FCA – Brexit: information for retail investment firms in the UK

The UK retail investments sector comprises many relatively small UK firms servicing primarily UK-based customers. If these firms have EEA-based customers (including UK expats), the FCA expects these firms to have taken steps to make sure they are able to continue servicing them now that the transition period has ended.

Servicing EEA customers after the transition period

If a firm has customers in the EEA, it should have decided on its approach to servicing existing contracts with them. The FCA expect the firm to have taken the steps available, so it can continue servicing customers in accordance with local law and national regulators’ expectations.

Financial protection and dispute resolution 

Firms must accurately assess whether their clients are covered by the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service now the transition period has ended.

The circumstances in which investors of UK UCITS and UK non-UCITS retail schemes (NURS) may be able to claim on the FSCS or refer a complaint to the ombudsman service have not substantively changed as a result of Brexit.

Broadly speaking:

  • Complaints or claims in relation to UK firms carrying on regulated activities from the UK relating to distribution/intermediation of retail funds (e.g. advising on investments) continue to be covered by the FSCS and the ombudsman service, provided the investor is eligible under the terms of those schemes.
  • Investors in UK UCITS and NURS with a UK management company and managed from the UK, are still covered by the FSCS and the ombudsman service for complaints or claims relating to the management company’s management of the fund, provided the investor is eligible under the terms of those schemes.
  • Investors in UK UCITS and NURS operated/managed by EEA management companies may be eligible to claim on the FSCS or refer a complaint to the ombudsman service relating to the management of the fund in certain circumstances. The position should be broadly the same as before the end of the transition period.

However:

  • Investors in EEA UCITS that are managed by an EEA management company and marketed into the UK under the temporary marketing permissions regime (TMPR) are unlikely to be able to claim on the FSCS or refer a complaint to the ombudsman service in relation to the management of the fund by the EEA management company. This was the same before the end of the transition period.
  • It is possible that the home state of the EEA fund and/or its management company provides an alternative dispute resolution and/or an investor compensation scheme for UCITS investors. The scope of such schemes might be limited to investors in the EEA, meaning that UK investors in EEA funds may have lost access to redress and compensation in the relevant EEA state from 1 January 2021. This will depend on the legislation and rules in the EEA state in question. Firms and advisors should have assessed this and considered the implications for their interactions with their UK-based clients.
  • Investors in EEA-domiciled retail funds with a UK alternative investment fund manager (UK AIFM) are not generally covered by the FSCS for claims relating to the UK AIFM’s management of the fund. An investor in such an EEA-domiciled retail fund may be able to refer a complaint to the ombudsman service about the AIFM’s management of the fund if the fund was managed from an establishment in the UK. This position is the same as before the end of the transition period.

Where a firm provides UK clients with information about relevant redress or compensation arrangements in the UK or in EU member states, the information must be fair, clear and not misleading. It should also be kept up-to-date and accurate.

Firms must also make sure that any reference in advertising to an investor compensation scheme is limited to a factual reference to the scheme.

https://www.fca.org.uk/firms/considerations-firms-after-transition-period/uk-retail-investments