Rules that apply to firms in SRO and fund operators in the TMPR

On this page:

• Principles for Business
• Rules that apply to firms in SRO that previously passported into the UK under Schedule 3 or Schedule 4 to FSMA
• Rules that apply to payment institutions, registered account information service providers and electronic money institutions that previously passported into the UK
• Rules that apply to fund operators in the TMPR
• Disclosure requirements for EEA UCITS
• The transitional power and application of legislative requirements to firms in SRO and investment funds in the TMPR (no longer in force apart from for DTO)
• More information

Principles for Businesses

We have 12 Principles for businesses which are our rules setting out the main regulatory obligations and high-level standards that authorised firms must meet. Firms in SRO must adhere to these Principles.

1. Integrity – a firm must conduct its business with integrity.
2. Skill, care and diligence – a firm must conduct its business with due skill, care and diligence.
3. Management and control – a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
4. Financial prudence – a firm must maintain adequate financial resources (only applies to firms in the TPR to the extent that the firm is subject to capital requirements – see GEN 2.2.30R in our Handbook.)
5. Market conduct – a firm must observe proper standards of market conduct.
6. Customers’ interests – a firm must pay due regard to the interests of its customers and treat them fairly.
7. Communications with clients – a firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading.
8. Conflicts of interest – a firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.
9. Customers: relationships of trust – a firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement.
10. Clients’ assets – a firm must arrange adequate protection for clients’ assets when it is responsible for them.
11. Relations with regulators – a firm must deal with its regulators in an open and co-operative way and must disclose to the FCA anything relating to the firm of which the FCA would reasonably expect notice.
12. Consumer Duty – a firm must act to deliver against good outcomes for retail customers.

Firms should pay particular attention to Principle 11. It is important you let us know anything relating to your firm about which we would reasonably expect notice. For example, when the run-off of your UK business is complete.

If your firm contravenes one or more of these principles, you could face enforcement action and this could result in a fine, public censure or your firm’s limited permission under SRO being suspended or removed.

Rules that apply to firms in SRO that previously passported into the UK under Schedule 3 or Schedule 4 to FSMA

Firms in SRO are treated as having a limited UK Part 4A permission. This means that they fall within the full scope of our supervision and rule-making powers and will, at all times, need to adhere to our Principles for Businesses (above) and follow the other relevant rules and guidance in our Handbook[1].

Our general approach to the rules in our Handbook

We explain our approach from GEN 2.2.26 onwards in our Handbook. In respect of their UK business, firms in the SRO must comply with:

• all FCA rules which applied to them when passporting into the UK (see GEN 2.2.26R(1))
• all FCA rules which implement a requirement of an EU directive – this is relevant if the rule applied to the firm’s home state and therefore did not apply when the firm was passporting into the UK (home state rules). Here we accept ‘substituted compliance’ in respect of these rules. This means that if your firm can demonstrate that it continues to comply with the equivalent home state rules in respect of its UK business (including where this is on a voluntary basis if the relevant rules have ceased to cover UK business), it will be deemed to comply with our rules (see GEN 2.2.26R(2))
• certain additional FCA rules which we believe are necessary to provide appropriate consumer protection or relate to funding requirements – for example, our Principles for Businesses; see below for further details of the other rules that apply (and see the list in GEN 2.2.37G(2))

Safeguarding client money and custody assets

To ensure client assets held by firms conducting investment business or insurance distribution are protected, and to enable us to effectively supervise firms in SRO, we require that:

• firms report their client assets arrangements to us by email at [email protected]
• investment firms subject to MiFID II must provide us with an English translation of their client assets audit reports, either upon our request or on receipt of an ‘adverse’ audit report on the adequacy of the firm’s arrangements under its client assets obligations. This should be submitted to us by email at [email protected]
• firms disclose certain information to UK clients relating to the treatment of their client assets in the event of the firm’s failure. Firms must: 
  • disclose this to existing clients when they enter the regime, and in good time before safeguarding client assets for new clients
  • among other things, make this disclosure in a durable medium that is not obscured or disguised by other information and ensure the disclosure is prominent among other information
• tied agents and appointed representatives of firms subject to MiFID II in the regime are prohibited from holding client assets

Full details of these requirements are set out at CASS 14[2].

Status disclosure

Firms in SRO must include specific status disclosure wording in letters (or electronic equivalents) to UK retail customers to indicate that the firm is in SRO.

Note: This wording is different to that which applied to firms that were in the TPR.

For full details of the wording, see GEN 4 Annex 1C Statutory status disclosure (TP firms under Part 6 of the EU Exit Passport Regulations)[3]. Please note that the wording to be used depends on whether your firm has a branch in the UK or not.

Disclosure on compensation scheme coverage

We expect firms in the TPR to consider and communicate to their customers any material changes in home state investor compensation scheme coverage.

We also expect firms in SRO to provide, at a customer’s request, information concerning the firm’s inclusion (or not) in any compensation schemes, including the firm’s home state scheme.

There is more information on the guidance on this issue at paragraph 7.56 onwards in our Policy Statement PS19/5[4].

Senior Managers and Certification Regime

While in SRO, firms with a UK branch should continue to comply with the requirements of the Senior Managers and Certification Regime (SM&CR)[5] as it applied to EEA branches. There are no requirements in this area for firms in the TPR that were previously operating on a cross-border basis.

Rules that apply to payment institutions, registered account information service providers and electronic money institutions that previously passported into the UK

While in SRO, these firms will be regulated by us for their UK business. All firms have to comply with all their regulatory requirements, including our Principles for Businesses (above), at all times.

Regulations/FCA Handbook

We set out guidance in our approach document[6] relating to requirements in the Payment Services Regulations 2017[7] (the PSRs) and the Electronic Money Regulations 2011[8] (the EMRs).

Firms must also ensure they meet all other relevant rules and guidance applicable to them.

If we identify firms that are failing to comply with our requirements, or the requirements of SRO, we will take action to ensure customers are protected.

Parts of our Banking Conduct of Business Sourcebook[9], Dispute Resolution: Complaints[10], Fees Manual[11], Supervision Manual[12] and Principles for Businesses[13] are also relevant.

You can see which parts are relevant by reviewing our approach document[6], paying attention to Chapter 3 – Authorisation and registration, Chapter 6 – Temporary permission scheme, Chapter 8 – Conduct of business requirements, Chapter 11 – Complaint Handling, Chapter 12 – Supervision and reviewing our dedicated website[14] for EMIs and PIs.

See also the chapter on interpretation of our Handbook in our General Provisions[15] section, GEN 2.2.36G in particular.

Regulatory reporting

We summarise the regulatory reporting requirements for payment service providers and e-money issuers in our approach document[16] (Chapter 13). We explain that firms are required to submit their reports to the FCA via RegData (our data collection platform).

EEA firms in SRO do not currently have access to RegData. Therefore, we are making SRO firms aware that they can email their reports to [email protected].

If a firm has a question regarding regulatory reporting in SRO, they can email us at [email protected] or phone 0800 111 6768 from the UK or +44 20 7066 1000 from outside the UK.

Rules that apply to fund operators in the TMPR

Operators, depositories and trustees of funds in the TMPR should continue to comply with the rules that applied to them at the end of the transition period. See GEN 2.2.32R[17].

Disclosure requirements for EEA UCITS

In the UK the exemption from the requirement for EEA UCITS to produce a PRIIPs KID lasts until 31 December 2026. We can confirm this exemption applies to both EEA UCITS recognised under s272 FSMA and those recognised under the TMPR. This means, when being marketed to retail investors in the UK, EEA UCITS that are recognised under either s.272 FSMA or the TMPR must produce a UCITS KIID.

The transitional power and application of legislative requirements to firms in SRO and investment funds in the TMPR

The Treasury provided the financial services regulators with a power to phase in post-transition period requirements, allowing flexibility for firms and investment funds to transition to a fully domestic UK regulatory framework.

Firms in SRO and investment funds in the TMPR are subject to our rules which are set out in our Handbook.

However, to the extent that the transitional power was used to provide relief more generally (ie also to firms other than those in the TPR) in respect of any of rules with which firms and investment funds in the regime are expected to comply, this relief was also available for firms and investment funds in the TPR regime.

To the extent that transitional relief was provided in respect of obligations outside of our Handbook, this relief was also available for firms in SRO and investment funds in the TMPR because the TTP directions applied in principle to any person, but there is also the TP substituted compliance direction in Part 5 of our main TTP direction.

Under that direction, where a regulatory obligation outside of our Handbook applied for the first time following the end of the transition period because it related to a matter previously reserved to the firm’s home state regulator, until 31 March 2022 we allowed substituted compliance with the equivalent obligation in the firm’s home state in the same way as for our Handbook rules, unless otherwise indicated. This direction, as with the rest of the TTP, has now ended.

Please refer to our TTP pages[19] for more detail.

More information

For more detail see:

• Consultation Paper CP18/28[20]
• Consultation Paper CP18/36[21]
• Consultation Paper CP19/2[22]
• Policy Statement PS19/5[23]
• our rules in FCA 2019/36[19]

You can also refer to the 4 Statutory Instruments passed by the Government which relate to the TPR:

• FSMA firms operating in the UK under a financial services passport[24]
• EEA payment institutions, EEA electronic money institutions and registered account information service providers[25]
• UCITS schemes[26]
• Alternative Investment Funds (subsequently amended)[27]