FCA consults on ‘no deal’ regulatory plans

The Financial Conduct Authority (FCA) is consulting on proposals for amendments to its standards and financial services passporting rules, plus the regulatory regime for credit ratings agencies and data reporting services providers in the event the UK leaves the EU on 29 March 2019 without an implementation period

There are two consultation papers. One focuses on amendments to the FCA handbook and binding technical standards, which covers the detailed EU rules which the FCA will have responsibility for after exit as a result of Brexit, and the FCA’s approach to EU non-legislative material.

The second outlines the temporary permissions regime, which will allow EEA firms and funds passporting into the UK to continue operating here for a limited period after Brexit while seeking full UK authorisation.

Nausicaa Delfas, executive director of international at the FCA, said: ‘The FCA is planning to be ready for a range of scenarios. Today we are publishing two consultation papers to ensure that in the event the UK leaves the EU in March 2019 without an implementation period, we have a robust regulatory regime from day one, and to ensure a smooth transition for EEA firms and funds currently passporting into the UK.

‘This is consistent with our aim to provide certainty and confidence for firms operating in the UK. We welcome engagement from across the sector, as we continue with our preparations for Brexit.’

The European Union (Withdrawal) Act 2018 will convert existing directly applicable EU law at the point of exit into UK law, preserve existing UK laws which implement EU obligations, and give the government powers to amend that law so it functions effectively when the UK leaves the EU.

The Treasury intends to give financial services regulators, including the FCA, responsibility for amending EU binding technical standards (BTS), which are detailed EU rules, for exit day.

Separately, the Treasury has published guidance on temporary transitional powers to be exercised by UK regulators in the event of a ‘no deal’ Brexit.

The FCA’s consultation paper proposes changes that may need to be made to the FCA handbook and BTS, whilst setting out the FCA’s approach after Brexit to EU non-legislative material. The majority are consequential to those proposed by the government under the European Union (Withdrawal) Act 2018. For example, changes include removing references to EU institutions, such as the European Commission or the European Supervisory Authorities, which will be replaced with the relevant UK equivalent.

In a small number of cases, the FCA is proposing other types of changes that reflect the UK’s new position outside of the EU. The FCA says it particularly welcomes feedback on whether compliance with changes to regulatory requirements by exit day would be a particular challenge for firms.

The consultation on the temporary permissions regime sets out how EEA firms and investment funds can continue to carry on regulated business in or into the UK for a limited period after Brexit while seeking full authorisation in the UK. The regime will only be available from 29 March 2019 if the UK leaves the EU without an implementation period.

The consultation paper sets out details of how the FCA expects the regime to work in practice, how firms and investment funds can enter into it, how long it will operate for, and the rules it proposes that should apply to firms and investment funds while they are part of it.

Overall, the FCA’s aim is to preserve existing arrangements as far as possible for both firms and consumers. In some cases, firms may be required to join additional schemes run by UK institutions to protect UK consumers, for example the Financial Services Compensation Scheme (FSCS).

Both consultations are open until 7 December 2018.

CP18/28: Brexit: proposed changes to the handbook and binding technical standards is here.

CP/18/29: Temporary permissions regime for inbound firms and funds is here.

Guidance Proposal for a temporary transitional power to be exercised by UK regulators is here.

Report by Pat Sweet

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