As of 11 pm on 31 December 2020, the transitional period for the UK’s departure from the EU will end, and EU legislation that has been ‘onshored’ will come into force. While substantially the same as existing EU-derived legislation, the process of onshoring does involve amendments to ensure that legislation works in a UK-only context. In order to give firms sufficient time to apply these different requirements, the UK’s regulators have used their Temporary Transitional Power (TTP) to make transitional provisions such that firms will have until 31 March 2022 to make preparations for changes arising from onshoring while complying with existing requirements.
Giving further certainty, the Financial Conduct Authority (FCA) has announced that it will extend the TTP to the Share Trading Obligation (STO). Broadly, the STO requires that shares issued in the EU should be traded on an EU venue, which would present challenges for EU issuers using a UK venue for their primary market in any volume. Extending the TTP to the STO means that UK market participants can continue to trade on EU trading venues that are UK Recognised Investment Exchanges, using the FCA’s Temporary Permissions Regime or fall under the Overseas Persons Exclusion. Separately, the European Securities and Markets Authority has clarified that trading of shares with an EEA ISIN on a UK trading venue in GBP by an EU investment firm will not be subject to the EU STO.
Firms are reminded that the TTP will not apply to a number of regulatory obligations, chiefly involving reporting, and that they should be making preparations to be in compliance with the changes to these requirements by 31 December. While the FCA is expressing reticence over enforcement action in the event of a failure to comply with new, Brexit-related obligations, forbearance will only be available when there is evidence that firms have taken reasonable steps to prepare.