UNITED KINGDOM: Regulatory Change for Firms as Brexit Transition Period Ends

Thursday December 31 2020

The Financial Conduct Authority (FCA) has announced that the transition period has ended, and EU law no longer applies in the UK. For many financial services businesses, this means changes to existing systems and services.

Passporting between the UK and EEA states has ended and the temporary permissions regime (TPR) has now come into effect for those firms and funds that notified the FCA that they wanted to enter this regime.

This allows EEA-based firms that had been passporting into the UK to continue new and existing regulated business within the scope of their previous permissions in the UK for a limited period, while they seek full authorisation from the FCA, if required.

It also allows EEA-domiciled investment funds that market in the UK under a passport to continue temporarily marketing in the UK.

Alongside the TPR, the Government has created the financial services contracts regime (FSCR). This allows, for a limited period, EEA passporting firms not in the TPR to continue to service UK contracts entered into prior to the end of the transition period (or prior to when they enter FSCR) in order to conduct an orderly exit from the UK market now that the transition period has ended.

The extent to which UK firms can continue to provide services to customers in the EEA depends on local law and local regulators’ expectations. The FCA expects UK firms to take the steps available to them to make sure they act consistently with these local laws and expectations. The FCA is clear that firms’ decisions need to be guided by obtaining appropriate outcomes for their customers, wherever they are based.

Firms should also be prepared for the regulatory changes that have come into force. To help firms adapt to some of the new rules, the Treasury has given new powers to make transitional provisions, known as the Temporary Transitional Power (TTP).

While the FCA have applied the TTP on a broad basis, there are some key exceptions where firms need to comply with the changed requirements now. Firms should check the implications of these for their business.

Click on the link for further information.