Technical Notice On Financial Services Post-Brexit – Finance and Banking


Gibraltar:

Technical Notice On Financial Services Post-Brexit


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The transition period (or “implementation” period)
will come to an end on the 31st December 2020 under the
EU-UK Withdrawal Agreement, after which, Gibraltar individuals and
businesses will no longer have access to the benefits previously
provided by EU rights. Negotiations regarding the United Kingdom
and Gibraltar’s future relationship with the EU are ongoing; in
order to prepare for the changes that will ensue, HM Government of
Gibraltar has published a Technical Notice to provide guidance on the
effect those changes will have on both financial services provided
by Gibraltar licensed firms in the UK and the EU, and on financial
services provided by EU licensed firms in Gibraltar.

NO AGREEMENT

The Financial Services and Markets Act 2000 (Gibraltar) Order
2001 (the “Gibraltar Order”) was amended in 2019
pre-empting a failure by the UK and EU to agree on the terms by
which the UK will leave the EU. Subsequently, in the event of a
no-deal Brexit, the reciprocal arrangements between the UK and
Gibraltar allowing licenced financial services firms to operate in
each other’s territory will be preserved.

To this end, the UK Government has recently consulted on a new
Gibraltar Authorisation Regime (“GAR”), which will
provide for future continued access arrangements for Gibraltar
licensed firms providing financial services in the UK market.

UK licenced firms will retain access to the Gibraltar market
under the draft Financial Services (Passport Rights and
Transitional Provisions) (EU Exit) Regulations 2020. The Government
will be supplementing the Regulations with further legislation to
support the retained existing market access arrangements between
Gibraltar and the UK; preserve the main elements of EU Single
Market directives which apply between Gibraltar and the UK (e.g.
Solvency II, MiFID II, and IDD); ensure that UK deposits remain
protected after 31 December 2020; and capture market abuse related
issues.

In terms of the implementation of EU law in EU Member States,
Gibraltar and UK licensed financial services firms providing
services in the EU will be considered third-country firms. As a
result, they will immediately lose EU passporting rights.

After 31 December 2020, EEA firms operating in Gibraltar would
become subject to the same supervisory regime that Gibraltar
already applies to other third countries. EEA authorised firms will
not be able to use the UK-Gibraltar passporting arrangements. These
rights will only be available for firms incorporated and
headquartered in Gibraltar and the UK.

To address the loss of EU passporting rights for EEA authorised
firms operating in Gibraltar, HMGoG announced the introduction of a
Temporary Permissions Regime (“TPR”) which will allow EEA
firms to continue passporting into Gibraltar for a limited
period.

AGREEMENT ESTABLISHED

Negotiations regarding any potential future relationship between
the UK/Gibraltar and the EU are ongoing. It remains unclear whether
an agreement would provide for specific provisions relating to
financial services including national treatment for cross-border
financial services suppliers, market access, the transfer of
financial information or regulatory cooperation.

However, whether or not an agreement is reached, arrangements
between the UK and Gibraltar with respect to market access in
financial services are impervious to any future relationship with
the EU, as secured early on in the negotiations between HMGoG and
the UK Government following the 2016 referendum.

Partner and financial services specialist, Christian Caetano,
commented: “The latest Technical Notice from HM Government of
Gibraltar provides valuable guidance to the financial services
sector as both firms and other stakeholders prepare for the end of
the transition period. As evidenced by the Notice, the Government
has made wide-ranging preparations to ensure that, in the event of
a No Deal Brexit, any potential disruption to this sector is
mitigated. This has included the drafting of domestic legislation
aimed at preserving reciprocal market access arrangements between
Gibraltar and the UK after 31 December 2020.

Work also continues on the amendment of Gibraltar’s
financial services legislation to ensure that no technical
statutory deficiencies arise at the end of the transition. This
exercise will ensure that the Financial Services Act 2019, as well
as the accompanying sector-specific regulations enacted earlier
this year as part of the Legislative Reform Programme (LRP) will
continue to function as necessary.

In parallel, the UK Government’s new Gibraltar Authorisation
Regime (“GAR”) will provide for continued access
arrangements for Gibraltar firms providing financial services in
the UK market. Given that the UK has historically been
Gibraltar’s main, although not only, market for insurance and
other financial services, these arrangements will ensure that these
links remain rock-solid into the future.”

HM Government of Gibraltar’s Technical Notice can be found
here.

Originally published 27-10-2020

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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