Onshoring and the Temporary Transitional Power

On this page, we explain how we have used the Temporary Transitional Power (TTP).

The transition period ended at 11pm on 31 December 2020 and the UK’s onshored EU legislation now applies. ‘Onshoring’ was the process of amending EU legislation and regulatory requirements so that they work in a UK-only context, including directly applicable EU legislation such as EU Regulations and Decisions that form part of UK law by virtue of the European Union (Withdrawal) Act 2018, now that the Brexit transition period has ended.

The onshoring process means that there are some areas where the requirements on firms and other regulated persons have changed. To help firms adapt to their new requirements, the Treasury gave UK financial regulators the power to make transitional provisions to financial services legislation for a temporary period. This is known as the Temporary Transitional Power (TTP).

As well as explaining how we have used the TTP, this page lists the areas where we have not made transitional provision, and where we expect regulated persons to be compliant with their obligations from 31 December 2020.

There are other pages in this section about:

Firms should review all of this information and the documents referred to carefully.

How we have used the TTP

We have applied the TTP on a broad basis from the end of the transition period until 31 March 2022. This means firms and other regulated persons do not generally need to adjust to the changes to their UK regulatory obligations brought about by onshoring straight away, although there are some exceptions to this.

Where the TTP applies:

  • firms and other regulated persons can continue to comply with their pre-existing requirements for a limited period
  • we expect firms to use the duration of the TTP period to prepare for full compliance with the onshored UK regime by 31 March 2022

Our use of the TTP is set out in our directions.

Under our main transitional directions, firms and other regulated persons must either comply with regulatory obligations that applied before 11pm on 31 December 2020, or with onshored regulatory obligations during the TTP period.

However, where our prudential transitional direction applies (eg in relation to capital requirements), in line with the Bank of England’s and PRA’s transitional directions, firms must continue to comply with their pre-existing obligations as they stood before the end of the transition period, until 31 March 2022. This will give firms time to make necessary changes and smooth the transition to the new UK regulatory framework.

What firms should be doing now

There were some areas where it was not consistent with our statutory objectives to grant transitional relief, or where it was not otherwise appropriate to do so.

In the key areas, listed below, we expect firms and other regulated persons to be compliant with changed obligations now that the transition period has ended:

  • MIFID II transaction reporting requirements
  • EMIR reporting obligations
  • SFTR reporting obligations
  • Certain requirements under MAR
  • Issuer rules
  • Contractual recognition of bail-in
  • Client Assets Specialist Sourcebook rules (CASS)
  • Market-making exemption under the Short Selling Regulation
  • Use of credit ratings for regulatory purposes
  • Securitisation
  • Electronic commerce EEA firms
  • Mortgage lending after the transition period against land in the EEA
  • Payment Services – strong customer authentication and secure communication

For more detail, see our key requirements of firms.

Firms should read our TTP directions, annexes and explanatory note for more detail. Below we also set out our expectations.

Other transitional provisions and regimes

In addition to the TTP, existing transitional provisions and regimes such as the temporary permissions regime (TPR) are operating.

Read about other transitional provisions and regimes.

Equivalence

The Treasury has taken equivalence decisions in respect of the European Economic Area (EEA) states. We have published further information on what these decisions mean for firms. Where the Treasury has taken an equivalence decision, the TTP does not apply to onshoring changes in the area affected by the decision.

Duties, functions or powers

The TTP does not apply where the onshoring regime affects the duties, functions or powers of the regulators or Treasury. For example, we have taken on the function of supervising credit rating agencies, trade repositories and securitisation repositories now that the transition period has ended.

The TTP does not apply to firm authorisations, registration or certification obligations in relation to those new FCA functions.

Perimeter changes

We do not generally use the TTP for onshoring changes affecting matters that fall within the FCA’s regulation, such as the activities for which persons need authorisation, registration or where they need to have advertising material approved. In particular, we do not generally apply the TTP to onshoring changes made to the:

  • regulated activities order (the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001), for example the amendments made by regulations 121 to 161 of the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 (the 'FSMA Exit Regulations')
  • financial promotions order (the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005), for example the amendments made by regulations 163 to 176 of the FSMA Exit Regulations, or
  • exemptions order (the Financial Services and Markets Act 2000 (Exemptions) Order 2001), for example the amendments made by regulations 177 of the FSMA Exit Regulations (except in relation to certain EU / Member State bodies)

Fees and levies

Firms and other regulated persons will need to meet any fee or levy obligations resulting from onshoring changes.

Foreign law

This statement cannot address firms’ and other regulated persons’ obligations under foreign laws. Those persons need to ensure that they can carry on their business lawfully under foreign law.

Our expectations and approach to enforcement

Our Approach to Enforcement sets out how we diagnose harm or potential harm through our investigations, so that we may use enforcement powers to reduce the consequences of suspected serious misconduct on consumers, markets and firms. Our expectations and approach to enforcement will depend on whether the TTP applies to a particular requirement and, if it does not, whether the requirement is one of the key requirements listed above.

Where the TTP applies

The duration of the TTP should be used to prepare for full compliance with changes to UK regulatory obligations. Full compliance with onshored regulatory obligations is required by 31 March 2022.

Key requirements

In the key areas that we have listed above, we expect firms and other regulated persons to now be compliant with their changed obligations (ie from 31 December 2020).

Firms and other regulated persons should also:

  • refer to our page with TTP directions, their annexes and our explanatory note to understand the detail of how the TTP applies to their own set of regulatory requirements
  • comply with obligations under transitional provisions and regimes, obligations to pay fees and levies, and/or obligations related to authorisations, registration or certification

We are conscious of the scale, complexity and magnitude of some of the changes in relation to key requirements and so we intend to act proportionately. This means that we do not intend to take enforcement action against firms and other regulated persons for not meeting all requirements straight away, where there is evidence that they took reasonable steps to prepare to meet the new obligations by 31 December 2020.

Where firms and other regulated persons are not fully prepared, we expect them to comply with the new obligations as soon as reasonably practicable.

Other areas where the TTP does not apply

For any remaining onshoring changes where the TTP does not apply, firms and other regulated persons must take reasonable steps during the TTP period to ensure compliance, at the latest by 31 March 2022.

For these areas, we will consider taking regulatory action where we find serious and foreseeable harm is being or has been caused. We will consider all known circumstances including the extent to which the firm has taken steps to institute a compliance programme, relevant systems and controls, training, staff awareness as well as the impact and scale of any non-compliance.

Full compliance with all onshored regulatory obligations is required by 31 March 2022.

Refer to our updated Handbook to see the rules that apply now that the transition period has ended. This should be read in conjunction with the statements above and the TTP directions.

The rules that apply to temporary permission firms are set out in our Handbook at GEN 2.2.26R onwards, including the list of rules in other parts of the Handbook at GEN 2.2.37(G).