John Glen
MP for Salisbury · Conservative · United Kingdom
“I welcome the Chief Secretary to her new position, but what words of comfort could she give the residents of Salisbury in Wiltshire, a unitary authority? We are not part of a combined authority and we do not have a metro mayor.”
“Sam Moody is my constituent. He is the chief executive of Rockhopper. During my time in this House, he has been absolutely scrupulous in following the laws of this country and respecting the Falkland Islanders.”
“I listened carefully to what the Minister said about the process, and I respect that. But most people who take a pretty level-headed, pragmatic view of the need for a transition over time still cannot get their heads around the short-term reality: when we have so much turmoil in the middle east, why would we extend the time that we are no…”
“It is 55 days till the Budget. Given the market’s reaction to the Prime Minister’s statement on Tuesday, and given that our gilt rates are higher than those of our peers in the G7, could we have a debate on the implications of higher taxes for growth?”
“Before the hon. Lady makes her statement on Thursday, will she, when reflecting on the arrangement in Wiltshire that would embrace Wessex—although we have been told that that is not the Government’s view—address the prevailing concern that the people of rural Wiltshire will be considerably worse off without having the opportunity to embra…”
“I recognise that the Minister wants to come to what the Government are going to do, but does he not accept that the decisions already made in the last two years—with respect to the price of employment and the national living wage, the cost of employment with regard to legislation, and business rates—have depressed the appetite of many sma…”
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“This SI therefore ensures that the MIFI SI will function as intended from exit day in a no-deal scenario. In terms of industry engagement and transparency, the Treasury has worked closely with the regulators in the drafting of the draft instrument. The regulators will also undertake a public consultation on any deficiency fixes they propose to make to the technical standards covered by this SI. We have also engaged extensively with the financial services industry on the two key instruments to which the draft instrument relates.”
“The Treasury has also worked closely with the financial regulators to develop these instruments, and industry has had the opportunity to check drafts that we have published. Considering the volume of onshoring legislation that we have been preparing, these mistakes are not out of line with those that happen from time to time in the normal legislative process. So far, we have laid 53 statutory instruments, amounting to around 1,000 pages, and I think this is the 23rd debate under the affirmative procedure. The number of mistakes identified in onshoring SIs has been low, with most being minor and technical in nature. These drafting errors in the MIFI SI were picked up as part of continuing preparations to ensure that the UK’s regulatory regime operates effectively from exit.”
“Regulation 3(d) removes a reference to repealed legislation in paragraphs 7A(2) and (3)(a) of the schedule to the recognition requirements regulations. Regulation 3(e)(i) changes the word “notifications” to “applications”, which more accurately reflects what the relevant regulator rules do. Regulation 3(e)(ii) removes a reference to an FCA rule that has now been repealed. Regulation 3(f) removes a reference to regulation 46 of the markets in financial instruments regulations 2017, which is being repealed. While every effort is made to avoid mistakes in legislation, mistakes happen from time to time in all Departments. I assure the committee that the onshoring SIs have been through all the usual internal and external checks that secondary legislation normally goes through.”
“One wrong digit meant that the provision being amended did not refer to the market abuse regulation, as intended, and consequently the Treasury’s power to make equivalence determinations in relation to regulated markets would not work effectively. Regulation 3(b) removes a provision relating to EU arrangements between member states, which was overlooked. It enables the Treasury to set out the criteria under which the operations of a trading venue in a host member state are to be considered to be of substantial importance for the functions of the markets and the protection of investors in that state. This provision will be redundant once the UK is no longer a member state. Regulation 3(c) corrects an incorrect cross-reference.”
“Specifically, it adds BTS relating to the benchmarks regulation, the European long-term investment funds regulation, the market abuse regulation, the bank recovery and resolution directive and the capital requirements regulation, all of which have been recently adopted by the Commission. In addition, the draft instrument also makes minor amendments to the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018, to ensure that it effectively addresses deficiencies in the retained EU law relating to markets in financial instruments. The changes affect schedule 3 to the regulations, which deal with the transfer of functions to the Treasury and the regulators. Regulation 3 of the draft instrument corrects a number of minor errors. Regulation 3(a) corrects a reference to regulation 396/2014 to regulation 596/2014.”
“The European Union (Withdrawal) Act will operate to bring the new BTS into UK law at exit day—automatically, as envisaged and as set out previously—and they contain deficiencies that need to be addressed to ensure that they work effectively in the UK after exit. It will be helpful for me to illustrate those deficiencies, because there will be references to the European Securities and Markets Authority versus the Financial Conduct Authority. They are not deficiencies in the functioning, but meaningful corrections to the wording will have to be made. Responsibility for fixing any deficiencies in these new BTS needs to be transferred to the UK regulators. The draft instrument does that by adding the new BTS to the schedule of the financial regulators’ powers SI, bringing them into scope of those regulations.”
“Many of the technical standards will be deficient and will require fixing to work effectively in a UK stand-alone regime. The financial regulators’ powers SI that was debated last October delegates the European Union (Withdrawal) Act power to fix deficiencies to the UK financial services regulators so that they can ensure onshored technical standards operate effectively from exit day. It sets out the procedure and requirements that the regulators must follow for amending technical standards in future. The SI listed all EU BTS that were in force at the point when the SI was laid. However, since the 2018 regulations were made, further BTS have been adopted by the Commission. It is a live process.”
“The technical standards do not take policy decisions, but set out at a granular level the requirements that firms need to meet to implement policy set out in higher EU legislation. Common examples of technical standards are those that set out the processes for firms to provide supervisory information to regulators, including the specific form templates that firms should use. The responsibility for developing and drafting the technical standards currently lies with the European supervisory authorities—ESAs—and they are then adopted by the European Commission. The European Union (Withdrawal) Act will bring the technical standards into UK law at the point of exit in the event that we do not reach an agreement with the EU on an implementation period.”
“The approach taken in the legislation aligns with that of other SIs being laid under the European Union (Withdrawal) Act 2018, providing continuity by maintaining existing legislation at the point of exit, but amending it where necessary to ensure that it works effectively in a no-deal context. As I set out during the financial regulators’ powers SI debate on 10 October, as a result of the UK leaving the EU the Government had to decide how to allocate responsibility for the huge body of financial services legislation being brought on to the UK statute book by the European Union (Withdrawal) Act. A significant volume of the legislation consists of EU level 2 BTS, which run to between 7,000 to 8,000 pages.”
“The main component follows on from the Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018, debated and made in October 2018, which transferred responsibility for fixing deficiencies in level 2 binding technical standards—BTS—to the UK financial services regulators. Consistent with the approach taken in that SI, this transfers responsibility for any new BTS adopted by the EU Commission since the previous SI was laid to ensure that those can also be fixed ahead of exit day. The second, smaller component of this morning’s SI makes minor correcting amendments to the Market in Financial Instruments (Amendment) (EU Exit) Regulations 2018 that was debated and made in December 2018 to ensure that it operates as intended if the UK were to leave the EU without a deal.”
“I beg to move, That the Committee has considered the draft Financial Regulators’ Powers (Technical Standards etc.) and Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2019. May I first say what an enormous pleasure it is to serve under your chairmanship, Sir Gary? It certainly feels like a long time since I was your researcher 22 years ago. As the Committee will be aware, particularly Front Benchers, the Treasury has been undertaking a programme of legislation to ensure that, if the UK leaves the European Union without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the United Kingdom. This instrument forms part of that work. There are two components to the instrument.”
“I recognise that going through all these statutory instruments is an arduous process, and I acknowledge the comments made by the hon. Member for Stalybridge and Hyde about the undesirability of the process. Of course, if we get a deal, which is the Government’s intention and policy, these SIs will not be required. However, it is important that we ensure that recently adopted binding technical standards continue to operate effectively and that the markets in financial instruments SI effectively addresses the deficiencies in retained EU law if the UK leaves without a deal or an implementation period. I hope I have adequately responded to the points that were raised, and I hope the Committee has found the sitting informative and will be able to support the draft regulations. Question put and agreed to.”
“It concerns the regulators’ functions and makes minor amendments to MIFI. That has already been impact-assessed. My hon. Friend the Member for The Cotswolds asked about a dispute between the EU and our regulators. A process for consultation is set out in the financial regulators’ powers SI. Where regulators do not agree on a joint approach, they can each make separate provision in relation to the parts of the financial services industry they are responsible for regulating, so there is inherently some discretion there, but in the context of the accountability I set out, there are checks to that. However, through this process, there will not be any policy deviation from what has already been agreed. I hope I have addressed the points that were raised.”
“The regulators are consulting on all their deficiency fixes. The hon. Gentleman asked why these additional binding technical standards were not incorporated in the relevant EU exit SIs and why they are only now being picked up. The mandates to produce these technical standards will already have transferred, post exit, the responsibility for them to UK regulators, but this SI transfers the responsibility to UK regulators for fixing deficiencies in new standards that have come into force since we laid the original SI. This SI is about making sure that our regulators are able to ensure that those are fixed in time for the standards to operate effectively from exit day. The hon. Gentleman asked about an impact assessment. The reason why there is not one is the de minimis impact; there will be no impact on industry from this SI.”
“Parliament will continue to be involved in every aspect of the process to onshore EU financial services regulation. All the changes that the Treasury will propose to level 1 legislation and delegated Acts will be put before Parliament to approve. Any transfer of responsibility to the regulators, including any transfer of powers to make technical standards, will be put before Parliament to approve through affirmative procedure SIs. The Treasury will continue to work closely with the Bank of England, the PRA, the FCA and the Payment Systems Regulator on how we fix deficiencies in EU financial services regulation, including binding technical standards. The hon. Gentleman asked whether the FCA has a statutory obligation to consult. Yes, that is clearly set out in the regulators’ powers SI for future amendments.”
“They have considerable experience and technical expertise in regulating the financial services sector to high standards—that is why the City of London remains, despite the unwelcome uncertainty, a vibrant place for financial services at this time—and they have actively participated in a wide range of groups developing technical policy and regulatory rules and chaired a number of committees and taskforces with considerable experience in implementing EU legislation. That means that the responsibilities of EU bodies can be reassigned efficiently and effectively, providing firms, funds and their customers with confidence after exit. The hon. Gentleman asked a question about what role is foreseen for Parliament to hold regulators to account.”
“There is no pride; there is just a sense of clarity about the thoroughness and rigour of this approach, which includes 30 affirmative discussions in SI Committees. The hon. Member for Stalybridge and Hyde asked how it was decided which BTS go to the FCA and so on; he asked about the allocation mechanism across the regulators. Frankly, they are allocated according to the functions of the regulators that were given to them previously by primary legislation, and BTS will go to the Prudential Regulation Authority in line with that. The hon. Gentleman asked about the resourcing. I am very confident that the regulators are making adequate preparations and effectively allocating resources ahead of March 2019.”
“I acknowledge the thoroughness of the scrutiny from the hon. Members for Stalybridge and Hyde and for Glenrothes, and my hon. Friend the Member for The Cotswolds, and I will address their specific points. I will refrain from going into a full disputation on the opening points made by the hon. Member for Stalybridge and Hyde. We have gone through this matter several times. All I can say is that we are able to bring to Committee only those statutory instruments that fit within the purview of the withdrawal Act as debated. And, despite the corrections that we are having to make today, I submit that this has been a thorough process. The hon. Member for Glenrothes said that it was with some pride that I spoke about 53 statutory instruments.”
“Any change to the underlying policy cannot be considered as part of this onshoring process. In summary, the Government believe that the proposed legislation is necessary to ensure that the disclosure framework for PRIIPs sold in the UK can operate effectively, and that legislation can continue to function appropriately, if the UK leaves the EU without a deal or implementation period. I hope that Committee members will join me in supporting the draft regulations. I commend the draft regulations to the Committee.”
“The draft instrument also deletes obligations in the PRIIPs regulation for the FCA to co-operate with EU counterparts. UK authorities will instead be able to share information with EU counterparts through existing domestic provisions for co-operation and information sharing under the Financial Services and Markets Act 2000. The Treasury worked closely with the FCA in drafting the instrument and also engaged the financial services industry on the draft instrument’s approach to correcting deficiencies. On 22 November 2018, the Treasury published the draft instrument, along with an explanatory policy note, to maximise transparency to Parliament and industry ahead of the draft instrument’s being laid. As mentioned, the draft instrument is only able to fix deficiencies in the PRIIPs regulation arising from the UK’s exit from the EU.”
“They are subject to a disclosure framework set out in the UCITS directive, separate from the PRIIPs disclosure framework, until the exemption ends. The draft instrument maintains that exemption in the UK for all UCITS funds, including EEA UCITS, ensuring that both UK and EEA funds can continue to adhere to the existing UCITS disclosure framework until this exemption ends. Finally, the draft instrument deletes provisions in the retained PRIIPs regulation that will become redundant once the UK leaves the EU. The draft instrument deletes references to EU regulators and to administrative sanctions powers for national regulators, which have already been brought into UK law and granted to the FCA through UK implementing legislation.”
“Moreover, the SI expands an exemption from the requirements of the PRIIPs regulation for certain securities issued by public sector bodies in the European economic area so that it covers public sector bodies in the UK and all third countries. This will ensure that no such securities fall into the scope of the regulation in the UK on exit day, and that the UK treats EEA countries in the same way as other third countries, as it is obliged to. Furthermore, the EU PRIIPs regulation contains an exemption from its requirements for all undertakings for collecting investment in transferable securities— UCITS—funds until 31 December 2019. UCITS funds are a common type of retail investor fund and must be domiciled in an EEA state. Both UK and EEA-domiciled UCITS are sold widely in the UK.”
“Secondly, the SI transfers functions currently in the remit of EU authorities to the relevant UK authorities. Following exit, EU authorities will have no mandate to carry out such functions in the UK. The SI corrects that deficiency by transferring the functions of the European Commission to the Treasury and the functions of the European supervisory authorities, or ESAs, to the FCA. European Commission powers to make delegated Acts are transferred to the Treasury, and powers to make and correct deficiencies in binding technical standards are transferred from the ESAs to the FCA. That is in line with the approach we have taken across the financial services legislation that has been laid in recent weeks.”
“In a no-deal scenario, the UK will be outside the EU and outside the EU’s legal, supervisory and financial regulatory framework. The retained PRIIPs regulation therefore needs to be updated to reflect that and to ensure that the provisions work properly in a no-deal scenario. The draft regulations make a number of changes. First, the SI will amend the territorial scope of the retained PRIIPs regulation to reflect the UK’s position outside the EU. The EU PRIIPs regulation applies to any firm that manufactures, advises on or sells PRIIPs to retail investors in the EU. The SI amends the territorial scope of the retained regulation so that, following exit, it will apply only to firms that manufacture, sell or advise on PRIIPs to retail investors in the UK.”
“However, the Government are not able to use the powers of the EU withdrawal Act to make any policy changes. That illustrates the constraints of the withdrawal Act in this regard. Nevertheless, the Financial Conduct Authority has taken action in relation to issues with the PRIIPs regulation. As I set out in a letter to the hon. Member for Oxford East (Anneliese Dodds) in January, the FCA launched a call in July 2018 to seek industry and consumer input on the new requirements introduced by the PRIIPs regulation. That call for input closed for responses on 28 September 2018, and the FCA is in the process of reviewing all the responses. It expects to publish its feedback statement in the next five weeks—in the first quarter of this year—and Treasury officials are engaging closely with it on these issues. I turn to the substance of the SI.”
“Retail investors may invest in PRIIPs as an alternative to depositing cash in a savings account, and PRIIPs are sold primarily by asset managers, banks and insurers. The EU PRIIPs regulation, which came into force on 1 January 2018, aims to make it easier for retail investors to compare similar financial products through the introduction of a standardised disclosure document called a key information document, or KID. The KID must display important information about the financial product, such as performance scenarios, risks and costs, in a standardised way. Any firm selling or advising on a PRIIP to a retail investor in the EU must provide them with a KID. Before I go into detail about the functions of the SI, let me say that the Government recognise that industry has raised several issues with the underlying PRIIPs regulation.”
“The SI will fix deficiencies in UK law related to the EU packaged retail and insurance-based investment products—PRIIPs—regulation to ensure that it continues to operate effectively post exit. The approach taken in the legislation aligns with that taken in other SIs laid under the EU withdrawal Act, providing continuity by maintaining existing legislation at the point of exit but amending where necessary to ensure that it works effectively in a no-deal context. Many Committee members will be familiar with PRIIPs. PRIIPs are investment products offered to retail investors, such as investment funds, life insurance policies with an investment element, and structured investment products.”
“I beg to move, That the Committee has considered the draft Packaged Retail and Insurance-based Investment Products (Amendment) (EU Exit) Regulations 2019. It is a pleasure to serve under your chairmanship, Sir Henry. As the Committee will be aware, the Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The Treasury is laying statutory instruments under the European Union (Withdrawal) Act 2018 to deliver that, and a number of debates on those SIs have already been undertaken in this place and the House of Lords. This SI is part of that programme.”
“That group is chaired by TheCityUK and has representation from several trade associations that cover different parts of the financial services sector across the United Kingdom. It also includes a number of law firms. In the time I have been doing this job, my strong determination has been that TheCityUK is a highly respected trade association—it is really a trade association of trade associations—so is well placed to co-ordinate the group, given that its remit covers all sectors of the financial services and related professional services industry, including banking, insurance, asset management, legal services, advisory, market infrastructure, private equity and wealth management. We are confident that through that engagement through TheCityUK, we have reached all the major sectors of the financial services sector.”
“I thank the hon. Members for Stalybridge and Hyde and for Glasgow Central for their thorough examination of the matters. I will endeavour to give them a thorough response. I acknowledge the concerns that both hon. Members expressed about the consultation or engagement process with industry. I cannot fortify the Committee with a list of individual companies that have been consulted, but it is worth explaining that engagement process. Although we did not formally consult on the measures, we established a cross-sectoral working group with representatives from the financial services sector to discuss the European Union (Withdrawal) Act 2018 and financial services onshoring issues.”
“Any amendments to fix the exit deficiencies would have to be made known to the Treasury, and any new binding technical standards derived from this ongoing review will also have to come from the Treasury and will have to be laid under the affirmative procedure. [Official Report, 18 March 2019, vol. 656, c. 4MC.] I think I have covered most of the other points made. The FCA’s resources have been covered in previous Committees, but for the record the FCA set out in its 2018-19 business plan the proportion of its resources to be used for forthcoming exit work. As of December 2018, it has 158 full-time employees working on Brexit. I cannot break that down, because I do not think that the FCA has, but that is a significant increase from 28 nine months earlier. It will bring forward a new plan in 2019-20.”
“Gentleman’s point on equivalence and the appropriateness of the changes to the Financial Services and Markets Act, in a situation in which we leave the EU without a deal, we cannot favour EEA countries of the basis of our close proximity. We will have to treat all third countries the same way. The hon. Lady’s point on the need to resist duplicate but different regulatory requirements is wise. Whatever happens, it is my determination to try to avoid that, because the common framework that exists in this area holds a lot of value for the industry. I also point out that EU national competent authorities collaborated fully in the construction of these regulations, and the FCA was one of the leaders in that.”
“It formally rejected the early iterations and delayed the implementation of the first draft that came out in 2016, so it was implemented on 1 January 2018. I set that out in detail to the Front-Bench colleague of the hon. Member for Stalybridge and Hyde. Frankly, the FCA is capable, as it is now doing, of responding to last year’s call for evidence, looking into the key concern of the industry around the methodology for calculating the information displayed in a KID—particularly relating to performance information and risk estimation, as well as transaction costs—and coming forward with suggested changes. On the hon.”
“We have published almost all our statutory instruments before they have been laid on a dedicated section of our website with contact details for stakeholders to contact us. I am not saying that it is perfect, but I draw the Committee’s attention to the remarks of Miles Celic from TheCityUK, who noted that there is an industry-wide recognition that all parties—industry, Government and regulators—are operating in an uncertain and time-constrained environment where doing nothing is simply not a feasible option, and that these are exceptional circumstances that require a unique response. On some of the other points, there was sensitivity about the transfer of functions to the FCA. As the national competent authority, the FCA has been instrumental in making strong representations on PRIIPs.”
“Yes I am. The green impact assessment, which was issued on 8 February, also identifies that the familiarisation costs will be £150 per firm and that there will be a range of costs between £510,000 and £680,000. I concede that this is an unique exercise in preparation for an outcome that the Government do not wish to have, and I hope that it will not need to be used. We had to take a view, however, about how to do it efficiently in a relatively compressed time period and I am convinced that we have done the best that we could have done in the circumstances. We have shared working drafts of the legislation as it has progressed to identify any unintended consequences and to help industry to understand how the sector would need to respond.”
“I conclude by saying that the draft instrument is needed to ensure that the PRIIPs disclosure framework can operate effectively in the circumstances of a no deal. I hope that Committee members have found this sitting informative and will join me in supporting the draft regulations. Question put and agreed to.”
“Member for Stalybridge and Hyde asked about UCITS funds. PRIIPs can be products other than UCITS funds, such as insurance policies with an investment element. UCITS funds qualify as a PRIIP but are currently exempt from PRIIPs regulation. The hon. Gentleman also asked about how the legislation will be affected by changes to PRIIPs regulation in the future. Any changes beyond what we are doing here today, which is simply onshoring, will be a matter for another day and will depend to some extent on our future relationship with the EU. I offer the reassurance that the FCA handbook gives us an enduring insurance policy, if you like, with its insistence that information on financial products must be sufficient, clear and not misleading. I think I have covered the points raised.”
“The hon. Gentleman, as always, makes a reasonable point. The challenge is to understand on what terms we will leave. Clearly, if we secure a deal, we will enter an implementation period and so will have 20 months to determine the dynamic with European regulators and how we will discern equivalence decisions going forward. In a no-deal scenario, we obviously face a very different world, which will necessitate considerable legislative intervention in the next parliamentary Session. The disruption and uncertainty of that, and the uncertainty about the level of disruption, cannot be fully examined through this SI onshoring process. The hon. Member for Glasgow Central asked me to provide a list of companies. I cannot, but I will examine what more granularity I can offer on that TheCityUK-convened work. The hon.”
“Throughout the drafting process, the Treasury has been working closely with the FCA and has also engaged the financial services industry using the assistance of TheCityUK as a convening body for the appropriate representative firms and trade bodies on the SI, and it will continue to do so in future. To conclude, the Government believe that the proposed legislation is necessary to ensure that if the UK leaves the EU without a deal or an implementation period, the UK’s prospectus regime, listing regime and transparency framework can continue to function appropriately post exit. I hope colleagues will join me in supporting the regulations. I commend them to the Committee.”
“The Bill as currently drafted requires the affirmative resolution procedure for every statutory instrument made under it, provided that Parliament has an opportunity to debate and discuss each file that the Government are implementing. The UK has played a leading role in shaping the prospectus regulation for the benefit of consumers and industry. It is welcomed by industry and acts to cut the costs to business of producing a prospectus in the UK. In terms of industry engagement and transparency, on 12 December 2018 the Treasury published the instrument in draft with an explanatory policy note published on 21 November 2018 to maximise transparency for Parliament and industry.”
“Certain provisions of the prospectus regulation have applied since July 2017 and July 2018, and the remainder of the legislation is due to apply from July 2019 after the UK leaves the EU. It is the Government’s intention to domesticate the remaining provisions as they will constitute the prospectus regulatory regime from July 2019. However, the European Union (Withdrawal) Act will convert into UK law only EU legislation that is already in force and applies immediately before exit day. Therefore, remaining provisions of the prospectus regulation will be domesticated via a statutory instrument laid under the Financial Services (Implementation of Legislation) Bill and in-flight files legislation.”
“The SI also makes further amendments to other retained UK and EU legislation to ensure that the prospectus regime, listing regime and transparency framework function correctly in the UK once it leaves the EU. Finally, the SI removes the requirements for the FCA to share information and co-operate with EU regulators, as such an obligation would not be appropriate as of exit day, given that there will be no guarantee of reciprocity. The FCA, however, will continue to have the ability to co-operate with EU counterparts through the existing framework in the Financial Services and Markets Act 2000, consistent with the current arrangements with all other third countries.”
“It is supported by the FCA and has been welcomed by industry. Additionally, the SI will transfer responsibility for powers and functions currently held and carried out by EU authorities to the appropriate UK institutions. Specifically, it transfers powers to the Financial Conduct Authority from the European Securities and Markets Authority—ESMA—to create and amend certain binding technical standards. It also transfers powers to the Treasury from the European Commission, including the ability to make delegated Acts pursuant to the relevant legislation. The transfer of functions is consistent with the current split between the regulatory role of ESMA and the legislative power of the Commission.”
“That includes prospectuses that are supplemented with further information as necessary. Furthermore, the explanatory memorandum for the statutory instrument states: “in a no deal scenario, HM Treasury intends to issue an equivalence decision, in time for exit day, determining that EU-adopted IFRS”— international financial reporting standards— “can continue to be used…to prepare financial statements” for UK transparency and prospectus requirements. That decision will enable EEA state-registered issuers in the UK that are making an offer of securities, or that have securities admitted to trading on a UK-regulated market, to continue to use EU-adopted IFRS when producing their consolidated accounts. The decision aligns with the Government’s approach to provide post-exit regulatory continuity.”
“Secondly, under the current arrangements, EEA issuers can passport prospectuses approved by another EEA regulator for use in the UK. Post exit, the statutory instrument will require EEA issuers to obtain the Financial Conduct Authority’s approval of their prospectuses when seeking access to the UK’s capital markets. That is in line with our current treatment of third countries and with the approach taken across other financial services statutory instruments laid under the 2018 Act. The statutory instrument also introduces grandfathering arrangements that enable any prospectus approved by an EEA regulator and passported into the UK before exit to continue to be eligible in the UK up to the end of its validity, which is usually 12 months after initial approval.”
“The amendments will ensure that the UK continues to have a functioning prospectus regime, listing regime and transparency framework in that scenario. First, under the prospectus directive, certain public bodies are exempt from the requirement to produce a prospectus. The statutory instrument extends the exemption to the same set of public bodies in all third countries post exit. If a UK-only approach were taken, EEA public bodies that currently access the UK market would be obliged to produce a prospectus to issue securities in the UK, which they would not be required to do when issuing in the EEA. Additionally, extending the exemption to public sector bodies of third countries is consistent with the UK treating EEA member states and third countries equally.”
“Prospectuses contain information on issuers seeking admission to trade on a regulated market or issuers seeking to offer securities to the public. The transparency directive provides for EU-wide transparency requirements that ensure that issuers with securities, such as bonds or shares, who are admitted to trading on an EU-regulated market publicly disclose certain information. CARD sets out the rules governing the admission of securities to official stock exchange listing and the information to be published on those securities. The UK legislation implementing the prospectus directive, the transparency directive and CARD needs to be amended, given that the UK will be outside the EU’s legal, financial regulatory and supervisory framework in a no-deal scenario.”
“The approach taken in the statutory instrument is consistent with that of other statutory instruments being laid under the 2018 Act in maintaining existing legislation at the point of exit where possible to provide continuity, but amending relevant legislation where necessary to ensure that it works effectively in a no-deal context. It amends the legislation that implements the prospectus directive, the transparency directive, the consolidated admissions and reporting directive—CARD—and related legislation to ensure that the UK continues to have an effective prospectus and listing regime and an effective transparency framework to regulate activity in the UK’s capital markets. The prospectus directive harmonises rules across the European economic area to govern the format, content, approval and distribution of prospectuses.”
“I beg to move, That the Committee has considered the draft Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019. It is a great pleasure to serve under your chairmanship, Sir David. The Treasury has been laying statutory instruments under the European Union (Withdrawal) Act 2018 to ensure that the UK continues to have a functioning regulatory and legislative regime for financial services should it leave the EU with no deal or implementation period. The regulations are part of that work and fix deficiencies in UK legislation that relate to the UK’s prospectus and listing regimes, as well as its transparency framework, to ensure that they function appropriately after exit.”
“Given that the SI is designed to replicate the existing regime, we do not expect there to be any business change that will result in further transitional costs. Our engagement with industry during the drafting of the SI did not highlight such concerns about costs.”