UK: the UKLA, FRC and companies regulation

As noted yesterday, HM Treasury has published a consultation paper setting out in more detail its proposals for reform of the UK financial regulatory structure: see here (pdf). The paper has raised an interesting question about the role of the Financial Reporting Council and the regulation of companies. To quote from paras. 5.21 and 5.22:

The Government believes that the functions of the UKLA [currently performed by the FSA] could be merged with other regulatory functions relating to companies and corporate information, notably those of the Financial Reporting Council (FRC). This would have the benefit of bringing the UKLA’s regulation of primary market activity alongside FRC functions relating to company reporting, audit and corporate governance. The Government is therefore considering whether the UKLA should be merged with the FRC under the Department for Business, Innovation and Skills (BIS), or whether it should remain within the [proposed] CPMA markets division.

The Government believes that, within the proposed new regulatory architecture, there is a strong case for a powerful companies regulator established with responsibilities for regulating corporate governance, corporate information and its disclosure, and the stewardship of companies by institutional shareholders. This is a matter on which BIS will bring forward detailed proposals for consultation in due course, but the merger of the UKLA and FRC would be an important step towards such a reform".