In view of the fact that following the withdrawal of the UK from the EU and the upcoming end of the transition period on the 31st December 2020, the MFSA has issued a circular to provide an update to the Industry. The guidance offered by the MFSA in this Circular encourages the finalization and implementation of contingency plans to ensure full adherence to the applicable EU legislation, and ensure that clients are kept abreast of any changes that will affect them.
The Authority notes that the post-Brexit scenario plans should be in their final stages taking into consideration the termination of the pan-European passport for UK based entities offering services in the EU and vice versa. Regardless of the fact that, equivalence frameworks foreseen in some areas of EU law, may empower the European Commission to allow UK firms in certain areas to continue to provide services to EU clients, licence holders are expected to prepare for all situations, such as a situation where no equivalence decisions may be taken by the Commission.
UK Licensed Entities Providing Services in Malta
The termination of the passporting regime brings with it the end of the freedom of services and freedom of establishment and therefore it is necessary that such firms obtain authorization from an EU competent authority prior to the 31st December 2020.
Clients must be provided the necessary information about availability of services, alternative arrangements and contact details in case of enquiries. UK entities currently notifying the MFSA to passport into Malta must keep the above in mind and are encouraged to contact the Authority to provide details of future plans.
UK Investment Firms and Investment Funds – In line with the withdrawal agreement, any previous communication relating to the temporary permission regime in this area should a no-deal Brexit have come about, is no longer applicable. The options outlined by the MFSA for such firms are:
To terminate the existing contracts in an orderly manner; and/or
Obtain the necessary authorization; and/or
Proceed with the assignment of the existing contracts to a duly authorized entity.
UK UCITS and AIFs Marketed in Malta – From 1st January 2021 these shall be considered non-EU AIFs and they shall be permitted to be marketed in Malta under the National Private Placement Regime (“NPPR”), subject to notification procedures that would allow them to continue to offer their units to Maltese investors. Applications for marketing under the NPPR are now being accepted by the MFSA.
UK Insurance Undertakings and Insurance Intermediaries – MFSA has issued a letter circulated to UK/Gibraltar firms and intermediaries disallowing such firms from concluding new insurance contracts or establish, renew, extend, increase or resume insurance cover under existing insurance contracts in Malta, unless authorized by the MFSA.
Without such authorization, insurance firms will be allowed to carry out an orderly run-off of the unauthorized business and inform the MFSA of such orderly run-off in a timely manner. Authorisation from the MFSA is needed for firms providing distribution activities in Malta, and the lack of such authorization from UK/GI firms prior to UK’s withdrawal from the EU, requires the intermediaries to inform the MFSA without further delay, of a realistic contingency plan.
Maltese Licence Holders Providing Services in the UK
These firms that wish to continue providing financial services in the UK should adhere to guidance provided by the UK financial services regulator, and ensuring they have applied to join the relevant UK TPR prior to 31st December 2020.
Maltese licence holders must submit any new passporting notification requests by the 10th December 2020, including details of the firm’s intentions in the UK, especially focused on whether they will be accessing the UK TPR.
Financial Services Register
Following the end of the transition period, the MFSA Financial Services Register will remove any reference to passporting activities of licensed entities in or out of the UK.
The Industry is encouraged to follow communication provided by the European Institutions and Supervisory Authorities when it comes to the impact of Brexit on specific areas. ESMA, EIOPA and EBA are providing regular updates on their website. MFSA have also previously set up a dedicated page on their website for Brexit updates.
About the Author
This article has been authored by Dirk Urpani, CSB Group Legal Counsel & Business Advisor. For any additional information or support required please contact us on [email protected].