Through its recent publications, FCA is starting to tell us how it will handle Brexit in practice. Wisely they continue to steer away from the politics, but quite rightly make clear their practical preferences – FCA’s job is, after all, to ensure that markets work well. Major disruptions and contract discontinuity might not quite fit the bill.
Alongside a massive pile of technical standards, FCA has published its approach to No Deal (CP 18/29). The discussion begins with a comforting description of the benefits of the implementation period, which FCA prefers to think of as the transition period, but which, in the event of no deal, will not materialise. To help to mitigate its disappointment, were such a situation to arise, the FCA will create its own transition period. Those who see this as a Treasury-led programme should think again – the Treasury Regulations have the FCA’s fingerprints all over them.
On the face of it, these are measures for EEA firms – a classic act of UK generosity in the face of studied hostility. Should we even care what is going to become of inward passporting firms, given that this refers to a scenario where any plans for equivalence will have failed? Those who feel most aggrieved about the loss of their EU access may feel disinclined to help those who have not helped them. As FCA says:
“Without other rule changes, firms currently passporting into the UK that choose to participate in the TPR will have to comply with the Handbook as Part 4A firms (whose head or registered offices are overseas) because of the TPR Regulations. This would be challenging for many firms given the short time until exit day……………….”
It quite makes your heart bleed. The opportunity to make a show of generosity with forked tongue is sorely tempting. Why make it a comfortable ride for them, if we get no ride at all? Unfortunately, it might not go down hugely well with affected consumers.
There is a better reason for looking at the plan: it covers how EEA domiciled funds can continue to be marketable here. Many of those funds are of course the creation of UK firms and have their assets managed in London. While alternative arrangement could certainly be made for similar offerings aimed at British consumers, much time and money would be saved by continued easy access.
The FCA’s cunning plan is to maintain the status quo, for the time being at least. Classically, that which sounds so straight-forward requires the whole Temporary Permissions Regime, from Statutory Instrument to FCA Rule. But let’s hope that the rules were well understood beforehand, because the chances of anyone understanding the requirements from the proposed structure of the TPR seem very slight indeed. The sensation that the FCA’s heart might not be entirely in this task is overwhelming – all a far cry from the spoon-feeding that we are used to where, in the Regulator’s constant attempts to minimise misunderstanding and non-compliance, jolly application tables provide everything except the name of the call centre operator who will, if spoken to nicely, read the rules to you in dulcet tones. Given their fervent hope that none of this will ever come about, it is not difficult to understand why FCA may not have applied its best efforts to drafting requirements that make any pretence at user-friendliness. Establishing the application of a rule imposed (or not) through the TPR will be a lawyer’s dream.
Anyway, if you don’t take anything else away from this Consultation Paper, and you probably won’t, there is one key message not to be overlooked: if you miss the window and don’t notify the Regulator before Brexit that you want to go on accessing the UK, that could be the start of a very long holiday.
Oliver Lodge
Originally published by Thomson Reuters © Thomson Reuters
OWL Regulatory Consulting is the adviser to the investment industry on matters of regulation.
