On 11 November 2024, the draft Financial Services and Markets Act 2000 (Designated Activities) (Supervision and Enforcement) Regulations 2024 were published on legislation.gov.uk, along with a draft explanatory memorandum.

Background

The Financial Services and Markets Act 2023 inserted a new Part 5A into the Financial Services and Markets Act 2000 (FSMA 2000), which allows HM Treasury to make regulations to ‘designate’ activities related to financial markets financial markets exchanges, instruments, products, or investments, and contains powers for the Financial Conduct Authority (FCA) to make rules and give directions relating to designated activities. The new regulatory framework set out in Part 5A of FSMA 2000 is known as the designated activities regime (DAR).

Purpose of the draft Regulations

The draft Regulations are intended to enable the FCA to supervise and enforce rules that it makes under the DAR. It extends the FCA’s existing supervision and enforcement powers under FSMA 2000 so that they can be used in relation to designated activities, enabling the FCA to:

  • Gather information and launch investigations into persons carrying out designated activities.
  • Enforce its designated activity rules by publicly censuring or imposing financial penalties on persons that breach them.

Also set out in the draft Regulations are the procedures that will apply to the giving of directions by the FCA in relation to designated activities, which will allow the FCA to require a person or persons to do or to refrain from doing something.

The draft explanatory memorandum explains that the supervision and enforcement framework set out in the draft Regulations will initially apply to:

  • The Consumer Composite Investments (Designated Activities) Regulations 2024, which will replace the UK version of Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products (or PRIIPs).
  • The Short Selling Regulations 2024, which will replace the UK version of Regulation (EU) No 236/2012 on short selling and certain aspects of credit default swaps.

If HM Treasury designates further activities in the future, the supervision and enforcement framework is also intended to be extended to them.