Pre-Brexit, some 8,000 financial services firms based in the EA or EEA relied on the mutual passporting regime to do business in the UK. Since 1 January 2021, such firms have been able to operate under a transitional temporary permissions regime (TPR). While some of those firms have now exited the UK market, most of those intending to continue to operate here are required to apply for full UK authorisation. The deadline for applications is 31 December 2022.

Firms applying for solo-regulation (that is, to be authorised by the FCA only) should have received a direction confirming their ‘landing slot’ – a specified window of time during which their application must be submitted. Most firms will now have submitted their applications within their allotted time slot. However, if a firm intends to continue operating in the UK but has not received such a direction, it should contact the FCA urgently to discuss its options. Any application received after the end of the year will be treated as invalid.

The FCA has made it clear that a firm which misses its landing slot or fails to submit its application by 31 December will be expected to voluntarily apply to cancel its temporary permission and either enter into supervised run off (if it is eligible to do so) or cease operating in the UK.

For firms that do apply, the authorisation application process is rigorous and time-consuming. Once the application is submitted, firms should anticipate receiving follow-up enquiries from the FCA Authorisations team and ensure that they have adequate resource available to deal with these. Key to this process is the FCA’s expectation that firms applying for authorisation are “ready, willing and organised” to comply with the applicable standards at all times. Firms will therefore be afforded only limited time to provide any outstanding information which might be sought.

Where the FCA has concerns as to the adequacy of an application, it may invite the applicant firm to withdraw it. This needs careful consideration as withdrawal of an application leads to an expectation that the firm will voluntarily leave the TPR, meaning that its right to operate under the regime ceases. If it fails to leave, the FCA may take action against it.

While such a firm may make a new application, the FCA has indicated that it should not re-apply while in the TPR. While it can do so from within the Financial services contracts regime (FSCR), this will mean that it is unable to conduct new business in the UK until its new application has been successful. Given the likely processing times for applications, this may mean a period of many months during which no new business can be conducted which will be highly disruptive. For that reason, the option of contesting a proposed refusal of an active application made in the TPR should be considered prior to making a decision to withdraw.

FURTHER INFORMATION

For more information on any issues raised in this blog post, please contact Jill Lorimer or a member of our financial services team.

 

ABOUT THE AUTHOR

Jill Lorimer is a Partner in our Criminal Litigation team and has an extensive track record in advising firms and individuals facing regulatory and criminal investigations by the Financial Conduct Authority (FCA). Having had the benefit of a 12 month secondment at the Criminal Prosecutions Team at the FCA, Jill has insight into the organisation’s approach to the investigation and prosecution of serious financial offences. Jill also advises firms from across the breadth of the regulated sector on the authorisation process, on registration under the Money Laundering Regulations and on supervisory issues. Jill has a particular interest in the regulatory and criminal aspects of cryptoassets and has spoken and written widely on this issue.