On 14 November 2024, Chancellor Rachel Reeves delivered her inaugural Mansion House 2024 Speech, announcing a package of reforms that are intended to drive growth and competitiveness in the financial services sector (Government Press Release). The Chancellor has announced bold reforms to the pensions system to boost investment in business, infrastructure and clean energy, and proposes to reform the current approach to financial services regulation by making it less risk averse, more dynamic and the sector more competitive. Various supporting materials have been published to accompany the Chancellor's speech (Mansion House 2024 Collection).
Financial Services Growth and Competitiveness Strategy
Central to the Chancellor's plans for growth and investment in the financial services sector is a new Financial Services Growth and Competitiveness Strategy, which will be published in Spring 2025. The strategy will focus on the five key areas of FinTech, sustainable finance, asset management and wholesale services, insurance and reinsurance, and capital markets. The government has published a Call for Evidence to coincide with the Chancellor's announcement, outlining its proposed approach to the strategy and seeking input from interested stakeholders. The call for evidence will close on 12 December 2024.
The previous government introduced legislation to make growth and competitiveness secondary objectives for regulators (see UK listing regime: overview, Q&A here). With the continued focus on growth, as highlighted in the Chancellor's speech, the government has issued new remit letters to regulators including the FCA (Remit Letter: Recommendations for the FCA – November 2024). The FCA remit letter makes recommendations to the FCA about aspects of the government's economic policy to which it should have regard when advancing its objectives and outlines the important role the FCA plays in facilitating growth and international competitiveness. While ensuring an appropriate degree of protection for consumers, and protecting the integrity of the financial system, the FCA is also instructed to consider how it can enable informed and responsible risk-taking by authorised firms and customers; this is seen as a prerequisite for growth.
Capital markets reform
The Chancellor stresses that reinvigorating capital markets is also a priority for the government. As such, it has committed to establishing the Private Intermittent Securities and Capital Exchange System (PISCES) by May 2025. Alongside this announcement, HM Treasury has published its response to the earlier consultation on PISCES (see FC Feature 6 March 2024), draft legislation to establish PISCES, as well as a policy note to assist stakeholders in reviewing the draft legislation (Response: PISCES consultation). The legislation will establish the PISCES sandbox and, alongside appropriate FCA rules, will set the regulatory requirements for PISCES.
After considering feedback on the consultation, PISCES will be established with the key features set out below.
- Trading of existing shares – PISCES will operate as a secondary market, facilitating the trading of existing shares in intermittent trading windows; it will not facilitate capital raising through the issuance of new shares.
- Shares not tradeable on a public market – only shares in companies whose shares are not admitted to trading on a public market (in the UK or abroad) will be tradeable on PISCES.
- Institutional investors – only institutional investors, employees of participating companies and investors who meet the definition of high net worth individuals (see Financial promotions, Q&A here) and self-certified or certified sophisticated investors (see Q&A here) under the Financial Promotion Order 2005 (FPO 2005), will be able to buy shares on PISCES.
- Market abuse – in a change from the original consultation, the PISCES regime will not include a public market style market abuse regime. Instead, the FCA will be granted rule-making powers to create a new and bespoke regime for PISCES. As there is no market abuse regime, there will not be any transaction reporting requirements for PISCES. This also reflects a change from the initial proposals.
- FPO 2005 exemption – there will be a new FPO 2005 exemption to cover PISCES disclosures.
- Share buybacks – companies will not be able to carry out share buybacks on PISCES at launch but, given feedback the Treasury received, it will explore whether to allow this at a later stage.
Feedback on the draft legislation should be received by 9 January 2025.
The Treasury has also committed to making further legislative changes to the UK's MiFID framework. It has published Policy Paper: Next steps for reforming UK MiFID in this regard.
Sustainable finance
The Chancellor indicated in her speech that the government is aiming to deliver 'a world-leading sustainable finance framework'. To advance this aim, the Treasury has since published the documents referenced below.
- ESG rating providers – the Treasury has published its response and draft legislation in relation to the future regulatory regime for ESG ratings providers (Consultation Response: Future regulatory regime for ESG ratings providers). The legislation will be finalised next year and the FCA will then consult on the specific requirements. The government welcomes technical comments on the draft legislation by 14 January 2025.
- UK Green Taxonomy – the Treasury has launched a consultation on the case for a UK Green Taxonomy, seeking views on whether such a taxonomy would be complementary to existing sustainable finance policies (Consultation: UK Green Economy).
First published on the Corporate News Service on 15 November 2024.
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