The Financial Conduct Authority has set out details of its temporary permissions (TP) regime, which will apply to EU and EEA firms after Brexit, in a consultation paper published on 10 October.
Firms and funds will be able to apply for temporary permission from early next year and the regime will come into force on 29 March 2019, ie on Brexit day.
At an unspecified time during the three-year period, funds will then be given a three-month application window or ‘landing slot’ to apply for full authorisation.
"Each relevant investment fund will need temporary permission to continue marketing in the UK after Brexit before registration"
The TP regime will require firms to meet all UK rules that currently apply to them and “substantial compliance” with all FCA rules that implement an EU directive requirement.
They may also have to apply “certain additional FCA rules necessary to provide appropriate consumer protection or that relate to funding requirements”.
The UK regulator does make it clear that it is seeking to ensure as smooth a process as possible, even in the event of a hard Brexit.
It said: “When considering the application of rules to the UK business of TP firms, our intention is to preserve the status quo as far as possible in terms of the requirements that TP firms and operators, depositaries and trustees of EEA-domiciled investment funds will need to meet in respect of their UK business.”
The FCA paper said that if firms are unsure whether they need a temporary permission they should seek expert legal advice, warning that operating as an unauthorised firm is a criminal offence.
In terms of financial promotions for funds, the paper added: “Marketing of relevant investment funds in the UK is not a regulated activity, though it is subject to the restrictions on financial promotions.
“It is our view that a non-UK-domiciled fund will always need to be either recognised under Section 272 of the Financial Services and Markets Act 2000 or registered under the national private placement regime to be marketed in the UK after exit day.
“So, each relevant investment fund will need temporary permission to continue marketing in the UK after Brexit before registration/recognition.”
The regulator expects the notification process for a temporary permission to operate through its Connect system, with a confirmation email being sent when a notification is received.
The notification window will open early in 2019 and close before exit day.
Once the window has closed, firms that have not submitted a notification will not be able to use the TP regime.
Firms in Gibraltar do not need to seek temporary permission but can continue to passport into the UK.