On 26 February 2013, the Financial Services Act 2012 (Commencement No.2) Order 2013 (SI 2013/423) was signed into law bringing the majority of the provisions of the Financial Services Act 2012 (the “Act”) into force on 1 April 2013. Under the Act the following changes to the existing regulatory framework will be made:
- The FSA will be disbanded and responsibility for financial stability will pass to the Bank of England (the “Bank”).
- A new entity called the Financial Policy Committee (“FPC”) will be established with responsibility for horizon scanning for systemic risk. The FPC will sit within the Bank.
- The newly formed Prudential Regulation Authority (“PRA”) will be responsible for the solvency and oversight of systemically important institutions. The PRA will be a subsidiary of the Bank.
A new regulator, the Financial Conduct Authority (“FCA”), will be established with responsibility for regulating the markets in financial products and financial services and ensuring consumer protection.
A high level diagram of how the new framework will be structured can be found at Appendix I. Appendix II contains a summary of the key objectives and policies of the bodies comprising the new regulatory framework.
The FCA will regulate conduct in retail and wholesale markets; supervise the trading infrastructure that supports those markets; and prudentially regulate firms not regulated by the PRA. The following constitute a brief sample of the firms/entities that will be FCA-regulated in terms of both conduct of business rules and prudential regulation:
- Investment managers
- Collective investment schemes
- Investment firms
Investment banks will be regulated by the FCA in terms of business conduct only.
The FCA will represent the UK at the European Securities and Markets Authority.
The PRA will prudentially supervise deposit takers, insurers and a small number of “significant” investment firms.
Contributed by Niall Crowley