States Assembly Brexit Report: January 2019 Update
On 15 January 2019, the Minister for External Relations presented to the States Assembly an updated report giving an overview of developments to date, and the steps taken by the Government of Jersey to protect and promote Jersey’s interests during the negotiations on the withdrawal of the UK from the EU and the future relationship between them. The Report also provides an update on the Island’s Brexit readiness preparations for the UK’s exit from the EU on 29 March 2019.
In the course of January 2019, the UK Government has continued to publish further final and draft statutory instruments (SIs) to make the changes to legislation required as part of Brexit, including in the event of a hard Brexit. Areas covered by some of the recent statutory instruments that have been published include:
• FSMA – the draft Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 were laid before Parliament on 31 January 2019 and would temporarily empower UK regulators to make transitional provisions if the UK leaves the EU without a withdrawal agreement. An overview of the provisions can be found on the FCA website
• Equivalence regime – the draft Equivalence Determinations for Financial Services and Miscellaneous Provisions (Amendment etc) (EU Exit) Regulations 2019 will give HM Treasury a temporary power, for up to twelve months after Brexit, to make equivalence directions and exemption directions for the EU and EEA Member States
• CREST – the draft Uncertificated Securities (Amendment and EU Exit) Regulations 2019 are intended to ensure that the UK retains an operative regulatory framework for uncertificated securities post-Brexit
• Listing regime – The draft Official Listing of Securities, Prospectus and Transparency (Amendment etc.) (EU Exit) Regulations 2019 have been laid before Parliament
An overview of HM Treasury’s list of financial services SIs made under the EU (Withdrawal) Act 2018 can be found here. The list of draft financial services SIs laid before Parliament and subject to the affirmative procedure is also available.
FCA statement on temporary transitional power
On 1 February 2019, the FCA published a statement outlining its approach to the temporary transitional power in the event that the UK leaves the EU without a withdrawal agreement; and setting out what firms need to do where transitional provisions will not be available.
Brexit MOUs between ESMA, EU securities regulator and FCA
On 1 February 2019, it was announced that the European Securities and Markets Authority (ESMA) and European securities regulators have agreed Memoranda of Understanding (MoUs) with the UK Financial Conduct Authority (FCA). The MoUs form part of authorities’ preparations should the UK leave the EU without a withdrawal agreement, the no-deal Brexit scenario. The MoUs will therefore only take effect in the event of a no-deal Brexit scenario. The MoUs are similar to those already concluded on the exchange of information with many third country supervisory authorities.
FCA notification window for the temporary permissions regime (TPR) now open
On 7 January 2019, the UK’s Financial Conduct Authority (FCA) opened its temporary permissions regime, which 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 regime closes at the end of 28 March 2019.
HM Treasury guidance on financial sanctions after Brexit
On 1 February 2019, HM Treasury published general guidance on financial sanctions for when the UK leaves the EU. The guidance covers how the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) will enable sanctions to continue uninterrupted when the UK leaves the EU. Secondary legislation under SAMLA, in the form of statutory instruments (SIs), will transfer existing EU sanctions into UK law.
FCA consultation on Brexit and contractual continuity
On 8 January 2019 the FCA published a consultation paper, CP19/2, which sets out details of the financial services contracts regime (FSCR) and the rules the FCA proposes should apply to firms during the regime. The consultation closes on 29 January 2019. The legislative bones of the regime are set out in the draft Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019. A draft of this regulation has been laid before Parliament for approval. The FSCR will allow EEA firms to continue to service pre-existing UK contracts entered into before exit day or before exiting the temporary permissions regime (TPR) for a limited period, provided they meet the conditions of the FSCR. Further details about the conditions of the regime can be found in Chapter 2 of the consultation paper. Unlike the TPR (see above), the FSCR will not allow these firms to undertake new business in the UK post-exit day. The deadline for comments was 29 January 2019 and the FCA is expected to publish its feedback in the first quarter of 2019.
ISDA updated Brexit FAQs
On 22 January 2019, the International Swaps and Derivatives Association (ISDA) updated its Brexit frequently asked questions (FAQs) webpage. The FAQs address the possible UK position post-Brexit by reference to the ISDA swaps documentation, and the responses to these FAQs involve an assessment of the various outcomes of the exit negotiations (including a no-deal outcome either on 29 March 2019 if the draft Withdrawal Agreement is not approved and the Implementation Period does not come into effect, or at the end of the Implementation Period if the draft Withdrawal Agreement is approved and comes into effect).
EU Exit: UK and Switzerland sign insurance deal
On 25 January 2019, HM Treasury (HMT) has announced the signing at Davos of the UK-Swiss Direct Insurance Agreement. The bilateral agreement covers direct insurance other than life assurance, and replicates the effects of the existing EU agreement with Switzerland. It will come into force when the current EU-Swiss Direct Insurance Agreement ceases to apply to the UK.
Letter to Treasury Committee on temporary transitional power proposal
On 23 January 2019, the House of Commons Treasury Committee published a letter from John Glen, Economic Secretary to HM Treasury (HMT), to Nicky Morgan MP, Chair of the Treasury Committee, on the proposal for a temporary transitional power to be delegated to the Bank of England (BoE), the PRA and the FCA, which forms part of HMT’s no-deal contingency planning . The proposal would delegate a temporary power to the regulators to delay or phase in regulatory requirements where they either change as a result of the UK leaving the EU, or apply to firms for the first time.
UK Treasury Committee inquiry: The future of UK financial services after EU exit
On 25 January 2019, the House of Commons Treasury Committee announced a new inquiry into the future of the UK’s financial services once the UK has left the EU. The inquiry will examine what the Government’s financial services priorities should be when negotiating the UK’s future trading relationship with the EU. It will also consider how the UK’s financial services sector can take advantage of the UK’s new trading environment with the rest of the world and, whether current regulatory barriers that apply to third countries should be maintained.
CMA consultation: effect of ‘no deal’ EU exit on the functions of the CMA
On 28 January 2019, the UK Competition and Markets Authority (CMA) announced that it is consulting on draft guidance on the effects of a UK ‘no deal’ exit from the EU on the functions of the CMA. The draft guidance covers: the legal framework; merger control; enforcement of competition law prohibitions (antitrust, including cartels); and consumer protection law enforcement. The guidance also explains the treatment of “live” cases in a no deal scenario. The consultation closes on 25 February 2019.
ESMA updated Q&As on the Prospectus Directive and the Transparency Directive
On 31 January 2019, the European Securities and Markets Authority (ESMA) published updated questions and answers (Q&As) on the Prospectus Directive and the Transparency Directive. The Q&As clarify the application of certain provisions in the event that the UK withdraws from the EU on 29 March 2019 with no withdrawal agreement in place. These Q&As will apply only in case of a no-deal Brexit. Copies of the Q&A on the transparency, the Q&A on the prospectus related topics and the press release are available.