The Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019

Made: 22nd March 2019

Coming into force in accordance with regulation 1

The Treasury are a government department designated for the purpose 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, and section 8(1) of, paragraph 1 of Schedule 4 to, and paragraph 21 of Schedule 7 to, the European Union (Withdrawal) Act 2018 .

In accordance with paragraphs 1 and 12 of Schedule 7 to the European Union (Withdrawal) Act 2018, a draft of this instrument has been laid before, and approved by a resolution of, each House of Parliament.

PART 1 — Introductory

Citation, commencement and interpretation

1

• (1) These Regulations may be cited as the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019.

• (2) This regulation, Part 7, Part 8 and the following regulations come into force on the day after the day on which these Regulations are made—

• (a) regulation 49(e);

• (b) regulation 85(3), (6), (8), (11) and (14);

• (c) regulation 87(b);

• (d) regulation 88(e);

• (e) regulation 130;

• (f) regulation 171;

• (g) regulation 179(3);

• (h) regulation 187(3), in so far as it inserts paragraph (3) in article 1 of the Financial Services and Markets Act 2000 (Qualifying EU Provisions) Order 2013 ; and

• (i) regulation 190(3), in so far as it inserts paragraph (3) in article 1 of the Financial Services and Markets Act 2000 (Qualifying EU Provisions) (No. 2) Order 2013 .

• (3) The other provisions of these Regulations come into force on exit day.

• (4) In these Regulations, “the Act” means the Financial Services and Markets Act 2000 .

PART 2 — Amendments to the Act

CHAPTER 1 — Part 1A of the Act: the regulators

Introduction

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Part 1A of the Act (the regulators) is amended as follows.

Section 1A (the Financial Conduct Authority)

3

In section 1A (the Financial Conduct Authority), in subsection (6)(d) for “qualifying EU provision” substitute “ qualifying provision ”.

Section 1H (further interpretative provisions for sections 1B to 1G)

4

• (1) Section 1H (further interpretative provisions) is amended as follows.

• (2) In subsection (2)(d), for “credit institutions” substitute “ qualifying credit institutions ”.

• (3) In subsection (8)—

• (a) omit the definition of “credit institution”;

• (b) in the definition of “relevant ancillary service”, for “Section B of Annex I to the markets in financial instruments directive” substitute “ Part 3A of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ” .

Section 1L (supervision, monitoring and enforcement)

5

In section 1L (supervision, monitoring and enforcement), in subsection (2)(b) for “qualifying EU provision” substitute “ qualifying provision ”.

Section 2AB (functions of the PRA)

6

In section 2AB (functions of the PRA), in subsection (3)(d) for “qualifying EU provision” substitute “ qualifying provision ”.

Section 3E (memorandum of understanding)

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In section 3E (memorandum of understanding between regulators) omit subsection (3)(a).

Section 3I (power of PRA to require FCA to refrain from specified action)

8

In section 3I (power of PRA to require FCA to refrain from specified action), in subsection (8) omit “EU obligation or any other”.

Section 3J (power of PRA in relation to with-profits policies)

9

In section 3J (power of PRA in relation to with-profits policies), in subsection (8) omit “EU obligation or any other”.

Section 3M (directions relating to consolidated supervision of groups)

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• (1) Section 3M (directions relating to consolidated supervision of groups) is amended as follows.

• (2) In subsection (1) (which refers to supervision required in pursuance of any of the relevant directives), for “any of the relevant directives” substitute—

(a) any implementing provision contained in subordinate legislation (within the meaning of the Interpretation Act 1978) made otherwise than by any of the following— (i) statutory instrument, and (ii) statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)); or (b) any other implementing provision (as amended from time to time),

• (3) After subsection (2) insert—

(2A) “Implementing provision” means an enactment that immediately before IP completion day implemented provisions of any of the relevant directives.

• (4) In subsection (10) omit “EU obligation or any other”.

CHAPTER 2 — Part 3 of the Act: authorisation and exemption

Introduction

11

Part 3 of the Act (authorisation and exemption) is amended as follows.

Section 39 (exemption of appointed representatives)

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• (1) Section 39 (exemption of appointed representatives) is amended as follows.

• (2) In subsection (1A) , in paragraph (a)—

• (a) for “credit institution” substitute “ qualifying credit institution ”;

• (b) for “a person mentioned in Article 3.1 (optional exemptions) of the markets in financial instruments directive” substitute “ a firm which has a Part 4A permission to carry on regulated activities as an exempt investment firm within the meaning of regulation 8 of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701) ”.

• (3) In subsection (1AA) —

• (a) in paragraph (a), for “credit institution” substitute “ qualifying credit institution ”;

• (b) in paragraph (b) omit “as defined by Article 4.1.43 (definitions) of the markets in financial instruments directive”.

• (4) In subsection (1B) , for the words after “ “the applicable register” is” substitute “ the record maintained by the FCA by virtue of section 347(1)(ha) ”.

• (5) In subsection (1BA) , in paragraph (b)—

• (a) after “of a kind” insert “ that ”;

• (b) in sub-paragraph (i), before “specified” insert “ is ”;

• (c) for sub-paragraph (ii) substitute—

(ii) relates to mortgage agreements entered into on or after 21st March 2016,

• (6) In subsection (4) , for “qualifying EU provision” substitute “ qualifying provision ”.

• (7) For subsection (7) substitute—

(7) A person carries on “investment services business” if, under the full and unconditional responsibility of only one investment firm on whose behalf the person acts, the person— (a) promotes investment services or ancillary services to the firm's clients or prospective clients, (b) receives and transmits instructions or orders from clients in respect of investment services or financial instruments, (c) places financial instruments, or (d) provides advice to clients or prospective clients in respect of investment services or financial instruments.

• (8) For subsection (8) substitute—

(8) In this section— - “ancillary services” means any of the services and activities listed in Part 3A of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544); - “financial instruments” means those instruments specified in Part 1 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; - “investment services” means any of the services and activities listed in Part 3 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, relating to any of the instruments listed in Part 1 of that Schedule; - “structured deposit” has the meaning given by Article 2.1.23 of the markets in financial instruments regulation.

Section 39A (certain tied agents operating outside United Kingdom)

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• (1) Section 39A (certain tied agents operating outside United Kingdom) is amended as follows.

• (2) In subsection (1)(a), for the words after “who is” substitute “ established in the United Kingdom; and ”.

• (3) In subsection (4), for the words after “Condition B is that” substitute “ the FCA is satisfied that no such business is, or is likely to be, carried on by the agent in the United Kingdom. ”.

• (4) In subsection (6)(c) omit sub-paragraph (ii).

• (5) In subsection (6)(d) omit “or register”.

• (6) For subsection (8) substitute—

(8) Section 39(7) applies for the purposes of this section.

• (7) In subsection (9) omit the definition of “competent authority”.

• (8) The amendments made by paragraphs (2), (3) and (7) do not apply during the three-year transitional period in relation to contracts entered into before IP completion day.

• (9) In relation to such contracts, section 39A(6)(d) has effect during the three-year transitional period as if “or on the register of tied agents of an EEA State maintained pursuant to Article 29 of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments” were inserted after “entered on that record”.

• (10) In paragraphs (8) and (9) “the three-year transitional period” means the period that—

• (a) begins with IP completion day, and

• (b) ends at the end of the period of three years starting with the first day after IP completion day.

CHAPTER 3 — Part 4A of the Act: permission to carry on regulated activities

Introduction

14

Part 4A of the Act (permission to carry on regulated activities) is amended as follows.

Section 55D (application for permission)

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• (1) Section 55D (firms based outside EEA) is amended as follows.

• (2) In the heading, for “EEA” substitute “ the United Kingdom ”.

• (3) For “non-EEA”, wherever occurring, substitute “ non-UK ”.

• (4) In subsection (1)(a) for “EEA” substitute “ United Kingdom ”.

Section 55J (variation and cancellation of Part 4A permission: general)

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• (1) Section 55J (variation or cancellation on initiative of regulator) is amended as follows.

• (2) In subsection (6A)—

• (a) in paragraph (c)—

• (i) for the words from “provide” to “managers directive” substitute “ carry on the management of portfolios of investments in accordance with mandates given by investors on a discretionary, and client-by-client, basis ”;

• (ii) for “the capital requirements directive” substitute “ any enactment (as amended from time to time) that immediately before IP completion day implemented provisions of the capital requirements directive ”;

• (b) in paragraph (e)—

• (i) for sub-paragraph (i) substitute—

(i) an AIFMD requirement;

• (ii) omit sub-paragraphs (ii) and (iii);

• (iii) for sub-paragraph (iv), including the “or” at the end, substitute—

(iv) an ELTIF requirement; or

• (iv) for sub-paragraph (v) substitute—

(v) an MMF requirement.

• (3) After subsection (6A), insert—

(6AA) For the purposes of subsection (6A)(e)— (a) an AIFMD requirement is a provision of— (i) the Alternative Investment Fund Managers Regulations 2013, (ii) any EU regulation, originally made under the alternative investment fund managers directive, which is retained direct EU legislation, (iii) any provision made by or under this Act that immediately before IP completion day implemented provisions of the alternative investment fund managers directive (as that implementing provision is amended from time to time), or (iv) any subordinate legislation (within the meaning of the Interpretation Act 1978) which is made under a power substituted for a power of an EU entity to make a directly applicable regulation under the alternative investment fund managers directive by regulations made under section 8 of the European Union (Withdrawal) Act 2018; (b) an ELTIF requirement is a provision of— (i) Regulation (EU) No. 2015/760 of the European Parliament and of the Council of 29th April 2015 on European Long-term Investment Funds (“the ELTIF Regulation”), (ii) any EU regulation, originally made under the ELTIF Regulation, which is retained direct EU legislation, or (iii) any subordinate legislation (within the meaning of the Interpretation Act 1978) made under the ELTIF Regulation on or after IP completion day; (c) an MMF requirement is a provision of— (i) the MMF Regulation, (ii) any EU regulation, originally made under the MMF Regulation, which is retained direct EU legislation, or (iii) any subordinate legislation (within the meaning of the Interpretation Act 1978) made under the MMF Regulation on or after IP completion day.

• (4) In subsection (6B)—

• (a) in paragraph (c), omit “, in accordance with Chapter 11 of the mortgages directive,”;

• (b) in paragraph (d)—

• (i) for “implements” substitute “ sets ”;

• (ii) omit “set out in the mortgages directive”.

• (5) Omit subsection (7).

• (6) In subsection (7ZA)—

• (a) in the words before paragraph (a), after the words “managing a”, insert “ UK ”;

• (b) for paragraph (c) substitute—

(c) an MMF requirement,

• (7) In subsection (7ZB), for the words after “requirement” substitute—

imposed by— (a) the market abuse regulation, (b) any EU regulation, originally made under the market abuse regulation, which is retained direct EU legislation, or (c) any subordinate legislation (within the meaning of the Interpretation Act 1978) made under the market abuse regulation on or after IP completion day.

• (8) After subsection (12), insert—

(13) In this section “enactment” has the meaning given by section 3T.

Section 55K (variation and cancellation of Part 4A permission: investment firms)

17

In section 55K (investment firms: particular conditions that enable cancellation), in subsection (1)—

• (a) in paragraph (c) omit the words from “pursuant”, in the first place it occurs, to “that Chapter,”;

• (b) in paragraph (d) for the words from “the operating conditions” to “that Chapter,” substitute “ any retained direct EU legislation, or any provision made by or under this Act, which sets the operating conditions ”.

Section 55KA (variation and cancellation of Part 4A permission: insurance undertakings etc.)

18

In section 55KA (insurance undertakings etc.), in subsection (1)(b)(i), for the words from “a finance scheme” to the end substitute “ , in accordance with requirements imposed by or under this Act, a finance scheme for restoring compliance with the appropriate capital requirement; ”.

Section 55PA (imposition and variation of requirements)

19

Omit section 55PA (assets requirements imposed on insurance undertakings or reinsurance undertakings).

Section 55Q (exercise of power in support of overseas regulator)

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• (1) Section 55Q (exercise of power in support of overseas regulator) is amended as follows.

• (2) Omit subsection (4).

• (3) In subsection (5), in the words before paragraph (a), for the words from “do so” to “EU obligation, it” substitute “ exercise its own-initiative powers in response to a request, the UK regulator ”.

• (4) Omit subsection (7).

• (5) In subsection (8), for “subsection” substitute “ subsections (5) and ”.

Section 55R (connected persons)

21

In section 55R (persons connected with an applicant), omit subsections (4) to (9) .

Section 55S (additional permissions)

22

Omit section 55S (duty of FCA or PRA to consider other permissions).

Sections 55Z1 to 55Z2A (notification)

23

Omit sections 55Z1 to 55Z2A (notification of ESMA, EBA and European bodies).

CHAPTER 4 — Part 5 of the Act: performance of regulated activities

Introduction

24

Part 5 of the Act (performance of regulated activities) is amended as follows.

Section 59 (approval for particular arrangements)

25

In section 59 (approval for particular arrangements) omit subsection (8) .

Section 63E (certification of employees by relevant authorised persons)

26

In section 63E (certification of employees by relevant authorised persons) omit subsection (7).

Section 66A (misconduct: action by the FCA)

27

In section 66A (misconduct: action by the FCA) in subsection (4)(b) for “qualifying EU provision” substitute “ qualifying provision ”.

Section 66B (misconduct: action by the PRA)

28

In section 66B (misconduct: action by the PRA) in subsection (4)(b) for “qualifying EU provision” substitute “ qualifying provision ”.

Section 71D (sections 71B and 71C: conditions)

29

In section 71D (sections 71B and 71C: conditions) in subsection (2) for “any measure of a kind described in Article 27(1) of the recovery and resolution directive” substitute “ any measure defined as a “relevant measure” by article 107 of the Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348) ”.

Section 71I (sections 71B to 71H: interpretation)

30

• (1) Section 71I (sections 71B to 71H: interpretation) is amended as follows.

• (2) In subsection (2)(b) for “an EEA parent” substitute “ a UK parent ”.

• (3) In subsection (3)—

• (a) for “an EEA parent” substitute “ a UK parent ”;

• (b) for “any EEA state” substitute “ the United Kingdom ”.

• (4) In subsection (4) for “Article 2.1(2) and 2.1(3) of the recovery and resolution directive” substitute “ article 2(1) of the Bank Recovery and Resolution (No. 2) Order 2014 ”.

• (5) In subsection (5)—

• (a) in the definition of “consolidating supervisor”, for “an EEA parent” substitute “ a UK parent ”;

• (b) omit the definition of “the recovery and resolution directive”.