UK Regulatory Initiatives  

September 17, 2021

ESG | LIBOR | European Initiatives | U.S. Initiatives

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Financial Services Act

The UK’s departure from the EU at the end of the transition period has significant implications for the regulation of financial institutions. In June 2020, the government issued a policy statement providing information on proposals for a Financial Services Bill (FS Bill) that would make amendments to the legislative and regulatory framework for financial services arising from the UK's departure from the EU. The FS Bill was introduced in Parliament on 21 October 2020. The FS Bill went through various stages of the UK legislative process and received Royal Assent on 29 April 2021, coming into force as the Financial Services Act 2021 (FS Act)1 on the same date.

The FS Act:

  • establishes the legislative framework for the Investment Firms Prudential Regime (IFPR) and for the UK implementation of the final Basel III standards. (See Section 4.4 for more details)

  • establishes the legislative framework for the Overseas Funds Regime (OFR) and makes amendments to the retained EU law version of the Markets in Financial Instruments Regulation (600/2014) (UK MiFIR) relating to the equivalence regime for third country investment firms. (See Section 4.2 for more details)

  • amends the retained EU law version of the Benchmarks Regulation ((EU) 2016/1011) (UK BMR) to provide the FCA with additional powers to manage an orderly wind-down of a critical benchmark, such as LIBOR. (See Section 2 LIBOR for more details), and

  • amends the retained EU law version of the Market Abuse Regulation (596/2014) (UK MAR) and increases the maximum sentence for criminal market abuse.

Section 49 of the FS Act sets out details of the commencement of individual provisions. Some entered into force on 29 April 2021, some entered into force on 29 June 2021 (that is, two months after Royal Assent), and others enter into force on such date as HM Treasury (or the appropriate Secretary of State) may specify in regulations. Pursuant to the Financial Services Act 2021 (Commencement No 1) Regulations 2021, published on 7 June 2021, the provisions setting out the legislative framework for IFPR and the provisions amending UK MiFIR entered into force on 1 July 2021. Pursuant to the Financial Services Act 2021 (Commencement No 2) Regulations 2021, published on 28 June 2021, the provisions relating to UK BMR and UK PRIIPs entered into force on 1 July 2021. Provisions relating to UK MAR entered into force on 29 June 2021. The commencement date for provisions relating to the OFR has not yet been announced.

Proposals for an ‘overseas funds regime’

Connected to the end of the Brexit transition period, HM Treasury consulted on proposals to simplify the process for allowing investment funds set up overseas to be marketed in the UK (OFR). The consultation set out the government’s proposal for a new process for allowing investment funds domiciled overseas to be sold to UK investors, to replace the existing regime. The consultation closed in May 2020 and the government then brought forward legislation as part of the FS Act, (see Section 4.1 above). In November 2020 HM Treasury published a summary of responses to its consultation, together with its policy decisions taken in response.

These provisions relating to the OFR are now law following the enactment of the FS Act, but the commencement date has not yet been confirmed.

Please refer to the January edition of the Horizon Scanner for full details of the OFR.

UK government to undertake a review of the UK funds regime

In the Spring 2020 Budget, the government announced that it would undertake a review of the UK funds regime to ensure its continued competitiveness and sustainability. The first stages are a review of the VAT treatment of fund management fees and a consultation on the tax treatment of asset holding companies in fund structures to make the UK a more attractive location for such companies.

The consultation focussed on whether there are tax changes that could help make the UK a more attractive location for companies used by alternative funds to hold assets. It closed in August 2020 and the government issued a response paper and announced a second stage consultation in December 2020. The government believes that there is a strong case for change and the introduction of a new tax favourable regime for UK asset holding companies and launched a second stage consultation and a series of targeted ‘town hall’ meetings to discuss the details of what that regime should look like. The second stage consultation ran until 23 February 2021, with a view to legislation being introduced in the Finance Bill 2021. The government issued a response paper to the second consultation together with some partial draft legislation on 20 July 2021 and it is envisaged that legislation will be introduced later this year that will take effect in April 2022. Many details of the proposed regime still need to be resolved and a further series of meetings are taking place in September 2021 with interested parties, with a view to ensuring that the regime will work effectively. For more information on UK Qualifying Asset Holding Companies, please our OnPoint.

On 26 January 2021, HM Treasury published a ‘Call for Input’ that sets out the objectives, scope and next steps for its review of the UK funds regime.

The deadline for providing responses to the Call for Input was 20 April 2021. The Call For Input is wide-ranging and proposes a number of different options to achieve the aim of making the UK a more attractive location to establish a fund. The government has said it will analyse responses and then consult on subsequent specific proposals for reform. Consequently, it is likely that any potential changes will not be effected quickly. The government will prioritise measures that have greater impact and those that can be delivered quickly.

Please refer to the April edition of the Horizon Scanner for full details of the Call for Input relating to the Review of the UK’s fund regime.

UK prudential regime for investment firms (IFPR)

The IFPR is a revised prudential regime for FCA-authorised investment firms that the government intends to establish by Autumn 2021. It will be based on – but not identical to – the Investment Firms Regulation (IFR) and the Investment Firms Directive (IFD), which establish a new prudential framework for EU investment firms (see Section 3.9 above).

HM Treasury and the FCA will adapt IFR and IFD to reflect the UK investment firms sector. The IFPR will apply to MiFID investment firms authorised by the FCA and will largely replace the existing prudential requirements for those firms. Its introduction will necessitate the amendment or deletion of existing legislation and regulation relating to these requirements. The IFPR will not apply to PRA-designated investment firms, nor will it apply to investment firms authorised by the FCA that are not FCA MiFID investment firms.

In its June 2020 policy statement on prudential standards in the FS Bill, HM Treasury stated that it intended to consult publicly on the IFPR “in due course” with a view to introducing the new regime by Summer 2021.

The FCA published a discussion paper (DP 20/2) in June 2020 and in December 2020 published its first consultation paper on the implementation of the IFPR (CP20/24). In CP20/24, the FCA set out its proposals for aspects of the IFPR, including details of where it intends to diverge from the rules set out in IFR and IFD. CP20/4 looks at, among other things:

  • the categorisation of investment firms

  • prudential consolidation

  • own funds and own funds requirements, and

  • reporting requirements.

The deadline for responses to CP20/24 was 5 February 2021. On 29 June 2021, the FCA published its first policy statement on the implementation of the IFPR (PS21/6),2 which sets out details of the feedback that the FCA received to its proposals in CP20/24. In PS21/6 the FCA states that it has largely implemented its proposals as consulted on. It has however made some amendments to provide more clarity in response to some of the feedback received. Chapter 9 of PS21/6 has a detailed summary of the amendments to the rules consulted on in CP20/24.

On 19 April 2021, the FCA published the second consultation paper on IFPR3 (CP21/7), which covered items such as:

  • proposals concerning own funds requirements, which supplement the proposals set out in CP20/24

  • proposals for the basic liquid asset requirement

  • proposals relating to risk management and governance that will introduce an internal capital and risk assessment (ICARA) process for all FCA investment firms and introduce new requirements for internal governance and controls, with certain FCA investment firms required to establish risk, remuneration and nomination committees

  • proposals to introduce a new Remuneration Code that will apply to all FCA investment firms, and

  • proposals concerning regulatory reporting, supplementing those considered in CP20/24, and that relate to reporting on, among other things, the liquid asset requirement and remuneration.

The deadline for responses to CP21/7 was 28 May 2021. The FCA published its second policy statement (PS21/9)4 in July 2021, setting out the feedback and final rules on its proposals in CP20/24 and CP21/7 respectively.

The FCA issued its third consultation paper (CP21/26)5 on 6 August 2021 and the consultation closes on 17 September 2021. The FCA has said that it will consider the feedback received and publish a policy statement and final rules for the whole of the IFPR in Autumn 2021.

CP 21/26 covers items including proposals relating to:

  • Disclosures – including proposals that all FCA investment firms must make some disclosure on their remuneration policies and practices, proportionate to the size and type of firm.

  • Own funds: excess drawings by partners and members. The FCA is proposing to introduce a rule to address the situation where excess drawings can be made by partners in a partnership or members in a limited liability partnership (LLP) without being recorded as a loss and is, instead, treated as a loan to partners or members. The new rule would require an FCA investment firm that is a partnership or LLP to deduct excess drawings by its partners or members that exceed the profits of the firm.

  • Technical standards. The FCA proposes to apply the on-shored UK equivalents of EU derived Binding Technical Standards (BTS) for which the FCA is listed as a responsible regulator and that the FCA has identified as relevant under the IFPR. As part of this process, the FCA confirms that is has examined the technical standards adopted under the UK versions of the Capital Requirements Regulation (575/2013) (UK CRR) and Financial Conglomerates Directive (2002/87/EC) (FICOD). Other than in two instances, the FCA proposes to apply the on-shored BTS with specific modifications that are set out in MIFIDPRU. There are two exceptions as the FCA believes that applying the BTS would make the FCA's rules difficult to follow due to too many amendments and cross references. The two exceptions will instead be incorporated in a specific MIFIDPRU annex.

  • Depositaries. The FCA proposes amending the requirements that certain depositaries must meet so that they no longer have to have permission to deal on own account. The FCA is proposing to allow other FCA investment firms to act as a depositary, as long as they also provide the MiFID ancillary service of safe-keeping and administration of financial instruments. The FCA is also proposing to change to the minimum own funds requirement and to move the relevant requirement from the FUND and COLL sections of the FCA Handbook into MIFIDPRU.

  • New Applications and notifications. The FCA proposes new forms, including a specific form to notify changes to investment firm groups and a generic application form and a generic notification form to address any specific requirements that arise from the various technical standards to be incorporated into MIFIDPRU. Details on the practicalities of applications and notifications are set out on the FCA's IFPR webpage.

In addition, in July 2021, the FCA opened its gateway for MIFIDPRU applications. Applications for MIFIDPRU permissions must be submitted via the FCA’s online portal, Connect. On the IFPR webpage, the FCA has published certain forms for MIFIDPRU permissions that firms will need to apply for in advance of MIFIDPRU coming into force. The requirement to complete the MIFIDPRU forms applies to all in scope firms currently applying for FCA authorisation, notwithstanding the fact that IFPR is not yet in force. The remaining application forms and all notification forms will be available in Autumn 2021. Draft versions of the forms and applications were published alongside CP 21/7.

The FCA plans to consult separately on requirements for firms to make disclosures on ESG issues in 2022.

It is important to note that the FCA intends to apply transitional provisions to the IFPR similar to those set out in the IFR, which contains provisions intended to ease the change from existing own funds requirements, or other types of capital requirements, to the full application of the IFR's own funds requirements. The relevant rules will be set out in the transition provisions (TPs) to MIFIDPRU, the current text of which is set out at pages 601 to 662 of PS21/9 and pages 176 to 177 and pages 321 to 322 of CP21/26.

The FCA will send a questionnaire to all existing FCA investment firms in Autumn 2021 asking for various key information, such as their expected small and non-interconnected (SNI) status, investment firm group membership/composition and expected ICARA reporting date. The rationale being that this will provide the FCA with the information it needs to set up reporting schedules and update its systems.

The FCA intends to publish a third policy statement on the IFPR, addressing issues consulted on in CP21/26, in Autumn 2021. The FCA will publish final rules once all the consultations are complete.


The UK Markets in Financial Instruments Directive (MiFID) is the collection of laws and rules that regulates the buying, selling and organised trading of financial instruments. It derives from EU legislation that first took effect in November 2007 and was significantly amended in January 2018 (MiFID II). The UK laws and regulations implementing MiFID II were modified to address deficiencies as part of the process of onshoring EU law following the UK’s departure from the EU, the on-shored version being referred as UK MiFID.

On 28 April 2021, the FCA published a consultation paper (CP21/9) setting out proposals to change the conduct and organisational requirements laid down in UK MiFID.

  • SMEs and fixed income, currencies and commodities (FICC) research

The FCA proposes to amend the inducements rules relating to research to broaden the list of minor non-monetary benefits to include research on SMEs with a market cap below £200m and FICC research. It also suggests changes to the way the inducement rules apply to openly available research and research provided by independent research providers.

  • Best Execution Reports

MiFID II introduced reporting requirements for execution venues (RTS 27) and for firms executing and transmitting client orders (RTS 28). The aim was to improve investor protection and transparency of the order execution process. The FCA’s view is that RTS 27 and RTS 28 have not delivered on their objectives in a meaningful or effective way and are not used by market participants. The FCA is proposing to remove these two sets of reporting obligations on firms. The FCA’s proposed changes cover two areas that were included in the EU MiFID ‘quick fix’ package (see Section 3.7 above), but it is not proposing that the UK on-shores the EU’s MiFID ‘quick fix’ package as such.

The consultation closed on 23 June 2021 and the FCA is considering the feedback it received. If the FCA chooses to proceed, it would publish any rules or guidance in a Policy Statement in the second half of 2021.

For more information on CP 21/9, please see our OnPoint “Brexit simplifies?  – FCA consultation on changes to UK MiFID's conduct and organisational requirements”.

UK Short Selling Regulation

Similar to many other pieces of EU legislation, the UK ‘on-shored’ the EU Short Selling Regulation by way of a Statutory Instrument (SI), meaning that the UK now has its own version of the Short Selling Regulation (the UK SSR).

In January 2021, HM Treasury laid an SI to amend the notification threshold under Article 5(2) of the UK SSR from 0.2% to 0.1% of the issued share capital of an issuer. This change came into force on 1 February 2021. Consequently, from 1 February 2021 the notification threshold for issued share capital of a company that has shares admitted to trading on a UK trading venue (UK Regulated Market and UK MTF) will be 0.1%. This is just one example of divergence between the EU and the UK following the end of the Brexit transition period, as the EU Short Selling Regulation has a notification threshold of 0.2%. However, as noted in Section 3.10 above, the EU has recently consulted on proposals that would adjust the threshold in the EU permanently from 0.2% to 0.1%. If ESMA’s recommendation is followed, the thresholds in the EU and UK would once again be aligned.


The UK also ‘on-shored’ EMIR by way of a series of statutory instruments and binding technical standards, meaning that the UK now has its own version of EMIR (UK EMIR). The related FCA page, summarises key aspects of UK EMIR. The FCA also has a webpage dedicated to news relating to UK EMIR and EU EMIR.

Focus to date has been on the UK EMIR reporting obligation. See, the latest on the FCA position on reporting pursuant to UK EMIR.

In March 2021, the FCA confirmed that amending a reference rate or adding a fallback would not trigger the application of margin or clearing requirements under UK EMIR, where this amendment relates to the treatment of legacy LIBOR trades. Further clarity was provided by the FCA on this point in July 2021. If the terms of a derivative contract say that, either immediately or at some other point in time, an alternative rate applies in the place of LIBOR, this would bring about a modification that is reportable under UK EMIR and the FCA confirmed that they would expect this modification to be reported at the time that the alternative rate takes effect. The FCA has however made it clear that while it expects market participants to make the necessary preparations to ensure the relevant UK EMIR reports are updated in a timely manner, it will apply it supervisory powers for this requirement in a “proportionate and risk-based manner.”

In March 2021, the FCA and PRA published a joint Consultation Paper relating to the margin requirements for non-centrally cleared derivatives. The consultation proposed revisions to the binding technical standards in the UK on-shored version of Commission Delegated Regulation (EU) 2016/2251 (BTS) that would establish or extend exemptions for some products subject to bilateral margining requirements and to align implementation phases and thresholds of the initial margin requirements to the BCBS and the IOSCO standards and to those now reflected in EU EMIR. In June 2021, the PRA and FCA published a related joint policy statement, which confirmed  they would proceed with the amendments to the text of the BTS largely as consulted on, apart from a minor change    that specifies  the temporary exemption for single-stock equity and index options will expire on 4 January 2024. The regulators also temporarily extended the continued use of EEA UCITS as collateral from March 2022 to the end of December 2022.

In other developments, in May 2021, the BoE published a consultation paper proposing to modify the scope of contracts that are subject to the UK EMIR clearing obligation to reflect the ongoing reforms to interest rate benchmarks. The consultation closed on 14 July 2021 and, subject to HM Treasury’s approval, the BoE intends to make and publish the amendments to the relevant legislation (BTS 2015/2205) in Autumn 2021.

For entities that are subject to UK EMIR, the first clearing threshold notification by all UK FCs and NFCs had to be made by 17 June 2021, regardless of whether the FC or NFC in question chose to calculate its positions.


SFTR was also on-shored under the European Union (Withdrawal) Act 2018, so the UK now has its own UK version of SFTR. A dedicated FCA webpage for UK SFTR, includes a note the FCA published in November 2020 dedicated to the application of UK SFTR reporting.

There have been no recent substantive developments in relation to UK SFTR. Please refer to the April edition of the Horizon Scanner for further details on UK SFTR.

With regards to potential divergence between the EU and UK reporting regimes, in a March 2021 FCA speech the FCA Director of Markets and Wholesale Policy addressed this with a statement noting that it “seems prudent to allow the regime to mature before we consider if there is a case for refinement or trimming” with the FCA seeking a “balance in which the regime meets its overall objectives while remaining proportionate in terms of cost and operational burdens for UK-based firms.” One area where the FCA seems open to considering change is whether to remove commodities lending transactions from scope, but no changes have been implemented to date.


The EU PRIIPs Regulation has applied across the EU since 1 January 2018. Like other EU legislation that is directly applicable within the EU, it became part of UK law at the end of the Brexit transition period. This means that there are now two versions of the legislation operating in parallel: the original EU PRIIPs Regulation and the UK PRIIPs Regulation that incorporates amendments made during the on-shoring process.

Both the EU and UK PRIIPS Regulation set the requirements for a standardised disclosure document, known as the Key Information Document (KID) that must be provided to retail investors when they purchase particular packaged investment products, known as PRIIPs.

Importantly for asset managers, Article 32 of the UK PRIIPs Regulation contains a temporary exemption from the obligations under the UK PRIIPs Regulation for UK and EEA UCITS, meaning that these entities do not need to draw up or provide KIDs to retail investors in the UK. Instead, they are expected to prepare or provide key investor information documents (KIIDs) under the disclosure regime in the UCITS Directive. The exemption is due to expire on 31 December 2021 but, as discussed below, the FS Act, which became law on 29 April 2021, proposes that the exemption be extended for up to five years (i.e. until 31 December 2026).

In June 2020, the government announced plans to introduce legislation to improve the functioning of the PRIIPs regime in the UK. It followed this up in July 2020 with a policy statement that contained information on three proposed amendments to the UK framework. These amendments were included in the FS Act and are as follows:

  • Clarification of the scope of the UK PRIIPs Regulation – there is currently significant uncertainty in industry as to the precise scope of PRIIPs. The FS Act provides that the FCA may make rules specifying whether or not a product, or category of product, falls within the definition of a PRIIP, enabling the FCA to address existing, and potentially future, ambiguities relating to certain types of investment product. The definition of a PRIIP would remain unchanged.

  • Replacement of “performance scenario” with “appropriate information on performance” in the UK PRIIPs Regulation. The current methodology for calculating these scenarios has been criticised for producing misleading performance scenarios across a wide range of products. The FS Act amends the UK PRIIPS Regulation so that “performance scenarios and the assumptions made to produce them” is replaced by “information on performance,” which enables the FCA to amend the UK PRIIPs KID Delegated Regulation to clarify what information on performance should be provided in the KID.

  • Further extension of the current UCITS exemption. UCITS funds are exempted from the requirements of the PRIIPs Regulation until 31 December 2021. Until that date, instead of a KID, UCITS funds must produce a Key Investor Information Document (KIID) per the requirements of the UCITS Directive. The FS Act delegates power to HM Treasury to further extend the exemption for UCITS for up to five years.

Linked to the above, on 20 July 2021, the FCA published a consultation paper6 proposing targeted amendments to the UK PRIIPs disclosure regime (CP21/23). The FCA proposes to:

a)     Introduce rules to clarify the scope of the retained EU law version of the PRIIPs Regulation (1286/2014) (UK PRIIPs Regulation) as regards corporate bonds, making it clearer that certain common features of these instruments do not make them into PRIIPs

b)     Introduce interpretative guidance to clarify what it means for a PRIIP to be "made available" to retail investors, and

c)     amend the PRIIPs regulatory technical standards (RTS) to:

i.              replace the requirement and methodologies for presentation of performance scenarios in the KID with a requirement for narrative information on performance to be provided

ii.             address the potential for some PRIIPs to be assigned an inappropriately low summary risk indicator in the KID, and

iii.             address concerns pertaining to certain applications of the slippage methodology when calculating transaction costs.

The FCA has stated that this consultation is the first step that it is taking “to improve disclosure in the consumer investment space.” The FCA also stated that it will work closely with HM Treasury as HM Treasury conducts the wider review mentioned in its PRIIPs policy statement published on 31 July 2020.

UK Benchmarks Regulation

The FS Act (see Section 4.1 above) makes amendments to the UK Benchmarks Regulation and the FCA has published a document entitled "Benchmarks Regulation and amendments under the Financial Services Act 2021."The document summarises the UK BMR and the transition from LIBOR, as well as giving an overview of the proposed amendments to the UK BMR to be made by the FS Act. (See also Section 2 – LIBOR above).

UK Securitisation Regulation

On 24 June 2021, HM Treasury published a call for evidence8 to inform its review of the retained EU law version of the Securitisation Regulation ((EU) 2017/2402) (UK Securitisation Regulation). Pursuant to Article 46 of the UK Securitisation Regulation, HM Treasury is required to review the functioning of the UK Securitisation Regulation and report to Parliament by 1 January 2022.

A key aim of the review is to assess the regulatory approach of the UK Securitisation Regulation and its effect on the UK securitisation market, as well as any wider implications for financial stability. In particular, the review will examine:

  • Risk retention requirements, including whether the different retention methods available to market participants are still appropriate.

  • The scope of information captured by existing disclosure requirements, and whether this is a determining factor in structuring private or public securitisations.

  • Environmental disclosure requirements and the development of a green securitisation framework.

  • The appropriateness of the third-party verification regime given the limited number of UK authorised verifiers.

  • The role of securitisation special purpose entities in effectively facilitating securitisations.

Alternative investment fund managers (AIFMs) and the definition of institutional investor. The UK Securitisation Regulation requires that institutional investors perform due diligence prior to holding a securitisation position, in order to assess the risks involved in a securitisation. These due diligence requirements, as set out in Article 5, require that, among other things, institutional investors carry out the following activities: verify certain characteristics regarding a securitisation’s underlying exposure and its structure; have processes in place to evaluate the risks involved in a securitisation position; verify that they have access to relevant disclosure information; and, in the case of an STS securitisation, verify that the securitisation meets the STS criteria.

Under the UK Securitisation Regulation the due diligence requirements apply to all institutional investors, including AIFMs. This means that the requirements for institutional investors under the UK Securitisation Regulation in particular due diligence requirements, apply to all AIFMs that market or manage AIFs in the UK. As part of the call for evidence, HM Treasury is considering whether the UK Securitisation Regulation’s definition of institutional investor as it relates to AIFMs could be amended and is specifically inviting respondents to share views on this proposed change.

The review will also consider the potential for a simple, transparent and standardised (STS) securitisation equivalence regime. HM Treasury envisages that any equivalence is regime-specific, rather than over-arching, so it can consider the particular nature of STS securitisations in the design of the equivalence regime.

Responses to the call for evidence were to be submitted by 2 September 2021.

HM Treasury proposals to amend the financial promotions approval regime

In July 2020, HM Treasury announced a consultation on limiting the scope of firms that can approve the financial promotions of unauthorised persons. The term “financial promotion” describes the communication of an invitation or inducement to engage in investment activity. Section 21 of the Financial Services and Markets Act 2000 (FSMA) provides that a firm must not, in the course of business, communicate a financial promotion unless the firm is FCA-authorised or the content of the communication is approved by an authorised firm (subject to certain exemptions).

The consultation closed on 25 October 2020. In June 2021. HM Treasury confirmed in a consultation response that it intends to amend the financial promotion regime by establishing a ‘regulatory gateway for the approval of unauthorised persons' promotions. This regulatory gateway will enable the FCA to assess the suitability of a firm before it is permitted to approve the financial promotions of unauthorised persons. It will also mean that the FCA has a record of which authorised firms are approving financial promotions, which will make it easier for the FCA to proactively supervise this area.

HM Treasury has stated that it will bring forward the necessary legislation when parliamentary time allows. The FCA will consult on its proposals for implementing the gateway in due course.

The regulatory gateway option is discussed in more detail in the January edition of the Horizon Scanner.

HM Treasury proposes expansion of financial promotion regime to include cryptoassets

HM Treasury launched a second consultation in July 2020 setting out proposals to expand the perimeter of the financial promotion regime to bring the promotion of certain types of unregulated cryptoassets within its scope. This consultation and the consultation on the approval of financial promotions of unauthorised firms (see Section 4.12 above) should be read together.

The deadline for responses was 25 October 2020. The government's feedback on its consultation and final policy is awaited and no date has been given for the feedback. HM Treasury has confirmed that the government has stated that it does not propose to introduce a transitional period before the proposed Financial Promotion Order amendments come into force. Please refer to the January edition of the Horizon Scanner for full details.

UK Fintech Strategic Review

In July 2020, the government announced a strategic review into the UK’s financial technology industry that aims to establish priority areas for industry, policy makers, and regulators to explore in order to support the ongoing success of the UK fintech sector and to identify opportunities to support further growth in the sector.

On 26 February 2021, the government published its report, the Kalifa Review on UK FinTech (the Kalifa Review), which makes recommendations for the creation and implementation of a new UK FinTech policy and regulatory strategy.

On 29 April 2021 the Chancellor gave a written response9 to the Kalifa Review, describing the actions that the UK government has committed to in response, including (but not limited to):

  • supporting the creation of a private-sector-led Centre for Finance, Innovation and Technology (CFIT) as an accelerator for Fintech sector growth

  • creating a "scale-up visa" system, that will allow employees with a job offer at the required skills level from a recognised UK scale up, including Fintechs, to qualify for a fast-track visa, without the need for sponsorship or third-party endorsement. The aim is that the new route will be implemented by March 2022, and

  • establishing a financial markets infrastructure sandbox for firms that are exploring innovation through new technologies.

Please refer to the April edition of the Horizon Scanner for full details of the Kalifa Review.

FCA regulation of cryptoassets

Regulation of cryptoassets remains on the agenda with the FCA stating “Cryptoassets are a very high-risk investment that we don’t regulate.” On 7 January 2021 HM Treasury launched a consultation on the broader regulatory approach to cryptoassets, including new challenges from stablecoins, with a deadline for comments of 21 March 2021.

The annex to the consultation includes a timeline of recent and ongoing workstreams, including potential HM Treasury legislation later in 2021.

In its business plan 2021/22, the FCA explained that it is working with HM Treasury and the BoE to develop a regime for cryptoassets that encourages innovation while protecting consumers.

There have been no significant developments since 29 January 2021. Please refer to the January edition of the Horizon Scanner for full details.

Review of the UK’s AML/CFT regulatory and supervisory regime

In July 2021, HM Treasury published a call for evidence to inform its review of the UK AML and CTF regulatory regimes. HM Treasury’s intention is to look at three themes in the call for evidence:

1.             the overall effectiveness of the AML/CFT regulatory and supervisory regimes and their extent (i.e. the sectors in scope as relevant entities),

2.             whether key elements of the current regulations are operating as intended, and

3.             the structure of the supervisory regime including the work of the Office for Professional Body AML/CFT Supervision (OPBAS) (established in 2018 to oversee professional body AML supervisors) to improve effectiveness and consistency.

As part of its assessment of the effectiveness and appropriateness of the UK’s supervisory regime in meeting its objectives, HM Treasury will consider the overall structure of the regime, including both statutory and professional body supervisors, the strengths and weaknesses of the regime, particularly any supervisory gaps that result from the structure, and possible options for reform, for example consolidation of the supervisory bodies or the creation of a single body with oversight of the whole regime.

In the call for evidence, HM Treasury confirms that it intends to maintain its efforts to uphold the FATF standards, in particular the application of a risk-based approach to applying the UK AML and CTF regulatory framework. HM Treasury is focused on improving effectiveness of the UK system, in line with the FATF's own rebalancing towards measuring effectiveness rather than technical compliance.

HM Treasury has requested comments are provided by 14 October 2021. In addition HM Treasury plans to run a series of events where stakeholders will be given the opportunity to take part in interactive discussions about the proposals and issues in the call for evidence.


  1. The text of the FS Act.
  2. PS 21/6.
  3. CP 21/7.
  4. PS 21/9.
  5. CP21/26.
  6. CP 21/23.
  7. Benchmarks Regulation and amendments under the Financial Services Act 2021.
  8. The call for evidence in relation to the UK Securitisation Regulation.
  9. The Chancellor’s written statement.

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