Libor: Implementing Wheatley

28 11 2012

In the wake of this summer’s scandalous events in the banking sector, the UK government wants to demonstrate that it is acting swiftly to implement the recommendations made by Martin Wheatley – CEO designate of the Financial Conduct Authority – in respect of the London Interbank Offered Rate (“Libor”). To this end, HM Treasury has made clear through Greg Clark (the Financial Secretary) that “the government is committed to restoring global confidence in this important benchmark.” New criminal offences are envisaged for attempted manipulation of Libor and the treasury is looking into bringing other benchmarks within the scope of regulation. Earlier posts on Libor on this blog can be recalled as (1) Treasury Committee on Libor; (2) Libor Needs Strengthening; and (3) Wheatley Review on Resetting Libor .

Some of the proposed changes are set out in the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2013 (“the 2013 order”) which seeks to amend existing legislation contained in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 – (“the 2001 order”) specifying the types of activities and investments for the purposes of the Financial Services and Markets Act 2000 (“the Act”).

The government’s consultation in respect of the changes contained in draft legislation laid before Parliament will close on 24 December 2012.

In sum, the 2013 order amends the (principal) 2001 order by specifying new regulated activities. The 2001 order specifies kinds of activities and investments for the purposes of the Act:

  • The matters in respect of which regulated activities may be specified include activities relating to the setting of benchmarks (paragraphs 24E to H of Schedule 2 to the Act, as inserted by the Financial Services Act 2012).
  • The 2013 order identifies the activities of providing information in relation to and administering a regulated benchmark: article 3 makes consequential amendments to sections 1G, 1H and 425A of the Act to adjust the definition of a consumer in order that the consumer protection objective applies in respect of the new regulated activities so that those affected by the carrying on of the new regulated activities may benefit from the provisions in the Act to protect consumers.
  • Articles 4 to 7 of the 2013 order insert a new definition, a new article and a new schedule into the 2001 order to specify the new regulated activities and to set out what regulated benchmarks are: thus, article 8 provides for a Part 4A permission to be deemed to be extended to those firms which immediately before commencement of the 2001 order were already carrying on the activity of providing information to the administrator of a benchmark listed in Part 1 of Schedule 5 to the 2001 order that was required for the determination of that benchmark and which already had a Part 4A permission.
  • Article 9 of the 2013 order provides for an interim permission to be granted to persons wishing to undertake administering, determining or publishing activities, provided that they have lodged an application with the relevant regulator.
  • Article 10 of the 2013 order enables the regulator to modify amongst other things, its rules in their application to persons with an interim permission. Moreover, Article 11 sets out the application of the Act to persons with interim permission.

In addition to the above, draft legislation is also in the offing in connection to relevant activities, relevant investments and relevant benchmarks for the purposes of the upcoming Financial Services Act.

Essentially, through the Financial Services Act (Misleading Statements and Impressions) Order, the government also desires:

  • The creation of criminal offences which relate to the making of false or misleading statements, or
  • The creation of a false or misleading impression, in connection with a relevant agreement, relevant investment or relevant benchmark.

The consultation document is available below


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