The FCA made the move today as it outlined how it would strive to use its temporary transitional powers to try to ensure disruption to financial services is kept to a minimum in the event of a ‘no-deal Brexit.

It says most firms will face a steady two year transition in the event of no-deal to smooth any upheaval but a number of firms, including those subject to MIFID II rules -  the EU legislation designed to improve investor protection and reporting - should get ready for change now.

The Treasury has already put forward draft legislation that would make transitional provisions if the UK leaves the EU without a withdrawal agreement.

The temporary transitional powers would give the FCA the ability to “delay or phase in” changes to regulatory requirements made under the EU (Withdrawal) Act 2018 for a maximum of 2 years from exit.

The FCA intends to make use of this power to ensure that firms and other regulated persons can generally continue to comply with their regulatory obligations as they did before exit. This will enable firms to adjust to post-exit requirements in “an orderly way,” says the FCA.

The FCA has added, however, that there are some areas where it would not be consistent with the FCA’s “statutory objectives” to grant transitional relief using the temporary transitional power. 

In these areas, firms and other regulated persons should begin preparing to comply with the changed obligations now if there is no implementation period, says the watchdog. These areas include firms subject to the MIFID II transaction reporting regime.

Nausicaa Delfas, executive director of International at the Financial Conduct Authority, said: “The temporary transitional power is an important part of our contingency planning. 

“In the event that the UK leaves the EU without an agreement, it gives us the flexibility to allow firms and other regulated persons to phase in the regulatory changes that would need to be made as a result of 'onshored' EU legislation. This will give firms certainty, ensure continuity, and reduce the risk of disruption.

“There are some area, such as reporting rules under MiFID II, where it would not be appropriate to provide a phase-in, as receiving these reports is crucial to our ability to ensure market oversight and the integrity of financial markets.  In these areas only, we expect firms and other regulated persons to begin preparing to comply with the changes now.”

The FCA says the following firms or persons should begin to prepare to comply with changes now:

•Firms subject to the MiFID II transaction reporting regime, and connected persons (for example approved reporting mechanisms).

•Firms subject to reporting obligations under European Market Infrastructure Regulations (EMIR).

•EEA Issuers that have securities traded or admitted to trading on UK markets.

•Investment firms subject to the Bank Recovery and Resolution Directive (BRRD) and that have liabilities governed by the law of an EEA State.

•EEA firms intending to use the market-making exemption under the Short Selling Regulation.

•Firms intending to use credit ratings issued or endorsed by FCA-registered credit ratings agencies after exit day.

•UK originators, sponsors, or securitisation special purpose entities (SSPEs) of securitisations they wish to be considered simple, transparent, and standardised (STS) under the Securitisation Regulation.

The FCA is currently consulting on changes to the FCA Handbook and technical standards for the same reason.

The FCA says in addition, existing transitional arrangements such as, for example, the temporary permissions regime (TPR) will operate from exit day. Firms and other regulated persons wishing to use these regimes have to ensure they have completed the necessary steps by exit day to enter the relevant regime, it says.

The FCA plans to publish more information on how firms should comply with post-exit rules before exit day, 29 March.