Written by Brandon Wong

The FCA has updated its webpage outlining the actions it expects UK retail investment firms with customers based in the EEA to have taken following the end of the Brexit transition period.

UK retail investment firms are expected to:

  • have decided on their approach to servicing their existing contracts with EEA customers in accordance with local law and national regulators’ expectations;
  • have provided customers with timely communications to enable them to make appropriate decisions and take necessary steps;
  • have been clear about whether the services they provide to EEA-based customers are regulated by EU law and local law, and about any changes in their ability to continue servicing those customers as a result of the transition period ending;
  • bear in mind that national regimes may change over time and that this could affect their business model in future; and
  • continue treating customers fairly when winding down or transferring EEA business, including communicating decisions clearly and in good time.

Bank account closures

Regarding bank account closures, where firms have EEA customers who rely on UK bank accounts that may be closed, they should review their capability to make and receive payments to and from an overseas account, and should identify and work with customers affected by the change to implement alternative arrangements. All communications with customers should be made in a timely and supportive manner.

The Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service (FOS)

The FCA has also made clear that firms must assess accurately whether their clients are covered by the FSCS and the FOS following the end of the transition period. It refers firms to the COMP and DISP sections of its Handbook.

The update outlines that there has been no substantial change as a result of Brexit to the circumstances in which investors of UK UCITS and UK non-UCITS retail schemes (NURS) may be able to make a claim to the FSCS or a complaint to the FOS.

Generally, provided the investor is eligible under the terms of those schemes:

complaints or claims in relation to UK firms carrying on regulated activities from the UK relating to distribution/intermediation of retail funds continue to be covered by the FSCS and the FOS; and

investors in UCITS and NURS with a UK management company and managed from the UK are still covered by the FSCS and the FOS for complaints or claims relating to the management company’s management of the fund.

Investors in UK UCITS and NURS operated or managed by EEA management companies may be eligible to claim under the FSCS or complain to the FOS about the management of the fund in certain circumstances.

However, investors in EEA UCITS that are managed by an EEA management company and marketed into the UK under the temporary marketing permissions regime are unlikely to be able to claim under the FSCS or complain to the FOS about the management of the fund by the EEA management company.

Investors in EEA-domiciled retail funds with a UK alternative investment fund manager (UK AIFM) are also not generally covered by the FSCS for claims relating to the UK AIFM’s management of the fund. However, they may be able to complain to the FOS about the AIFM’s management of the fund if the fund was managed from an establishment in the UK.

The FCA also points out that where firms provide UK clients with information about redress or compensation arrangements in the UK or in EU member states, the information must be fair, clear and not misleading, up-to-date and accurate.