Brexit update for financial services firms - week ending 29 March 2019

United KingdomScotland

In outline:

This was due to be the week of the UK's departure from the EU and, despite the postponement of Brexit, there was a flurry of activity to complete the financial services (FS) regulatory regime for a no-deal scenario (the ND regime). Most of the measures were on the UK side where all the ND regime statutory instruments (SIs) for FS completed their parliamentary procedure (see the ‘Other publications’ section below). As can be seen for our database here, there now 63 FS related SIs in place for the ND regime.

The FCA also published its final instruments and guidance for the ND regime (see Document 6 below) and announced (see Document 2 below) that two existing MoUs with the SEC had been updated for the ND regime (the changes cover derivatives and AIFM activities). The PRA is yet to publish its final rules, however it did release its near final rules in February which we’ve previously discussed here. The EU also announced (see Document 4 below) the completion of its preparations for no-deal which included the FS ND regime measures covered in previous updates.

Various adjustments were made in UK law and regulation to reflect the extension of the Article 50 period (see our update for the previous week) in the European Council decision of 22 March 2019. Under the European Union (Withdrawal) Act 2018, the definition of ‘exit day’ was changed by a statutory instrument (see Document 1 below) to delete 29 March and substitute the alternative dates 11.00 pm on 22 May if applicable under in the European Council decision or, if not, then on 12 April. The condition for the 22 May date has not been met, and so the effective exit date is now 12 April. FCA and PRA made various consequent changes (see Document 5 below) and extended the widow for applications to join the temporary permissions regime to 11 April (see Document 3 below).

With the completion of the ND regime, we now expect the flow of FS related activity on Brexit to slow. In common with other sectors, everything now hangs on the outcome of the emergency European Council summit on 10 April.

1. Department for exiting the EU: legislating for the extension of Article 50

The Government has laid a draft SI under s20(4) on the EU (Withdrawal) Act 2018 that will give effect to the extension to Article 50 in domestic law. The government statement can be accessed here and the SI here.

“Major changes to the UK statute book reflecting our exit from the EU are due to take effect on ‘exit day’, which is currently defined in the EU (Withdrawal) Act 2018 as 11pm on 29 March 2019. Now that the UK and the EU have agreed an extension to Article 50, this date needs to be amended to reflect the new point at which the EU Treaties will cease to apply in the UK. Section 20(4) of the EU (Withdrawal) Act 2018 contains a power to amend ‘exit day’ through a statutory instrument (SI). Once exercised, references to ‘exit day’ on the UK statute book will be updated.


However, a rejection of the ‘exit day’ SI would cause serious problems and uncertainty with regard to the domestic statute book from 11pm on 29 March. A large volume of EU exit legislation preparing the domestic statute book for the moment EU law ceases to apply is due to enter into force automatically on ‘exit day.’ A rejection of the SI would therefore create a clash in domestic law; contradictory provisions would apply both EU rules and new UK rules simultaneously, and in some cases new UK rules would replace EU rules prematurely. This could generate confusion and uncertainty for businesses and individuals, resulting in litigation. In some cases, it could restrict the rights of individuals or impair the ability of public bodies to operate within the framework of EU rules.”


It has been announced that FCA and SEC have signed two updated MoUs. The first MOU, originally signed in 2006, is a comprehensive supervisory arrangement and has been updated to expand the scope of covered firms under the MOU to include firms that conduct derivatives, credit rating and derivatives trade repository businesses to reflect post-financial crisis reforms related to derivatives and FCA's supervisory powers post-Brexit. The second MoU, required under the Alternative Investment Fund Managers Regulations, was originally signed in 2013 and is intended to ensure that investment advisers, fund managers, private funds and other covered entities in the alternative investment fund industry that are regulated by FCA and SEC will continue to operate on a cross-border basis without interruption, regardless of the outcome of the UK’s withdrawal from the EU. Texts of the updated MoUs have not been published. The press release can be accessed here.

3. FCA/PRA: Temporary Permissions

The regulators have extended the notification window for the temporary permissions regime until the end of 11 April 2019. See the FCA statement here and the PRA one here.


“In light of the short delay to the process of the UK’s withdrawal from the EU, the notification window for the temporary permissions regime will be extended and will now close at the end of 11 April 2019.

Any fund managers that, as a result of this extension, wish to update their notification should email [email protected] by the end of 2 April 2019 at the very latest confirming this and including their FRN.”


“The PRA Direction: Temporary permission and variation: notification before exit day (amendment) made by us today extends the deadline for notification for firms that wish to enter into the temporary permissions regime (TPR). Firms that choose to enter the TPR by notifying the PRA should make their notification using the form available on the FCA Connect system before the end of 11 April 2019.”

4. EC: Brexit preparedness

This EC press release reports that the EC has completed its no-deal Brexit preparation and suggests that it is "increasingly likely that the United Kingdom will leave the European Union without a deal on 12 April". The press release can be accessed here.

“To date, the Commission has tabled 19 legislative proposals. 17 proposals have been adopted or agreed by the European Parliament and the Council. Formal adoption of all those files by the European Parliament and Council is currently taking place. Two proposals are to be finalised by the two colegislators in due course.

As outlined in the Commission's Brexit Preparedness Communications, the EU's contingency measures will not – and cannot – mitigate the overall impact of a "no-deal" scenario, nor do they in any way compensate for the lack of preparedness or replicate the full benefits of EU membership or the favourable terms of any transition period, as provided for in the Withdrawal Agreement. These proposals are temporary in nature, limited in scope and will be adopted unilaterally by the EU. They are not “mini-deals” and have not been negotiated with the UK. The EU has maintained - and will continue to maintain - a fully united position throughout its preparations, and during any possible “no-deal” period.”

5. FCA: Temporary permissions notifications

FCA has published three notifications with regard to firms which have passports under Schedule 3 to FSMA or Treaty firms under Schedule 4 to FSMA with or without a top-up permissions and with regard to payments and to e-money. The notifications can be accessed here, here and here.

The notifications amend the term “exit day” to have the same meaning as in the European Union (Withdrawal) Act 2019.

6. FCA: Brexit - final instruments and guidance

FCA has published its final instruments and guidance that will apply in the event of a no-deal Brexit, noting that the final instruments are largely unchanged from the near-final versions published in February. The most significant change is that the instruments now commence on “exit day”, rather than 11pm on 29 March in order to reflect the decision made at the European Council on 21 March and the changes made by the European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019. FCA has also published the majority of its final transitional directions and guidance for using the transitional power. It has identified three additional areas where it has made amendments to the near-final directions published in February which relate to: UK managers of EEA UCITS funds; the application of CASS to activities carried on from an EEA branch and the distance marketing provisions. FCA will publish information about technical standards under EU legislation on capital requirements, banking resolution and financial conglomerates later once PRA have published similar information. The first link includes links to finalised guidance with regard to FCA's approach to EU non-legislative materials; FCA's approach to non-Handbook guidance where it relates to EU-law or EU-derived law and completing FCA forms post-Brexit and to information on transitional directions. The publication can be accessed here and the press release here.

Other publications from the RegZone Brexit news feed

Single Resolution Board: Expectations to ensure resolvability of banks in the context of Brexit

A short paper setting out SRB's resolvability expectations in the context of Brexit which can be accessed here.

HoC: UK's withdrawal from the EU

This HoC Library briefing pack was prepared for the debate on 29 March 2019 and sets out the legal implications of the Government's motion. The briefing paper can be accessed here.

HoC: UK progress in rolling over EU trade agreements

This HoC Library briefing paper provides a list of EU trade agreements in force and the Government's progress in rolling them over. The briefing paper can be accessed here.

HoL: Brexit and delegated legislation

This HoL Library briefing provides an overview of how scrutiny of delegated legislation takes place in both HoL and HoC and considers the impact of Brexit on it. The briefing paper can be accessed here.

FCA: Handbook Notice 64/Instruments

FCA has published details of instruments passed at its Board meetings on 28 February (additional to those announced earlier) and 28 March 2019. These are: Fees (Office for Professional Body Anti-Money Laundering Supervision) Instrument 2019/9; Reporting of Information About Directory Persons (Dual-Regulated Firms) Instrument 2019/11; Consumer Credit (Rent-To-Own Cost Cap) Instrument 2019/13; Financial Ombudsman Service (Award Limit) Instrument 2019/12 (FOS 2019/1); Fees Manual (Financial Ombudsman Service Case Fees 2019/2020) Instrument 2019 (FOS 2019/2); Financial Services Compensation Scheme (Management Expenses Levy Limit 2019/20) Instrument 2019/14; Approved Persons Regime (Exclusion for Claims Management) Instrument 2019/16; Consumer Credit (High Net Worth Exemption) Instrument 2019/17; Fees (Credit Rating Agencies, Trade Repositories and Securitisation Repositories) Instrument 2019/12; European Union Withdrawal Instruments 2019/18 - 20, 22 - 56 and 60 – 62; Small Business (Eligible Complainant) (Amendment) Instrument 2019/63 (FOS 2019/4). The hand book notice can be accessed here. Instruments may be downloaded via the second link.

FCA: PS19/10: Recovering the costs of regulating credit rating agencies, trade repositories and securitisation repositories after the UK leaves the European Union

Further to chapter 2 of CP18/34 and CP19/01, FCA sets out its final requirements and guidance on recovering the costs of regulation from credit rating agencies, trade repositories and securitisation repositories post-Brexit. FCA has implemented the proposals it consulted on apart from a small technical change that gives firms greater flexibility over their reporting years. The rules will come into effect on the day the UK leaves the EU. The full publication can be accessed here.

ESMA: MiFID II/MiFIR review reports

ESMA has now published a letter dated 16 January 2019 which it sent to the EC with regard to its contribution to a range of MiFID II/MiFIR review reports in the light of Brexit. The letter can be accessed here.

HoC: E-petitions relating to leaving the EU

Ahead of a debate being held on 1 April 2019 on three e-petitions, this HoC library briefing has been published. It can be accessed here.

The Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019/707

This SI has been made and can be accessed here.

ESMA: Board of supervisors meeting

ESMA has now published the minutes of a meeting held on 5 March 2019 to discuss Brexit. The minutes can be accessed here.

The Financial Services (Miscellaneous) (Amendment) (EU Exit) Regulations 2019/710

This SI has been made and can be accessed here.

ESMA: Brexit update

In this statement, ESMA provides an update with regard to its policies in the event of a no-deal Brexit, specifically in the areas of clearing and settlement arrangements; counterparties to uncleared OTC derivatives and its databases and IT systems. The full statement can be accessed here.

The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019/718

This SI has been made and can be accessed here.

EC: Delegated Regulations in relation to EMIR and Brexit

The following Delegated Regulations have been adopted. The delegated regulation relating to CCPs can be accessed here and the one relating to the date of a clearing obligation can be accessed here.

EC: Statement by Donald Tusk

Text of Donald Tusk's statement to the European Parliament of 27 March 2019 follows, in which he comments on Brexit. It can be accessed here.

HoC: Brexit – proposals for the future UK-EU relationship

A HoC briefing paper for the debates taking place on 27 March 2019. The full briefing paper can be accessed here.

FCA Regulation round-up

FCA has published the latest edition of its round-up, including Brexit updates and information on digital regulatory reporting. The former includes a MiFID IT systems update. The full publication can be accessed here.

The Uncertificated Securities (Amendment and EU Exit) Regulations 2019/679

This SI has now been made and can be accessed here.

HoL: Extending Article 50: European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019

This HoL Library Briefing has been prepared in advance of the Lords’ consideration of the statutory instrument to change the date of ‘exit day’ in domestic law. The briefing paper can be accessed here.

The Mortgage Credit (Amendment) (EU Exit) Regulations 2019/656

This SI has been made and can be accessed here.

The Public Record, Disclosure of Information and Co-operation (Financial Services) (Amendment) (EU Exit) Regulations 2019/681

This SI has been made and can be accessed here.

The Gibraltar (Miscellaneous Amendments) (EU Exit) Regulations 2019/680

This SI has now been made and can be accessed here.

The European Union (Withdrawal) Act 2018 (Consequential Modifications and Repeals and Revocations) (EU Exit) Regulations 2019/628

This SI has now been made and can be accessed here.

HoL EU Select Committee: Beyond Brexit: how to win friends and influence people

The Committee's report analyses the formal governance arrangements set out in the Withdrawal Agreement for future UK-EU cooperation, and considers how these can be complemented by less formal means of exercising influence in Brussels post-Brexit. The report can be accessed here.

The Insurance Distribution (Amendment) (EU Exit) Regulations 2019/663

This SI has now been made and can be accessed here.

The Securitisation (Amendment) (EU Exit) Regulations 2019/660

This SI has now been made and can be accessed here.

The Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019/632

This SI has now been made and can be accessed here.

The Payment Accounts (Amendment) (EU Exit) Regulations 2019/661

This SI has now been made and can be accessed here.

The Sanctions Regulations (Commencement No. 1) (EU Exit) Regulations 2019/627

This SI has now been made and can be accessed here.

The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019/662

This SI has now been made and can be accessed here.

The Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019/657

This SI has now been made and can be accessed here.

PMO: Statement by Theresa May

Theresa May's statement of 25 March 2019 can be accessed here.

CMS RegZone publishes weekly updates (available via email, on-line and via Twitter) on Brexit developments for financial services firms. These provide analysis and commentary on significant developments during the week in question. A daily digest of Brexit news (without analysis or commentary) is also available by email here and online via the RZ news wizard here (both of these can be filtered using the Brexit topic). Links to publications are contained in each update; publications released before the updates commenced in April 2018 can be found in a bibliography here. CMS RegZone publication ‘Where we stand’ provides an overview of the current position in a single report; this is updated regularly to take account of the key developments from the weekly updates.