The week in outline:

The UK Government (HMG) published a second batch of 28 technical papers describing the impact of a “no deal” scenario (see one of those papers in document 3 below). The paper on financial services was published in the first batch and was reviewed in our update for the week 24 August 2018. Further papers are expected to be published in the coming weeks.

The FCA published material (see Document 1 below) on ‘no-deal’ planning for EEA market operators. HMG has already published its proposed legislation for a temporary permission regime for EU-27/EEA firms which avoids the sudden loss of authorisation for UK business on 29/3/19 (see our update for the week ending 27 July 2018). In a ‘no-deal scenario’, EU-27/EEA market operators (of regulated markets, multilateral trading facilities and organised trading facilities) will lose their MiFID II passporting rights for UK activities. HMG will not, however, be introducing a temporary recognition regime for market operators, so they may now need to act urgently to obtain the relevant UK regulatory status by 29/3/19.

Market operators (which do not have a permanent place of business in the UK) may be able to rely upon the UK’s overseas persons exemption but, in making their markets available to UK members, they may be carrying on regulated activities in the UK beyond the scope of that exemption. In that event they may wish to apply to the FCA for recognition as a recognised overseas investment exchange (under section 287 of the Financial Services and Markets Act 2000). The application process has been streamlined for EU-27/EEA market operators but, as there is no temporary recognition regime, permanent recognition would need to be granted by the FCA before a ‘no-deal Brexit’ on 29/3/19.

The FCA says that complete applications should be submitted as soon as possible and at least 6 months before the recognition order is required. This means the final date for complete applications to be submitted is 29/9/18 (if recognition is to be available for exit on 29/3/19).


FCA has published a direction which clarifies how an EEA market operator may make an application to become a recognised overseas investment exchange in order enable the participation of the exchange in UK markets, should they no longer be able to rely on MiFID II passport rights post-Brexit. The FCA urges relevant entities to contact the regulator as soon as possible if they are considering making an application. Overseas investment exchanges which do not carry on regulated activities in the UK need to take no action. For further information, visit here.

The FCA states:

“The Treasury is not planning to put in place a temporary recognition regime for EEA market operators in the event the UK leaves the EU without a deal and without entering an implementation period”.

“…EEA market operators who cannot rely on the overseas persons exclusion and who undertake regulated activities in the UK should seek appropriate FCA permissions such as recognition as a Recognised Overseas Investment Exchange [ROIE]".

Applications should be made not later than 6 months before the applicant wishes a ROIE recognition order to take effect.


This briefing paper discusses what would happen if the UK left the EU on 29 March 2019 without a withdrawal agreement or a final deal. The full report can be accessed here.

The HMG states:

“… That preparations for a no deal are part of its overall Brexit preparation strategy”.

The paper includes a brief section on financial services. It mentions the temporary permissions regime and approach of HM Treasury and the Bank of England. The paper notes:

“The derivatives market has been identified by the Governor of the Bank of England as the ‘big issue’ for the UK and EU to solve post Brexit day”

“He [the Governor of the Bank of England] also drew attention to the ‘no passport’ problem applying to cross-border clearing houses, where the EU has not come up with an equivalent temporary permissions regime”

The briefing paper also stressed that “the combination of the ‘no passport’ issue and the derivatives issue is particularly troublesome for the insurance industry.”

Otherwise the briefing paper focuses on the impact of a no deal scenario on the following areas: the economy, trade and customs, the Irish border, free movement, food supply, agriculture and fisheries, energy, internal security, transport and research and higher education.

In relation to the economy,

“It is difficult to pinpoint the economic impact of 'no deal' with certainty. Many economists expect the pound to fall in value in the event of 'no deal'. This would mean the price of imports would rise, pushing up inflation. However, UK exports would become cheaper internationally, potentially mitigating some of the disruptive effects on trading with the EU.

But most economic modelling in this area shows that the potential benefits of leaving the EU with no deal over the longer term do not make up for the higher trade barriers with the EU, given its importance to the UK".


The technical note for data protection has been published which sets out the actions UK organisations should take to enable the continued flow of personal data between the UK and the EU in the event of a no-deal Brexit. The full note can be accessed here.

“If the UK leaves the EU in March 2019 with no agreement in place regarding future arrangements for data protection, there would be no immediate change in the UK’s own data protection standards. This is because the Data Protection Act 2018 would remain in place and the EU Withdrawal Act would incorporate the GDPR into UK law to sit alongside it.”

“You would continue to be able to send personal data from the UK to the EU. In recognition of the unprecedented degree of alignment between the UK and EU’s data protection regimes, the UK would at the point of exit continue to allow the free flow of personal data from the UK to the EU. The UK would keep this under review.”

“The EU has an established mechanism to allow the free flow of personal data to countries outside the EU, namely an adequacy decision. The European Commission has stated that if it deems the UK’s level of personal data protection essentially equivalent to that of the EU, it would make an adequacy decision allowing the transfer of personal data to the UK without restrictions. While we have made it clear we are ready to begin preliminary discussions on an adequacy assessment now, the European Commission has not yet indicated a timetable for this and have stated that the decision on adequacy cannot be taken until we are a third country.

If the European Commission does not make an adequacy decision regarding the UK at the point of exit and you want to receive personal data from organisations established in the EU (including data centres) then you should consider assisting your EU partners in identifying a legal basis for those transfers.

For the majority of organisations the most relevant alternative legal basis would be standard contractual clauses. These are model data protection clauses that have been approved by the European Commission and enable the free flow of personal data when embedded in a contract. The clauses contain contractual obligations on you and your EU partner, and rights for the individuals whose personal data is transferred. In certain circumstances, your EU partners may alternatively be able to rely on a derogation to transfer personal data.”

Other publications from the RegZone Brexit news feed

HoC Library Brexit: a reading list of post-EU Referendum publications

This reading list contains publications by Parliament and devolved Assemblies which have been published after the Brexit Referendum. The list can be accessed here.

HoC European Scrutiny Committee 37th Report of Session 2017-19

The Committee is dealing, amongst other things, with the EU’s concessions on WTO tariff quotes post-Brexit and the UK’s participation in Erasmus post-2020 but nothing directly relating to financial services. The report can be accessed here.

Department for Exiting the EU: Joint Ministerial Committee (EU Negotiations) communique

This summarises the twelfth meeting of the Committee held on 13 September 2018. It can be accessed here.

FMLC: EMIR: the EC’s legislative proposal to amend procedures for recognition of third country CCPs

FMLC’s paper (dated July 2018 and published 14/09/18) provides an overview of the current EMIR regime on TC CCPs and of the changes proposed in the EC's proposal; identifies issues of legal uncertainty derived from such changes; considers the impacts of the changes and suggest possible mitigants and/or solutions to the uncertainties identified. The paper can be accessed here.

HoC: Brexit and governance of the UK-EU relationship

This paper looks at the EU and UK proposals to date on how EU law will be observed and how disputes will be dealt with. The full paper can be accessedhere.

The Friendly Societies (Amendment) (EU Exit) Regulations 2018

HMT notes that the sifting committees agreed with the Government that this SI (originally published in July 2018) does not have to have a debate in parliament, though one may still occur. The note can be accessed here.

DBEIS/MoJ: Brexit no-deal planning – handling civil legal cases that involve EU countries

This technical note looks at how a no-deal Brexit would change the rules for, amongst other matters, civil and commercial judicial cooperation and cross-border insolvency cooperation. The full note can be accessed here.