On 22 July, the Treasury published the response to the Call for Evidence on the Overseas Framework, which was initially issued in December 2020. The Call for Evidence received 34 responses, with submissions from stakeholders from a range of sectors spanning banking, legal, wholesale, trading venues, insurance and trade bodies. Submissions also emanated from a number of jurisdictions, including the UK, EU, Switzerland, Japan, US and Isle of Man.
The response helpfully summarises the content of submissions made in response to the Call for Evidence. The Call for Evidence sought specific feedback on a number of aspects of the regime, namely:
- The overseas persons exclusion (OPE);
- Investment services equivalence under Title VIII of the Markets in Financial Instruments Regulation (MiFIR);
- Recognised overseas investment exchanges (ROIEs);
- The Financial Promotion Order (FPO) in general, and specifically in relation to the distribution of certain overseas long-term insurance products in the UK.
In response to the Call for Evidence, the government has committed to the following next steps:
- HM Treasury, working closely with the Financial Conduct Authority, the Bank of England and the Prudential Regulation Authority, will review the overseas regulatory perimeter. The review will seek to identify:
- Whether the balance of the overseas perimeter remains appropriate for the UK following the UK’s exit from the EU in order to ensure resilient and safe financial markets;
- Whether there are elements of the overseas regulatory perimeter that need updating to reflect modern working patterns and advancements in technology, such as the ‘in the UK’ test which is the first consideration for firms assessing their regulatory compliance; and
- Areas of the overseas perimeter that could be clarified to allow greater transparency and clarity for firms.
- Following this review, HM Treasury will initiate consultation on potential changes to the UK’s regime for overseas firms and activities in Q4 2021. In particular, the Government will look to consult on:
- Any proposed changes to the overseas regulatory perimeter following this review, including changes aimed at making the UK’s overseas perimeter more coherent and easier to navigate;
- Any proposed changes to the OPE, including the option to remove the overlap between the OPE and equivalence provisions under MiFIR Title VIII;
- Whether the current operation of the regime appropriately balances openness whilst mitigating risks to the resilience and safety of financial markets, the protection of consumers and market integrity, and the promotion of competition; and whether further regulatory powers are needed for the ROIE and OPE to address any deficiencies in regulatory oversight; and
- Options for amendments to the FPO exemptions relating to insurance distribution with an overseas element
- Finally, the government has committed to the following principles in respect of any changes it makes, which should:
- Facilitate the benefits of maintaining an open and globally integrated financial system, enabling international financial services business by reducing barriers and frictions where practicable;
- Consist of robust, high-quality and proportionate regulation, guided by and consistent with international standards;
- Ensure resilient and safe financial markets and firms in a way that supports financial stability, market integrity and consumer protection;
- Support the transition to sustainable finance;
- Be transparent and predictable;
- provide a stable and reliable arrangement for cross-border market access;
- Enable effective cooperation with international partners
To view the response to the Call for Evidence, please click here.