Draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2017

Simon Kirby Excerpts

Tuesday 14th March 2017 General Committees

[The Economic Secretary to the Treasury (Simon Kirby)]

I beg to move,

That the Committee has considered the draft Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2017.

What a pleasure it is to serve under your chairmanship, Mr Flello. The draft order will amend the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. This statutory instrument is proposed in the regulatory context of the revised markets in financial instruments directive and the markets in financial instruments regulation. I shall refer to those collectively as MiFID II. They were agreed by the EU in 2014 to strengthen the regulation and transparency of financial and commodity markets—an important commitment by the G20. MiFID II applies from 3 January 2018, and member states are required to transpose the directive into national law by 3 July this year. In the UK, that is being achieved through legislation and regulators’ rules.

I am pleased to say that last month we concluded our consultation on the legislation needed to transpose MiFID II, and now this draft order seeks to amend the regulated activities order, which sets the scope of our financial regulation, to give effect to MiFID II. The key changes are as follows. First, the draft order will allow the new investments and activities that are introduced by MiFID II, including, for example, emission allowances and the operation of an organised trading facility. Secondly, it will transfer the regulation of binary options from the Gambling Commission to the Financial Conduct Authority, where they will be regulated as financial instruments. That will allow consumers to benefit from strengthened consumer protection measures. Thirdly, the draft order will make a number of technical amendments, including the updating of definitions and references.

I am keen not to detain the Committee unnecessarily. However, I am happy to take questions and give answers later.

--- Later in debate ---

[Simon Kirby]

Let me start by welcoming the contributions made by right hon. and hon. Members. It is right and proper that we consider the draft order adequate and effective in meeting our important aim to tighten and reform our legislation, as a response to the weakness that has emerged from the financial crisis. We have consulted extensively on how we transpose these provisions effectively into UK law.

I will briefly touch on a few points. The hon. Members for East Lothian and for Stalybridge and Hyde asked what MiFID II means for Brexit. I will say two things. First, until exit negotiations conclude, the UK remains a full member of the EU, and all the rights and obligations of EU membership will remain in force. During that period, the Government will continue to negotiate, implement and apply EU legislation. Secondly, the outcome of the negotiations will determine what arrangements apply in relation to EU legislation in the future, once the UK has left the EU.

I think it fair to say that we have an open mind about MiFID III. It is about getting the correct balance between regulation and consumer protection; that must always be what we look out for. The hon. Member for Stalybridge and Hyde asked about binary options. It is important that consumers receive at least equivalent protection with binary options as with other derivative products.

The answer to whether the statutory instrument would still become law if rejected is no. We are here in our legislating capacity. This is secondary legislation. I urge all members of the Committee to ensure that we have increased transparency and resilience in our financial markets by supporting the draft order.

Question put and agreed to.