This week, the Financial Conduct Authority ramped up its efforts to make sure firms are prepared for the potential of a no-deal Brexit.
Here, we look at the regulator’s work on Brexit to date and its increased efforts to prepare firms for a possible no-deal scenario.
The FCA’s Brexit planning to date
With an appreciation of the potential impact of Brexit, the financial regulator has been preparing and communicating with firms for some time.
Two consultation papers were published by the Authority last October, with another launched in November and two more published on 8 January this year.
On 28 February, it published its near-final rules and guidance covering the UK’s financial services industry in the event the UK leaves the EU without an implementation period. Those proposals were based on feedback from the consultations.
And then in June, the FCA published its final instruments and guidance that will apply in the event that the UK leaves the EU without a deal or an implementation period.
What is the regulator doing now to help firms prepare?
Now, with only a couple of months before the UK is set to leave the EU, and with the potential for a no-deal scenario still very live, the FCA has announced new steps to help firms to prepare.
- The regulator will run a series of digital adverts signposting its Brexit webpages
- It has set up a dedicated telephone line (0800 048 4255) for firms to call for more advice
Which firms is the regulator targeting?
Announcing its new measures, the regulator ‘is urging all firms to consider the implications of a no-deal exit and finalise their preparations’.
Its communication and preparatory planning are particularly relevant for firms that:
- are a UK business which does any business in the EEA
- passport into the UK and have not notified the FCA for entry into the Temporary Permissions Regime
- have consumers in the EEA
- transfer personal data from the EEA
Commenting on the latest preparations, Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority, said:
‘We expect firms to ensure they are ready if there is a no-deal. If firms haven’t finalised their preparations, there is a risk they could be impacted.’
What do firms need to do?
- Read the FCA’s Brexit webpages
- Understand whether the loss of passporting will affect your firm and whether you need regulatory permissions to continue to do business in an EEA country (which will depend on the activity you are carrying on, the local law and the approach of the local authorities in that jurisdiction).
- Make yourself aware of any transitional regimes, with deadlines or registration requirements attached to them, that have been put in place by relevant EU Member States. The FCA has published a list of these on its website; the most urgent is the Luxembourg transitional regime for existing contracts, where firms must register by 15 September 2019.
- Prepare for any regulatory changes that will take effect in the event of a no-deal Brexit. The FCA highlights the example of MiFID II transaction reporting, which will change in a no-deal scenario. Firms should be ready to implement the changes needed.
- Be aware of changes that will take place to the FCA Handbook.
- Understand the Temporary Permissions Regime which will come into force in the event of no deal.
- In the event of a no-deal Brexit, the FCA will become responsible for Credit Ratings Agencies and Trade Repositories – any firms operating in those markets need to understand the potential implications of this.
Be prepared for change
The developments around Brexit are a good (maybe extreme!) example of the fluid nature of compliance, and the ever-evolving environment Compliance Officers need to work within.
Understanding the changes you face – and learning how to tackle the challenges they bring, creating opportunity from potential obstacles – is a key skill for Compliance teams.