The regulator has published its approach to the authorisation and supervision of international firms operating the UK market.

It says international firms serving UK customers can create "different risks of harm" compared to UK firms because of the way their businesses are structured and operate.

In the approach document the FCA sets out how these risks may be mitigated and the factors it will take into account when deciding whether it may be more appropriate for an international firm to seek authorisation as a UK incorporated firm for all or part of its business.

During the consultation with firms last year, some respondents pushed back against the need for firms to have a meaningful local presence in the UK.

However, the regulator said it will assess firms on a case-by-case basis and “may impose limitations or requirements where appropriate”, and that the scale of UK-based operations may vary depending “on the specific circumstances of the firm” to “achieve proportionate outcomes”.

Senior managers who are directly involved in managing the regulated firm’s UK activities will also be required to spend “an adequate and proportionate” amount of time in the UK. The regulator said it will take external factors, such as Coronavirus pandemic-related travel restriction, into account when considering how much time senior managers need to spend in the UK.

The FCA’s approach to international firms has come under the microscope following Brexit and changes for EEA firms and investment funds that used to passport into the UK.

EEA firms currently regulated under the Temporary Permissions Regime (TPR) will now be allocated a period during which they need to submit their application for UK authorisation.

EEA firms that did not enter the TPR and required permission to perform an existing contract, entered the Financial Services Contracts Regime (FSCR). This allows them, for a limited period, to fulfil their contractual obligations existing at the end of the Brexit transition period to UK customers while exiting from the UK market. The FSCR also applies where a firm that was in the TPR fails to obtain authorisation.

In the case of dual-regulated firms, the Prudential Regulation Authority is the lead authority for authorisation but the FCA must also provide its consent

Nausicaa Delfas, executive director of international at the Financial Conduct Authority, said: “Our approach to authorising international firms, including EEA firms currently in the Temporary Permissions Regime, is to mitigate the risks of harm to UK customers and ensure market integrity.

“Any firm intending to apply for FCA authorisation, should take note of our expectations set out in the approach document and be ready to meet our standards.”