Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2020 — House of Lords, 2020-06-18
Topic: Mixed Topics
Joanna Penn (Conservative, Centre-right): My Lords, I apologise for the previous confusion. I believe I have already set out the programme of work that this SI—in addition to the previous SI—is part of, so I turn to the specific content of this SI The approach taken in this SI aligns with the general approach established by the EU withdrawal Act 2018: providing continuity by retaining existing legislation at the end of the transition period, but amending where necessary to ensure effectiveness in a UK-only context. While this SI makes amendments to approximately 20 pieces of legislation, the number and nature of these amendments are modest and minor. They act to preserve the effect of recent changes to EU legislation in the UK, and in doing so limit any impact on business that would otherwise arise at the end of the transition period Primarily, this SI fixes deficiencies in recently applicable EU legislation. For example, the fifth money laundering directive was transposed in the UK in January this year through amendments to the Money Laundering Regulations. This SI fixes minor deficiencies in the Money Laundering Regulations resulting from the recent transposition of this directive. These minor amendments remove references to EU institutions and regulatory distinctions between EEA and other third countries, and change a requirement for co-operation with overseas authorities into an ability to co-operate. This will ensure that the UK has an independent and coherent anti-money laundering regulatory regime at the end of the transition period As a further example, the EU has recently amended the benchmarks regulation to include two new categories of low-carbon benchmarks—the "Climate Transition Benchmarks" and "Paris-aligned Benchmarks". The EU also extended existing transparency rules to reflect environmental, social and governance, or ESG, factors. This SI fixes deficiencies that will arise in retained EU law as a result of these EU amendments. It inserts definitions for a "UK Climate Transition Benchmark" and a "UK Paris-aligned Benchmark" into the retained EU law version of the benchmarks regulation. It also specifies disclosure requirements in relation to ESG factors. This will ensure that the UK continues to have an effective regime to enhance the transparency and comparability of low-carbon benchmarks, enabling investors to make informed decisions At the end of the transition period, there will be elements of retained EU law and domestic law that would not be appropriate to keep on the statute book. This SI therefore revokes certain pieces of retained EU law and UK domestic law—for example, elements of the European system of financial supervision regulations—that will not be relevant in a UK-only context This SI also makes a small number of minor clarifications and corrections to previous financial services EU exit instruments. Noble Lords will be aware of the unprecedented scale of the legislative programme that the Treasury has undertaken, and this has been carried out with rigorous checking procedures. However, it is unfortunately the case that errors are made on occasion, and when they arise it is important that they are corrected as soon as possible I note that this SI also includes provisions initially included in the Cross-Border Distribution of Funds, Proxy Advisors, Prospectus and Gibraltar (Amendment) (EU Exit) Regulations 2019. This instrument was laid using the "made affirmative" procedure in October 2019, when it was necessary to ensure that the SI was in force prior to the previous exit date of 31 October. The SI subsequently ceased to have effect, but it is important that those provisions, which include amendments to the UK’s prospectus regime to ensure it remains operational in a wholly domestic context, are in force before the end of the transition period. These provisions have therefore been included in this SI. Noble Lords will be aware that this information was also identified by the Secondary Legislation Scrutiny Committee in its report published on 7 May Finally, I turn to the amendments this SI makes to a previous EU exit instrument: the Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019, which I will refer to as the equivalence SI. The equivalence SI enables the Treasury to make equivalence directions for EEA states, for specified provisions, during the transition period. Today’s SI adds additional equivalence regimes to the scope of the power for the Treasury to make equivalence directions for EEA states during the transition period—through the inclusion of provisions relating to central securities depositories, which are entities that hold financial instruments, and trade repositories, which collect and maintain records of derivatives trades This SI also amends the existing drafting on the length of the direction power to tie it to the end of the transition period. This will enable Ministers to make directions during the transition period to come into force at the end of the transition period, granting equivalence to those EEA regimes. Finally, it clarifies that Her Majesty’s Treasury can impose limitations on the application of state-level equivalence decisions when granting equivalence to the EEA; for example, in response to EU conditions placed on the UK The Treasury has been working closely with the financial services regulators in the drafting of this instrument. The Treasury is also engaged with the financial services industry on this SI, as it has been extensively over the course of its financial services EU exit legislation programme. In summary, the Government believe that this instrument is necessary to ensure that the UK has a coherent and functioning financial services regulatory regime at the end of the transition period. I hope noble Lords will join me in supporting these regulations. I beg to move.