PART 1Introductory provisions

Citation and commencement

1.—(1) These Regulations may be cited as the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017.

(2) These Regulations come into force on 29th June 2017 —

(a)to enable the following to be done under the Act, as amended and applied by these Regulations—

(i)^M5rules to be made under section 137R (financial promotion rules) of the Act;

(ii)^M6,M7rules to be made under sections 213 (the compensation scheme) or 214 (general) of the Act;

(iii)^M8,M9rules to be made under paragraph 23 of Schedule 1ZA (the Financial Conduct Authority) to the Act, including rules that may be made as a result of amendments by these Regulations to the Financial Services and Markets Act 2000 (Qualifying EU Provisions) Order 2013 ;

(iv)fees to be charged under any rules that are made by virtue of paragraph (iii); and

^F2(v). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)^M10to enable rules to be made under regulation 11 (FCA rules) of the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001 .

(3) These Regulations come into force on 3rd July 2017—

(a)to enable—

(i) applications to be made under regulation 4;

(ii)directions to be given under regulation 16(1) to establish position limits applying on or after 3rd January 2018;

(iii)applications to be made, directions to be given, and requirements to be imposed, under regulation 17;

(iv)requirements to be imposed and directions to be given under regulation 27;

(v)requirements to be imposed under regulations 31 and 33; and

(vi)the FCA and the PRA to prepare and issue a statement of policy under paragraph 14 of Schedule 1; and

(b)to enable notifications to be given, reports or applications to be made, directions to be given, and requirements to be imposed under regulation 47 for the purposes of—

(i)[^F3any UK legislation which was relied on by the United Kingdom before IP completion day to implement^F3] the markets in financial instruments directive, including any [[^F4,F5assimilated^F5] law^F4] made under the directive, as it has effect on or after 3rd January 2018; and

(ii)^M11the markets in financial instruments regulation, including any [[^F4,F6assimilated^F6] law^F4] made under that regulation, as it applies under Article 55 of that regulation; and

(c)for the purposes of—

(i)paragraphs 6, 7, 16, 19, 20, 22, 23 and 28 of Schedule 1; and

(ii)paragraphs 25 and 26 of that Schedule in so far as they relate to a matter referred to in sub-paragraph (a) or (b) or in paragraph (i) of this sub-paragraph.

(4) These Regulations come into force on 31st July 2017 —

(a)to enable the following to be done under the Act, as amended and applied by these Regulations—

(i)^M12,M13notices to be given or sent under section 312A(1)(b) (exercise of passport rights by EEA market operator) or 312C (exercise of passport rights by recognised investment exchange) of the Act;

(ii)^M14entries to be added, removed, or altered in the record the FCA maintains under section 347(1) of the Act;

(iii)^M15,M16,M17notices relating to any relevant regulated activity to be given or received under paragraph 13(1) , (1B) , or (1C) of Schedule 3 to the Act ;

(iv)^M18the PRA to give consent under paragraph 13(1D) of that Schedule;

(v)^M19,M20preparations to be made under paragraph 13(1E) or (1F) of that Schedule;

(vi)^M21,M22,M23notices relating to any relevant regulated activity to be given or received under paragraph 14(1)(ba) , (1B) , or (1C) of that Schedule ;

(vii)^M24,M25preparations to be made under paragraph 14(1D) or 14(1E) of that Schedule; and

(viii)^{M26,M27,M28,M29,M30,M31,M32,M33,M34}notices relating to any relevant regulated activity to be given or received under paragraph 19(2) , (4) , (7B) , (8) , (11) , or (12) , or paragraph 20(1) , (3) , or (4) of that Schedule; and

(b)^M35to enable notices to be given under the following provisions of the Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001 for the purposes of Schedule 3 to the Act, as amended and applied by these Regulations—

(i)^M36regulation 4 (management companies, credit institutions and financial institutions: changes);

(ii)^M37regulation 4A (investment firms: changes to branch details);

(iii)^M38regulation 5A (investment firms: changes to services);

(iv)^M39regulation 11 (UK management companies, credit institutions and financial institutions);

(v)^M40regulation 11A (UK investment firms: changes to branch details); and

(vi)^M41regulation 12A (UK investment firms: changes to services).

^M42,M43(5) In paragraph (4) “relevant regulated activity” means a regulated activity which relates to any specified activity or specified investment in Part 2 or 3 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 that was amended or inserted by the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2017 .

(6) These Regulations come into force for all other purposes on 3rd January 2018.

Interpretation

2.—(1) In these Regulations—

^M44“the Act” means the Financial Services and Markets Act 2000 ;

[^F7“algorithmic trading” means trading in financial instruments where a computer algorithm automatically determines individual parameters of orders such as whether to initiate the order, the timing, price or quantity of the order or how to manage the order after its submission, with limited or no human intervention, and does not include any system that is only used for the purpose of routing orders to one or more trading venues or for the processing of orders involving no determination of any trading parameters or for the confirmation of orders or the post-trade processing of executed transactions;^F7]

[^F8“ancillary services” means any of the services and activities listed in Part 3A of Schedule 2 to the Regulated Activities Order;^F8]

[^F9“appropriate regulator” has the meaning given in section 55A of the Act;^F9]

“authorised person” has the same meaning as in section 31(2) (authorised persons) of the Act;

“branch” has the meaning given by [^F10Article 2.1.20 of the markets in financial instruments regulation^F10] ;

“client” has the meaning given by [^F11Article 2.1.7 of the markets in financial instruments regulation^F11] ;

“the Commission” means the Commission of the European Union;

“commodity derivative” has the meaning given by [^F12Article 2.1.30 of the markets in financial instruments regulation^F12] ;

[^F13“competent authority” means the authority designated by regulation 3;^F13]

“credit institution” has the meaning given by [^F14Article 2.1.19 of the markets in financial instruments regulation^F14] ;

[^F15“derivative” means a financial instrument referred to in paragraphs 4 to 10 of Part 1 of Schedule 2 to the Regulated Activities Order;^F15]

[^F16“direct electronic access” means an arrangement where a member or participant or client of a trading venue permits a person to use its trading code so the person can electronically transmit orders relating to a financial instrument directly to the trading venue and includes arrangements which involve the use by a person of the infrastructure of the member or participant or client, or any connecting system provided by the member or participant or client, to transmit the orders (direct market access) and arrangements where such an infrastructure is not used by a person (sponsored access);^F16]

“EEA” means the European Economic Area created by the EEA agreement;

“emission allowance” means an emission allowance as described in [^F17 paragraph 11 of Part 1 of Schedule 2 to the Regulated Activities Order^F17] ;

^F18...

“the FCA” means the Financial Conduct Authority;

[^F19“financial instrument” means those instruments specified in Part 1 of Schedule 2 to the Regulated Activities Order, read with Part 2 of that Schedule;^F19]

[^F20“high-frequency algorithmic trading technique” means an algorithmic trading technique characterised by—

“investment activity” means an activity listed in [^F21Part 3 of Schedule 2 to the Regulated Activities Order^F21] relating to a financial instrument;

“investment firm” has the meaning given by [^F22Article 2.1A of the markets in financial instruments regulation^F22] ;

“investment service” means any service listed in [^F23Part 3 of Schedule 2 to the Regulated Activities Order^F23] relating to a financial instrument;

“investment services and activities” means any of the services and activities listed in [^F24Part 3 of Schedule 2 to the Regulated Activities Order^F24] relating to a financial instrument;

“market abuse” means a contravention of Article 14 (prohibition of insider dealing and of unlawful disclosure of inside information) or 15 (prohibition of market manipulation) of the market abuse regulation;

^M45“market abuse regulation” means Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) ;

^M46“markets in financial instruments directive” means Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (recast) ;

^M47“markets in financial instruments regulation” means Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments ;

[^F25“multilateral trading facility” or “MTF”, “UK multilateral trading facility” or “UK MTF” and “EU multilateral trading facility” or “EU MTF” have the meanings given in Article 2.1.14, 2.1.14A and 2.1.14B respectively of the markets in financial instruments regulation;^F25]

“the PRA” means the Prudential Regulation Authority;

^M48“Part 4A permission” has the meaning given by section 55A(5) (application for permission) of the Act;

^M49“recognised investment exchange” has the meaning given by section 285(1)(a) (exemption for recognised investment exchanges and clearing houses) of the Act;

^M50“regulated activity” has the meaning given by section 22 (regulated activities) of the Act;

[^F26“Regulated Activities Order” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001^F26] ;

[^F26“Regulation (EU) 2017/578” means Commission Delegated Regulation (EU) 2017/578 supplementing Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments with regard to regulatory technical standards specifying the requirements on market making agreements and schemes;^F26]

[^F26“Regulation (EU) 2017/589” means Commission Delegated Regulation (EU) 2017/589 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the organisational requirements of investment firms engaged in algorithmic trading;^F26]

[^F26“Regulation (EU) 2017/591” means Commission Delegated Regulation (EU) 2017/591 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the application of position limits to commodity derivatives;^F26]

[^F26“SME growth market” means a MTF that is registered as an SME growth market in accordance with Part 5.10 of the Market Conduct sourcebook containing rules made by the FCA under the Act;^F26]

[^F27“regulated market”, “UK regulated market” and “EU regulated market” have the meanings given in Article 2.1.13, 2.1.13A and 2.1.13B respectively of the markets in financial instruments regulation;^F27]

[^F28“trading venue”, “UK trading venue” and “EU trading venue” have the meanings given in Article 2.1.16, 2.1.16A and 2.1.16B respectively of the markets in financial instruments regulation;^F28]

“the Tribunal” means the Upper Tribunal.

(2) In these Regulations any reference to the markets in financial instruments directive or the markets in financial instruments regulation includes any EU legislation made under the directive or the regulation.

[^F29(3)Unless the context otherwise requires, all references in these Regulations to—

(a)a trading venue are to a UK trading venue;

(b)a regulated market are to a UK regulated market;

(c)an MTF are to a UK MTF;

(d)an OTF are to a UK OTF; and

(e)an EU regulated market, EU MTF or EU OTF include EU regulated markets, MTFs and OTFs in EEA countries.

(4)References in these Regulations to a “third country” (including in expressions including the words “third country”) are, except where the context otherwise requires, to be read as references to a country other than the United Kingdom.

(5)Any reference in these Regulations to a sourcebook is to a sourcebook in the Handbook of Rules and Guidance published by the FCA containing rules made by the FCA under the Act, as the sourcebook has effect on IP completion day.^F29]

[^F30References to EU Regulations etc

2A.Any reference in these Regulations to any EU Regulation, EU decision or EU tertiary legislation (within the meaning of section 20 of the European Union (Withdrawal) Act 2018) is, unless the contrary intention appears, to be treated as a reference to that EU regulation, EU decision or EU tertiary legislation as it [^F31forms part of [^F32assimilated^F32] law^F31].^F30]

Designation of competent authorities

3.[^F33—(1)The FCA is designated to carry out all the functions of a competent authority provided for in—

(a)the Act;

(b)the markets in financial instruments regulation; and

(c)rules made under section 137A (the FCA general rules) of the Act or any other subordinate legislation conferring functions on the FCA made under the Act.^F33]

(2) The PRA is designated to carry out any duty of a competent authority that relates to a PRA authorised person where the PRA has the function of carrying out that duty under—

(a)these Regulations;

(b)^M51,F34Parts 4A , 12 to 15, 22, and 25 of the Act ... ; or

(c)^M52rules made under section 137G (the PRA's general rules) of the Act or any other subordinate legislation conferring functions on the PRA made under the Act.

(3) Where a PRA authorised person is obliged to keep records at the disposal of the competent authority under Article 25 (obligation to maintain records) of the markets in financial instruments regulation both the FCA and PRA are designated as the competent authority.

^M53(4) The Bank of England is designated to carry out any duty of a competent authority that relates to a central counterparty (as defined by section 313(1) (interpretation of Part 18) of the Act) and is provided for in the following provisions of the markets in financial instruments regulation—

(a)Article 29 (clearing obligation for derivatives traded on regulated markets and timing of acceptance for clearing);

(b)Article 30 (indirect clearing arrangements);

(c)Article 35 (non-discriminatory access to a CCP);

(d)Article 36 (non-discriminatory access to a trading venue);

(e)Article 37 (non-discriminatory access to and obligation to licence benchmarks); and

(f)Article 54.2 (transitional provisions).

^M54(5) In this regulation “PRA authorised person” has the meaning given by section 2B(5) (the PRA's general objective) of the Act.

PART 2Exempt and third-country investment firms

CHAPTER 1Exempt investment firms

Applications to be an exempt investment firm

^M554.—(1) A person may apply in accordance with section 55A (application for permission) of the Act for a Part 4A permission to carry on regulated activities as an exempt investment firm.

^M56,M57(2) An authorised person may become entitled to carry on regulated activities as an exempt investment firm only by applying for a variation of its Part 4A permission in accordance with section 55H (variation by FCA) or 55I (variation by PRA) of the Act.

(3) A person may only apply for a Part 4A permission as mentioned in paragraph (1), and an authorised person may only apply for a variation of their Part 4A permission as mentioned in paragraph (2), if the person or authorised person has its relevant office in the United Kingdom.

(4) In this regulation “relevant office” means—

(a)in relation to a body corporate, its registered office or, if it has no registered office, its head office; and

(b)in relation to a person, or authorised person other than a body corporate, the person's head office.

Limitation on exempt investment firms

^F355. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Requirements applying to exempt investment firms

6.—(1) If the appropriate regulator—

(a)gives to a person who has applied under regulation 4(1) a Part 4A permission to carry on regulated activities as an exempt investment firm; or

(b)varies the Part 4A permission of an authorised person who has applied as mentioned in regulation 4(2) for a variation to permit them to carry on regulated activities as an exempt investment firm,

^M58,M59the requirements specified in paragraph (3) (“the specified requirements”) shall be treated as being imposed under section 55L (imposition of requirements by FCA) (where the FCA is the appropriate regulator) or 55M (imposition of requirements by PRA) (where the PRA is the appropriate regulator) of the Act.

(2) Notwithstanding paragraph (1)—

(a)the treatment of the specified requirement as a requirement imposed under section 55L or 55M of the Act does not—

(i)^M60amount for the purpose of section 55X(1) (determination of applications: warning notices and decision notices) of the Act to a proposal to exercise the power of the appropriate regulator under section 55L(1) or 55M(1) of the Act;

(ii)^M61amount for the purpose of section 55X(4) of the Act to a decision to exercise the power of the appropriate regulator under section 55L(1) or 55M(1) of the Act; or

(iii)^M62entitle the person to refer a matter under section 55Z3(1) (right to refer matters to the Tribunal) of the Act;

(b)the specified requirements shall not expire until the person ceases to be an exempt investment firm; and

(c)no application under section 55L(5) or 55M(5) of the Act to vary or cancel any of the specified requirements may be made by the person unless they inform the appropriate regulator when making the application that they wish to cease to be an exempt investment firm.

(3) The requirements are that the person—

(a)does not hold clients' funds or securities and does not, for that reason, at any time, place themselves in debit with their clients;

(b)does not provide any investment service other than the—

(i)reception and transmission of orders in transferable securities and units in collective investment undertakings; and

(ii)provision of investment advice in relation to the financial instruments mentioned in paragraph (i); and

(c)in the course of providing the investment services mentioned in sub-paragraph (b), transmits orders only to—

[^F36(i)an investment firm which—

(aa)has a Part 4A permission to carry on regulated activities relating to investment services and activities; or

(bb)is authorised in accordance with the markets in financial instruments directive;^F36]

[^F37(ii)a credit institution which—

(aa)has a Part 4A permission to carry on the regulated activity of accepting deposits and falls within paragraph (3A); or

(bb)is authorised in accordance with Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and investment firms;^F37]

[^F38(iii)a branch of an investment firm or of a credit institution authorised in a third country and which is subject to, and complies with, prudential rules considered by the appropriate regulator to be at least as stringent as those laid down in [^F39Part 9C rules, CRR rules,^F39] the markets in financial instruments directive, the capital requirements regulation, and the solvency 2 directive;^F38]

(iv)a collective investment undertaking authorised under the law of [^F40the United Kingdom or of^F40] an EEA State to market units to the public and to a manager of such an undertaking; or

(v)an investment company with fixed capital, the securities of which are listed or dealt in on [^F41a UK regulated market or^F41] a regulated market in an EEA State.

[^F42(3A)A credit institution falls within this paragraph if—

(a)it has its head office in the United Kingdom; and

(b)it is not a credit union within the meaning of the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985, or a friendly society within the meaning of section 417(1) of the Act.^F42]

[^F43(4)In paragraph (3), “investment company with fixed capital” means a company—

(a)the exclusive object of which is to invest its funds in various stocks and shares, land or other assets with the sole aim of spreading investment risks and giving its shareholders the benefit of the results of the management of their assets; and

(b)which offers its own shares for subscription by the public.^F43]

^F44(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F45(6)In this regulation—

“appropriate regulator” means the appropriate regulator for the purposes of section 55A in relation to an application under regulation 4(1);

[^F46“the capital requirements regulation” means Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms;^F46]

[^F47“CRR rules” has the meaning given in section 144A of the Act;^F47]

[^F47“Part 9C rules” has the meaning given in section 143F(1) of the Act;^F47]

“the solvency 2 directive” means Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II).^F45]

Transitional provision: exempt investment firms

7.—(1) An authorised person who immediately before 3rd January 2018 was—

(a)^M63an exempt investment firm by virtue of regulation 9A (transitional provision: exempt investment firms) of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007; or

(b)^M64permitted to carry on regulated activities as an exempt investment firm in accordance with permission granted in accordance with regulation 4C (requirements to be applied to exempt investment firms) of those Regulations,

^M65becomes an exempt investment firm with effect from that day as if they had applied as mentioned in regulation 4(1) or (2) and had been granted the permission or variation on that day.

Meaning of “exempt investment firm” in Chapter 1

8. In this Chapter “exempt investment firm” means an authorised person who—

(a)is an investment firm; and

(b)has a Part 4A permission;

[^F48but to whom the appropriate regulator has granted exemption from authorisation and operating conditions which usually apply to investment firms.^F48]

CHAPTER 2Third country investment firms

Third country firms with an EEA branch: provision of services

^F499. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FCA power to intervene in relation to third country firms with an EEA branch

^F5010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Third country firms registered with [^F51the FCA^F51] : provision of services

11.[^F52—(1)^F52] A third country firm registered with [^F53the FCA^F53] is not to be regarded as carrying on a regulated activity if it carries on the activity in the course of exercising rights under Article 46.1 (general provisions) of the markets in financial instruments regulation.

[^F54(2)For the purposes of this regulation, third country firms which are included on the register with ESMA immediately before IP completion day under Article 46.2 of the markets in financial instruments regulation are to be treated after exit day as being registered with the FCA.^F54]

FCA power to intervene in relation to third country firms registered with [^F55the FCA^F55]

12.—(1) The FCA may exercise its power of intervention in relation to a third country firm registered [^F56with it^F56] where it considers that —

(a)the firm has acted, or is acting, in a manner which is clearly prejudicial to the interests of investors or the orderly functioning of the markets; or

(b)the firm has seriously infringed provisions—

(i)applicable to the firm in the country in which it is established; and

[^F57(ii)on the basis of which—

(aa)the Commission has adopted a decision in relation to the country under paragraph 1 of Article 47 of the markets in financial instruments regulation before IP completion day; or

(bb)the Treasury have made regulations in relation to the country under that paragraph after IP completion day;^F57]

(2)Section 197 (procedure on exercise of power of intervention) applies to the exercise by the FCA of its power of intervention under paragraph (1) [^F58as it applied^F58] to the exercise by the FCA[^F59before IP completion day^F59] of its power of intervention under Part 13 of the Act generally.

(3) Where it appears to the FCA that the power of intervention is exercisable under paragraph (1) in relation to a third country firm registered [^F60with it^F60] the FCA must give—

^F61(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)the firm written notice of its concerns which—

(i)requires the firm to put an end to the conduct which gives rise to the concern;

(ii)states that the FCA's power of intervention will become exercisable in accordance with this regulation; and

(iii)indicates any requirements that the FCA proposes to impose on the firm in exercise of its power of intervention in the event the power becomes exercisable.

(4) The FCA may then only exercise its power of intervention under paragraph (1) if—

(a)the FCA considers a reasonable time has elapsed since it gave the written [^F62notice^F62] under paragraph (3); [^F63and^F63]

(b)the firm has not put an end to the concerning conduct;

^F64(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F64(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F65(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F65(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Third country firms: provision of services to eligible counterparties or clients considered to be professionals

13. A third country firm is not to be regarded as carrying on a regulated activity if it carries on the activity in the course of exercising rights under the third paragraph of Article 46.5 (general provisions) of the markets in financial instruments regulation.

Third country firms: financial promotions

14.—(1) The communication, in the course of business, of an invitation or inducement to engage in investment activity is not to be regarded as a communication for the purposes of section 21(1) (restrictions on financial promotion) of the Act if it is made in the course of exercising rights under Title 8 of the markets in financial instruments regulation.

(2) For the purposes of paragraph (1) a communication is made in the course of exercising rights under Title 8 of the markets in financial instruments regulation if it is made—

(a)by a third country firm registered with [^F66the FCA^F66] to eligible counterparties or to clients considered to be professionals in the course of exercising rights under Article 46.1 (general provisions) [^F67of the Regulation^F67] ; [^F68or^F68]

(b)by a third country firm to eligible counterparties or to clients considered to be professionals in the course of exercising rights under Article 46.5 of the Regulation provided that—

(i)the counterparty or client has initiated at his or her own exclusive initiative the provision by the firm of an investment service or activity under that Article to the counterparty or client; and

(ii)^F69the communication is in respect of the investment service or activity; ...

^F70(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) An order made by the Treasury under section 21(5) of the Act does not apply to a person who, in the course of business, communicates an invitation or inducement to engage in investment activity if—

(a)the communication is made in the course of providing investment services or performing investment activities with or without ancillary services to eligible counterparties or clients considered to be professionals; and

(b)the person is—

(i)established in a country which is subject to an equivalence [^F71determination^F71] ; or

(ii)permitted to provide those services under Article 46.5 of the markets in financial instruments regulation.

(4) For the purposes of paragraph (3)—

[^F72(a)“equivalence determination” means—

(i)a decision adopted by the Commission in relation to a country under paragraph 1 of Article 47 of the markets in financial instruments regulation before IP completion day which has not been withdrawn by a subsequent decision adopted by the Commission under that Article before exit day; or

(ii)regulations made by the Treasury in relation to a country under that paragraph after IP completion day which have not subsequently been revoked;^F72]

[^F73(b)a country is subject to an equivalence determination if a period of more than three years has elapsed since—

(i)the adoption of the decision by the Commission, beginning on the day after the date of the adoption of the decision; or

(ii)the making of the regulations by the Treasury, beginning on the day after the day on which the regulations were made;^F73]

Interpretation of Chapter 2

15. In this Chapter—

“clients considered to be professionals” means professional clients (as defined by [^F74Article 2(1)(8) of the markets in financial instruments regulation^F74] ) who fall within [^F75Part 2 of Schedule 1 to that regulation^F75] ;

[^F76“power of intervention” means the power of the regulator to impose any requirement in relation to the firm in respect of which the power is exercisable which the regulator could impose if—

“third country firm” has the same meaning as in [^F77Article 2.1.42 of the markets in financial instruments regulation^F77] ;

“third country firm registered with [^F78the FCA^F78]” means a third country firm which—

^F81...

PART 3Position limits and position management controls in commodity derivatives

[^F82FCA rules relating to position limits

15A.—(1)The FCA may by rules require relevant persons to establish and apply—

(a)position limits in respect of specified commodity derivatives, or commodity derivatives of a specified class, that are traded on a trading venue, and

(b)position management controls in relation to the trading of commodity derivatives.

(2)The power to make rules under paragraph (1) is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of the Act.

(3)In making rules under paragraph (1) the FCA must have regard to its competitiveness and growth objective in section 1EB of the Act.

(4)Rules under paragraph (1) may provide for matters that relevant persons must have regard to when establishing position limits, or position management controls, under requirements imposed by the rules.

(5)Rules under paragraph (1) may provide for exemptions from the requirements imposed by the rules to such extent, and in such cases, as the rules may specify.

(6)The reference in paragraph (1)(b) to position management controls includes (for example) arrangements under which—

(a)the open interest positions of persons can be monitored;

(b)information and documentation can be obtained from persons about the size of positions entered into;

(c)requirements can be imposed on persons to terminate or reduce positions or to provide liquidity.

(7)The following provisions of Part 9A of the Act (rules and guidance) apply in relation to rules made by the FCA under this regulation as they apply in relation to rules made by the FCA under that Part of the Act, subject to the modification in paragraph (8)—

(a)section 137T (general supplementary powers);

(b)Chapter 2 (modification, waiver, contravention and procedural provisions), with the exception of sections 138D (actions for damages) and 138EA (matters to consider when making rules);

(c)section 141A (power to make consequential amendments of references to rules etc).

(8)Section 137T applies as if the reference to authorised persons were a reference to relevant persons to whom rules under this regulation apply.

(9)A requirement imposed by rules under this regulation is, for the purposes of section 296 of the Act (regulator’s power to give directions), to be treated as an obligation imposed under the Act.

(10)In this Part “relevant persons” means market operators and investment firms operating a trading venue.^F82]

FCA duty to establish position limits

16.—(1) The FCA must, by giving directions, establish position limits in respect of commodity derivatives traded on trading venues in the United Kingdom and economically equivalent over the counter contracts.

(2) The FCA must establish position limits under paragraph (1) on the basis of all positions held by a person in the contract to which the limit relates and those held on the person's behalf at an aggregate group level in order to—

(a)prevent market abuse; and

(b)support orderly pricing and settlement conditions, which includes, but is not restricted to—

(i)preventing market distorting positions; and

(ii)ensuring convergence between prices of commodity derivatives in the delivery month and spot prices for the underlying commodity without prejudice to price discovery on the market for the underlying commodity.

(3) The FCA must determine if a position is held at an aggregate group level for the purpose of paragraph (2) in accordance with the relevant methods.

(4)Position limits established by the FCA under this regulation must be published in a manner the FCA considers appropriate.

(5) In this regulation—

[^F83“group” means a parent undertaking and all its subsidiary undertakings, and for these purposes, “parent undertaking” and “subsidiary undertaking” have the same meanings as in section 420 of the Act;^F83]

“the relevant methods” means the methods determined by [^F84Article 4 of Regulation (EU) 2017/591.^F84]

Exemption for non-financial entities

17.—(1) The calculation of the size of a position a person holds for the purposes of regulation 16(2) must not include a position which is—

(a)held by or on behalf of a non-financial entity;

(b)objectively measurable as reducing risks directly relating to the commercial activity of that non-financial entity; and

(c)approved by the FCA in accordance with—

(i)the relevant criteria and methods; and

(ii)the relevant procedure.

(2) An application to the FCA for approval under paragraph (1)(c) must—

(a)be made in such manner as the FCA may direct; and

(b)contain or be accompanied by such information as the FCA may reasonably require for the purpose of determining the application.

(3) At any time after receiving an application and before determining it the FCA may require the applicant to provide the FCA with such further information as the FCA reasonably considers necessary to enable the FCA to determine the application.

(4) The FCA may give different directions, and may impose different requirements, in relation to different applications.

(5) In this regulation—

“the relevant criteria and methods” means the criteria and methods determined by [^F85Article 7 of Regulation (EU) 2017/591; and^F85]

“the relevant procedure” means the procedure determined by [^F86Article 8 of Regulation (EU) 2017/591.^F86]

Content of position limits

18. A position limit established by the FCA under regulation 16 must specify clear quantitative thresholds for the maximum size of a position in a commodity derivative that a person can hold.

FCA duty to use [^F87Regulation (EU) 2017/591^F87] to establish position limits and to review if market changes

19.—(1) The FCA must, unless regulation 25 applies, establish position limits under regulation 16 in accordance with [^F88Regulation (EU) 2017/591^F88] .

(2) The FCA must review a position limit it has established under regulation 16 where there is—

(a)a significant change in deliverable supply or open interest; or

(b)any other significant change on the market, based on the FCA's determination of deliverable supply or open interest.

(3) Where following a review the FCA believes that the position limit should be reset it must establish a new position limit under regulation 16.

ESMA opinions on position limits

^F8920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Position limits affecting multiple EEA jurisdictions

^F8921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cooperation with other competent authorities regarding position limits affecting multiple EEA jurisdictions

^F8922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General requirements for position limits

23.Position limits established by the FCA under regulation 16 must be—

(a)transparent and non-discriminatory;

(b)specify how they apply to persons; and

(c)take account of the nature and composition of market participants and of the use those market participants make of the contracts admitted to trading.

FCA duty to notify ESMA of established position limits and position management controls

^F9024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Procedure in exceptional cases

25.—(1) The FCA may establish a position limit under regulation 16 which is more restrictive than would be permitted by [^F91Regulation (EU) 2017/591^F91] (“a more restrictive position limit”) in exceptional cases, if the position limit is objectively justified and proportionate taking into account—

(a)the liquidity of the specific market; and

(b)the orderly functioning of that market.

(2) Where the FCA establishes a more restrictive position limit the FCA must publish that position limit on its website.

(3) The FCA must not impose a more restrictive position limit for a period of more than six months from the day it is published under paragraph (2).

(4) But the FCA may impose the more restrictive position limit for further periods of no more than six months each if the position limit continues to be objectively justified and proportionate taking into account the matters mentioned in paragraph (1)(a) and (b).

^F92(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F92(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F92(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^F93Effect of position limits established by the FCA ...

26.—(1) A person must not hold a position which is in excess of a position limit established under regulation 16, regardless as to whether the person is in the United Kingdom or not.

^F94(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FCA power to require information

27.—(1) The FCA may, in such manner as it may direct, require a person to provide information on, or concerning—

(a)a position the person holds in a relevant commodity derivative or over the counter contract; or

(b)trades a person has undertaken, or intends to undertake, in a relevant commodity derivative or over the counter contract.

(2) The FCA may, in such manner as it may direct, require the operator of a trading venue to provide information on, or concerning, trades a person has undertaken, or intends to undertake in a relevant commodity derivative or over the counter contract.

(3) In this regulation a commodity derivative or over the counter contract is relevant if the FCA—

(a)has established a position limit under regulation 16 in respect of that derivative or contract; or

(b)is considering whether it is required to establish or modify a position limit in respect of that derivative or contract under regulation 16.

FCA power to intervene

28.—(1) If the FCA considers it necessary for the purpose of the exercise by the FCA of functions under [^F95these Regulations^F95] or the markets in financial instruments regulation the FCA may—

(a)limit the ability of a person to enter into a contract for a commodity derivative;

(b)restrict the size of a position a person may hold; or

(c)require a person to reduce the size of a position held.

^F96(2) The FCA may exercise the power under paragraph (1) notwithstanding that the limitation, restriction, or reduction would be more restrictive than a position limit established by the FCA under regulation 16 ...

(3) Paragraph (1) applies regardless as to whether the person is in the United Kingdom or not where the position relates to a commodity derivative traded on a trading venue established in the United Kingdom or an economically equivalent over the counter contract.

(4) If the FCA imposes a limitation, restriction, or requirement under paragraph (1) it must issue a notice to the person.

(5) A person on whom a limitation, restriction or reduction has been imposed under paragraph (1) may refer that matter to the Tribunal.

Cooperation with ESMA and other competent authorities in respect of interventions to restrict, reduce, or limit positions

^F9728A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation of Part 3

29.—(1) In this Part an over the counter contract is economically equivalent to a commodity derivative if it satisfies the criteria set out in [^F98Article 6 of Regulation (EU) 2017/591.^F98]

(2) In this Part—

^F99...

^F100...

[^F101“market operator” has the same meaning as in the markets in financial instruments regulation;^F101]

“position” means a net position in a commodity derivative traded on a trading venue in [^F102the United Kingdom^F102] and any economically equivalent over the counter contract that has been calculated in accordance with the methodology determined by [^F103Articles 3 and 4 of Regulation (EU) 2017/591;^F103]

“position limit” means a limit on the maximum size of a position which a person may hold at any time; and

[^F104“relevant person” has the meaning given by regulation 15A(10)^F104]

[^F105“significant volumes” has the meaning given by [^F106Article 5 of Regulation (EU) 2017/591^F106].^F105]

“trading venue” has the meaning given in regulation 2 but also includes a facility mentioned in—

PART 4Algorithmic trading etc by members of trading venues covered by certain exemptions from the markets in financial instruments directive

Algorithmic trading

30.—(1) A member of, or participant in, a regulated market or multilateral trading facility (“M”) that engages in algorithmic trading must comply with the requirements of this regulation if —

(a)[^F107M is established in^F107] the United Kingdom;

[^F108(b)M falls within paragraph (1A); and^F108]

(c)M does not have a Part 4A permission[^F109to carry on a regulated activity which is any of the investment services and activities^F109] .

[^F110(1A)M falls within this paragraph if M is—

(a)the society incorporated by Lloyd's Act 1871 known by the name of Lloyd's;

(b)an authorised person with a Part 4A permission to carry on the regulated activity of—

(i)effecting or carrying out contracts of insurance under article 10 of the Regulated Activities Order;

(ii)insurance risk transformation under article 13A of the Regulated Activities Order;

(iii)managing the underwriting capacity of a Lloyd's syndicate under article 57 of the Regulated Activities Order,

when carrying on those activities (and any other activities permitted by rules made by the FCA or the PRA under the Act);

(c)an operator (within the meaning of regulation 3(2) of the Greenhouse Gas Emissions Trading Scheme Regulations 2012), subject to compliance obligations under those Regulations who when dealing in emission allowances does not execute client orders and does not provide any investment services or perform any investment activities other than dealing on own account, provided that the operator does not apply a high-frequency algorithmic trading technique;

(d)a collective investment undertaking, pension fund or a depositary or manager of such an undertaking;

(e)a person (“P”)—

(i)dealing on own account, including a market maker, in commodity derivatives or emission allowances or derivatives thereof, excluding a person who deals on own account when executing client orders; or

(ii)providing investment services, other than dealing on own account, in commodity derivatives or emission allowances or derivatives thereof to the customers or suppliers of P's main business,

provided that in each case the activity in paragraph (i) or (ii), considered both individually and on an aggregate basis, is an ancillary activity to P's main business, when considered on a group basis, and paragraph (1B) applies.

(1B)This paragraph applies if—

(a)P's main business is not—

(i)the provision of investment services;

(ii)banking activities requiring permission under Part 4A of the Act (or banking activities which would require such permission if they were carried on in the United Kingdom); or

(iii)acting as a market-maker in relation to commodity derivatives;

(b)P does not apply a high-frequency algorithmic trading technique; and

(c)[^F111P reports to the FCA under regulation 47^F111] upon request the basis on which P considers that [^F112P’s activity under paragraph (1A)(e)(i) and (ii)^F112] is ancillary to P's main business.^F110]

(2) M must have in place effective systems and [^F113risk^F113] controls, suitable to the business it operates, to ensure that M's trading systems—

(a)are resilient and have sufficient capacity;

(b)are subject to appropriate trading thresholds and limits; and

(c)prevent the sending of erroneous orders or the systems otherwise functioning in a way that may create or contribute to a disorderly market.

(3) M must have in place effective systems and risk controls to ensure that M's trading systems cannot be used for any purpose that is contrary to—

(a)the market abuse regulation; or

(b)the rules of a trading venue to which it is connected.

(4) M must have in place effective business continuity arrangements to deal with any failure of its trading systems.

(5) M must ensure M's systems are fully tested and properly monitored to ensure that they meet the requirements set out in paragraph (2) to (4).

(6) If M engages in algorithmic trading in the United Kingdom [^F114or in an EEA state^F114] M must notify the FCA.

^F115(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) M must arrange for records to be kept in relation to the matters referred to in this regulation and ensure that those records are sufficient to enable the FCA to monitor M's compliance with the requirements imposed on M by this regulation.

^F116(9) If M engages in a high-frequency algorithmic trading technique ... M must store accurate and time sequenced records of all its placed orders, cancelled orders, executed orders, and quotations on trading venues, in an approved form.

(10) If M engages in algorithmic trading to pursue a market making strategy M must, taking into account the liquidity, scale, and nature of the specific market and the characteristics of any financial instrument traded—

(a)carry out market making continuously during a specified proportion of the market or facility's trading hours, except under exceptional circumstances, with the result that liquidity is provided on a regular and predictable basis to that market or facility;

(b)if the specified circumstances arise, enter into a binding written agreement with the market or facility which—

(i)specifies the obligations of M under the agreement;

(ii)imposes obligations on M that are in accordance with sub-paragraph (a); and

(iii)includes the specified content; and

(c)have in place effective systems and controls to ensure that M meets the obligations under the agreement mentioned in sub-paragraph (b).

(11) In paragraph (10) M pursues a market making strategy if—

(a)M is a member of, or participant in, one or more regulated markets or multilateral trading facilities;

(b)M's strategy, when dealing on M's own account, involves posting firm, simultaneous two-way quotes of comparable size and at competitive prices relating to one or more financial instruments on a single regulated market or multilateral trading facility, or across different regulated markets or multilateral trading facilities; and

(c)as a result the result liquidity is provided on a regular and frequent basis to the overall market.

(12) In this regulation—

“approved form” means a form specified as an approved form by [^F117Article 28 of Regulation (EU) 2017/589;^F117]

“exceptional circumstances” means circumstances specified in [^F118Article 3 of Regulation (EU) 2017/578;^F118]

“the specified circumstances” means the circumstances specified in [^F119Article 1 of Regulation (EU) 2017/578; and^F119]

“the specified content” means the content specified by [^F120Article 2 of Regulation (EU) 2017/578.^F120]

Provision of information to the FCA concerning algorithmic trading

31.[^F121—(1)If a member of, or participant in, a regulated market or multilateral trading facility (“M”) is subject to the requirements set out in regulation 30 the FCA may require M to provide the information specified in paragraph (2) on a regular or ad hoc basis.^F121]

(2) The specified information for the purposes of paragraph (1) is—

(a)a description of the nature of M's algorithmic trading strategies;

(b)details of the trading parameters or limits to which M's trading systems are subject;

(c)information concerning the [^F122compliance and risk controls^F122] M has in place to ensure M meets any requirements imposed on M by regulation 30(2) to (4) (“M's [^F122compliance and risk controls^F122] ”);

(d)^F123details of M's testing of M's systems ... for the purposes of regulation 30(5);

(e)any records M keeps for the purposes of regulation 30(8) and (9); and

(f)any further information about M's algorithmic trading and systems used for that trading.

^F124(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Direct electronic access

32.—(1) A member of, or participant in, a regulated market or multilateral trading facility that provides direct electronic access to the market or facility (“M”) must comply with the requirements set out in paragraphs (4) to (9) if condition A or B is met.

(2) Condition A is that—

(a)[^F125M is established in^F125] the United Kingdom;

[^F126(b)M falls within paragraph (1A) of regulation 30; and^F126]

(c)M does not have a Part 4A permission[^F127to carry on a regulated activity which is any of the investment services and activities^F127] .

(3) Condition B is that M provides direct electronic access in accordance with the [^F128law of the United Kingdom^F128] for the purposes of Article 54.1(transitional provisions) of the markets in financial instruments regulation.

(4) M must have in place effective systems and controls which ensure—

(a)M conducts an assessment and review of the suitability of clients using the service;

(b)clients using the service are prevented from exceeding appropriate pre-set trading and credit thresholds;

(c)trading by clients using the service is properly monitored; and

(d)risk controls prevent trading by clients which—

(i)may create risks to M itself;

(ii)could create, or contribute to, a disorderly market;

(iii)could be contrary to the market abuse regulation; or

(iv)could be contrary to the rules of the regulated market or multilateral facility to which M provides direct electronic access.

(5) M must monitor the transactions made by clients to which it provides direct electronic access to a regulated market or multilateral trading facility to identify—

(a)infringements of the rules of the regulated market or multilateral trading facility;

(b)disorderly trading conditions; or

(c)conduct which may involve market abuse.

(6) If M's monitoring under paragraph (5) identifies an infringement of the rules of a regulated market or multilateral trading facility, disorderly trading conditions, or conduct which may involve market abuse M must notify the FCA.

(7) M must have a binding written agreement with each client which—

(a)details the rights and obligations of both parties arising from the provision of the service; and

(b)states that M is responsible for ensuring the client complies with the requirements of the [^F129UK law on markets in financial instruments^F129] and the rules of the regulated market or a multilateral trading facility; and

(8) M must notify—

(a)^F130the FCA that M is providing direct electronic access services; ...

^F131(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) M must arrange for—

(a)records to be kept on the matters referred to in [^F132paragraphs (4), (5), and (7)^F132] ; and

(b)records to be kept to enable M to meet any requirement imposed on them under regulation [^F13333^F133] .

^M67(10) In this regulation the provision of direct electronic access is in accordance with the [^F134law of the United Kingdom^F134] for the purposes of Article 54.1 (transitional provisions) of the markets in financial instruments regulation if it is an activity subject to the exclusion in Article 72 (overseas persons) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2000 .

[^F135(11)References to “UK law on markets in financial instruments” are to the law of the United Kingdom which was relied on by the United Kingdom immediately before IP completion day to implement Directive 2014/65/EU and its implementing measures—

(a)as they have effect on IP completion day, in the case of rules made by the FCA or by the PRA under the Act;

(b)as amended from time to time, in all other cases.^F135]

Provision of information to the FCA concerning direct electronic access

33.—(1) The FCA may require a member of, or participant in, a regulated market or multilateral trading facility subject to the requirements set out in regulation 32 (“M”) to provide on a regular or ad hoc basis—

(a)a description of the systems [^F136and controls^F136] mentioned in regulation [^F13732(4)^F137] ;

(b)evidence that those systems [^F138and controls^F138] have been applied; and

(c)the information stored in accordance with regulation 32(9) .

^F139(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acting as a general clearing member

34.—(1) A member of, or participant in, a regulated market or multilateral trading facility that acts as a general clearing member for other persons (“M”) must comply with the requirements set out in paragraph (2) if—

(a)[^F140M is established in^F140] the United Kingdom;

[^F141(b)M falls within paragraph (1A) of regulation 30; and^F141]

(c)M does not have a Part 4A permission[^F142to carry on a regulated activity which is any of the investment services and activities^F142] .

(2) M must have in place effective systems and controls to ensure—

(a)M's clearing services are only provided to persons who —

(i)are suitable recipients of those services; and

(ii)meet clear criteria applied by those systems and controls regarding which persons are suitable to receive clearing services; and

(b)requirements are imposed on the persons to whom clearing services are being provided to reduce risks to M and to the market.

(3) M must have a binding written agreement with any person to whom they are providing clearing services detailing the rights and obligations of both parties arising from the provision of the service.

(4) In this regulation “clearing services” means the services provided by M in the course of acting as a general clearing member for other persons.

Synchronisation of business clocks

35.—(1) A member of, or participant in, a trading venue (“M”) must comply with the requirement set out in paragraph (2) if—

(a)[^F143M is established in^F143] the United Kingdom;

[^F144(b)M falls within paragraph (1A) of regulation 30; and^F144]

(c)M does not have a Part 4A permission[^F145to carry on a regulated activity which is any of the investment services and activities^F145] .

(2) M must synchronise the business clock M uses to record the date and time of any reportable event with the business clock the trading venue uses for that purpose to the level of accuracy specified in [^F146Commission Delegated Regulation (EU) 2017/574 of 7 June 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to regulatory technical standards for the level of accuracy of business clocks.^F146]

FCA power to impose requirements

36.—(1) The FCA may impose a requirement mentioned in paragraph (2) on a person to whom any of regulations 30 to 35 applies if it appears to the FCA that—

(a)the person has contravened, or is likely to contravene, a requirement imposed on it by or under these Regulations or the markets in financial instruments regulation;

(b)the person has, in purported compliance with any requirement imposed on it by or under these Regulations or the markets in financial instruments regulation, knowingly or recklessly given the FCA information which is false or misleading in a material particular; or

(c)^M68it is desirable to exercise the power in order to advance one or more of the FCA's operational objectives (as defined by section 1B(3) (the FCA's general duties)) of the Act.

(2) For the purposes of paragraph (2) the FCA may impose a requirement that the person—

(a)take specified action; or

(b)refrain from taking specified action.

(3) A requirement imposed under paragraph (2) may—

(a)be imposed by reference to the person's relationship with another person;

(b)be expressed to expire at the end of such period as the FCA may specify, but the imposition of a requirement that expires at the end of a specified period does not affect the FCA's power to impose a new requirement in accordance with paragraph (2); and

(c)refer to the past conduct of the person (for example, by requiring the person to review or take remedial action in respect of past conduct).

(4) If the FCA imposes a requirement under this regulation it must issue a notice to the person.

(5) A person on whom a requirement has been imposed under this regulation may refer that matter to the Tribunal.

Interpretation of Part 4

[^F14737.For the purposes of this Part, a person is established in the United Kingdom if the person has its registered office, or (if it has no registered office), its head office, in the United Kingdom.^F147]

PART 5Removal of persons from the management board of an investment firm, credit institution, or recognised investment exchange

FCA and PRA power to remove a person from a management board

38.—(1) The appropriate regulator may require an investment firm, credit institution, or recognised investment exchange to remove a person from the management board if the regulator considers it necessary for the purpose of the exercise by it of [^F148functions under—

(a)these Regulations;

(b)the markets in financial instruments regulation;

(c)EU tertiary legislation (within the meaning of section 20 of the European Union (Withdrawal) Act 2018) made under the markets in financial instruments directive which forms part of [^F149assimilated^F149] law ; or

(d)the Act, which correspond to functions under the markets in financial instruments directive.^F148]

(2) For the purposes of this Part “the appropriate regulator” means—

(a)in a case where an investment firm or credit institution is a PRA-authorised person, the FCA or PRA;

(b)in any other case, the FCA.

(3) The FCA must consult the PRA before requiring an investment firm or credit institution which is a PRA-authorised person to remove a person from the management board under paragraph (1).

(4) In this regulation “PRA-authorised person” has the same meaning as in section 2B(5) (the PRA's general objective) of the Act.

Right to refer matters to the Tribunal

39. If the appropriate regulator requires an investment firm, credit institution, or recognised investment exchange to remove a person from the management board under regulation 38—

(a)the firm, credit institution, or exchange may refer the matter to the Tribunal; and

(b)the person to whom the requirement relates may refer the matter to the Tribunal.

Removal of persons from management boards: procedure

40.—(1) A requirement under regulation 38 may be expressed to come into effect—

(a)immediately; or

(b)on a specified date.

(2) The time or date on which a requirement under regulation 38 is expressed to come into effect under paragraph (1) must be a time or date that the appropriate regulator considers it necessary for the requirement to come into effect, having regard to the grounds for imposing the requirement.

(3) If the appropriate regulator proposes to impose a requirement on an investment firm, credit institution, or recognised investment exchange, or imposes such a requirement with immediate effect, it must give written notice—

(a)to that investment firm, credit institution, or recognised investment exchange, and

(b)to each person on the management board of the investment firm, credit institution, or recognised investment exchange to whom the requirement relates (“interested party”).

(4) A notice given under paragraph (3) must—

(a)give details of the requirement;

(b)identify each interested party;

(c)give the regulator's reasons for imposing the requirement—

(i)in the case of a notice given to the investment firm, credit institution, or recognised investment exchange, in relation to [^F150each interested party^F150] ;

(ii)in the case of a notice given to the interested party, in relation to that interested party;

(d)^F151inform the investment firm, credit institution, or recognised investment exchange and the interested party that each of them may make representations to the regulator within such period as may be specified in the notice (whether or not the matter has been referred ... to the Tribunal);

(e)state when the requirement takes effect; and

(f)inform the investment firm, credit institution, or recognised investment exchange and the interested party of their right to refer the matter to the Tribunal.

(5) The regulator may extend the period allowed by the notice given under paragraph (3) for making representations.

(6) If, having considered any representations made by a person to whom notice has been given under paragraph (3) (the “original notice”), the regulator decides—

(a)not to impose the requirement;

(b)to impose the requirement; or

(c)not to rescind the imposition of any such requirement which has already taken effect,

the regulator must give written notice to the person to whom the original notice was given.

^F152(7) A notice under paragraph (6)(b) or (c) must inform the person to whom it is given of that person's right to refer the matter to the Tribunal ....

[^F153(8)If a notice under paragraph (3) or (6)(b) or (c) informs a person of that person’s right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference.^F153]

PART 6Miscellaneous FCA functions in relation to the markets in financial instruments directive and markets in financial instruments regulation

Provision of FCA record of recognised investment exchanges to ESMA and other competent authorities

^F15441. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision of information to ESMA about multilateral trading facilities etc

^F15542. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision to ESMA of reports by recognised investment exchanges of infringements of the exchange's rules, disorderly trading, suspected market abuse, and systems disruptions

^F15643. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Authorisation of members of management bodies to hold additional non-executive directorship

44.—(1) Where a relevant recognition requirement limits the number of non-executive directorships a member of the management body of an exchange may hold at the same time, the FCA may authorise that member to hold one additional directorship.

(2) In paragraph (1)—

^M69“management body” has the meaning given by regulation 3 (interpretation) of Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001 ; and

“relevant recognition requirement” means a requirement set out in paragraph 2B(1)(a)(i) or (ii) of the Schedule to those Regulations.

^F157(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision of information to ESMA regarding sanctions and measures imposed for the purposes of the markets in financial instruments directive

^F15845. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision of information to other competent authorities regarding persons engaged in algorithmic trading or providing direct electronic access

^F15946. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F160Reports and applications^F160]

47.—(1) The FCA may direct the manner in which a person must—

^F161(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)^F162,F163report to the FCA ... the basis on which a person considers an activity ... to be ancillary to that person's main business;

(c)make an application for—

(i)a waiver under Article 4 (waivers for equity instruments) of the markets in financial instruments regulation;

(ii)an authorisation under Article 7 (authorisation of deferred publication) of the markets in financial instruments regulation;

(iii)a waiver under Article 9 (waivers for non-equity instruments) of the markets in financial instruments regulation; and

(iv)an authorisation under Article 11 (authorisation of deferred publication) of the markets in financial instruments regulation.

(2) An application mentioned in paragraph (1)(c) must contain or be accompanied by such information as the FCA may reasonably require for the purpose of determining the application.

(3) At any time after receiving an application mentioned in paragraph (1)(c) and before determining it the FCA may require the applicant to provide the FCA with such further information as the FCA reasonably considers necessary to enable the FCA to determine the application.

(4) The FCA may give different directions, and may impose different requirements, in relation to different applications.

[^F164Position management and publication of position reports

47A.—(1)The FCA must maintain a database containing—

(a)the position limits established by the FCA under regulation 16; and

(b)the information the FCA receives from—

(i)market operators operating trading venues summarising the position management controls in effect in relation to trading venues under paragraph 7BA(3) of the Schedule to the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges, Clearing Houses and Central Securities Depositories) Regulations 2001 (“the Recognition Requirements Regulations”); and

(ii)firms operating MTF or OTF in the United Kingdom summarising the position management controls in effect in relation to trading venues under rule 10.3.3R of the Market Conduct sourcebook.

(2)The FCA must ensure that the database referred to in paragraph (1) is published on its website.

(3)The FCA must publish all weekly reports it receives from market operators and firms operating trading venues in the United Kingdom under—

(a)paragraph 7BB(5) of the Schedule to the Recognition Requirements Regulations;

(b)rule 10.4.3 of the Market Conduct sourcebook.

(4)For the purpose of this regulation, “market operator” has the meaning given in Article 2(1)(10) of the markets in financial instruments regulation.^F164]

[^F165Statements of Policy

47B.—(1)The FCA must prepare and issue a statement of its policy in relation to the exercise of—

(a)the following functions in the markets in financial instruments regulation—

^F166(i). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(ii)withdrawing a waiver under Article 9(3);

(iii)suspending the obligations referred to in Article 8 under Article 9(4A);

(iv)suspending the obligations referred to in Article 10 under Article 11(2A);

(v)determining the class to which financial instruments belong under Article 14.6A;

(vi)suspending the obligations referred to in Article 21(1) under Article 21(4A); and

(b)its functions under Article 5(1A) of Commission Delegated Regulation 2017/567/EU supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions.

(2)No statement may be issued under paragraph (1) or amended without the approval of the Treasury.

(3)The Treasury may refuse to approve a statement of policy or amended statement of policy if it appears to the Treasury that—

(a)the issue of that statement would prejudice any current or proposed negotiations for an international agreement between the United Kingdom and one or more other countries, international organisations or institutions; or

(b)they may direct the FCA not to issue the statement of policy under section 410 (international obligations) of the Financial Services and Markets Act 2000.

(4)For the purposes of paragraph (3), “international organisations” includes the European Union.

(5)The Treasury must notify the FCA in writing whether or not they approve a statement of policy within four weeks from the day on which that statement is submitted to the Treasury for approval (“the relevant period”).

(6)Provision of a draft statement of policy to the Treasury for consultation does not amount to submission of the statement for approval.

(7)If the Treasury do not give notice under paragraph (5) before the end of the relevant period, the Treasury is deemed to have approved the statement of policy.

(8)The FCA must publish any statement of policy issued under this Article in the way appearing to the FCA to be best calculated to bring it to the attention of the public.^F165]

PART 7Miscellaneous

Refund of fees by the Gambling Commission

^M7048.—(1) The Gambling Commission may refund the whole or part of any fee paid for an operating licence if immediately before 3rd January 2018 the licence authorised a person to carry on an activity which became a regulated activity on 3rd January 2018 by virtue of Article 85(4A) and (4B) (contracts for differences etc.) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

^M71(2) In paragraph (1) “operating licence” means an operating licence issued by the Gambling Commission under Part 5 of the Gambling Act 2005 .

Administration and enforcement of the Regulations

49. Schedule 1 on the administration and enforcement of these Regulations has effect.

Amendments to legislation

50.—(1) Schedule 2, which contains amendments to the Act, has effect.

(2) Schedule 3, which contains amendments to secondary legislation made under the Act, has effect.

(3) Schedule 4, which contains amendments to primary legislation other than the Act, has effect.

(4) Schedule 5, which contains amendments to secondary legislation which was not made under the Act, has effect.

Review

^F151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Regulation 49

SCHEDULE 1Administration and enforcement of Parts 3, 4, and 5

PART 1Interpretation

Interpretation of Schedule 1

1. In this Schedule—

^M72“the EMIR regulation” means Regulation (EU) 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories [^F167as last amended by Regulation (EU) 2019/2099 of the European Parliament and of the Council of 23 October 2019^F167] ;

“management body” in relation to a person (“P”) means—

“non-authorised counterparty” means—

^M73“PRA-authorised person” has the meaning given in section 2B(5) of the Act ;

“recognised body” has the meaning given in section 313(1) of the Act;

[^F168“senior management” means natural persons who exercise executive functions within an investment firm, a market operator or a data reporting services provider and who are responsible, and accountable to the management body, for the day-to-day management of the entity, including for the implementation of the policies concerning the distribution of services and products to clients by the firm and its personnel.^F168]

[[^F169,F170Assimilated^F170] law^F169]

2.—(1) In this Schedule, any reference to a requirement imposed by or under Part 3 or 4 of these Regulations includes a reference to a requirement imposed on a person to whom Part 3 or 4 of these Regulations applies under—

(a)[[^F171,F172an assimilated^F172] law^F171] made under the markets in financial instruments directive or the markets in financial instruments regulation; and

(b)the markets in financial instruments regulation.

(2) In this Schedule, any reference to Article 28 of the markets in financial instruments regulation includes a reference to any [[^F173,F174assimilated^F174] law^F173] made under that Article.

PART 2The FCA and the PRA

Functions of the FCA and the PRA

Functions of the FCA

3.—(1) The FCA has the functions conferred on it by these Regulations.

(2) In determining the general policy and principles by reference to which it performs particular functions under these Regulations, and in giving general guidance under these Regulations, the FCA must, so far as is reasonably possible, act in a way which—

(a)^M74is compatible with its strategic objective as defined in section 1B(2) of the Act (the FCA's general duties); and

(b)advances one or more of its operational objectives as defined in section 1B(3) of the Act.

Functions of the PRA

4.—(1) The PRA has the functions conferred on it by these Regulations.

^M75(2) In determining the general policy and principles by reference to which it performs particular functions under these Regulations, the PRA must, so far as is reasonably possible, act in a way which is compatible with its general objective as defined in section 2B(2) of the Act (the PRA's general duties).

^M76(3) Section 2H(1) of the Act (secondary competition objective) applies to the exercise by the PRA of its functions under these Regulations.

Supervision

Monitoring and enforcement

5.—(1) The FCA must maintain arrangements designed to enable it to determine whether persons on whom requirements are imposed by or under Part 3, 4 or 5 of these Regulations or non-authorised counterparties on whom requirements are imposed by Article 28 of the markets in financial instruments regulation are complying with them.

(2) The PRA must maintain arrangements designed to enable it to determine whether PRA-authorised persons on whom requirements are imposed by or under Part 5 of these Regulations are complying with them.

(3) The FCA must maintain arrangements for enforcing the provisions of—

(a)Parts 3, 4 and 5 of these Regulations, and

(b)Article 28 of the markets in financial instruments regulation as respects non-authorised counterparties.

(4) The PRA must maintain arrangements for enforcing the provisions of Part 5 of these Regulations as respects PRA-authorised persons.

Co-operation

6.—(1) In exercising its functions under these Regulations and with respect to Article 28 of the markets in financial instruments regulation, the FCA must take such steps as it considers appropriate to co-operate with—

(a)persons who have functions similar to the functions of the FCA under these Regulations; [^F175and^F175]

(b)^F176persons who have functions similar to the functions of the FCA with respect to Article 28 of the markets in financial instruments regulation;...

^F177(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In exercising its functions under Part 5 of these Regulations, the PRA must take such steps as it considers appropriate to co-operate with—

(a)^F178persons who have functions similar to the functions of the PRA under these Regulations; ...

^F179(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

^M77(3) The duty under section 3D of the Act (duty of FCA and PRA to ensure co-ordinated exercise of functions) applies to the exercise of the functions of the FCA and PRA under these Regulations, and in the case of the FCA its functions with respect to Article 28 of the markets in financial instruments regulation, as it applies to the exercise of their functions under the Act.

Guidance

7.—(1) The FCA may give guidance consisting of such information and advice as it considers appropriate with respect to—

(a)the operation of Parts 3, 4, and 5 of these Regulations;

(b)any matters relating to the functions of the FCA under these Regulations or with respect to Article 28 of the markets in financial instruments regulation; or

(c)any other matters about which it appears to the FCA to be desirable to give information or advice in connection with these Regulations.

(2) The FCA may—

(a)publish its guidance;

(b)offer copies of its published guidance for sale at a reasonable price; and

(c)if it gives guidance in response to a request made by any person, make a reasonable charge for that guidance.

^M78(3) Section 139B of the Act (notification of FCA guidance to the Treasury) applies with respect to guidance given by the FCA under this paragraph as it applies with respect to guidance given by the FCA under section 139A of the Act (power of the FCA to give guidance) as if—

(a)for subsection (5) there were substituted—

“(5)“General guidance” means guidance given by the FCA under paragraph 7 of Schedule 1 to the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 which is—

(a)given to persons generally, to persons to whom those Regulations apply generally or to a class of persons to whom those Regulations apply,

(b)intended to have continuing effect, and

(c)given in writing or other legible form.”;

(b)subsection (6) were omitted.

Reporting requirements

8.—(1) A person (“P”) must provide the appropriate regulator with such information in respect of P's compliance or non-compliance with any requirement imposed by or under these Regulations or by Article 28 of the markets in financial instruments regulation applicable to P as the appropriate regulator may direct.

(2) The information required to be given under this paragraph must be provided at such times, in such form, and verified in such manner, as the appropriate regulator may direct.

(3) If at any time P considers that it is unable to comply with a requirement imposed by or under these Regulations or by Article 28 of the markets in financial instruments regulation applicable to it, P must as soon as reasonably practicable notify the appropriate regulator of that fact, including the reasons why it is unable to comply.

(4) In this paragraph, “appropriate regulator” means—

(a)in relation to a requirement imposed by the PRA on a PRA-authorised person under Part 5 of these Regulations, the PRA, and

(b)in any other case, the FCA.

PART 3Administrative sanctions and offences

Administrative sanctions

Interpretation of Part 3

9.—(1) In this Part, “regulator” means the FCA or the PRA.

(2) In paragraphs 10 and 11, “appropriate regulator” means—

(a)in relation to a contravention of a requirement imposed by the PRA on a PRA-authorised person under Part 5 of these Regulations, the PRA; and

(b)in relation to any other contravention of these Regulations or of Article 28 of the markets in financial instruments regulation, the FCA.

Public censure

10. If the appropriate regulator considers that—

(a)a person (“P”) has contravened a requirement imposed by or under these Regulations or by Article 28 of the markets in financial instruments regulation,

(b)a member of the management body of P is responsible for the contravention by P of a requirement imposed by or under these Regulations or by Article 28 of that regulation, or

(c)another member of the senior management of P is responsible for the contravention by P of a requirement imposed by or under these Regulations or by Article 28 of that regulation,

the appropriate regulator may publish a statement to that effect.

Financial penalties

11.—(1) If the appropriate regulator considers that a person (“P”) has contravened a requirement imposed by or under these Regulations or by Article 28 of the markets in financial instruments regulation, it may impose a penalty of such amount as it considers appropriate on—

(a)P;

(b)a member of the management body of P if the appropriate regulator considers the person is responsible for the contravention;

(c)another member of the senior management of P if the appropriate regulator considers the person is responsible for the contravention.

(2) A penalty imposed under this paragraph is payable to the regulator that imposed the penalty and may be recovered as a debt owed to that regulator.

Warning notice

12.—(1) If a regulator proposes to—

(a)publish a statement in respect of a person under paragraph 10; or

(b)impose a penalty on a person under paragraph 11,

it must give the person a warning notice.

(2) A warning notice about a proposal to publish a statement must set out the terms of the statement.

(3) A warning notice about a proposal to impose a penalty must state the amount of the penalty.

Decision notice

13.—(1) If, having considered any representations made in response to the warning notice, a regulator decides to—

(a)publish a statement under paragraph 10 (whether or not in the terms proposed); or

(b)impose a penalty under paragraph 11 (whether or not of the amount proposed),

it must without delay give the person concerned a decision notice.

(2) In the case of a statement, the decision notice must set out the terms of the statement.

(3) In the case of a penalty, the decision notice must state the amount of the penalty.

(4) If a regulator decides to—

(a)publish a statement in respect of a person under paragraph 10; or

(b)impose a penalty on a person under paragraph 11,

the person may refer the matter to the Tribunal.

^M79(5) After a statement under paragraph 10 is published, the regulator concerned must send a copy of it to the person concerned and to any person to whom a copy of the decision notice was given under section 393(4) of the Act (third party rights) (as applied by paragraph 22).

Statements of policy

14.—(1) Each regulator must prepare and issue a statement of policy with respect to—

(a)the imposition of penalties under paragraph 11; and

(b)the amount of penalties under that paragraph.

(2) A regulator's policy in determining what the amount of a penalty should be must include having regard to—

(a)the seriousness of the contravention in question in relation to the nature of the requirement contravened;

(b)the extent to which that contravention was deliberate or reckless; and

(c)whether the person against whom action is to be taken is an individual.

(3) A regulator may at any time alter or replace a statement issued by it under this paragraph.

(4) If a statement issued under this paragraph is altered or replaced by a regulator, the regulator must issue the altered or replacement statement.

(5) A regulator must, without delay, give the Treasury a copy of any statement which it issues under this paragraph.

(6) A statement issued under this paragraph by a regulator must be published by the regulator in the way appearing to the regulator to be best calculated to bring it to the attention of the public.

(7) The regulator may charge a reasonable fee for providing a person with a copy of the statement.

(8) In exercising, or deciding whether to exercise, its power under paragraph 11 in the case of any particular contravention, a regulator must have regard to any statement of policy published by it under this paragraph and in force at the time when the contravention in question occurred.

Statements of policy: procedure

15.—(1) Before a regulator issues a statement under paragraph 14, the regulator must publish a draft of the proposed statement in the way appearing to the regulator to be best calculated to bring it to the attention of the public.

(2) The draft must be accompanied by a notice that representations about the proposal may be made to the regulator within a specified time.

(3) Before issuing the proposed statement the regulator must have regard to any representations made to it in accordance with sub-paragraph (2).

(4) If the regulator issues the proposed statement it must publish an account, in general terms, of—

(a)the representations made to in accordance with sub-paragraph (2); and

(b)its response to them.

(5) If the statement differs from the draft published under sub-paragraph (1) in a way which is, in the opinion of the regulator, significant, the regulator must (in addition to complying with sub-paragraph (4)) publish details of the difference.

(6) A regulator may charge a reasonable fee for providing a person with a copy of a draft published by it under sub-paragraph (1).

(7) This paragraph also applies to a proposal to alter or replace a statement.

Offences

Misleading the FCA or PRA

16.—(1) A person must not, for the purposes of compliance or purported compliance with a requirement imposed by or under these Regulations or by Article 28 of the markets in financial instruments regulation knowingly or recklessly give a regulator information which is false or misleading in a material particular.

(2) A person must not provide information to another person—

(a)knowing; or

(b)being reckless as to whether,

the information is false or misleading in a material particular and knowing that the information is to be provided to, or to be used for the purposes of providing information to, a regulator in connection with the discharge of its functions under these Regulations or with respect to Article 28 of the markets in financial instruments regulation.

(3) A person who contravenes sub-paragraph (1) or (2) is guilty of an offence.

(4) A person guilty of an offence under this paragraph is liable—

(a)on summary conviction—

(i)in England and Wales, to a fine;

(ii)in Scotland or Northern Ireland, to a fine not exceeding the statutory maximum; or

(b)on conviction on indictment, to a fine.

Restriction on penalties

17.—(1) A person who is convicted of an offence under these Regulations or under the Act as applied by these Regulations is not subsequently liable to a penalty under paragraph 11 in respect of the same acts or omissions that constituted the offence.

(2) A person who is liable to a penalty under paragraph 11 is not subsequently liable for an offence under these Regulations in respect of the same acts or omissions that constituted the contravention of a requirement imposed by or under these Regulations for the purposes of that penalty.

PART 4Application of the Act for the purposes of the Regulations

Application of Part 9 of the Act (hearings and appeals)

^M8018.—(1) Part 9 of the Act (hearings and appeals) applies with respect to proceedings pursuant to references to the Tribunal under these Regulations and under the Act as applied by these Regulations (“relevant proceedings”) as it applies with respect to proceedings pursuant to references to the Tribunal under that Act, with the following modifications.

(2) Section 133 of the Act (proceedings before the Tribunal: general provision) applies as if—

(a)in subsection (1)—

(i)“(whether made under this or any other Act)” were omitted;

(ii)paragraphs (b) and (c) were omitted;

(b)in subsection (2), “, (b) or (c)” were omitted;

(c)in subsection (5) the reference to section 393(11) were a reference to section 393(11) as applied by these Regulations;

(d)for subsection (7A) there were substituted—

“(7A)A reference is a “disciplinary reference” for the purposes of this section if it is in respect of either of the following decisions—

(a)a decision to publish a statement under paragraph 10 of Schedule 1 to the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017;

(b)a decision to impose a penalty under paragraph 11 of Schedule 1 to those Regulations.”.

(3) Section 133A of the Act (proceedings before Tribunal: decision and supervisory notices, etc.) applies as if for subsection (1) there were substituted—

“(1)In determining in accordance with section 133(5) (as applied by the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017) a reference made as a result of a decision notice given by the FCA or the PRA, the Tribunal may not direct the FCA or the PRA (as the case may be) to take action which it would not, under the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017, have had power to take when giving the notice.”.

(4) Section 133B of the Act (offences) applies as if subsection (1)(b) and (c) were omitted.

Application of Part 11 of the Act (information gathering and investigations)

^M8119.—(1) Part 11 of the Act (information gathering and investigations) applies with respect to the discharge by the regulators of their functions under these Regulations and with respect to Article 28 of the markets in financial instruments regulation as it applies with respect to the discharge by the regulators of their functions under the Act, with the following modifications.

(2) In this paragraph, “regulator” means the FCA or the PRA.

(3) Part 11 of the Act applies as if—

(a)each reference to the Act included a reference to these Regulations and Article 28 of the markets in financial instruments regulation;

(b)each reference to a section or Part of, or Schedule to, the Act were a reference to that section, Part or Schedule as applied by these Regulations;

(c)each reference to an authorised person were a reference to a person in respect of whom a requirement is imposed by or under these Regulations or to a non-authorised counterparty in respect of whom a requirement is imposed by Article 28 of the markets in financial instruments regulation.

(4) Sections 165A (PRA's power to require information: financial stability), 165B (safeguards etc. in relation to exercise of power under section 165A) and 165C (orders under section 165A(2)(d)) of the Act do not apply.

(5) Section 166A of the Act (appointment of skilled person to collect and update information) applies as if—

(a)for subsection (1) there were substituted—

“(1)This section applies if either regulator considers that a person has contravened a requirement imposed by or under the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 to collect, and keep up to date, information of a description specified in those Regulations.”;

(b)subsection (10) were omitted.

(6) Section 167 of the Act (appointment of persons to carry out general investigations) applies as if—

(a)for subsection (1) there were substituted—

“(1)If it appears to an investigating authority that there is good reason for doing so, the investigating authority may appoint one or more competent persons to conduct an investigation on its behalf into—

(a)the nature, conduct or state of the business of a person in respect of whom a requirement is imposed by or under the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (“a person subject to the 2017 Regulations”) or a non-authorised counterparty in respect of whom a requirement is imposed by Article 28 of the markets in financial instruments regulation (“a non-authorised counterparty”);

(b)a particular aspect of that business; or

(c)the ownership or control of a person subject to the 2017 Regulations or a non-authorised counterparty.”;

(b)for subsection (4) there were substituted—

“(4)The power conferred by this section may be exercised in relation to a person who was formerly a person subject to the 2017 Regulations or a non-authorised counterparty but only in relation to—

(a)business carried on when the person was a person subject to the 2017 Regulations or a non-authorised counterparty; or

(b)the ownership or control of a person who was formerly a person subject to the 2017 Regulations or a non-authorised counterparty at any time when the person was a person subject to the 2017 Regulations or a non-authorised counterparty.”;

(c)in subsection (5A) for paragraphs (b) and (c) there were substituted—

“(b)in relation to any other person subject to the 2017 Regulations, the FCA or the PRA;

(c)in relation to a non-authorised counterparty, the FCA.”;

(d)subsection (6) were omitted.

(7) Section 168 of the Act (appointment of persons to carry out investigations in particular cases) applies as if—

(a)for subsection (1) there were substituted—

“(1)Subsection (3) applies if it appears to an investigating authority that there are circumstances suggesting that—

(a)a person may have contravened a requirement imposed by or under the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 or by Article 28 of the markets in financial instruments regulation;

(b)a member of the management body of a person referred to in paragraph (a) or another member of the senior management of such a person may be responsible for the contravention of a requirement imposed by or under the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 or by Article 28 of the markets in financial instruments regulation; or

(c)a person may be guilty of an offence under those Regulations or under this Act as applied by those Regulations.”;

(b)subsections (2), (4) and (5) were omitted;

(c)for subsection (6) there were substituted—

“(6)“Investigating authority” means the FCA or the PRA.”.

(8) Section 169 of the Act (investigations etc. in support of overseas regulator) applies as if—

(a)subsection (2A) were omitted;

(b)for subsection (13) there were substituted—

“(13)“Overseas regulator” means an authority in a country or territory outside the United Kingdom which has functions corresponding to those of the FCA or the PRA under the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 or with respect to Article 28 of the markets in financial instruments regulation.”.

(9) Section 169A of the Act (support of overseas regulator with respect to financial stability) does not apply.

(10) Section 170 of the Act (investigations: general) applies as if—

(a)in subsection (1) “or (5)” were omitted;

(b)for subsection (3) there were substituted—

“(3)Subsections (2) and (9) do not apply if the investigator is appointed as a result of section 168(1) and the investigating authority believes that the notice required by subsection (2) or (9) would be likely to result in the investigation being frustrated.”;

(c)subsection (10)(b) were omitted.

(11) Section 172 of the Act (additional power of persons appointed as a result of section 168(1) or (4)) applies as if in the heading and in subsection (4) “or (4)” were omitted.

(12) Section 173 of the Act (powers of persons appointed as a result of section 168(2)) applies as if—

(a)in the heading for “as a result of section 168(2)” there were substituted “ in relation to a recognised investment exchange ”;

(b)in subsection (5) for “subsection (3) of section 168 (as a result of subsection (2) of that section)” there were substituted “ section 167 in relation to a recognised investment exchange ”.

(13) Section 174 of the Act (admissibility of statements made to investigators) applies as if—

(a)in subsection (2) “or in proceedings in relation to action to be taken against that person under section 123 to which this section applies” were omitted;

(b)in subsection (3)(a) for “398” substitute “ paragraph 16 of Schedule 1 to the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 ”;

(c)subsection (3A) were omitted;

(d)in subsection (4) the words from “or (5),” to the end were omitted.

(14) Section 175 of the Act (information and documents: supplemental provisions) applies as if in subsection (8) “or (5)” were omitted.

(15) Section 176 of the Act (entry of premises under warrant) applies as if—

(a)in subsection (1) “the Secretary of State,” were omitted;

(b)in subsection (3)(a) for “an authorised person or an appointed representative” there were substituted “ a person in respect of whom a requirement is imposed by or under the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 or a non-authorised counterparty in respect of whom a requirement is imposed by Article 28 of the markets in financial instruments regulation ”;

(c)in subsection (10) “or (5)” were omitted;

(d)in subsection (11)(a) “87C, 87J,” and “,165A, 169A” were omitted.

Restrictions on disclosure of information

^M8220. Sections 348 (restrictions on disclosure of confidential information by FCA, PRA etc.), 349 (exceptions from section 348) and 352 (offences) of the Act apply with respect to information received under these Regulations as they apply with respect to information received under the Act as if—

(a)each reference to the Act included a reference to these Regulations;

(b)each reference to a section or Part of the Act were a reference to that section or Part as applied by these Regulations;

(c)in section 348(2), for “In this Part” there were substituted “ In sections 348, 349 and 352 as applied by the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 ”;

(d)in section 352—

(i)in subsection (1) “or 350(5)” were omitted;

(ii)subsection (4) were omitted;

(iii)in subsection (5) “or (4)” were omitted;

(iv)in subsection (6)(a) “or that it had been disclosed in accordance with section 350” were omitted.

Application of Part 25 of the Act (injunctions and restitution)

^M8321.—(1) Part 25 of the Act (injunctions and restitution) applies for the purposes of these Regulations, Article 28 of the markets in financial instruments regulation, and the Act as applied by these Regulations, with the following modifications.

(2) Part 25 of the Act applies as if—

(a)each reference to the Act included a reference to these Regulations and to Article 28 of the markets in financial instruments regulation;

(b)each reference to a section of the Act were a reference to that section as applied by these Regulations;

(c)references to the Secretary of State were omitted;

(d)each reference to a relevant requirement were a reference to a requirement which is imposed by or under these Regulations, Article 28 of the markets in financial instruments regulation or the Act as applied by these Regulations.

(3) Section 380 of the Act (injunctions) applies as if—

(a)subsections (6) and (7) were omitted;

(b)in subsection (8) paragraphs (b) and (c) were omitted;

(c)subsection (9) were omitted.

(4) Section 381 of the Act (injunctions in cases of market abuse) does not apply.

(5) Section 382 of the Act (restitution orders) applies as if—

(a)subsections (9) and (10) were omitted;

(b)in subsection (11) paragraphs (b) and (c) were omitted;

(c)subsection (12) were omitted.

(6) Section 383 of the Act (restitution orders in cases of market abuse) does not apply.

(7) Section 384 of the Act (power of FCA or PRA to require restitution) applies as if—

(a)subsections (2) and (3) and references to those subsections were omitted;

(b)subsection (7) were omitted;

(c)in subsection (9) paragraphs (b) and (c) were omitted;

(d)subsection (10) were omitted.

Application of Part 26 of the Act (notices)

^M8422.—(1) Part 26 of the Act (notices) applies with respect to the giving of notices under regulations 28(4) (FCA power to intervene), 36(4) (FCA power to impose requirements) and 40(3) and (6) (removal of persons from management boards: procedure), paragraphs 12 and 13 of this Schedule and the Act as applied by these Regulations as it applies with respect to the giving of notices under the Act, with the following modifications.

(2) Part 26 of the Act applies as if—

(a)each reference to the Act included a reference to these Regulations;

(b)each reference to a section of the Act were a reference to that section as applied by these Regulations;

(c)each reference to a regulator or to the regulator concerned were a reference to the regulator giving the notice.

(3) In this paragraph, “regulator” means the FCA or the PRA.

(4) Section 387 of the Act (warning notices) applies as if subsections (1A) and (3A) were omitted.

(5) Section 388 of the Act (decision notices) applies as if subsections (1A) and (2) were omitted.

(6) Section 391 of the Act (publication) applies as if—

(a)in subsection (1) the reference to a warning notice falling within subsection (1ZB) were to a warning notice given under paragraph 12;

(b)in subsection (1ZA) the reference to a warning notice not falling within subsection (1ZB) were to a warning notice given under the Act as applied by these Regulations;

(c)subsection (1ZB) were omitted;

(d)in subsection (4A) the reference to sections 391A, 391B and 391C were omitted;

(e)subsections (5A), (8A), (8B) and (8C) were omitted;

(f)for subsection (11) there were substituted—

“(11)Section 425A ^M85 (meaning of “consumers”) applies for the purposes of this section as if subsection (2)(c) were omitted.”.

(7) Sections 391A (publication: special provisions relating to the capital requirements directive), 391B (publication: special provisions relating to the transparency obligations directive) and 391C (publication: special provisions relating to the UCITS directive) of the Act do not apply.

(8) Section 392 of the Act (application of sections 393 and 394) applies as if for paragraphs (a) and (b) there were substituted—

“(a)a warning notice given in accordance with paragraph 12 of Schedule 1 to the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 or section 385 as applied by those Regulations;

(b)a decision notice given in accordance with paragraph 13 of Schedule 1 to those Regulations or section 386 as applied by those Regulations.”.

(9) Section 395 of the Act (the FCA's and PRA's procedures) applies as if—

(a)in subsection (1) paragraph (b)(ii) were omitted;

(b)in subsection (9) “other than a warning notice or decision notice relating to a decision of the PRA that is required by a decision of the FCA of the kind mentioned in subsection (1)(b)(ii)” were omitted;

(c)subsection (9A) were omitted;

(d)for subsection (13) there were substituted—

“(13)“Supervisory notice” means a notice given in accordance with regulation 28(4) (FCA power to intervene), 36(4) (FCA power to impose requirements) or 40(3) or (6) (removal of persons from management boards: procedure) of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017.”.

Application of Part 27 of the Act (offences)

^M8623.—(1) Part 27 of the Act (offences) applies with respect to offences under these Regulations and the Act as applied by these Regulations as it applies with respect to offences under the Act, with the following modifications.

(2) Part 27 of the Act applies as if—

(a)each reference to the Act included a reference to these Regulations;

(b)each reference to a section of the Act were a reference to that section as applied by these Regulations;

(c)references to the Secretary of State were omitted.

(3) Sections 398 (misleading the FCA or PRA: residual cases) and 399 (misleading the CMA) of the Act do not apply.

(4) Section 400 of the Act (offences by bodies corporate) applies as if subsection (6A) were omitted.

(5) Section 401 of the Act (proceedings for offences) applies as if—

(a)subsection (1)(c) were omitted;

(b)in subsection (3A)—

(i)paragraphs (a), (f), (g) and (h) were omitted;

(ii)in paragraph (i) for “section 398(1)” there were substituted “ paragraph 16(1) of Schedule 1 to the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 ”;

(c)subsection (3AB) were omitted.

(6) Section 402 of the Act (power of FCA to institute proceedings for certain other offences) does not apply.

(7) Section 403(7) of the Act (jurisdiction and procedure in respect of offences) applies as if the words from “or an offence” to the end were omitted.

Application of section 413 of the Act (protected items)

24. Section 413 of the Act (protected items) applies for the purposes of these Regulations as it applies for the purposes of the Act.

FCA: penalties, fees and exemption from liability in damages

^M8725.—(1) Paragraphs 19 to 23 (penalties and fees) and 25 (exemption from liability in damages) of Schedule 1ZA to the Act apply with respect to the discharge by the FCA of its functions under these Regulations and with respect to Article 28 of the markets in financial instruments regulation as they apply with respect to the discharge by it of its functions under the Act, with the following modifications.

(2) Those paragraphs apply as if—

(a)each reference to penalties imposed under the Act included a reference to penalties imposed under these Regulations;

(b)each reference to a section or Part of the Act included a reference to that section or Part as applied by these Regulations;

(c)each reference to the functions of the FCA included a reference to its functions under these Regulations and with respect to Article 28 of the markets in financial instruments regulation.

(3) Paragraph 20 applies as if references to the FCA's enforcement powers included—

(a)its powers under these Regulations and under Part 25 of the Act as applied by these Regulations;

(b)its powers in relation to the investigation of offences under these Regulations or under the Act as applied by these Regulations;

(c)its powers in England and Wales or Northern Ireland in relation to the prosecution of offences under these Regulations or under the Act as applied by these Regulations.

(4) Paragraph 21 applies as if regulated persons included persons on whom requirements are imposed under these Regulations and non-authorised counterparties on whom requirements are imposed by Article 28 of the markets in financial instruments regulation.

(5) Paragraph 23 applies as if references to qualifying functions included references to the functions of the FCA under these Regulations, with respect to Article 28 of the markets in financial instruments regulation and under the Act as applied by these Regulations.

PRA: penalties, fees and exemption from liability in damages

^M8826.—(1) Paragraphs 27 to 31 (penalties and fees) and 33 (exemption from liability in damages) of Schedule 1ZB to the Act apply with respect to the discharge by the PRA of its functions under these Regulations as they apply with respect to the discharge by it of its functions under the Act, with the following modifications.

(2) Those paragraphs apply as if—

(a)each reference to penalties imposed under the Act or under FSMA 2000 included a reference to penalties imposed under these Regulations;

(b)each reference to a section or Part of the Act included a reference to that section or Part as applied by these Regulations;

(c)each reference to the functions of the PRA included a reference to its functions under these Regulations.

(3) Paragraph 28 applies as if references to the PRA's enforcement powers included—

(a)its powers under Part 5 of these Regulations and under Part 25 of the Act as applied by these Regulations;

(b)its powers in relation to the investigation of offences under these Regulations or under the Act as applied by these Regulations;

(c)its powers in England and Wales or Northern Ireland in relation to the prosecution of offences under those Regulations or under the Act as applied by those Regulations.

(4) Paragraph 31 applies as if references to qualifying functions included references to the functions of the PRA under Part 5 of these Regulations and under the Act as applied by these Regulations.

PART 5Application of secondary legislation for the purposes of the Regulations

Service of notices

^M8927.The Financial Services and Markets Act 2000 (Service of Notices) Regulations 2001 (“Notice Regulations”) apply with respect to any notice or document to be given by the FCA or PRA under regulation 12(3)(b) (FCA power to intervene in relation to third country firms registered with ESMA), 28(4) (FCA power to intervene), 36(4) (FCA power to impose requirements) or 40(3) or (6) (removal of persons from management boards: procedure), paragraph 12 or 13 of this Schedule or the Act as applied by these Regulations, as if—

(a)that notice or document were “a relevant document” under the Notice Regulations;

(b)each reference to the Act included a reference to these Regulations and to the Act as applied by these Regulations;

(c)each reference to a section of the Act were a reference to that section as applied by these Regulations.

Disclosure of confidential information

^M9028.The Financial Services and Markets Act 2000 (Disclosure of Confidential Information) Regulations 2001 apply for the purposes of section 349 of the Act (exceptions from section 348) as applied by paragraph 20.

Communications by auditors

^M9129.The Financial Services and Markets Act 2000 (Communications by Auditors) Regulations 2001 apply for the purposes of sections 342 (information given by auditor or actuary to a regulator), 343 (information given by auditor or actuary to a regulator: person with close links) and 344 (duty of auditor or actuary resigning etc. to give notice) of the Act as if—

(a)in regulation 1(2) (citation, commencement and interpretation) “relevant requirement” included a requirement which is imposed by or under these Regulations or by Article 28 of the markets in financial instruments regulation;

(b)in regulation 2(2)(a)(ii) (circumstances in which an auditor is to communicate) the reference to functions included a reference to the FCA's and PRA's functions under these Regulations and under the Act as applied by these Regulations.

Regulation 50(1)

SCHEDULE 2Amendments to the Financial Services and Markets Act 2000

1. The Act is amended as follows.

Amendments to Part 3 (authorisation and exemption)

2.—(1)Section 39 (exemption of appointed representatives) is amended as follows.

^M92(2) In subsection (1ZA) after “(1A)” insert “ , (1AA) ”.

^M93(3) In the opening words of subsection (1A)(a) for “or a credit institution” substitute “ , a credit institution, or a person mentioned in Article 3.1 (optional exemptions) of the markets in financial instruments directive ”.

(4) After subsection (1A) insert—

“(1AA)This subsection applies to a person—

(a)if the person's principal is an investment firm or a credit institution, and

(b)so far as the business for which the person's principal has accepted responsibility is selling, or advising clients on, structured deposits as defined by Article 4.1.43 (definitions) of the markets in financial instruments directive,

unless the person is entered on the applicable register.”.

^M94(5) In subsection (1B) —

(a)in the opening words at the beginning insert “ In subsections (1A) and (1AA) ”;

(b)in paragraph (a)—

(i)omit the words from “which” to “appoint tied agents”;

(ii)for “Article 23” substitute “ Article 29 ”; and

(iii)at the end insert “ and ”; and

(c)omit paragraph (b) (with the “and” following it).

^M95(6) In subsection (7)(a) for “4.1.25” substitute “ 4.1.29 ”.

^M96(7) In subsection (8) , in the definition of “competent authority” for “4.1.22” substitute “ 4.1.26 ”.

^M973.—(1)Section 39A (certain tied agents operating outside the United Kingdom) is amended as follows.

(2) In subsection (6)—

(a)^M98for paragraph (c) substitute—

“(c)enters into a relevant contract with an agent who is not entered on—

(i)the record maintained by the FCA by virtue of section 347(1)(ha), or

(ii)the register of tied agents of another EEA State maintained pursuant to Article 29 of the markets in financial instruments directive,”; and

(b)in paragraph (d) after “record” insert “ or register, ”.

(3) In subsection (8)(a) for “Article 4.1.25” substitute “ Article 4.1.29 ”.

(4) In subsection (9) in the definition of “competent authority” for “Article 4.1.22” substitute “ Article 4.1.26 ”.

Amendments to Part 4A (permission to carry on regulated activities)

^M994. After section 55K(1)(d) (investment firms: particular conditions that enable cancellation) insert—

“;

(e)that the firm has seriously or systematically infringed the markets in financial instruments regulation.”.

^M1005.—(1)Section 55R (persons connected with an applicant) is amended as follows.

(2) In subsection (2)—

(a)in paragraph (a) after “intermediaries))” insert “or “ an EEA market operator ”; and

(b)in the closing words after “the firm's” insert “ or the market operator's”.

(3) After subsection (3) insert—

“(3A)A person (“P”) is connected with an EEA market operator if—

(a)P is an investment firm and is a subsidiary undertaking of the market operator, or

(b)P is an investment firm and is a subsidiary undertaking of a parent undertaking of the market operator.

(3B)In subsection (2)—

“EEA market operator” has the meaning given in section 312D (interpretation of Chapter 3A); and

“home state regulator”, in relation to an EEA market operator, has the meaning given in section 312D.”.

^M101(4) After subsection (6) insert—

“(7)Subsection (8) applies where—

(a)an investment firm (“C”) makes an application for permission under section 55A to carry on a regulated activity which is any of the investment services and activities;

(b)the requirement for C to obtain permission under section 55A to carry on that activity derives from Chapter 1 of Title II of the markets in financial instruments directive; and

(c)C is controlled by a person who also controls—

(i)an EEA credit institution,

(ii)an EEA investment firm, or

(iii)an EEA insurance undertaking.

(8)Before granting C's application for permission, the regulator concerned must—

(a)in a case falling within subsection (7)(c)(i) consult the competent authorities of the other EEA State responsible for the authorisation or supervision of the credit institution;

(b)in case falling within subsection (7)(c)(ii) consult the competent authority of the other EEA State responsible for the authorisation of the investment firm;

(c)in a case falling within subsection (7)(c)(iii), consult the competent authorities of the other EEA State responsible for the authorisation or supervision of the insurance undertaking.

(9)In subsections (7)—

“controls” has the same meaning as in Article 4.1.35(b)(definitions) of the markets in financial instruments directive;

“EEA credit institution” means a credit institution, as defined by Article 4.1.27 of the markets in financial instruments directive, authorised in another EEA State pursuant to Title III of the capital requirements directive;

“EEA insurance undertaking” means an insurance undertaking, as defined by Article 13.1 of the Solvency 2 Directive, authorised in another EEA State;

“EEA investment firm” means an investment firm, as defined by Article 4.1.1 of the markets in financial instruments directive, authorised in another EEA State pursuant to Chapter 1 of Title II of that directive.”.

Amendments to Part 6 (official listing)

^M1026. In section 86(7) (exempt offers to the public) for subsection (d) substitute—

“(d)a person whom—

(i)any relevant firm was authorised to continue to treat as a professional client immediately before 3 January 2018by virtue of Article 71.6 (transitional provisions) of Directive 2004/39/EC on markets in financial instruments ^M103; and

(ii)the firm may continue to treat as a professional client from 3 January 2018 by virtue of Section II.2 of Annex II to the markets in financial instruments directive.”.

^M1047.—(1) Section 102A (meaning of “securities” etc) is amended as follows.

^M105(2) In subsection (3) for the words “Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments” substitute “ the markets in financial instruments directive ”.

^M106(3) In subsection (4) for “4.1.17” substitute “ 4.1.15 ”.

^M1078. In section 103(1) (interpretation of Part 6) in the definition of “regulated market” for the words “Article 4.1(14) of Directive 2004/” to the end substitute “ Article 4.1.21 of the markets in financial instruments directive ”.

Amendments to Part 8 (provisions relating to market abuse)

^M1089.—(1)Section 122G (publication of information and corrective statements by issuers) is amended as follows.

(2) In the opening words of subsection (1) after “issuer” insert “ or emission allowance market participant ”.

(3) For subsection (7) substitute—

“(7)In this section—

“emission allowance market participant” has the same meaning as in Article 3.1.19 (definitions) of the market abuse regulation; and

“specified” means specified by the FCA.”.

^M10910.—(1)Section 122I (power to suspend trading in financial instruments) is amended as follows.

(2) After subsection (2) insert—

“(2A)But subsection (2) does not apply if the financial instrument is an emission allowance.”.

(3) In the opening words of subsection (4) after “instrument” insert “ other than an emission allowance ”.

(4) After subsection (4) insert—

“(4A)A suspension of trading in a financial instrument that is an emission allowance takes effect—

(a)immediately, if the FCA states that is the case; or

(b)on such later date as the FCA specify.”.

11. After section 122I insert—

“122IA.Power to suspend auctioning of auctioned products on a recognised auction platform

(1)The FCA may suspend the auctioning of a relevant auctioned product at an auction conducted by a recognised auction platform where it considers it necessary for the purpose of the exercise by it of functions under the market abuse regulation or a supplementary EU regulation.

(2)If the FCA does so the recognised auction platform may refer the matter to the Tribunal.

(3)A suspension by the FCA takes place—

(a)immediately, if the FCA specify this is the case, or

(b)on such later date as the FCA specify.

(4)The FCA may—

(a)cancel a suspension under subsection (1), and

(b)impose such conditions for the cancellation to take effect as it considers appropriate.

(5)The provisions relating to the suspension and removal of financial instruments from trading set out in—

(a)section 313B(2) to (4) ^M110 (suspension or removal of financial instruments from trading: procedure), and

(b)sections 313BA (procedure following consideration of representations) to 313BC ^M111 (decisions on applications for revocation by institutions),

apply, with the modifications set out in subsection (6), to a suspension of the auctioning of a relevant auctioned product at an auction conducted by a recognised auction platform.

(6)The modifications referred to in subsection (5) are—

(a)references to a requirement imposed on an institution under section 313A are to be read as references to the suspension of the auctioning of the relevant auctioned product;

(b)references to an institution are to be read as references to the recognised auction platform;

(c)in section 313B, the omission of—

(i)subsection (2)(a)(ii);

(ii)in subsection (3A)(d), the words “or the issuer of the financial instrument in question” and “or the issuer”;

(iii)in subsection (3A)(f), the words “or the issuer of the financial instrument in question;

(d)the omission of section 313BA(5)(b) and (8);

(e)the omission of section 313BB(6)(b); and

(f)the omission of section 313BC(3)(b) and (6)(b).

(7)In this section “relevant auctioned product” means an auctioned product (as defined by Article 4 (auctioned products) of the emission allowance auctioning regulation) which is an emission allowance or based on an emission allowance.”.

^M11212. In section 123(1)(c)(i) (power to impose penalties or issue censure) after “122I, ” insert “ 122IA, ”.

^M11313.—(1)Section 123A (power to prohibit individuals from managing or dealing) is amended as follows.

(2) In subsection (1)(c) after “122I” insert “ , 122IA ”.

(3) In subsection (2)—

(a)in the opening words for “either or both” substitute “ one or more ”; and

(b)after paragraph (b) insert—

“(c)a temporary prohibition on the individual making a bid, on his or her own account or the account of a third party, directly or indirectly, at an auction conducted by a recognised auction platform.”.

(4) After subsection (7) insert—

“(8)For the meaning of “recognised auction platform” in this Part, see section 131AB.”.

^M11414. In section 123B(1)(c) (suspending permission to carry on regulated activities etc) after “122I” insert “ , 122IA ”.

^M11515. In section 124(10) (statement of policy) in paragraph (c)(i) of the definition of “relevant person” after “122I,” insert “ 122IA, ”.

^M11616.—(1)Section 129 (power of the court to impose administrative sanctions in cases of market abuse) is amended as follows.

(2) In subsection (7), in the definition of “temporary prohibition”—

(a)at the end of paragraph (a) omit “or”;

(b)after paragraph (b) insert—

“; or

(c)making a bid, on his or her own account or the account of a third party, directly or indirectly, at an auction conducted by a recognised auction platform.”.

(3) After subsection (7) insert—

“(8)For the meaning of “recognised auction platform” in this Part, see section 131AB.”.

^M11717. In section 131AB (interpretation)—

(a)in the definition of “financial instrument” for “4.1(17)” substitute “ 4.1.15 ”; and

(b)at the appropriate places insert—

““emission allowance” has the meaning given in Article 3.1.19 (definitions) of the market abuse regulation;”;

““recognised auction platform” has the meaning given in regulation 1(3) of the Recognised Auction Platform Regulations 2011 (S.I. 2011/2699);”.

Amendments to Part 9A (rules and guidance)

^M11818. In section 137R(5)(b) (financial promotion rules)—

(a)in sub-paragraph (i) for “paragraphs 1 to 8 of Article 19” substitute “ Articles 24 (general principles and information to clients) and 25 (assessment of suitability and appropriateness and reporting to clients) ”; and

(b)^M119for sub-paragraph (ii) substitute—

“(ii)any delegated act adopted under Article 24.13 or 25.8 of that directive,”.

Amendments to Part 12 (control over authorised persons)

^M12019. In section 184(4)(a) (disregarded holdings) for “4.1(8)” substitute “ 4.1.7 ”.

Amendments to Part 13 (incoming firms: intervention by FCA or PRA)

^M12120.—(1) Section 194A (contravention by relevant EEA firm with UK branch of requirement under markets in financial instruments directive: appropriate regulator primarily responsible for securing compliance) is amended as follows.

^M122(2) In subsection (1)(b) for “62.2” substitute “ 86.2 ”.

(3) In subsection (3)—

(a)at the end of paragraph (a) omit “or”;

(b)after paragraph (a) insert—

“(aa)by or under any provision of the markets in financial instruments regulation; or”; and

(c)in paragraph (b)—

(i)for “Community” substitute “ EU ”; and

(ii)after “directive” insert “ or the markets in financial instruments regulation ”.

^M12321.—(1)Section 195A (contravention by relevant EEA firm etc of directive requirements: home state regulator primarily responsible for securing compliance) is amended as follows.

^M124(2) In subsection (1)(a) for “62.1 or 62.3” substitute “ 86.1 or 86.3 ”.

(3) In subsection (2), insert—

(a)at the end of paragraph (a) omit “or”;

(b)after paragraph (a) insert—

“(aa)by or under any provision of the markets in financial instruments regulation; or”; and

(c)in paragraph (b)—

(i)for “Community” substitute “ EU ”; and

(ii)after “directive” insert “ or the markets in financial instruments regulation ”.

Amendments to Part 14 (disciplinary measures)

^M12522. In section 206A(1B) (suspending permission to carry on regulated activities etc) after “122I,” insert “ 122IA, ”.

Amendments to Part 15 (the financial services compensation scheme)

23.—(1)Section 213 (the compensation scheme) is amended as follows.

^M126(2) In subsection (1) —

(a)at the end of paragraph (a) omit “or”;

(b)after paragraph (a) insert—

“(aa)relevant exchanges are unable, or likely to be unable, to satisfy claims made against them in connection with a regulated activity relating to a trading facility carried on by the exchange, or”; and

(c)in paragraph (b) after “relevant persons” insert “ or relevant exchanges ”.

(3) In subsection (3)—

(a)for paragraphs (a) and (b) substitute—

“(a)to assess and pay compensation, in accordance with the scheme, to claimants in respect of claims made in connection with—

(i)a regulated activity carried on (whether or not with permission) by relevant persons; and

(ii)a regulated activity relating to a trading facility carried on (whether or not in accordance with any requirements relating to that activity resulting from section 286) by relevant exchanges; and

(b)to have power to impose levies for the purpose of meeting its expenses (including in particular expenses incurred, or expected to be incurred, in paying compensation, borrowing or insuring risks)—

(i)on authorised persons, or any class of authorised person;

(ii)on recognised investment exchanges carrying on a regulated activity relating to a trading facility, or any class of such exchanges; or

(iii)on authorised persons and on recognised investment exchanges carrying on a regulated activity relating to a trading facility, or on any class of such persons and exchanges.”.

(4) For subsection (4) substitute—

“(4)The compensation scheme may provide for the scheme manager to have power to impose levies—

(a)on authorised persons, or any class of authorised person;

(b)on recognised investment exchanges carrying on a regulated activity relating to a trading facility, or any class of such exchanges; or

(c)on authorised persons and on recognised investment exchanges carrying on a regulated activity relating to a trading facility, or on any class of such persons and exchanges,

for the purpose of recovering the cost (whenever incurred) of establishing the scheme.”.

^M127(5) For subsection (5) substitute—

“(5)In making any provision of the scheme by virtue of subsection (3)(b), the regulators must take account of the desirability of ensuring that the amount of the levies imposed on a particular —

(a)class of authorised person;

(b)class of recognised investment exchange carrying on a regulated activity relating to a trading facility; or

(c)class of authorised person and of recognised investment exchanges carrying on a regulated activity relating to a trading facility;

reflects, so far as is practicable, the amount of claims made, or likely to be made in respect of that class of person, exchange, or persons and exchanges.”.

^M128(6) After subsection (11) insert—

“(12)In this Part (except in sections 220 and 224) “relevant exchange” means a body corporate or unincorporated association which was a recognised investment exchange carrying on a regulated activity relating to a trading facility at the time the act or omission giving rise to the claim against it, or against a successor falling within subsection (1)(b), took place.

(13)In this Part “regulated activity relating to a trading facility” means—

(a)the regulated activity of operating a multilateral trading facility; or

(b)the regulated activity of operating an organised trading facility.”.

^M12924. In section 214(1) (general)—

(a)in paragraph (a)—

(i)after “person” insert “ or relevant exchange ”; and

(ii)after “him” insert “ or it ”;

(b)^M130in paragraph (aa) after “person” insert “ or relevant exchange ”.

^M13125.—(1)Section 215 (rights of the scheme in insolvency) is amended as follows.

(2) In subsection (3) for the words from “a company” to the end substitute—

“(a)a company or partnership which is a relevant person; or

(b)a body corporate or unincorporated association which is a relevant exchange;

the scheme manager has the same rights as are conferred on the regulators by section 362.”.

(3) In subsection (4) after “relevant person” insert “ or relevant exchange ”.

^M13226.—(1)Section 218A (regulators power to require information) is amended as follows.

^M133(2) In subsection (1) after “authorised persons” insert “ or recognised investment exchanges carrying on a regulated activity relating to a trading facility ”.

(3) In subsection (3) after paragraph (a) insert—

“(aa)to recognised investment exchanges mentioned in subsection (1) generally or only to specified exchanges or classes of exchange;”.

^M13427.—(1)Section 220 (scheme manager's power to inspect information held by liquidator etc.) is amended as follows.

(2) In subsection (1) after “relevant person” insert “ or insolvent relevant exchange ”.

(3) In subsection (3)—

(a)in paragraph (a) after “relevant person” insert “ or insolvent relevant exchange ”; and

(b)in paragraph (b) after “relevant person” insert “ or insolvent relevant exchange ”.

(4) In subsection (5)—

(a)after “ “relevant person”” insert “ and “relevant exchange” ”; and

(b)for “has” substitute “ have ”.

28.—(1)Section 224 (scheme manager's power to inspect documents held by Official Receiver etc) is amended as follows.

^M135(2) In subsection (1) in the opening words after “relevant person” insert “ or relevant exchange ”.

(3) After subsection (4) insert—

“(4A)In this section “relevant exchange” means a body corporate or unincorporated association carrying on a regulated activity relating to a trading facility at the time the act or omission which may give rise to the liability mentioned in subsection (1)(a) took place.”.

Amendments to Part 18 (recognised investment exchanges and clearing houses)

^M13629. Omit section 286(4A) to (4E) (qualification for recognition).

^M13730. After section 287 (application by an investment exchange) insert—

“287A.Application by an investment exchange: persons connected with an applicant

(1)Subsection (2) applies where—

(a)a body corporate or unincorporated association (“A”) makes an application under section 287 for an order declaring it to be a recognised investment exchange; and

(b)A is—

(i)connected with an EEA credit institution or EEA insurance undertaking; or

(ii)controlled by a person who also controls an EEA credit institution or EEA insurance undertaking.

(2)Before making a recognition order declaring A to be a recognised investment exchange under section 290, the FCA must consult the competent authority responsible for the supervision of the EEA credit institution or EEA insurance undertaking.

(3)A is connected with an EEA credit institution or EEA insurance undertaking if—

(a)A is a subsidiary undertaking of the EEA credit institution or EEA insurance undertaking; or

(b)A is a subsidiary undertaking of a parent undertaking of the EEA credit institution or EEA insurance undertaking.

(4)In this section—

“control” has the same meaning as in Article 4.1.35(b) (definitions) of the markets in financial instruments directive;

“EEA credit institution” means a credit institution (as defined by Article 4.1.27 of the markets in financial instruments directive) authorised in another EEA State under the capital requirements directive;

“EEA insurance undertaking” means an insurance undertaking (as defined by Article 13.1 of the Solvency 2 Directive) authorised in another EEA State.”.

^M13831. In section 290(1A) (recognition orders)—

(a)for “Community” substitute “ EU ”; and

(b)at the end insert “ or the markets in financial instruments regulation ”.

^M13932. In section 292(3) (overseas investment exchanges and overseas clearing houses), for paragraph (a) substitute—

“(a)investors are afforded protection equivalent to that which they would be afforded if the body concerned were required to comply with—

(i)recognition requirements, other than any such requirements which are expressed in regulations under section 286 not to apply for the purposes of this paragraph, and

(ii)requirements contained in any directly applicable EU regulation made under the markets in financial instruments directive or the markets in financial instruments regulation;”.

^M14033. In section 301E(4)(a) (disregarded holdings) for “4.1(8)” substitute “ 4.1.7 ”.

^M14134.—(1)Section 312A (exercise of passport rights by EEA market operator) is amended as follows.

^M142(2) In subsection (1) for “regulated market or specified multilateral trading facility” substitute “ trading venue ”.

(3) In subsection (2) for “market or facility” substitute “ venue ”.

^M14335.—(1)Section 312B (removal of passport rights from EEA market operator) is amended as follows.

^M144(2) In subsection (1) for “regulated market or multilateral trading facility” substitute “ trading venue ”.

^M145(3) In subsection (2) —

(a)at the end of paragraph (b) omit “or”;

(b)for paragraph (c) substitute—

“(c)by the markets in financial instruments regulation; or

(d)by any directly applicable EU regulation made under that directive or that regulation”.

^M14636.—(1)Section 312C (exercise of passport rights by recognised investment exchange) is amended as follows.

(2) In subsection (1) for “regulated market or multilateral trading facility” substitute “ trading venue ”.

^M147(3) In subsection (5) —

(a)in paragraph (a)—

(i)for “31.6” substitute “ 34.7 ”; and

(ii)after “multilateral trading facility”, insert “ or an organised trading facility ”; and

(b)in paragraph (b) for “42.6” substitute “ 53.6 ”.

(4) In subsection (7) for “4.1.22” substitute “ 4.1.26 ”.

^M14837. In section 312D (interpretation of Chapter 3A of Part 18)—

(a)in the definition of “the applicable provision”—

(i)in paragraph (a) for “Article 31.5” substitute “ or an organised trading facility, Article 34.6 ”; and

(ii)in paragraph (b) for “42.6” substitute “ 53.6 ”;

(b)in the definition of “EEA market operator” for “4.1.13” substitute “ 4.1.18 ”; and

(c)in the definition of “home state regulator” for “4.1.22” substitute “ 4.1.26 ”.

^M14938. In section 313(1) (interpretation of Part 18)—

(a)in the definition of “multilateral trading facility” for “4.1.15” substitute “ 4.1.22 ”;

(b)after the definition of “multilateral trading facility” insert—

““organised trading facility” has the meaning given in Article 4.1.23 of the markets in financial instruments directive;”;

(c)in the definition of “regulated market” for “4.1.14” substitute “ 4.1.21 ”;

(d)after the definition of “revocation order” insert—

““trading venue” means a multilateral trading facility, a regulated market or an organised trading facility.”.

Amendments to Part 18A (suspension and removal of financial instruments from trading)

^M15039. In section 313A(3) (FCA's power to require suspension or removal of financial instruments from trading) for the words “regulated market” to the end substitute “ trading venue ”.

^M15140. Omit section 313C (notification in relation to suspension or removal of a financial instrument from trading).

41. After section 313C insert—

“313CA.Suspension or removal of financial instruments from trading: notification and trading on other venues

(1)The FCA must take the steps in subsection (2) to (4) if it imposes a requirement on an institution under section 313A to—

(a)suspend or remove a financial instrument from trading; or

(b)suspend or remove a derivative which relates, or is referenced, to the financial instrument from trading to support the objectives of a suspension or removal mentioned in paragraph (a).

(2)The FCA must require any trading venue or systematic internaliser which falls under its jurisdiction and trades the same instrument or derivative to suspend or remove the instrument or derivative from trading if a suspension or removal mentioned in subsection (1) was due to—

(a)suspected market abuse;

(b)a take-over bid; or

(c)the non-disclosure of inside information about the issuer or the instrument.

(3)But the FCA is not obliged to impose a requirement under subsection (2) if it could cause significant damage to the interests of investors or the orderly functioning of the market.

(4)The FCA must—

(a)inform ESMA and the competent authorities of every other EEA State of—

(i)a decision to impose a requirement under section 313A;

(ii)a decision to revoke a requirement imposed under section 313A;

(iii)a decision to impose, not to impose, or to revoke a requirement under subsection (2); and

(b)publish a decision mentioned in paragraph (a)(i) to (iii) in such a manner as it considers appropriate unless the decision has already been published under section 313B(2)(b) or 313BE(5).

313CB.Suspension or removal of a financial instrument from a trading by a trading venue: FCA duties

(1)The FCA must take the steps in subsections (2), (4), and (5) if a person specified in subsection (6) operating a trading venue in the United Kingdom informs the FCA it has made a decision—

(a)to suspend or remove a financial instrument from trading on the trading venue because the instrument no longer complies with the venue's rules, or

(b)to suspend or remove a derivative which relates, or is referenced, to the financial instrument from trading on the trading venue to support the objectives of a suspension or removal mentioned in paragraph (a).

(2)The FCA must require any other trading venue or any systematic internaliser which falls under its jurisdiction and trades the same instrument or derivative to suspend or remove the instrument or derivative from trading if a suspension or removal mentioned in subsection (1) was due to—

(a)suspected market abuse;

(b)a take-over bid; or

(c)the non-disclosure of inside information about the issuer or the instrument.

(3)But the FCA is not obliged to impose a requirement under subsection (2) if it could cause significant damage to the interests of investors or the orderly functioning of the market.

(4)The FCA must revoke a requirement imposed under subsection (2) if the person mentioned in subsection (1) informs the FCA it has lifted the suspension mentioned in that subsection.

(5)The FCA must—

(a)inform ESMA and the competent authorities of every other EEA State of any decision to impose, not to impose, or to revoke a requirement under subsection (2),

(b)provide ESMA and those competent authorities with an explanation if the decision is not to impose a requirement under subsection (2) because subsection (3) applies, and

(c)publish any decision mentioned in paragraph (a) in such a manner as it considers appropriate.

(6)The specified persons for the purposes of subsection (6) are—

(a)a recognised investment exchange,

(b)an investment firm with a Part 4A permission to carry on a regulated activity which is any of the investment services and activities,

(c)a credit institution authorised under the capital requirements directive.

313CC.Suspension or removal of a financial instrument from trading in another EEA state: FCA duties

(1)The FCA must take the steps in subsections (2) and (3) if the FCA is informed that a competent authority of another EEA State has made a decision to—

(a)suspend or remove a financial instrument from trading on a trading venue or systematic internaliser in that State for the purposes of—

(i)Article 32.2 (suspension and removal of financial instruments from trading on an MTF or OTF) of the markets in financial instruments directive;

(ii)Article 52.2 (suspension and removal of financial instruments from trading on a regulated market) of the directive, or

(iii)Article 69.2(m) or (n) (supervisory powers) of the directive, or

(b)suspend or remove a derivative which relates, or is referenced, to the financial instrument from trading on a trading venue or systematic internaliser in that State for those purposes.

(2)The FCA must require any trading venue or systematic internaliser which falls under its jurisdiction and trades the same instrument or derivative to suspend or remove the instrument or derivative from trading if the suspension or removal was due to—

(a)suspected market abuse;

(b)a take-over bid; or

(c)the non-disclosure of inside information about the issuer or the instrument.

[^F180(2A)But the FCA is not obliged to impose a requirement under subsection (2) if it could cause significant damage to the interests of investors or the orderly functioning of the market.^F180]

(3)The FCA must revoke a requirement imposed under subsection (2) if the competent authority of the other EEA State informs the FCA it has lifted the suspension or removal mentioned in subsection (1).

(4)For the purposes of subsection (1) the FCA is informed of a decision mentioned in subsection (1)(a) or (b) when the competent authority that made the decision, the competent authority of any other EEA State, or ESMA informs the FCA of the decision for the purposes of Article 32.2 or 52.2 of the markets in financial instrument directive.”.

^M15242.—(1)Section 313D (interpretation of Part 18A) is amended as follows.

(2) The existing text becomes subsection (1).

(3) In subsection (1)—

(a)in the definition of “financial instrument” for “4.1.17” substitute “ 4.1.15 ”;

(b)omit the definition of “multilateral trading facility”;

(c)omit the definition of “regulated market”; and

(d)in the appropriate places, insert—

““competent authority” has the meaning given in Article 4.1.26 (definitions) of the markets in financial instruments directive;”;

““derivative” means a derivative referred to in points (4) to (10) of Section C of Annex 1 to the markets in financial instruments directive;”;

““non-disclosure of inside information” means a failure to disclose inside information, as defined by Article 7 (inside information) of the market abuse regulation, in contravention of Article 17 (public disclosure of inside information) of that Regulation;”;

““market abuse” means a contravention of Article 14 (prohibition of insider dealing and of unlawful disclosure of inside information) or 15 (prohibition of market manipulation) of the market abuse regulation;”;

““systematic internaliser” has the meaning given in Article 4.1.20 of the markets in financial instruments directive;”; and

““trading venue” has the meaning given in Article 4.1.24 of the markets in financial instruments directive.”.

(4) After subsection (1) insert—

“(2)In this Part a trading venue or systematic internaliser falls under the FCA's jurisdiction if—

(a)the United Kingdom is the home Member State (as defined by Article 4.1.55 of the markets in financial instruments directive) of—

(i)in the case of a trading venue which is a regulated market (as defined by Article 4.1.21 of the directive), the regulated market;

(ii)in the case of a trading venue which is a multilateral trading facility (as defined by Article 4.1.22 of the directive), the person operating the facility;

(iii)in the case of a trading venue which is an organised trading facility (as defined by Article 4.1.23 of the directive), the person operating the facility; or

(iv)in the case of a systematic internaliser, the systematic internaliser; or

(b)in the case of a systematic internaliser does not fall within the FCA's jurisdiction by virtue of paragraph (a)—

(i)it has established a branch (as defined by Article 4.1.30 of the directive) in the United Kingdom; and

(ii)the FCA considers that it is necessary to impose a requirement on the systematic internaliser under section 313CA(2), 313CB(2), or 313CC(2) for the purposes of Article 32.2 or 52.2 ^F181... of the markets in financial instruments directive.”.

Amendments to Part 20 (provision of financial services by members of the professions)

43.—(1)Section 327 (exemption from general prohibition) is amended as follows.

(2) In subsection (1)—

(a)at the end of paragraph (a) omit “and”;

(b)after paragraph (a) insert—

“(aa)where the activity is the provision of a service listed in Section A of Annex 1 of the markets in financial instruments directive relating to a financial instrument, the condition set out in subsection (7A) is also satisfied; and”.

(3) After subsection (7) insert—

“(7A)The condition mentioned in subsection (1)(aa) is that—

(a)the service is provided in an incidental manner in the course of a professional activity for the purposes of the markets in financial instruments directive; and

(b)the professional activity concerned is the provision of professional services.

(7B)In subsection (7A) a service is provided in an incidental manner in the course of a professional activity for the purposes of the markets in financial instruments directive if the applicable conditions are satisfied.

(7C)The applicable conditions for the purposes of subsection (7B) are those set out in Article 4(a) to (c) of Commission Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive ^M153.”.

Amendments to Part 23 (public record, disclosure of information and co-operation)

44.—(1)Section 347 (the record of authorised persons etc) is amended as follows.

^M154(2) In subsection (1)(a) for the “and” after paragraph (hb) insert—

“(hc)appointed representative to whom subsection (2C) applies; and”.

^M155(3) In subsection (2A) —

(a)in paragraph (a) after “subsection (1A)” insert “ or (1AA) ”; and

(b)^M156in paragraph (c) for “23.3” substitute “ 29.3 ”.

^M157(4) After subsection (2B) insert—

“(2C)This subsection applies to an appointed representative of an authorised person who has a Part 4A permission by virtue of regulation 4 or 7 of the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/XXXX).”.

(5) After subsection (3) insert—

“(3A)But if a person ceases to be a person to whom one of the paragraphs of subsection (1) applies as a result of—

(a)a cancellation of that person's Part 4A permission under section 55J(6) ^M158 because one or more of the conditions in 55K(1)(b) to (d) was met; or

(b)a cancellation of that person's Part 4A permission to carry on regulated activities as an exempt investment firm under section 55J(1) to (3) because—

(i)the person has contravened a requirement imposed on that person by or under the Act for the purposes of Article 3.2(a) of the markets in financial instruments directive; and

(ii)one or more of the conditions mentioned in Article 8(b) to (d) of the directive was met;

the power conferred by subsection (3) is not exercisable for a period of five years from the date on which the person ceased to be a person to whom subsection (1) applied.

(3B)Where the power conferred by subsection (3) is not exercisable in respect of an entry in the record as a result of subsection (3A) the FCA must—

(a)make a note in the record that it considers the person to whom the entry relates has ceased to be person to whom one of the paragraphs of subsection (1) applies as a result of a cancellation of that person's Part 4A permission for a reason mentioned in subsection (3A)(a) or (b); and

(b)state why it considers that is the case.”.

(6) At the end of subsection (4)(b) insert “ in any case where it has not already done so under subsection (3B) ”.

^M159(7) In subsection (8A) at the appropriate place insert—

““exempt investment firm” means an authorised person who—

(a)is an investment firm; and

(b)has a Part 4A permission;

but to whom Title II of the markets in financial instruments directive does not apply by virtue of Article 3 of the directive..”.

Amendments to Part 26 (notices)

45. In section 391 (publication) —

(a)^M160in subsection (4A) for “and 391C” substitute “ , 391C and 391D ”; and

(b)^M161in subsection (7B) —

(i)at the end of paragraph (c) omit “or”;

(ii)in paragraph (d) after “by” insert “ or under ”; and

(iii)at the end of paragraph (d) insert—

“; or

(e)by or under the markets in financial instruments regulation and any directly applicable EU regulation made under it.”.

^M16246. After section 391C (publication: special provisions relating to the UCITs directive), insert—

“391D.Publication: special provisions relating to the markets in financial instruments directive

(1)This section applies where a supervisory notice, decision notice or final notice relates to the imposition of a sanction or measure to which Article 71 of the markets in financial instruments directive applies.

(2)Where a regulator publishes information under section 391(4) or (5) about a matter to which a supervisory notice or decision notice relates and the person to whom the notice is given refers the matter to the Tribunal, the regulator must, without undue delay, publish on its official website information about the status of the appeal and its outcome.

(3)Subject to subsections (4), (5), and (8) where a regulator gives a final notice, it must, without undue delay, publish on its official website information on the type and nature of the breach and the identity of the person on whom the sanction or measure is imposed.

(4)Subject to subsection (7) and (8), information about a matter to which a final notice relates must be published in accordance with subsection (5) where—

(a)a regulator considers it to be disproportionate to publish the identity of a legal person on whom the sanction or measure is imposed following an assessment by the regulator of the proportionality of publishing the person's identity;

(b)a regulator considers it to be disproportionate to publish the personal data of an individual on whom the sanction or measure is imposed following an assessment by the regulator of the proportionality of publishing the personal data; or

(c)the publication of information under subsection (3) would jeopardise the stability of the financial markets or an ongoing investigation.

(5)Where subsection (4) applies, a regulator must—

(a)defer the publication of the information about a matter to which a final notice relates until such time as subsection (4) ceases to apply; or

(b)publish the information on an anonymous basis if publication on that basis would ensure the effective protection of any anonymised personal data in the information.

(6)Where subsection (5)(b) applies, the regulator may make such arrangements as to the publication of information (including as to the timing of publication) as are necessary to preserve the anonymity of the person on whom the sanction or measure is imposed.

(7)The regulator may make arrangements for the postponed publication of any personal data that is anonymised in information it publishes under subsection (5)(b) if—

(a)publication of the data is postponed for a reasonable period of time; and

(b)the regulator considers that subsection (5)(b) will no longer apply in respect of that data at the time of the postponed publication.

(8)Information about a matter to which a final notice relates must not be published if publication in accordance with subsection (5) is considered by the regulator insufficient to ensure—

(a)that the stability of the financial markets would not be put in jeopardy; or

(b)that the publication of the information would be proportionate with regard to sanctions or measures which are considered by the regulator to be of a minor nature.

(9)Where a regulator publishes information in accordance with subsections (2) to (7), the regulator must—

(a)ensure the information remains on its official website for at least five years, unless the information is personal data and the Data Protection Act 1998^M163 requires the information to be retained for a different period; and

(b)promptly report the information to ESMA.”.

^M16447. After section 395(13)(bbza) (the FCA's and PRA's procedures) insert—

“(bbzb)section 122IA;”.

Amendments to Part 27 (offences)

^M16548. In section 398(1A) (Misleading FCA or PRA: residual cases)—

(a)after paragraph (b) insert—

“(ba)the Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/[^F182701^F182]);”;

(b)^M166at the end of paragraph (e) omit “or”; and

(c)after paragraph (e) insert—

“(ea)any directly applicable EU regulation made under the markets in financial instruments directive;

(eb)the markets in financial instruments regulation and any directly applicable EU regulation made under it; or”.

Amendments to Part 28 (miscellaneous)

^M16749. Omit sections 405 (directions) to 408 (EFTA firms).

^M168,M16950. Omit sections 412A (approval and monitoring of trade-matching and reporting systems) and 412B (procedure for approval, suspension and withdrawal).

Amendments to Part 29 (interpretation)

^M17051.—(1) Section 417(1) is amended as follows.

(2) For the definition of “investment services and activities” substitute—

““investment services and activities” has the meaning given by Article 4.1.2 (definitions) of the markets in financial instruments directive, read with Articles 5 to 8 of the Commission Delegated Regulation (EU) 2017/565 on Directive 2014/65/EU of the European Parliament and of the Council as regarding organisational requirements and operational conditions for investment firms and defined terms for the purposes of that Directive;”.

(3) Insert the following definition in the appropriate places—

““markets in financial instruments regulation” means Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2004 on markets in financial instruments;”;

^M17152. In section 422A(4)(a) (disregarded holdings) for “4.1(8)” substitute “ 4.1.7 ”.

^M17253. In section 424A(5)(b) (investment firm) for “4.1.20” substitute “ 4.1.55 ”.

Amendments to Schedule 3 (EEA passport rights)

54.—(1)Schedule 3 (EEA passport rights) is amended as follows.

^M173(2) For paragraph 4C substitute—

“(4C)“The markets in financial instruments directive” means Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments.”.

^M174(3) In paragraph 11A for “4.1.25” substitute “ 4.1.29 ”.

^M175(4) In paragraph 12(3) after “5(a)”, insert “ or (b) ”.

^M176(5) In paragraph 14(1)(ba) for “31.5” substitute “ 34.6 ”.

^M177(6) In paragraph 20(4BA) for “31.6” substitute “ 34.7 ”.

^M178(7) In paragraph 20A —

(a)after “investment firm” in both places, insert “ or UK credit institution ”; and

(b)after sub-paragraph (2) insert—

“(3)In this paragraph “UK credit institution” means a UK firm—

(a)which is a credit institution; and

(b)whose EEA right derives from the markets in financial instruments directive.”.

Amendments to Schedule 10A (liability of issuers)

^M17955. In paragraph 8(1) of Schedule 10A (liability of issuers in connection with published information)—

(a)in paragraph (a)—

(i)for “4.1.18” substitute “ 4.1.44 ”; and

(ii)for “4.1.19” substitute “4.1.17; and

(b)in paragraph (b)—

(i)for “4.1.14” substitute “ 4.1.21 ”; and

(ii)for “4.1.15” substitute “ 4.1.22 ”.

Regulation 50(2)

SCHEDULE 3Amendments to secondary legislation made under the Financial Services and Markets Act 2000

The Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001

^M1801.—(1)The Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001 are amended as follows.

^M181(2) In regulation 3(1) (interpretation)—

(a)in the definition of “branch” for “Article 4.1.26” substitute “ Article 4.1.30 ”;

(b)omit the definition of “the Commission Regulation”;

(c)in the definition of “financial instrument” for “Article 4.1.17” substitute “ Article 4.1.15 ”;

(d)in the definition of “multilateral trading facility” for “Article 4.1.15” substitute “ Article 4.1.22 ”;

(e)in the definition of “regulated market” for “Article 4.1.14” substitute “ Article 4.1.21 ”;

(f)in the definition of “transferable securities” for “Article 4.1.18” substitute “ Article 4.1.44 ”;

(g)at the appropriate places insert—

““algorithmic trading” has the meaning given in Article 4.1.39 of the markets in financial instruments directive;”;

““certificates” has the meaning given in Article 2.1.27 of the markets in financial instruments regulation;”;

““commodity derivatives” has the meaning given in Article 4.1.50 of the markets in financial instruments directive;”;

““depositary receipts” has the meaning given in Article 4.1.45 of the markets in financial instruments directive;”;

““derivative” means a financial instrument defined in Article 4.1.44(c) of the markets in financial instruments directive and listed in Section C(4) to (10) of Annex 1 to that directive;”;

““direct electronic access” has the meaning given in Article 4.1.41 of the markets in financial instruments directive;”;

““emission allowances” has the same meaning as in the markets in financial instruments directive;”;

““exchange-traded fund” has the meaning given in Article 4.1.46 of the markets in financial instruments directive;”;

““group” has the meaning given in Article 4.1.34 of the markets in financial instruments directive;”;

““high-frequency algorithmic trading technique” has the meaning given in Article 4.1.40 of the markets in financial instruments directive;”;

““liquid market” has the meaning given in Article 4.1.25 of the markets in financial instruments directive;”;

““management body” in relation to an exchange means—

(a)the board of directors, or if there is no such board, the equivalent body responsible for the management of the exchange; and

(b)any other person who effectively directs the business of the exchange;”;

““matched principal trading” has the meaning given in Article 4.1.38 of the markets in financial instruments directive;”;

““multilateral system” has the meaning given as in Article 4.1.19 of the markets in financial instruments directive;”;

““senior management” has the meaning given by Article 4.1.37 of the markets in financial instruments directive;”;

““SME growth market” has the meaning given by Article 4.1.12 of the markets in financial instruments directive;”;

““sovereign debt” has the meaning given by Article 4.1.61 of the markets in financial instruments directive;”;

““structured finance products” has the meaning given in Article 4.1.48 of the markets in financial instruments directive;”;

““systematic internaliser” has the meaning given in Article 4.1.20 of the markets in financial instruments directive;”;

““third country firm” has the meaning given in Article 4.1.57 of the markets in financial instruments directive;”.

(3) After regulation 10 (revocation of recognition) insert—

“FCA rules

11.The FCA may make rules for the purposes of these Regulations.”.

^M182(4) For paragraph 2(3) of the Schedule (suitability) substitute—

“(3)The members of the management body must be of sufficiently good repute and possess sufficient knowledge, skills and experience to perform their duties.”.

(5) After paragraph 2 of the Schedule insert—

“Management body

2A.—(1)The composition of the management body of an exchange must reflect an adequately broad range of experience.

(2)The management body must possess adequate collective knowledge, skills and experience in order to understand the exchange's activities and main risks.

(3)Members of the management body must—

(a)commit sufficient time to perform their functions on the management body;

(b)act with honesty, integrity and independence of mind; and

(c)effectively—

(i)assess and challenge, where necessary, the decisions of the senior management; and

(ii)oversee and monitor decision-making.

(4)The management body must—

(a)define and oversee the implementation of governance arrangements that ensure the effective and prudent management of the exchange in a manner which promotes the integrity of the market, which at least must include—

(i)the segregation of duties in the organisation; and

(ii)the prevention of conflicts of interest;

(b)monitor and periodically assess the effectiveness of the exchange's governance arrangements; and

(c)take appropriate steps to address any deficiencies found as a result of the monitoring under paragraph (b).

(5)An exchange must—

(a)devote adequate human and financial resources to the induction and training of members of the management body;

(b)ensure that the management body has access to the information and documents it requires to oversee and monitor management decision-making; and

(c)notify the FCA of the identity of all the members of its management body.

(6)An exchange and, if it has a nomination committee, its nomination committee must engage a broad set of qualities and competences when recruiting persons to the management body, and for that purpose have a policy promoting diversity on the management body.

(7)The number of directorships a member of the management body can hold at the same time must take into account individual circumstances and the nature, scale and complexity of the exchange's activities.

Management body: significant exchanges

2B.—(1)If an exchange is significant the following requirements apply to the management body—

(a)members of the management body must not at the same time hold positions exceeding more than one of the following combinations—

(i)one executive directorship with two non-executive directorships (or where so authorised by the FCA under regulation 44(1), three non-executive directorships); or

(ii)four non-executive directorships (or where so authorised by the FCA under regulation 44(1), five non-executive directorships); and

(b)the management body must have a nomination committee unless it is prevented by law from selecting and appointing its own members.

(2)For the purposes of sub-paragraph (1)(a)—

(a)any directorship in which the person represents the United Kingdom is not counted;

(b)executive or non-executive directorships—

(i)held within the same group, or

(ii)held within the same undertaking where the exchange holds a qualifying holding within the meaning of Article 4.1.31 of the markets in financial instruments directive,

shall be counted as a single directorship; and

(c)any directorship in an organisation which does not pursue predominantly commercial objectives is not counted.

(3)The nomination committee referred to in sub-paragraph (1)(b) must—

(a)be composed of members of the management body who do not perform an executive function in the exchange;

(b)identify and recommend to the exchange persons to fill management body vacancies;

(c)at least annually assess the structure, size, composition and performance of the management body and make recommendations to the management body;

(d)at least annually assess the knowledge, skills and experience of individual members of the management body and of the management body collectively, and report to the management body accordingly;

(e)periodically review the policy of the management body for the selection and appointment of senior management and make recommendations to the management body; and

(f)be able to use any forms of resource it deems appropriate, including external advice.

(4)In performing its functions under sub-paragraph (3) the nomination committee must take account of the need to ensure that the management body's decision-making is not dominated by—

(a)any one individual; or

(b)a small group of individuals,

in a manner that is detrimental to the interests of the exchange as a whole.

(5)In performing its function under sub-paragraph (3)(b) the nomination committee must—

(a)evaluate the balance of knowledge, skills, diversity and experience of the management body;

(b)prepare a description of the roles, capabilities and expected time commitment for any particular appointment;

(c)decide on a target for the representation of the underrepresented gender in the management body and prepare a policy on how to meet that target;

(d)engage a broad set of qualities and competences, and for that purpose have a policy promoting diversity on the management body.

(6)In sub-paragraph (1), “significant” in relation to an exchange means significant in terms of the size and internal organisation of the exchange and the nature, scope and complexity of the exchange's activities.”.

^M183(6) In paragraph 3 of the Schedule (systems and controls)—

(a)for sub-paragraph (1) substitute—

“(1)The exchange must ensure that the systems and controls, including procedures and arrangements, used in the performance of its functions and the functions of the trading venues it operates are adequate, effective and appropriate for the scale and nature of its business.”;

(b)at the end of sub-paragraph (2)(d) omit “and”;

(c)after sub-paragraph (2)(e) insert—

“(f)the resilience of its trading systems;

(g)the ability to have sufficient capacity to deal with peak order and message volumes;

(h)the ability to ensure orderly trading under conditions of severe market stress;

(i)the effectiveness of business continuity arrangements to ensure the continuity of the exchange's services if there is any failure of its trading systems including the testing of the exchange's systems and controls;

(j)the ability to reject orders that exceed predetermined volume or price thresholds or which are clearly erroneous;

(k)the ability to ensure algorithmic trading systems cannot create or contribute to disorderly trading conditions on trading venues operated by the exchange;

(l)the ability to ensure disorderly trading conditions which arise from the use of algorithmic trading systems, including systems to limit the ratio of unexecuted orders to transactions that may be entered into the exchange's trading system by a member or participant, are capable of being managed;

(m)the ability to ensure the flow of orders is capable of being slowed down if there is a risk of system capacity being reached;

(n)the ability to limit and enforce the minimum tick size which may be executed on its trading venues; and

(o)the requirement for members and participants to carry out appropriate testing of algorithms.

(3)For the purposes of sub-paragraph (2)(c), the exchange must—

(a)establish and maintain effective arrangements and procedures including the necessary resource for the regular monitoring of the compliance by their members or participants with its rules; and

(b)monitor orders sent including cancellations and the transactions undertaken by its members or participants under its systems in order to identify infringements of those rules, disorderly trading conditions or conduct that may indicate behaviour that is prohibited under the market abuse regulation or system disruptions in relation to a financial instrument.

(4)For the purposes of sub-paragraph (2)(o) the exchange must provide environments to facilitate such testing.

(5)The exchange must be adequately equipped to manage the risks to which it is exposed, to implement appropriate arrangements and systems to identify all significant risks to its operation, and to put in place effective measures to mitigate those risks.

Market making agreements

3A.—(1)The exchange must—

(a)have written agreements with all investment firms pursuing a market making strategy on trading venues operated by it (“market making agreements”);

(b)have schemes, appropriate to the nature and scale of a trading venue, to ensure that a sufficient number of investment firms enter into such agreements which require them to post firm quotes at competitive prices with the result of providing liquidity to the market on a regular and predictable basis;

(c)monitor and enforce compliance with the market making agreements;

(d)inform the FCA of the content of its market making agreements; and

(e)provide the FCA with any information it requests which is necessary for the FCA to satisfy itself that the market making agreements comply with paragraphs (c) and (d) of this sub-paragraph and sub-paragraph (2).

(2)A market making agreement must specify—

(a)the obligations of the investment firm in relation to the provision of liquidity;

(b)where applicable, any obligations arising from the participation in a scheme mentioned in sub-paragraph (1)(b);

(c)any incentives in terms of rebates or otherwise offered by the exchange to the investment firm in order for it to provide liquidity to the market on a regular and predictable basis; and

(d)where applicable, any other rights accruing to the investment firm as a result of participation in the scheme referred to in sub-paragraph (1)(b).

(3)For the purposes of this paragraph, an investment firm pursues a market making strategy if—

(a)the firm is a member or participant of one or more trading venues;

(b)the firm's strategy, when dealing on own account, involves posting firm, simultaneous two-way quotes of comparable size and at competitive prices relating to one or more financial instruments on a single trading venue, or across different trading venues; and

(c)the result is providing liquidity on a regular and frequent basis to the overall market.

Halting trading

3B.—(1)The exchange must be able to—

(a)temporarily halt or constrain trading on any trading venue operated by it if there is a significant price movement in a financial instrument on such a trading venue or a related trading venue during a short period; and

(b)in exceptional cases cancel, vary, or correct, any transaction.

(2)For the purposes of sub-paragraph (1) the exchange must ensure that the parameters for halting trading are calibrated in a way which takes into account—

(a)the liquidity of different asset classes and sub-classes;

(b)the nature of the trading venue market model; and

(c)the types of users,

to ensure the parameters avoid significant disruptions to the orderliness of trading.

(3)The exchange must report the parameters mentioned in sub-paragraph (2) and any material changes to those parameters to the FCA in a format to be specified by the FCA.

(4)If a trading venue operated by the exchange is material in terms of liquidity of the trading of a financial instrument and it halts trading in an EEA State in that instrument, it must have systems and procedures in place to ensure that it notifies the FCA.

Direct electronic access

3C.Where the exchange permits direct electronic access to a trading venue it operates it must—

(a)ensure that a member of, or participant in, the trading venue is only permitted to provide direct electronic access to the venue if the member or participant—

(i)is an investment firm, as defined by Article 4.1.1 of the markets in financial instruments directive (definitions), authorised in accordance with the directive;

(ii)is a credit institution authorised in accordance with the capital requirements directive ^M184;

(iii)comes within Article 2.1(a), (e), (i), or (j) of the markets in financial instruments directive (exemptions) and has a Part 4A permission relating to investment services and activities;

(iv)is a third country firm providing the direct electronic access in the course of exercising rights under Article 46.1 (general provisions) or 47.3 (equivalence decision) of the markets in financial instruments regulation;

(v)is a third country firm and the provision of the direct electronic access by that firm is subject to the exclusion in article 72 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001^M185; or

(vi)is a third country firm which does not come within paragraph (iv) or (v) and is otherwise permitted to provide the direct electronic access under the Act;

(b)ensure that appropriate criteria are set and applied for the suitability of persons to whom direct electronic access services may be provided;

(c)ensure that a member of, or participant in, the trading venue retains responsibility for adherence to the requirements of the markets in financial instruments directive in respect of orders and trades executed using the direct electronic access service;

(d)set appropriate standards for risk controls and thresholds on trading through direct electronic access;

(e)be able to distinguish and if necessary stop orders or trading on that trading venue by a person using direct electronic access separately from—

(i)other orders; or

(ii)trading by the member or participant providing the direct electronic access; and

(f)have arrangements in place to suspend or terminate the provision to a client of direct electronic access to that trading venue by a member of, or participant in, the trading venue in the case of non-compliance with this paragraph.

Co-location services

3D.The exchange's rules on co-location services must be transparent, fair and non-discriminatory.

Fee structures

3E.—(1)The exchange's fee structure, for all fees it charges including execution fees and ancillary fees and rebates it grants, must—

(a)be transparent, fair and non-discriminatory;