FCA is consulting on its approach to authorisation and supervision of international firms operating in the UK. The approach will apply to EEA firms seeking authorisation as they exit the TPR, and firms from non-EEA countries.
FCA says there are over 1500 firms registered to the TPR, and it expects this number to increase when it reopens the TPR notification window on 30 September. It feels that, overall, its current approach to authorisation and supervision of overseas firms is proportionate and appropriate, but thought it helpful to explain what factors it takes into account. The consultation is particularly pertinent because the majority of international firms operating in the UK currently do so under a services passport, which they will be allowed to continue for a limited period under the TPR.
Broadly, if an international firm meets the requirements to be authorised and has good risk mitigation in place, it will be authorised. But, FCA will pay particular attention to certain aspects of the firm, such as how well it can supervise the conduct of its UK business, the role and accountability of its management, potential outcomes in an insolvency situation and supervisory cooperation.
Currently, FCA offers international firms the choice between a branch and a subsidiary – but the authorisation, if granted covers the whole entity regardless. Generally, FCA feels risk mitigation is harder, and harm more likely, in branches – not least because it may be more complex for FCA to take certain actions where firms operate from branches. FCA will be looking at:
- risks of harm: broadly, retail harm, client assets harm and wholesale harm;
- mitigation of those harms: retail harm is generally the hardest to address; and
- overall, the supervisory regime in the home state, and international cooperation.
Where appropriate, FCA will authorise, but impose a limitation or requirement.
When supervising, FCA will look at how best to supervise firms, looking at the business and how it is organised. It will pay great attention to SMCR compliance and systems and controls. It will also take great care to assess the risks presented by business carried out from outside the UK with UK customers – such as when FOS and FSCS coverage would, or would not, be available. Again the paper looks at the 3 harms and possible mitigants.
FCA seeks responses by 27 November.