Brexit Asset Management Update

In this post we summarise the latest Brexit developments related to asset management.

FCA updates on Brexit implementation period

The FCA has published information to assist firms during the Brexit implementation period, which is due to run from 11pm on 31 January 2020 until 31 December 2020, and during which EU law will continue to apply. In particular, the FCA confirms the following:

• there will be no changes to the reporting obligations for firms, including those for Markets in Financial Instruments Regulation (MiFIR) transaction reporting and under European Market Infrastructure Regulation (EMIR), which will continue in line with existing EU regulatory requirements; and
• the windows for notifications to be made by EEA firms under the Temporary Permissions Regime (TPR), or for fund managers to notify the FCA of any funds they want to continue to market in the UK under the Temporary Marketing Permissions Regime (TMPR), has closed as at the end of 30 January 2020. Firms and fund managers that have already submitted a notification need take no further action at this stage. The FCA will confirm its plans to reopen the notification window later this year to allow additional notifications to be made by firms and fund managers before the end of the implementation period.

FCA Handbook update

The FCA has made the following instruments in Handbook Notice 73 relating to the agreed implementation period:

• Exiting the European Union: Deferral of Commencement and Miscellaneous Fees Instrument 2020; and
• Exiting the European Union: Implementation Period (Guidance) Instrument 2020.

Updates to the FCA’s guidance on EU non-legislative materials, non-Handbook materials and completing FCA forms after Brexit have also been published. The changes make it clear that firms should not refer to the guidance during the Brexit implementation period.

The FCA will issue an update when it has published the changes made by its final Handbook and Binding Technical Standards (BTS) instruments in the online Handbook.

FCA and BoE statements on Brexit temporary transitional directions

The FCA and the Bank of England (BoE) have published information on temporary transitional directions made in preparation for a no-deal Brexit following the UK’s entry into a Brexit implementation period.

The FCA has updated its webpage on Temporary Transitional Power (TTP) directions to confirm that during the implementation period, the TTP Directions previously made by the FCA were not required at this stage and did not come into force at 11 pm on 31 January 2020. The FCA further confirms it will update firms on the position for the period after the implementation period in due course.

The BoE has updated its webpage on transitioning to post-exit rules and standards to confirm that it has not made final versions of the BoE and PRA transitional directions or published updated transitional guidance materials. The BoE and PRA confirm they will communicate on the status of the transitional directions before the end of the implementation period. They may also issue further statements or updates, including in relation to any EU materials that begin to apply during the implementation period.

ESMA statement on governance and reporting obligations

The European Securities and Markets Authority (ESMA) has published a statement clarifying issues relating to its governance and reporting obligations for UK entities from 1 February 2020 following the UK’s withdrawal from the EU. From 1 February 2020, the FCA is no longer a member of ESMA’s Board of Supervisors nor will it participate in any of ESMA’s other governance bodies.

As EU law will continue to apply to the UK as if it were a Member State during the implementation period, rights and obligations of UK entities under EU law will also continue to apply, including reporting and notification obligations under MiFIR and MiFID II, EMIR, the Central Securities Depositories Regulation (CSDR), the Alternative Investment Fund Managers Directive, and the Money Market Funds Regulation. ESMA will continue to directly supervise registered credit rating agencies, trade repositories (TRs) and securitisation repositories established in the UK during this period.

European Commission recommendation on future EU-UK partnership and UK statement on proposed approach to negotiations

The European Commission has published its recommendation for a Council decision authorising the opening of negotiations for a new partnership with the UK. On the subject of financial services, the Commission outlines its view that the envisaged partnership should reaffirm both parties’ commitment to preserving financial stability, market integrity, investor and consumer protection and fair competition, while respecting both parties’ regulatory and decision-making autonomy, and their ability to take equivalence decisions in their own interest.

The UK Parliament has published a statement by the Prime Minister, which sets out the Government’s proposed approach to the negotiations, including a statement in relation to financial services. The Government will aim to ensure that the new negotiated agreement will require both sides to provide a predictable, transparent, and business-friendly environment for financial services firms, ensuring financial stability and providing certainty for both business and regulatory authorities and with obligations on market access and fair competition. In addition, the UK will be aiming for enhanced provision for regulatory and supervisory cooperation arrangements with the EU and for the structured withdrawal of equivalence findings.

ESMA consultation on RTS and ITS on provision of investment services and activities in the EU by third-country firms under MiFID II and MiFIR

ESMA has launched a consultation paper on draft regulatory and implementing technical standards (RTS and ITS) on the provision of investment services and activities in the EU by third-country firms either (i) on a cross-border basis according to the national law of their host Member State; or (ii) through a branch in accordance with Chapter IV (Provision of investment services and activities by third country firms) of Title II (Authorisation and operation conditions for investment firms) of MiFID II, or under Title VIII (Provision of services and performance of activities by third-country firms following an equivalence decision with or without a branch) of MiFIR.

Comments are requested by 31 March 2020. ESMA expects to publish the final RTS and ITS in Q3 2020.