It is worth noting that among such entities, only those that, having submitted a request of authorization as of 31 December 2020, are still waiting for the procedure to be completed, may continue to operate, limited to the management of the existing relations, until they have obtained the authorization, but no later than 30 June 2021. This is also one of the consequences caused in the regulatory field by the Brexit “earthquake”.
The withdrawal agreement (aiming at regulating the exit of UK from the EU as provided by article 50(2) TEU in case of withdrawal from the Union by a member State), ratified by the EU and the UK, which entered into force on 1 February 2020, provided for a transition period ending on 31 December 2020.
During the “transition” period, the intermediaries have been invited several times by their respective supervisory authorities, including Bank of Italy and Consob, to make suitable plans for an orderly management of Brexit.
In particular, the Bank of Italy has issued specific guidelines (Communication April 2020) on the possibility of:
- continuing to provide services in Italy as third-country operators, by promptly filing the relevant application, also focusing on the strict deadline to obtain it;
- transferring their activities to another intermediary - either an existing one or a newly established one - active in Italy;
- ceasing to provide services by the end of 2020, also informing the surveillance authority in UK.
Attention has also been drawn by the Bank of Italy on the need for banks, payment institutions and electronic money institutions, offering their products and services in Italy under European law, to promptly inform clients as to what will happen to existing contracts after Brexit (Communication February 2019).
Finally, with its Communication addressed to UK intermediaries ahead of the end of the transition period (15 December 2020), the Bank of Italy invited financial intermediaries to complete - if they had not already done so - their plans for an orderly management of Brexit, enhancing their instruments and channels of assistance and communication, including the online ones, for their clients, and to keep them running also after the transition period.
At the same time, starting from March 2020, the Consob has issued several warning notices to British intermediaries providing investment services in Italy in order to establish operational instructions in view of the expiry of the transition period and to limit the possible negative impacts for the clients, who have been invited to verify if they have received adequate and up-to-date information on the consequences of Brexit.
However, as anticipated, Law Decree 183/2020 sets out provisions aimed at protecting the clients of UK intermediaries, stating that those who have submitted, by 31 December 2020, an application to be authorized as third-country firms and to whom the authorization has not yet been granted or refused - can continue to operate until the authorization is granted, and in any case for no later than 30 June 2021.
Such period is of “limited operations”: new clients cannot be acquired, and existing contracts cannot be modified ('life-cycle event' activities are allowed, however, for existing 'over the counter' derivative contracts).
Additionally, deposits of clients with UK banks operating in Italy will benefit of the Italian deposit guarantees scheme, and will continue to adhere to the Italian alternative dispute resolution system (Banking and Financial Ombudsman, ABF), which will be responsible to put clients in contact with the foreign ADR system in case UK banks operating without a branch did not adhere to the ABF).
Furthermore, clients of UK intermediaries providing investment services and activities in Italy will be assisted by an Italian compensation scheme and will continue to have the right of access to the Arbitrator for Financial Disputes (ACF).
During such period of “limited operations”, UK banks, investment firms and e-money institutions will be subject to the national regulations applicable to third country intermediaries and to the supervision of the Italian competent authorities.
In the event that authorization is refused, UK intermediaries must cease their activities in Italy within three months from when they were informed of such a refusal, in such a way and in a time frame that will not negatively affect customers.
When the authorization is refused and in case of intermediaries that must cease their activities, the law law states that intermediaries must return cash, goods and financial instruments to clients, according to their instructions, and with regard to loans, clients will be entitled to make payments according to the originally agreed deadlines (but they can opt for the early full repayment).