Emma RadmoreThe Financial Markets Law Committee (FMLC) has written to HM Treasury asking it to clarify areas of legal uncertainty relating to the MLRs 2017.
The FMLC considers that the continued reference to the EU CRD Annex 1 activities creates uncertainty as the activities do not tie closely to the UK regulatory perimeter. Post-Brexit, it would be preferable if the activities falling within the scope of the MLRs were aligned with those requiring authorisation under FSMA.
Another issue is that key concepts in the MLRs are not defined in legislation. For example, the concept of “customer” is undefined, so advisers look to external guidance (e.g. JMLSG guidance) for interpretation. The legal status of such guidance may be unclear and it may impose a more onerous interpretation than the government intended. The FMLC recommends that key concepts are either defined in the MLRs or by Treasury in authoritative guidance.
The FMLC also notes that there is some uncertainty around the treatment of investment vehicles in the MLRs. Collective investment undertakings (CIUs) (also not defined) are included as financial institutions in regulation 10(2)(e) but no other investment structures are explicitly referenced and CIUs will often only act through a third-party manager. The FMLC therefore queries whether an entity should be caught in scope of the MLRs where it is managed by another person which is already subject to obligations under the MLRs (or an equivalent regime).