Legislative & regulatory action
On 10 April 2019 the law of 3 April 2019 on the withdrawal of the UK from the European Union was published in the Belgian State Gazette. The law enables the King to take certain (legislative) measures to ensure the continuity post-Brexit of, among other things, financial services contracts which are currently (i.e. prior to Brexit) in place between Belgian residents and UK financial institutions active in Belgium under the European passport. The FSMA has also issued a communication on the continuance of the provision of investment services and activities by UK investment firms and credit institutions in case of a hard Brexit. In the absence of a (Belgian) transitional regime, UK investment firms can, post-Brexit, either opt to establish an authorized branch in Belgium or notify the FSMA that they wish to provide cross-border investment services.
Access to Belgium for non-EEA investment firms
The possibility to provide, as a non-EEA investment firm, investment services on a cross-border basis was already included in the former Royal Decree of 20 December 1995 and has thus been a possibility for non-EEA investment firms to access the Belgian market for quite some time. The regime nevertheless contains some important restrictions.
First, the FSMA can deny access to the Belgian market if the home country of the investment firm does not provide for equal market access for Belgian firms (the so-called 'reciprocity'). The FSMA has, however, clarified in its communication that in view of the announcement by the British government of the introduction of a temporary permissions regime for inbound passporting EEA firms, the reciprocity condition should be deemed to be fulfilled, as long as this temporary regime remains in force.
Second, in case a non-EEA firm wants to provide services on a cross-border basis in Belgium, it must limit the provision of such services to certain categories of investors, namely: (i) eligible counterparties within the meaning of MiFID (II), (ii) “per se” professional clients within the meaning of MiFID (II) and/or (iii) persons established in Belgium with the nationality of the home state of the firm concerned or of a state in which such firm has established a branch, provided the firm is, in its home state or in the state in which it has established a branch, subject to supervision that is equivalent to that to which investment firms governed by Belgian law are subject.
Subject to the above conditions, the cross-border access regime for non-EEA firms provides for a relatively straightforward notification procedure. The FSMA has now issued template notification forms for the purposes of the notification. It has also clarified that by way of the (prior) notification, firms are authorized to commence their activity. If the FSMA establishes that the conditions for the cross-border access regime are not met, it is entitled to oppose to the provision of the investment services at any time.
However, the restriction under the cross-border access regime to certain categories of investors does not provide for a solution for the continuity of contracts concluded (prior to Brexit) with Belgian retail clients. This issue may be resolved by one of the measures the King is empowered to take on the basis of the aforementioned law of 3 April 2019.
We will keep you informed on any future developments.