28 March, 2019
With Brexit potentially fast approaching, the Financial Conduct Authority (FCA) has taken a proactive response to provide effective information and prepare inbound passporting financial services firms on their operation within the UK. Currently, financial services firms in any European Economic Area (EEA) member state can use the passporting regime to carry out permitted activities in any other member state. Investment funds can be marketed across the EEA under similar passporting provisions.
One of the key focuses of the FCA has been the development of a temporary permissions regime for inbound passporting EEA firms and investment funds. The regime is designed to ensure that firms and investment funds can continue their business post Brexit whilst mitigating as much disruption as possible. The regime will allow EU-based firms and funds to continue to access the UK markets and serve their customers.
In 2018, the UK and the EU reached an agreement on the terms of an implementation period, whereby applicable EU law would continue to apply. The implementation period proposed is due to operate from 29 March 2019 until December 2020. However, in light of recent developments, the FCA has prepared for a situation where the UK leaves the EU without a deal, or without entering the implementation period. If there is not an implementation period and the passporting regime fails following a hard Brexit, the temporary permissions regime will provide 'back-stop' for FCA regulated firms and investment funds for a time.
The regime will be coming into place on exit day, when the UK leaves the EU. It will allow all inbound firms to continue operating in the UK within the scope of their current permissions, whilst seeking UK authorisation, for a maximum of three years.
Firms are advised to notify the FCA that they wish to use the regime by submitting a notification on the Connect system (implemented on the FCA website) before exit day. Firms are advised not to wait for confirmation of an implementation period before they submit their notification. There is no fee, and firms that have not submitted a notification after Brexit will not be able to use the temporary permissions regime. Failure to do so will mean that they can only operate within the UK once they have obtained full UK authorisation. Prior to notification firms should check their passport on the Financial Services Register, and fund managers should also check which funds they are actively marketing in the UK.
Forbes regularly advises on all aspects of commercial law, including matters relating to FCA compliance. For further information or assistance contact John Pickervance, or 0333 207 1134.