The temporary permissions regime (TPR) relates solely to EEA firms previously passported into the UK who are now preparing to obtain full FCA authorisation in order to continue longer-term operations in the UK. The FCA has recently set out clearly how it plans to deal with TPR firms that don’t meet its expectations.
Four scenarios
There are four scenarios where the regulator will act against firms in the TPR. The scenarios are:
- Firms that miss their landing slot to apply for FCA authorisation
- Firms that fail to respond to the FCA’s mandatory information requests
- Firms that do not intend to apply for full authorisation
- Firms whose authorisation application is refused
The FCA will take steps to ensure that firms in the above scenarios cannot expand their UK business while in the TPR. If these firms do not voluntarily leave the TPR, the FCA will take action to remove them. Where the FCA takes action against a firm (for example, refusing an application for authorisation), this may also result in them contacting that firm’s home state regulator as well as publishing a notice of the action they have taken against the firm in the UK.
Missing the designated landing slot:
Under the TPR, firms are expected to submit their authorisation application when the FCA asks them to do so. If a firm misses its landing slot, the FCA states that it will likely take the view that the firm has failed to meet its expectations and that accordingly should either:
- take steps to enter the financial services contracts regime (FSCR) to run down its UK business (if the firm has UK business to run off); or
- apply to cancel the firm’s temporary permission if there is no UK business to run off.
Failing to respond to mandatory information requests:
The FCA expects firms to respond to its requests for information promptly. Firms that don’t do so risk being deemed unable to meet the FCA’s conditions for authorisation.
To demonstrate that it means business, the FCA goes on to point out that it has already taken action against a number of firms that haven’t responded to mandatory information requests, including cancelling four firms’ temporary permissions. As a result, these firms are no longer permitted to conduct regulated business in the UK.
Not applying for full FCA authorisation:
Firms may of course decide that, having entered the TPR, they no longer intend to apply for authorisation (for example, if they have instead decided to merge with another entity and intend to cancel thereafter). From the FCA’s perspective, a firm holding a temporary permission with no valid reason for not pursuing an application presents a clear risk of harm due to the possibility of UK business expansion without any intention of staying in the UK long term.
In such cases the FCA will again expect firms to:
- take steps to enter the FSCR to run down its UK business (if the firm has UK business to run off); or
- apply to cancel the firm’s temporary permission if there is no UK business to run off.
Application refused by the FCA:
Inevitably, a number of TPR firms will fail to demonstrate to the FCA that they can meet the conditions to be authorised. Where such firms have existing UK regulated business to run-off, they will then be expected to voluntarily cancel their temporary permission and enter the FSCR. Where this expectation is not met, the FCA warns that it is likely to take its own action to remove the firm from the TPR. (Firms should remember that the FCA may also contact the firm’s home state regulator as well as publishing a notice of the action it has against the firm in the UK).
Finally, where an application is refused or withdrawn, firms may not then reapply under TPR. Instead, they must make any subsequent application separately as a new firm seeking full authorisation.
In summary
In issuing its recent news update, the FCA has made its expectations of TPR firms clear in each scenario. Where firms don’t meet these expectations then the FCA will use its powers to address the situation. Actions it will take against such firms may involve:
- taking steps to remove the firm from the TPR
- asking the firm to confirm that they have voluntarily stopped undertaking new business (i.e., onboarding new customers)
- preventing firms from undertaking new business if they do not voluntarily agree to the above
- requesting firms to specify a date when they will cease to engage in new business, or specifying the date if a firm fails to do so
A firm may of course avoid these actions if it voluntarily applies to cancel its temporary permission completely and, if eligible, enter the run-off within the FSCR.
How Complyport can help
Compliance assistance can be invaluable to a firm setting out on the road to regulation, especially against a dynamic backdrop of ever-updated expectations and requirements. (For example, at the time of writing the FCA has just implemented its revised fee structure for firms seeking authorisation.)
Additionally, achieving the goal of FCA authorisation is not the end of the story – if anything it instead marks the end of the beginning. Once authorised, firms must continue to meet the FCA’s standards and rules and achieve good outcomes.
Complyport is a market leader in FCA authorisations and have successfully assisting in over 1000 applications. Over the last 20 years, we have provided guidance and advice on permissions required, outlined the amount of regulatory capital the new firm will need and project managed the building of the application pack.
Once a firm is successfully authorised, Complyport’s expert consultants assist firms in remaining compliant with regulation as well as advise them on how to meet and adapt for upcoming regulatory change. We are currently providing regulatory support to over 600 regulated firms on an ongoing basis globally.
Click here to learn more about Complyport’s FCA authorisation support and to book a free consultation meeting.
About Complyport
Complyport is the City’s market leading consulting firm supporting the UK financial services industry for over 20 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.
Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. Our vision is to be there for our clients every step of the way, helping them change, grow, and excel through expertise, insight, and innovation, and in so doing to become our clients’ most valued supplier and trusted advisor.
With presence in the UK and EU, as well as via our Associates Network, Complyport can assist firms across multiple jurisdictions.
Complyport’s multidisciplinary consultants possess deep expertise in their field, having acted in FCA skilled person reviews, as expert witnesses in legal cases and as expert investigators for firms or their legal advisers.
Day to day, we conduct audits and reviews of a firm’s products, processes, policies, and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Complyport can also assist firms by providing personnel to cover all the key compliance functions including resourcing individuals to be registered as your Compliance Oversight Function (SMF16) and/or Money-Laundering Reporting Officer (SMF17).
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