On 1 October 2020, the FCA published an updated version of the FCA Handbook to show the rules and guidance that will apply at the end of the transition period.

Nausicaa Delfas, Executive Director of International at the FCA, said:

‘We are approaching the end of the transition period, so firms should be completing their final preparations. To help firms to prepare and provide clarity, we have published a version of our Handbook that will apply from the end of this year, which includes the changes made through the onshoring process.”

To assist firms the FCA has also published a Guide to the FCA Handbook for Post-Brexit Transition. The guide is intended to help readers navigate the FCA Handbook website after the end of the transition period. The FCA has made a large number of EU exit-related instruments to amend the Handbook in preparation for the end of the transition period. HM Treasury has also made a significant number of statutory instruments which amend UK legislation and EU law which will be incorporated into UK law under the European Union (Withdrawal) Act 2018 (known as onshoring). The instruments made by the FCA can be found in pdf form on the FCA’s Handbook website, and have been consolidated into the Handbook and technical standards which are viewable on that website. The EU exit-related instruments amending the Handbook generally come into force at the end of the transition period. Section B of the guide explains how to navigate the FCA Handbook, and sections C to E explain how to locate and read other legislative and regulatory materials which are not formally part of the FCA Handbook but which the FCA supervises and enforces. Sections C to E need to be read in light of the temporary transitional power.

The FCA has also published a new web page on the temporary transitional power (TTP). The FCA intends to apply the TTP on a broad basis from the end of the transition period until 31 March 2022. This means firms do not generally need to prepare now to meet the changes to their UK regulatory obligations brought about by onshoring, although there are some areas where the TTP will not apply.

Where the TTP applies:

  • Firms can continue to comply with their existing requirements for a limited period.
  • The FCA expects firms to use the duration of the TTP period to prepare for full compliance with the onshored UK regime by 31 March 2022

The FCA lists the areas where it will not make transitional provision, and where it expects firms to start preparing now to comply with these obligations immediately after the transition period. In the key areas, listed below, the FCA expects firms to be preparing to comply with changed obligations ready for 31 December 2020:

  • MIFID II transaction reporting requirements
  • EMIR reporting obligations
  • SFTR reporting obligations
  • Certain requirements under MAR
  • Issuer rules
  • Contractual recognition of bail-in
  • Client Assets Specialist Sourcebook rules (CASS)
  • Market-making exemption under the Short Selling Regulation
  • Use of credit ratings for regulatory purposes
  • Securitisation
  • Electronic commerce EEA firms
  • Mortgage lending after the transition period against land in the EEA
  • Payment Services – strong customer authentication and secure communication

Each of the above are further explained in the new ‘key requirements of firms’ webpage.

Nausicaa Delfas, Executive Director of International at the FCA, said:

“We have also set out further details on the TTP. The power will in most cases give firms more time to adapt to their new obligations. There are some areas where it would not be appropriate for us to apply the TTP, including where doing so could run counter to our objectives: in those key areas, we continue to expect firms and other regulated entities to prepare now to comply with the changes to their regulatory obligations by 31 December 2020.”

The FCA expects firms to use the duration of the TTP to prepare for full compliance with changes to UK regulatory obligations by 31 March 2022.

The FCA has also published a new webpage regarding transitional provisions and regimes. On the new web page the FCA lists the transitional provisions and regimes which include the temporary permission regime, the financial services contracts regime and the temporary marketing permission regime for UCITS and alternative investment funds. Among other things, the FCA states on this webpage that the TTP does not apply to the transitional provisions and regimes. Also, the FCA reminds firms that where an area already contains a transitional provision or regime, it generally does not propose to apply the TTP beyond that transitional provision or regime. For example, in relation to the transitional provision for EEA prospectuses approved before the end of the transition period, the TTP will not affect a person’s duty to comply with the new onshored requirements for EEA prospectuses which have not been approved by the end of the transition period.

A further new webpage that the FCA has published concerns transitional directions. The FCA explains that to understand the legal framework of the TTP, firms need to read: the main transitional directions, annexes A and B, the explanatory note and the FCA prudential transitional direction (links to each are on the new web page). The FCA states that it proposes to make the final TTP directions towards the end of the transition period, and expects to publish them in December. The FCA also reminds firms that:

  • Annex A to the main FCA transitional direction sets out how the TTP applies and where it does not apply to legislation, including binding technical standards.
  • Annex B (FCA rules) to the main FCA transitional directions sets out how the TTP applies and where it does not apply to FCA rules. The TTP does not apply to rules that apply only to temporary permission firms (including Part 6 financial services contracts firms) and temporary marketing permission managers etc. However, the rules themselves include provision to ensure that the transition is smooth.

The TTP does not apply to various FCA rules, including: FEES rules and levies rules applying to the temporary permission regime and various rules in: PRIN, GEN, MIPRU, IPRI(INV), COBS, ICOBS, MCOB, BCOBS, CASS, MAR, SUP, COMP, COLL, CONC, FUND, LR, PRR, DTR rules referring to UCITS management companies specified in Annex B.