But UK financial services firms range in size enormously and all the choices were really only open to those at the bigger end of the market.
Some of those at the smaller end may have favoured the reverse solicitation option, particularly where they had a large number of retail clients with directly held portfolios.
An increase in activity in this area forced the European Securities and Markets Authority, to issue a public statement on January 13 2021, to remind firms of the Mifid II requirements on the provision of investments services to retail or professional clients by third country firms.
ESMA pointed out they were seeing ‘some questionable practices’ around reverse solicitation, where ‘some firms appear to be trying to circumvent Mifid II requirements’.
This statement emphasised that if it was proved investment services were being provided in the EU without proper authorisation, then the service provider was at risk of administrative or criminal proceedings, and the investors themselves may have lost the protections granted to them under the relevant EU rules, including access to any investor compensation schemes.
While many UK financial advisers wrote to their clients in the EU requesting they appoint new advisers, others were maybe unaware these clients had actually left the UK in the first place.
Others were maybe hoping an eventual agreement around ‘enhanced-equivalence’ could provide the salvation they needed.
And this problem may not be restricted to just smaller IFA businesses.
UK networks may not realise the businesses they are supporting and providing compliance services to may have not yet advised their EU-based clients they can no longer act for them, if those businesses themselves are unaware of their client’s movements.
There are 40 areas of equivalence in the EU’s regime, but together they in no way cover the full extent of cross-border financial services traded into the EU - and there are significant gaps between what is available through passporting and the activities for which equivalence is available.
There are also different equivalence regimes for different financial services, which means third countries’ laws will have to satisfy different criteria in order to secure equivalence for different services.
Legally, these activities cannot include services such as insurance and distribution, commercial bank lending, payment services and mortgages – activities at the core of UK financial services.
But perhaps even more important are fundamental banking activities like accepting deposits and providing investment services to retail (non-professional) investors.
The fact these are outside of the ambit of equivalence explains why many EU-based customers have received letters from financial institutions in the UK, confirming their UK bank accounts will be closed, or why a UK investment manager can no longer manage their portfolio.