CCR2 Brexit
Be prepared
Brexit means significant changes for the UK’s financial services sector
Nausicaa Delfas Executive director for international, Financial Conduct Authority
As we move through the end of the Brexit transition period, the FCA is urging financial services companies to ensure they are ready. Customers should also be aware of any changes that may apply to them. Irrespective of the outcome of the negotiations between the UK and the EU on a free trade agreement, firms will need to be prepared for the end of the transition period. The Brexit transition period ended at
11pm on 31 December 2020. After this point EU law will no longer apply in the UK. For many financial services businesses, this will mean changes to existing systems and services. The FCA expects firms to have ensured they have assessed the impact on them and their customers, and have taken action so they are ready for the end of the transition period. As part of the FCA’s preparations the
FCA will be making changes to the Financial Services Register. This is to take account of the end of passporting for firms and funds and the start of the temporary permissions regime (TPR).
Firm preparation Passporting will no longer be possible after the end of the transition period. The FCA, working with other UK authorities, has introduced the temporary permissions regime (TPR). The TPR will allow EEA- based firms passporting into the UK to continue operating in the UK within the scope of their current permissions for a limited period, while they seek full FCA authorisation, if required. In addition, the FCA and other UK
authorities have also introduced the financial services contracts regime (FSCR). This will allow EEA passporting firms that do not
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enter the TPR to wind down their UK business in an orderly fashion. When passporting ends at the end of the
transition period, the extent to which UK firms can continue to provide services to customers in the EEA will be dependant on local law and local regulators’ expectations. The FCA expects UK firms to take the steps available to them to ensure they act consistently with these local laws and expectations. The FCA is clear that firms’ decisions need to be guided by obtaining appropriate outcomes for their customers, wherever they are based. Firms should also be prepared for any
regulatory changes that will come into force. To help firms adapt to some of the new rules the Treasury has given the FCA new powers to make transitional provisions, known as the temporary transitional powers (TTP). Whilst the FCA has applied the TTP on a broad basis, there are some key exceptions where firms will need to comply with the changed requirements from the end of the transition period. Firms should check the implications of these for their business.
Systems and operational changes The FCA continues to urge firms to be fully prepared for the end of the transition period. Whilst much progress has been made on preparations, the FCA recognises the challenges for firms in making the systems and operational changes required. The FCA intends to take a pragmatic
approach to any issues should they arise, where firms can demonstrate that they have taken all reasonable steps to prepare. The FCA’s focus during this time will be
on our strategic objective of ensuring markets function well. The FCA will continue to
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The FCA intends to take a pragmatic approach to any issues should they arise, where firms can demonstrate that they have taken all reasonable steps to prepare
monitor both primary market and associated secondary market activities closely, including for any misconduct by market participants, throughout this period during which some market volatility could arise. This monitoring will include order book
reporting, suspicious order and transacting reporting, inside information disclosures, price movement monitoring, and reporting on net short positions and the FCA will use its powers to request information and make enquiries where behaviour that may be abusive or creating a disorderly market is identified. The FCA is calling on issuers to be
particularly vigilant in ensuring procedures, systems and controls for the protection and disclosure of inside information are met and on market participants to be aware of the FCA’s significant detective capabilities.
Customers For UK based customers, the FCA has put in place plans to ensure any possible disruption to UK financial services is minimised at the end of the transition period. Nevertheless, there will be some changes. Customers should have been contacted
January 2021
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