Brexit: Proposal for temporary licensing relief for UK investment firms to remain in force until 31 December 2022

Under the EU-UK withdrawal agreement, the EU granted the UK a transition period, ending on 31 December 2020. Norwegian authorities have started their review of necessary changes to Norwegian laws and regulations, assuming no agreement will be reached between the UK and EU before the end of the transition period.

First in line is the temporary regulation introducing a separate transition period for investment services under the Markets in Financial Instruments Directive (MiFID). A current proposal to allow the temporary regulation to remain in force until 31 December 2022, is now subject to a public consultation in Norway. This newsletter looks at the consequences in more detail.

A temporary regulation which allows UK firms (investment firms and credit institutions) to continue providing cross-border services under the Markets in Financial Instruments Directive (MiFID) in Norway after Brexit is already in place. The temporary regulation is limited to services to eligible counterparties and per se professional clients in Norway and only applies to UK firms that had passported their services into Norway on 12 April 2019.

A proposal to allow the temporary regulation to remain in force until 31 December 2022 is now subject to a public consultation. The scope of the regulation remains unaltered (i.e. investment services under MiFID provided to eligible counterparties and per se professional clients), but the regulation will now be available for UK firms that have passported such services into Norway before 31 December 2020 and it will be in force until 31 December 2022.

Responses to the proposal will have to be submitted prior to 28 October 2020, in order to allow for the necessary changes to come into force before the end of the transition period.

Our view

The proposal grants UK firms a full two-year period to adjust to a new regime and continue to provide services on a cross-border basis. This is more generous than what the UK currently offers Norwegian firms. Currently, a Norwegian firm looking to continue to provide investment services into the UK after the end of the transition period, will most likely be required to do so from a place of business in the UK and subject to local authorisation.

The changes are subject to a public consultation, but we expect that they will be approved and become effective, even if some Norwegian firms may have misgivings about what currently seems to an be imbalance in terms between our two countries.