On 1 February 2019, the FCA published a new web page, Brexit – what we expect firms and other regulated persons to do now.

HM Treasury has published draft legislation which gives the UK financial regulators the power to make transitional provisions connected to changes to financial services legislation. In a hard Brexit scenario, the UK financial regulators intend to use this power broadly.

However, there are some areas where the UK financial regulators believe that using the transitional powers would not be consistent with their statutory objectives. In these areas only, the UK financial regulators expect firms and other regulated persons to begin preparing to comply with changed obligations now.  The FCA states that the following should refer to the Annex for more information:

  • firms subject to the MiFID II transaction reporting regime, and connected persons (for example approved reporting mechanisms);
  • firms subject to reporting obligations under EMIR;
  • EEA Issuers that have securities traded or admitted to trading on UK markets;
  • investment firms subject to the 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; and
  • 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.

The FCA states that in the areas mentioned in the Annex it expects firms to undertake reasonable steps to comply with the changes to their regulatory obligations by exit day. According to the FCA this means that it will not take a strict liability approach and will not take enforcement action against firms for not meeting all the requirements straight away, where there is evidence they have taken reasonable steps to prepare to meet the new obligations by exit day.

To accompany the new web page, the FCA has also published:

  • a new web page on FCA FIRDS and transaction reporting. This provides a high level overview of what firms need to do now to comply with the onshored MiFID II regime as it applies to transaction reporting. It also gives more detail about the FCA’s internal project timetables and the industry testing schedule; and
  • a new web page on requirements for UK trade repositories and reporting counterparties. Among other things the FCA notes that the European Securities and Markets Authority (ESMA) has published a statement clarifying certain areas relating to derivatives reported under EMIR in a no deal Brexit scenario. The FCA states that it is considering ESMA’s statement to determine whether it needs to provide additional clarification for UK reporting counterparties and UK trade repositories who will become subject to FCA supervision after exit day.