FCA urges retail investment firms to protect customers from negative impact of Brexit

Maria Nikolova

EEA-based customers holding retail investment products serviced by UK providers could be affected if their UK provider cannot operate in the EEA after Brexit.

The UK Financial Conduct Authority (FCA) has earlier today published updated guidance about Brexit, with the information bearing to the activities of several categories of companies, including retail investment firms.

The regulator says that in a no-deal scenario, UK firms’ ability to continue to service EEA-based customers (including UK expats) is likely to be problematic. EEA-based customers holding retail investment products serviced by UK providers could be affected if their UK provider cannot operate in the EEA after Brexit.

Retail investment firms are advised, if they have customers in the EEA, to decide on their approach to servicing their existing contracts with them. The firms are urged to take the steps to continue to service customers in accordance with local law and national regulators’ expectations.

As part of retail investment firms’ preparations for Brexit, they are expected to be clear whether the services they provide to EEA-based customers are regulated by EU law, and how a no-deal scenario affects their ability to service those customers under EU and local law.

If a retail investment firm has decided to stop servicing customers in the EU after Brexit, the FCA expects it to treat the customers fairly when winding down or transferring business. This includes considering what would be a fair timeframe for winding down or transferring business and supporting customers while they are in the process of finding alternative providers.

In January this year, the FCA advised firms to continue to make their contingency plans and think about how their consumers might be affected by the UK leaving the EU.

In the meantime, the notification window for the temporary permissions regime opened on January 7, 2019. It is set to close on March 28, 2019. The regime will allow EEA-based firms currently passporting into the UK to continue new and existing regulated business within the scope of their current permissions in the UK for a limited period, while they seek full FCA authorisation, if the UK leaves the EU on exit day without an implementation period in place. It will also allow EEA-domiciled investment funds that market in the UK under a passport to continue temporarily marketing in the UK.

The FCA has also set out proposals to implement the financial services contracts regime (FSCR) so that EEA firms can fulfil their existing contractual obligations in the UK.

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