Passport to Pimlico or an Ealing Comedy?
EEA Firms that provide regulated financial services in the UK through the EU’s Freedom of Establishment or Freedom of Services passporting systems will soon lose the right to do so as a result of Brexit.
The UK’s transition period for leaving the European Union will end on 31 December 2020 at which point the passporting regime ends. If you are an EEA firm currently providing services into the UK based on the passporting regime and wish to continue to provide such services, the FCA’s Temporary Permissions Regime will enable you to continue to service clients in the UK for a limited time (up to a maximum of three years).
The notification to the FCA must be made using their online portal “Connect” and the FCA has published guidance for firms to follow in making the application. In order to notify the FCA, the firm must sign up for an account with FCA’s Connect portal and ensure that the information held on the Financial Services Register for the firm is correct. If any such information is incorrect or out-of-date, the firm will need to contact the national competent authority in their home Member State to notify the FCA of any required amendments.
The deadline for notifying the FCA is 11pm (UK time) on 30 December 2020. If affected EEA firms do not apply by the deadline, they will be unable to use the Temporary Permissions Regime and may have to cease their activities in the UK.
The expectation is that firms using the grace period afforded by the Temporary Permissions Regime will use that time to apply for direct authorisation by the UK regulators. This will generally involve the establishment and capitalisation of a UK subsidiary, the staffing of that subsidiary by UK-based employees and compliance with other UK financial market legislation. Firms currently operating on the basis of a services passport will therefore need to consider significant changes in their corporate structure, strategy and cost base.