UK To Adopt Amendments to Brexit Legislation
06/10/2019HM Treasury has laid before Parliament a draft of the Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019. The draft Regulations make amendments to certain elements of the EU exit legislation relating to financial services that has been developed by the U.K. government in preparation for the U.K.'s exit from the EU. The amendments will come into force on the later of: (i) the day after the day on which the Regulations are made; and (ii) immediately before exit day or, in the case of the amendment to the Capital Requirements Regulations, exit day.
Under the draft Regulations, amendments are made to the legislation establishing the Temporary Permissions Regime and Contractual Run-Off Regime for EEA firms. In its original form, the Temporary Permissions Regime ensured that EEA firms providing financial services in the U.K. under the passporting regime could continue to do so until new permissions are issued by U.K. regulators. For firms that do not enter the Temporary Permissions Regime, the Contractual Run-Off Regime ensured firms could conclude business under their existing contracts but were not entitled to enter into new business in the U.K. The draft Regulations amend this legislation to provide that firms in the Contractual Run-Off Regime notify U.K. customers of the fact that they are operating under only EU regulation and not U.K. regulation (making them "exempt firms") and of any relevant changes to consumer protection arrangements. The amendments also clarify that EEA fund managers managing U.K. authorized funds will not be able to continue to carry out business under the Contractual Run-Off Regime and will be obliged to obtain permission from U.K. regulators.
The draft Regulations make similar amendments to the Temporary Permissions and Contractual Run-Off Regimes applicable to EEA Payments Services and E-Money firms, requiring such firms operating under the Contractual Run-Off Regime to notify their customers of their "exempt" status. The Regulations also make explicit the FCA's power to cancel the temporary permission of an EEA payments firm to provide account information services where the firm does not have appropriate professional indemnity insurance or a guarantee.
Further amendments under the draft Regulations are to the U.K. Financial Conglomerates Regulations, the Long Term Investment Funds Regulations and the Capital Requirements Regulations. The amendments to the Financial Conglomerates Regulations ensure that U.K. regulators can delay the U.K. supervision requirements they will impose upon EEA financial conglomerates following Brexit for up to two years. The Long Term Investment Funds Regulations are clarified to ensure references to European Long-Term Investment Funds are replaced by references to U.K. only funds. The U.K. Capital Requirements Regulations, which onshore the EU Delegated Regulation on Liquidity Coverage for banks and investment firms, are amended to remove the discretion (which is present in the EU Delegated Regulation) for national regulators to vary group liquidity coverage standards.
View the draft Financial Services (Miscellaneous) (Amendment) (EU Exit) (No. 2) Regulations 2019.
View HM Treasury's Explanatory Memorandum.
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