The FCA recently updated its webpage explaining the on-shoring of EU legislation at the end of the Brexit transition period on 31 December 2020, the point at which the FCA’s Temporary Transition Power (“TTP”) kicks in. The bottom line for firms is that there is a further 15-month transition period during which they can continue to comply with existing FCA rules – although there are some important exceptions (see below).
The end of the Brexit transition period and the TTP
Under the UK/EU Withdrawal Agreement, the Brexit transition period is scheduled to come to an end at 11pm on 31 December 2020 – this date is known by the authorities as Implementation Period Completion Day (“IPCD”). This is the moment when EU legislation and related arrangements cease to have force in the UK and are replaced by the large body of UK Statutory Instruments which, effectively, onshore these EU laws.
Alongside this general principle, the UK Treasury has granted the FCA powers under the TTP that allow them to introduce a further transitional period, until 31 March 2022. During this period, regulated firms have the option of complying with the existing FCA rules (i.e. pre-IPCD), or moving to the new FCA Handbook on or after 1 January 2021. In other words, firms must be in full compliance with the revised FCA Handbook by 31 March 2022.
The updated FCA Handbook
The FCA has now published the updated, post-Brexit version of the FCA Handbook. This version currently incorporates all the onshoring instruments up to and including 30 September 2020, and further exit-related instruments are expected between now and 31 December 2020 which in turn will be absorbed into the updated Handbook.
The FCA has also published a Guide to the FCA Handbook for Post-Brexit Transition to assist firms in understanding how the revised Handbook should be used.
How can I view this revised Handbook?
This can be viewed in the on-line version of the FCA Handbook by using the time-shift feature: in the left-hand column on the Table of Contents page, select “Show timeline” and then enter the date 1 January 2021 as directed.
What happens to past EU guidance?
The FCA has also published a note Brexit: our approach to EU non-legislative materials, which provides helpful clarification. This refers to the body of materials provided by the EU and the European Supervisory Authorities, including ESMA, including Q&As on EU legislation and other opinions and recommendations. The FCA confirms that it considers this so-called Level 3 guidance from EU authorities to remain relevant to its expectations of firms after IPCD, appropriately interpreted in the light of the UK’s exit from the EU.
What are the exceptions to the 15-month TTP?
On a further webpage, Key requirements of firms, the FCA lists the exceptions to the 15-month TTP. These are the areas where a delayed implementation would run counter to the FCA’s objectives and hence must be complied with from 1 January 2021. The key areas are:
- MiFID transaction reporting: The UK’s transaction reporting regime will change as a result of Brexit, including connected obligations such as the requirement to submit financial reference data. This includes trading venues reporting transactions on their venues by their EEA members, and EEA firms in the temporary permissions regime who operate through a UK branch to start transaction reporting to the FCA.
- EMIR reporting: UK firms and central counterparties entering into derivatives transactions in scope of EMIR will be required to report details to an FCA-registered Trade Repository (“TR”). In addition, UK TRs will be required to provide the relevant UK authorities with access to that data.
- SFTR reporting: All UK financial counterparties (including third country branches) entering into securities financing transactions in scope of the SFTR will be required to report these to a UK TR, who again in turn will have to provide details to the UK authorities. It should be noted that the UK Government has already announced that non-financial counterparties will not be subject to the SFTR reporting obligation.
The full list of exceptions can be viewed on the FCA’s webpage, as above.
Should I update my compliance framework now?
The 15-month TTP effectively relaxes the burden on firms who might otherwise be expecting to update all their compliance documents by 1 January 2021. We have already noted that further UK instruments are expected to be incorporated into the FCA Handbook before IPCD, and there may be further dependency on the outcome of the UK/EU trade negotiations. A further point is that most of the anticipated updates are consequential and/or nominal in nature – they will not fundamentally change the regulatory burden on firms or the required policies and controls.
ACA plans to work on updates to our precedent documents during the first quarter of 2021. We will be encouraging our clients to incorporate all Brexit related changes to their compliance frameworks during the remainder of 2021.
How We Help
Brexit solutions: Whether you are seeking long- or short- term solutions to access the UK markets, we can help. We help global firms find solutions to the challenges presented by Brexit, including:
- FCA Authorisation Project Management
- MiFID Passporting Solution
- EEA to Third Country Branch Solution
- TPR Notification Management
- Mirabella Tied-Agent Option
- Ongoing Compliance Support, including MIFID II reviews and SM&CR support and implementation.
Trade and transaction reporting solutions: Our range of trade and transaction reporting solutions helps your firm identify failings in the completeness, accuracy, and timeliness of your trade and transaction reports.
Complimentary regulatory reporting monitoring & assurance review: Take advantage of a complimentary one-time reporting trade and transaction reporting analysis to help identify the percentage of reports featuring an error.