Financial supervision law

‘No deal’ Brexit closer than ever; is your company ready?

4 min reading time

The United Kingdom (UK) left the European Union (EU) on January 31 of this year. On December 31, the transition period – during which all EU laws and regulations are still in force in the UK – will come to an end. The EU and the UK are still struggling to negotiate their new relationship and the agreements that will apply after the end of the transition period. If they fail to make these agreements on time, the result will be a ‘no deal’ Brexit. This means a no deal Brexit is closer than ever.

This entails consequences for British parties that are active in the Netherlands. Is your company ready for a ‘deal or no deal’ Brexit? We would like to draw your attention to a few important points of interest.

Are your contracts ‘Brexit-proof’?

As a financial enterprise you have ongoing contracts with many different parties, among which may be parties from the Netherlands. Are you still allowed to offer services to these parties after 1 January 2021? Have your contracts been drawn up or adjusted in such a way that Brexit does not pose a problem? You may still need to renegotiate current obligations to avoid unwanted situations and unnecessary costs. Or you may come to the conclusion that you want to end your activities in the Netherlands from that moment on. Whatever you have to do, you only have a short time left to do it.

Active in the Netherlands with your ‘EU passport’?

Operating as a financial enterprise in an EU Member State requires a license from the supervisory authority of that Member State. This obligation does not currently apply to UK financial firms licensed by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA). They can use this license as a “passport” to operate within the European Economic Area (EU member states + Norway, Iceland and Liechtenstein).

However, after December 31, ‘passporting’ will no longer be possible. This means that, if you want to keep offering services to Dutch clients, you require a license from the Dutch Authority for the Financial Markets (AFM) or the Dutch Central Bank (DNB). If you decide to apply for a license in the Netherlands, please take into account the differences in financial supervision between the Netherlands and the UK. In some cases, the insights, priorities and expectations of the Dutch regulators deviate significantly from those of their British colleagues.

Could 'reverse inquiry' provide a solution?

‘Reverse enquiry’ is subject to the condition that the services may only be provided on the client’s initiative. On that basis, you may not actively offer or perform investment products or services in the Netherlands. ‘Reverse inquiry’ therefore does not provide an optimal solution. For more information, please consult the Q&As of the AFM and European regulator ESMA.

Does the Exemption Regulation under the Financial Supervision Act (Vrijstellingsregeling Wft) offer a solution?

Companies that provide investment services from the UK to the Netherlands, or trade for their own account with Dutch professional market parties, have been temporarily exempted from the license requirement in the Netherlands. Now that the need for this exemption has lapsed, it will no longer apply once the transition period comes to an end. This means that after 1 January 2021, the temporary exemption can no longer be used.

Want to know more?

Do you have questions about the (deal or no deal) Brexit and its consequences for your company? Would you like expert advice on how to prepare for yourself in these uncertain times? Our specialists have the necessary knowledge and experience to offer assistance. Please feel free to get in touch.

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