Draft Market Abuse (Amendment) (EU Exit) Regulations 2018
Draft Credit Rating Agencies (Amendment, Etc.) (EU Exit) Regulations 2019
Debate between John Glen and Greg Knight(5 years, 3 months ago)
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John Glen
It is a pleasure to serve under your chairmanship again, Mr Davies. The Treasury has been preparing extensively for a range of outcomes in the context of the UK’s withdrawal from the EU, including a no-deal scenario. The draft regulations form part of the necessary work to ensure that there will continue to be a functioning regulatory and legislative regime for financial services if the UK leaves the EU with no deal and no implementation period.
Sir Greg Knight (East Yorkshire) (Con)
Although explanatory memorandums are not technically part of regulations, it is important that they be accurate and up to date in all respects. Will the Minister confirm that that is the case? In particular, will he confirm that the first sentence of paragraph 7.1 of both memorandums is still Government policy? It states:
“The UK will leave the EU on 29 March 2019.”
John Glen
I am happy to confirm that point—I wondered what my right hon. Friend was going to come out with.
As part of the programme that I have set out, the draft regulations will address legal deficiencies in retained EU legislation relating to market abuse and credit rating agencies. They are important for regulating market conduct practices and safeguarding market integrity. Their approach aligns with that of other legislation laid before Parliament under the European Union (Withdrawal) Act 2018, providing continuity by maintaining existing legislation at the point of exit, but amending deficiencies where necessary and introducing transitional provisions to ensure that they work as effectively as possible in a no-deal context. I shall first outline the 2018 draft regulations and then turn to the 2019 draft regulations.
Market abuse can involve a range of illegal practices relating to financial markets, including unlawful disclosure of inside information, insider dealing and market manipulation. MAR—the EU market abuse regulation, which came into effect in 2016—prohibits market abuse practices, thereby increasing market integrity and investor protection and enhancing the attractiveness of the EU securities markets for capital raising. It gives EU regulators powers and responsibilities to prevent and detect market abuse; the Financial Conduct Authority is the regulator that currently enforces it in the UK. MAR applies to financial instruments traded on EU trading venues, as well as market abuse that concerns such instruments anywhere in the world.
The 2018 draft regulations will make amendments to MAR and related legislation to ensure that the UK continues to have an effective regime to regulate market abuse once it leaves the EU. In line with our general approach of onshoring EU legislation by transferring powers and functions in the remit of EU authorities to the appropriate UK institutions, they will transfer powers from the European Commission to the Treasury, including the ability to make delegated Acts related to market abuse, and from the European Securities and Markets Authority to the FCA, enabling the FCA to make binding technical standards.
The FCA has consulted on its proposed changes to its binding technical standards, and it will continue to enforce the market abuse regime in line with its current role as part of the EU framework. That approach reflects the FCA’s extensive experience, expertise and capability to continue in that function post exit. I remind the Committee that it has 158 full-time employees working on Brexit—an increase from 28 in March 2018—and that in a few months it will publish its plans for the year 2019-20.
Furthermore, the statutory instrument retains the existing scope of MAR, so that it continues to apply to financial instruments traded on both UK and EU trading venues, as well as to conduct anywhere in the world that concerns these instruments. That means that the FCA will continue to be able to investigate, prohibit and pursue cases of market abuse related to financial instruments that affect UK markets, as far as is possible in a no-deal scenario. The scope has been limited to the UK and EU, and is not worldwide, given that markets in both jurisdictions are highly integrated due to the current arrangements.
The SI also retains exemptions in MAR—and amends the scope of the exemptions to UK-only—that relate to certain trading activities that cannot be enforced against the regulation[Official Report, 5 February 2019, Vol. 654, c. 1MC.] They include exemptions on monetary and public debt management activities, buy-backs and stabilisation, and accepted market practices. Power will be conferred on the Treasury to extend the exemptions related to monetary and public debt management activities. That power is currently held by the Commission.
In addition, the SI retains references to emission allowances. That will allow UK firms to continue to participate in secondary market trading under the emissions trading scheme, despite the UK leaving it, and will enable the FCA to continue to monitor and enforce against UK-registered emission allowance market participants.
Additionally, the SI removes co-operation requirements between the UK and EU counterparts. The UK will no longer be obliged to share information related to market abuse with the EU, given that there would be no guarantee of reciprocity. However, the FCA will still be able to respond to information requests from third-country regulators; indeed the existing domestic framework for co-operation on information sharing with countries outside the UK already allows for that on a discretionary basis.
Finally, the SI will make further amendments to retained EU and UK legislation, including EU legislation that amends MAR, to ensure that it is operable in a UK-only scenario; to the Criminal Justice Act 1993 to remove references to directly applicable EU regulation; and to the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 to ensure that the UK’s market abuse regime works effectively once the UK leaves the EU.
Draft Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018
Debate between John Glen and Greg Knight(5 years, 4 months ago)
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John Glen
The hon. Lady is absolutely right to draw attention to the significant resources that will be required. The FCA has been in conversation with my officials in the Treasury, and we are reassured that it is in a position to do the work, and that it can do so under the provisions of the levy that it has.
Sir Greg Knight (East Yorkshire) (Con)
Will the Minister confirm, for the avoidance of all doubt, that all the powers in the regulations are temporary and time-limited, and that the powers do not give rise to the right to increase taxation?