Considerations for firms after the transition period

Following Brexit and the end of 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

End of passporting

Passporting between the UK and the EEA has now ended.

Passporting allows firms authorised in EEA states to conduct business in other EEA states based on their ‘home’ member state authorisation.

However, passporting between the UK and EEA states ended with the close of the transition period at 11pm on 31 December 2020.

This affects firms and funds based in the:

  • UK that conduct certain types of business in the EEA
  • EEA that carry out certain types of business in the UK

If you intend to do business in the EEA, you should ensure you do so consistent with local laws and local regulatory expectations, eg seeking authorisation with a local authority where appropriate. 

Converting EU legislation

The European Union (Withdrawal) Act 2018 converted into UK law existing EU legislation that had direct effect in the UK at the end of the transition period. This also preserved existing UK laws that implemented EU obligations.

The Government was given powers to amend the retained EU legislation so it works in the UK after Brexit. It has used this power to make numerous statutory instruments that amend retained EU financial services legislation.

The Government’s intention was that the same rules and laws continue to apply, as far as possible, but with the necessary amendments to reflect the UK’s position outside the EU.

The Government gave us (and, where relevant, the Bank of England and the Prudential Regulation Authority) responsibility for amending and maintaining certain EU binding technical standards that have become UK law. These technical standards specify detailed requirements for the purposes of various EU regulations and directives.

We have amended our Handbook to make sure it’s consistent with changes the Government has made, and so it still works effectively now that the transition period has ended.

For more information, read our statement on changes to UK legislation.

Temporary transitional power (TTP)

To help you adapt to your new requirements, the Treasury has given UK financial regulators the power to make temporary transitional provisions in relation to financial services legislation. This is known as the temporary transitional power (TTP).

We are applying the TTP on a broad basis from the end of the transition period until 31 March 2022. This means firms and other regulated persons can continue to comply with existing requirements for a limited period.

However, there are some areas where the TTP doesn’t apply and where you are now expected to be compliant.

Find out more about the TTP

Users of credit ratings

We are now the UK regulator of UK-registered and certified credit rating agencies (CRAs).

This means that any UK legal entity that wishes to issue credit ratings publicly or by subscription will need to be registered or certified with us as a CRA. These CRAs have made system changes to flag ratings that are available for regulatory use in the UK.

If you use credit ratings for regulatory purposes, you should use credit ratings issued or endorsed by FCA-registered CRAs. You should have contacted the relevant CRAs whose ratings you use, to understand the systems changes they’ve made.

Data sharing

If your firm transfers personal data between the UK and the EEA, you should be aware of the new data rules that are now in place.

The Government has legislated so that UK firms can continue to lawfully send personal data from the UK to the EEA and 13 other countries that the EU has deemed to provide an adequate level of protection of personal data.

The Government has also announced that the UK-EU Trade and Cooperation Agreement provides for the continued free flow of personal data from the EU and EEA to the UK until adequacy decisions are adopted, for no longer than 6 months.

The Information Commissioner’s Office (ICO) is the regulator for data protection issues in the UK. Read the ICO's information on data protection and Brexit.

The ICO has said that the agreement between the UK and the EU enables businesses and public bodies across all sectors to continue to freely receive data from the EU (and EEA). However, as a sensible precaution, the ICO recommends that businesses work with EU and EEA organisations who transfer personal data to them, to put in place alternative transfer mechanisms to safeguard against any interruption to the free flow of EU to UK personal data.

You should also consider taking legal advice if you believe that you might be affected. 

Communicating with customers

You must pay attention to what your customers need to know, and communicate with them in a way which is clear, fair and not misleading (Principle 7).

We expect you to have contacted any of your customers who have been affected by the end of the transition period. We have made this clear in information we have published for consumers on how Brexit might affect them.

You should be able to show you have considered and planned for how the end of the transition period may have affected your customers. You should keep in mind that different categories of customers may have been affected in different ways, as is set out in our guidance in PRIN 1.2.

For example, customers based in the EEA (including UK expats) may be more affected than those living in the UK. You should have contacted each group of customers, to explain clearly how they have been or will be affected.

As well as offering information directly to your customers, you should have made the important information available more widely, such as on your website. This also includes being prepared for the possibility that you may have a significant increase in consumer queries now that the transition period has ended.

We expect you to have communicated to your customers in good time – usually, the earlier the better. You must also continue to communicate clearly to your customers, taking care to avoid confusion with multiple messages that could change over time.

You should continue to consider what information consumers need to know and when. If customers need to act, then you must provide (or, in many cases, should have already provided) the information they need in a realistic time for them to make these decisions.

It’s important you have answers ready to reassure customers where appropriate and make sure you’re able to address customer queries accurately, fairly, clearly and promptly.

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 refered 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 occured, 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.

    Keep up to date with our latest information by signing up to our monthly Regulation Round Up and reading the latest issues, or signing up to our weekly news and publications alerts

    Contact us

    If you need help, call our dedicated phone line on 0800 048 4255. The line is open Monday, Tuesday, Wednesday and Friday 9am to 5pm, and Thursday 9.45am to 5pm.

    Page updates

    11/12/2020: Information added Passporting will end on 31 December
    11/11/2020: Information added Guidance for EEA firms conducting business in the UK
    09/10/2020: Information changed Data sharing, and addition of PDF guide to preparing for Brexit

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