IMPLEMENTING FINANCIAL REGULATION

Economic Secretary Melanie Johnson today announced a revised timetable for the commencement of the key provisions of the Financial Services and Markets Act 2000, known as N2.

In a Parliamentary debate on measures to set the boundaries of the new framework for financial regulation, Miss Johnson said :

?Good progress continues to be made on the implementation of the Financial Services and Markets Act. The seven statutory instruments we have sought Parliament's approval for, including the three under discussion today, will between them define the extent of FSA regulation, the framework for the marketing of financial services and for the provision of financial services by professional firms.

?I am now in a position to provide greater certainty on the latest date on which the main provisions of the Act will come into force, a date known as N2. In doing so I have taken into account the importance of firms and consumers enjoying the benefits of the new regulatory framework as soon as practicable, and the need to give financial services firms a reasonable time to prepare between announcing a firm date and N2.

?I can now announce our aim that N2 be no later than the end of November this year. As soon as I am in a position to announce the actual day of N2, I will do so. I should make clear that this is not an aspiration or a working assumption. Firms should prepare for N2 on this basis.?

?The legislation for which we are seeking Parliamentary approval will enable the FSA to finalise many of its rules and give financial services firms greater certainty about how the Financial Services and Markets Act will affect them. On the basis of our continuing to make progress, I understand the FSA expects to be in a position to make the key provisions of its rule-book no later than the end of July.

Howard Davies, Chairman of the FSA, said :

?I welcome the Government's aim that N2 will be no later than the end of November. It has my full support. It gives the FSA and financial services firms a clear basis on which to continue preparations for N2?.

NOTES FOR EDITORS

The Financial Services and Markets Bill was published in July 1998(Treasury press releases 126/98 and 127/98). Following extensive public consultation and Parliamentary scrutiny the Bill received Royal Assent on 14 June 2000. The coming into force of the main provisions of the Act is known as N2. Melanie Johnson announced a target for N2 of about one year's time on 18 July 2000 (Treasury press release 92/00).
Before the Act can come into force a number of pieces of secondary legislation need to be approved by Parliament. Further details are in a Treasury document of August 2000, Financial Services and Markets Act: The Way Ahead, which is available on this website. Melanie Johnson was speaking today during the House of Commons? debate on the Regulated Activities Order, Exemption Order and By Way of Business Order laid on 27 February 2001.

4. On 26 October the Treasury published seven pieces of draft legislation in two consultation documents (Treasury press release 121/00):

a) A draft of the Regulated Activities Order (which has been made using powers under section 22 of FSMA), together with draft orders on:

when regulated activities are and are not being carried on by way of business (section 419);
persons who will be exempt from the requirement for FSA authorisation (section 38);
the exemption of appointed representatives of authorised persons (section 39); and
activities which will not be exempt regulated activities under Part XX of FSMA (section 327)

b) Draft orders on financial promotion (section 21) and on the promotion of collective investment schemes (section 238).

Consultation on these documents closed on 20 December.

5.On 7 December the Treasury published consultation documents on six pieces of legislation (Treasury press release 146/00):

Redress for contravention of an FSA requirement or rule (sections 20, 71, 150 and 202 of FSMA refer);
Disclosure of information (section 353);
Service of notices under FSMA (section 414);
Recognition requirements for investment exchanges and clearing houses (section 286);
Markets and investments prescribed for market abuse (section 118);
Transitional provisions (section 426).

Responses were sought to these consultation documents by 2 February 2001.

6.The Lord Chancellor's Department issued a consultation document on the rules of procedure of the Financial Services and Markets Tribunal on 5 January. Responses are sought by 30 March.

7.All consultation documents are on the Treasury's website and can be reached by clicking the link below. Printed copies are also available from Tima Musa on 020 7270 1634.

8.On 21 December Miss Johnson announced that the target date for N2 remained as announced on 18 July, but that she planned to give a firm date for implementation in the Spring (Treasury press release 150/00). Miss Johnson today announced that the need to take full account of the outcome of the wide public consultation on secondary legislation, and representations received on the date of N2, together with the requirements of the FSA and the industry to make effective preparations for N2, suggest that this should be delayed until no later than the end of November 2001.

9.Media enquiries should be addressed to Charles Keseru on 020 7270 5188.