Summary
The Swedish government has published the text of a regulation which will provide transitional relief to UK firms providing MiFID services to professional clients and eligible counterparties in the event of a No Deal Brexit. The transitional provisions can be relied upon where the UK firm has established a contractual relationship with the relevant client prior to Exit Day (and therefore appears limited to existing clients). There does not appear to be a notification requirement.
The Italian government has approved transitional measures which will allow UK banks and firms providing MiFID and certain banking services in Italy on a passported basis to continue to do so in the event of a No Deal Brexit. Italian branches of UK firms may continue their current activities, while UK firms operating in Italy on a cross-border basis may continue to provide services to professional clients and eligible counterparties only. In each case, a notification is required.
Detail
Swedish Measures
On 21 March 2019, the Swedish government published the text of a regulation which aims to provide transitional relief to UK firms, in the event the UK leaves the European Union without a Withdrawal Agreement having been ratified by the UK parliament and EU27 member states ("No Deal Brexit").
The relief enables UK firms to provide MiFID investment services to professional clients and eligible counterparties in Sweden. The relief will apply where the UK firm provides MiFID services on a passported basis, and has established a contractual relationship with the client prior to the UK leaving the European Union ("Exit Day"). Importantly therefore, the relief cannot be relied upon for "new" client relationships established following Exit Day. Additionally, the relief will not extend to firms that provide deposit taking services to Swedish clients.
The proposed transitional period currently runs until 2020 (although there is a mechanism to extend this until the end of 2021).
Italian Measures
On 20 March 2019, the Italian government approved a law decree setting out transitional measures which would apply in a No Deal Brexit scenario (the "Decree"). The Decree has yet to be formally enacted by the Italian president or converted into law by the Italian parliament. The final text of the Decree is not available, however, the Italian press has published the draft version which was discussed by the government.
Accordingly, following a No Deal Brexit, the draft transitional measures appear to allow:
- UK Banks to continue to carry out cross-border banking activities with the exception that they may not take any new deposits;
- UK Investment Firms providing MiFID services, and UK e-money institutions, currently operating in Italy through a branch to continue to do so; and
- UK Investment Firms providing MiFID services in Italy on a cross-border basis to continue to provide such services to eligible counterparties and per-se professional clients only.
Importantly, UK insurance companies, investment funds, asset managers, e-money institutions and payment institutions providing cross-border services, as well as UK banks and investment firms providing cross-border investment services to retail clients or elective professionals will be required to discontinue this business in Italy following Exit Day.
A six month runoff period is permitted following Exit Day during which such firms may service existing contracts with a view to terminating or moving them. Such firms should communicate their plans to customers within 15 days of the Decree entering into force. UK insurance firms must submit a runoff plan to the Italian insurance regulator within 90 days of the Decree entering into force.
In order to avail of the transitional regime, UK firms must notify the appropriate Italian regulator (Bank of Italy in the case of a bank, and CONSOB in the case of an investment firm) at least three working days prior to Exit Day.
The proposed transitional period is up to 18 months.
Your Ashurst European Regulatory Team
