Out-Law News | 25 Sep 2020 | 3:29 pm | 2 min. read
In its consultation, which closes on 27 November, the regulator is seeking views on the suitability of its current approach. The consultation is relevant to European Economic Area (EEA) firms intending to seek post-Brexit authorisation in the UK, as well as those from outside the EEA which are already authorised, or intend to seek authorisation in the future.
Financial regulation expert Elizabeth Budd of Pinsent Masons, the law firm behind Out-Law, said: "This consultation is slightly unusual in that the FCA isn't actively proposing any rule changes. Rather, it is seeking views on if the current approach is appropriate and whether there are any improvements that can be made".
The consultation comes at an opportune time as we anticipate the reopening of the Temporary Permissions Regime window on 30 September.
"The consultation is, however, very helpful to remind overseas firms of what the FCA looks for when considering whether to approve an applicant and comes at an opportune time as we anticipate the reopening of the Temporary Permissions Regime window on 30 September. Of particular interest is the FCA's approach on the influence of overseas offices on the UK business. It is in this area where we might expect to see tensions between different regulators' approaches to compliance," she said.
The FCA applies the same minimum standards to international firms seeking UK authorisation as it does to UK firms. An international firm must be able to demonstrate that it is ready, willing and organised to meet those standards before seeking authorisation, and that it will continue to do so once authorised.
International firms are required to have an active place of business in the UK to allow the FCA to effectively supervise the firm's UK activities. In the FCA's view, international firms serving UK customers through a UK branch may create different risks of harm when compared to UK firms, given the relationship between the branch and the overseas headquarters. It is keen to understand how these risks can be mitigated, including the circumstances in which an international firm should seek authorisation as a UK-incorporated firm.
A temporary permissions regime (TPR) will operate in the UK for a limited time once the Brexit transition period ends at the end of this year. The TPR will allow EEA financial services firms to continue their activities while they seek authorisation as an international firm. Those that do not enter the TPR will have a limited period of time to service their existing contracts as part of an orderly exit from the UK market.
Over 1,500 firms and over 600 funds are currently registered for the TPR, according to the FCA. Applications re-open at the end of September.
Elizabeth Budd said: "Even with the TPR, the FCA is facing a potential tsunami of applications over the next few years from overseas businesses. Understanding the regulator's concerns and approach in advance can only help to smooth the application process, which by its very nature is detailed and nuanced".
Dublin-based investment funds expert Gayle Bowen of Pinsent Masons said: "This consultation will hopefully provide clarity to Irish and European firms on how they can continue to operate within the UK, and is welcome amid the current doubt and uncertainty of what will happen post-Brexit within the investment funds and asset management sector".
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