Despite 51.9 per cent voting to sever Britain’s 43-year membership of the EU, financial advisers look set to still have to meet MiFID II requirements and the demands of other rules generated by Brussels.
The UK’s decision on 23 June prompted the resignation of Prime Minister David Cameron, a fall in the FTSE 100 of more than 5 per cent and a collapse in the pound’s value to a 30-year low of $1.32.
Amid this market and political turmoil, there has been uncertainty over when and how Britain will trigger the process of formally leaving the EU, which is expected to take two years.
But despite this upheaval, regulation experts have said advisers who hoped a Brexit would slash the amount of European regulation they face are set for disappointment.
Far from resulting in the axing of MiFID II requirements, which demand that financial advisers give much more information about their costs and that providers check their products are being distributed to the target audience, these rules still look set to come into force.
Mark Spiers, head of wealth management and banks at regulatory consultants Bovill, said MiFID II, which is due to come into effect in January 2018, is very much the brainchild of the Financial Conduct Authority (FCA).
He said: “One of the prime movers behind MiFID II was the FCA, so it doesn’t really matter if we leave the EU tomorrow or today – it is coming in, come what may.
“Our current position is that MiFID II will not materially change, and if we go for full Brexit, we will want to acquire third-country status.
“That means you can get access to the European market and the European consumer, but you have to follow their rules.”
Simon Gleeson, a partner at City law firm Clifford Chance, said the need to retain EU rules and to continue to introduce future regulations created in Brussels in order to gain access to the European market was raised during the referendum campaign.
He said: “The damage you might do to the City by not having third-country status is greater than the benefits you thought you were going to gain by not implementing whatever it was in the first place.
“MiFID II was largely written by the FCA anyway. My feeling is that the starting point for the Treasury and the FCA is an absolute determination to be fully equivalent, and if that’s your starting point there is no reasonable position other then full implementation.”
Jeffrey Mushens, technical policy director of the Tax Incentivised Savings Association, said cross-industry work on the implementation of MiFID II, particularly on the product governance rules, would continue.
He said: “The UK is still bound by membership of the EU, rules and all, until the withdrawal process is complete – which can’t be much before the beginning of 2019.
“In any event, I think it is likely that the FCA would introduce it anyway, and add some gold-plating.”