Today, the Financial Conduct Authority (FCA) has updated and published draft directions under its Temporary Transitional Power (TTP). The TTP gives the FCA flexibility in applying post-Brexit requirements, allowing firms to transition to a new UK regulatory framework. The directions would only come into effect on exit day if the UK leaves the EU without an implementation period.
Under the directions, firms do not generally need to prepare now to meet the changes to their UK regulatory obligations that are connected to Brexit. However, in some cases where the FCA considers it important for its objectives, it expects firms to take reasonable steps to comply with post-exit obligations from exit day, for example in relation to key reporting obligations. The FCA set out its approach in its February statement.
The draft directions published today under the TTP update the directions made on 28 March 2019. Alongside this the FCA also updated its explanatory note providing guidance on the use of the TTP. The draft directions are being published now to give firms time to consider changes which may apply, before they are finalised.
The main updates relate to the following areas:
- extending the proposed duration of the directions issued under the TTP from 30 June 2020 to 31 December 2020
- updating the provisions relating to prudential requirements in our directions to reflect new HM Treasury legislation and FCA exit instruments published since 29 March 2019. Our policy approach has not changed
- revoking certain directions in relation to payment services, provided by EEA credit institutions in the financial services contracts regime, as these are no longer needed because of legislative amendments made by the Government
- applying a standstill direction to allow EEA Central Banks and the European Central Bank to continue to rely upon their status as exempt persons until 31 December 2020
Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority, said:
'The Temporary Transitional Power is intended to reduce the risk of disruption for firms in a no-deal scenario while ensuring consumers remain appropriately protected and markets continue to work well. It forms part of the extensive work the FCA has been doing to prepare for Brexit. It gives firms and other regulated persons time – to December 2020 – to phase in any regulatory changes they may need to make as a result of 'onshored' EU legislation.
'However, as we said in February 2019, there are specific areas where we will not be granting transitional relief and, in these areas, we continue to expect firms and other regulated entities to take reasonable steps to comply with the changes to their regulatory obligations by exit day.'
The FCA does not expect to make significant changes to the draft directions in advance of exit day. Firms can contact us on the impact of the use of the TTP to make us aware of any specific changes that they believe are not fully accounted for.
Notes to editors
- Read the FCA's February 2019 Brexit statement on what we expect firms and other regulated persons to do.
- Read the FCA's July 2019 press release announcing its extension to its use of the temporary transitional power.
- Read the Bank of England's Consultation Paper about UK withdrawal from the EU.
- View our new draft directions.
The areas where firms will have to make changes on exit day are:
- firms subject to the MiFID II transaction reporting regime, and connected persons (for example approved reporting mechanisms)
- firms subject to reporting obligations under European Market Infrastructure Regulations (EMIR)
- EEA Issuers that have securities traded or admitted to trading on UK markets
- investment firms subject to the Bank Recovery and Resolution Directive (BRRD) and that have liabilities governed by the law of an EEA State
- EEA firms intending to use the market-making exemption under the Short Selling Regulation
- firms intending to use credit ratings issued or endorsed by FCA-registered credit ratings agencies after exit day
- UK originators, sponsors, or securitisation special purpose entities (SSPEs) of securitisations they wish to be considered simple, transparent, and standardised (STS) under the Securitisation Regulation
- Find out how you can prepare for Brexit.
- On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA). On 1 April 2014, the FCA took over responsibility for consumer credit regulation.
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this, it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.