Rules that will apply to firms and fund operators in the TPR

This page summarises the rules that will apply to firms in the temporary permissions regime (TPR) and fund operators in the temporary marketing permissions regime (TMPR).

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Rules that will apply to firms in the TPR

Firms in the TPR are treated as having a UK Part 4A permission (with the exception of payments and e-money firms), which means that, after the end of the transition period, the home-host state restrictions on regulatory action will no longer apply and they will come within the full scope of our supervision and rule-making powers. In designing and implementing the TPR, we have taken a proportionate approach that will enable firms to comply with our requirements from Day 1 while maintaining an adequate level of consumer protection.

General provision

We will apply most of the Handbook via new provisions in GEN 2.2.26R onwards which apply:

  • rules that currently apply to passporting firms (as at the end of the transition period) to temporary permission firms
  • UK home state rules which implement directives (subject to substituted compliance)
  • certain other UK rules where protections would otherwise fall away

Financial Services Compensation Scheme (FSCS)

The FCA and the Prudential Regulation Authority (PRA) each make rules which set out how FSCS cover works and is funded, covering different areas of the financial services industry.

The TPR legislation provides that the FSCS is only to cover UK branches during the TPR in relation to the FCA’s areas of responsibility (however it also allows coverage for a limited category of cross-border fund managers that were covered before the end of the transition period). Accordingly, our approach is to provide customers of firms with UK branches in the regime with FSCS protection, equivalent to the cover provided to customers of UK firms. This will address the possibility that the expiration of the transition period could result in customers of these firms losing compensation scheme protection offered by home states.

If your firm is in the TPR you will be required to contribute to the cost of the FSCS.

As a consequence of the legislation, customers of firms in the regime without a UK branch will not have access to the FSCS, other than where there is existing FSCS cover in respect of the activities of certain cross-border fund managers.

The PRA has separately set out proposals for its areas of responsibility in relation to the FSCS (ie for deposit-taking and insurance).

Financial Ombudsman Service

Firms in the TPR without a UK branch will be included in the Compulsory Jurisdiction (CJ) of the Financial Ombudsman Service. This will ensure that customers of these firms will not lose rights to refer complaints to an Alternative Dispute Resolution (ADR) scheme after the transition period. These firms will be required to pay case fees and annual levies.

Firms with a UK branch are already included in the CJ and this will continue as part of the regime.

For firms that are already members of the Voluntary Jurisdiction (VJ) of the Financial Ombudsman Service, complaints (including post-exit complaints) about their pre-exit activities will continue to come under the VJ as they do now. These firms will also be allowed to pay a reduced VJ levy to reflect that certain activities which were covered by the VJ will now be covered by the CJ going forward.

Senior Managers and Certification Regime

While in the TPR, firms with a UK branch should continue to comply with the requirements of the Senior Managers and Certification Regime as it currently applies to EEA branches.

We have not proposed any requirements in this area for services firms, in line with the current position and our general approach.

Safeguarding client money and custody assets (client assets)

To ensure client assets held by firms conducting investment business or insurance mediation are protected, and to enable us to effectively supervise firms in the regime, we will require that:

  • firms report their client assets arrangements to us by email
  • investment firms subject to MiFID II provide us with an English translation of their client assets audit reports, either upon our request or receipt of an ‘adverse’ audit report on the adequacy of the firm’s arrangements under its client assets obligations
  • firms disclose certain information to UK clients relating to the treatment of their client assets in the event of the firm’s failure. Firms must:
    • disclose this to existing clients when they enter the regime, and in good time before safeguarding client assets for new clients
    • among other things, make this disclosure in a durable medium that is not obscured or disguised by other information and ensure the disclosure is prominent among other information
  • tied agents and appointed representatives of firms subject to MiFID II in the regime are prohibited from holding client assets

Our Principles for Businesses

Our Principles for Businesses will generally apply in full to firms in the TPR.

Status disclosure

Firms in the TPR will be required to include specific status disclosure wording in letters (or electronic equivalents) to indicate that they are in the regime.

Single Financial Guidance Body

The Single Financial Guidance Body (SFGB) levies are raised to fund the SFGB which is now known as the Money and Pensions Service (MAPS). TPR branch firms will pay the SFGB levies on the same basis as UK firms. TPR cross-border service firms will pay the minimum SFGB money advice levy.

Devolved Authorities’ debt advice levy

The debt advice levy is raised to fund debt advice for consumers in Scotland, Wales and Northern Ireland. All TPR branch firms will be required to contribute to Devolved Authorities’ debt advice costs on the same basis as UK firms.

Illegal money lending levy

The illegal money lending (IML) levy is raised to recover the expenses that the Treasury incurs providing funding for the teams tackling illegal money lending and is recovered from consumer credit firms. The basis for calculating the IML levy mirrors that of FCA fees.

Financial Services Contracts Regime

Firms in the supervised run-off regime of the financial services contracts regime (FSCR) are generally subject to the rules above, with certain modifications, for example in relation to status disclosure (see the specific provision in GEN 4 Annex 1C of our Instrument No. 2019/36).

Rules that will apply to fund operators in the TMPR

Operators, depositories and trustees of funds in the temporary marketing permission regime (TMPR) will need to continue to comply with all relevant marketing requirements. As with firms in the TPR, we are taking a proportionate approach.

However, funds must enter the TMPR to continue to be marketed in the UK on the same basis as they were before the end of the transition period or ensure they have another legal basis on which they may market their units to specific types of investors in the UK.

Operators, depositories and trustees of funds in the regime will need to continue to comply with all relevant marketing requirements.

The transitional power and application of legislative requirements to firms and investment funds in the TPR/TMPR

The Treasury has provided the financial services regulators with a power to phase in post-transition period requirements, allowing flexibility for firms and investment funds to transition to a fully domestic UK regulatory framework.

Firms in the temporary permission and supervised run-off regimes (part of the financial services contracts regime) and investment funds in the TMPR will be subject to rules mainly as set out in the Exiting the European Union: Temporary Permission and Financial Services Contracts Instrument 2019 (2019/36).

However, to the extent that the transitional power is used to provide relief more generally (ie also to firms other than firms in the TPR) in respect of any of rules with which firms and investment funds in the regime are expected to comply, this relief will also be available for firms and investment funds in the regime.

Please refer to our statement on the transitional power for more detail and see our rules for TP firms in the FCA Handbook at GEN 2.2.26R onwards and in particular, GEN 2.2.27R(3) and (4) and GEN 2.2.33R(3).

To the extent that transitional relief will be provided in respect of obligations outside of our Handbook, this relief will also be available for firms and investment funds in the regime, see Part 5 of the FCA’s draft main TTP direction, published most recently in September 2019.

In addition, where a regulatory obligation outside of our Handbook applies for the first time following the end of the transition period because it relates to a matter previously reserved to the firm’s home state regulator, we intend to permit substituted compliance with the equivalent obligation in the firm’s home state in the same way as we are proposing for our Handbook rules, unless otherwise indicated. There is more information in our Policy Statement PS19/5.

We do not intend to provide transitional relief for any of the rules which we have proposed specifically for firms or investment funds in the regime.

More information

We have set out the rules which will apply to firms and funds in the regime, in the Exiting the Exiting the European Union: Temporary Permission and Financial Services Contracts Instrument 2019 (2019/36).

Our Policy Statement PS19/5 provides more background to these rules.

You can also refer to the 4 Statutory Instruments passed by the Government which relate to the TPR:

Note that the date for the operation of the regime has been amended by secondary legislation under the new European Union (Withdrawal Agreement) Act so that it will commence after the end of the transition period. References to 'exit day' in our rules will be amended, where necessary, later in the year.

Page updates

14/09/2020: Link changed Links to page sections updated