FCA prepares for post Brexit world, launches consultation for EEA firms
With Brexit already in force since January 2020, and the temporary transition period for EU licensed firms operating in the UK via the MiFID license passport about to end at the conclusion of this year, UK financial regulator The FCA has launched a consultation on its approach to the authorisation and supervision of international firms operating in the UK.
The FCA stated that the consultation is relevant to EEA firms that intend to seek authorisation in the UK in the future, including those entering the Temporary Permissions Regime, as well as firms from non-EEA countries that have applied or intend to apply for authorisation in the UK, or are already authorised in the UK.
EEA firms that are passporting into the UK at the end of the transition period, that do not enter the TPR and require permission to perform an existing contract, will enter the Financial Services Contracts Regime. This will allow them, for a limited period of time, to continue to service their existing UK contracts in order to conduct an orderly exit from the UK market.
The regulator said it expects that there will be an increase in the number of international firms seeking authorisation at the end of the Brexit transition period, with over 1,500 firms currently registered in the Temporary Permissions Regime.
International firms serving UK customers through branches can sometimes create different risks of harm compared to UK firms because of the way their businesses are structured and operate. As part of this consultation, The FCA wants to hear views on how these risks can be mitigated, and when it would be appropriate for an international firm to seek authorisation as a UK-incorporated firm for all or part of its business.
The final document following the consultation will help firms structure their business to provide financial services in the UK and to understand The FCA’s authorisations approach.
Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority, said:
‘With the Brexit transition period due to end on 31 December 2020, firms that have registered for temporary permission will need to consider plans for full authorisation. Today we are setting out our expectations for the future authorisation and supervision of international firms, to ensure appropriate protection for users of financial services.
‘International firms are a key contributor to the success of the UK financial services market. This consultation will give EEA and non-EEA firms a chance to feedback on our future approach to the regulation of international firms.’
When the FCA decides whether to authorise an international firm, it said that it applies the same minimum standards as it does for UK firms. Before seeking authorisation, any international firm needs to demonstrate it is ready, willing and organised and meets the relevant minimum standards. Once authorised, firms need to continue to meet those standards, which are designed to protect consumers and ensure the integrity of markets.
The FCA expects a firm seeking authorisation to have an active place of business in the UK to enable it to effectively supervise its UK activities.
The deadline for consultation responses is 27 November 2020. All feedback received will form the basis for the FCA’s final statement on its approach to international firms.
The consultation is relevant for EEA firms that intend to seek authorisation in the UK in the future, including those entering the Temporary Permissions Regime. It is also relevant for firms from non-EEA countries that have applied or intend to apply for authorisation in the UK, or are already authorised in the UK.
There are currently over 1500 firms and around 600 funds registered with the FCA for the Temporary Permissions Regime.
The window for EEA-based firms, that have not already done so, to notify The FCA that they wish to use the temporary permissions regime will re-open at 9am 30 September 2020. Firms that have already submitted a notification need take no further action.
Under FSMA the FCA’s strategic objective is to ensure that relevant markets function well and its operational objectives are: to secure an appropriate degree of protection for consumers, to protect and enhance the integrity of the UK financial system, and to promote effective competition in the interests of consumers.