UK: Brexit: Five Reasons For Financial Services To Keep Calm And Carry On

Summary and implications

In the immediate aftermath of the Brexit vote, we published a briefing on the implications of the result. This briefing focuses on the implications for financial services, a key part of the UK's economy.

We argued a few weeks back that the future regulatory landscape for UK financial services, at least as far as the detail goes, depends enormously on the nature of the broader Brexit deal that the UK manages to negotiate (touch wood) with its erstwhile EU colleagues. Although this uncertainty now exists following the result, we think even at this stage there are some things worth remembering as you plan for a currently unclear future. We have set out five of these below.

1. Financial services regulation was not invented entirely by the EU

Whilst it is clear that many aspects of the UK's financial services regulatory regime are based on European law, some of it also follows global policy agreed in the wake of the financial crisis by the G20, the Financial Stability Board and IOSCO. It is also worth remembering that some of the more controversial regulation has been driven by the UK, not the EU. Examples include the ban on inducements, ring-fencing of retail and investment banks, the bank levy and adviser charging rules. Given the influence of the UK in shaping the EU's financial services regulation, most recently via the very active Lord Hill as EU Commissioner for Financial Services, it is also conceivable that an independent UK might have implemented similar rules in certain areas even if it had not been part of the EU.

2. Bad law is better than no law

Nevertheless, the extent to which financial services in this country are regulated by EU legislation is huge. This is demonstrated by the veritable alphabet soup of regulatory regimes that are very familiar to us and our clients – AIFMD, CRD, EMIR, MAD, MiFID, PSD2, UCITS... we could go on. However, the very ubiquity of EU rules means that they are likely to remain largely in place in the near to medium term. It may even be sensible for the UK to transpose EU Regulations directly into UK law, at least during a transitional period (Regulations have direct effect and apply automatically in the UK on adoption by the EU, whereas Directives must be implemented into national law by Member States themselves). The confusion of no law is much more damaging than the certainty of unpopular law. In any case, EU regulation will continue to apply in full for a minimum of two years, until a formal exit is agreement is reached.

3. Divergence may come, but it will be gradual

Even so, the FCA has had its differences with EU regulation. It has been known to go further than European regulators at times, in some cases "gold-plating" the application of EU rules in the UK. For example, the EU's telephone recording obligations under MiFID II are to a great extent an exercise in the EU catching up to where the FCA is already. In other areas the UK regulator has been more liberal than other Member States. In the AIFMD context for example, the FCA has taken a more practical approach than other Member States when applying new rules on remuneration, granting authorisations and the defining what constitutes the "marketing" of Alternative Investment Funds.

So, whilst the UK may wish over time to implement rules that differ in places to those within the EU, there are a number of reasons why any such divergence is likely to be gradual:

  • The task of replacing multiple regimes would be huge and take a very long time, both for regulators and for firms who have invested heavily in complying with current regimes.
  • For the most part, despite some grumbling, EU financial services rules have been accepted in the UK (except perhaps in certain parts of the hedge fund and brokering industries, there is no deep feeling of resentment akin to the public outcry against the famous, egregious, fictional banana regulations).
  • The uncertainty around a wholesale re-working from a blank canvass would be unacceptable.
  • There will be a lot of pressure to negotiate as much access for UK service providers to the EU's Single Market as possible, which depends on the UK's regime passing the "equivalence test". This in practice means the UK continuing to comply with EU standards (it is worth remembering that even the US, birthplace of private equity funds, recently failed this test in the AIFMD context).

4. We can help with the "known unknowns"

Donald Rumsfeld's famous line was over-used in the period leading up to the referendum (including by us), but it is clear that there are key questions to which the financial services industry would ideally needed answers sooner rather than later. These include:

  • Passporting – will UK firms keep their various "passports" for business in the EU?
  • AIFMD – will the UK receive a "third country" passport if required, and if so when?
  • EMIR – where will clearing need to be carried out post-Brexit?
  • MiFID II – should firms continue or call off preparations?
  • UCITS – will firms need to set up a management company inside the reduced EU?

However, it would be very optimistic to expect definitive answers to these questions in the immediate future. Given the notoriously pedestrian pace of EU negotiations, and their tendency towards brinksmanship and eleventh hour deals, firms need to consider their options. One such option is whether EU authorisations should be sought sooner rather than later, regardless of the eventual Brexit terms. If access to European markets is business-critical, then such pre-emptive hedging strategies might be worth the premium. In any case, Nabarro can help you consider the options that are available and if necessary implement any contingency plans.

5. Crowdfunding is not yet regulated at EU level

The EU's Capital Markets Union is a work in progress, and certain important growth areas, notably crowdfunding, are not currently subject to any bespoke EU regulation. The UK's crowdfunding industry has grown to be the largest and most dynamic in Europe under mostly FCA oversight. Brexit may mean that the industry misses out on any move by the EU towards a cross-border framework, but this seems very distant and hypothetical anyway, given that the EU as recently as May 2016 decided that there was "no strong case for EU level policy intervention at this juncture". The impact of Brexit on UK crowdfunding is therefore likely to be confined to broader economic issues, rather than any increased regulatory uncertainty.


We will be following all the issues for financial services firms very closely and communicating developments and our thoughts in detail over the coming weeks, months and years. In the meantime, please get in touch if you would like to discuss the regulatory challenges or opportunities that these uncertain times present for your business.

Please also remember that financial services regulation was already evolving at a rapid pace – that is one certainty that Brexit will not change.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Bircham Dyson Bell LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Bircham Dyson Bell LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions