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"No Deal" issues & actions required now

Withdrawal of the EU Passport for Financial Services firms (European Commission Contingency Action Plan)

If the Withdrawal Agreement is not ratified, financial operators established in the United Kingdom will lose, as of the withdrawal date, the right to provide their services in the EU27 Member States under EU financial services passports.

UK Temporary Permissions Regime (Banking/Asset Management/Insurance)

As of as of 7 January 2019, UK authorities are accepting formal notifications from EEA firms and funds that may wish to make use of the Temporary Permission Regimes. This notification window will close on 28 March 2019 and firms that have not submitted a notification prior to 29 March will be unable to continue accessing the UK market on the same basis as currently.

Further, fund managers that have not submitted a notification for a fund will be unable to use the temporary permissions marketing regime for that fund. They will not be able to continue marketing that fund in the UK on the same basis as they did before exit day.

Temporary and conditional equivalence: safeguarding financial stability (Market Infrastructure)

The European Commission has adopted a 12 month equivalence decision for UK Central Counterparties as well as a 24 month equivalence decision for UK central securities depositories, in order for EU 27 entities to fulfil their legal obligations and put a viable alternative in place.

The Commission also adopted two delegated Regulations facilitating novation, for a fixed period, of certain OTC derivatives contracts with a counterparty established in the UK to replace that counterparty with a counterparty established in the Union. This allows such contracts to be transferred to an EU27 counterparty while continuing to be exempt from the clearing and margining obligations under the European Market Infrastructure Regulation (EMIR).

Action required now

Impact Assessment on inability for UK firms to utilize the EU passport

The Central Bank of Ireland has stated that they expect firms to ensure they have robust contingency plans in place to minimise the impact on customers, investors and markets.

Firms should perform an impact assessment which enables them to identify whether they have an EU-passport related reliance on a UK financial services firm. Where such reliance exists, firms should continue to take all the necessary steps to mitigate the loss of that passporting ability.

Client Communications:

Firms should, in accordance with their Brexit contingency plans, actively inform their clients about the steps they have taken and how they are implementing them.

The European Securities and Markets Authority (ESMA) recently reminded firms that will be impacted by Brexit that they should ensure that they provide clear information to clients whose contracts and services may be affected by Brexit. ESMA also noted that relevant information should be provided as soon as possible, and should cover at least the following areas:

  • Impact of UK departure for the given firm and its business, and the implications this has for the relationship between the client and the firm;
  • Actions the firm is taking such as organisational arrangements to deal with client inquiries;
  • Implications for clients of any corporate restructuring and, in particular, any relevant changes to contractual terms; and
  • Contractual and statutory rights of clients in these circumstances, including the right to cancel the contract and any right of recourse, where applicable.