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

• Citation: S.I. 2019/632
• Sections: 209

Section 1 Citation, commencement and interpretation

(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 .

Section 2 Introduction

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

Section 3 Section 1A (the Financial Conduct Authority)

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

Section 4 Section 1H (further interpretative provisions for sections 1B to 1G)

(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 5 Section 1L (supervision, monitoring and enforcement)

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

Section 6 Section 2AB (functions of the PRA)

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

Section 7 Section 3E (memorandum of understanding)

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

Section 8 Section 3I (power of PRA to require FCA to refrain from specified action)

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

Section 9 Section 3J (power of PRA in relation to with-profits policies)

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

Section 10 Section 3M (directions relating to consolidated supervision of groups)

(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”.

Section 11 Introduction

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

Section 12 Section 39 (exemption of appointed representatives)

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

(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 .

Section 14 Introduction

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

Section 15 Section 55D (application for permission)

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

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

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

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 19 Section 55PA (imposition and variation of requirements)

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

Section 20 Section 55Q (exercise of power in support of overseas regulator)

(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 21 Section 55R (connected persons)

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

Section 22 Section 55S (additional permissions)

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

Section 23 Sections 55Z1 to 55Z2A (notification)

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

Section 24 Introduction

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

Section 25 Section 59 (approval for particular arrangements)

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

Section 26 Section 63E (certification of employees by relevant authorised persons)

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

Section 27 Section 66A (misconduct: action by the FCA)

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

Section 28 Section 66B (misconduct: action by the PRA)

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

Section 29 Section 71D (sections 71B and 71C: conditions)

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

(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”.

Section 31 Introduction

Part 7 of the Act (control of business transfers) is amended as follows.

Section 32 Section 105 (insurance business transfer schemes)

(1) Section 105 (insurance business transfer schemes) is amended as follows.

(2) In subsection (1)—

(a) in paragraph (a) for “one of the conditions” substitute “ the condition ” ;

(b) in paragraph (b) for “an EEA State” substitute “ the United Kingdom or Gibraltar ” .

(3) For subsection (2) substitute—

(2) The condition is that the whole or part of the business carried on in the United Kingdom by an authorised person who has permission to effect or carry out contracts of insurance (“the transferor concerned”) is to be transferred to another body (“ the transferee ”).

(4) In subsection (3) —

(a) omit Case 2;

(b) in Case 3—

(i) in paragraph (b) for “(none of which is an EEA State)” substitute “ outside the United Kingdom ” ;

(ii) in paragraph (b) for “an EEA State”, in the second place it occurs, substitute “ the United Kingdom ” ;

(iii) in paragraph (c) for “other than an EEA State” substitute “ outside the United Kingdom ” .

(5) In subsection (4) omit “2,”.

Section 33 Further amendments to Part 7 of the Act

(1) In section 111 (sanction of the court for business transfer schemes) in subsection (2)(a) for “certificates have” substitute “ certificate has ” .

(2) In section 112 (effect of order sanctioning business transfer scheme) omit subsection (9) .

(3) Omit sections 114 (rights of certain policyholders), 114A (notice of transfer of reinsurance contracts) and 116 (effect of insurance business transfers authorised in other EEA States).

Section 34 Introduction

Part 9A of the Act (rules and guidance) is amended as follows.

Section 35 Section 137J (rules about recovery plans: duty to consult)

In section 137J (rules about recovery plans: duty to consult), in subsection (6) —

(a) for the definition of “institution” substitute—

“ institution ” means—

(a) a credit institution, other than an entity mentioned in Article 2.5 of the capital requirements directive; or

(b) an investment firm as defined in Article 4.1(2) of the capital requirements regulation that is subject to the initial capital requirement specified in rules made by a regulator for the purpose of implementing Article 28(2) of the capital requirements directive;

(b) in the definition of “institution authorised in the UK”, for “an institution which is an authorised person and” substitute “ an authorised person who is ” .

Section 36 Section 137N (recovery plans and resolution packs: restriction on duty of confidence)

In section 137N (recovery plans and resolution packs: interpretation), in subsection (5) , in the definition of “qualifying parent undertaking” omit paragraph (b) and the “or” preceding it.

Section 37 Section 137Q (price stabilising rules)

(1) Section 137Q (price stabilising rules) is amended as follows.

(2) In subsection (3A)(b) for “EEA” substitute “ United Kingdom ” .

(3) For subsection (5) substitute—

(5) In this section references to Article 5 of the market abuse regulation include—

(a) any technical standards originally adopted or made under that Article which are retained direct EU legislation, and

(b) any technical standards made under that Article by the FCA.

Section 38 Section 137R (financial promotion rules)

(1) Section 137R (financial promotion rules) is amended as follows.

(2) In subsection (5)(b) , for the words from “requirements” to “(as defined in section 71I(5)),” substitute “ listed requirements ” .

(3) In subsection (5)(c) , for “requirements mentioned in paragraph (b)” substitute “ listed requirements ” .

(4) After subsection (5) insert—

(5A) In subsection (5) “ the listed requirements ” means—

(a) requirements under the law of any part of the United Kingdom that appear to the FCA to correspond to requirements of—

(i) Articles 24 (general principles and information to clients) and 25 (assessment of suitability and appropriateness and reporting to clients) of the markets in financial instruments directive,

(ii) Commission Delegated Directive (EU) 2017/593 of 7 April 2016, so far as adopted under those Articles,

(iii) Article 77 of the UCITS directive,

(iv) Articles 10 and 11 of the mortgages directive, ...

(v) Article 17 of the insurance distribution directive, or

(vi) Article 44a of the recovery and resolution directive (as defined in paragraph (c)), and

(b) requirements of any retained direct EU legislation originally made under Article 24(13) or 25(8) of the markets in financial instruments directive.

(c) In paragraph (a)(vi), “recovery and resolution directive” means Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms, as it had effect immediately before IP completion day.

Section 39 Section 138K (consultation: mutual societies)

In section 138K omit subsections (5)(d) and (6) (references to EEA mutual societies).

Section 40 Section 139A (power of the FCA to give guidance)

In section 139A (power of the FCA to give guidance), in subsection (4) for “or a directly applicable regulation made under the market abuse regulation” substitute “ , any retained EU direct legislation originally made under the market abuse regulation or any subordinate legislation (within the meaning of the Interpretation Act 1978) made on or after IP completion day under the market abuse regulation ” .

Section 41 Section 141A (power to make consequential amendments of references to rules etc)

In section 141A (power to make consequential amendments of references to rules etc), after subsection (4) insert—

(5) A regulator's power under Part 2 of the Powers Regulations to amend its rules is treated for the purposes of this section as a power under this Part; and for this purpose “ the Powers Regulations ” means the Financial Regulators' Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018 (S.I. 2018/1115).

Section 42 Introduction

Part 11 of the Act (information gathering and investigations) is amended as follows.

Section 43 Section 165A (PRA's power to require information: financial stability)

(1) Section 165A (PRA's power to require information: financial stability) is amended as follows.

(2) In subsection (8), in the definition of “management”, for “Annex II to the UCITS Directive” substitute “ Schedule 6 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ” .

(3) In subsection (9)(b) , for the words from “meaning given” to the end substitute “ same meaning as in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (see article 3(1) of that Order). ” .

Section 44 Section 167 (appointment of persons to carry out general investigations)

Omit section 167(3A) (investigations of persons in other EEA States).

Section 45 Section 168 (appointment of persons to carry out investigations in particular cases)

In section 168 (appointment of investigators: particular cases), in subsection (4)—

(a) in paragraph (jc)(ii) for “a directly applicable EU regulation made” substitute “ any retained EU direct legislation originally made under the market abuse regulation or any subordinate legislation (within the meaning of the Interpretation Act 1978) made on or after IP completion day ” ;

(b) in paragraph (k) for “qualifying EU provision” substitute “ qualifying provision ” .

Section 46 Section 169 (investigations etc. in support of overseas regulator)

Omit section 169(3) and (6) (investigations in connection with EU obligations).

Section 47 Section 169A (support of overseas regulator with respect to financial stability)

In section 169A (support of overseas regulator with respect to financial stability), in subsection (4)(b) for “169(3), (4)(a) and (d), (5) and (6)” substitute “ 169(4)(a) and (d) and (5) ” .

Section 48 Introduction

Part 12 of the Act (control over authorised persons) is amended as follows.

Section 49 Section 184 (disregarded holdings)

In section 184 (disregarded holdings)—

(a) in subsection (4)—

(i) in paragraph (a) , for the words from “article 4.1.7” to “directive” substitute “ article 2.1.6 of the markets in financial instruments regulation ” ;

(ii) for paragraph (b), substitute—

(b) has a Part 4A permission to carry on one or more investment services and activities;

(b) in subsection (5), for “credit institution” substitute “ qualifying credit institution ” ;

(c) in subsection (6)—

(i) in the opening words and in paragraph (b)), for “credit institution” substitute “ qualifying credit institution ” ;

(ii) in paragraph (a)(ii), omit the words from “in accordance with” to the end;

(d) in subsection (7) , for “Article 2.1(b) of the UCITS Directive” substitute “ section 237(2) ” ;

(e) in subsection (9A) , for the words from “Commission” to “financial instruments” substitute “ the market abuse regulation and the Commission Delegated Regulation (EU) No. 1052/2016 of 8 March 2016 supplementing Regulation (EU) No. 596/2014 of the European Parliament and the Council with regard to the regulatory technical standards for conditions applicable to buy-back programmes and stabilisation measures ” .

Section 50 Section 186 (assessment criteria)

In section 186 (assessment criteria), in paragraph (f)(i), for the words from “within the” to “terrorist financing” substitute “ as defined in regulation 3(1) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 ” .