The FCA says it believes that ‘passporting’ - the ability of a firm regulated in the UK to operate around the EU - should be maintained post-Brexit during any transition period.

The regulator said that while the final nature of any implementation period is yet to be agreed it is “anticipated” that firms will be able to continue to “benefit from passporting between the UK and EEA” after the point of exit and during the implementation period.

The FCA has welcomed the intention to provide for an implementation period to ensure a smooth exit of the UK from the EU. The FCA says it will monitor the negotiations and provide further information to firms as appropriate.

On December 15, the European Council confirmed that sufficient progress had been made to move to the second phase of negotiations related to transition (the ‘implementation period’) and the framework for the future relationship between the UK and the European Union.

The FCA welcomes the progress that has been made and is supportive of open markets and free trade in financial services underpinned by strong regulatory standards.

HM Treasury has also announced that, if necessary, the Government will legislate for a temporary permissions regime. This regime will enable relevant firms and funds to undertake new business within the scope of their permission, enable them to continue performing their contractual rights and obligations, manage existing business and mitigate risks associated with a sudden loss of permission.

For firms and funds that are solely regulated in the UK by the FCA they would need to notify the FCA before exit day of their desire to benefit from the regime but this notification for temporary permission will not require the submission of an application for authorisation.  The watchdog will set out further details of its approach in the New Year.

To support the transition period the FCA will continue to cooperate closely with the home state regulators of EEA firms and the European Supervisory Authorities.

Firms based in the UK servicing clients in the EEA should continue to prepare for a range of scenarios and should discuss these arrangements and the implications of an implementation period with the relevant EU regulator, says the FCA.

The FCA has reiterated that the UK remains a member state of the EU and therefore all rights and obligations derived from EU law continue to apply. Firms must abide by their obligations and continue with implementation plans for legislation that is still to come into effect.