The UK left the European Union on 31 January 2020 with a withdrawal agreement. Since then, the UK has been in a transition period which is due to end on 31 December.
As the end of the transition period approaches, the Financial Conduct Authority (FCA) has published an updated version of its Handbook. In addition to the updated Handbook published on 1 October 2020, the FCA has introduced new powers to help financial firms adapt to the regulatory changes after Brexit.
A new ‘Temporary Transitional Power’ (TTP) will be implemented from the 31 December 2020 until 31 March 2022. This power allows firms to meet many existing European Union requirements whilst they are preparing to comply with the new UK regulatory rules.
Nausicaa Delfas, executive director of international at the FCA, said that TTP “…will in most cases give firms more time to adapt to their new obligations. There are some areas where it would not be appropriate for us to apply the TTP, including where doing so could run counter to our objectives. In those key areas, we continue to expect firms and other regulated entities to prepare now to comply with the changes to their regulatory obligations by 31 December 2020.”
Regulated persons and firms will have to comply with changing regulations in the following key areas by 31 December 2020. These key areas include:
- MIFID II transaction reporting
- EMIR and SFTR reporting obligations
- Certain requirements under MAR
- Issuer rules
- Contractual recognition of bail-in
- Client Assets Sourcebook requirements (CASS)
- Market-making exemption under the Short Selling Regulation
- Use of credit ratings for regulatory purposes
- Electronic commerce European Economic Area (EEA) firms
- Mortgage lending after the transition period against land in the European Economic Area EEA
- Payment Services – strong customer authentication and secure communication
The FCA says it expects firms to “use the duration of the TTP to prepare for full compliance with changes to UK regulatory obligations by 31 March 2022”.
Most UK firms will be relieved that the new TTP powers offer a period of reprieve during the transition to new regulations. The new TTP powers will give firms time to adapt and understand the new regulatory landscape. At the same time, many of the uncertainties surrounding Brexit can be addressed, in particular uncertainty about a future free trade agreement between the UK and EU.