The British financial regulator, the Financial Conduct Authority (FCA), has outlined a new approach to European firms temporarily operating in the UK. In essence, European firms wishing to remain in the temporary permissions regime need to meet the FCA’s standards to continue operating in the UK, as The Financial Times reports.
The FCA regulates the financial services industry in the UK. This role includes protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers, according to the UK government.
The FCA has cancelled the temporary permissions of four firms, who, “despite multiple opportunities, did not respond to mandatory information requests.” This approach will send warning signs through the non-UK business establishment operating from London and other business centres.
Other reasons that could preclude firms include missing their landing slot; firms that do not intend to apply for full authorisation; and with firms whose authorisation application is refused.
Looking into the new arrangement for Digital Journal is Neil Robson, partner at Katten Muchin Rosenman UK LLP.
According to Robson the new framework presented by the FCA should be seen in terms of an alarm sounding: “The FCA’s clarification can be seen more as a warning to other EU firms that are not taking their UK regulatory responsibilities seriously.”
More specifically, says Robson: “‘Passporting’ (the right to provide cross-border financial services within the EU) ended at the end of the Brexit transition period – both for UK firms that had previously passported into the EU, and also for EU firms that had passported into the UK. The severing of passporting is a two-way street from the EU to the UK and vice versa.
The FCA created the temporary permissions regime to allow a further year’s ‘grace’ so that EU firms could get their house in order and commence their UK office setup, with a ‘landing slot’ for such firms being called in by the FCA to explain how they’d go about getting the UK office regulated in the UK.”
Distilling the new advice, Robson notes: “The FCA’s message here is plain that the FCA has rejected four EU firms, who, despite multiple opportunities, didn’t even engage with the FCA – so they will never be able to offer financial services to UK clients again in all likelihood. The FCA wants other EU firms to take their responsibilities seriously – suggesting that it has been struggling with some other firms who haven’t been open and cooperative with the FCA.”
