On September 14, the UK Financial Conduct Authority (FCA) published a statement and direction clarifying how a market operator based in the European Economic Area (EEA) may make an application to become a recognized overseas investment exchange (ROIE), following the United Kingdom’s departure from the European Union (Brexit).
The FCA has made the direction in order to enable the participation of an EEA exchange in UK markets, should they no longer be able to rely on passport rights under the revised Markets in Financial Instruments Directive (MiFID II) after Brexit.
The statement accompanying the direction explains that HM Treasury is not planning a temporary recognition regime for EEA market operators in the event the United Kingdom leaves the European Union without a deal without an implementation period. This is in contrast to the approach taken in relation to other EEA market participants, who may be able to rely on a planned temporary permissions regime to carry on regulated activities in the United Kingdom following the withdrawal (for further details, see the July 27 edition of Corporate & Financial Weekly Digest).
EEA market operators who currently make use of passport rights may, therefore, wish to apply to be recognized as an ROIE. EEA market operators who do not maintain a permanent place of business in the UK may be able to rely on the overseas persons exclusion, following the UK’s withdrawal from the European Union, to the extent that they would otherwise be deemed to be carrying on a regulated activity in the United Kingdom. However, the statement advises that EEA market operators who cannot rely on such exclusion and who undertake regulated activities in the United Kingdom should seek appropriate FCA permissions, such as recognition as an ROIE.
The direction itself clarifies the FCA’s expectations of EEA market operators when applying for recognition as an ROIE. The FCA notes that it has streamlined the application requirements where possible, considering that EEA market operators are subject to MiFID II.
FCA’s statement is available here.
The direction is available here