1. The temporary operation introduced by the "Milleproroghe" Decree
On the verge of the end of the Brexit transition period envisaged under the EU-UK Withdrawal Agreement dated 31 January 2020, the Italian Government issued some provisions (namely, Article 22 of Law Decree no. 183 of 31 December 2020 (the so-called "Milleproroghe" Decree; hereinafter, the "Decree")), which apply to UK banks, investment firms, insurance companies and money electronic institutions, including FinTechs and InsurTechs (hereinafter, the "UK Intermediaries") in relation to the withdrawal of UK from the EU.
Indeed, the latter affects the operational regime in Italy of the UK Intermediaries, since they can no longer rely on the EU passport regime and must apply for a prior authorisation with the Italian competent authorities (namely, the Bank of Italy, Consob or IVASS, as the case may be) pursuant to the national provisions applicable to third-country firms, which are contained in the Consolidated Banking Act, the Consolidated Financial Act and the Private Insurance Code, respectively.
According to the above mentioned Article 22 of the Decree, UK Intermediaries that have submitted, within 31 December 2020, an application authorisation (not yet granted or refused) to either operate in Italy as third-country firms or to establish an Italian intermediary in favour of which to transfer their activity, can continue to operate in Italy limitedly to the management of the existing relationships, up until the afore-said authorisation is issued and, in any case, for no longer than six months after the end of the Brexit transition period (i.e., up to 30 June 2021).
During such "grace period", UK Intermediaries cannot open new contractual relationships with Italian clients, nor modify the existing ones, except for "over the counter" derivative contracts.
More specifically, as far as banks and non-EU firms other than banks are concerned, Article 22 of the Decree provides that they may continue to provide for investment services and activities (with or without additional ones) to retail clients or professional clients on request, solely through the establishment of branches in Italy.
2. Relevant client protection measures
UK Intermediaries are subject to the national legislation applicable to third-country firms, as well as to the supervision of the competent Italian authorities, and must comply with the provisions governing the Italian alternative dispute resolution systems (led by Arbitro Bancario e Finanziario (the Banking and Financial Ombudsman) and Arbitro per le Controversie Finanziarie (the Securities and Financial Ombudsman) respectively), and the deposit guarantee systems (DGSs).
In this respect, they must provide their clients with clear information no later than 10 February 2021, in order to allow them to understand which DSG is in charge of protecting their savings.
In addition, within 31 March 2021, they must contact the relevant DGS and take all the necessary steps in order to finalise their participation thereto, including the payment contributions of the annual registration fees.
In the event of a refusal of their authorisation application, UK Intermediaries must immediately cease any unauthorised activities or, in any case, no later than three months after the refusal has been communicated, without prejudice to their clients. Within the same period, all operations necessary for the orderly termination of the existing relationships must be completed and, with regard to UK Intermediaries operating cross-borderly, the client protection granted by out-of-court dispute resolution and investor-compensation systems must be also ensured.
Furthermore, Article 22 of the Decree sets forth that UK Intermediaries must provide adequate information to their clients on the effects of Brexit on existing contracts and return cash, goods and financial instruments to such clients, according to the instructions received by the latter in all cases of ceasing activity. With regard loans, the above termination does not affect time-frame and modalities for the payment of carried interests and repayment of borrowed sums by the clients.
Finally, it is worth pointing out that, by means of Bank of Italy and Consob's communications, issued on 2nd January 2021 respectively, UK Intermediaries' clients are recommended to contact the latter (should they had not been informed properly) in order to obtain all the necessary information concerning the possibility to either continue or cease the existing contractual relationships, as well as to act promptly, whenever they intend to withdraw from their contracts or transfer any such contracts to another intermediary authorised to operate in Italy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
