FCA Update on Post-Brexit Regulatory Framework and End of TTP Powers

Key Takeaways

• The Financial Conduct Authority (FCA) has provided an update regarding the conclusion of the UK's transition period and the expiration of Temporary Transitional Powers (TTP).
• Compliance teams must ensure all regulatory activities align with updated UK law and local EEA requirements following the end of passporting.

Deep Dive

This regulatory update serves as a formal reminder that the era of passporting between the UK and the European Economic Area (EEA) has ended. For compliance professionals, this means that firms based in the UK intending to conduct business in the EEA, or EEA-based firms operating in the UK, must now ensure they meet local regulatory expectations and seek appropriate authorizations where necessary. The loss of passporting fundamentally changes the cross-border service delivery model for financial institutions.

A significant technical aspect of this update is the expiration of the Temporary Transitional Power (TTP). While the TTP allowed regulators to make temporary provisions to assist with the transition, most of these powers expired on 31 December 2022. Notably, while the Share Trading Obligation (STO) was revoked via the Financial Services and Markets Act 2023, the Derivative Trading Obligation (DTO) has transitioned into a new regulatory direction under updated FCA powers. Compliance teams must monitor these specific directions to ensure ongoing adherence to UK-onshored obligations.

The update also highlights changes in the regulation of Credit Rating Agencies (CRAs). The FCA is now the official regulator for UK-registered and certified CRAs. Any UK legal entity intending to issue credit ratings publicly or via subscription must be registered or certified with the FCA. For firms that utilize credit ratings for regulatory purposes, there is a critical need to verify that the ratings used are issued or endorsed by FCA-registered agencies to maintain regulatory compliance.

For risk assessment and impact analysis, compliance professionals should review their cross-border operational workflows and third-party dependencies. The primary risk involves potential non-compliance with local EEA laws if firms continue to rely on outdated passporting assumptions. Furthermore, the shift from retained EU legislation to UK-specific statutory instruments requires a thorough gap analysis of existing internal policies to ensure they reflect the current UK regulatory handbook and any new technical standards maintained by the FCA or Bank of England.

Source: Financial Conduct Authority