Consultation and Legislation: Bulletin 44

05 December 2005

FSMA Bulletin No.44

This FSMA Bulletin provides an update on:

(i) Legislation adopted after the previous Bulletin;
(ii) Progress on consultations which have closed;
(iii) New consultations and those still open;
(iv) Consultations planned in the next three months.

If you would like future FSMA Bulletins to cover this new format please e-mail fsma.bulletin@hmtreasury.gsi.gov.uk

Do you have any ideas or thoughts on any aspects of FSMA or FSA regulation which would benefit from simplification or deregulation, or which might merit further examination or review? If so please e-mail fsma.bulletin@hmtreasury.gsi.gov.uk

Section One: Legislation adopted after FSMA Bulletin No. 43 (15 July 2005)

SI 2005/1998
The Insurers (Reorganisation and Winding Up) (Lloyds) Regulations 2005
In force on 10 August 2005
This implements the EC Insurers Reorganisation and Winding Up Directive (2001/17/EC) in relation to Lloyds’ of London. This EC Directive introduced a mechanism for coordinating insolvency proceedings across the EU, and altered the priority given to different classes of creditor in the event of insolvency.

SI 2005/2967
The Financial Services and Markets Act 2000 (Consequential Amendments) Order 2005
In force on 16 November 2005
This removes existing dual regulation by the OFT and FSA of some regulated mortgage contracts, which stems from section 82 of the Consumer Credit Act 1974. This also removes the requirement which stems from section 145 of the Consumer Credit Act 1974 for mortgage brokers, debt counsellors and debt adjusters to hold a consumer credit licence when they provide their services in relation to regulated mortgage contracts in excess of £25,000.

SI 2005/3071
The Financial Services and Markets Act 2000 (Disclosure of Confidential Information)(Amendment) Regulations 2005
In force on 25 November 2005
This provides the FSA with an information exchange gateway to The Pensions Regulator equivalent to the FSA’s prior gateway to the Occupational Pensions Regulatory Authority.

Section Two: Progress on consultations which have already been launched

The Community Benefit Societies (Restriction on Use of Assets) Regulations 2005
Consultation on these proposals has now closed. These UK regulations are likely to be laid in the next two months and will be subject to the affirmative resolution procedure. They place Community Benefit Societies in the same position as Community Interest Companies and provide them with an option to close off the possibility that carpetbaggers might seek to force a vote on demutualization.

The Friendly and Industrial and Provident Societies Act 1968 (Audit Exemption)(Amendment) Order 2005
Consultation on these proposals has now closed. These UK regulations are likely to be laid in the next two months and will be subject to the affirmative resolution procedure. They reduce audit requirements for industrial and provident societies, and raise the turnover level below which non-charitable societies (and to a limited extent charitable societies) do not need to have accounts fully audited.

Investment trust companies
An open consultation on the possibility of introducing additional regulation for investment trust companies closed in February 2005. This consultation was launched in light of recommendations made in the 2003 Treasury Select Committee report on split capital investment trusts. A consultation feedback statement was issued on 17 November 2005. Significant changes to the scope of regulation will not be pursued.

Myners principles
This consultation, which related to revising current voluntary codes relating to institutional investment decision-making, closed in April 2005. The code makes use of comply-or-explain principles to improve the efficiency of investment decisions. A consultation feedback statement is likely to be issued in the next two months.

UK implementation of EC Transparency Directive (2004/109/EC)
This consultation on how the UK proposes to implement this EC Directive closed in June 2005. The Directive relates to financial reporting by listed companies to markets and also increases the transparency of ownership of listed companies. A consultation feedback statement is likely to be issued in the next two months.

Raising the cap on credit union interest rates
This consultation period closed in July 2005 and proposed to alter a current restriction in the Credit Union Act 1979 which places a cap on credit union interest rates. A consultation feedback statement is likely to be issued in December 2005.

Section Three: New consultations and those still open

Proposed changes to the eligibility rules for establishing a pension scheme
This consultation on changes to the Financial Services and Markets Act 2000 (Regulated Activities) Order was launched on 30 September 2005 and closes on 23 December 2005. The consultation proposes to establish a new regulated activity of operating a pension scheme, for the sake of enabling tax relief to be applied to all persons engaged in this activity, i.e. a wider range of persons than those currently qualifying for tax relief.

Regulatory Reform Order: Changes to FSMA
This consultation was launched on 5 December 2005 and will close on 5 March 2006. It proposes to make a range of amendments to FSMA via a Regulatory Reform Order in order to reduce compliance burdens, especially in relation to consultation burdens and the FSA’s ability to waive and modify rules.

Section Four: Consultations planned in the next three months

UK implementation of EC Markets in Financial Instruments Directive, MiFID (2004/39/EC)
A consultation on Treasury aspects of how MiFID will be implemented in the UK should be issued in the next two months. In parallel the FSA is likely to issue a consultation on how FSA aspects of MiFID will be implemented in the UK.

UK implementation of the EC Collateral Directive (2002/47/EC)
A consultation which proposes to alter the way this EC Directive is implemented in the UK should be issued in the next three months. Relatively minor proposed changes relate to the priority given to financial collateral compared to other classes of creditor in cases of insolvency.

FSA information gateways to the Gambling Commission, the Financial Reporting Review Panel (FRRP) and the Accountancy Investigation and Discipline Board (AIDB)
A consultation which proposes to establish new information exchange gateways between the FSA and these three bodies should be issued in the next three months.

Money Service Businesses (MSBs)
A consultation which proposes to improve the current regulatory regime applied by HM Revenue and Customs to money service businesses should be launched in the next two months.

European Co-operative Statute (EC 1435/2003)
A consultation is planned in the next three months on how this EC legislation should be implemented in the UK. This establishes a number of legal forms designed to enable registration in one Member State and operation cross-border.

Home reversions and Ijara products
Following future Royal Assent of the Land Transactions Bill, the timing of which remains somewhat uncertain, consultation will hopefully proceed in the next three months on changes to the Financial Services and Markets Act 2000 (Regulated Activities) Order which are necessary to provide for the FSA regulation of home reversion schemes and Ijara products.

UK implementation of EC Capital Requirements Directive (not yet published in EC Official Journal)
A consultation is planned in the next three months on Treasury aspects of EC Capital Requirements Directive implementation in the UK. In parallel the FSA will issue its final consultation on how the FSA intends to implement the vast bulk of the Directive in the UK.