FCA Warning for EEA Firms in TPR

  • Posted on: 5 July 2021
  • Written by: James Borley

Offering Financial Services In The UK Series

Nikhil Rathi's speech at City Week 2021 carried a warning for former passporting EEA firms that are in the Temporary Permissions Regime (TPR), as the CEO of the Financial Conduct Authority (FCA) spoke of them "setting the bar high at the gateway". A warning that could be equally relevant to all potential applicant firms.

City Week brought together industry leaders and policy makers from around the globe to consider the future of global financial markets and London in particular. Some might suggest an ideal setting for the CEO of the FCA to deliver a speech that ostensibly positioned the FCA as being free to set much of its own agenda following the UK’s departure from the EU, but with a warning that it will be "upholding high standards".

As a former FCA manager of a gateway function (Payments Authorisation), I understand the conflicting priorities that the FCA faces across financial services sectors. On the one hand it must assess each applicant firm against the relevant conditions of authorisation/’threshold conditions’, only granting ‘permission’ to those firms that can clearly demonstrate that they satisfy those conditions and will likely do so on an ongoing basis. On the other hand it should nevertheless apply a proportionate approach to its assessment so that it does not create artificial barriers to entry and, importantly, investment in the UK.

Well actually the second priority is not one that is set out for the FCA in its statutory objectives but, in the context of EEA and overseas firms seeking to set up businesses in the UK, perhaps it should be. Whilst we understand the FCA’s focus on consumer protection and market stability, and that rapid firm growth may well impact both, the FCA must also understand that firms do not have an endless source of funding and need some certainty at the gateway in order to succeed.

Whilst the FCA insists it wants to encourage firms to become authorised and grow and scale safely and successfully, that assumes that the high bar at the gateway can be overcome in a timely manner.

With the wait times before the FCA even looks at an application seeming to increase on a weekly basis, it is increasingly challenging for applicants – whether from the UK, EEA or overseas – to fund sufficiently and with enough certainty to be able to demonstrate that they are ‘ready, willing and organised’. Remember, the FCA has up to 12 months in which to determine an application for authorisation. The more questions the FCA has for an applicant firm the longer the process will take.

The FCA expects that firms in the TPR are already at a high standard, by virtue of their supervision by their home state regulator. It has taken action against those firms with whom it has concerns, with firms that have ‘riskier’ business models being directed to apply for authorisation in earlier landing slots. The FCA is promising “a rigorous review” of applications once submitted, so it's important that firms submit a thorough and complete application to avoid unnecessary delays. 

Understanding the common terms that are used and the UK regulatory processes and requirements can help firms avoid the additional regulatory questions and common pitfalls that often delay applications. Our guide can help, but for many firms the best option will be to seek support from a specialist consultancy such as Compliancy Services either to review their application before it gets submitted to the FCA or to prepare and manage the whole application process.

Download FCA Authorisations Guide For EEA Firms