions applying by virtue of paragraph 8 or 9 of Article 11 (as read with Chapter 3 of Regulation 2016/2251).

• (11) In this regulation, “competent authority” means a regulatory authority which is responsible for the authorisation and supervision of counterparties in its territory.

Relevant day for the purposes of regulation 82

83

• (1) In relation to the clearing obligation, the relevant day referred to in regulation 82(3) is the earlier of—

• (a) the day which is 2 months after the day on which an equivalence determination in relation to the third country in which the non-UK counterparty is established comes into force; or

• (b) in respect of any third country in which a non-UK counterparty is established, 31st December 2026.

• (2) In relation to the risk-management obligation, the relevant day referred to in regulation 82(3) is the earlier of the day which is—

• (a) 4 months after the day on which an equivalence determination in relation to the third country in which the non-UK counterparty is established comes into force; or

• (b) in respect of any third country in which a non-UK counterparty is established, 31st December 2026.

Regulations

84

• (1) The Treasury may, in respect of the relevant days referred to in—

• (a) regulation 81(1)(b) and (2)(b); or

• (b) regulation 83(1)(b) and (2)(b),

prescribe a later day in regulations in respect of any third country in which a non-UK counterparty is established.

• (2) The power to make regulations conferred by paragraph (1) is exercisable by statutory instrument.

• (3) A statutory instrument made under paragraph (1) is subject to annulment in pursuance of a resolution of either House of Parliament.

Signed

Jeremy Quin — Craig Whittaker — Two of the Lords Commissioners of Her Majesty's Treasury — 2019-02-20

Explanatory note

(This note is not part of the Regulations)

Footnotes

Editorial notes