Luxembourg regulator highlights hard Brexit implications for UK firms
Luxembourg’s financial regulator has called for UK asset managers to notify it as soon as possible if they want to be able to conclude new contracts in the country following a potential “hard Brexit”.
In a press release, CSSF reiterated that, if the UK exits the EU without ratifying a withdrawal agreement, it would become a “third country” in relation to providing services to EU entities. CSSF emphasised that providing regulated services in Luxembourg without proper authorisation was illegal and therefore subject to sanctions.
UK asset managers and other financial services firms that wanted to continue their business and conclude new contracts in Luxembourg following an abrupt UK departure from the EU should apply for authorisation with the regulator as soon as possible, it said.
Authorisation could take up to 12 months to be granted, CSSF said, so any asset managers without such permissions would have to cease all business as of the date of a hard Brexit. The UK is currently scheduled to leave the EU on 31 October 2019.
The Luxembourg regulator also confirmed it would be offering a transitional regime, which it has set at 12 months.
UK fund managers wanting to take advantage of this arrangement would need to notify CSSF “of their intention and way forward” to continue to provide services in Luxembourg after the occurrence of a hard Brexit, the regulator announced yesterday.
The notifications would need to be lodged by 15 September via an online portal, which is due to be opened in the coming weeks. The asset managers would then need to submit, by 31 October, “the corresponding application for authorisation, or, as the case may be, the corresponding notification or information on any action taken otherwise, depending on the nature of the activities they intend to pursue after the occurrence of a hard Brexit and/or the steps undertaken to address the loss of passporting rights”.
Both the “Brexit notification” and subsequent application or notification would need to be submitted in order for a UK asset manager to be eligible for the transition regime.
According to consultancy EY, financial services firms paused or slowed down their Brexit planning between March and May once EU leaders in April agreed to extend the deadline for the UK’s exit to the end of October. Boris Johnson, the Conservative Party politician who looks likely to become the next UK prime minister, has pledged to take the UK out of the union on 31 October regardless of whether or not a withdrawal agreement has been finalised.
The UK’s Financial Conduct Authority (FCA) has signed memoranda of understanding with a number of other regulators in an effort to reduce the impact of a ‘no-deal’ Brexit. It agreed terms with the 27 remaining EU national regulators in February, and has signed similar deals with the Australian Securities and Investments Commission and the US’ Securities and Exchange Commission.
The FCA has also signed an agreement with Dutch regulator the Financial Markets Authority to increase their co-operation regardless of the Brexit outcome.