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Investments after Brexit: What should financial-intermediaries do?

Investments after Brexit: measures for UK intermediaries providing investment services and activities in Italy 

Investments have changed after Brexit, just as measures for UK financial intermediaries providing investment services and activities in Italy did. Since 1stFebruary 2020 the latter must face the consequences of the UK's withdrawal from the EU.

In particular, under the terms of the UK withdrawal agreement, a transitional period has begun, which will last until 31st December 2020. During said transitional period European Regulations will apply as if the UK were still a Member State. The agreement further provides for ensuring regulatory continuity in matters of financial, banking, and insurance services. Starting from 1stJanuary 2020, the UK will be officially considered a Non-Member State.

So, what will change for UK intermediaries (banks or investment firms) providing investment services and activities in Italy?

CONSOB has asked all the people working in this sector through branches or under the freedom to provide services to inform both professional and retail customers about the consequences of Brexit

In accordance with ESMA's decisions, customers must be given the following information:

- the impact of Brexit on how services and activities are provided by the company, on the specific service provided to the customer, as well as on future relationships with the same customer;

- the steps taken to achieve an orderly management of the contractual relationship with customers (including, where necessary, termination modalities), as well as management of the customer's information requests and complaints in connection to Brexit;

- the implications of Brexit (even when due to changes in the intermediary’s operations) for contractual relationships with customers, including the presumed time scale for termination, according to the specific service provided, and  contractual provisions relating on the advance notice required for termination of the relationship.

Such information should be drafted in the language chosen by the customer in the contract, or in the absence of such a provision, in the same language of the contract itself. It should be published on the intermediary’s website both in Italian and in English.

The above-mentioned information obligations also apply to Italian banks and investment firms operating in the UK on a cross-border basis, with or without ancillary services, in compliance with the UK’s regulatory framework.

Investments after Brexit: requirements for UK financial services intermediaries that provide investment services in Italy 

Consob has adopted three Warning Notices specifying the measures that operators should take by the end of 2020, following the ratification of the UK withdrawal agreement.

In accordance with the rules applying to the provision of investment services after Brexit, access for UK financial intermediaries to the EU market depends on the type of clients served (retail/elective professional or per se professional/qualified counterparties)

Pursuant to MiFIR Regulation, third country firms will be allowed to operate in Europe under the freedom to provide services, only to qualified counterparties or  per se professional clients, provided that:

- the EC has adopted an equivalence decision on the requirements in force in the third country;

- the intermediary is authorized in its home country;

- the appropriate cooperation agreements have been established with the Authority of the home country.

In the absence of an equivalence decision by the European Commission, each Member State is entitled to allow the non-EU firm to operate in its territory, even without the establishment of branches.

As regards Italy, third-country firms other than banks, have the possibility to operate under the freedom to provide services, subject to Consob's authorization, after consulting the Bank of Italy, provided that the conditions set out are met and only with qualified counterparties or per se professional clients. In case of provision of services to retail and elective professional clients, instead, the Italian Law provides for the mandatory establishment of a branch, still subject to Consob's authorization, after consulting the Bank of Italy.

In light of the above, 

- UK financial intermediaries operating under the freedom to provide services with qualified counterparties and/or per se professional clients will be subject to the operating and supervisory regime provided by the MiFIR Regulation, provided that the EC has issued the equivalence decision by the end of the transition period;

- in case the EC has failed to issue the equivalence decision by the end of the transition period, UK financial intermediaries, including those operating under the freedom to provide services, will be required to comply with national regulations.

As Consob states: “In the absence of the required authorisations/registrations, UK intermediaries will not be able to continue to provide investment services and activities in Italy at the end of the transition period”.

Investments after Brexit: Requirements for Italian financial services intermediaries that provide investment services in the UK 

After the end of the transition period, Italian trading venues wishing to operate in the UK, in the presence of an equivalence assessment of the UK regulatory and supervisory regimes, as well as an agreement of collaboration between Consob and the FCA, will need to obtain from Consob:

- a measure of clearance (for regulated markets and MTFs managed by a market operator); or

- or authorisation (for MTFs managed by Italian investment firms in order to extend their activity in the UK (see Articles 70(2) and 26(6) of Legislative Decree no. 58/1998 (the Italian Consolidated Law on Finance).

Investments after Brexit: How can we help you?

Arnone & Sicomo international Law Firm has a team of lawyers specialized in banking and finance law. We are aware that Brexit is causing enormous changes in financial markets as well as in UK financial intermediaries' operations, and we believe that legislation will further change.

Are you a UK financial intermediary operating in Italy? Would you like to deepen your knowledge of Italian rules, in order to keep operating in the Italian financial market? Contact us. We will be glad to provide you legal advice starting from your specific needs and requests.