The Financial Services and Markets Act 2023 (Commencement No. 2 and Transitional Provisions) Regulations 2023

These Regulations are the second commencement regulations made under the Financial Services and Markets Act 2023 (c. 29) (“the Act”).

Regulation 2 brings section 20 (financial promotion) and Schedule 5 (financial promotion: related amendments) of the Act into force. Regulation 2(1)(a) brings certain provisions of Section 20 and Schedule 5 which are listed in regulation 2(2) into force on 6th September 2023, for the purpose of enabling the FCA to give directions, to give guidance and to make rules. Regulation 2(1)(b) brings the provisions listed in regulation 2(2) into force for the purpose of the FCA receiving applications made during the application period (“the application period” is defined in regulation 2(4) as the period beginning with 6th November 2023 and ending with 6th February 2024), so far as not already in force. Regulation 2(3) states that section 20 and Schedule 5 come into force, so far as not already in force, on 7th February 2024.

Regulation 3 makes transitional provision in respect of the commencement of section 20 and Schedule 5 of the Act (which are brought into force by regulation 2). Regulation 3(1) provides that the amendments made by the provisions listed in regulation 3(2) do not apply in relation to the approval of the content of a communication by an authorised person who has submitted an application under section 55NA(3)(a) of the Financial Services and Markets Act 2000 (c. 8) (“the 2000 Act”) during the application period (“the application period” is defined in regulation 2(4)). Section 55NA(3) is inserted by section 20(3) of the Act. Regulation 3(3) provides that regulation 3(1) ceases to have effect in relation to the approval of the content of a communication when the application is determined (as defined in regulation 3(4)), or when it is withdrawn. Regulation 3(5) confirms that Regulation 3(3) does not affect the validity of approvals that are given before that point.

Regulation 4 makes transitional provision for PRA rules, technical standards and policies implementing reforms to the so-called Basel international prudential standards for banks and other financial institutions (“the Basel standards”) and addressing related matters. In November 2022, the PRA published a consultation paper on the implementation of reforms to the Basel standards and related matters, including drafts of proposed rules. The making and content of those rules are subject to specific accountability requirements under the 2000 Act. Regulation 4 disapplies new requirements and procedural mechanisms provided for by the Act that would otherwise apply to the subject matter of the consultation paper. Paragraph 4(2) lists the provisions of the Act to be disapplied for this purpose. Those provisions come into force on 29thAugust 2023 by virtue of the Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023 (S.I. 2023/779).

The PRA consultation paper can be found at https://www.bankofengland.co.uk/prudential-regulation/publication/2022/november/implementation-of-the-basel-3-1-standards and a copy can be obtained from the Prudential Regulation Authority, 20 Moorgate, London EC2R 6DA.

Regulation 5 makes transitional provision for PRA rules that are not in scope of regulation 4 where those rules are (i) CRR rules (as defined in section 144A of the 2000 Act) or (ii) rules made under section 192XA of the 2000 Act that are not CRR rules. Requirements in sections 144C, 144D and 144E of the 2000 Act apply to CRR rules and, by virtue of section 192XB(2) of the 2000 Act, to rules made under section 192XA that are not CRR rules. Section 1 of, and Part 4 of Schedule 1 to the Act provide for the repeal of these requirements, which is yet to be brought into force. Regulation 5 makes transitional provision disapplying sections 144C, 144D and 144E to the extent that these provisions overlap with the new accountability requirements established by Chapter 3 of Part 1 of the Act, which come into force on 29th August 2023 pursuant to the Financial Services and Markets Act 2023 (Commencement No. 1) Regulations 2023. In relation to deference decisions, regulation 5(5) disapplies the requirement in section 144C(3) to the extent that it would otherwise apply where the PRA makes rules that are not CRR rules in a rule-making instrument made under sections 192XA and 137G of the 2000 Act: such rules will be subject to the accountability mechanism in section 409A of the 2000 Act (as inserted by section 32 of the Act).

Regulation 6 makes transitional provision in respect of the commencement of section 61 of the Act (control over authorised persons). Section 61 is commenced by section 86(2) (commencement) of the Act. Section 61 amends section 187(2) of the 2000 Act which provides the regulators with a power to impose conditions when approving an application for an acquisition of control, or for an increase in control, over a UK authorised person under section 178 of the 2000 Act (obligation to notify the appropriate regulator: acquisitions of control). The amendment made by section 61 allows the regulators to approve such an application with conditions where it is desirable to do so in order to advance that regulator’s objectives. The transitional provision in regulation 6 states that this amendment will not apply in relation to any applications made under section 178 which were received by the regulators before section 61 commences on 29th August 2023.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen. A full impact assessment has been published in relation to the Act and copies can be obtained from HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ or at https://bills.parliament.uk/publications/49053/documents/2621.