The project arguably prompting most concern is Mifid II, which comes into force in January next year. It requires huge changes for the firms affected in terms of transaction reporting, new rules around research and communications including a requirement to notify clients when a portfolio falls more than 10%.
Of course, Mifid II is not the only piece of European regulation having an impact.
To take one example, the UK government announced legislation to give people more control over their personal information in a planned Data Protection Bill. However it is partially driven by the need to conform to the EU’s General Data Protection Regulation (GPRD), which comes into force in mid-2018, with big implications for dealing with client information. That is, of course, less than a year before Brexit.
So what exactly is going on?
Well for now the FCA has an established line on Brexit and it hasn’t shifted it significantly since just after the vote – that we comply with EU rules while we are members.
There is no sign of divergence from this – as the full range of EU initiatives for financial firms have continued to be embraced, translated and adapted for the UK.
Meanwhile, as the Department for Exiting the European Union sets out a range of views and position papers on transitional trade arrangements, customs, the Irish border and relations with the European Court of Justice, it has given little indication about its views about financial services.
Immediately post Brexit, a lot of talk has focused on maintaining finance’s passport into the EU, but it looks likely to require membership of the European Economic Area and so is deemed increasingly unlikely.
Attention then turned to equivalence, where the EU accepts that countries outside EU may have rules, that while not identical are equivalent and thus, subject to various approvals, can access EU markets in return for access to that country. This idea also seems to have lost favour as it was realised the gaps in the approach were too large notably for banks.
Actually at a very high level, one might argue that it is the regulators who have taken the political initiative.
FCA chief executive Andrew Bailey made a significant set piece speech earlier this summer making the case for open relations and equivalence, while emphasising the downside of barriers for the EU in terms of funding for both states and business.
Beyond the need to maintain the law for now, it could also give the UK another reason not to diverge.
