HM Treasury is consulting on changes to the current UK secondary legislation setting the tests that firms must meet to use the “ancillary activities” exemption when they trade in commodity derivatives and emissions allowances. As part of the Wholesale Markets Review, it said it would replace the current test with a new, simpler, version. It is now legislating to give the FCA powers to put in place a replacement test. The Order would amend the RAO and other statutory instruments in respect of the definition of “investment firm” and will provide that firms can use the exemption where the relevant business is ancillary to its main business, or is below an annual threshold that the FCA will set.
The FCA is in turn consulting on its proposals to set out, simply, how firms can work out whether they can benefit from the exemption. It proposes 3 separate and independent tests, and a firm will be able to use the exemption if it meets any one of them. It hopes the proposals will have the advantage of simplicity while having minimal impact on costs for firms, given the methods they already use to calculate the application of the exemption under the current regime.
Comments on both the draft legislation and the FCA consultation are due by 28 August. The changes will take effect from 1 January 2027.