Brexit Asset Management Update

The post below summarises the latest Brexit developments related to asset management.

ISDA publishes no-deal Brexit FAQs

The International Swaps and Derivatives Association (ISDA) has published a set of no-deal Brexit FAQs which provide a high-level summary of the key impacts of a no-deal Brexit on the OTC derivatives market and ISDA documentation.

FCA updates Brexit guidance on data sharing

The FCA has updated its webpage on preparing firms for Brexit to include further information on data sharing. The FCA advises that the UK Government has taken action to ensure that if the UK leaves the EU after 31 October with no deal, UK firms will continue to be able to legally send personal data from the UK to the EEA and 13 countries deemed adequate by the EU. The FCA notes that the position for transfers of personal data from the EEA to the UK has not been made clear.

Queen’s Speech 2019: Financial Services Bill 

The UK Government has published the Queen’s Speech 2019, which sets out the legislative agenda for the forthcoming Parliamentary session. The Financial Services Bill, which aims to ensure the UK maintains regulatory standards and international access post-Brexit, will form part of the legislative agenda. The Bill aims to:

• protect the UK’s status as an asset management centre by simplifying the process allowing overseas investment funds to be sold in the UK;
• strengthen the regulation of global banks via implementation of the Basel Standards; and
• ensure long-term market access to the UK for financial services firms in Gibraltar.

A practical summary and background briefing notes of the Queen’s Speech have also been published.

FCA update for firms on no-deal expectations

The FCA has issued an update setting out its latest expectations for firms in the event the UK leaves the EU on 31 October 2019 without a deal:

• wholesale banks, wholesale markets and asset managers are alerted to relevant memoranda of understanding and the FCA’s October 2019 Primary Markets Bulletin;
• the FCA intends to consult soon on its proposed approach to branches and subsidiaries of international firms;
• the FCA intends to publish further details of the process by which new EEA sub-funds which are authorised after exit, but form part of an umbrella scheme that notified for the temporary permissions regime (TPR) prior to exit, may be added into the regime; and
• regarding the reporting of derivatives, the FCA expects all UK reporting counterparties to have reported the details of all derivative transactions concluded, terminated and/or modified on 1, 2 and 3 November 2019 to an FCA registered trade repository (TR) by no later than 4 November 2019.

The FCA will take a proportionate and pragmatic approach to supervising reporting around exit day.

FCA publishes Market Watch on Brexit

The FCA has published Market Watch 61 on the topic of a no-deal Brexit. The short note covers: Brexit planning; Brexit and MiFID transaction reporting; the operation of the MiFID transparency regime post-exit; and industry testing of FCA FITRS.

FCA FITRS instructions

The FCA has published instructions on the FCA Financial Instruments Transparency System (FITRS), which has been built to replace the European Securities and Markets Authority (ESMA) FITRS in the UK as part of the FCA’s planning for Brexit. The document is addressed to market participants which need to make use of the UK transparency calculation results for the purpose of complying with the Markets in Financial Instruments (Amendment) (EU Exit) Regulations 2018 (UK MiFI Regs) and the associated Binding Technical Standards. The FCA FITRS transparency results files are calculated from transparency data collected from UK trading venues and UK approved publication arrangements (APAs). The results files also include pre-Brexit results sourced from ESMA FITRS, to the extent these results have not been superseded within FCA FITRS.

EU Exit: Financial Services (Implementation of Legislation) Bill falls

The UK Parliament has confirmed that the Financial Services (Implementation of Legislation) Bill 2017 – 19 has failed to complete its passage through Parliament before the end of the session. This follows the prorogation of Parliament. The Bill, which would have provided a mechanism, in a no-deal scenario, for HM Treasury to implement EU financial services legislation that is currently in the pipeline for a period of two years after the UK leaves the EU, will instead make no further progress. The Bill had completed its passage through the House of Lords but only proceeded as far as completing the committee stage in the House of Commons, and was among the Bills deemed to have fallen following the government’s attempt to prorogue Parliament in September 2019, which was later held by the Supreme Court to be unlawful.

OFSI publish Russia post EU-Exit financial sanctions guidance

OFSI has published specific guidance in respect of the financial and investment restrictions in the Russia sanctions regime should the UK leave the EU without a deal. This guidance does not currently apply and would only come into effect if the UK leaves the EU without a deal and when the Russia (Sanctions) (EU Exit) Regulations 2019 come into force.