UK and EU Sign Agreement on Financial Services Cooperation

The Chancellor of the Exchequer, Jeremy Hunt was today in Brussels to sign an agreement with EU financial services commissioner Mairead McGuinness on financial services cooperation as part of the developing relationship after Brexit.  This should look to bolster the UK as a leading centre for financial services and enable better cooperation on many matters including fraud and scams involving our money.

Many do not know but financial services were not included in the Brexit Trade Agreement with continued negotiations on 5 X Memorandums of Understanding (MoUs) on various matters.  The MoUs are:

• 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.
• An MoU with the European Securities and Markets Authority (ESMA) covering supervision of credit rating agencies and trade repositories.
• 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.
• 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.
• An 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.

Our Current Position

For us, financial advice on regulated products is covered in the first MoU with parties working towards ‘delegated authority’ provided there is equivalency of rules 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 UK and therefore advice will need to be delivered by a UK authorised IFA.  This is where EU regulators will delegate their authority to the UK FCA to oversee and regulate the advice on a UK pension/investment.

Given the ‘state of flux’ we are all in as negotiations continue, technically, we are no longer authorised in EU (for the time being).  Fish, wine, cheese and cars are no problem, but finance is a ‘no’ at present.  We do not ‘solicit’ or promote services to EU residents, but we will accept ‘Reverse Solicitation’ i.e.  you approach us to help you with existing UK taxes, investments or pensions only.  We will not advise on or arrange 'new money' investments for you, but we will advise on existing UK arrangements that are then actioned/transferred/amended within the UK.  Given this, and until an agreement is reached on Equivalency and Delegated Authority, we will offer the technical advice from the UK on your UK pensions, investments, and tax with our requirement that you also take advice locally in the EU to oversee any actions at 'your end' to ensure tax compliance and reporting requirements with EU authorities.  You should also be aware that there are even greater restrictions for residents of France.  No Fishing Rights = No Finance in France, although they are softening their position to that of other EU authorities where things appear to continue as they were with EU regulators happy that the FCA oversees any UK advice on existing UK products and services.

Please note we have written confirmation from both our professional insurers and the FCA that all advice that we offer must be offered and delivered from the UK, under FCA regulatory rules and FCA protection and that we are permitted to advise people anywhere in the World according to the UK regulator, but we must check if there are any regulatory restrictions where a client lives.  In short, we offer advice as if clients were resident in the UK and if clients and their EU adviser check with the relevant EU regulator that they are happy for us to continue UK advice for clients in tandem with a local adviser ensuring tax compliance and reporting requirements with EU authorities.  We will require this in writing from the EU regulator/client’s EU adviser.

We already have confirmation within the EEA from Ireland, Germany, Spain, and Switzerland that we are permitted to advise EU residents on their UK interests.  Finland and France have said “no” with France being something of a joke at present given the number of expats living in France and the French Regulator requiring clients to unravel any pensions or investments that they arranged in the UK after the 1^st of January 2021 (end of transition period) and before their move to France.  We are still awaiting replies from Greece, Holland, Italy, Norway, and Sweden’s regulators.  That said, we still require clients to take local advice on top of anything we do in the UK as well as us/you/your EU adviser talking to the relevant EU regulator.

All advice is offered from the United Kingdom with the explicit agreement and understanding that any fee for services is offered under the laws of England and Wales and the English Courts shall have exclusive jurisdiction and no other country’s regulatory or legal systems have any judicial powers over any dealings between us.

What Now?  It’s Just Another MoU …

Remember though, the agreement signed today is just another MoU i.e., an agreement to reach an agreement on the already agreed MoUs as set out above.  It was the Windsor Agreement on Northern Ireland protocol that changed the mood, relationship, and desire to cooperate between the UK and EU that has now resulted in the signed ‘header’ MoU.

Do not hold your breath though.  It took years of negotiation to get to the position of the MoU being signed and given that this MoU means that UK and EU regulators/finance ministers will meet up every 6 months i.e., twice a year, we cannot see all equivalent rules and regulations being in place that quickly.

That said, despite the expected exodus from the UK of financial services workers, only 10,000 jobs of the estimated 1.1m people employed in the UK in finance have moved from the UK to the EU and the UK remains the number 1 centre for financial services in Europe.  We hope this agreement paves way for a realistic and pragmatic implementation of cross border equivalence and cooperation although, we will still not be authorised to distribute or market our services within the EU and will still only operate on reverse solicitation i.e., you approach us to help you with your UK pensions, investments and equivalence.

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