Brexit and (E)You
As Brexit continues to unfold, the impact this will have on advice firms is becoming clearer. Luckily, Brexit won’t immediately have an impact on most advice firms. But, for those of you who have clients in the European Union, or if you’re just generally interested, we have summarised the key points so far…
The FCA has allowed EEA firms to operate in the UK, but UK firms have not been granted the same privilege within the EEA. If you have clients overseas, don’t panic! You will be able to continue to provide advice but ONLY when clients are in the UK. You can send generic information to clients overseas as long as this doesn’t amount to advice. You need to be confident that you can sustain your ongoing obligations in terms of delivering the services that clients are paying for and continue to meet regulatory requirements.
If you wish to provide advice to clients based in the EU without them being in the UK, there are a couple of options available to you: obtaining your own separate MiFID compliant EU licence, or partner with an EU firm. Both are not decisions that should be taken lightly and can be difficult processes to go through. Applying for a separate EEA licence can bring with it challenges such as the ability to easily obtain a licence from a particular regulator, the presence of local office space, tax obligations in the country you chose to be regulated in, capital adequacy requirements, and the requirement to have resident directors to name a few. If your firm is thinking about partnering with an EU based firm, you should be considering things such as the typical service provided by the firm, the investment solutions used, knowledge of advisers, compliance, and the standards of the regulator in comparison to the FCA.
GDPR remains the law in the UK under the new name ‘UK GDPR’. UK firms can continue to send data to the EEA. The UK-EU Trade and Cooperation Agreement will allow personal data to flow between the UK, EU and EEA until adequacy decisions are made (this shouldn’t take longer than 6 months). The Information Commissioners Office recommend that firms based in the UK and rely on the free flow of data to the EU should have alternative safeguards in place before the end of April in the form of a Standard Contractual Clause between yourself and the sender on EU-approved terms.
The FCA has reminded firms with clients living abroad of principle 7 – ‘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’. Firms should contact customers and let them know about the changes, how these affect their situation and what the firm can do to support them.
The FCA has been given Temporary Transitional Power (TTP) which enables the FCA to delay any regulatory requirements that will change as a result of Brexit. Therefore, firms have until 31/03/2022 to prepare for any potential regulatory changes due to Brexit.
The consultations are ongoing and evolving all the time, we are keeping a close eye on developments as they happen and how these may impact on firms.
Alanis Daniel – Compliance Support