On 25 July 2019, the FCA confirmed its intention to extend the proposed duration of directions issued under the Temporary Transitional Power (TTP) to 31 December 2020.
The TTP is designed to minimise disruption in the event the UK leaves the EU without a withdrawal agreement by giving firms the time they need to phase in any regulatory changes which need to be made as a result of “onshored” EU legislation. The FCA hopes that the power will “provide certainty, ensure continuity and reduce the risk of disruption.”
Under the TTP, firms do not need to prepare now to meet the changes to their UK regulatory obligations which are connected to Brexit. However, there are some areas where the FCA has stated it would not be appropriate to phase in the changes and where it expects firms and other regulated entities to take “reasonable steps” to comply with the required changes from exit day.
In particular the following firms will be expected to continue their preparations to comply with the changes from the date of Brexit:
- firms subject to the MiFID II transaction reporting regime, and connected persons (e.g. approved reporting mechanisms);
- firms subject to reporting obligations under the European Market Infrastructure Regulation;
- EEA issuers that have securities traded or admitted to trading on UK markets;
- investment firms subject to the Bank Recovery and Resolution Directive 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; and
- UK originators, sponsors, or securitisation special purpose entities of securitisations that wish to be considered simple, transparent, and standardised under the Securitisation Regulation.
The FCA has re-iterated its expectation that these firms will use the additional time between now and the end of October to prepare to meet their obligations. This effectively means that these firms (including those subject to the transaction reporting regime under MiFID II) will be expected to “comply or explain” from the date of Brexit. The FCA has promised to publish further information before exit day on how firms will be expected to comply with these post-exit rules.
The timelines above are consistent with the FCA’s recent extension of its Temporary Permissions Regime. This regime allows EEA-based firms passporting into the UK to continue new and existing regulated business within the scope of their current permissions in the UK for a limited period, while they seek full FCA authorisation. Like the TTP, the Temporary Permissions Regime is intended to minimise disruption caused by Brexit. For further details please refer to our recent FinBrief on the subject. The deadline of applying to be part of the Temporary Permissions Regime has been extended by the FCA to 30 October 2019.