Compliance
No-Deal Brexit Threatens Financial Passporting, So Prepare - FCA
The risks of a no-deal Brexit have prompted the regulator to warn financial firms about the steps they must take to retain market access.
UK-based firms will not be able to passport funds into the European Union if the UK leaves the bloc without a trade deal, which means businesses need to operate under a temporary permissions regime, the Financial Conduct Authority has warned.
The watchdog issued a notice to the market as the clock ticks down towards a possible UK departure from the EU on 31 October. It is possible that the UK will leave without a deal. A major concern is whether the UK can remain in the Customs Union, as Brexit supporters fear this effectively unites Northern Ireland (part of the UK) with the Irish Republic (an EU member state). If the UK leaves without a deal, it falls under the umbrella of the World Trade Organisation.
An important element of the European Single Market is the ability of financial organisations to “passport” fund services across all member states without having to separately register in each 28 member state and other countries in the European Economic Area (Iceland, Liechtenstein and Norway). Switzerland is not in the EU or EEA, but it does have Single Market access (with some caveats).
“Any EEA passporting firm wishing to continue operating in the UK will need to notify the FCA by 30 October that they wish to enter the Temporary Permissions Regime. Fund managers have until 16 October 2019 to inform the FCA if they want to make changes to their existing notification,” the FCA said in its statement.
After exit, firms who notified the FCA of their intention to use the TPR will be contacted and provided with a landing slot when they will need to submit their application for full UK authorisation. Upon authorisation, we will generally expect firms to have a physical presence in the UK to help ensure effective supervision,” it continued.
As far as complying with MiFID II regulations which came into force two years ago, the FCA said firms that can’t comply fully with the regime at the time of the UK’s withdrawal from the EU will need to back-report missing, incomplete or inaccurate transactions. This should be competed as soon as possible after 31 October 2019.