Hard Brexit Impact Analysis

Page 41 of 106 Category If no agreement is reached: Consequence EU Document Finance financial instruments CONTRACTS: As of the withdrawal date UK established UCITS will become non-EU AIFs and EU established investment firms may be no longer able to distribute them to their clients, unless the relevant AIFMD provisions are complied with. WITHDRAWAL OF THE UNITED KINGDOM AND EU RULES IN THE FIELD OF MARKETS IN FINANCIAL INSTRUMENTS Finance financial instruments As of the withdrawal date The outsourcing of certain operational functions to UK providers may be undertaken only when in compliance with relevant MiFID requirements. In particular, the outsourcing of functions related to portfolio management to UK entities will only be permitted where the conditions under Article 32 of the MiFID Delegated Regulation 2017/565 are met, including the requirement that cooperation arrangements between National Competent Authorities and UK competent authorities are in place. The European Securities and Markets Authority (ESMA) has issued opinions with specific clarifications on these matters, in particular on the risks of letter-box entities which may arise from the use of outsourcing arrangements or from the use of non-EU branches for the performance of functions/services with respect to EU clients WITHDRAWAL OF THE UNITED KINGDOM AND EU RULES IN THE FIELD OF MARKETS IN FINANCIAL INSTRUMENTS Finance financial instruments As of the withdrawal date According to Article 59 MiFID II, the provision of data reporting services requires an authorisation by the home Member State competent authority. UK based data reporting service providers which have not obtained a MiFID authorisation by a competent authority established in the EU will have to cease to serve EU markets WITHDRAWAL OF THE UNITED KINGDOM AND EU RULES IN THE FIELD OF MARKETS IN FINANCIAL INSTRUMENTS Finance post trade services As of the withdrawal date , EU rules on financial markets, in particular Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (EMIR), Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/20126 (MIFIR), Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/20127 (SFTR), Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (SFD), no longer apply to the United Kingdom. WITHDRAWAL OF THE UNITED KINGDOM AND EU RULES IN THE FIELD OF POST-TRADE FINANCIAL SERVICES