FCA says most post-Brexit plans meet its expectations
Nikhil Rathi, CEO of the UK Financial Conduct Authority (FCA) has made some comments regarding post-Brexit plans of firms.
“Post-Brexit, if you are a predominantly UK business, your regulated entity should be here to protect investors and the integrity of the markets,” he said today.
For authorised firms, the FCA remains committed to a system that allows firms to provide cross-border financial services in a way that protects consumers and markets. The FCA is collaborating with Government and supporting the Treasury’s market access agenda.
To ensure post-Brexit stability the FCA introduced a Temporary Permissions Regime (TPR) for firms to continue operating here while making permanent arrangements.
As that comes to an end firms are coming to the FCA with their plans. For businesses focussed in the UK, this will usually mean they want to set up an FCA authorised subsidiary.
Most plans the FCA has seen meet its expectations. But in some cases the FCA has asked firms to think again.
Where firms are not predominantly focused on the UK, and where the FCA has good cooperation with the home state regulator, a branch may be appropriate.
The regulator has different powers over branches. So if you are a predominantly UK business, if most of your clients are in the UK, it follows that your main entity should be there as well. This better protects UK based investors from harm and protects the integrity of the wider UK market.
In some cases, an international firm can operate in the UK without FCA authorisation, through the Overseas Persons Exclusion (OPE). For example, if a firm’s UK business is just a handful of wholesale market clients. But in FCA’s view the OPE is not intended to run a UK-focussed business.
The Government has been clear that firms with significant UK business must continue to maintain the appropriate operations, permissions and authorisations in the UK. And importantly the FCA needs to be able to supervise them effectively.
In January 2022, rhe UK regulator published a set of notices announcing the cancellation of Part 4A permissions of several EU-based firms that have failed to comply with the requirements to remain in the TPR. The list of such firms includes Cyprus investment firm Arumpro Capital.
The TPR was designed to ensure that European firms operating in the UK via a passport when the Brexit transition period ended could continue operating temporarily while they seek full authorisation in the UK. The TPR should only be used by firms who want to operate in the UK in the long-term and meet the standards to do so.