The Financial Times reports that 1,300 incoming EU firms and funds are willing to sign up to the FCA’s proposed temporary permissions regime (TPR). This contrasts with the nearly 8,000 EU entities which currently have passports to do business in the UK.
This follows the publication of an FCA consultation paper (CP) on the proposed temporary permissions regime for inbound firms and funds (CP18/29). In summary, the FCA have proposed that, in the event of a no-deal Brexit, where an EEA firm or an EEA investment fund exercises a passport or treaty right which covers certain regulated activities, that firm or fund would be able to apply for a temporary permission to undertake all those regulated activities for a maximum of three years from exit day. The application window would open in early 2019 and close before exit day.
Each firm or fund within the TPR would then be assigned a three-month "landing slot" in which to apply for authorisation or submit an application / notification for recognition. The first landing slot is expected to be from October to December 2019. The FCA would apply a tailored set of rules to the firms and funds within the TPR.
The FCA’s stated aim is to “preserve the status quo as far as possible”. The FCA has invited stakeholder feedback on Chapter 4 of CP18/29 (“Applying our rules to the temporary permissions regime”) and Chapter 7 (“Funding the temporary permissions regime”) by 7 December 2018.
This is a welcome step by the FCA, providing clarity on the regulatory regime in the event of a no-deal Brexit. What is unclear is why fewer than 20% of the 8,000 EU entities which hold a passport are currently willing to enter the TPR. Whilst many EU entities may have multiple passports, the FCA does not know what impact this may have on the number of EU firms and funds which apply for temporary permission. In any event, EEA firms and funds which passport into the UK and wish to enter the TPR need to prepare now to notify the FCA.
Conversely, the EU has not offered a similar system of temporary permits for the 5,500 UK firms which currently use passports to do business in the EU. These UK firms and fund managers must continue to prepare for a hard Brexit in March 2019.
The regulator also revealed that 1,300 EU firms that have activities in Britain would be willing to sign up to its proposal that they have time-limited permits lasting three years. This figure represents fewer than 20 per cent of the 8,000 EU entities that hold authorisations from the bloc, called passports, to do business in the UK.