FCA's Temporary Permission Regime now open

Whilst Her Majesty's Government continues to grapple with the Prime Minister's Withdrawal Agreement, businesses across Europe have been asked to begin preparing for the possibility of a 'no deal' Brexit. In spite of frequent government pledges suggesting a no deal Brexit was both unlikely and undesirable, the FCA has been preparing for such an outcome for over six months, with the creation of its Temporary Permission Regime ('TPR') for incoming firms. The TPR is intended to allow firms from the EEA 'passporting' into the UK to continue their business for a period of up to three years following 'exit day', during which they will need to apply for full UK authorisation. On 7 January 2019 the notification window for TPR opened, meaning firms looking to benefit from this regime are advised to apply now.

What is the TPR?

The TPR is to allow EEA firms that were already eligible to conduct business in the UK before exit day, to continue doing so for a period of up to three years from 29 March 2019. This includes the following types of firm:

• Firms which have passports under Schedule 3 of FSMA.
• Treaty firms under Schedule 4 of FSMA (with or without top up permission).
• EEA authorised payment institutions and EEA registered account information service providers which before exit day are entitled to offer payment services in the UK by way of a passport right.
• EEA authorised electronic money institutions which before exit day are entitled to offer electronic money issuance, redemption, distribution or payment services in the United Kingdom in the exercise of a passport right.

Firms in the abovementioned categories are required to submit a notification using the Connect system by close on 28 March 2019. Firms that have not submitted a notification by this date will not be able to participate in the TPR.

Once a notification has been received by the FCA, it will allocate a 'landing slot' to the respective firm, during which it will be required to apply for full authorisation in the UK. Only firms with full UK authorisation will be able to continue operating in the UK beyond the expiry of the temporary permission period.

What about Funds and Fund Managers?

The TPR also extends to certain types of fund and fund manager.

The TPR is open to UCITS funds and also EEA domiciled Alternative Investment Funds ('AIFs') (including EuVECAs, EuSEFs, ELTIFs and AIFs authorised as MMFs). Like FSMA firms, fund managers must also use the Connect system to submit notifications for the funds they wish to continue operating in the UK after exit day.

The government has also laid two statutory instruments before parliament (one for UCITS and one for AIFMs) which intend on creating a regime allowing fund managers to market funds in the UK for a limited period after exit day. This is not in force as yet, but once approved by Parliament, will allow the operator of an EEA UCITS to notify the FCA that:

• a stand-alone scheme is to be treated as a 'recognised scheme' for the purposes of Part 17 FSMA, in circumstances where immediately before exit day the stand-alone scheme is an EEA UCITS recognised under s262 FSMA, and/or
• a sub-fund authorised by a home state regulator before exit day and treated as recognised under s264 of FSMA immediately before exit day, is to be treated as a Part 17 FSMA recognised scheme.

For managers of AIFs, EuVECAs and EuSEFs, once approved by Parliament, the respective statutory instrument will insert a Part 9A into the Alternative Fund Managers Regulations 2013. This will enable:

• an AIF, EuVECA or a EuSEF to be marketed in the United Kingdom on the same terms and subject to the same conditions as it was able to before exit day for a limited period; and/or
• an EEA AIFM which is authorised by its home state regulator under Article 6(1) of the AIFM Directive to continue to market a UK AIF in the United Kingdom on the same terms and subject to the same conditions as it was able to before exit day for a limited period.

Further information and next steps

The FCA website contains a comprehensive suite of information on the TPR, with dedicated pages for funds. It is also worth noting that the FCA has issued two separate directions specifically targeted at UCITS managers and AIFMs. These are also available on the website.

If you have any questions concerning the TPR or any other Brexit related queries concerning Financial Services in the UK, please do not hesitate to give one of our experts a call.