An update on our approach to international firms
We are contacting you to inform you about, and encourage you to engage with, a Consultation Paper (CP). This is an important consultation and will be relevant to EEA-based firms that have notified for the UK’s temporary permissions regime (TPR). We would welcome your feedback on the CP.
The CP sets out how we propose to assess applications for the authorisation of branches of international firms, which following the end of the transition period will include firms from both EEA and non-EEA jurisdictions. Once finalised, this will supplement our existing Approach to Authorisation and Approach to Supervision documents.
This newsletter also includes information about:
- being regulated by us once your firm is in the TPR and which of our rules will apply to your firm while it is in the TPR
- applying for full authorisation in the UK (whether this is via a branch or a UK-incorporated subsidiary) and the associated application fees
- what do to if your firm has changed its plans and you want to withdraw your firm’s TPR notification before 31 December 2020
- the UK’s financial services contract regime
Our approach to international firms
We recognise that international firms have been and will continue to be a key contributor to the success of the UK financial services market. Our operational objectives mean that we need to secure an appropriate degree of protection for UK consumers and protect and enhance the integrity of the UK’s financial system while promoting effective competition in the interests of consumers.
In order to effectively supervise a firm’s UK activities, international firms that require authorisation to undertake regulated business in the UK will be expected to have a physical place of business in the UK, whether this is via a branch or subsidiary.
International firms operating in the UK through branches present some unique challenges and we need to consider whether the nature and scale of those activities would present additional risks of harm to UK consumers and the UK’s financial system, and whether these risks can be adequately mitigated.
The CP sets out our general expectations and we would welcome your comments on it so that we can consider your views on our proposed approach.
The consultation is open until 27 November 2020 and you can give us your feedback by email on cp20-20@fca.org.uk or use the online response form.
Being regulated by the FCA
The TPR will now commence after the transition period which is due to end on 31 December 2020. It will allow your firm to continue to operate in the UK for a limited period after the end of the transition period within the scope of its passport into the UK, while you apply for full authorisation in the UK, if this is required.
Once your firm enters the TPR, it will be regulated by us for its UK business and it will, at all times, need to meet our Threshold Conditions, adhere to our Principles for Businesses and follow the relevant rules and guidance in our Handbook. In our Principles for Businesses, please pay attention to Principle 11 which requires firms to deal with the regulator in an open and cooperative manner. It is important to let us know anything relating to the firm of which we would reasonably expect notice, for example, plans to grow the business.
We have set out the main rules which will apply to firms in the TPR here and our approach to supervision is here.
In particular, and because this may require your firm to change its systems, we would draw your attention to the status disclosure wording that you will need to include in letters (or electronic equivalents) to indicate that your firm is in the TPR. Full details of the wording can be found in GEN 4 Annex 1B Statutory status disclosure (TP firms) in here. Please note that the wording you will need to use depends on whether your firm has a branch in the UK or not.
Firms in the TPR will also be required to pay annual fees and the levies that we collect on behalf of other bodies in the UK. Further details are included in our Policy Statement PS19/5.
You can find out more about the purpose of, and our approach to supervising firms and individuals here.
Applying for authorisation
Once your firm is in TPR, we will allocate it a period (or landing slot) during which it can apply for full authorisation in the UK, if this is required.
You should also take into account the UK’s Senior Managers and Certification Regime (SM&CR) which covers people working in financial services and aims to reduce harm to consumers and strengthen market integrity by making individuals accountable for their conduct and competence.
When you submit your application for full authorisation, we will expect you to be ready, willing and organised.
In addition to the annual fees mentioned above, your firm will also need to pay a fee when you submit your application for authorisation. This ranges from £1,500 to £25,000 depending on the complexity of your application. There is more information on authorisation application fees here.
You can find our Approach to Authorisation here and there is more information about applying for full authorisation in the UK here.
Withdrawing a TPR notification
If your firm has changed its plans and no longer wants to use the TPR, you can withdraw your notification at any time before the end of the transition period. If you do this your firm will not enter the TPR but may instead enter the UK’s financial services contracts regime (FSCR) under which it can wind-down its UK business. Please see below for more information on the FCSR.
To withdraw your notification, you must let us know by email before 31 December 2020.
If your firm cancels its passport to the UK (via your local regulator) before the end of the transition period or your firm’s home state authorisation is cancelled before the end of the transition period, your firm will not enter the TPR or the FSCR.
Financial services contracts regime (FSCR)
If your firm has changed its plans and no longer intends to carry on its UK business nor undertake new business, your firm will need to wind down and enter the FSCR.
The FSCR will automatically apply to firms that are passporting into the UK at the end of the transition period (and have existing UK contracts to service which require a UK permission) but that do not enter the TPR and will allow these firms to wind-down their UK business in an orderly fashion.
Please note that the FSCR does not cover new business and therefore if you wish to undertake new business (which requires a UK permission) after the transition period, you should not withdraw your TPR notification.
Updating details of UK tied agents
If your firm provides MiFID services in the UK through tied agents, your firm will have included a list of those tied agents as part of its TPR notification. You should consider if this list of tied agents needs to be updated. If it does please email an updated tied agents annex to TPQueries@fca.org.uk including your firm’s name and FRN.
If you have any queries, you can contact us via firm.queries@fca.org.uk or contact our Brexit Helpline 0800 048 4255 (from the UK) or +44 207 066 1000 (from outside the UK).
You can also stay up to date with the latest regulatory developments via our monthly Regulation Round-up newsletter.
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