The FCA recently reported on what happened to the 1,191 solo-regulated firms that entered the Temporary Permissions Regime: 212 firms secured full UK authorisation, 875 firms did not seek full UK authorisation and 104 firms did seek full UK authorisation but failed to meet the FCA standards and were not authorised.
By my calculations, just under half of applications submitted by TPR firms were unsuccessful. At first blush, this might seem surprising given that they were typically starting from a strong position, in that they already held a licence in another jurisdiction. However, that may have created a sense of complacency, and that FCA authorisation would be a fait accompli. Actually, I suspect the opposite was true, with the FCA expecting more of these firms [than from new start-ups for example] because of their home-state authorisation. Indeed, Val Smith, the FCA’s Head of Authorisation said precisely that at our webinar on the subject back in February 2021.
Those that chose not to apply may not have had a pressing commercial need to do so. In my experience, as previous Head of the Passporting Team at the FSA, firms often applied to exercise a passporting right, on a cross-border services basis, to have it available on a ‘just in case’ basis. Given that a prerequisite for UK authorisation is to demonstrate a UK head office (i.e. physical presence and infrastructure in the UK), many EEA firms will have concluded that pursuing a UK licence was just not commercially viable. Indeed, for payments firms, the FCA’s adopt of the EU Commission’s Interpretative Communication (Freedom to provide services and the interest of the general good in the Second Banking Directive (97C 209/04)) means that a firm operating from the EEA (or any other third country) would don’t require FCA authorisation if all it does is to provide internet-based and other services to UK customers from that location.
Unfortunately, the FCA approach does not appear to be reciprocated across Europe, meaning UK firms are typically needing to set up new entities and seek local authorisation if wanting to do business in the EEA. Which leads me to wonder, just where is the ‘best’ place in Europe for firms to try an gain authorisation?