On February 5, 2018, the Financial Services and Markets Act 2000 (Benchmarks) Regulations were laid before Parliament and will come into force mainly on February 27, 2018. Certain provisions will come into force on July 1, 2018 and transitional provisions apply until revoked on May 1, 2020.
The U.K. already has a fairly comprehensive regime for benchmark regulation. The new U.K. Regulations make the necessary changes to U.K. primary and secondary legislation to align it with the EU Benchmarks Regulation, which introduces a common framework and consistent approach to benchmark regulation across the EU and which has been directly applicable throughout the EU since January 1, 2018. The U.K. Regulations appoint the FCA as "competent authority" for the purposes of the EU Benchmarks Regulation.
The current U.K. regime under the Financial Services and Markets Act 2000 will fall away after a transitional period ending on May 1, 2020, with the repeal or revocation of essentially all provisions in FSMA and the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 relating to the current U.K. benchmark regulation regime. The U.K. Regulations make provision for dual operation of the current U.K. regime and for continuation of the new regime after that date. During the transitional period, existing U.K. permissions to carry on benchmark-related activity remain valid. However, those wishing to conduct benchmark-related activity after the end of the transitional period must apply for permission to carry on the new regulated activity of administering a benchmark (for EU purposes), as defined in the EU Benchmarks Regulation. The U.K. Regulations insert this new regulated activity into FSMA and the RAO.
The U.K. Regulations make a number of amendments to FSMA to provide the FCA with powers over "Miscellaneous BM persons." A "Miscellaneous BM person" is defined in the U.K. Regulations as a person conducting various benchmark-related activities that is not authorized by the FCA and that falls within one of six specified categories of person. The amendments to FSMA extend the FCA's enforcement powers so that they can be applied in respect of Miscellaneous BM persons. The FCA is consulting separately on changes to its rules and guidance in respect of these enforcement powers.
The U.K. Regulations make provision for the FCA to impose requirements on persons requiring them to administer or contribute to a benchmark to ensure continuity. They also make provision for the operation of the FCA's powers and obligations in relation to recognition of third-country benchmarks and approving endorsements of third-country benchmarks. As well as the amendments to FSMA and to the RAO, the U.K. Regulations make a number of consequential amendments to other secondary U.K. legislation.
The U.K. Regulations (S.I. 2018/135) are available at: http://www.legislation.gov.uk/uksi/2018/135/pdfs/uksi_20180135_en.pdf and the explanatory memorandum is available at: http://www.legislation.gov.uk/uksi/2018/135/pdfs/uksi_20180135_en.pdf.
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