Brexit Asset Management Update

Treasury Committee inquiry: The future of UK financial services after EU exit

The House of Commons Treasury Committee has announced a new inquiry into the future of the UK’s financial services once the UK has left the EU. The inquiry will examine what the Government’s financial services priorities should be when negotiating the UK’s future trading relationship with the EU. It will also consider how the UK’s financial services sector can take advantage of the UK’s new trading environment with the rest of the world and, whether current regulatory barriers that apply to third countries should be maintained.

The Committee is currently accepting written submissions; there is no set deadline for the submission of written evidence to this inquiry.

Statutory instruments for a no-deal Brexit

The Government has continued to publish further final and draft statutory instruments to make the changes to legislation required in the event of a hard Brexit. Areas covered by some of the recent statutory instruments that have been published include:

• CREST – the draft Uncertificated Securities (Amendment and EU Exit) Regulations 2019 are intended to ensure that the UK retains an operative regulatory framework for uncertificated securities post-Brexit. They also amend the Uncertificated Securities Regulations 2001 to amend or revoke certain provisions which overlap with the framework under the Central Securities Depositories Regulation 2014 (EU/909/2014), and these amendments will come into force regardless of the outcome of the Brexit negotiations.
• Listing regime – The draft Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019 have been laid before Parliament. There have been no substantive changes to the previously published draft (see our corporate update 2018/25). These Regulations will underpin the proposed changes to the Listing Rules, Prospectus Rules, Disclosure Guidance and Transparency Rules on which the FCA is consulting (see our corporate update 2018/24).
• Equivalence regime – the draft Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 will give HM Treasury a temporary power, for up to twelve months after Brexit, to make equivalence directions and exemption directions for the EU and EEA Member States. Some EU financial services legislation contains provisions which allow the European Commission to determine that a third country’s regulatory and supervisory regime is equivalent to the EU’s corresponding regulatory framework. These regulations will transfer these functions to the Treasury. Existing EU equivalence decisions will become retained EU law but will contain deficiencies that these Regulations will address.

The draft Financial Services (Distance Marketing) (Amendment and Savings Provisions) Regulations 2019 (with draft explanatory memorandum), which remedies certain deficiencies in retained EU law in relation to the distance marketing of consumer financial services arising as a result of the UK’s exit from the EU, and the draft Money Market Funds (Amendment) Regulations 2019 (with explanatory memorandum), which remedies certain deficiencies in money market funds (MMFs) legislation arising as a result of the UK’s exit from the EU, have also been published.

UK temporary permissions regime

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) propose to implement a temporary permissions regime (TPR) if the UK leaves the EU on 29 March 2019 without a deal or any transitional period. The TPR is intended to ensure that EEA firms currently operating under an incoming passport (either from a UK branch or on a cross-border services basis into the UK) can continue to carry out regulated activities in the UK until they receive new direct authorisation by the UK regulators.

We have published a briefing on the TPR which is available here.