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Closure of TPR regime in the event of a no-deal Brexit

The FCA has issued Consultation, CP18/29 inviting feedback on their proposed temporary permissions regime, “TPR” which will allow EEA firms and investment funds to continue business activity in the UK where there is no agreement or transition period in place post Brexit date, 11th April 2019 (extended from 28th March).

Background

  • Where there is no transitional period, the Passporting Regime will no longer be in place and existing permissions could be disbanded for inbound firms and investment funds.
  • Without these revised rules, TPR firms cannot continue their business activities in the UK post Brexit.

Impact

  • TPR will allow UK Passporting Rules that currently apply to the TP firm to continue post Brexit for a maximum period of 3 years after EU exit date;
  • Applicable firms must notify the FCA of their intention to utilise the TPR regime, the date of this notification window yet to be advised;
  • Failure to notify within the relevant notification window will result in an inability for TPR firms to continue to market in the UK;
  • TPR firms will be issued a ‘landing slot’, a date by which to seek full authorisation in preparation for the end of the 3-year period of TPR, this date is immovable;
  • TPR will last a maximum period of 3 years and after that the permission will automatically end where full FCA authorisation is not taken up;
  • The FCA will allow for substituted compliance where the TP firm can demonstrate it continues to comply with the equivalent home member state rule subject to FCA equivalence assessment review.
  • However, given there is often interpretation or transposition differences across member states, this may prove challenging for the TPR firm.
  • Also reference in the consultation and key additional considerations for the TPR firm will be the application of the new compliance requirements under the UK’s Senior Manager and Certificate regime, SM&CR and Disclosure and Reporting requirements under CASS.
  • Under the proposed TPR, a fund manager cannot:-
    • add any new schemes to the funds in the TPR;
    • add new sub-funds to umbrella schemes; or
    • change or extend the customer category to be marketed while the scheme is in TPR. 
  • The FCA seeks response to this consultation before 7th December 2019.

Next Steps

  • Is your business impacted by the TPR?
  • This consultation is now closed, 7th December 2018
  • Final Rules anticipated in early 2019 ahead of Brexit date, 11th April 2019
  • Have you considered the extent of Brexit impacts to your business model?