The Financial Services and Markets Bill (FSM Bill) includes provisions to revoke all EU-derived legislation related to financial services and replace it with an approach to regulation that is designed for the UK, subject to a transitional period.
On 9 December 2022, HM Treasury issued a policy statement setting out the government’s approach to repealing and replacing retained EU law on financial services. The government expects to make significant progress on Tranches 1 and 2, including the Packaged Retail and Insurance-Based Investment Products (PRIIPS) Regulation, the Taxonomy Regulation, the UK Money Market Funds Regulation and the European Long-Term Investment Fund (ELTIF) Regulation, by the end of 2023. The government plans to repeal the ELTIF Regulation, without replacement.
- Is expected to undertake horizontal mapping of environmental, social and governance (ESG) data needs and usages for supervisory purposes in the area of investment management as detailed in ESMA’s sustainable finance roadmap 2022–2024.
- Is expected to carry out a discretionary peer review on the depositary obligations under Directive 2009/65/EC UCITS (Undertakings for Collective Investments in Transferable Securities) IV and Directive 2011/61/EU, the Alternative Investment Fund Managers Directive (AIFMD). The peer review will focus on the oversight and safekeeping functions of depositaries. ESMA expects to finalise and publish its report on the peer review in 2024.
- Will extend the notification portal, originally developed for the purpose of the cross-border database, to enable national competent authorities to exchange notifications of cross-border marketing of funds.
- Will start a coordinated supervisory action (CSA) in the area of sustainability, covering the risk of greenwashing in the area of sustainable investment management products.
- Will report on the outcome of the 2022 CSA on valuation of less liquid assets in the UCITS and AIFMD frameworks.
Amendments to the RTS relating to the PRIIPs Regulation set out in Regulation (EU) 2021/2268 regarding the underpinning methodology and presentation of performance scenarios, the presentation of costs and the methodology for the calculation of summary cost indicators, the presentation and content of information on past performance and the presentation of costs by packaged retail and insurance-based investment products offering a range of options for investment, come into force.
In policy statement PS21/24, the FCA introduced new obligations on client-focused Task Force on Climate-Related Financial Disclosures (TCFD) aligned disclosures for asset managers, life insurers and FCA-regulated pension providers in two phases. Starting from 1 January 2022, the rules came into force for the largest firms, comprising:
- Asset managers with assets under management of more than £50 billion.
- Asset owners with £25 billion or more in assets under management or administration in relation to in-scope business.
Effective from 1 January 2023, the rules will take effect for the remaining firms above the proposed £5 billion threshold for both asset managers and asset owners. The first disclosures by these firms will be made by 30 June 2023, and subsequent disclosures will be made by 30 June each calendar year.
The temporary marketing permissions regime (TMPR) for European Economic Area (EEA) funds (other than EEA UCITS) expires on 31 December 2023. HM Treasury has the power to extend the temporary regime by an additional 12 months.