In February 2011, the Treasury published a second consultation document which provided further details on the Government's proposals for the reform of the UK financial services regulatory regime. This was followed in June 2011 by a White Paper and draft Bill setting out its detailed proposals for reform of financial regulation in the UK. The White Paper also poses further questions for consultation and provides a summary of responses to the consultation published in February.
The Government remains committed to creating three new institutions to regulate financial activities in the UK. The proposed new regulatory structure consists of a new Bank of England Financial Policy Committee (FPC), responsible for macro-prudential regulation; a Prudential Regulatory Authority (PRA), responsible for prudential regulation of financial institutions; and a Financial Conduct Authority (FCA), responsible for conduct issues across the entire spectrum of financial services. "Prudentially significant firms", such as large deposit takers, insurers and some investment firms, will be regulated by both the PRA and FCA.
The Government confirmed in November 2010 that the powers of the FSA in its capacity as the UK Listing Authority (UKLA) will be transferred to the FCA. The White Paper and draft Bill propose that the FCA will be allowed to:
- require a listed issuer to commission a skilled person's report (notwithstanding acknowledged objections). These are currently only able to be required for authorised firms. They are reports by an independent 'skilled person' on a regulated firm to see if there has been a breach of a rule or any failure of the firm’s systems and controls and are used to find out what further regulatory action may be needed;
- commission a skilled person's report on a sponsor (which had not previously been proposed);
- sanction sponsors by imposing unlimited penalties and/or suspensions or restrictions on sponsor activity (for a period of up to 12 months);
- extend the limitation period for taking action for breaches of the Part 6 rules, which include the Listing Rules, from two years to three years;
- give the UKLA the power to make rules for, and impose sanctions on, primary information providers, such as regulatory information services; and
- allow the UKLA to discontinue or suspend a listing at the request of an issuer without following the warning notice and decision notice procedure
In April 2011 the FSA moved to creating a shadow form of the new structure by replacing its risk and supervision units with a prudential business unit and a conduct business unit.
The consultation on the White Paper closes on 8 September 2011 and it is envisaged that a Bill will be introduced into Parliament before the end of this year. The Government states that it remains committed to putting the new regulatory structure in place by the end of 2012.