UK: New Financial Services Bill Removes EU Regulation, Aims to Ensure UK at Forefront of Innovation

Today, the Financial Services and Markets Bill was introduced to Parliament in the UK. The legislation will replace “hundreds of pieces of EU retained law” as the UK moves beyond the oversight in Brussels.

The aim of the bill is to establish a “coherent, agile and internationally respected approach to financial services regulation that works in the interests of British people and businesses.”

The goal is to make certain the UK remains a top global finance hub as well as embracing financial innovation.

Included in the current language, the bill will also allow certain types of stablecoins to be regulated as a form of payment in the UK as “digital settlement assets.” The Bank of England will establish rules for digital settlement asset providers.

the bill will allow certain types of #stablecoins to be regulated as a form of payment in the UK Click to Tweet

Also codified will be the creation of Financial Markets Infrastructure Sandboxes “allowing firms to test the use of new technologies and practices in financial markets, increasing efficiency, transparency and resilience of new products.” The UK has long led this sector but now it appears it may become law.

Chancellor of the Exchequer, Nadhim Zahawi, called the introduction of the bill a “landmark day for financial services in the UK.”

“Through the introduction of this Bill, we are repealing hundreds of pieces of burdensome EU regulations and seizing on the benefits of Brexit to ensure the financial sector works in the interests of British people and businesses,” said Zahawi.

In a speech delivered yesterday, the Chancellor explained part of the government’s vision:

“UK financial regulation will once again be decided in the United Kingdom, for the United Kingdom, by the UK’s expert, independent regulators. And, as the regulators take on new responsibilities, we will give the FCA and PRA a new, secondary objective: to facilitate growth and competitiveness. [emphasis added] I know that some people will say that making this a secondary objective, doesn’t go far enough.

Others will say that having it as an objective at all, goes too far. We are, I think, taking a balanced approach. By making growth and competitiveness a formal objective, we’re encouraging a greater focus on our medium to longer-term productivity. But, by making it secondary, we’re giving the regulators an unambiguous hierarchy of objectives…with financial stability and consumer protection, prioritised.”

we will give the FCA and PRA a new, secondary objective: to facilitate growth and competitiveness Click to Tweet

The legislation aims to seize “the opportunities of EU Exit, tailoring financial services regulation to UK markets to bolster the competitiveness of the UK as a global financial centre and deliver better outcomes for consumers and businesses.”

Under the bill, the government will gain new “rule review” power that can direct regulators to review rules deemed to be in the public’s interest.

The utilization of cash is safeguarded for “generations to come.”

Under EU law, Member States were able to exempt securities offerings of under €8 million from requiring a prospectus – which is a costly undertaking. It appears that the Bill has removed this requirement in its current iteration.

Darren Westlake, co-founder and CEO of Crowdcube – an online investment platform with global aspirations, commented on the bill:

“For a long time, we’ve been witnessing businesses staying private for longer. At Crowdcube alone, we saw £295m invested in 2021, a 44% increase on 2020. We also saw a 68% increase in £1m+ raises compared to 2020 which illustrates the rising amounts being invested into private businesses.

 

This trend shows no signs of abating, and so we therefore welcome and support the changes announced as part of the Financial Services and Markets Bill. Amongst other things, it proposes the removal of EU and related rules that require a prospectus for offering shares to the public, and the creation of a new regulated activity of offering securities to the public. The removal of the current requirement for a prospectus for offers over €8 million (in any 12 month period) will enable  businesses to raise as much as they wish through regulated equity crowdfunding platforms. This will be a welcome boost to Britain’s genuinely world-leading start-up scene.”

The removal of the current requirement for a prospectus for offers over €8 million (in any 12 month period) will enable businesses to raise as much as they wish through regulated equity crowdfunding platforms Click to Tweet

“However, before companies can take advantage of the benefits of this Bill in practice, the Financial Conduct Authority (FCA) will need to develop guidance and roll-out a new application process for platforms seeking to approve offers to the public. At a time when funding from other avenues is proving hard to come by, and other economic headwinds looking inevitable, it is crucial that the next administration ensures that the FCA prioritise this work and implement it in a proportionate manner, so that private businesses can take advantage of this innovative legislative change to turbocharge their growth and allow retail investors to maximise returns on the businesses they love.”

James Allum, SVP and Regional Head of Payoneer, Europe, welcomed the legislation as reinforcing the UKs status as a global financial services hub:

“It’s positive to see that the regulatory landscape for financial services remains high on the agenda. London has a reputation as a welcoming place for fintech innovators not only due to robust regulation, but its central global position and language also mean that it has often provided a home for companies looking to build innovative financial solutions for businesses. The FCA has been the gold standard for regulation in areas like payments and any efforts to maintain this position should be welcomed. Brexit has presented challenges for the sector but hopefully the Financial Services Bill will represent continued support for the UK’s position as a progressive environment for fintech players. Looking to the future it is vital that all efforts to foster innovation through regulation are both maintained and driven forward.”

The bill has just been introduced in Parliament and will most likely see changes in the coming months.

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