Newsflash – Brexit – Investment firms
- 10 july 2019
How investment firms governed by UK law will thus access the Belgian market post Brexit?
The Belgian federal government voted a Brexit law dated of 10 April 2019 and the Belgian regulator (the “FSMA”) published a Communication dated of 21 February 2019 on the provision of investment services and the performance of investment activities in Belgium by investment firms governed by UK law post Brexit. The system that will apply in Belgium (in case of hard Brexit) is that investment firms governed by UK law will be authorized to carry on their MiFID activities (or to start providing their MiFID activities) under certain conditions, either by way of establishing a Belgian branch or on a cross border basis, subject to appropriate authorization (branch) or notification (cross border) being made to the FSMA.
Investment firms governed by UK law will need to comply with the following conditions to be allowed to carry out their MiFID activities in Belgium on a cross border basis:
- (1) the investment firm must provide its services or carry out its activities in its home country;
- (2) the investment firm must only solicit restricted categories of clients: - eligible counterparties; - professionals per se within the meaning of MiFID II – but not professionals on request; or - persons established in Belgium with the nationality of the home country of such investment firm (“expatriates”) or of a country in which such investment firm has established a branch;
- (3) the investment firm must be subject, in its home country or in the country in which such investment firm has established a branch, to supervision equivalent to that to which investment firms governed by Belgian law are subject.
The FSMA is legally empowered to prohibit the provision of investment services or activities in Belgium to third country firms established in a country which does not offer the same opportunities to access its market to Belgian investment firms (reciprocity principle).
The existence of the above-mentioned conditions does not imply that the relevant third country firm will automatically receive prior authorization from the FSMA.
The FSMA published guidelines related to the notification process as well as a template notification form in its Communication FSMA_2019_07 dated 21 February 2019.
According to such communication, third country firms are obliged to (i) identify themselves to the FSMA, (ii) specifying the contemplated services they intend to provide and the contemplated activities they intend to carry out in Belgium and (iii) specifying the categories of clients they intend to solicit.
The notification will, however, only have a legal effect when the UK will have left the EU, and provided that no transitional period during which investment firms governed by UK law would benefit from a European passport or equivalent authorizations.
Investment firms governed by UK law that are currently included in the lists published by the FSMA of investment firms governed by the law of an EEA Member State active in Belgium, that do not obtain the authorization for their branch or that do not notify their intention to provide investment services or carry out investment activities in Belgium under the freedom to provide services, will be deleted from the aforementioned lists held by the FSMA. Such investment firms will therefore no longer be authorized to carry out their MiFID activities in Belgium from the date on which they were deleted from such lists. Any pursuit of MiFID activities will be punishable with criminal and/or administrative sanctions.
What about existing contracts? A question arose in respect of the continuity of existing contracts entered into by investment firms governed by UK law which will not be entitled to carry on their activities in Belgium post Brexit.
As no European legislation has been issued yet, the above-mentioned law dated of 10 April 2019 also empowers the King of Belgium to take measures, upon advice of the FSMA and/or the National Bank of Belgium, to safeguard the continuity of such contracts.
France Wilmet, partner firstname.lastname@example.org
Muriel Baudoncq, partner email@example.com
Quentin Metz, associate firstname.lastname@example.org