Draft Public Offers and Admissions to Trading Regulations 2023 Draft Securitisation Regulations 2023 Draft Financial Services Act 2021 (Overseas Funds Regime and Recognition of Parts of Schemes) (Amendment and Modification) Regulations 2024 Draft Data Reporting Services Regulations 2023

Tulip Siddiq Excerpts

Wednesday 17th January 2024 General Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under you, Mr Vickers. I thank the Minister for setting out the four statutory instruments under debate today, and I agree with him about shortening the names of such instruments.

As the Minister will know, I did give my full support to the Financial Services and Markets Act, and I am wholly committed to protecting the international competitiveness of the sector. That is why we will be supporting the secondary legislation today.

The draft Public Offers and Admissions to Trading Regulations 2023 are a positive development, in my opinion. The UK’s attractiveness as a listing destination will benefit from a more flexible approach to prospectus rules. Likewise, the draft Securitisation Regulations 2023 are an important step forward in developing a securitisation market in the UK that contributes to growth in the real economy.

We also support the aims of the draft Financial Services Act 2021 (Overseas Funds Regime and Recognition of Parts of Schemes) (Amendment and Modification) Regulations 2024, as they will provide smoother market access for overseas funds that have been determined to be equivalent to the UK’s in relation to consumer protection.

Finally, I welcome the long-overdue establishment of a UK consolidated tape under the draft Data Reporting Services Regulations 2023. That will hopefully boost the international competitiveness of UK capital markets by improving efficiency and transparency, reducing trading costs and attracting more investment.

However, of course, the Minister will know that I have some questions for him on all of the legislation before us today, and I hope that he will be able to address some of my concerns. First, while the draft regulations will replace the prospectus regulation and create a new framework, the new prospectus regime is not expected to come into effect until 2025. In the meantime, the competitiveness of the UK’s public markets will continue to suffer.

In addition, in the Treasury’s initial review of the prospectus regime, the Government committed to introducing a new regime of regulatory deference for offers in the UK of securities listed on certain designated overseas stock markets. Despite that review being published almost two years ago, this draft statutory instrument fails to introduce a deference mechanism for prospectuses. Will the Minister please confirm whether such a regime remains under consideration and, if so, how it will be delivered and in what timescale?

I also have a question about the draft Securitisation Regulations 2023. This SI recognises simple, transparent and standardised—STS—equivalent securitisations from the EU and elsewhere. However, the EU does not recognise UK STS securitisations. What assessment has the Minister made of the impact of that? What steps is he taking to get an arrangement with the EU in the light of what I have said? Also, during the consultation on that SI, the Association for Financial Markets in Europe expressed concern regarding the lack of clarity of transitional provisions for legacy transactions. Is the Minister confident that the provisions for historical securitisations in the SI as drafted address such concerns?

On the draft Financial Services Act 2021 (Overseas Funds Regime and Recognition of Parts of Schemes) (Amendment and Modification) Regulations 2024, it is important to note that this SI is part of a wider set of measures to bring the overseas funds regime, or OFR, online. The regime will apply to funds from jurisdictions that the Treasury has deemed “equivalent”, so the OFR will only become operational once those decisions by the Treasury have been made. In the light of that, will the Minister set out when he expects the Treasury to take the equivalence decisions that would enable overseas funds to utilise the streamlined approach envisioned under the new overseas funds regime?

Finally, the draft Data Reporting Services Regulations 2023 will bring us into line with the EU, as the Minister said, but it is also consulting on a consolidated tape, or CT, so I have concerns that the UK is at risk of falling behind competitor jurisdictions. The FCA has consulted on a CT for bonds, but that is unlikely to be operational before mid-2025. It has not even begun consultations for an equities CT, and the UK does not have a pre or post-trade equities CT. By contrast, as the Minister will know, the EU is racing ahead on an equities CT, so the longer that change takes to deliver, the more that key public market listings will be lost to our competitors. The UK’s status as a global financial centre will be put at risk. Will the Minister talk a bit about how he will ensure that swifter progress is made on CT reform to support the UK’s international competitiveness?

I look forward to the Minister’s response. We will not oppose any of the draft SIs, but I would like some answers.

[Bim Afolami]

It will be a pleasure to answer the questions of the hon. Member for Hampstead and Kilburn. I will take them in turn, but before I get to them I will say that I have very much noted the comments of the hon. Lady and those of my right hon. and hon. Friends about the speed of implementation and that being key to what the House and the Committee want to see so that we get the changes we all need.

On the prospectus rules coming into force in 2025, the hon. Member for Hampstead and Kilburn will appreciate that this is a complicated set of changes. The Treasury and industry needed to ensure that what we are doing, when that is such a comprehensive piece of work, was the right thing and had the broad support of industry. We have got that, but I repeat that I will be working very hard to make sure that we implement these as quickly as possible. We are closely engaging with the FCA while it is beginning the complex process of reviewing its rules and changing them. The FCA is committed to completing this by the first half of 2025—not just completing the work but actually having new rules published. I will increase the speed of that if humanly possible.

On the point from the hon. Member for Hampstead and Kilburn about securitisation, I am always keen to talk with European Union friends and colleagues across a range of matters. Indeed, I will be visiting Brussels soon in order to discuss these issues and a range of others. I am happy to continue to do that. She also mentioned the legacy transactions point that was brought up by the Association for Financial Markets. We are confident that the regulations are appropriate, but I am very happy to meet with the Association if it would like to discuss any of its concerns.

On the OFR and the equivalence judgments, the answer is: very soon, I hope. I will be updating the hon. Lady and the House as soon as I possibly can, because I recognise that this is important. In relation to the consolidated tape, lots of different competitor jurisdictions are trying to do this work, which is part of the evidence that we are doing the right thing. I am confident that we are going to do this faster and more effectively than our competitors.

[Tulip Siddiq]

I appreciate the Minister’s responses, but the EU does not recognise the UK STS securitisations. Has the Minister made an assessment of that? He says that he is going to Brussels to speak to them, but has he not already started speaking to them, or is this the first time? That is quite an oversight, considering that they do not recognise those securitisations.

[Bim Afolami]

The hon. Lady will appreciate that across a range of different issues there are often political reasons why the European Union may or may not do things. We are committed to making sure that it operates in a sensible way when it comes to the UK, because we know that the UK’s financial services ecosystem, regulatory regime and market make it the leading financial services centre. But I will continue to engage with the EU on that basis. To her precise point, there are a range of different issues we are talking to the European Union about at all levels of Government. Financial services is included in that, and I will continue to have those conversations.

[Tulip Siddiq]

Can I ask the Minister to write to me after his visit to Brussels?

[Bim Afolami]

Of course.

Question put and agreed to.

DRAFT SECURITISATION REGULATIONS 2023

Resolved,

That the Committee has considered the draft Securitisation Regulations 2023.—(Bim Afolami.)

DRAFT FINANCIAL SERVICES ACT 2021 (OVERSEAS FUNDS REGIME AND RECOGNITION OF PARTS OF SCHEMES) (AMENDMENT AND MODIFICATION) REGULATIONS 2024

Resolved,

That the Committee has considered the draft Financial Services Act 2021 (Overseas Funds Regime and Recognition of Parts of Schemes) (Amendment and Modification) Regulations 2024.—(Bim Afolami.)

dRAFT DATA REPORTING SERVICES REGULATIONS 2023

Resolved,

That the Committee has considered the draft Data Reporting Services Regulations 2023.—(Bim Afolami)