The UK Financial Conduct Authority (FCA) has issued an announcement earlier today how it would use the temporary transitional power in an UK leaves the European Union without a withdrawal agreement scenario.
Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority said:
The temporary transitional power is an important part of our contingency planning. In the event that the UK leaves the EU without an agreement, it gives us the flexibility to allow firms and other regulated persons to phase in the regulatory changes that would need to be made as a result of ‘onshored’ EU legislation. This will give firms certainty, ensure continuity, and reduce the risk of disruption.
Nausicaa Delfas, FCA
There are some areas such as reporting rules under MiFID II, where it would not be appropriate to provide a phase-in, as receiving these reports is crucial to our ability to ensure market oversight and the integrity of financial markets. In these areas only, we expect firms and other regulated persons to begin preparing to comply with the changes now.
The FCA will have the ability to delay or phase in changes to regulatory requirements made under the EU (Withdrawal) Act 2018 (the legislation that has enabled the ‘onshoring’ of EU legislation and rules into the UK rulebook) for a maximum of 2 years from exit.
The Treasury set out a draft legislation that would make transitional provisions in case of a no-deal Brexit. This aims to minimise the disruption for firms and other regulated entities if this scenario happens in March.
The UK regulator plans to make use of the temporary transitional power to ensure that firms and other regulated persons can generally continue to comply with their regulatory obligations as they did before exit. If a non-consistent area occurs, firms should begin preparing to comply with the changed obligations now, if there is no implementation period.
The following firms or persons should begin to prepare to comply with changes now:
- 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 Regulation.
In June 2018, the FCA set out its approach to preparing for all Brexit scenarios, including if there is no withdrawal agreement and no implementation period.
Back in October, the FCA has published two consultation papers, setting out its proposals in the event the UK leaves the European Union on March 29, 2019 without an implementation period. It also set out its approach to the regulation of Credit Ratings Agencies, Trade Repositories and Data Reporting Services Providers.
The FCA has published its EU Withdrawal Impact Assessment two months ago.
More information on how firms should comply with post-exit rules before exit day coming up soon.