Today, 29 March, was due to be the day the UK left the EU – as if we needed reminding.
While that deadline hasn’t been met, we are, of course, still on course to leave the EU at some point. Whether this is with or without a negotiated deal remains to be seen.
In preparation, the Financial Conduct Authority (FCA) has today 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.
The FCA’s Brexit preparations
The final rules published today are the culmination of a large piece of work by the regulator on Brexit.
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 a number of consultations the regulator has held. Two consultation papers were published by the Authority in October, with another launched in November and two more published on 8 January.
What do the FCA’s final rules say?
Announcing the near-final rules in February, the FCA made it clear that the proposed changes were still subject to approval by the Treasury, as most needed to be made under powers given to the FCA under the EU (Withdrawal) Act.
The instruments published today have now had this approval, so the FCA can make them final. They appear in full on the regulator’s Handbook website.
Do they differ from the near-final rules?
The announcement states that the final instruments are ‘largely unchanged from the near-final versions, which were published in February’.
There is one significant change, in that the instruments now commence on ‘exit day’ – rather than the original time of 11pm on 29 March – a chance brought in to reflect the fact that the proposed Brexit date has moved.
The FCA has also published the majority of its final transitional directions and guidance for using the transitional power. This temporary transitional power is intended ‘to ensure that firms and other regulated entities do not generally need to prepare now to meet the changes to their UK regulatory obligations that are connected to Brexit’.
In addition, the regulator has identified three areas where it has made amendments to the near-final directions published in February.
These changes relate to:
- UK managers of EEA UCITS funds
- the application of the Client Assets sourcebook (CASS) to activities carried on from an EEA branch, and
- the distance marketing provisions
The FCA also confirmed that it has extended the notification window for firms who wish to enter the temporary permissions regime until the end of 11 April 2019.
The regime is designed to enable relevant firms and funds which passport into the UK to continue operating in the UK if the passporting regime falls away abruptly when the UK leaves the EU.
Commenting on the final rules, Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority said:
“The documents published today are the final stages in our preparations in the event that the UK leaves the EU without an implementation period: they ensure that firms have certainty of the financial regime they will be operating within, and so can plan accordingly to meet the needs of their customers.”
What happens next?
Always a hard question to answer when it comes to Brexit! But in terms of the FCA’s next steps, these at least seem clear.
- The Authority will publish information about technical standards under EU legislation on capital requirements, banking resolution and financial conglomerates later, once the Prudential Regulation Authority has published similar information.
- As we mentioned, the notification window for firms who wish to enter the Temporary Permissions Regime will remain open until the end of 11 April 2019.
You can read more detail on the FCA’s updated Policy Statement on Brexit on its website.
Brexit is as yet unresolved – and may well be for some time. Being able to work within an ever-changing regulatory and political landscape is, of course, an essential skill for Compliance professionals. If you face business or regulatory challenges, we provide solutions that are tailor-made to your needs with a view to releasing your energies to focus on your clients.