The Financial Conduct Authority has outlined plans to ‘onshore’ a vast number of EU regulations directly into its handbook, including Ucits and Mifid rules, in case a Brexit transition period is not agreed.
The rules would come into force in the UK handbook after 29 March 2019 with the proposed changes including detailed handbook amendments outlined in a consultation paper published on 10 October 2018.
The FCA notes that various changes may not need to come into force immediately after March if there is a withdrawal agreement with the EU which includes a transition period.
The main areas covered are prudential rules for firms regulated only by the FCA; conduct of business rules; rules for UK funds and fund managers covered by EU fund management legislation, including Ucits and AIFMD; and rules affecting other market participants, including UK investment firms covered under EU markets legislation, including Mifid.
The FCA also notes that most of the changes depend upon the provisions of the European Union Withdrawal Act, which is still to reach the statute book.
The changes to the handbook, referred to as onshoring, are governed by statutory instruments and so do not require the FCA to carry out a cost benefit analysis as it does with many other significant regulatory changes.
The FCA also notes the HM Treasury position which says that, if there is no withdrawal agreement, the UK cannot rely on any specific arrangements being in place between the UK and the EU.
It warns that the EU and its member states would theoretically be treated in the same way as non-EU or third countries after exit day because “the UK would be outside of the EU framework for financial services and would be a third country to the EU and its member states”.
However the paper adds: “The Treasury has made clear that there are instances where it will diverge from this approach to ensure that there is a functioning regime in place on exit day to enable firms and regulators to be ready for exit, to protect the existing rights of UK consumers or to ensure financial stability”.
