The UK’s exit from the EU will doubtless create challenges for Business owners, Client Relationship owners and Compliance Officers. They all need to understand any changes in order not to fall foul of the regulations after March 2019. The FCA have published two consultation papers, setting out its proposed approach on the UK’s exit from the EU in the event of a ‘hard’ Brexit.
It wants to ensure there is a ‘functioning regulatory framework in place’ if we leave the EU without an implementation period.
What do the consultation papers cover?
The two-consultation papers cover:
- Amendments to the FCA Handbook and Binding Technical Standards(detailed EU rules which the FCA will have responsibility for after exit) resulting from leaving the EU, and the FCA’s approach after Brexit to EU non-legislative material; and
- The Temporary Permissions Regime, which will allow EEA firms and funds passporting into the UK to continue operating here for a limited period after Brexit while seeking full UK authorisation.
How is the FCA approaching the UK’s withdrawal from the EU?
In publishing its consultation papers, the Authority said that it is ‘working to ensure as smooth a transition as possible as the UK prepares to leave the European Union’.
What this means for you and your clients?
Confidence is crucial to any business and client relationship. So it is important you know the direction of regulatory travel the FCA is taking. Also such change also provides means wealth management, advice and planning firms need to focus on:
- The impact of the process on investment decisions and capital requirements
- Developing a Client communication plan is in place to ensure the value of planning is understood
- Assessing and understanding the firm’s market access exposure
- Understanding the impact on existing legal contracts and mandates
- Identifying documents that need to change
- Reviewing counter party risk on outsourced suppliers
- Assessing cross-boarder data management implications
What happens to financial services regulation when the UK leaves the EU?
Parliament has passed the European Union (Withdrawal) Act 2018 to prepare the UK’s legal framework for exiting the EU. The Act will convert existing, directly applicable EU law at the point of exit into UK law, as well as preserving existing UK laws which implement EU obligations, and giving the Government powers to amend that law so it functions effectively when the UK leaves the EU.
As part of these preparations, the Treasury intends to give financial services regulators, including the FCA, responsibility for amending EU binding technical standards (BTS), which are detailed EU rules, for exit day.
How can RegTech help?
As we have seen, Business owners, Client relationship owners, Compliance Officers, operations and risk management professionals need to ensure they have mapped key risks and assess the impact for BREXIT across their client and business activities.
By employing RegTech across the business and scrutinising their activities, operations and data, this can help firms identify challenges, cut through the noise and prioritise actions in real-time to ensure blind spots are addressed and the business is as BREXIT ready as possible. This can ensure:
- Risks are identified, assessed and managed
- Roles and responsibilities are allocated and staff empowered to manage risk
- Mechanisms for managing risks are used to ensure the business is ready
- Board oversight is constructive, pro-active and communications are clear
- Activities that could undermine risk management are identified and stopped
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