City watchdog tells finance sector it’s business as usual for regulation post-referendum until government says otherwise
The City watchdog has told the financial sector it should carry on complying with regulation as usual, until government decides otherwise.
The Financial Conduct Authority (FCA) has today acknowledged that the decision to leave the EU has "significant implications for the UK", particularly given the sheer amount of financial regulation in the UK that originates from the EU.
However, the regulator also stressed that such regulation would remain in force and applicable until any changes are announced, which would ultimately be a decision for government and parliament.
"Firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect," the statement from the FCA read.
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The statement continued: "The longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future. We will work closely with the Government as it confirms the arrangements for the UK’s future relationship with the EU."
The FCA also moved to reassure the industry that it was "in very close contact with the firms we supervise as well as the Treasury, the Bank of England and other UK authorities, and…monitoring developments in the financial markets".
Two topical examples of EU legislation that affects the UK's financial sector include MiFiD II and the Market Abuse Regulations.
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The Market Abuse Regulations are due to come into force in two weeks' time and are designed to make trading processes more transparent and insider trading more difficult. Law firm Linklaters revealed yesterday that just five per cent of UK firms were prepared for the introduction of the new rules.
Meanwhile, the Markets in Financial Instruments Directive – otherwise known as MiFID II – is designed to increase transparency in investment banking and better integrate the EU's financial markets and is due to come into force in 2018.
Grant Lee, an asset management regulation partner at PwC, said that he thought it would be unlikely that MiFID II would be completely struck off the country's legislation books.
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"The Directive is EU law at the time the UK was part of Europe," Lee said. "There are also aspects of MiFIDII which are already in the UK regulatory framework such as inducements and the Retail Distribution Review. And other aspects the UK Financial Regulator views as good regulatory practice, for example the bundling of research and brokerage deal commissions"