The UK left the EU on 31 January 2020 and entered into a ‘transition period’, during which time EU law has continued to apply in the UK. This transition period will end at 11pm on 31 December 2020 (referred to in this article as ‘IP Completion Day’). Up until IP Completion Day, EEA financial services firms are able to continue using the passporting regime to carry out regulated activities in the UK: for example, through use of a services passport or a branch passport.
However, after IP Completion Day, the automatic passporting rights EEA financial services firms currently enjoy will cease. Thereafter, one of the only ways in which such firms will be permitted to continue carrying out regulated activities in the UK is through having opted in to the Financial Conduct Authority’s (FCA) ‘Temporary Permissions Regime’ (TPR) and accordingly becoming a ‘TP firm’.
In order to enter into the TPR, firms will need to ensure that they have notified the FCA of their intention to do so. This may only be done via the FCA’s online ‘Connect’ portal, which has now been reopened (after being shut for several months) and will remain open until 11pm on 30 December 2020.
The FCA has indicated that the TPR will last for a maximum of three years. During this time, a TP firm will be given ‘permission to carry on regulated activities … by the FCA or PRA under Part 4A of FSMA’ - known as ‘Part 4A permissions’. This will allow an EEA firm to continue carrying out the same regulated activities throughout the TPR period as it is permitted under its current passport, as if it were fully authorised by the FCA/PRA to do so.
However, once the TPR comes to an end, deemed authorisation will fall away. Therefore, a TP firm wishing to continue its regulated activities in the UK must apply for full UK authorisation whilst in the TPR. To enable this, the FCA will allocate each TP firm a ‘landing slot’ in which to submit its application for full UK authorisation. The application will need to explain how the firm intends to meet the FCA’s threshold conditions and how its UK business will be structured. Firms will also need to make sure that they have made the necessary preparations to comply with the various FCA and PRA rules that will apply to them after the TPR ends.
The FCA has also informed firms that they will not be able to apply for temporary ‘top-up permissions’ (permission to carry out activities outside of the scope of their passporting rights) during the TPR. Instead, it has stipulated that firms wishing to expand the list of regulated activities which they are authorised to carry out in the UK must submit an application for full UK authorisation and include in the list those new regulated activities for which they seek Part 4A permissions.
Although discussions surrounding Brexit and life after the transition period are not conclusive at present, what does seem clear is that any EEA firm which seeks to continue carrying out regulated activities after 31 December 2020 should notify the FCA of its intention to enter into the TPR as soon as possible, and in any event, before the notification windows shuts on 30 December 2020. It is imperative that a passported firm uses the time afforded by the TPR not only to decide whether it wants to apply for full UK authorisation but, if it decides to do so, to also submit its application and ensure that it puts in place the necessary preparations so as to comply with the various FCA and PRA rules which will apply after the TPR ends.