As a reminder, the UK Treasury (HMT) published its Consultation on the Second Phase of the Future Regulatory Framework Review (FRFR) in October 2020.  The Consultation is open for input until 19 February 2021.

The FRFR aims to set out how the UK’s financial services regulatory framework should change in light of the UK’s exit from the EU. The Government seeks to use the UK’s departure from the EU as an impetus to create a more coherent financial services regulation system in the UK.

Content of Review

Phase I of the Review focused on the question of coordination between the regulatory authorities in the UK. The Second Phase tackles the wider regulatory structure in the UK’s financial services – it is on this element that HMT is consulting, with a view to ascertaining the shape of a blueprint which will be the subject of a further consultation exercise later in 2021.

Rationale

HMT argues that the UK’s existing regulatory oversight system which sees delegation of regulatory responsibility to independent financial services regulators has been very effective. However, the UK’s departure from the EU represents an opportunity to revisit the existing regulatory framework, which is governed by the Financial Services and Markets Act 2000 (FSMA),

Accordingly, this Consultation seeks to adapt, rather than re-write the regulatory system, to create a simpler, more flexible and dynamic oversight regime, with less demand on Parliamentary time and more responsibility devolved away from HMT towards the regulators. The Consultation also offers the opportunity to create a more coherent system, based solely on UK legislation, rather than a mix of retained EU and UK legislation.

Key Elements

The proposals on which HMT is seeking views, aim to achieve this new regime through:

  • Creating a clear division of responsibility with new legislation setting the regulatory framework, and allowing the regulators to set the applicable requirements;
  • Ensuring that regulators can be held accountable to for their decisions;
  • Revisiting the FSMA transparency requirements so that regulators have to demonstrate that they have considered the activity-specific regulatory principles and show how their proposals meet that statutory purpose; and
  • Allowing government and Parliament to set the overall policy approach for specific financial services activities, leaving the regulators to develop policy and regulatory requirements for that activity.
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Photo of Thomas Reilly Thomas Reilly

Ambassador Thomas Reilly, Covington’s Head of UK Public Policy and a key member of the firm’s Global Problem Solving Group and Brexit Task Force, draws on over 20 years of diplomatic and commercial roles to advise clients on their strategic business objectives.

Ambassador…

Ambassador Thomas Reilly, Covington’s Head of UK Public Policy and a key member of the firm’s Global Problem Solving Group and Brexit Task Force, draws on over 20 years of diplomatic and commercial roles to advise clients on their strategic business objectives.

Ambassador Reilly was most recently British Ambassador to Morocco between 2017 and 2020, and prior to this, the Senior Advisor on International Government Relations & Regulatory Affairs and Head of Government Relations at Royal Dutch Shell between 2012 and 2017. His former roles with the Foreign and Commonwealth Office included British Ambassador Morocco & Mauritania (2017-2018), Deputy Head of Mission at the British Embassy in Egypt (2010-2012), Deputy Head of the Climate Change & Energy Department (2007-2009), and Deputy Head of the Counter Terrorism Department (2005-2007). He has lived or worked in a number of countries including Jordan, Kuwait, Yemen, Libya, Iraq, Saudi Arabia, Bahrain, and Argentina.

At Covington, Ambassador Reilly works closely with our global team of lawyers and investigators as well as over 100 former diplomats and senior government officials, with significant depth of experience in dealing with the types of complex problems that involve both legal and governmental institutions.

Ambassador Reilly started his career as a solicitor specialising in EU and commercial law but no longer practices as a solicitor.