The UK Financial Conduct Authority is addressing one of the hottest topics for the London trading industry – Brexit. The regulator has just published an official announcement detailing some steps it intends to take in the coming weeks.
The uncertainty of the Brexit is burdensome for management decisions at financial firms. Wednesday’s move by the FCA is to publish two consultation papers that help UK and EU firms get more clarity.
Both documents are assuming a worst case scenario for the negotiating process – a no deal Brexit. Both proposals are tied to the UK leaving the EU on March 29, 2019, without an implementation period.
Temporary Permission Regime
The FCA outlines that companies which are operating in the UK with an EEA license will get some time to apply for a UK license. The document concerns firms passporting into the UK from any EEA country, electronic money institutions, payment providers fund managers, etc.
Commenting on FCA’s move, the Executive Director of International at the UK regulator, Nausicaa Delfas, said: “The FCA is planning to be ready for a range of scenarios. In the event the UK leaves the EU in March 2019 without an implementation period, we have a robust regulatory regime from day one.”
The FCA is aiming to ensure a smooth transition for EEA firms and funds which are currently passporting into the UK.
“We welcome engagement from across the sector, as we continue with our preparations for Brexit,” Delfas elaborated.
The Temporary Permissions Regime paper sets out how EEA firms and investment funds can continue to operate in the UK. They will need to seek UK authorization while doing this via their existing passport agreement.
The regime will only be available March 29, 2019, if the UK leaves the EU without an implementation period.
The consultation paper elaborates on how the FCA expects the regime to work. Any requirements for firms and investment funds that are willing to enter into it are well detailed. The UK regulator takes a proportionate approach to enable firms to comply with its requirements from day one.
The UK regulator states that it aims to preserve existing arrangements as far as possible. In some cases, firms may be required to join additional schemes run by UK institutions. In the case of client protection rules, that is the UK Financial Services Compensation Scheme (FSCS).
FCA Handbook and Binding Technical Standards
The larger document is focusing on amendments to the FCA’s Handbook and Binding Technical Standards (BTS). The existing EU law will be converted into UK law at the point of exit.
The preservation of existing UK laws which implement EU obligations, can give the UK Government powers to amend that law so it functions effectively when the UK leaves the EU.
The UK Treasury is going to give the FCA, responsibility for amending EU binding technical standards (BTS). The consultation paper proposes changes to the documents in accordance with the exit terms.
Changes include removing references to EU institutions, such as the European Commission or the European Supervisory Authorities. The FCA outlines that such institutions will be replaced with the relevant UK equivalent.
The FCA states that it particularly welcomes feedback on whether compliance with changes to regulatory requirements by exit day would be a particular challenge for firms.
Both consultations will be open until the first week of December 2018. Compliance officers will have a hard time with the FCA Handbook document length at around 800 pages. The temporary permissions regime paper is much shorter at 150 pages.