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EMEA Regulations

Brexit: What The FCA Wants You To Know

With the transition period over, and a trade deal done that doesn’t cover financial services, the City of London and its resident firms are wondering what to do next. Here’s some initial guidance from the FCA

On June 23, 2016, the UK voted to leave the European Union. Three and a half years later—on January 31, 2020—it officially left. A transition period then began, which would see the UK continue to do business under EU law at all levels for 11 months, until January 1, 2021. During this time a trade deal was to be agreed, which would cover, among other things, financial services. After a flurry of last-minute negotiations, a trade deal was signed on December 24, 2020,  but financial services weren’t covered; that sector would be discussed separately. This may be because the world of financial services—above and beyond other commercial arenas—is particularly complex, and given the last-minute nature of the talks between the two entities there simply wasn’t time to hash out the details. A reason wasn’t offered. Regardless of why, this lack of clarity surrounding financial services gives City of London firms and the traders who work for them little to go on as talks continue.

Happily, the Financial Conduct Authority has stepped up to offer some guidance: things for firms to think about as they await final instructions from the EU and the UK. Following is an overview of that guidance.

The End Of Passporting

  • Passporting between the UK and the European Economic Area has ended. Passporting allows firms authorized in EEA states to conduct business in other EEA states based on their member-state authorization. Passporting officially ended at the close of the transition period.
  • This affects firms based in the UK that conduct certain types of business in the EEA, as well as firms based in the EEA that conduct certain types of business in the UK. For UK firms doing business in the EEA, then, practices should be consistent with local laws and regulations.

Converting EU legislation

  • The EU Withdrawal Act of 2018 converted existing EU legislation that had a direct impact on the UK into UK law at the end of the transition period. This also preserved existing UK laws that implemented EU obligations. The UK government was given powers to amend the retained EU legislation, and has used this power to make statutory instruments that amend retained EU financial-services legislation as needed.
  • The intention was for the same rules and laws to continue to apply as far as possible, but with the necessary amendments to reflect the UK’s new position outside of the EU. The government gave the FCA responsibility for amending and maintaining certain EU binding technical standards that have become UK law. These technical standards specify detailed requirements for the purposes of various EU regulations and directives. The FCA amended its handbook to make sure it’s consistent with changes the government made and to make sure firm obligations are clear. For further information, read the FCA’s statement on changes to UK legislation.

Temporary Transitional Power (TTP) 

  • To help firms adapt to new requirements, the UK Treasury has given UK financial regulators the power to make temporary transitional provisions in relation to financial-services legislation. This is known as the temporary transitional power, or TTP.
  • The FCA will apply the TTP on a broad basis from the end of the transition period until March 31, 2022. This means firms and other regulated persons can continue to comply with existing requirements for a limited period. However, there are some areas where the TTP doesn’t apply and where you are now expected to be compliant. Firms may learn more about the TTP here.

Users Of Credit Ratings 

  • The FCA is now the UK regulator of UK-registered and certified credit rating agencies, or CRAs. This means that any UK legal entity that wishes to issue credit ratings publicly or by subscription will need to be registered or certified with the FCA as a CRA. If a firms use credit ratings for regulatory purposes, they should use credit ratings issued or endorsed by FCA-registered CRAs.

Data Sharing

  • UK firms can continue to lawfully send personal data from the UK to the EEA and the 13 other countries that the EU has deemed to provide an adequate level of protection of personal data. The UK government has also announced that the UK-EU Trade and Cooperation Agreement provides for the continued free flow of personal data from the EU and EEA to the UK until adequacy decisions are adopted.
  • The Information Commissioner’s Office, or ICO, is the regulator for data protection issues in the UK; it has said that the trade agreement enables businesses and public bodies across all sectors to continue to freely receive data from the EU and EEA. But as a precaution, the ICO recommends that businesses work with EU and EEA organizations to put in place alternative transfer mechanisms to safeguard against any interruption of the free flow of EU-to-UK personal data.

Communicating With Customers 

  • Firms must pay attention to what customers need to know, and communicate with them in a way which is clear, fair, and not misleading. Firms should already have contacted any customers that have been affected by the end of the transition period. See more on that from the FCA here.
  • Firms should also be able to show they have considered and planned for how the end of the transition period may affect their customers, keeping in mind that different categories of customers may have been affected in different ways. See relevant FCA guidance on that topic here
  • As well as communicating directly with customers, firms should make important information more widely available, such as on the firm website. Firms should also be prepared for a significant increase in consumer queries now that the transition period has ended.
  • As the situation changes, firms must continue to communicate clearly to their customers. Firms must continue to consider what information consumers need to know and when. If customers need to act, firms must provide the information they need in a realistic timeframe for them to make the right decisions.

Firms that do business only in the UK are less likely to have been affected by the end of the transition period, if at all. The following questions will help firms to decide whether they’ve been affected:

  • Do you provide any regulated products or services to customers resident in the EEA?
  • Do you have customers or counterparties based in the EEA, including UK expatriates now based in an EEA country?
  • Do you market financial products in the EEA? This includes products marketed on a website aimed at consumers in the EEA.
  • Do you have agents in the EEA or interact with any intermediary service providers in the EEA?
  • Do you transfer personal data between the UK and the EEA or vice versa?
  • Do you have membership of any market infrastructure—like trading venues, clearing houses, or settlement facilities—based in the EEA?
  • Are you part of a wider corporate group based in the EEA, or do you receive any funding from an entity in the EEA?
  • Do you outsource or delegate to an EEA firm or does an EEA firm outsource or delegate to you?
  • Are you party to legal contracts which referred to EU law?
  • Do you deposit client money and/or custody assets in any institution in the EEA?

Servicing EEA Customers 

  • Now that passporting has ended, firms should have considered whether and how they can continue to service EEA customers, following local law and local regulator expectations.
  • Decisions should be guided by obtaining appropriate outcomes for customers. Customers must be treated fairly, regardless of where they’re based. In many cases, it would be a poor outcome for customers if firms were to stop servicing them suddenly. There would be some situations where significant harm would result, e.g., withholding payments that customers are entitled to.


  • Firms should consider how their outsourcing and third-party relationships may have been affected by the UK leaving the EEA. Firms should also consider their own operational risk and potential harm to customers that may result from any change to the services they provide.

Engaging With Non-UK Regulators 

  • Firms may need to discuss their plans with European regulators to make sure they can continue to provide services to EEA customers now that the UK is no longer in the EEA.
  • European regulators have been making their own preparations and contacting firms directly about their intentions. In the same way that firms deal with the FCA, firms should act lawfully and respond to the FCA’s counterpart regulators as best they can and in a timely manner. For information on Brexit from EEA financial regulators, see this list of dedicated websites.

Client Money & Custody Assets

  • Firms must carry out periodic due diligence reviews on third parties holding client money and/or custody assets. If firms deposit client money and/or custody assets with any institution in the EEA, they should have reviewed their due diligence to ensure that client assets will not be subject to increased risk due to any changes arising from the end of the transition period.


  • Firms should make sure that existing safeguards and protections for client assets, especially in the event of insolvency, remain effective now that the transition period has ended.

Sector-Specific Information
The FCA has also published specific Brexit-related information for the following sectors: 


  • UK authorities have taken a number of steps to limit the impact of the end of passporting on financial products and services provided to UK-based customers from EEA firms. This includes introducing the Temporary Permissions Regime and the Financial Services Contracts Regime.
  • EEA firms that don’t plan to take advantage of these regimes to continue to provide services to customers, and are planning to stop servicing customers in the UK, should inform the FCA about their plans if they haven’t already done so.

The FCA has agreed Memoranda of Understanding, or MoUs, with ESMA and EU regulators, covering cooperation and exchange of information. These MoUs are now in effect following the end of the transition period. If a firm or its customers have been affected by the end of the transition period:

  • Implement any remaining changes you might need to make to your business.
  • Continue to provide information to customers who might be affected by your plans in a way which is clear, fair, and not misleading.
  • Continue to consider the implications of any further developments, checking the FCA website regularly for new information.