EU and UK Financial Services Co-operation Moves Closer

EU Residents, Financial Advice and Brexit

The Brexit Trade Agreement did not include financial services passporting although it was supposed to.   Negotiations are ongoing with regard to ‘Equivalency’ on financial services with  5 X Memorandums of Understanding (MOUs) agreed in January 2021 but not yet signed.  MOUs are essentially ‘agreements to reach an agreement’ only.  One of the MOU’s between UK and EU regulators confirms that they are working towards ‘delegated authority’ where if an EU resident has a UK pension/investment, then respective EU advisers are not authorised to advise on unless they have set up a UK branch with FCA authorisation in the UK and therefore advice will need to be delivered by a UK authorised IFA.  This is where EU regulators delegate their authority to the UK FCA to oversee and regulate the advice on a UK pension/investment.

The Five Memorandums of Understanding

1. A multilateral MoU with EU and EEA National Competent Authorities (NCAs) covering supervisory cooperation, enforcement and information sharing relating to, among others, market surveillance, investment services and asset management activities.
2. An MoU with the European Securities and Markets Authority (ESMA) covering supervision of credit rating agencies and trade repositories.
3. A multilateral MoU with EU and EEA NCAs covering supervisory cooperation, enforcement and information exchange between UK and EU/EEA national supervisors in the field of insurance regulation and supervision.
4. An MoU with the European Insurance and Occupational Pensions Authority (EIOPA) covering information exchange and mutual assistance between the UK authorities and EIOPA in the field of insurance regulation and supervision.
5. A MoU with the European Banking Authority (EBA) covering information exchange and mutual assistance between the UK authorities and the EBA in the field of banking.

There has been a ‘state of flux’ since 2021 as negotiations continue, so technically, we are no longer authorised in EU (for the time being) even on helping with UK interests but things have taken a positive step forward.

EU Signs Draft MOU

Of the above 5 MOUs, the European Commission has now adopted a draft of the first MOU to create a framework for financial services regulatory cooperation with the UK see - Multilateral MoU concerning consultation, cooperation and the exchange of information between each of the EEA competent authorities and the FCA.

If then signed by the UK authorities, the draft MoU will create an administrative framework for voluntary regulatory cooperation, including an EU-UK joint Financial Regulatory Forum, which would serve as a platform to facilitate regulatory dialogue.  It was the Windsor Framework on EU NI Protocol signed in March 2023 that has now paved the way for pushing ahead on financial services co-operation and agreement.

See: Brexit Finance

Current Procedure for Financial Advice to EU Residents

The MoU does give the UK access to the EU's single market or vice versa, and it does not prejudge the adoption of equivalency on rules and regulations as well as delegated authority.  Therefore, as financial advisers with both clients and potential clients approaching us regularly for existing UK pensions and investment advice but now being tax resident in the EU, until we have an agreement on ‘delegated authority’ (Article 16 of the 1^st MOU), we must continue our current procedures of:

1. The UK Financial Conduct Authority has already confirmed to us, as have our professional insurers, that we can give advice to people living all over the globe and clients have the full protection of the FCA supervisory powers, but we must all check with each individual regulator to seek their specific permission that we are allowed to advise a resident of their country on existing UK pensions and investments in the UK.
2. Between us, the overseas client and their local/overseas financial or tax adviser, we then contact the local regulator for permission.  We already have confirmation from as far away as USA, Australia, Canada (partial and awaiting full confirmation), New Zealand, Japan, etc., even the Ascension Islands.   Also, within the EEA from Ireland, Germany, Spain, and Switzerland.  Finland said no, we must set up a branch in Finland and France gave us a ‘blanket no’ and is something of a joke at present given the number of expats living in France and we are still awaiting replies from Greece, Holland, Italy, Norway, and Sweden’s regulators.
3. Even where there is permission, we will still require you to take local advice on top of anything we do in the UK as well as us/you/your overseas adviser talking to the local regulator.

Mairead McGuinness, EU commissioner for financial services, financial stability and capital markets union, said: "The Windsor Framework allowed the EU and the UK to open a new chapter in our partnership based on a spirit of mutual trust and cooperation.  I am confident that our relationship and future engagement in financial services will be built on a shared commitment to preserve financial stability, market integrity, and the protection of consumers and investors."