1 00118601 Emerging themes 2019 A4 AW v31 combined - Page 73



EMERGING THEMES 2019
Currently, under the EU passporting regime, financial
services firms in any EEA Member State that are subject
to certain EU directives (such as MIFID II, UCITS and
AIFMD) have access to the single market for financial
services. This means that they can either set up
branches, or provide financial services within the remit
of the passporting provisions of the relevant directives
without requiring further authorisation.
Following the UK’s planned exit from the EU on 29 March
2019, provided that the terms of the Withdrawal and
Transition Agreement can be agreed, EU law and
consumer rights and protections will continue to apply
in the UK during the implementation period set to start
on 29 March and end on 31 December 2020. During this
time, UK firms and investment funds will continue to
have the benefit of the EU passporting arrangements.
However, following the delay of the Commons vote
in early December last year, the possibility that the
Withdrawal and Transition Agreement will not be agreed
in time is becoming more real and a number of draft
statutory instruments (SIs) were published early last
October under the powers in the EU Withdrawal Act
2018. Subject to changes, they are due to take effect
on 29 March if the UK and EU are unable to conclude
a Withdrawal and Transition Agreement.
The SIs do not make any policy changes and are
designed to enable inbound firms and investment funds
to continue their activities in the UK for a limited period
of time after Brexit by creating a temporary permissions
regime (TPR) in order to minimise the risk associated with
an abrupt loss of the passporting rights.
The TPR will have the effect of temporarily authorising
the incoming firm or investment fund to undertake the
regulated activities (usually covered by its passport) in
the UK as if it were authorised in the UK. It is intended
that the TPR will last for a maximum of three years,
however the period will vary from firm to firm depending
on when they are asked to submit their application for
full authorisation in the UK (and therefore leave the TPR).
MATTHEW BAKER
Partner, London
We envisage that the TPR will operate in much the same
way as the temporary regime that was implemented
when the FCA took over regulation of consumer credit
from the Office of Fair Trading (OFT). For example, once
in the TPR, the firm or investment fund will be given a
three month “landing slot” within which to submit an
application for authorisation.
One point to note is that in order to benefit from the TPR,
EEA firms and investment funds will need to notify the
FCA (or the Prudential Regulatory Authority (PRA), in
respect of dual authorised firms) of their intention to use
the TPR. This will be an online process and it is expected
that the notification window will open in this month.
Once the notification window closes, firms and
investment funds that have not notified the UK regulator
of their intention to use the TPR will not be able to do so.
The FCA has consulted on the proposed TPR, however
the consultation period was only eight weeks long to
ensure that there was sufficient time to incorporate
comments from the financial services industry. The
consultation period closed on 7 December and
feedback is expected early this year, with final versions
of the SIs to be published shortly before 29 March.
Whilst measures are being put in place by the UK
in relation to EEA firms and investment funds looking
to market in the UK, what is not clear is whether our
conciliatory approach will be reciprocated by the EU.
To date no measures for how UK firms and investment
funds will be able to provide financial services in the EU
have been announced and it remains to be seen how
favourable any proposed measures (if any) will be.
In summary
For those EEA firms and investment funds that are
currently relying on the passporting regime to provide
services or to market to investors in the UK, we would
recommend that you put your notification in to use the
TPR as soon as possible. For UK firms and investment
funds, in the absence of any further guidance from the
EU, you should continue to work on your contingency
plans whilst we wait to see what the future holds.
NILEENA
PREMCHAND
Senior Associate,
London
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