Mifid II will have some of its ‘rough edges smoothed off’ in post-Brexit Britain, but there is no appetite to completely tear up the EU’s protection for investors in UK law, according to regulator the Financial Conduct Authority (FCA).
At an IR Society webinar last week on how Mifid II might be overhauled post-Brexit, as part of the government’s efforts to maintain London’s competitiveness as a financial center, Stephen Hanks, a manager at the FCA, said the UK government is planning to introduce its new Future Regulatory Framework to pass responsibility for various items currently in legislation back to regulators. As a result of Brexit, directly applicable EU law was turned into legislation, rather than regulators’ rules, he noted.
‘When it comes to Mifid II, virtually all of the provisions, in due course, are going to end up in our handbook, so decisions about the regulatory regime will be made by the independent regulators and not by the government,’ he pointed out.
Hanks added there is also work going on under the rubric of the Wholesale Markets Review, which is looking at Mifid II provisions in the UK. ‘We are working on it with the Treasury in the same way as the EU is reconsidering various provisions of its own version of Mifid II with a commission making some proposals at the back end of last year,’ he said.
‘In the work we’re doing, certainly in the discussions we have with industry, there’s no great appetite among people in industry for Mifid II to be torn up. Therefore, what we’re looking to do is to make a series of changes, which essentially try to smooth off some of its rough edges, and reduce the burden of regulation where possible, but without significantly changing the protection of investors and the protections for market integrity that were built into the legislation.’
A new Brexit Freedoms Bill will be brought forward by the UK government, under plans unveiled by Prime Minister Boris Johnson. The bill is intended to make it easier to amend or remove EU laws kept on the statute book after Brexit as a bridging measure. The government says the reforms will cut £1 bn ($1.35 bn) of red tape for UK businesses, ease regulatory burdens and contribute to its mission to unite and ‘level up’ the country.
Mifid II was introduced by the EU in 2018 and aims to strengthen investor protection and improve the functioning of financial markets, making them more efficient, resilient and transparent, the EU says.
The UK government’s three-month consultation on its Future Regulatory Framework closes on February 9.