Onshoring and the Temporary Transitional Power

On this page we explain how we intend to use the Temporary Transitional Power (TTP).

The transition period is due to end at 11pm on 31 December 2020, after which onshored legislation will apply. ‘Onshoring’ is the process of amending legislation and regulatory requirements so that they work in a UK-only context, including EU legislation that will form part of UK law by virtue of the European Union (Withdrawal) Act 2018.

The onshoring process means that there will be some areas where the requirements on firms and other regulated persons have changed. To help firms adapt to their new requirements, the Treasury has given 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).

On this page, we explain further how we intend to use the TTP following our previous announcements. We list the areas where we will not make transitional provision, and where we expect regulated persons to start preparing now to comply with these obligations from 31 December 2020.

There are other pages in this section about:

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

How we intend to use the TTP

We intend to apply 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 prepare now to meet the changes to their UK regulatory obligations brought about by onshoring, although there are some areas where the TTP will not apply.

Where the TTP applies:

  • firms and other regulated persons can continue to comply with their 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

Under the main FCA transitional directions, firms and other regulated persons must either comply with existing regulatory obligations, or with onshored regulatory obligations during the TTP period. However, where the FCA prudential transitional direction applies (eg in relation to capital requirements), in line with the Bank’s and PRA’s draft transitional directions, firms must continue to comply with their 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 need to do now

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

In the key areas, listed below, we expect firms and other regulated persons to be preparing to comply with changed obligations ready for 31 December 2020:

  • 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) will operate from the end of the transition period. Firms and other regulated persons wishing to use these regimes should ensure they have completed the necessary steps by the end of the transition period. This may include submitting a notification to us.

Read about other transitional provisions and regimes.

Equivalence

For some provisions, the effect of the TTP may interact with powers conferred on the Treasury to make equivalence decisions. Once the Treasury has set out how it intends to use these powers, we expect to confirm our approach, outlining whether we will use the TTP for these provisions.

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, the FCA will be taking on the function of supervising credit rating agencies, trade repositories and securitisation repositories from the end of the transition period. The TTP will 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 that affect what falls within the FCA’s regulation, ie the activities for which persons need authorisation, registration or where they need to have advertising material approved. In particular, we do not propose to 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 from the end of the transition period.

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 from the end of the transition period.

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 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 the 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 prepare now and be ready to comply with their changed obligations by 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 they have taken reasonable steps to prepare to meet the new obligations by 31 December 2020.

Where firms and other regulated persons are not fully prepared by that date, we would 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 will apply at the end of the transition period. This should be read in conjunction with our consultation on further onshoring changes.