On January 7, the UK Financial Conduct Authority (FCA) announced that the notification window for the temporary permissions regime (TPR) is now open.
In the lead-up to the United Kingdom’s exit from the European Union (Brexit) on March 29 (Exit Day), the agreement on the United Kingdom’s withdrawal (Withdrawal Agreement) has not been ratified by the UK Parliament. If ratification fails, this would result in a so-called “no-deal Brexit,” meaning that the UK would leave the EU without having agreed on any transitional arrangements, and any European Economic Area (EEA)-based firms or fund managers passporting their services or products into the UK would lose their permission to do so on Exit Day.
Given the continuing political uncertainty surrounding Brexit, the FCA is preparing for a no-deal Brexit and EEA-based firms passporting activities into the United Kingdom have been directed to prepare in a similar way. Such preparations include EEA-based firms notifying the FCA of their intention to continue to operate in the UK, but under the FCA’s TPR. Failure to do so would result in EEA-based firms having to seek authorization from the UK’s regulators if they wish to continue carrying on regulated financial services activities in the UK in the event of a no-deal Brexit.
The TPR would enable firms established in the EEA to continue passporting activities into the UK for a limited period after Exit Day in the event of a no-deal Brexit. Permanent FCA authorization would only be needed by the end of the transition period, which is set by the Withdrawal Agreement to operate from Exit Day until December 31, 2020.
Only EEA firms that are already authorized to carry on regulated activities in the UK by passporting are eligible to enter the TPR. EEA firms without passports would not benefit from the “overseas persons” exemption. This exemption would only continue to be of benefit to firms that do not have a permanent place of business in the UK from which regulated activities are conducted.
TPR Notification Requirements
As from January 7, FCA-authorized firms can notify the FCA that they wish to enter the TPR using the form available on the FCA’s Connect system, without charge. The FCA also has provided guidance to passporting EEA firms and fund managers on the TPR notification process.
The notification window will close at the end of March 28, after which firms that have not submitted notification by then will not be able to enter or rely on the TPR, but will instead be subject to the financial services contracts regime (FSCR) (subject to meeting the relevant conditions—for more information on the FSCR see the January 11, 2019 edition of Corporate & Financial Weekly Digest).
Once a firm has notified the FCA that it wishes to enter the TPR, it will be allocated a period of time (a “landing slot”), based on the type of business undertaken, during which it can submit the application for recognition by the FCA or notification under the national private placement regime. After Exit Day, the FCA will confirm firms’ landing slots so that they can prepare their respective applications. The FCA expects the first landing slot will be from October to December 2019, followed by five more landing slots, with the last to close at the end of March 2021. Details of firms with temporary permission will be shown on the Financial Services Register. Once an FCA-regulated firm receives recognition, it will leave the TPR.
The FCA’s announcement, together with its guidance to passporting fund managers and firms, is available here.