An amendment to current Dutch legislation has been published on 04 February 2019 which allows investment firms from the United Kingdom to continue the provision of investment services to per se professional clients in the Netherlands in a no-deal Brexit scenario.
What is this about?
Under MiFID, investment firms established in the United Kingdom (UK) have passporting rights which enable them to provide investment services throughout the European Economic Area. In case of a no-deal Brexit, UK investment firms will lose such passporting rights and consequently will not be able to provide investment services in the Netherlands without being appropriately licensed.
Under an existing third country exemption regime (following from article 10 Exemption Regulation FSA) investment firms based in Australia, the United States of America and Switzerland are exempted from the MiFID licence obligation if they (i) exclusively provide investment services to per se professional clients or deal on own account; and (ii) are subject to regulatory supervision in their home state.
This regime is amended to temporarily expand the exemption to investment firms based in the UK. The Dutch temporary permission regime (Dutch TPR) will enter into effect if and when the UK leaves the European Union without a deal and it is expected to last until 01 January 2021.
Which parties should care?
This temporary permission regime is relevant for investment firms with their registered office in the UK that wish to continue providing investment services to per se professional clients or dealing on own account in the Netherlands post-Brexit. However, is also of interest to Dutch firms being serviced by UK investment firms as it avoids disruption of current servicing.
What should they do?
A third country investment firm (ie a UK firm post-Brexit) that wishes to avail itself of the exemption under article 10 Exemption Regulation FSA must notify the Netherlands Authority for the Financial Markets (AFM) by submitting a notification form and demonstrating that they are subject to supervision in the United Kingdom.
Dutch firms may wish to reach out to their UK service providers to see whether these service providers are looking to rely on this exemption.
Any further thoughts?
Although the Dutch TPR provides for some very welcome flexibility in repapering/contingency planning exercises, it should be noted that while the exemption relieves investment firms of a burdensome and time-consuming licence application process, a number of ongoing requirements do apply to UK firms when relying on this exemption. Essentially, these come down to certain client-related MiFID conduct of business rules, so this should not be worrying for UK investment firms that are already MiFID-compliant. Prudential rules that would generally apply to licensed investment firms do not apply.
Please see the Dutch legislation (in Dutch) here
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