Financial Services (Distance Marketing) (Amendment) (EU Exit) Regulations 2019: explanatory information
Updated 12 December 2018
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This publication is available at https://www.gov.uk/government/publications/draft-financial-services-distance-marketing-amendment-eu-exit-regulations-2019/financial-services-distance-marketing-amendment-eu-exit-regulations-2019-explanatory-information
1. Context
The European Union (Withdrawal) Act 2018 (EUWA) repeals the European Communities Act 1972 on the day the UK leaves the EU and converts into UK domestic law the existing body of directly applicable EU law. The purpose of the EUWA is to provide a functioning statute book on the day we leave the EU.
The EUWA also gives Ministers powers to make Statutory Instruments (SIs) to prevent, remedy or mitigate any failure of that existing body of EU law to operate effectively after exit, or any other deficiency in retained EU law. We refer to these contingency preparations for financial services legislation as ‘onshoring’.
HM Treasury is using these powers to ensure that the UK continues to have a functioning financial services regulatory regime in any scenario.
This SI is part of the wider work the government is undertaking to prepare for the UK’s withdrawal from the EU. It is not intended to make policy changes, other than to reflect the UK’s new position outside the EU, and to smooth the transition. The changes made in this SI would not take effect on 29 March 2019 if, as expected, we enter an implementation period.
2. Notice
This policy note is intended to provide Parliament and stakeholders with further details on our approach to onshoring financial services legislation. The draft instrument is still in development and will be published in due course. The drafting approach, and other technical aspects of the proposal, may change before the final instrument is laid before Parliament.
3. Policy background and purpose of the SI
What does the underlying EU regulation and UK law do?
Distance contracts are defined in Article 2 of the Financial Services (Distance Marketing) Regulations 2004 as contracts for financial services between consumers and suppliers concluded under an organised distance sale, or service provision scheme run by the supplier or an intermediary, where the supplier or intermediary makes exclusive use of one or more means of distance communication up to, and including, the time at which the contract is concluded. Distance communications refers to communication media where the supplier and consumer are not physically present at the same time, for example telephone, email, fax communications etc.
The Distance Marketing Directive (DMD) sets the minimum standards for information to be given to consumers of financial services prior to a distance contract becoming binding on the consumer. The DMD also makes provisions for withdrawal (cancellation) rights and protections against the unsolicited supply of financial services. The financial services covered by the DMD include any service of a banking, credit, insurance, personal pension, investment or payment nature; both regulated and non-regulated.
The DMD is transposed in the UK through the Financial Conduct Authority (FCA) Handbook and the Financial Services (Distance Marketing) Regulations 2004.
Deficiencies this SI remedies
This SI will make amendments to the Financial Services (Distance Marketing) Regulations 2004 to ensure that the regulations continue to operate effectively in the UK once the UK has left the EU.
We have worked very closely with regulators, specifically the FCA, to develop the necessary changes.
Changes introduced by the SI include:
Once the UK has left the EU/EEA, it will no longer be appropriate for UK legislation to refer to EU/EEA bodies, territories and instruments. To ensure the Financial Services (Distance Marketing) Regulations 2004 continue to operate effectively, references to EU and EEA bodies, territories and instruments have been omitted where necessary. Additionally, references to the European Consumer Credit Information Form have been replaced with references to the Pre-Contract Credit Information (Overdrafts) Form.
Relevant Rulebook and Binding Technical Standard changes
The FCA will be updating its rulebook to ensure consistency with the amendments introduced in this SI. This will mitigate any deficiencies within the legal framework of the financial services industry which result from the UK leaving the EU.
Stakeholders
This SI will affect providers of any financial services of a banking, credit, insurance, personal pension, investment or payment nature which is provided at a distance.
As already noted, the intention of this SI is not to make policy changes, but rather to reflect the UK’s new position outside the EU, and to smooth the transition to this position.
This SI does not include provisions that may be necessary to ensure Gibraltarian financial services firms’ continued access to UK markets in line with the UK Government’s Statement in March 2018, and other provisions dealing with Gibraltar more generally. Where necessary, provisions covering Gibraltar will be included in future SIs.
4. Next steps
HM Treasury plans to lay this instrument before Parliament before exit.
5. Further information
6. Enquiries
If you have queries regarding this instrument, email FSlegislationEUWA@hmtreasury.gov.uk.