BREXIT UPDATE FROM LONDON & CAPITAL
BY LONDON & CAPITAL
London & Capital (L&C) has been following closely and preparing the Group for the outcome of the Brexit discussions, the subsequent Agreements and the likely changes in the post-Brexit Regulatory landscape.
As part of the Brexit transitioning year of 2020 (and potentially beyond), L&C will continue to use this passporting regime to manage our clients investments. At the end of the transition period, L&C will continue to look after our European clients by way of setting up an entity in the European Union (EU).
WHAT IS BREXIT?
Brexit is the withdrawal of the United Kingdom (UK) from the EU. Following a referendum in June 2016, the UK government formally announced the country’s withdrawal in March 2017, starting a process that concluded with the UK withdrawing from the European Economic Area (EEA) on 31 January 2020. The withdrawal is subject to a transition period.
WHAT IS THE EEA?
EEA means the European Economic Area as constituted by the agreement on the European Economic Area (94/1/ECSC, EC), as amended from time to time, excluding the UK and constitutes the following 30 states; Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.
WHAT IS THE TRANSITION PERIOD? WHAT IS THE TRANSITION END DATE?
The UK and the EU leaders concluded an agreement on the withdrawal of the UK and Northern Ireland from the EU on 17 October 2019, which entered into force on 1 February 2020. The agreement includes a transitional period during which there will be legal and regulatory continuity between the UK and the EU on the basis of the existing rules from the date the UK leaves the EU (31 January 2020) until the expiry of such period (the transition end date). The transition period is set to expire on 31 December 2020.
WHAT IS PROPOSED BY L&C?
It is proposed that clients of L&C resident in the EEA will be transferred to a wholly owned EU-based subsidiary.
WHY CAN’T MY DISCRETIONARY MANAGEMENT AGREEMENT (DMA) STAY WHERE IT IS?
All DMAs with EEA clients must be transferred to an EEA regulated company to allow for the compliant ongoing servicing of the agreement. Otherwise there is a risk that following the end of the Brexit transition period L&C will not legally be able to service you.
WHY WILL YOUR EU SUBSIDIARY BE BASED IN SPAIN?
We carefully considered the choice of location for our EEA subsidiary that will be known as ‘London and Capital Europe’ (L&C EU).
L&C has actively explored various EU jurisdictions that would allow us to continue with our strategy of serving existing EU based clients and continuing to develop our business across Europe. Based on various key criteria and consultations with local experts, the Board of L&C has decided to establish an EU regulated entity in Spain, subject to the relevant authorisations. As with the current UK structure, clients of the Spanish entity do not need to reside in Spain but can reside anywhere within the EEA.
WHAT HAPPENS IF THERE IS AN EXTENSION TO THE CURRENT TRANSITION PERIOD?
An extended transition period on the same terms as the current transition will still require a solution, even if it is at a later date. In anticipation of the service continuity requirement arising at a later date and in order to take advantage of the legal certainty that exists prior to the transition end date, the transfer will continue in line with current plans. The UK Government has stated that it does not intend to request an extension to the transition period and the UK Parliament has passed legislation to implement this intention as well.
WHAT IS THE EFFECTIVE DATE?
Effective Date means the time and date on which the scheme of transfer shall become effective. This is currently expected to be on or around April 2021.
WHAT DO I NEED TO DO?
Nothing. L&C will formally notify you to let you know that you will become a client of the EU entity. We will continue to manage your investments in the same way, advisers won’t change and, as none of our staff are impacted by Brexit, your day to day points of contact will remain the same.
WILL THERE BE ANY CHANGES TO MY CONTRACT WITH L&C?
We are not anticipating any changes except that our EU subsidiary will become the Investment Manager. The proposed transfer is being carefully designed to ensure that it will not change how we serve clients.
WILL THE FINANCIAL OMBUDSMAN SERVICES (“FOS”) ACCESS BE LOST FOLLOWING TRANSFER?
Regarding complaints that will be covered by the FOS Compulsory Jurisdiction; the FOS will continue to have jurisdiction in relation to L&C EU as transferee where the relevant act or omission complained of took place prior to the transfer.
WHO IS PAYING FOR THE TRANSFER?
Any direct costs incurred to execute the proposed transfer will be borne by L&C Group.