As the 29th of March 2019 fast approaches, and the prospects for a transition period under the Withdrawal Agreement remain uncertain, UK regulated firms must consider if or how they will be affected by the UK's withdrawal from the EU, and assess the steps they may need to take to prepare for Brexit (including a potential no-deal exit on 29 March 2019).

In December, the Financial Conduct Authority (FCA) published the latest update in its "Preparing your firm for Brexit" series to assist UK firms in preparing for Brexit.

Key takeaways from the update include:

  • Contract continuity: Brexit will result in the loss of passporting rights for UK firms doing business in the EEA. The FCA reminds firms that a no-deal Brexit on 29 March 2019 and the resulting loss of passporting rights could create a "cliff edge" for those UK firms who want to carry on servicing EEA clients under existing contracts. Whether firms will require regulatory permissions in the local EEA jurisdiction to continue to service local clients will depend on the nature of the activity the firm is carrying on, local laws and the approach of the relevant local authorities. With this in mind, the FCA urges firms which do business in the EEA under the passporting regime to review existing contracts and make sure they will be able to continue to service customers with existing contracts post-Brexit.
  • Data sharing: If the UK leaves the EU on 29 March 2019 without a Withdrawal Agreement, the UK Government has stated that the UK will continue to allow the free flow of data from the UK to the EEA post Brexit. However, the position for transfers of personal data from the EEA to the UK has not yet been confirmed. The FCA urges firms to consider the extent to which their business operations rely on the transfer of personal data and the potential risks faced if no overarching solution is put in place to allow such transfers to continue. UK firms should ensure that strategies to mitigate any identified risks form part of their contingency planning activities. For more information see our update on data protection in a no-deal scenario.
  • Client communications: The FCA is clear that it expects firms to contact clients if they might be affected by Brexit. Communications should comply with the requirements of the existing regulatory regime, and must demonstrate that firms have considered how Brexit and its contingency plans may affect clients, keeping in mind that different categories of client might be impacted in different ways.
  • Execution of firms' contingency plans: With less than 12 weeks to go until 29 March 2019, firms' contingency planning should be well underway by now. However, to the extent it is not, the FCA advises firms that they should urgently complete their assessment of the extent to which they will be impacted by Brexit, and consider the implications of a range of possible scenarios when doing so (including the potential for a no-deal exit with no transition period).

You can read about the steps the FCA has directed EEA firms operating in the UK to take in our recent update, and visit our Brexit Hub for regular Brexit updates.