New FCA Brexit transition period rules - Thistle Initiatives

What has happened?

The FCA has published an updated version of its Handbook to show the rules that will apply at the end of the Brexit transition period on 31^st December 2020. It has also set out details on how it intends to use the Temporary Transitional Power (the TTP). The TTP gives the FCA flexibility over how and when changes to its rules apply following the end of the transition period, allowing firms to transition to the new regime. Where it applies, the TTP means that firms can continue to comply with their existing requirements for a limited period.

What do you need to do?

The FCA intends to apply the TTP on a broad basis from the end of the transition period until 31 March 2022. This means that firms do not generally need to prepare now to meet the changes to their UK regulatory obligations brought about by onshoring (that is, the process of amending legislation and regulatory requirements so that they work in a UK-only context). By reviewing the new Handbook site, alongside the updated TTP information, firms will be able to see which changes will apply to them.

In some key areas, however, the FCA does expect firms to be preparing to comply with any changed obligations applicable to them ready for 31 December 2020. These are;

• • MIFID II transaction reporting (the UK’s transaction reporting regime under MiFID II will change as a result of Brexit, including connected obligations such as the requirement to submit financial reference data. This includes the need for trading venues to transaction report for transactions on their venues by their EEA members, and for EEA firms in the temporary permissions regime who operate through a UK branch to start transaction reporting to the FCA)
  • EMIR reporting obligations
  • SFTR reporting obligations
  • Certain requirements under the Market Abuse Regulation (persons professionally arranging or executing transactions will be required to report Suspicious Transaction and Order Reports to the FCA where they are registered in the UK or have their head office in the UK or, in the case of a branch, where the branch is situated in the UK)
  • Issuer rules
  • Contractual recognition of bail-in
  • CASS requirements (CASS will be disapplied for EEA branches of UK firms)
  • Market-making exemption under the Short Selling Regulation
  • Use of credit ratings for regulatory purposes (all ratings will need to be issued or endorsed by a credit ratings agency that is registered or certified with the FCA in order to be eligible for regulatory use in the UK)
  • Securitisation
  • Electronic commerce EEA firms (the TTP does not apply to these firms)
  • Mortgage lending after the transition period against land in the EEA
  • Payment services – strong customer authentication and secure communication

It has stated that it intends to act proportionately and will not take enforcement action against firms for not meeting all requirements straight away where there is evidence they have taken reasonable steps to prepare to meet the new obligations by the due date. The FCA expects firms to use the TTP to prepare for full compliance with changes to UK regulatory obligations by 31 March 2022.

How can we help you?

If you’d like to know more about how we can help you with your analysis of which FCA rules apply to your firm, or with any other aspect of FCA compliance, our expert team is here to help. Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.