FCA Details Post-Brexit Rules for Regulated Firms

The UK Financial Conduct Authority is addressing one of the hottest topics for the London trading industry - Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term. 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 Obligations In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you Read this Term, 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. Both documents are available to our readers below.

Consultation Paper FCA Handbook by TorVik on Scribd

FCA Passporting Transition Rules by TorVik on Scribd