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The temporary transitional power would give the FCA the ability to delay or phase in changes to regulatory requirements made under the EU (Withdrawal) Act 2018 (the legislation that has enabled the 'onshoring' of EU legislation and rules into the UK rulebook) for a maximum of 2 years from exit.
The FCA intends to make use of this power to ensure that firms and other regulated persons can generally continue to comply with their regulatory obligations as they did before exit. This will enable firms to adjust to post-exit requirements in an orderly way.
There will be some areas where it would not be consistent with the FCA’s statutory objectives to grant transitional relief using the temporary transitional power. In these areas only, firms and other regulated persons as identified below should begin preparing to comply with the changed obligations now, if there is no implementation period.
Nausicaa Delfas, Executive Director of International at the Financial Conduct Authority said:
“The temporary transitional power is an important part of our contingency planning. In the event that the UK leaves the EU without an agreement, it gives us the flexibility to allow firms and other regulated persons to phase in the regulatory changes that would need to be made as a result of 'onshored' EU legislation. This will give firms certainty, ensure continuity, and reduce the risk of disruption.
“There are some areas such as reporting rules under MiFID II, where it would not be appropriate to provide a phase-in, as receiving these reports is crucial to our ability to ensure market oversight and the integrity of financial markets. In these areas only, we expect firms and other regulated persons to begin preparing to comply with the changes now.”