Before Brexit, EEA financial services firms could use the existing passporting regime to establish a branch or provide services (without a UK branch) in the UK without authorisation from the PRA or the FCA. The passporting regime also allowed EEA-based investment funds to be marketed in the UK.
However, following Brexit, EEA-based firms can no longer passport into the UK, nor can EEA-based investment funds be marketed under an existing passport in the UK.
The Temporary Permission Regime (TPR), from the FCA, enables relevant EEA firms and funds to continue operating in the UK when the transition period ended on a temporarily basis.
Firms can apply for full permission (non-temporary) while they are in TPR. They should have been contacted by the FCA on their “landing slot”. The firms will have a few months of warning to prepare their application. The process of full authorisation is expected to be completed by end December 2022.
Are you already up and running with a permanent license from the FCA for pre/post trade, MiFID reporting? Have you considered the technology investment to remain compliant?
Are you keeping your UK operations?
If you’re keeping your UK operations, are you having to re-hire/re-purpose resources to create another regulatory branch to submit reports to the FCA? That is, you will need to aggregate, normalise, standardise, and maintain a divergent set of reports and manage both ESMA and FCA data sets.
If you’re closing your UK operations, but keeping your EU operations, how are you managing to keep up to date with the changing regulations from ESMA?
Within a control framework, MiFID II Data Accuracy is under scrutiny by both the EU and UK regulators – errors in your MiFID II reporting data could result in sanctions from your NCAs.
The FCA, CSSF (Luxembourg) and AFM (Netherlands) are all actively monitoring erroneous MiFID II transaction reporting data and have made public their findings.
You can access SmartStream RDU data for validating your reference data quality, as and when you find errors. Rest assured SmartStream RDU monitor in real time for notifications from ESMA and the FCA that impact regulatory reference data.
How will the end of LIBOR effect your regulatory reporting?
Since LIBOR has been phased out, and alternative benchmark rates to risk-free rates are being phased in (SONA, SOFR etc).
These changes can affect the data you include in your regulatory reports as well as the result of ToTV calculations and SI determination.
At SmartStream RDU, as part of our Regulatory Data as a Service offering, we are receiving, processing, and maintaining the various benchmark rates that institutions are now using.
It is important to address these changes in your control framework.
Do you rely on your APA to determine pre- / post-trade reporting?
You can no longer outsource the correctness of the reports that get submitted to an external institution. That is, the regulator is looking for systemic errors in your reporting, which could also lead to re-reporting for prior periods.
You must have controls in place to ensure your APA or ARM is reporting accurately on your behalf. You will need to have historical data accessible if/when the regulator requires back reporting. The SmartStream RDU provides historical MiFID data.
Do you source FIRDS and FITRS data directly?
If you do, then they may not be aware that in-order-to operate and report in both the UK and EU they will need to source two different sets of data to drive reporting decisions both from ESMA and the FCA.
If you source the data via a third party, check that you have been in touch with their provider to determine how they will be handling the data sets and divergence in regulation.
At SmartStream RDU our regulatory data has been Brexit compliant since January 1, 2020.