FCA updates directions under its Temporary Transitional Power

Maria Nikolova

The directions are set to become effective on exit day if the UK leaves the EU without an implementation period.

The UK Financial Conduct Authority (FCA) announces that it has updated and published draft directions under its Temporary Transitional Power (TTP). The TTP, as FinanceFeeds has reported, offers the FCA flexibility when it comes to applying post-Brexit requirements, allowing firms to transition to a new UK regulatory framework.

The directions are set to become effective on exit day if the UK leaves the EU without an implementation period.

Pursuant to the directions, firms do not generally need to prepare now to meet the changes to their UK regulatory obligations related to Brexit. However, in some cases, firms must take reasonable steps to comply with post-exit obligations from exit day.

Firms that will have to make changes on exit day are:

  • firms subject to the MiFID II transaction reporting regime, and connected persons (for example approved reporting mechanisms);
  • firms subject to reporting obligations under European Market Infrastructure Regulations (EMIR);
  • EEA Issuers that have securities traded or admitted to trading on UK markets;
  • investment firms subject to the Bank Recovery and Resolution Directive (BRRD) and that have liabilities governed by the law of an EEA State;
  • EEA firms intending to use the market-making exemption under the Short Selling Regulation;
  • firms intending to use credit ratings issued or endorsed by FCA-registered credit ratings agencies after exit day;
  • UK originators, sponsors, or securitisation special purpose entities (SSPEs) of securitisations they wish to be considered simple, transparent, and standardised (STS) under the Securitisation.

The draft directions published today under the TTP update the directions made on March 28, 2019. Alongside this the FCA also updated its explanatory note providing guidance on the use of the TTP.

The main draft updates include:

  • The FCA has extended the proposed duration of the directions issued under the temporary transitional power from June 30, 2020 to December 31, 2020.
  • The FCA has updated the provisions relating to prudential requirements in our directions to reflect new HM Treasury legislation and FCA exit instruments published since March 29, 2019.
  • The new main FCA transitional direction revokes certain directions in relation to payment services, provided by EEA credit institutions in the financial services contracts regime, as these are no longer needed, because of legislative amendments made by the Government.
  • The regulator has applied the standstill direction to allow EEA Central Banks and the European Central Bank to continue to rely upon their status as exempt persons for the duration of the transitional relief.

Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority, commented:

‘The Temporary Transitional Power is intended to reduce the risk of disruption for firms in a no-deal scenario while ensuring consumers remain appropriately protected and markets continue to work well. It forms part of the extensive work the FCA has been doing to prepare for Brexit. It gives firms and other regulated persons time – to December 2020 – to phase in any regulatory changes they may need to make as a result of ‘onshored’ EU legislation.

‘However, as we said in February 2019, there are specific areas where we will not be granting transitional relief and, in these areas, we continue to expect firms and other regulated entities to take reasonable steps to comply with the changes to their regulatory obligations by exit day.’

The FCA does not expect to make significant changes to the draft directions in advance of exit day.

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