Considerations for firms after the transition period

Find out about the Temporary Transitional Power (TTP), considerations for UK and EEA firms, and how the end of passporting may affect you.

The UK left the EU on 31 January 2020 with a Withdrawal Agreement and entered a transition period that ended on 31 December 2020. On 24 December 2020, the UK and the EU agreed on the terms of the UK-EU Trade and Cooperation Agreement. The UK has approved the agreement and it came into effect provisionally at 11pm on 31 December 2020, pending the EU taking the necessary steps to fully approve it.

How this affects you will depend on several factors, including the nature of your business and where your customers are located. You should make sure you have considered the following points and understand the impact they could have on your firm:

Considerations for all firms

Considerations for UK firms

If you’re a UK-based firm and only do business in the UK, you’re less likely to have been affected by the end of the transition period. You may not have been affected at all.

However, if you carried out business between the UK and the European Economic Area (EEA) – whether through a passport or directly under EU legislation – you should have implemented plans to address any risks for your firm.

These questions will help you to decide whether you conducted business in the EEA and whether your business may have been affected by the end of the transition period.

  • Did you provide any regulated products or services to customers resident in the EEA? For example, you might have provided financial advice to EEA-based customers. Or you might have had insurance contracts either with EEA-based customers or which covered risks located in the EEA that required regulatory permission in that country in order to be serviced.
  • Did you have customers or counterparties based in the EEA, including UK expatriates now based in an EEA country?
  • Did you market financial products in the EEA? This includes products marketed on a website aimed at consumers in the EEA.
  • Did you have agents in the EEA or interact with any intermediary service providers in the EEA? For example, you may have used an insurance intermediary to distribute products into the EEA.
  • Did your firm transfer personal data between the UK and the EEA or vice versa?
  • Did your firm have membership of any market infrastructure (trading venues, clearing house, settlement facility) based in the EEA?
  • Were you part of a wider corporate group based in the EEA, or did your firm receive any funding from an entity in the EEA?
  • Did you outsource or delegate to an EEA firm or did an EEA firm outsource or delegate to you?
  • Were you party to legal contracts which referred to EU law?
  • Did you deposit client money and/or custody assets in any institution in the EEA, or was your safeguarding institution in the EEA?

If any of these questions apply to you – or you conducted (or currently conduct) business in the EEA in any other way – then you should think about the legal basis on which that business occurred, and how that might have been affected by the end of the transition period. This includes thinking about whether your firm needed additional regulatory permissions in the UK and/or in another country.

Not all these factors will automatically mean your business or your customers are impacted. There are other ways firms can access the EEA that may not be affected by the UK leaving the EU. However, these will depend on the specific firm, type of activity and the exemption or local permission in question.

These include:

  • permission under local law or based on rules of a local financial market infrastructure
  • local exemptions in an individual EEA country
  • whether reverse solicitation is permitted without local authorisation – this is where the client initiates the provision of the service on their own initiative, and you do not promote or advertise services
  • whether your activity would potentially be covered by any prospective EU equivalence decision on a specific aspect of the UK’s regulatory framework

Considerations for EEA firms conducting business in the UK

UK authorities have taken a number of steps to limit the impact of the end of passporting on financial products and services provided to UK-based customers from EEA firms. This includes introducing the temporary permissions regime (TPR) and the financial services contracts regime (FSCR).

If you’re an EEA firm and you don’t plan to take advantage of these regimes to continue to provide services to customers, and are planning to stop servicing customers in the UK, you should tell us about your plans if you have not already done so by contacting us directly as detailed on our website, or via your usual supervisory contacts.

We expect you to treat customers fairly, including when considering what notice to provide and what support customers need to make alternative arrangements.

Next steps

If you or your customers have been affected by the end of the transition period, you should:

  • implement any remaining changes you might need to make to your business
  • continue to provide information to customers who might be affected by your plans in a way which is clear, fair and not misleading
  • continue to consider the implications of any further developments, checking our website regularly for new information

You may want to discuss the implications with the relevant EEA regulator in the countries where you do business, or your trade association. You may also want to get independent legal advice for any additional clarification you need.

More information

We have agreed Memoranda of Understanding (MoUs) with ESMA and EU regulators, covering cooperation and exchange of information. These MoUs are now in effect following the end of the transition period on 31 December 2020.

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Page updates

: Editorial amendment Correction of spelling error
: Editorial amendment Amending one instance of incorrect punctuation
: Information changed To reflect that our use of the TTP has ended
: Information changed Removed section at the end about contacting the Brexit telephone line
: Link changed Removed outdated links from the 'More on Brexit' section
: Information added Passporting will end on 31 December
: Information added Guidance for EEA firms conducting business in the UK
: Information changed Data sharing, and addition of PDF guide to preparing for Brexit

28/07/2020: Information added MoUs with ESMA and EU regulators