On 25 June 2020, HM Treasury published a draft of The Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020 together with a draft explanatory memorandum.
The Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 (Equivalence Regulations 2019) would have enabled HM Treasury and the UK regulators to be ready for exit day had a deal not been reached with the European Union. The Equivalence Regulations 2019 provided Ministers with a temporary power to make equivalence determinations (by a power of direction) for EEA states where those directions would not have entered into force until exit day. Now that the UK is in the transition period, it is necessary to make this draft statutory instrument in order to ensure that the UK has an independent and coherent equivalence framework during and at the end of the transition period.
To ensure the UK has a fully functioning equivalence regime during and at the end of the transition period, this draft statutory instrument is necessary to complement the Equivalence Regulations 2019. This draft statutory instrument is one of several financial services instruments that have been and will need to be laid during the transition period under the European Union (Withdrawal) Act 2018, to remedy deficiencies and to ensure that the UK financial services regulatory regime is fully functioning during and at the end of the transition period.
The draft statutory instrument makes provisions for the UK regulators to establish cooperation arrangements with a relevant regulatory authority or authorities for an EEA state, which could be the relevant EU authority (such as ESMA) or the European Free Trade Association (“EFTA”) supervisory authority, and to take regulatory decisions concerning EEA firms or products before the end of the transition period, for the following retained EU law financial services regimes:
- Article 30 of Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds.
- Article 5 of Regulation (EC) 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies.
- Article 25 of Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories.
- Articles 75 and 77 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories.
- Articles 46 and 47 of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments.
- Article 30 of Regulation (EU) No 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC.
- Article 19 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.
The draft statutory instrument will come into force on the day after the day on which they are made.