• Startups
  • November 15, 2018

Brexit Series Part 4 | No Deal Game Plan for Financial Services Firms

By Lawbite Team

Talk to a Lawyer Free Legal Help
LawBriefs solicitor Raza Naqvi has been providing his expert insight into the latest developments on Brexit. This week we bring the final blog post in this 4 part series, taking a look at ‘Brexit for Financial Services Firms’. The UK financial regulators (the Financial Conduct Authority (FCA) and Prudential Authority (PRA)) in their preparation for a “no-deal” Brexit have published three consultation papers in October: FCA, CP 18/28: “Brexit: proposed changes to the Handbook and Binding Technical Standards – first consultation” FCA, CP 18/29: “Temporary permissions regime for inbound firms and funds” PRA, CP 26/18: “UK withdrawal from the EU: Changes to PRA Rulebook and onshored Binding Technical Standards” These consultation papers are particularly relevant for European Economic Area (EEA) regulated financial services firms which use “pass-porting” to sell their products and services into the UK. Although these documents are for consultation at this stage, they will form the basis of the regulatory framework for financial services firms once finalised and consideration of these should form the basis of Brexit contingency planning for the 8000 EEA entities that hold authorisations from their home regulator to do business in the UK. Firms these are relevant to include: 
  • EEA firms that are pass-porting into the UK under FSMA.
  • EEA electronic money and payment institutions and registered account information service providers pass-porting into the UK
  • Managers of EEA-domiciled UCITS (Undertakings for Investments in Transferable Securities) that market those funds in the UK
  • Managers of EEA-domiciled investment funds (AIFs), including European Venture Capital Funds (EuVECAs), European Social Entrepreneurship Funds (EuSEFs), European Long-Term Investment Funds (ELTIFs)
It is important to note that these consultation papers do not directly apply to equivalent UK financial services firm (which are already authorised by the UK regulators) selling their products and services into EEA – which will require reciprocal policy formulation from EU regulators (and in some cases national regulators). “Pass-porting” refers to the ability of a financial services firm that is regulated by its home state regulator within the EEA to market its products and services to customers in other EEA member countries (e.g. a Luxembourg based and regulated investment fund marketing products to customers in the UK currently would, broadly speaking, not require authorisation by the UK regulators). After Brexit, this “pass-porting” regime will change. If there is a “deal”: The FCA is operating under the assumption that in the event there is a deal, the current regulatory environment will continue to apply to both UK and EEA financial services firms during an agreed transitional period from 29 March 2019 to 31 December 2020. This period would provide financial services firms with time to understand the implications of Brexit on their activities. Greater clarity as to regulation would emerge at the time of those negotiations between the UK and EU during the transitional period, but the approach of the FCA adopted in these consultation papers will potentially form the basis of its authorisation and regulation of EEA financial services firms post 31 December 2020. As such, firms and funds should continue with plans to implement EU legislation that is still to come into effect before the end of December 2020 (the end of the proposed transition period). If there is “no deal”: In the event of “no deal”, the FCA aims to roll out its Temporary Permissions Regime(s) (“TPR”). The TPR will enable firms and funds currently “pass-porting” into the UK to continue their activities in the UK for a limited time after exit (currently listed as being a maximum of 3 years from 29 March 2019). These temporary regimes will allow time for those firms that wish to maintain their business in the UK to obtain full UK authorisation (as they are not able to rely on “pass-porting”. The TPR Regulations (covering pass-porting), TPR Payments Regulation (covering EEA electronic money and payment institutions) and TPR Funds Regulation (for investment funds and their managers) are currently in front of Parliament for approval. The TPR aims to reduce the risk of harm associated with an abrupt loss of permission by enabling firms that passport into the UK to undertake new business that falls within the scope of their existing permissions, continue to perform their contractual rights and obligations and manage existing business. It will allow relevant EEA-domiciled investment funds to continue to be marketed in the UK to new and existing investors. Temporary Permissions Regime checklist (for now)
  1. EEA financial services firms will before 29 March 2019 need to notify the relevant regulator of their wish to be treated as if they have permission to carry on the relevant regulated activities in the UK on a temporary basis while in the TPR.
  2. Proposed amendments in the consultation papers will apply to the relevant FCA Handbooks particularly in relation to EU-derived provisions which will be incorporated into UK law so that they function effectively after exit day. Firms will need to comply with these during the TPR phase.
Following exit day, the FCA will allocate each firm a 3-month application period or ‘landing slot’ when it will need to submit its application for full authorisation in the UK. LawBite is helping small and medium-sized businesses understand their risks and develop strategies for Brexit. For further legal advice, you can contact the author of this article expert LawBrief Raza Naqvi, or enter an enquiry for a free 15-minute legal consultation. Alternatively please do call our friendly Client Care Team today on 020 7148 1066.
Journey Further... Brexit Series Part 1 | Timeline, What Next? Brexit Series Part 2 | SME advice Brexit Series Part 3 | Prepare Your Contracts for ‘No Deal’

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.

Related Articles

Read more of our latest blog posts, featuring all the latest legal news, analysis and opinion from our expert lawyers.

blog image
  • By Lawbite Team
  • July 27, 2021
Setting up a Limited Company UK: a guide for businesses

As a business owner, you may want to learn about the business legal structure known as a limited company. A limited company has a separate legal id...

blog image
  • By Lawbite Team
  • March 16, 2021
10 Steps every Start Up must take to avoid Legal 'Bear Traps'

Every start-up business needs the law. Unfortunately, many cut corners or worse still, ignore the legal side of their business all together. Here's...

blog image
  • By Lawbite Team
  • March 10, 2021
Moving Goods and Services between UK and EU/EEA Post-Brexit

The transition period between the European Union (EU) and the UK, with its associated single market, ended at the end of 2020.  The rules around cr...


LawBite can help you

LawBite is on a mission to provide business legal advice that is easier to access, clearer to understand and much cheaper. Our on-line legal advice platform can quickly connect you with expert business legal advice. Our friendly, highly qualified business lawyers, solicitors and mediators will give you the guidance and reassurance that comes from customised legal advice for small and medium sized business.

Whether you are bringing or defending a legal claim, outsourcing work, want a business contract review to ward off disagreements, talk to an expert trademark lawyer, resolve a contractual dispute with methods like mediation and arbitration, or getting your new company set up and on the right footing with a robust shareholder agreement and GDPR standards, we can help you succeed.

defend a claim

Talk to a Lawyer

Book a Call
defend a claim

Essentials Plan