Financial services contracts regime

This includes:

• credit institutions
• Solvency 2 insurers
• investment firms
• AIF managers
• UCITS management companies
• insurance distribution firms
• mortgage intermediaries
• firms that qualified for authorisation under Schedule 4 to FSMA.

If these firms entered into contracts before the end of the transition period or before they left the TPR, the performance of which would otherwise require continued UK authorisation, SRO provides a limited deemed Part 4A permission.

This permission allows these firms to perform regulated activities in the UK within the scope of their previous passport (as it was immediately prior to 11pm on 31 December 2020) but only to the limited extent necessary to continue to perform pre-existing contracts (and certain other activities referred to in the legislation) with UK customers for a specified period after 31 December 2020 or after they leave the TPR.

Firms in SRO are unable to be the manager, trustee or depositary of certain types of fund or to be the sole director or depositary of an authorised open-ended investment company.

For these firms, the SRO regime is set out in Part 6 of the Regulations[7].

If these firms entered into contracts (or issued electronic money) before the end of the transition period, the performance of which would otherwise require authorisation/registration after the transition period or after they left the TPR, SRO provides firms with a limited deemed authorisation/registration.

The limited authorisation/registration allows these firms to provide services in the UK within the scope of their previous passport (as it was immediately prior to 11pm on 31 December 2020), but only to the limited extent necessary to continue to perform pre-existing contracts or redeem outstanding electronic money.

For these firms, the SRO regime is set out in Schedule 3 of the Regulations[8].

If these firms entered into contracts before 11pm on 31 December 2020, the performance of which would require UK authorisation after that time, CRO acts as an exemption from the general prohibition in section 19 of FSMA[9].

This exemption allows these firms to perform regulated activities in the UK within the scope of their previous passport (as it was immediately prior to 11pm on 31 December 2020) but only to the limited extent necessary to continue to perform pre-existing contracts with UK customers after 11pm on 31 December 2020 (and certain other activities referred to in the legislation).

For these firms, the CRO regime is set out in Part 7 of the Regulations[10].

For these firms, CRO acts as an exemption from the prohibitions in regulation 138 of the PSRs[11] and regulation 63 of the EMRs[12], as appropriate.

This exemption allows these firms to provide services in the UK within the scope of their previous passport (as it was immediately prior to 11pm on 31 December 2020), but only to the limited extent necessary to enable the firm to perform pre-existing contracts or redeem outstanding electronic money.

For these firms, the CRO regime is set out in Schedule 3 to the Regulations[8].

CRO firms and open banking

While these firm are able to provide payments services in the UK, Account Servicing Payment Service Providers (ASPSP) do not have to provide CRO firms with access to the payments accounts they provide given that CRO firms are not authorised/registered in the UK but that it is at the discretion of individual ASPSPs whether they do allow CRO firms access.

Firms which enter SRO (ie that are eligible for SRO) must include specific status disclosure wording in letters (or electronic equivalents) to UK retail customers to indicate that they are in the regime. For full details of the wording, see GEN 4 Annex 1C[13] in our Handbook.

These firms in SRO should be aware of our guidance in Chapter 7 of our Approach Document[14] on status disclosure. There are also rules in our Banking Conduct of Business Sourcebook[15] that apply to communications and financial promotions.

Firms which enter CRO (ie which are eligible for CRO) must notify parties to existing contracts, as soon as practicable to do so following entry into CRO, that they are exempt from the general prohibition in section 19 of FSMA[2] and not regulated by the FCA or the PRA. See regulation 54A of the Regulations[7].

These firms must also notify parties to existing contracts if there is a material change, after 31 December 2020, in protection of client assets, dispute resolution or the compensation schemes available relevant to the contract.

These firms in CRO must, as soon as practicable to do so, notify parties to existing contracts: 

• that the firm is exempt from the prohibition in regulation 138 of the PSRs[3] or regulation 63 of the EMRs[4] (as appropriate) and is not authorised by the FCA; 
• that as a result of the UK’s withdrawal from the EU, it is possible that: 
  • the person’s assets held by the firm in relation to the performance of a pre-existing contract no longer attract the same protection as afforded to them before 31 December 2020, and/or 
  • recourse that was available to that person to an alternative dispute resolution procedure or compensation scheme under the pre-existing contract before 31 December 2020 is no longer available; and 
• of any changes arising as a result of the UK’s withdrawal from the EU to: 
  • the protection afforded to that person’s assets held by the firm in relation to the performance of a pre-existing contract, or 
  • the availability to that person of an alternative dispute resolution procedure or compensation scheme under the pre-existing contract. 

The firm must also provide the party with details of any material change (or likely material change) or inaccuracy to the information outlined above. 

See paragraphs 12C and 36 of Schedule 3 to the Regulations[16].

If your firm is in SRO or CRO, you must inform us if your home state authorisation is varied or cancelled, if your firm becomes the subject of a criminal investigation or proceedings, or if your firm becomes subject to an insolvency event. 

To notify us of any of the events above, please use this form[17].

If your firm is in SRO, you must inform us if your home state authorisation or registration is cancelled or varied, if your firm becomes the subject of any regulatory action taken by the home state competent authority or any adverse judgement made in pursuance of the money laundering directive

To notify us of any of the events above, please use this form[22].