FCA outlines proposals for post-Brexit financial services contracts regime

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FCA outlines proposals for post-Brexit financial services contracts regime

10th January 2019 banking industry Fintech News 0

The financial services contracts regime aims to ensure that firms can still fulfill their contractual obligations in the UK for a limited period of time, even if they are outside the temporary permissions regime.

The UK Financial Conduct Authority (FCA) has earlier today published further proposals to prepare its regulations for various outcomes of Brexit. The regulator now proposes to introduce the financial services contracts regime (FSCR).

Let’s recall that, the FCA consulted on Handbook rules in relation to the temporary permissions regime (TPR) for inbound EEA firms and other relevant regulations. The TPR will enable EEA firms to continue their activities in the UK for a limited period after Brexit.

To further reduce the risk of harm associated with an abrupt loss of permission on exit day, the FSCR Regulations are outlined. This proposal aims to ensure that firms can still fulfil their existing contractual obligations in the UK for a limited period of time, even if they are outside the TPR following the UK’s withdrawal from the EU.

The new financial services contracts regime (the FSCR) is available for firms with pre-existing contracts in the UK that would require a permission to service, which:

  • do not submit a notification to enter into the TPR, or
  • are unsuccessful in securing, or do not apply for, full UK authorisation through the TPR route.

The FSCR will apply automatically to these firms. It will allow them to continue to service UK contracts entered into before exit day or before exiting the TPR for a limited period, provided that they meet the conditions of the FSCR.

The FSCR will be time-limited depending on the type of regulated activity being performed. It will apply for a maximum of 5 years for all contracts except for insurance contracts and for a maximum of 15 years for those contracts. The Treasury can extend these periods, if necessary, based on a joint assessment by the FCA and the PRA.

The FSCR will be available to firms which the FCA and the Prudential Regulation Authority (PRA) at the Bank of England are both responsible for regulating (dual-regulated firms), and to firms which the FCA is solely responsible for regulating (solo-regulated firms). Dual regulated firms should also have regard to information published by the PRA in relation to the FSCR.

There are two mechanisms within the FSCR – supervised run-off and contractual run-off.

Certain entities will automatically enter into supervised run-off (SRO):

  • An EEA or a Treaty firm which qualifies for authorisation before exit day to carry out a regulated activity in the UK in line with FSMA Schedule 3 or 4 either (1) on a freedom of establishment basis (an EEA branch firm) or (2) which has a top-up permission, in either case which did not notify the FCA before 28 March 2019 of its intention to enter into the TPR but which has pre-existing contracts in the UK which would require a permission to service.
  • An EEA branch firm, or an EEA or a Treaty firm which qualifies for authorisation before exit day to carry out a regulated activity in the UK in line with FSMA Schedule 3 or 4 on a freedom to provide services basis (an EEA services firm), which is unsuccessful in obtaining full UK authorisation through the TPR route but which has pre-existing contracts in the UK which would require a permission to service.
  • An EEA authorised e-money institution (EMI) which was providing services through a branch or UK agent immediately before exit day in exercise of passport rights, did not notify the FCA of the intention to enter into the TPR and requires permission to service pre-existing contracts or to redeem outstanding e-money.
  • An EMI which was providing payment and e-money services in accordance with permission under the TPR and, at the end of the TPR period, is not an authorised e-money institution, and who requires permission to service pre-existing contracts or to redeem outstanding e-money.
  • An EEA authorised payment institution (PI) or EEA Registered Account Information Service Provider (RAISP) which was providing payment services in the exercise of passport rights immediately before exit day, is not a UK registered RAISP on exit day, did not notify the FCA of the intention to enter the TPR and requires permission to service outstanding contractual obligations.
  • A PI or RAISP which was providing payment services in the UK in accordance with permission under the TPR and is not a UK Registered RAISP on exit from the TPR. If such firms require permission to service outstanding contractual obligations on exit from the TPR, they will automatically enter into SRO.

Contractual run-off

An EEA firm will automatically enter contractual run-off (CRO) if it is an EEA services firm (including a PI, RAISP or EMI which provides services on a cross-border basis) which does not notify the FCA before 28 March 2019 of its intention to enter into the TPR, but which has pre-existing contracts in the UK which would require a permission to service. The firm will automatically enter into CRO on exit day if there is no implementation period.

All credits to source belowby

Maria Nikolova

http://snip.ly/4f2i9g#https://financefeeds.com/fca-outlines-proposals-post-brexit-financial-services-contracts-regime/

 

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