FCA warnings for TPR firms

Following the Brexit transition period, the temporary permissions regime (“TPR”) was developed to ensure continuity of services for UK customers. The TPR allows European firms operating in the United Kingdom (the “UK“) via a passport to continue operating temporarily while they seek full authorisation before the Financial Conduct Authority (“FCA”). However, in order to remain authorised under the TPR, firms must comply with ongoing requirements established by the FCA. In light of this, the FCA has recently published a reminder of its expectations for firms in the TPR.

SUMMARY OF THE FCA’S EXPECTATIONS FOR FIRMS IN THE TPR

The TPR requires firms to both submit applications for full authorisation and respond to information requests from the FCA in a timely manner. It is also essential that any firm availing of TPR has plans to operate in the UK for the foreseeable future and intends to apply for full authorisation. Furthermore, the FCA alerts that if a TPR firm fails to meet the conditions for full authorisation, its application for authorisation will be refused.

CONSEQUENCES OF FALLING SHORT OF THE FCA’S EXPECTATIONS

Firms that do not fulfil the FCA’s expectations for the TPR face the risk of having their application for full authorisation refused by the FCA. The FCA can require firms to completely stop undertaking new business and remove them from the TPR if they miss their ‘landing slot’ (the application deadline to apply for full authorisation). Failures to respond to mandatory information requests from the FCA and a firm’s lack of intention in applying for full authorisation can also trigger cancellation of the TPR permission.

The importance of the aforementioned has been brought sharply into focus following the FCA’s recent action against certain TPR firms. After missing multiple requests for action, four firms have had their temporary permissions cancelled. Final notices were issued to Arumpro Capital Limited, Esfera Capital, Agencia de Valores, S.A., Evest Limited and INZMO Europe GmbH.

NECESSARY ACTION

Firms who obtained the TPR permission are treated as having a UK Part 4A permission meaning that at all times they need to adhere to the FCA’s 11 Principles for Businesses as well as any the other relevant rules and guidance as prescribed in the FCA Handbook.

This involves:

  • ongoing adherence to any rules that they heeded when previously passporting;
  • certain additional FCA rules which are considered necessary to provide appropriate consumer protection or relate to funding requirements;
  • rules on the safeguarding of client money and custody assets;
  • providing specific status disclosure wording in letters (or electronic equivalents) to UK retail customers to indicate they are in the TPR;
  • communicate any material changes in home state investor compensation scheme coverage as result of Brexit;
  • continuing to comply with the requirements of the Senior Managers and Certification Regime as it currently applies to EEA branches;
  • ensuring that FCA’s requests for information are promptly addressed; and
  • ensure that the application for full authorisation will be submitted within the landing slot granted.

BOTTOM LINE

When TPR permissions are cancelled, conducting business in the UK is no longer lawful and the FCA have stated that such firms would be committing a criminal offence to do so. TPR firms which have had applications refused or withdrawn have been advised not to reapply. Therefore, it is necessary to ensure compliance with all requirements under the TPR to protect the permission to conduct business in the UK whilst firms are seeking full authorisation.

To review the FCA’s statement on TPR firms that do not meet their expectations, please click here.

To review the FCA’s statement on the rules that apply to firms and fund operators in the TPR, please click here.

For more information, and any guidance or advice on the temporary permissions regime, Cleveland & Co External in-house counsel™, your specialist outsourced legal team, are here to help.

 

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