FSA is consulting on regulatory reform changes to the FCA Handbook. The changes cover:

  • Chapter 1 of the Supervision Manual (SUP): the paper proposes a new chapter 1A, which will be an overview of FCA's supervisory model;
  • Chapter 7 of SUP: the changes to this chapter will cover FCA's powers to vary permissions and the powers it will be given in the FS Bill. After legal cut-over SUP 7 will carry forward only to the FCA Handbook, with the Prudential Regulation Authority (PRA) explaining its powers on material outside its Handbook;
  • the Threshold Conditions Sourcebook (COND): the changes will align COND to the FCA-related threshold conditions in the FS Bill, specifically to include reference to the FCA business model condition. Again, COND will apply only to FCA Threshold Conditions after legal cut-over, with PRA's approach being addressed elsewhere; and
  • FCA powers over qualifying parent undertakings: this consults on a new tool for both FCA and PRA which the regulators will use outside the Handbook. The changes will give the regulators a power of direction, a rule-making power for information-gathering and a supporting enforcement power over "qualifying parent undertakings" of "qualifying authorised persons" (likely to be any authorised firm that is an investment firm) and UK recognised investment exchanges. Qualifying parent undertakings are those which are (i) incorporated in the UK or with a place of business in the UK, (ii) not themselves authorised firms or recognised investment exchanges or clearing houses and (iii) financial institutions of a type Treasury specifies. Treasury is currently consulting on the third condition, but the list is likely to include insurance, financial and mixed financial holding companies. The FS Bill requires the regulators to consult on a statement of policy on how they intend to use the powers, and in this paper FSA complies with the requirement on behalf of FCA.

FSA asks for comments by 29 January 2013 and will publish transitional provisions before legal cut-over. FSA also says it will publish a designated version of the existing Handbook before legal cut-over to show how rules will transition to the new regulators. (Source: CP12/34 – Regulatory Reform)