Three years on since the end of the Temporary Permissions Regime (TPR), the transition rules are still causing confusion for groups with both UK authorised entities and EU intermediaries operating through UK branches. Why are the requirements so challenging to understand, and what should firms be doing now?
The FCA requirements for UK firms that took advantage of the TPR to continue to transact European business post-Brexit, remain unclear even though the transition period has long since passed its sell-by date. In the intervening years, the majority of entities and intermediaries have been interpreting the regulations as they evolved. The result is that a big slice of the market is still unsure whether it needs to undertake a client money audit for the UK branches of their EU intermediaries, or not.
A look at the chronology of events will provide some much-needed clarity.
How did we get here: the Temporary Permissions Regime explained
Following Brexit, many EEA insurance intermediaries continued operating in the UK through branches under the Temporary Permissions Regime (TPR). The TPR allowed eligible firms to continue to operate using this work-around for a three‑year period to 31 December 2023, ostensibly to give firms time to cement their long-term plans.
Crucially, the time-limit was designed to lead to one of two outcomes:
- Full UK authorisation (where a firm wanted to remain in the UK market); or
- Orderly wind‑down, for firms leaving the UK market.
Client money rules under the TPR: why firms were confused
The UK branches created under the TPR regime were foreign entities. As a result, for insurance intermediaries, client money oversight during the transitional period was unusual: the regulator wanted visibility, but responsibility for client money frameworks and audit expectations sat outside the UK with the Home State Regulator. Client money requirements across Europe varied significantly from one country to another and intermediaries were left unclear about whether they needed to conduct a client money audit, or not for the relevant jurisdiction.
There was much uncertainty initially as to whether the FCA would require a client money audit for the UK branches. Subsequent policy statements made it clear that it would not regulate client money for UK branches as in the case of an insolvency, the FCA would have no jurisdiction over those funds.
CASS 14: the FCA’s monitoring under the TPR
To support supervision of client assets during the TPR, the FCA introduced CASS 14. CASS 14 applies to a “TP firm” in relation to activities where CASS 5, CASS 6 or CASS 7 would apply as a result of the temporary permission rules. A central feature of CASS 14 was the Temporary Permission Client Assets Return (TPCAR).
For TP firms where CASS 5 applied under the temporary permission rules, CASS 14 set the reporting cycle by reference to revenue thresholds and prescribed submission deadlines. Essentially, TPCAR was designed to give the FCA oversight, but it was not the same as bringing all TP branches into the full UK CASS 5 audit framework.
What changed after the TPR ended?
When the TPR ended from 31 December 2023 firms were expected to seek full UK authorisation if they wished to continue to access the UK market.
For firms that did not become UK authorised or registered, the FCA’s Financial Services Contracts Regime (FSCR) provided a route to wind down UK business in an orderly fashion.
The practical implication was that once a firm was no longer operating as a TP firm, the ongoing CASS 14/TPCAR framework no longer fit, because it applied to activities carried on in reliance on temporary permission.
UK branch vs UK subsidiary: the key regulatory difference
This is the point that most often creates confusion in groups with both UK authorised entities and EU intermediaries operating through UK branches.
Many UK branches still follow a similar system to UK authorised firms in terms of segregation of client money, client money calculations, and associated procedures (as these were put in place before the current rules were fully established), and such Groups also benefit from complimentary client money systems and controls to the UK authorised entities with client money permissions.
But what is required for UK groups in practice?
- A UK subsidiary with CASS 5 permissions sits in the UK audit and reporting framework.
- A UK branch of an EU intermediary may still be operating with audit expectations driven by the Home State approach, even if the group chooses to adopt UK‑style processes for consistency.
It’s important to note the FCA would still like to be notified and provided with an adverse opinion issued by a client money auditor for an EU insurance intermediary (as required originally under TPCAR reporting process) as this could put the FCA on alert that there may be a client money issue with the FCA regulated entity in the group.
Where this leaves firms now
Firms should see that the landscape is cleaner:
- No TPR means no CASS 14 monitoring return for firms that are no longer TP firms.
- UK authorised intermediaries remain anchored to CASS 5 (and to the FCA’s external audit expectations where thresholds and trust structures trigger them).
- For groups with a UK branch of an EU intermediary – the audit requirements sit with the Home State regulator and not the FCA, even if the group decides to adopt UK-style approach with client money bank accounts and client money calculations.
For groups that contain both FCA regulated UK firms and EU intermediaries operating through UK branches, the practical focus should be on clarity of legal entity, clarity of permissions, and clear internal escalation if issues arise that might affect the UK authorised firm’s client money arrangements.
