Here we explain the key requirements where transitional relief was not available under the Temporary Transitional Power (TTP)[1].
The legal text setting out the detail of these requirements can be found in the relevant legislation and is referred to in Annexes A and B of the main FCA transitional directions. The contractual recognition of bail-in provision is referred to in the FCA prudential transitional direction.
See our transitional directions[2] page for more information.
We are conscious of the scale, complexity and magnitude of some of the changes listed on this page, and so we intend to act proportionately. This means that we do not intend to take enforcement action against firms and other regulated persons for not meeting all requirements straight away after 31 December 2020, where there is evidence they had taken reasonable steps to prepare to meet the new obligations by that date.
Where firms and other regulated persons were not fully compliant by that date, we expect them to comply with the new obligations as soon as reasonably practicable.
MiFID II transaction reporting requirements
The UK’s transaction reporting regime under MiFID II has changed as a result of Brexit, including connected obligations such as the requirement to submit financial reference data. This includes the need for trading venues to report transactions on their venues by their EEA members. EEA firms in the temporary permissions regime (TPR)[3] who operate through a UK branch should also be transaction reporting to us. Find out more about this on our FCA FIRDS and transaction reporting[4] page.
These changes now apply and affect EEA firms in the temporary permissions regime, as well as UK-approved reporting mechanisms (ARMs) that submit reports on behalf of firms.
Find out more about the onshored MiFID regime:
EMIR reporting obligations
All firms and central counterparties (CCPs) that enter into derivatives transactions in scope of EMIR are now required to report the details of those transactions to an FCA-registered Trade Repository (TR).
In addition, TRs are required to provide the relevant UK authorities with access to that data.
Therefore, the TTP did not apply to onshoring changes for firms and CCPs subject to the reporting obligation under the onshored EMIR regime or to the onshored requirements for TRs.
Find out more about the onshored EMIR regime:
SFTR reporting obligations
All financial counterparties, including third country branches, central securities depositories (CSDs) and central counterparties (CCPs) that enter into securities financing transactions in scope of the Securities Financing Transactions Regulation (SFTR) are now required to report details of those transactions to an FCA-registered TR.
In addition, TRs are required to provide the relevant UK authorities with access to that data.
Therefore, the TTP did not apply to onshoring changes for firms, CSDs or CCPs subject to the reporting obligation under the UK SFTR regime, or to the onshored requirements for TRs.
Please note, however, that the TTP applied to securities financing transactions where one of the counterparties is a member of the European System of Central Banks (ESCB). However, our use of the TTP has now ended and firms must fully comply with UK onshored regulatory obligations.
However, where firms are subject to MiFIR transaction reporting obligations they need to report these securities financing transactions to us under UK MiFIR, where the counterparty is a member of the ESCB.
Find out more about the UK SFTR regime[15].
Certain requirements under MAR
MAR issuer notifications: Issuers that have securities admitted to trading or traded on UK markets (and persons discharging managerial responsibilities within the issuer) must submit information to us regardless of any existing obligations under EU law to provide this information to an EU authority.
Find out more about the UK MAR regime:
MAR STOR reporting: persons professionally arranging or executing transactions must report Suspicious Transaction and Order Reports (STORs) to us where they are registered in the UK, have their head office in the UK or, in the case of branches, where the branch is situated in the UK. This will be the case regardless of any obligations under EU law to report STORs to an EU authority where they are registered in the EU, have their head office in the EU, or, in the case of branches, where the branch is situated in the EU.
Find out more about reporting STORs to the FCA[20].
Issuer rules
issuers that have securities admitted to trading on UK regulated markets must now submit information to us and disclose certain information to the market.
Find out more about issuer rules:
- CP 18/36[21]
- PS 19/5[22]
- the Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019 (SI 2019/707)[23]
- Exiting the European Union: Listing, Prospectus and Disclosure Sourcebooks (Amendments) Instrument 2019 (FCA 2019/26)[19]
- the Technical Standards (Transparency Directive) (EU Exit) Instrument 2019 (FCA 2019/55)[24]
Contractual recognition of bail-in
To safeguard resolvability, firms need to include contractual recognition of bail-in terms in all new or materially-amended liabilities governed by the law of an EEA State, except for unsecured liabilities that are not debt instruments.
See our prudential transitional direction[25] for more information.
Client Assets Sourcebook requirements (CASS)
CASS no longer applies to EEA branches of UK firms. These firms should have (i) segregated UK client money from EEA branch money, and (ii) ensured that EEA branch money is no longer held under the CASS statutory trust.
We decided not to apply the TTP to these changes to increase the certainty of the scope of consumer protection and avoid costly legal confusion on insolvency.
Find out more about CASS:
- CASS sourcebook[26]
- CP 18/29[27]
- PS 19/5[23]
- FCA 2019/36[28] (Annex B and D)
Market-making exemption under the Short Selling Regulation
Any firm wishing to use the exemption for market-making activities under the Short Selling Regulation (SSR) must join a UK trading venue (unless an equivalence decision has been made for the relevant firm’s jurisdiction) and notify us of their intention to use the market maker exemption 30 days ahead of their intended use.
Any notifications made to us before the end of the transition period, in relation to instruments admitted to trading in the UK, will remain valid.
Find out more about SSR:
Use of credit ratings for regulatory purposes
All ratings need to be issued or endorsed by a credit ratings agency (CRA) that is registered or certified with us in order to be eligible for regulatory use in the UK. Users of credit ratings should have already taken steps to ensure they are operationally ready to use credit ratings issued or endorsed by FCA-registered or certified CRAs.
To help provide some continuity to users of credit ratings, a transitional arrangement was introduced under the CRA Regulation Statutory Instrument. This allows for ratings that have been issued or endorsed in the EU before the end of the transition period by a CRA with an affiliate registered or currently applying for registration with us to be used for regulatory purposes in the UK for up to 1 year after the end of the transition period. This excludes any new credit ratings, or credit ratings that undergo a subsequent rating change.
Under the TTP, credit ratings that have been issued or endorsed (and not withdrawn) by an EU-established CRA that does not have a group affiliate registered in the UK were available for regulatory use in the UK for up to 1 year after the end of the transition period. However, our use of the TTP has now ended and firms must fully comply with UK onshored regulatory obligations.
The TTP did not apply to other amendments to the CRA Regulation, to its tertiary legislation or to the onshoring legislation for CRAs.
Firms that are subject to the UK Capital Requirements Regulation (CRR) should also note that the TTP did not apply in relation to the UK versions of external credit assessment institution (ECAI) mappings under the CRR. This ensures that relevant UK firms can rely on the amended mappings which, where appropriate, have been updated to include certain CRAs which we anticipate will be newly registered in the UK now that the transition period has ended.
Firms are reminded, however, that the presence of a mapping for a particular CRA does not guarantee that its ratings can be used for regulatory purposes (including prudential calculations). Firms should have ensured that the relevant CRA meets all of the necessary conditions under the UK CRA Regulation to permit this.
Find out more about CRAs:
Securitisation
UK originators and sponsors now need to notify us using the onshored STS notification templates, where their UK securitisations meet the STS criteria for being simple, transparent, and standardised (STS) under the UK Securitisation Regulation.
In addition, transitional measures under the onshored Securitisation Regulation will permit EU STS securitisations issued up to 2 years after the end of the transition period, which remain on ESMA’s STS list, to qualify as UK STS.
Prospective UK Securitisation Repositories (SRs) need to apply to us in order to register and operate in the UK.
In order to comply with article 7(2) of the UK Securitisation Regulation, the originator, sponsor and SSPE (securitisation special purpose entity) of a UK securitisation that is a public securitisation must make the relevant information available via a UK SR, once one is registered.
Originators and sponsors of UK STS securitisations need to use the services of a UK Third Party Verifier (TPV) where they chose to employ a TPV.
Find out more about the onshored securitisation regime:
Electronic commerce EEA firms
The TTP did not apply to EEA e-commerce firms whose activities have been excluded from UK regulation under the eCommerce Directive. Firms wishing to carry on new regulated business via e-commerce in the UK should have considered whether they need UK authorisation and should have made urgent plans to apply.
However, e-commerce firms have a run-off regime under Part 4 of the Electronic Commerce and Solvency 2 (Amendment etc.) (EU Exit) Regulations 2019 allowing them to run-off existing contracts.
Find out more about the onshored eCommerce regime[39].
Mortgage lending after the transition period against land in the EEA
Changes to the Regulated Activities Order 2001 mean that loan contracts, entered into since the end of the transition period and secured on land in the EEA, are no longer regulated mortgage contracts (though existing regulated mortgage contracts secured on land in the EEA before the end of the transition period will remain as such).
These post-transition period contracts may instead be regulated credit agreements, in which case firms need to comply with consumer credit provisions.
See our main transitional directions[3] for more information.
Payment services – strong customer authentication and secure communication
The regulatory technical standards on strong customer authentication and secure communication (the SCA-RTS) applied from September 2019 and include requirements enabling the functioning of open banking as well as new security requirements, including anti-fraud requirements called strong customer authentication (SCA).
These are onshored via FCA binding technical standards (the UK-RTS). The TTP did not apply to the UK-RTS and we expect firms to be compliant with the UK-RTS and to refer to our approach document for guidance.
Find out more about Payment services: