ESMA instructs investment firms to inform clients of Brexit implications

Maria Nikolova

The statement is addressed to UK firms that provide services in EU27 Member States, as well as EU27 firms that deal with clients based in the UK.

The European Securities and Markets Authority (ESMA) has earlier today published a statement instructing firms that provide investment services to provide clients with information on the implications of the UK withdrawal from the European Union.

The statement is addressed to UK firms that provide services in EU27 Member States, as well as EU27 firms that deal with clients based in the UK.

In order to avoid any potential disruption arising from client confusion, firms that will be impacted by Brexit are told to ensure that they provide clear information to clients whose contracts and services may be affected. The information should be provided as soon as possible and has to cover:

  • Impact of UK departure for the given firm and its business, and the implications this has for the relationship between the client and the firm;
  • Actions the firm is taking such as organisational arrangements to deal with client inquiries;
  • Implications for clients of any corporate restructuring and, in particular, any relevant changes to contractual terms; and
  • Contractual and statutory rights of clients in these circumstances, including the right to cancel the contract and any right of recourse, where applicable.

ESMA and national competent authorities (NCAs) will keep monitoring developments, including by engaging with firms to assess the level of firms’ preparedness and to ensure that their clients are appropriately informed in the context of the firms’ preparation for Brexit.

In the meantime, a growing number of investment firms have sought to obtain licenses in the European Union in order to secure smooth provision of their services after Brexit. Electronic trading major IG Group Holdings plc (LON:IGG), for instance, has recently confirmed that IG Europe, the Group’s client facing subsidiary in Germany, has received its licence from BaFin. This offers certainty that IG will be able to offer its regulated financial products in all EU member states following the UK’s exit from the EU.

In the meantime, the UK Financial Conduct Authority (FCA) has published a consultation paper on plans to introduce a temporary permissions regime (TPR). The temporary permissions regime will allow EEA firms and funds to continue regulated business in the UK, if the UK leaves the EU in March 2019 without an implementation period in place.

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