Proposal for the Draft Regulatory Reform
(Financial Services and Markets act 2000) Order 2006
Introduction
77. This is a "first stage" proposal
laid before Parliament on 18 December 2006 under section 6 of
the Regulatory Reform Act 2001. An explanatory statement by HM
Treasury has been laid with the proposal in accordance with section
6(2) of that Act[3].
78. The purpose of this proposal is to amend
sections of the Financial Services and Markets Act 2000 (FSMA)
relating to the regulatory functions of the Financial Services
Authority (FSA) by removing restrictions, requirements, inconsistencies
and anomalies that relate to how the FSA operates and thereby
reducing burdens on the financial services sector.
79. The FSMA established a single regulatory
framework for financial services and markets. It also established
the FSA as the sole independent financial regulator and supervisor
with powers to regulate sectors including insurance, investment
business and banking. In 2003/4, the Treasury undertook a Two
Year Review of FSMA to take stock of the new regulatory system
after two years of operation. During the Review, various bodies
representing the financial services industry complained about
unnecessary and disproportionate burdens and restrictions placed
on industry by the FSA.
80. The proposal also forms part of a ten point
action plan of reforms to wholesale and retail financial markets
set out in the Government's Pre-Budget Report 2005. The proposal
would introduce:
- Changes to lighten the authorisation
requirements in relation to partnerships whose members change;
[Article 3]
- An amendment to remove unnecessary consultation
between the FSA and regulators in other countries in the European
Economic Area; [Article 4]
- Amendments to remove the obligation on the
FSA to fulfil a number of procedural requirements associated with
discontinuing or suspending the listing of a security; [Articles
5-7 and 11]
- Changes that would exempt the FSA from issuing
a warning notice in cases where the cancellation of a sponsor's
approval has been requested by the issuer or sponsor himself;
[Article 8]
- An amendment that would extend the FSA's
powers to waive or modify any (as opposed to only some) of its
rules in respect of authorised and unauthorised persons; [Article
9]
- Amendments to lighten the burdens on the
FSA when consulting on guidance; [Article 10] and
- An amendment to permit the FSA board to
delegate the issuing of guidance. [Article 12]
Tests in the Regulatory Reform Act 2001
81. We are satisfied that, for each of the elements
of this proposal, the requirements of the Regulatory Reform Act
2001 have been met.
Other tests
82. The proposed order is neither large (12 Articles),
nor does its subject matter appear controversial within the definition
which we set out in our 18th Report (2004-05). We note that the
consultation exercises consulted on a broader range of proposals
than contained in this RRO. Three proved controversial, including
proposals to relax the FSA's requirement to consult on rules,
to relax its requirement to consult on other matters, and to amend
the distribution of penalty income (paragraphs 213 -218). These
proposals are not included in this RRO.
Conclusion
83. We consider that the proposal for the
draft Regulatory Reform (Financial Services and Markets Act 2000)
Order 2006 meets the requirements of the Regulatory Reform Act
2001 and is appropriate to be made under it.
3 Members of the House may obtain both the proposal
and explanatory statement from the Printed Paper Office. Both
documents are also available at:
www.cabinetoffice.gov.uk/regulation/reform/orders/proposals.asp Back
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