My Lords, I will speak first to the data reporting services SI. The Explanatory Memorandum for this instrument helpfully reduces its
28 pages to a succinct six pages. It makes plain what the scrutiny situation with regard to the SI will be. Paragraph 7.4 says:
“Before FSMA 2023, the FCA did not have any rule-making powers over DRSPs, except for some limited powers in respect of technical standards, as well as limited powers of direction enabling them to establish the current authorisation process. These were not sufficient to replace the detailed provisions currently in retained EU law”.
Paragraph 6.6 goes on to remind us:
“Separately, Section 11 of FSMA 2023 inserts new section 300H into FSMA 2000 which establishes a general rule-making power for the FCA in relation to DRSPs. Going forward, it will be the responsibility of the FCA to make firm-facing rules in relation to DRSPs within the powers established by FSMA 2023”.
These new FCA rules will not be subject to parliamentary scrutiny—unlike the retained EU law provisions, which were. We should be clear that Parliament will be bypassed by these new FCA rules.
In this SI, we are simply being asked to consider a set of framework proposals for these new FCA rules, not the rules themselves. The helpful de minimis assessment makes this point very clearly in its opening paragraph when it says:
“Retained EU law will be replaced with rules set by our independent and expert regulators, operating within a framework set by government and Parliament”.
We regret that Parliament is being excluded from effective scrutiny here.
There are some questions relating to this framework; I would be grateful if the Minister could address them. In paragraph 7.10 of the Government’s response to the consultation on the WMR, there is a note on the issue of removing the requirement for CTPs to provide data streams free after 15 minutes. The report notes that most respondents favoured removing this requirement but others argued that
“retail and non-professional investors currently benefit from this obligation and removing it, even for CTPs, could risk disadvantaging them”.
Have the Government discussed this with the FCA? Which approach is currently favoured? Are we going to leave the 15 minutes in or take it out?
In paragraph 7.11 of the WMR response, it is noted that some respondents suggested that
“the current requirement in legislation for market participants, operators and data reporting services providers to make data available on a ‘reasonable commercial basis’ (RCB) is not working”.
These respondents argued that this is because the FCA
“does not have sufficient enforcement powers and asked for the FCA to be given appropriate enforcement powers to control the cost of market data”.
Can the Minister say whether this framework SI will allow the FCA to take on these obviously necessary enforcement powers?
I turn now to the 44 pages of the second SI before us, the Securitisation Regulations 2023. We acknowledge the need for action in this area but, as with the previous SI, we strongly regret that Parliament is in effect excluded from scrutiny of the rules to be set by the FCA and PRA. There are several areas in the instrument where it would be helpful to hear more detailed explanations from the Minister.
Paragraph 7.12 of the EM notes:
“This SI makes some changes to the regulatory perimeter, including scoping out”—
I take that to mean “ruling out of scope” rather than “investigating”—
“non-UK AIFMs from the definition of institutional investor”,
and transferring
“the responsibility for the supervision of providing securitisations by occupational pension schemes”
from TPR to the FCA. Can the Minister explain on what basis these two changes are thought to be beneficial and to whom?
I am also puzzled by this comment in paragraph 7.14 of the EM:
“Due diligence requirements for occupational pension schemes will remain in legislation and be supervised by TPR”.
It goes on to say:
“These requirements will be restated as part of a further SI in 2024”.
Why is there a need for restatement? What deficiencies are there in the current legislation?
Paragraph 7.20 of the EM says that
“this instrument exercises sections 71N(3) and 71N(4) FSMA to allow the FCA to disapply or modify their rules in relation to securitisation activity”.
Are there any limitations here to what the FCA may do or does it have carte blanche to do as it sees fit, absent any scrutiny from HMT or Parliament? If there are any limitations, where are they set out?
I close by referring to paragraph 10.4 of the EM and the Q2 2024 date for the publication of the outcomes of the FCA and PRA consultations and, therefore, of their new rules. This is a long wait. It is extremely unfortunate that these outcomes and the final new rules are not available to Parliament to inform our debate on this SI. No doubt we will have many more financial services SIs in this Session. Will the Minister ensure that the relevant consultation outcomes and proposed new rules are available to Parliament before we debate future SIs?