No passport, no (finance sector) travel post Brexit?

Finance Update

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In our last update, we told you about emerging opportunities in Asia for New Zealand fund managers, using the Asia Region Funds Passport. It could be a different story for financial institutions in the United Kingdom and Europe following Brexit.

Today, the UK's membership in the European Economic Area means UK authorised financial institutions (banks, investment firms, fund managers, insurers, insurance intermediaries, payment institutions and e-money issuers) can carry on activities across the EEA without setting up a separate entity and/or obtaining authorisation in each EEA state, thanks to various EEA directives.

UK financial institutions could lose these passporting rights post Brexit, unless the UK retains their EEA membership. If EEA membership is lost, UK financial institutions will be treated as 'third country firms' under EEA directives and may need to establish a subsidiary in another European Union member state to continue to operate cohesively across the EU.

Some EEA directives do give passporting rights for 'third country firms', but under the existing Markets in Financial Instruments Directive, which provides harmonised regulation for investment services across the member states, there are none.

Of course, we're still waiting and wondering if the UK will necessarily lose its EEA membership status - it may follow the Norwegian model and become a non-EU member of the EEA.

But with the implications, such a change would carry for the world financial markets - this is definitely one to watch!

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