FCA gives firms flexibility over cross-border business post-Brexit

The UK’s financial watchdog has promised firms seeking to operate cross-border after Brexit will be granted flexibility to choose their own business model.

The FCA issued its ‘Dear CEO’ letter in which it set forth a framework to make sure conduct risks were managed accordingly, no matter what business model is used for firms wanting to branch out across Europe after the UK leaves the EU.

The letter said: “If you are expanding your presence elsewhere in Europe, the structures you put in place must enable us to supervise the conduct of your UK business effectively and ensure that you continue to meet our threshold conditions.

“When designing the structures you should assess whether the proposed changes are in the best interests of your clients. We are aware that some authorities elsewhere in Europe have set out specific requirements as regards business models.

“We are open to a broad range of legal entity structures or booking models. This includes those making use of back-to-back and remote booking, providing their associated conduct risks are effectively controlled and managed.”

The FCA underlined: “Our starting point is therefore not to restrict business models but to understand the principles and practice involved and how the conduct risks that arise from them are managed.”

City law firm CMS Cameron McKenna welcomed the regulator’s “more flexible approach”.

In a newsletter, CMS said: “The FCA’s statement and its more flexible approach coincides with recent reports that chancellor Philip Hammond was concerned about the danger of capital shifting from the UK to the EU as a result of Brexit.

“Flexibility on business structures and back-to-back booking would help firms to maintain capital in the UK.”

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