UK: Draft UK Legislation Published To Broaden Range Of Permitted Trading Venues For Islamic Finance Instruments

On May 9, 2018, a draft of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2018 was laid before Parliament. The draft Order makes amendments to the definition of Alternative Finance Investment Bonds in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

AFIBs, such as Sukuk, are currently not permitted to trade on multilateral trading facilities or organised trading facilities, due to the wording of the AFIB definition in the RAO. However, conventional bonds can be traded on these venues. This disparity of treatment between AFIBs and conventional bonds creates an obstacle to the use of U.K. venues for the issue and trading of AFIBs and is contrary to the U.K. Government's standing commitment to provide a level playing field for Islamic finance instruments in regulation and taxation in the U.K. The draft Order amends the RAO to expand the criteria for AFIBs to qualify as a specified investment under the RAO. This will allow AFIBs to be traded on U.K. MTFs and OTFs and ensure AFIBs are treated in the same way as conventional bonds for trading purposes.

The draft Order also amends the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001, so that a person administering a benchmark as specified in the RAO will be regarded as carrying on the activity by way of business and will therefore require authorization under the Financial Services and Markets Act 2000 to do so.

The draft Order will come into force on the day after the day on which it is made. No impact assessment was produced for this instrument as no significant impact on the costs of business or the voluntary sector is foreseen.

The draft Order is available at:

http://www.legislation.gov.uk/ukdsi/2018/9780111169292/pdfs/ukdsi_9780111169292_en.pdf , the explanatory memorandum to the draft Order is available at:

http://www.legislation.gov.uk/ukdsi/2018/9780111169292/pdfs/ukdsiem_9780111169292_en.pdf  and the de minimis statement accompanying the draft Order is available at:

http://www.legislation.gov.uk/ukdsi/2018/9780111169292/pdfs/ukdsiod_9780111169292_en.pdf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.