We have left the European Union and agreed a deal, yet discussions around Brexit continue to unfold.
The impact of this on advice firms is becoming clearer.
Brexit shouldn't immediately have an impact on most advice firms.
But for those of you who have clients in the EU, or if you’re just generally interested, here's where things stand at the moment.
The FCA has allowed firms in the European Economic Area (EEA) to operate in the UK, but UK firms have not been granted the same privilege within the EEA.
If you have clients overseas, don’t panic.
You are still able to continue to provide advice, but only when clients are in the UK.
You can send generic information to clients overseas as long as this doesn’t amount to advice.
However, you also need to be confident you can sustain your ongoing obligations in terms of delivering the services clients are paying for and continue to meet regulatory requirements.
If you wish to provide advice to clients based in the EU without them being in the UK, there are a couple of options available to you:
- Obtaining your own separate Mifid-compliant EU licence; or
- Partnering with an EU firm.
Both are not decisions that should be taken lightly and can be difficult processes to go through.
Applying for a separate EEA licence can bring with it challenges, such as the ability to easily obtain a licence from a particular regulator, the presence of local office space and the tax obligations in the country you chose to be regulated in.
There are also capital adequacy requirements to think about, and the requirement to have resident directors.
If your firm is thinking about partnering with an EU-based firm, consider factors like the typical service provided by the firm, the investment solutions used and the knowledge of advisers.
Also it's worth thinking about compliance, and the standards of the regulator in question compared with the FCA.
Other issues to consider
The General Data Protection Regulation (GDPR) remains the law in the UK under the new name ‘UK GDPR’.
UK firms can continue to send data to the EEA. The UK-EU trade and cooperation agreement will allow personal data to flow between the UK, EU and EEA until adequacy decisions are made (this shouldn’t take longer than six months).
The Information Commissioner's Office recommends that firms based in the UK which rely on the free flow of data to the EU should have alternative safeguards in place before the end of April.
This should be in the form of a standard contractual clause between yourself and the sender on EU-approved terms.
The FCA has reminded firms with clients living abroad of principle 7, that "a firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading."
Firms should contact clients and let them know about the changes, how these affect their situation and what the firm can do to support them.
The FCA has been given a temporary transitional power, or TTP, which allows it to delay any regulatory requirements that will change as a result of Brexit.
As a result, firms have until 31 March 2022 to prepare for any potential regulatory changes due to Brexit.
The consultations are ongoing and evolving all the time. We are keeping a close eye on developments as they happen and how these may impact on firms.