FCA extends interim powers to waive rules in no-deal Brexit

The Financial Conduct Authority (FCA) has confirmed it intends to extend the proposed duration of the directions issued under the temporary transitional power to the 31st December 2020.  This is to reflect the extension of Article 50.  Other than the additional time the FCA’s approach remains unchanged.

The temporary transitional power is intended to minimise disruption for firms and other regulated entities if the UK leaves the EU without a withdrawal agreement. Under the power firms do not generally need to prepare now to meet the changes to their UK regulatory obligations that are connected to Brexit.

Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority, said “The temporary transitional power is a key part of our contingency planning if the UK leaves the EU without an agreement. This extension 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.  The power will provide certainty, ensure continuity and reduce the risk of disruption.”

“As we said in February, there are some areas where it would not be appropriate to phase in the changes. For example, reporting rules under MiFID II as receiving these reports is crucial to our ability to ensure market oversight and the integrity of financial markets.  In these few areas only, we still expect firms and other regulated entities to take reasonable steps to comply with the changes to their regulatory obligations by exit day.”

As the FCA announced in February 2019, there are specific areas where it will not be granting transitional relief and, in these areas, it continues to expect firms and other regulated entities to take reasonable steps to comply with the changes to their regulatory obligations by exit day.

The following firms or persons should continue their preparations to comply with the changes:

• Firms subject to the MiFID II transaction reporting regime, and connected persons (for example approved reporting mechanisms).
• Firms subject to reporting obligations under the European Market Infrastructure Regulation (EMIR).
• EEA Issuers that have securities traded or admitted to trading on UK markets.
• Investment firms subject to the Bank Recovery and Resolution Directive (BRRD) and that have liabilities governed by the law of an EEA State.
• EEA firms intending to use the market-making exemption under the Short Selling Regulation.
• Firms intending to use credit ratings issued or endorsed by FCA-registered credit ratings agencies after exit day.
• UK originators, sponsors, or securitisation special purpose entities (SSPEs) of securitisations they wish to be considered simple, transparent, and standardised (STS) under the Securitisation Regulation.

The FCA expects firms to use the additional time between now and the end of October to prepare to meet these obligations.  If firms are not ready to meet these obligations in full, we will expect to see evidence of why this was not possible.

The FCA will publish further information before exit day on how firms should comply with post-exit rules.  The extension is aligned with the end date intended by the Bank of England and the Prudential Regulation Authority (PRA).