The Financial Conduct Authority (FCA) has published two consultation papers on the subject of its preparations for Brexit, including its preparations for the possibility of a ‘no deal’ Brexit.
The two papers concern amendments to Binding Technical Standards (BTS), and the Temporary Permissions Regime.
Regarding the first of these, the FCA notes that the European Union (Withdrawal) Act 2018 will provide for the conversion of EU law into UK law, whilst also giving the UK Government the power to amend the wording of these laws so that they make sense in a UK-only context. The FCA intends to adopt a similar approach with its Handbook, and recognises that changes need to be made to the wording here, such as removing references to EU institutions such as the European Commission or the European Supervisory Authorities.
The Temporary Permissions Regime will allow firms based in EU and European Economic Area (EEA) states to continue to carry on regulated business in the UK for a limited period after Brexit. This Regime is intended to take effect if the UK ends up leaving the EU without any form of implementation period in place.
Under the Regime, European firms that currently operate in the UK using the ‘passporting’ system can continue to do so for a limited time after Brexit, before needing to apply for full FCA authorisation. There is currently no reciprocal agreement for UK firms who operate in the EEA. It is to be hoped the situation can be resolved, but at present it is the case that any UK firm that operates in European countries via the passporting system will lose their authorisation to do so on Brexit day (March 29).
Temporary permissions will last for up to three years, unless the firm is asked to submit an application for full FCA authorisation prior to this.
Any firm requiring a temporary permission will firstly need to inform the FCA, via the Connect system, that they require one. The notification ‘window’ for this purpose is expected to open in early 2019. Then, following exit day, the FCA will allocate each firm a three-month application period or ‘landing slot’ during which it will need to submit its application for full authorisation in the UK.
If a firm with a temporary permission wishes to conduct additional regulatory activities, it will need to apply for these when it applies for its full authorisation in the UK.
During their temporary permissions period, firms will need to apply with all relevant FCA rules. It is also anticipated that they will be subject to the Compulsory Jurisdiction of the Financial Ombudsman Service.
Responses to the two consultations are invited up until December 7 2018.
Nausicaa Delfas, Executive Director of International at the FCA said:
”The FCA is planning to be ready for a range of scenarios. Today we are publishing two consultation papers to ensure that in the event the UK leaves the EU in March 2019 without an implementation period, we have a robust regulatory regime from day one, and to ensure a smooth transition for EEA firms and funds currently passporting into the UK.
”This is consistent with our aim to provide certainty and confidence for firms operating in the UK. We welcome engagement from across the sector, as we continue with our preparations for Brexit.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article