Key Facts

• Amendment 3 clarifies the scope of the FCA’s review when re-exercising Article 23D powers.
• Article 23D gives the FCA power to direct changes in methodology rules or codes for critical benchmarks.
• The Government aims to coordinate with international counterparts to ensure consistent outcomes for users.
• Clause 17 introduces article 23F of the benchmarks regulation.
• The FCA must publish statements of policy regarding designations, prohibitions, legacy use permissions, and methodology requirements for critical benchmarks.
• On 18 November, the FCA published two consultations inviting industry feedback on how it intends to exercise its new powers.
• Clause introduces article 23G into the benchmarks regulation.
• LIBOR is an example of an umbrella benchmark with 35 individual settings referred to as “versions” of the benchmark.
• Paragraphs 1A to 1E set out requirements for written change and cessation procedures by critical benchmark administrators, requiring assessments and FCA review before publication or updates.
• The clause supports orderly wind-down of benchmarks like LIBOR through targeted application of powers.
• Article 51(5) of the benchmarks regulation provides a transitional period for third-party benchmarks.
• Only 14 third-country benchmark administrators have come through access routes outlined in the EU benchmarks regulation as of October 2020.
• UK firms rely on third-country benchmarks for key business functions such as risk management and overseas investment.
• Clause 22 delivers a commitment to enable Gibraltar-based firms to have ongoing access to UK financial markets.
• The discussion moves on from benchmarks and LIBOR transition issues.
• The Financial Services and Markets Act 2000 provides authorised persons categories for carrying out regulated activities in the UK.
• Schedule 6 inserts schedule 2A into the Financial Services and Markets Act to govern Gibraltar-based firms' access to the UK market.
• Schedule 7 inserts schedule 2B, detailing requirements for outgoing UK-based firms accessing the Gibraltarian market.
• The Treasury must report biennially on the regime's operation to Parliament.
• Roughly one in five car insurance policies in the UK is held by Gibraltar-based insurance companies.
• The EU anti-money laundering watchdog, MONEYVAL, called for Gibraltar to do more on money laundering in February this year.
• Gibraltar’s main corporation tax rate is 10%, significantly lower than the UK's rates.
• The Bill includes a condition in schedule 6 for the Government to consider relationships with other territories with significant financial services markets.
• The Bill allows Gibraltarian authorities to regulate financial markets with immediate access to the UK.
• Gibraltar does 90% of its business with the UK.
• There is currently no legal requirement in Gibraltar to refuse registration to individuals with criminal records.
• The Bill creates a market access regime for Gibraltar-based financial services to operate in the UK.
• 90% of Gibraltarian insurance is UK-facing.
• Schedule 2A firms will be covered by FOS’s compulsory jurisdiction, ensuring redress for individuals and small businesses.
• Amendments expand the definition of “prohibition order” in new Schedule 2A to include orders under section 143S.
• An FCA prohibition order can be made if an individual is not of good repute or lacks necessary skills and experience.
• Equivalent prohibition orders from Gibraltar law are also included for UK regulator consideration.
• Amendment extends the definition of ‘prohibition order’ in paragraph 19 of new Schedule 2A.
• Amendments clarify UK regulators’ powers to give directions altering meanings of ‘protected contract’ and ‘existing contract’ for Part 10 of new Schedule 2A.
• New schedule sets out market access arrangements for Gibraltar-based firms into the UK.
• Clause 22 provides rights equivalent to passporting rights for Gibraltar-based firms accessing UK markets.
• Certain regimes are authorised under separate regulatory regimes, not the Financial Services and Markets Act.
• The power is constrained in scope and compatible with objectives like financial stability and consumer protection.
• Clause 24 introduces the new Overseas Funds Regime (OFR) in the Financial Services Bill.
• There are about 9,000 collective investment schemes based outside the UK which will be impacted by this regime.
• The EU’s passporting provisions allowed for two-way market access between the UK and EEA until Brexit.
• The Government's approach to financial regulations may push major UK companies to move elsewhere in Europe.
• The Office for Budget Responsibility estimates that a no-deal scenario will result in an economy 2% smaller permanently.
• Clause 24 sets out a country-by-country approval system for equivalence decisions.
• There are approximately 9,000 collective investment products from EU member states that may require registration with the FCA.
• The UK has filled in 2,500 pages of forms over about 40 questionnaires by June last year for the equivalence granting process.
• About 9,000 EEA-domiciled funds use passporting to market to retail investors in the UK compared to approximately 2,600 UK-domiciled funds.
• The OFR will be used to find any jurisdiction equivalent and allow a fund from another jurisdiction permissible even if not equivalent.
• Amendments made to correct cross-references in schedule 9.
• Amendments clarify that both application and order are made under section 271A.
• Further consideration of the bill was ordered to be adjourned until Tuesday, December 1st at 9:25 PM.