At the end of the transition period, EU firms will lose their ability to provide crossborder MiFID services to UK clients under a MiFID or CRD passport. However, even if HM Treasury takes no action to activate the third-country regime in the ‘onshored’ MiFIR, the impact of this change will be mitigated by the UK’s temporary permission regime (TPR) and financial services contracts regime (FSCR)7 and, for firms not operating through a branch in the UK, by the general exemptions and exclusions under the UK Financial Services and Markets Act 2000 (FSMA).
However, imposing these registration and ongoing requirements on EU firms may also inhibit the ability of UK firms to provide MiFID services to EU firms. Some EU firms may be unwilling to register with the FCA and be uncertain as to whether they would be regarded as providing services at the ‘own exclusive initiative’ of the UK firm, meaning that they prefer to transact with other EU firms instead of UK firms. In any event, other UK – or EU or member state – rules may apply in ways that inhibit the ability of EU firms to provide crossborder services to UK qualifying clients. For example, the EMIR clearing obligation may apply to OTC derivatives entered into by EU firms with UK pension schemes. In addition, some, but not all of, the inhibitions described in above affecting UK firms’ business with EU qualifying clients (such as the DTO or STO) may also affect the ability of EU firms to conduct business with UK qualifying clients in a similar way.