Wednesday 21 October 2020 4:55 pm

UK to increase sentence for market abuse in post-Brexit financial regulation

The UK is planning to increase the maximum prison sentence for market abuse from seven to 10 years, as the government sets out a roadmap for financial regulation after the end of the Brexit transition period.

The government is also proposing introducing “more proportionate” regulation of investment firms and giving the City watchdog greater powers to ensure the scrapping of the scandal-hit Libor interest rate benchmark, according to a new financial services bill introduced to parliament today.

“Now the UK has left the EU, we must ensure we have a regulatory regime that works for the UK and allows us to seize new opportunities in the global economy,” said economic secretary to the Treasury John Glen. 

“Following the work we’ve done to prepare for EU exit and ensure a smooth transition to a UK rule book, this bill is the next step in delivering a regulatory framework that boosts the competitiveness of our world-leading financial services sector and ensures that UK consumers are properly protected,” he added. 

Britain has indicated that its post-Brexit regulation is likely to diverge from that of the EU due to the scale and complexity of financial flows through London.

The Bank of England has indicated it does not want to see lower regulatory standards after Brexit, but governor Andrew Bailey has repeatedly said it would be wrong for Britain to continue to follow EU rules it has no control over. 

Transition extension

The proposed financial services legislation would extend the transition period for the UK to stop using some third-country financial benchmarks from 2022 to 2025 to allow the country more time to find a replacement.

The legislation would also implement the remaining Basel 3 capital standards for banks.

Other proposals include making it easier to market foreign investment funds and money market funds to British consumers, and for financial firms to move between different clearing houses.

The Financial Conduct Authority welcomed the introduction of the bill, saying it would “help to maintain high standards and provide greater clarity to firms”. 

Bob Wigley, executive chair of banking industry lobby group UK Finance, said the legislation “is an important part of ensuring we have the right regulatory framework in place following the end of the transition period”.

““The UK’s future success as a world-leading financial centre will best be underpinned by a strong and proportionate regulatory framework that protects consumers, enhances our competitiveness and makes the UK attractive for international investment,” Wigley said.