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FINANCIAL SERVICES AND MARKETS ACT 2000:  RECENT DEVELOPMENTS

Bulletin number nine from HM Treasury

This is the ninth bulletin covering developments on the Financial Services and Markets Act 2000 (FSMA).

Laying of secondary legislation under the FSMA

Since bulletin 8, we have made the following orders (and we are in the process of preparing several more).

• SI 2001 No 2657: The Financial Services and Markets Act 2000 (Transitional Provisions and Savings) (Civil Remedies, Discipline, Criminal Offences, etc) Order 2001
  
  
• SI 2001 No 2632/c.87: The Financial Services and Markets Act 2000 (Commencement No 5) Order 2001
  
  
• SI 2001 No 2633: The Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2001
  
  
• SI 2001 No 2659: The Financial Services and Markets Act 2000 (Consequential and Transitional Provisions) (Miscellaneous) (No 2) Order 2001
  
  
• SI 2001 No 2634: The Financial Services and Markets Act 2000 (Insolvency) (Definition of  “Insurer”) Order 2001
  
  
• SI 2001 No 2637: The Financial Services and Markets Act 2000 (Transitional Provisions) (Controllers) Order 2001
  
  
• SI 2001 No 2636: The Financial Services and Markets Act 2000  (Transitional Provisions) (Authorised Persons etc) Order 2001
  
  
• SI 2001 No 2638: The Financial Services and Markets Act 2000 (Controllers) (Exemption) Order 2001
  
  
• SI 2001 No 2639: The Financial Services and Markets Act 2000 (Own-initiative Power) (Overseas Regulators) Regulations 2001
  
  
• SI 2001 No 2635: The Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2001

The Economic Secretary answered a Parliamentary Question on FSMA’s transitional provisions on 20 July.  The relevant extract from Hansard is attached to this bulletin.

The Consequentials, Repeals and Savings order (s. 426)

 When the Financial Services and Markets Act 2000 is brought fully into force later this year, the legislation which forms the statutory framework for the current regulatory regime will be repealed.  The principal enactments which will be repealed or revoked are the Insurance Companies Act 1982, the Financial Services Act 1986, the Banking Act 1987, the Banking Co-ordination (Second Council Directive) Regulations 1992, the Insurance Companies (Third Council Directives) Regulations 1994, and the Investment Services Regulations 1995.    There are hundreds of references, in other current legislation, to those enactments, which must all be amended under FSMA.  

The Order making all the necessary consequential amendments is currently being written; in August a substantial number of the amendments to primary legislation will be available in draft.  The consequential amendments do not change the effect or application of the provisions amended, unless a limited change is inevitable as a direct consequence of the changes in the regulatory framework made by FSMA itself.  If you would like to see and comment, by the end of August, on a copy of the draft Order please contact Deirdre Barrie on deirdre.barrie@hm-treasury.gov.uk or call her on 0207 270 1634.


Inland Revenue consultation exercise

The Inland Revenue have published for consultation a draft order making amendments to tax law in the light of  FSMA.  The consultation document can be found at www.inlandrevenue.gov.uk/consult_new/index.htm or contact David Sly on 020 7438 6262.  The closing date for comments is 12 October 2001.

Address and method of receipt

We are keen to deliver the bulletin by e-mail where possible, if you would like to switch from hard copy to e-mail please contact Deirdre.Barrie@hm-treasury.gov.uk; also if your address has changed or if you no longer require this bulletin.

HM Treasury

31 July 2001


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Mr. Russell Brown: To ask the Chancellor of the Exchequer what transitional arrangements will be put in place as part of the entry into force of the main provisions of the Financial Services and Markets Act 2000. [6537]

Ruth Kelly: I announced on 12 July that the date, known as "N2", on which the main provisions of the Financial Services and Markets Act 2000 (FSMA) will come into force will be Saturday 1 December. Regulation of financial services by a single statutory regulator, the Financial Services Authority (FSA), operating under a single body of law will bring substantial benefits to financial services firms and consumers.

A large number of firms are already authorised to carry on financial services under existing legislation; a small number of firms and individuals will require authorisation for the first time at N2. For all financial services firms and individuals the Government seek to minimise the disruption arising from the introduction of the new framework for financial services regulation, while maintaining the appropriate degree of consumer protection.

A number of transitional issues arise from the replacement by FSMA of existing regulatory frameworks. The Government have made or expect to make transitional orders covering the treatment of misconduct by firms which was committed before N2; applications for authorisation to existing regulators which are partly completed by N2; complaints about financial services firms to the ombudsman which will be replaced by the Financial Ombudsman Service; and a significant number of other issues.

Today the Financial Services and Markets Act 2000 (Transitional Provisions)(Authorised Persons etc.) Order 2001 has been laid before Parliament. This Order provides, in summary, that if a firm is authorised by one of the existing financial services regulators that firm is from N2 to have equivalent authorisation under FSMA.

The Order generally requires the FSA to use its best endeavours to provide by N2 firms' scope of permission under FSMA. Where the FSA is unable to provide this, firms will not have contravened, for those activities which they were carrying on prior to N2, the requirement that they carry on only regulated activities for which they have permission from the FSA.

A small number of firms are expected to require authorisation for the first time at N2. As I also announced on 12 July, these firms will be able to apply for authorisation by the FSA under FSMA from 3 September. We will legislate to ensure that new applications for authorisation received before N2 for activities currently carried on lawfully will have, where appropriate, interim authorisation under FSMA until the application has been determined.

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