The Financial Conduct Authority (FCA) has updated and published draft directions under its Temporary Transitional Power (TTP). The TTP gives the FCA flexibility in applying post-Brexit requirements, allowing firms to transition to a new UK regulatory framework. The directions would only come into effect on exit day if the UK leaves the EU without an implementation period.
Under the directions, firms do not generally need to prepare now to meet the changes to their UK regulatory obligations that are connected to Brexit.
However, in some cases where the FCA considers it important for its objectives, it expects firms take reasonable steps to comply with post-exit obligations from exit day, for example in relation to key reporting obligations. The FCA set out its approach in our February statement.
The draft directions published today under the TTP update the directions made on 28 March 2019. Alongside this the FCA also updated its explanatory note providing guidance on the use of the TTP. The draft directions are being published now to give firms time to consider changes which may apply, before these are finalised.
The main updates relate to the following areas:
- extending the proposed duration of the directions issued under the TTP from 30 June 2020 to 31 December 2020.
- updating the provisions relating to prudential requirements in our directions to reflect new HM Treasury legislation and FCA exit instruments published since 29 March 2019. Our policy approach has not changed.
- revoking certain directions in relation to payment services, provided by EEA credit institutions in the financial service contracts regime, as these are no longer needed because of legislative amendments made by the Government.
- applying a standstill direction to allow EEA Central Banks and the European Central Bank to continue to rely upon their status as exempt persons until 31 December 2020.
Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority, said “The Temporary Transitional Power is intended to reduce the risk of disruption for firms in a no-deal scenario while ensuring consumers remain appropriately protected and markets continue to work well. It forms part of the extensive work the FCA has been doing to prepare for Brexit. It should give firms and other regulated persons the time they need to phase in any regulatory changes they may need to make as a result of “onshored” EU legislation.”
“As the FCA announced in February 2019, there are specific areas where we will not be granting transitional relief and, in these areas, we continue to expect firms and other regulated entities to take reasonable steps to comply with the changes to their regulatory obligations by exit day.”
The FCA do not expect to make significant changes to the draft directions in advance of exit day. Firms can contact us on the impact of the use of the TTP to make us aware of any specific changes that they believe are not fully accounted for.”