As a reminder, the UK Treasury (HMT) published its Consultation on the Second Phase of the Future Regulatory Framework Review (FRFR) in October 2020.  The Consultation is open for input until 19 February 2021.The FRFR aims to set out how the UK’s financial services regulatory framework should change in light of the UK’s exit from the EU. The Government seeks to use the UK’s departure from the EU as an impetus to create a more coherent financial services regulation system in the UK.Content of Review

Phase I of the Review focused on the question of coordination between the regulatory authorities in the UK. The Second Phase tackles the wider regulatory structure in the UK’s financial services – it is on this element that HMT is consulting, with a view to ascertaining the shape of a blueprint which will be the subject of a further consultation exercise later in 2021.


HMT argues that the UK’s existing regulatory oversight system which sees delegation of regulatory responsibility to independent financial services regulators has been very effective. However, the UK’s departure from the EU represents an opportunity to revisit the existing regulatory framework, which is governed by the Financial Services and Markets Act 2000 (FSMA),

Accordingly, this Consultation seeks to adapt, rather than re-write the regulatory system, to create a simpler, more flexible and dynamic oversight regime, with less demand on Parliamentary time and more responsibility devolved away from HMT towards the regulators. The Consultation also offers the opportunity to create a more coherent system, based solely on UK legislation, rather than a mix of retained EU and UK legislation.

Key Elements

The proposals on which HMT is seeking views, aim to achieve this new regime through:

  • Creating a clear division of responsibility with new legislation setting the regulatory framework, and allowing the regulators to set the applicable requirements;
  • Ensuring that regulators can be held accountable to for their decisions;
  • Revisiting the FSMA transparency requirements so that regulators have to demonstrate that they have considered the activity-specific regulatory principles and show how their proposals meet that statutory purpose; and
  • Allowing government and Parliament to set the overall policy approach for specific financial services activities, leaving the regulators to develop policy and regulatory requirements for that activity.