Brexit Update: MiFID and AIFMD Passporting
Posted on 25 Jun 2020
Since the UK left the EU and entered the transition period, firms have been waiting for the Financial Conduct Authority (‘FCA’) to shed some light onto what the regulatory landscape would look like at the end of the transition period. Recent announcements by the FCA appear to have given more insight into this. Although it is not yet as detailed as what many firms were hoping for, it does allow some decisions to be made in defining their future business activities across the UK/EU border.
In recent announcements, the FCA has confirmed that achieving legislative equivalency is the key priority throughout the ongoing Brexit negotiations. Nausicaa Delfas – Head of International at the FCA reiterated that the regulator was working towards as smooth an exit as possible from the EU on 31 December 2020.
This week the UK government and the EU entered into the fourth and final round of trade agreement talks. Notably, by 30 June both parties must decide if they are going to extend the transition period beyond 31 December 2020. Up to this point, the UK government has always insisted that there will be no further extension to the transition period.
At this time, the FCA is proceeding on the basis that the UK and the EU will discuss whether the new agreements will be equivalent across financial services. This may lead to mutual recognition and the facilitating of some cross border transactions, possibly providing some services; however as of yet there is no clarity on this .
Such equivalence does not require identical legislation but would be achieved by an “equivalent outcome” of the UK and the EU legislation.
Changes to MiFID and AIFMD Passporting
Importantly, the FCA also indicated that after the transition period, it is highly unlikely that the UK-EU border will continue to operate with the current passporting regime. Therefore firms that do business across the UK-EU border should now start planning on how to continue activities without interruption.
European firms should also note that the FCA confirmed its intention to re-open registration for the inbound Temporary Permissions Regime (‘Inbound TPR’). The Inbound TPR will allow firms and funds which passport into the UK to continue operating when the current passporting regime ceases to exist at the end of the transition period. The FCA will do so once there is confirmation, on 30 June 2020 as to whether the UK Government will request the extension of the transitional period or not.
Earlier this week, the FCA published a discussion paper proposing new prudential rules for UK investment firms to replace the EU’s latest prudential rulebook post-Brexit. Thus, following the end of the transition period, there will be no obligation for the FCA to implement the EU’s Investment Firm Directive and Regulation (IFD/IFR) currently due to take effect on 26 June 2021.
According to the FCA, the “large majority of UK investment firms” would prefer a new domestic regime as it provides the potential of “lower regulatory costs, better alignment of requirements to business models, strengthened supervisory dialogue, improved competition and better prudential outcomes”.
Be ready for 2021 and act now.
Time is running out for firms to establish and put in place plans for their regulatory requirements post-Brexit. To assist firms, Laven has developed several different services designed to mitigate the potential impacts of Brexit for both UK and EU businesses. To find out more visit our Brexit Page.
Alternately, if you would like to speak directly with the Brexit team, please do not hesitate to get in touch via: