On 27 June 2018 the FCA issued a statement (the “Statement”) about its role in preparing for Brexit. The Statement is in response to the announcement from HM Treasury on its approach to amending financial services legislation under the European Union (Withdrawal) Act (the “Act”), which can be found here. The Statement provides stakeholders with an update on how the FCA are preparing for Brexit.
For further background on the potential impact of Brexit and the potential outcomes on the financial services industry, please see our newsletter published earlier in the year, available here.
SUMMARY
The Statement sets out the steps the FCA will be taking, which includes the following:
- amending and maintaining EU binding technical standards (detailed EU rules) whereby these rules sit underneath EU regulations and directives and provide technical detail of how those requirements must be met;
- amending their Handbook to ensure it is consistent with changes the Government is making to EU law and that it functions effectively when the UK leaves the EU. In the run up to March 2019, the FCA will limit non-Brexit related Handbook changes to those identified as ‘core priorities’ in the FCA Business Plan as well as other essential items;
- planning to consult on the above changes in Autumn 2018, subject to the Treasury’s timelines for Statutory Instruments (“Sis”); and
- planning to consult on the rules which will apply to firms in the temporary permissions regime.
THE FCA’S APPROACH TO THE LEGAL CHANGES
The Statement says that the FCA will take the same general approach as HM Treasury, i.e. that new specific arrangements will not be relied upon between the UK and EU after Brexit and, as a general rule, EU member states will be treated as third countries (non-EU countries), although there will be times when deviations from this will need to be made. In taking the same approach, the FCA will ensure that the requirements they are responsible for are consistent with the wider legislative framework.
In addition to the Brexit related Handbook updates and those required pursuant to the FCA Business Plan, the FCA will continue to progress important initiatives, such as the High-Cost Credit Review, the implementation of the Senior Managers and Certification Regime and next steps from their Asset Management Market Study. Rulemaking outside of the aforementioned remit, such as the FCA’s work on illiquid assets or the remit of Independent Governance Committees, may be delayed as a result of Brexit.
NEW REGUALTORY RESPONSIBILITIES
In addition to the consultation in relation to the temporary permission regime, the FCA will provide separate details in due course for those EU entities that currently access or do business in the UK through means other than an EU passport.
The Treasury has announced that it will bring forward measures that will allow for some flexibility in applying new requirements under the Act and the FCA have stated that they will also be prepared to introduce transitional measures. This means that the FCA does not expect firms and other regulated entities providing services within the UK’s regulatory remit to have to prepare now to implement these new requirements. Firms and other regulated entities should look to the FCA’s upcoming consultations and respond accordingly.
To view the FCA’s Statement please click here.
To review the approach the Bank of England is taking in regards to Brexit please click here and to review our article on the Bank of England’s approach please click here.
For more information, and any guidance or advice on the impact of Brexit on your firm, Cleveland & Co External in-house counsel, your specialist outsourced legal team,are here to help.
