Countdown to Brexit - Financial ServicesThursday, 08 October 2020
With the Brexit deadline passed and the end of the transition period fast approaching, the ByrneWallace Brexit team address various issues which will impact upon businesses either trading with or through the UK, or with suppliers in the UK, and/or with UK staff based in Ireland or staff in the UK.
In this issue, we address Financial Services.
Critical issues for businesses to consider:
Provision of services and/or products on a cross-border basis: From the end of the transitional period in December 2020, UK firms will lose the benefits of delivery of cross-border services to clients throughout the EU; and the same will be true, in principle, for EU firms seeking to service clients in the UK.
Even without an overarching agreement between the EU and UK on such services, various key EU (and UK) regimes provide for an equivalence mechanism (deeming a third country to apply equivalent supervisory standards as the EU and, therefore, allowing for relevant firms to provide services in the EU, and the same on the UK side). Where equivalence is provided for as has been the case with some of these regimes (particularly where EU firms frequently make use of UK-based providers), cross-border service provision into and out of the UK may continue. There may be limitations in the equivalence regime, however, in terms of its extension to particular classes of clients, and it is, usually, subject to termination at short notice where the European Commission determines that equivalence is no longer in place.
Generally speaking, when firms are no longer able to rely on permissions previously relied upon to distribute into the EU (from the UK) or the UK (from the EU), such firms should obtain requisite authorisations, partner with entities with such permissions, or run-off existing arrangements / terminate such where required.
Delegation and reliance on service providers: Firms should ensure that their financial service providers, including bankers, insurers, and investment service providers, have requisite permissions to provide services or take care to select alternative providers; and the same is true of delegates such as investment firms, custodians, technical service providers, etc. Firms should pay close attention to arrangements affected by Brexit and ensure that they do not agree to reverse solicitation provisions, for example, which are put to them to allow for continuation of a service but which materially affect their rights in the event of future disputes.
Consumer rights: Various entitlements EU retail customers would have had against UK-based firms (and the inverse) will no longer be the case post-Brexit.
Overseas Person Exemption: In Ireland, UK-based firms may be able to rely on an Overseas Persons Exemption which can provide continued cross-border access by UK firms to professional clients in Ireland under domestic Irish law.