The Financial Services and Markets Act 2000 (Transitional Provisions and Savings) (Rules) Order 2001

Explanatory Note

(This note does not form part of the Order)

This Order makes transitional provision in relation to the rule making powers conferred on the Financial Services Authority under the Financial Services and Markets Act 2000 (c. 8) (“FSMA”). The Order is divided into three Parts.

Part I contains the commencement and interpretation provisions. The Order comes into force on the same date as the main rule making power conferred by FSMA, section 138. This will be before the date of commencement of the main provisions of FSMA, including the general prohibition in section 19.

Part II concerns the power of the Authority to designate existing rules and legislative provisions which will be repealed or will lapse at commencement so that they continue in effect after commencement as if they were rules made by the Authority. This is an alternative to the Authority making new rules under its FSMA powers. Provisions can only be designated before commencement where it is necessary or expedient to do so. The Order sets out the requirements to be satisfied by the designation instrument and provides for how continued rules can be verified for the purposes of legal proceedings Article 8 carries forward any waiver or modication of the pre-commencement provision that was granted before commencement.

Part III of the Order concerns consultation which the Authority has carried out in anticipation of the powers to be conferred on it by FSMA. Where consultations about rules, codes, statements of policy etc. to be made under the Act was carried out before FSMA received Royal Assent, the procedure adopted may not have been fully compliant with the requirements laid down in the Act. Where this is the case, the Order enables the Authority to complete the consultation exercise by issuing any items required such as a cost benefit analysis. Article 14 provides that where the Authority has taken steps in anticipation of its rule making powers in FSMA or of the powers in this Order, those steps can be treated as having been taken in accordance with the requirements for exercising those powers. Article 15 clarifies that where the Authority is required, in undertaking a cost benefit analysis, to compare the position if proposed rules are made with the position in the absence of those rules then the correct comparison is with the position before the repeal of the legislation replaced by FSMA.