On December 20, 2017, the UK Financial Conduct Authority (FCA) published a statement on the UK’s withdrawal from the European Union (EU).
Referencing the announcement made by the European Council that enough progress had been made in negotiations to begin discussions on future trading relations (for further information please see the Corporate & Financial Weekly Digest of December 8, 2017), the FCA states that it welcomes the progress that has been made and is supportive of open markets and free trade in financial services, underpinned by strong regulatory standards.
The FCA goes on to state that while the final nature of any implementation period is yet to be agreed upon, it is anticipated that firms will be able to continue to benefit from passporting between the United Kingdom and the European Economic Area (EEA) after the point of exit and during an implementation period. The FCA will monitor the negotiations and provide further information to firms as appropriate.
The FCA also refers to HM Treasury’s announcement (also covered in this week’s Corporate & Financial Weekly Digest [“UK Government Plans To Ensure Continuity in Financial Services in the Event of No Deal With the EU”]) that, if necessary, it will legislate for a temporary permissions regime. This regime would enable relevant firms and funds to undertake new business within the scope of their permissions, continue performing their contractual rights and obligations, manage existing business, and mitigate risks associated with a sudden loss of permission. Firms and funds that are solely regulated in the United Kingdom by the FCA would need to notify the FCA of their wish to benefit from the regime before the day that the United Kingdom leaves the EU. However, the FCA states that this notification for temporary permission will not require submission of an application for authorization.
The FCA adds that UK-based firms servicing EEA clients should continue to prepare for a range of scenarios, and should discuss these arrangements and the implications of an implementation period with the relevant EU regulators. The FCA will keep its expectations under review as implementation period negotiations progress, and communicate to firms accordingly.
Finally, the FCA reminds firms that the United Kingdom remains an EU Member State until its formal withdrawal, and therefore all rights and obligations derived from EU law continue to apply. Firms must therefore abide by their obligations and continue with implementation plans for legislation that is still to come into effect.
The statement is available here.