Key requirements of firms

Here we explain the key requirements where the Temporary Transitional Period (TTP) will not apply. Firms must prioritise these for compliance by the end of 2020.

The legal text setting out the detail of these requirements is in Annexes A and B of the main FCA transitional directions and for the contractual recognition of bail-in provision in the FCA prudential transitional direction.

See our transitional directions page for more information.

We are conscious of the scale, complexity and magnitude of some of the changes listed on this page, 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.

MiFID II transaction reporting requirements

The UK’s transaction reporting regime under MiFID II will change as a result of Brexit, including connected obligations such as the requirement to submit financial reference data. This includes the need for trading venues to transaction report for transactions on their venues by their EEA members, and EEA firms in the temporary permissions regime who operate through a UK branch to start transaction reporting to us. Find out more about this on our FCA FIRDS and transaction reporting page. 

These changes will apply from the end of the transition period and will affect EEA firms entering the temporary permissions regime, as well as UK-approved reporting mechanisms (ARMs) that submit reports on behalf of firms.

Find out more about the onshored MiFID regime:

EMIR reporting obligations

From the end of the transition period, all firms and central counterparties (CCPs) that enter into derivatives transactions in scope of EMIR will be required to report the details of those transactions to an FCA-registered Trade Repository (TR). 

In addition, TRs will be required to provide the relevant UK authorities with access to that data. 

Therefore, the TTP does not apply to onshoring changes for firms and CCPs subject to the reporting obligation under the onshored EMIR regime or to the onshored requirements for TRs.

Find out more about the onshored EMIR regime:

SFTR reporting obligations

From the end of the transition period, all financial counterparties, including third country branches, central securities depositories (CSDs) and central counterparties (CCPs) who enter into securities financing transactions in scope of the SFTR will be required to report details of those transactions to an FCA-registered TR. 

In addition, TRs will be required to provide the relevant UK authorities with access to that data.

Therefore, the TTP does not apply to onshoring changes for firms, to CSDs or CCPs subject to the reporting obligation under the onshored SFTR regime, or to the onshored requirements for TRs.

Please note that the TTP will apply to securities financing transactions where one of the counterparties is a member of the European System of Central Banks (ESCB). For these transactions, the status quo is retained and counterparties will not need to report these transactions under the onshored SFTR until 31 March 2022. However, where firms are subject to MiFIR transaction reporting obligations they will need to report these securities financing transactions to the FCA under the onshored MiFIR, where the counterparty is a member of the ESCB.

Find out more about the onshored SFTR regime.

Certain requirements under MAR

MAR issuer notifications: Issuers that have securities admitted to trading or traded on UK markets (and persons discharging managerial responsibilities within the issuer) will be required to submit information to the FCA regardless of any existing obligations under EU law to provide this information to an EU authority.

Find out more about the onshored MAR regime:

MAR STOR reporting: persons professionally arranging or executing transactions will be required to report Suspicious Transaction and Order Reports (STORs) to the FCA where they are registered in the UK or have their head office in the UK or, in the case of a branch, where the branch is situated in the UK. This will be regardless of any obligations under EU law to report STORs to an EU authority where they are registered in the EU or have their head office in the EU, or, in the case of a branch, where the branch is situated in the EU.

Find out more about reporting STORs to the FCA.

Issuer rules

Issuers that have securities admitted to trading on UK regulated markets will be required to submit information to the FCA and disclose certain information to the market after the end of the transition period.

Find out more about issuer rules:

Contractual recognition of bail-in

To safeguard resolvability, firms will need to include contractual recognition of bail-in terms in all new or materially-amended liabilities governed by the law of an EEA State, except for unsecured liabilities that are not debt instruments.

See our draft prudential transitional direction for more information.

Client Assets Sourcebook requirements (CASS)

After the end of the transition period, CASS will be disapplied for EEA branches of UK firms. These firms must (i) segregate UK client money from EEA branch money; and (ii) ensure that EEA branch money will no longer be held under the CASS statutory trust. 

We have decided not to apply the TTP to these changes to increase the certainty of the scope of consumer protection and avoid costly legal confusion on insolvency.

Find out more about CASS:

Market-making exemption under the Short Selling Regulation

Any firm wishing to use the exemption for market-making activities under the Short Selling Regulation (SSR) will be required to join a UK trading venue and notify the FCA of their intention to use the market maker exemption 30 days ahead of their intended use. Any notifications already made to the FCA will remain valid after the transition period. 

To ensure a smooth transition, EU market makers can join a UK trading venue and provide us with a copy of any notification made to another competent authority, at least 30 days before the end of the transition period. 

Find out more about SSR:

Use of credit ratings for regulatory purposes

Once the transition period ends, all ratings will need to be issued or endorsed by a credit ratings agency (CRA) that is registered or certified with the FCA in order to be eligible for regulatory use in the UK. Users of credit ratings should therefore take steps to ensure they are operationally ready to use credit ratings issued or endorsed by FCA-registered or certified CRAs after the end of the transition period.

To help provide some continuity to users of credit ratings, a transitional arrangement was introduced under the CRA Regulation Statutory Instrument allowing for ratings issued or endorsed in the EU before the end of the transition period, by a CRA with an affiliate registered or currently applying for registration with the FCA, to be used for regulatory purposes in the UK for up to 1 year after the end of the transition period. This excludes any new credit ratings, or credit ratings that undergo a subsequent rating change.

Under the TTP, credit ratings that have been issued or endorsed (and not withdrawn) by an EU-established CRA that does not have a group affiliate registered in the UK will still be available for regulatory use in the UK for up to 1 year after the end of the transition period.

The TTP does not apply to other amendments to the CRA Regulation, its tertiary legislation or the onshoring legislation for CRAs.

Firms that are subject to the onshored Capital Requirements Regulation (CRR) should also note that the TTP does not apply in relation to the UK versions of external credit assessment institution (ECAI) mappings under the CRR. This ensures that relevant UK firms can rely on the amended mappings which, where appropriate, have been updated to include certain CRAs which we anticipate will be newly registered in the UK from the end of the transition period. Firms are reminded, however, that the presence of a mapping for a particular CRA does not guarantee that its ratings can be used for regulatory purposes (including prudential calculations). Firms must ensure that the relevant CRA meets all of the necessary conditions under the onshored CRA Regulation to permit this.

Find out more about CRAs:

Securitisation

UK originators and sponsors must notify the FCA using the onshored STS notification templates from the end of the transition period, where their UK securitisations meet the criteria for being simple, transparent, and standardised (STS) under the onshored Securitisation Regulation, in order for those securitisations to qualify as UK STS.

In addition, transitional measures under the onshored Securitisation Regulation will allow EU STS securitisations issued up to 2 years after the end of the transition period, and which remain on ESMA’s STS list, to qualify as UK STS.

Prospective UK Securitisation Repositories (SRs) will need to apply to the FCA in order to register and operate in the UK.

In order to comply with article 7(2) of the onshored Securitisation Regulation, the originator, sponsor and SSPE (securitisation special purpose entity) of a UK securitisation that is a public securitisation, will need to make the relevant information available via a UK SR, once one is registered.

Originators and sponsors of UK STS securitisations will need to use the services of a UK Third Party Verifier (TPV) where they chose to employ a TPV.

Find out more about the onshored securitisation regime:

Electronic commerce EEA firms

The TTP does not apply to EEA e-commerce firms, which have been excluded under the E-commerce Directive. Firms wishing to carry on new regulated business via e-commerce in the UK from the end of transition period will need to consider if they need UK authorisation and make urgent plans to apply. 

However, e-commerce firms will have a run-off regime under Part 4 of the Electronic Commerce and Solvency 2 (Amendment etc.) (EU Exit) Regulations 2019 allowing them to run-off existing contracts.

Find out more about the onshored eCommerce regime.

Mortgage lending after the transition period against land in the EEA

Changes to the Regulated Activities Order 2001 mean that where loan contracts entered into after the end of the transition period are secured on land in the EEA, they will not be regulated mortgage contracts (though existing regulated mortgage contracts secured on land in the EEA before the end of the transition period will remain as such). 

These post-transition period contracts may instead be regulated credit agreements, in which case firms will need to comply with consumer credit provisions.

See our draft prudential transitional direction for more information.

Payment services – strong customer authentication and secure communication 

The regulatory technical standards on strong customer authentication and secure communication (the SCA-RTS) applied from September 2019 and include requirements enabling the functioning of open banking as well as new security requirements, including anti-fraud requirements called strong customer authentication (SCA). 

These are onshored into FCA binding technical standards (the UK-RTS). The TTP does not apply to the UK-RTS and we expect firms to comply with the UK-RTS and to refer to the FCA’s approach document for guidance.

Find out more about Payment services: