EU firms will be able to continue passporting into the UK if the Brexit transition period is canned, according to the UK’s Financial Conduct Authority (FCA) which spelled out its backup plan on 25 July.
In December 2017, the UK government announced that it intended to introduce a “temporary permissions regime” for inbound passporting European Economic Area (EEA) firms and funds.
However, in March 2018, the UK and European Union reached an agreement on the terms of an implementation (or transitional) period following the UK’s withdrawal from the EU.
This implementation period is intended to operate from 29 March 2019 until the end of December 2020. During this time, EU law would remain applicable in the UK, in accordance with the overall withdrawal agreement.
Despite this agreement now being in place, the FCA has pushed ahead with its temporary permissions regime, treating it as a “backstop” in case the implementation regime “abruptly falls away”.
“We are continuing to prepare for a range of scenarios, including a scenario where the UK leaves the EU without a deal and without entering an implementation period,” the FCA said in a statement.
Temporary passporting regime
The authority said the temporary permissions regime will allow inbound firms to continue to operate in the UK within the scope of their current permissions for a limited period after exit day.
It will also allow funds with a passport to continue marketing in the UK while seeking UK recognition.
HM Treasury has also published draft legislation for the temporary permissions regime, which it will consult on in autumn 2018.
The legislation proposes that the regime will be in place for a maximum of three years, with firms and funds required to obtain authorisation and recognition in the UK during this time.
Notification process
If the implementation period does fall through, and firms and funds want to use the regime, then they will have to notify the FCA.
The authority said this would be an online process which it expects to open in early January 2019 and close prior to exit day.
Once the notification period is closed, firms that have not submitted a notification will not be able to use the temporary permissions regime.
“We will allocate firms a period (a ‘landing slot’) within which they will need to submit their application for UK authorisation.
“After exit day, we will confirm firms’ landing slots so they can start to prepare their applications. We expect the first landing slot will be October to December 2019 and the last to be January to March 2021,” the FCA statement says.
Gibraltar exemption
Gibraltar-based firms that passport into the UK will not need to use the temporary permissions regime and will be able to continue to operate as they do now post-Brexit until 2020.
“The UK government will work closely with the Government of Gibraltar to design a replacement framework for after 2020,” the FCA said.
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