An Italian Brexit Law Decree entered into force last 26th March, introducing measures to establish a transitional regime in Italy in the event of a no-deal Brexit. The provisions of the Italian Brexit Law Decree will help mitigating risks for Italian clients and investors inherent to an unorganised discontinuation of business activities of UK firms currently operating in Italy in case of withdrawal of the UK from Europe without an agreement.
In this brief post we will concentrate on the temporary permission regime introduced for UK investment firms by the Italian Brexit Law Decree.
Should I Stay or Should I Go
The Italian Brexit Law Decree provides for different measures depending on the type of firms operating in Italy (i.e. banks, electronic money providers, payments institutions, asset managers and investment advisors). In some cases, the approach adopted by the Italian Brexit Law Decree is to establish a temporary permission regime to allow for temporary continuation of provision of services in Italy by UK firms. In some others, it simply stipulates rules for an orderly and organised exit from the country by UK firms operating in Italy. Also, depending on the type of firm, the notification required to avail of the temporary permission regime will have to be made either to the Bank of Italy or Consob.
For investment firms, Consob is the body that should receive the relevant notifications.
British Investment Firms
Consob released an explanatory notice (please find it here) detailing the requirements for intermediaries providing investment services or carrying out investment service activities in Italy. The provisions are all subject to the UK exiting the EU without an agreement and are different on the basis of a) type of entity; b) way services are provided (freedom to provide services vs. branch); and c) target client.
Accordingly, UK based investment firms providing investment services and activities in Italy:
a) under the freedom to provide services – may continue to perform the same activities only vis-a-vis eligible counterparts and professional clients until the adoption of a decision of the European Commission pursuant to article 47, paragraph 1 MiFIR and in any case not beyond the transitional period;
b) through a branch – may continue during the transitional period to carry out the same activities;
c) under the freedom to provide services – vis-a-vis retail clients and opt-up professional clients shall terminate activity by the date of withdrawal.
The temporary permission regime will last for 18 months. UK firms interested in carrying out activities also beyond this time-frame will have to make arrangements for direct authorisation with domestic authorities in Italy within 6 months from the commencement date of the temporary permission regime period.
Notices to Consob and Forms
In the above cases under a) and b), UK investment firms may activate their temporary permission by submitting with Consob within 3 days from the date of withdrawal the notification forms below.
a) Notification form for firms operating under the freedom to provide services – click here
b) Notification form for firms operating under right of establishment – click here.
Within 15 days from the date of withdrawal, the same firms will also have to send to Consob information and data on existing client relationships using this form.
The notifications, applications and notices described in this communication must be sent to CONSOB at the following certified email address: din.Brexit@pec.consob.it.
Notices to Investors
In the case under c) above, investment firms – within fifteen days of the date of entry into force of the decree – shall inform their clients, other entities with whom they have business relations as well as CONSOB about the procedures to ensure orderly termination of their activity. In order to mitigate the risk of adverse consequences for clients, these intermediaries will have to terminate existing contracts in the shortest time frame possible and in any event no later than 6 months from withdrawal date. No new contracts shall have to be entered into nor existing contracts renewed.
Clients shall be informed by means of notices drafted using clear language and highlighting the consequences and the measures prepared in the event of a ‘hard Brexit’ scenario, as well as providing adequate evidence of the initiatives taken to ensure the orderly termination of activity and of the impact on existing contractual relations.
The Italian Brexit Law Decree has established very detailed measures for a temporary permission regime. However, what is authentic about these measures is that in certain specific situations, UK firms will not be allowed to continue operations in Italy, if not for the time sufficient required exclusively to dismantle their operations and make sure that Italian clients are informed accordingly of the relevant operations being ceased and terminated.