January 22, 2019

January 22, 2019

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FCA TPR Notification Window Now Open for EEA-Passported Firms and Fund Managers

On January 7, the UK Financial Conduct Authority (FCA) announced that the notification window for the temporary permissions regime (TPR) is now open.

In the lead-up to the United Kingdom’s exit from the European Union (Brexit) on March 29 (Exit Day), the agreement on the United Kingdom’s withdrawal (Withdrawal Agreement) has not been ratified by the UK Parliament. If ratification fails, this would result in a so-called “no-deal Brexit,” meaning that the UK would leave the EU without having agreed on any transitional arrangements, and any European Economic Area (EEA)-based firms or fund managers passporting their services or products into the UK would lose their permission to do so on Exit Day.

Given the continuing political uncertainty surrounding Brexit, the FCA is preparing for a no-deal Brexit and EEA-based firms passporting activities into the United Kingdom have been directed to prepare in a similar way. Such preparations include EEA-based firms notifying the FCA of their intention to continue to operate in the UK, but under the FCA’s TPR. Failure to do so would result in EEA-based firms having to seek authorization from the UK’s regulators if they wish to continue carrying on regulated financial services activities in the UK in the event of a no-deal Brexit.

The TPR

The TPR would enable firms established in the EEA to continue passporting activities into the UK for a limited period after Exit Day in the event of a no-deal Brexit. Permanent FCA authorization would only be needed by the end of the transition period, which is set by the Withdrawal Agreement to operate from Exit Day until December 31, 2020.

Only EEA firms that are already authorized to carry on regulated activities in the UK by passporting are eligible to enter the TPR. EEA firms without passports would not benefit from the “overseas persons” exemption. This exemption would only continue to be of benefit to firms that do not have a permanent place of business in the UK from which regulated activities are conducted.

TPR Notification Requirements

As from January 7, FCA-authorized firms can notify the FCA that they wish to enter the TPR using the form available on the FCA’s Connect system, without charge. The FCA also has provided guidance to passporting EEA firms and fund managers on the TPR notification process.

The notification window will close at the end of March 28, after which firms that have not submitted notification by then will not be able to enter or rely on the TPR, but will instead be subject to the financial services contracts regime (FSCR) (subject to meeting the relevant conditions—for more information on the FSCR see the January 11, 2019 edition of Corporate & Financial Weekly Digest).

Once a firm has notified the FCA that it wishes to enter the TPR, it will be allocated a period of time (a “landing slot”), based on the type of business undertaken, during which it can submit the application for recognition by the FCA or notification under the national private placement regime. After Exit Day, the FCA will confirm firms’ landing slots so that they can prepare their respective applications. The FCA expects the first landing slot will be from October to December 2019, followed by five more landing slots, with the last to close at the end of March 2021. Details of firms with temporary permission will be shown on the Financial Services Register. Once an FCA-regulated firm receives recognition, it will leave the TPR.

The FCA’s announcement, together with its guidance to passporting fund managers and firms, is available here.

©2019 Katten Muchin Rosenman LLP

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About this Author

John Ahern, Financial Attorney, London, Katten Law Firm
Partner

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
Partner

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
Partner

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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