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The role of the Financial Markets Law Committee is to identify issues of legal uncertainty, or misunderstanding, present and future, in the framework of the wholesale financial markets which might give rise to material risks, and to consider how such issues should be addressed. The Committee will also act as a bridge to the judiciary to help UK court remain up-to-date with developments in financial markets practice.
History
The role of the Financial Markets Law Committee is to identify issues of legal uncertainty, or misunderstanding, present and future, in the framework of the wholesale financial markets which might give rise to material risks, and to consider how such issues should be addressed. The Committee will also act as a bridge to the judiciary to help UK court remain up-to-date with developments in financial markets practice.
An element of legal uncertainty is inevitable in wholesale financial markets that are international, competitive and innovative. Although the UK framework of law for these markets is highly developed and robust, new ideas or practices can sometimes raise uncertainties as to how the law will apply, on occasion based on misunderstandings about existing law. In addition, proposals (whether at home or abroad) for new law or regulation can give rise to uncertainties or misunderstandings, when specific features of wholesale markets practice have not been fully or accurately reflected by a legislator or other public authority.
Following the decision in 2002 to close the Financial Law Panel, the Bank of England canvassed a wide range of opinion on whether and, if so, in what form London should continue to have arrangements in place to identify and analyse areas of legal uncertainty or misunderstanding affecting the wholesale financial markets.
The general view was that such arrangements should indeed be kept in place and that the Bank was well placed to organise them. In response, the Bank decided to establish the Financial Markets Law Committee. One of the Bank’s core purposes is to maintain the stability of the financial system, which it aims to achieve by inter alia monitoring developments in the financial system both at home and abroad and promoting a sound financial infrastructure. The Committee’s work will contribute to this aim by strengthening the legal context in which the wholesale financial markets operate.
The Bank is the sponsor of the Committee and provides the facilities for it to meet, including its Secretariat. The Committee is independent and any views it expresses should be understood as its own, and not those of the Bank.
Wholesale financial markets participants are encouraged to see the FMLC as a new part of the legal infrastructure of those markets. It is intended that the Committee will rely heavily on the resources of firms, both financial and professional, and trade bodies, in its work.
The Committee’s ‘radar’ function is aimed at identifying significant issues – those which might give rise to material risks. Naturally in the process a great many other, perhaps lesser, issues will be noted. But the focus is on those that might give rise to material risks for the wholesale financial markets. This implies that the majority of issues of which the Committee takes note will not become the subject of any detailed projects. The Committee itself will address in depth only issues which are material and for which it is better placed than any other relevant organisation or group. And the Committee stands ready to respond to an issue quickly if need be. The nature of the Committee’s work will be dictated by the nature of the issue and might be anything on a range from a short bulletin identifying the existence of a relevant issue, to a fully elaborated paper.
The Committee will also act as a bridge to the judiciary, a task it will carry out primarily by organising seminars to brief senior members of the judiciary on aspects of wholesale financial markets practice of which they might not otherwise be aware. Whilst the Committee will convene these seminars, it is intended that the speakers will normally be market practitioners drawn from outside the Committee’s membership.