Revocation of retained EU law Comprehensive FSMA model for financial services
The current model of financial services regulation was introduced by the Financial Services and Markets Act 2000 (FSMA 2000). The FSMA model delegates the setting of regulatory standards to the independent financial services regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), that work within an overall policy framework set by government and Parliament.
	During the UK’s membership of the European Union (EU), and particularly following the global financial crisis, the majority of new financial services regulation was developed and delivered at an EU level. When the UK left the EU, the body of EU legislation that applied directly in the UK at the point of exit was transferred onto the UK statute book by the European Union (Withdrawal) Act 2018 (EUWA 2018). This is known as retained EU law.
	HM Treasury undertook a significant programme of secondary legislation to ensure that the body of retained EU law relating to financial services would operate effectively following the UK’s withdrawal from the EU, using powers in EUWA 2018 to make the necessary amendments to address any deficiencies arising as a result of exit at the end of the transition period.
	This approach provided stability and continuity in the immediate period after EU exit, but it was never intended to provide the optimal, long-term approach for UK regulation of financial services. It has led to a complicated patchwork of regulatory requirements across domestic primary and secondary legislation, retained EU law, and regulator rulebooks. And it means that the regulators are restricted in how they can pursue their statutory objectives through their rules, as they are not able to make changes to rules that are set out directly in retained EU law, except in very limited cases.
	Financial services regulations need to be updated regularly to take account of new products and markets, and emerging risks and opportunities. The FSMA model supports this by delegating the setting of regulatory requirements to the regulators, working within an overall policy framework set by government and Parliament.
	The government considers that the FSMA model remains the most appropriate way to regulate financial services in the UK.
	That means that a large number of detailed regulatory requirements which currently sit in retained EU law should, under a FSMA approach, generally be in the regulators’ rules.
	The government’s overall policy objective is to establish a comprehensive FSMA model for financial services regulation. That means applying the FSMA model to areas currently covered by retained EU law, so that the government and Parliament establish the framework and objectives for the regulators, and the regulators design the detailed rules that apply to firms.
	The government published two consultations, in October 2020 and November 2021 , outlining the aim of establishing a comprehensive FSMA model. Respondents demonstrated overwhelming support for the establishment of a comprehensive model of regulation based on FSMA 2000, agreeing that the FSMA model is world-leading.