New legislation that will come into force immediately before Brexit this Friday will ensure that the UK’s temporary permissions regimes (“TPRs”) for firms and funds will apply from 31 December 2020, once the Transition Period has ended. This move should ensure that any EEA firms or funds which have not been able to secure the necessary UK licences or registrations during the course of 2020 will be able to continue to operate in the UK on a temporary basis.
The UK is due to exit the European Union at 23:00 UK time this Friday 31 January 2020. However, except to the extent provided in the Withdrawal Agreement, EU law will continue to apply to and in the UK during the Transition Period. In practice, this means that firms and funds currently operating or marketing in the UK on the basis of EEA passporting rights will be able to continue to do so until the end of the Transition Period.
The Transition Period (also referred to in the UK as the Implementation Period) is due to end on 31 December 2020, subject to any future extensions. The UK had previously unilaterally introduced legislation providing for a number of temporary permissions regimes designed to enable firms, funds and certain other market participants seeking to continue to operate or market in the UK to do so in the event of a hard Brexit. Once a firm or fund has made the necessary notifications and entered into a TPR, that firm or fund will be given a “landing slot” within which to apply for fresh post-Brexit licences and registrations and can continue to operate or market whilst going through that process.
On 28 January 2020, the Financial Services (Consequential Amendments) Regulations 2020/56 were laid before the UK Parliament and will come into force immediately before exit day (i.e. immediately before 23:00 UK time this Friday). Various pieces of secondary legislation were previously introduced using powers under the European Union (Withdrawal) Act 2018 to legislate for the TPRs, which each cover certain firms and funds (including investment firms, banks, insurers, UCITS funds and AIFs, electronic money institutions and payment services institutions) and certain market participants/infrastructures (including data reporting service providers, central counterparties, trade repositories, central securities depositories and credit rating agencies). References to “exit day” in the relevant legislation will be replaced by references to “IP completion day” (i.e. Implementation Period completion day, or 23:00 UK time on 31 December 2020). These changes ensure that the TPRs will apply from the end of the Transition Period, rather than from exit day.
Based on various statements including the Political Declaration made by the UK and EU, which refers to “the Parties’ regulatory decision-making autonomy” in relation to financial services, it is not currently expected that the UK and EU will agree the continuance of passporting rights once the Transition Period ends. Although expected, this move to renew the TPRs will be welcomed by affected EEA firms and funds, who now have certainty that the UK’s TPRs will come into effect once the Transition Period has ended. The FCA has stated that it is intending to update its webpage on the TPRs after Brexit and firms should look out for further information from the FCA and, where relevant, the PRA. Firms and funds that have not already notified under a TPR should look out for information as to if and when the relevant notification window will re-open.