The Financial Conduct Authority (FCA) has rolled out a consultation on how it should approach the supervision and authorisation of international firms operating in the UK.
The move stems from the watchdog’s belief that many international companies will be seeking authorisation at the end of the Brexit tradition period – which is currently set at 31 December 2020.
Currently, there are over 1,500 businesses that are registered in the temporary permissions regime, the scheme that allows firms and funds to passport into the UK to continue operating in the country.
The FCA wants to look at the types of risk that international businesses will pose to UK-based retail clients and investors due to the way companies are structured and operate.
As a result, the regulator is looking to mitigate those risks and understand when it would be appropriate for an international company to seek authorisation as a UK-incorporated firm for either all or parts of its business.
Protection from harm
Nausicaa Delfas, executive director of international at the FCA, said: “With the Brexit transition period due to end on 31 December 2020, firms that have registered for temporary permission will need to consider plans for full authorisation.
“Today we are setting out our expectations for the future authorisation and supervision of international firms, to ensure appropriate protection for users of financial services.
“International firms are a key contributor to the success of the UK financial services market. This consultation will give EEA and non-EEA firms a chance to feedback on our future approach to the regulation of international firms.”
Concerns
One of the main areas of concerns for the UK watchdog is the possibility that UK retail investors may not be eligible for redress if they are clients of an international company.
The FCA added: “This is because, although UK branches of international firms will generally be subject to the same regulatory redress requirements as UK firms, and the same Financial Services Compensation Scheme (FSCS) cover, a person in the UK seeking redress from a branch of an international firm may be more dependent upon the cooperation of the international firm’s head office or, in the case of the firm’s insolvency, the position of UK consumers under the home state’s insolvency rules and/or the FSCS.”
The regulator is currently seeking feedback on the initiative and the consultation will end on 27 November 2020.
