The Financial Services and Markets Act 2000 (Transparency of Securities Financing Transactions and of Reuse) Regulations 2016

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations implement certain Articles of Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (OJ No L 337, 23.12.2015, p.1) (“the SFT regulation”).

In Part 2, regulation 3 designates the Bank of England (“the Bank”) as the competent authority responsible for supervising recognised central counterparties for the purposes of the SFT regulation. For all other counterparties the Financial Conduct Authority (“FCA”) is designated as the competent authority.

Part 3 provides administration and enforcement powers to the FCA so that it can monitor and enforce the compliance of non-authorised counterparties with the SFT regulation. Non-authorised counterparties are those counterparties that are not already subject to supervision by the FCA or the Bank of England under the Financial Services and Markets Act 2000 (c.8) (“the Act”).

In particular, Part 3 confers powers on the FCA for information gathering, giving directions for action to be taken to comply with the SFT regulation, publicly censuring counterparties for breach of the SFT regulation and imposing financial penalties. Part 3 also provides a power to the FCA to temporarily prohibit an individual responsible for a counterparty’s breach of the SFT regulation from being concerned in the management of a financial or non-financial counterparty. The same power is conferred on the Bank in relation to an individual responsible for a breach by a recognised central counterparty. Notice and appeal rights are also provided for and the competent authority is given the power to seek an injunction against any person who has breached or is likely to breach a requirement imposed by or under Part 3. Part 3 also makes it an offence to mislead the FCA in purported compliance with a requirement imposed under Part 3.

Part 4 provides for these Regulations to be reviewed before the end of 2020 and subsequently at intervals of not more than five years.

Schedule 1 amends the Act and paragraph 4 of Schedule 2 amends the Financial Services and Markets Act 2000 (Qualifying EU Provisions) Order 2013 (S.I. 2013/165) to implement fully the minimum sanctions and other measures required by the SFT regulation in respect of authorised persons and regulated bodies under the Act.

The remainder of Schedule 2 makes consequential amendments to secondary legislation.

An impact assessment of the effect that this instrument will have on the costs of business and the voluntary sector has not been prepared. These Regulations provide an enforcement mechanism for obligations which are imposed by directly applicable EU legislation and any impact on business or the voluntary sector will arise as a result of that EU legislation rather than these Regulations.