The UK's Financial Conduct Authority (FCA) launched a comprehensive consultation today aimed at transferring key investment firm regulations from retained EU law into its rulebook. This marks a significant step in Britain's post-Brexit financial reforms.
FCA Proposes Major Overhaul of Investment Firm Rulebook
The regulator is seeking to move requirements from the MiFID Organizational Regulation into its handbook without making substantial policy changes, providing continuity for investment firms while laying the groundwork for future streamlining of rules.
“We want to provide continuity to firms and therefore the overall approach we are proposing in this consultation is to retain the current substance of the requirements,” the FCA commented in the consultation paper. “We are interested in views about reform, either now or in the future, to make the rules better suited to the range of UK authorized firms and clients they provide services to.”
As noted by the FCA, they also seek feedback on situations where the recently implemented Consumer Duty rules do not apply. Companies are thus given the opportunity to share their views on the current regulations and the need to report progress in adopting a consumer-driven approach.
The consultation affects a broad spectrum of financial institutions, including investment firms, credit institutions, third-country firms, and fund managers. Firms have until February 28, 2025, to respond to the main proposals, with an extended deadline of March 28 for feedback on potential future reforms.
The move comes as part of a broader initiative announced in the Chancellor's Mansion House reforms to enhance the UK's financial services competitiveness. The Treasury will separately publish draft legislation to address non-firm-facing aspects of the regulations.
This is another regulatory move after the watchdog announced two weeks ago a major reform of its enforcement disclosure procedures. It implemented broader document review standards and enhanced staff training protocols.
Regulatory Framework Updates
The proposals aim to maintain existing consumer protection levels while simplifying the regulatory framework. The FCA confirms that consumers will continue to benefit from the same protections currently in place for investment services.
The changes are designed to ensure market stability during the transition. The FCA is promising minimal disruption to existing operations. The consultation aligns with the FCA's secondary objective of enhancing the UK's international competitiveness and growth, particularly in the post-Brexit environment.
The FCA's proposal covers several critical areas:
- Client categorization
- Disclosure requirements
- Suitability assessments
- Best execution practices
- Inducements and research
- Conflicts of interest management
- Business continuity planning
- Risk management and compliance
The Prudential Regulation Authority (PRA) will launch a parallel consultation on transferring relevant provisions into its rulebook, with both regulators working to align their approaches.
“Today, the FCA has published its consultation paper on proposals to transfer the firm facing requirements of the Commission Delegated Regulation (EU) 2017/565 (MiFID Org Reg) into FCA Handbook rules. The consultation is a stage in the process to finalize Prudential Regulation Authority and FCA rules that will replace MiFID Org Reg assimilated law which is being revoked by the Government under its Smarter Regulatory Framework (SRF) program,” PRA commented.
