Mansion House reforms: reform of UK financial services regulation

Written by Harvey Spencer, trainee solicitor at Burges Salmon:

On 10 July 2023, Chancellor Jeremy Hunt delivered his Mansion House speech in which he launched a suite of proposals for reform of the financial services sector.

The Mansion House Reforms form part of a wider context of financial services reform under this government, which began with the Edinburgh Reforms in December 2022, and the subsequent Financial Services and Markets Act (FSMA) 2023 which will make wide ranging reforms to the UK’s financial services framework.

In addition to the extensive reforms to pensions, which we have covered in a separate blog, the Chancellor announced changes to company listings and to the current regulatory framework applicable to the UK’s financial services sector, which we consider here in overview.

Wholesale markets

In the Chancellor’s own words, he is looking to “incentivise companies to start and grow in the UK by strengthening our position as a listing destination”, in light of a steep decline in the number of domestic listed companies in the UK.

This will involve:

• prospectus reform which will allow companies to raise larger sums from investors more quickly, by reducing the instances in which publication of a prospectus is required. This will allow listed companies to return to the market quickly and at less cost; and
• The establishment of a new “intermittent trading venue”, to be in action before the end of 2024, which is said to improve private companies’ access to capital markets before they publicly list. The Chancellor referred to this as a “pioneering” and “innovative” “global first”.

The Chancellor called on the FCA to begin engaging with the market. . The FCA  responded immediately, welcoming the reforms and promising to engage with the market to support the proposals stating “We have already taken significant steps to support UK capital markets and will continue to build on that strength in the months ahead to support the reforms announced today”.

Smarter regulation

The Chancellor also committed to reforming financial services regulation to provide a more effective, simplified and growth-friendly regulatory framework.

The  FSMA 2023 introduces a raft of regulatory changes and will result in extensive amendment to existing legislation. These changes include:

• a new secondary objective for the FCA and the PRA to advance the UK’s economic growth and international competitiveness; 
• the repeal and replacement of retained EU law (REUL) with consistent domestic legislation; 
• a new Designated Activities Regime (DAR) to allow for the regulation of  certain activities related to financial markets, instruments, products and investments made available in the UK, and which the Treasury consider that it would be disproportionate to bring within the regulated activities regime;
• a new “critical third parties” regime, certain third-party providers designated as critical by the Treasury will be subject to requirements intended to ensure minimum standards throughout supply chains;
• bringing activities facilitating the use of stablecoins as a means of payment (digital settlement assets) into the regulatory perimeter together with provisions on cryptoassets;
• a new framework to protect access to cash, relied upon by so many people in their day to day lives, and maintain a network of cash facilities across the UK (despite the closure of many bank and building society branches across the UK);
• a new financial promotions framework which will include a new gateway requiring authorised firms intending to approve the financial promotions of unauthorised firms to first obtain the permission of the FCA; and
• a power for the Treasury to introduce Financial Market Infrastructure (FMI) sandboxes, within which a specifically modified regulatory environment will allow the testing and delivery of new technologies.

It is hoped that these reforms will provide a platform for the UK to boast a world-leading financial services sector. As the Chancellor said: “British growth driven by British financial firepower……not just more competitive financial services but a more innovative economy”.

Keep an eye out for our regulatory timetable as we track the changes as they happen and the further changes to be expected.

For further UK financial services regulatory updates, please visit the Burges Salmon blog.

British growth driven by British financial firepower……not just more competitive financial services but a more innovative economy

https://www.gov.uk/government/speeches/chancellor-jeremy-hunts-mansion-house-speech