The FCA recently confirmed that it will re-open the so-called Brexit Temporary Permissions Regime (“TPR”) on 30 September 2020. This presents many European asset management firms considering their options to maintain access to the UK market with a useful short-term solution.
The UK formally left the EU on 31 January 2020. Since then the relationship between the two jurisdictions has been governed by the Withdrawal Agreement which established a transitional arrangement which is now certain to end on 31 December 2020. At that moment, EU laws will cease to apply in the UK, and existing passporting rights will come to an end.
From 1 January 2021, therefore, firms based within the EEA will need to change their authorisation arrangements to continue operating within the UK.
What is the TPR?
To help firms through this transition period, the UK created TPR (originally in early 2019), to enable EEA firms to continue operating in the UK in line with their current permissions for a limited period while they apply for full UK authorisation. The TPR also allows investment funds with a passport to continue marketing in the UK during this phase. Many firms will already have made notifications to the TPR, although the window for doing so has been closed since January.
Firms who have already submitted a notification to TPR need take no further action at this stage.
As stated above, the FCA has announced that the TPR window will re-open on 30 September and will be available until the end of the transition period. It has also promised to provide further details at that point.
I think I understand about TPR for firms. What about funds?
The TPR is available for the following EEA-domiciled fund vehicles:
- UCITS schemes; and
- Alternative Investment Funds (“AIF”), including European Venture Capital Funds (“EUVECA”), European Social Entrepreneurship Funds (“EUSEF”), European Long-term Investment Funds (“ELTIF”) and AIFs authorised as Money Market Funds (“MMF”).
The TPR for investment funds is only relevant in the context of marketing to UK-based investors – in other words, replacing the current (inbound) EU passport.
For the avoidance of doubt, the domicile of the investment manager is irrelevant (apart from, of course, UK managers who do not need a passport to operate in their own jurisdiction). Therefore, this is potentially applicable to both EU and non-EU managers alike.
However, it does not apply to non-EEA AIFs – they will continue to use the UK’s Private Placement Regime.
How long will TPR remain in effect?
The FCA originally stated an expectation that the TPR regime would be in place for a maximum of three years – EEA firms that need authorisation will have to have received it by the end of the TPR regime. However, this time horizon has only ever been indicative – firms and funds should plan on the basis that the FCA may contact them sooner (than the end of that three year period) to initiate full FCA authorisation, in the case of firms, and registration/recognition for funds under the relevant UK regime.
Therefore – and importantly ─ TPR is only a short-term solution. Firms/funds should already be thinking about this as a stepping-stone to full authorisation/registration.
I’ve heard about a similar regime for financial services contracts – does that help at all?
In some cases, yes – the UK has established the Financial Services Contracts Regime (“FSCR”) which allows EEA passporting firms that do not enter the TPR to wind down their UK business in an orderly fashion after the end of the transition period. It will automatically apply to EEA firms who do not make a TPR notification and applies only to pre-existing contracts in the UK which would otherwise need FCA authorisation to service.
In short, FSCR is a convenience for EEA firms exiting the UK, not a step to an on-going presence.
We expect a significant number of EEA firms to apply for FCA authorisation with a view to establishing permanent London-based operations after the end of the transition period. It is important for EEA firms to plan ahead and get the FCA application process in motion as part of their overall strategic approach to the UK asset management market post-Brexit.
How we help
Contact us at +44 (0)20 7042 0500 to learn more about we help global firms find solutions to the challenges presented by Brexit. Whether you are seeking long- or short- term solutions to access the UK markets, we can help. View our Brexit solutions here.
Our services include:
- TPR Notification Management: We help EEA based firms submit their TPR notification to the UK FCA for a short-term solution, as well as supporting them in their understanding what it means to operate in the UK under the TPR.
- FCA Authorisation Project Management: Whether you are an EEA or Non-EEA based firms, we can help you continue to access the UK markets on a long-term basis through FCA authorisation. Our experienced authorisations team can support you, whether you are submitting a full FCA license or a third-country branch application. We will draft the FCA application package, prepare for meetings with the regulator where required, and respond to FCA due diligence requests.
- MiFID Passporting Solution: We help non-European Economic Area (EEA) firms to interact with their EEA clients using our Mirabella tied agent MiFID passporting solution.
- EEA to Third Country Branch Solution: ACA can assist with the steps necessary to convert the status of an entity’s branch from an EEA to a Third Country Branch. This includes, the required FCA application, compliance documentation, systems and controls gap analysis and ongoing support.
- Ongoing compliance support: ACA can support firms with a range of solutions to assist with the ongoing compliance obligations arising from rules announced by the UK FCA – be they for fully authorised firms or third country branches. These include:
- MiFID II reviews
- SM&CR: project support and implementation