Financial Services Act 2010

Regulatory Roundup #13 contained an article on a consultation paper on the implementation of certain parts of the Financial Services Act 2010 (‘FSA2010’) and which introduced FINMAR to the regulated community.

Based on the feedback received the FSA has now published CP10/18 “Implementing aspects of the Financial Services Act 2010”. Although comments are welcomed, the paper contains final rules and guidance, most of which come into effect on 6th August.

FINMAR (the Financial Stability and Market Confidence Sourcebook) is the new sourcebook that will belong in the ‘High Level Standards’ block of the Handbook. In addition to giving the FSA ‘financial stability information power’, FINMAR includes short positions disclosure requirements (which has been removed from MAR 1.9).

The disclosure requirements have been largely transposed unchanged save that the rights issue disclosure requirement (currently in MAR 1.9.2A) has been narrowed in scope. It will now effectively be restricted to UK companies which are admitted to trading on a UK prescribed market (non-UK companies are also captured if the UK prescribed market is the sole or main venue for trading the securities).

Responsibility for disclosure remains with the holder of the net short position, although this function can be performed by a discretionary/non-discretionary investment manager – see FINMAR 2.4.One effect of the changes is that the FSA no longer has to link shorting rules with market abuse.

FINMAR 3 will replace ‘Threshold Conditions’ COND 3 in its entirety (COND 3 is only relevant to firms falling within the scope of the Banking Act 2009).

FINMAR can be found in Appendix 2 of CP10/18.

DEPP (Decision Procedure and Penalties Manual) has been enhanced to reflect the additional powers given to the FSA under FSA2010. These include the power to: impose penalties on persons that perform controlled functions without approval; impose suspensions or restrictions on authorised persons and approved persons; and impose financial penalties on persons that breach short selling requirements.