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A brief note about e-commerce financial services after Brexit.

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The United Kingdom (UK) is in the transition/implementation period which currently ends on the 31 December 2020. During this period, the UK is mostly treated as if it were still a European Union (EU) Member State. During the transition period trade negotiations are taking place, but what happens to e-commerce and financial services if the UK leaves without a deal.

On the 25 March 2019, the E-Commerce Exit Regulations 2019 were created. They are part of HM Treasury’s package of statutory instruments under the European Union (Withdrawal) Act 2018, which deals with contingency preparations for a ‘no deal’ Brexit.

If the UK and EU fail to reach a deal, the UK will then trade with the EU as a third country on World Trade Organization (WTO) terms. In this ‘no deal’ scenario, the E-Commerce Exit Regulations 2019 will need to be reviewed and probably amended to reflect the situation. If a trade deal is agreed the regulations will also need to be reviewed and amended to reflect the deal.

One of the things the E-Commerce Exit Regulations deals with is any deficiencies that arise from the UK leaving the EU relating to financial service elements of the E-Commerce Directive. The E-Commerce Exit Regulations repeal provisions that currently exclude European Economic Area (EEA) companies from UK regulation if they deliver online only financial services.

Some main changes that will be initiated by the Electronic Commerce and Solvency 2 (Amendment ect.) (EU Exit) Regulations 2019 are:

  • Article 72A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 will be revoked. This means EEA companies offering information society services (ISS) of a financial service nature will no longer be able to enter new contracts with UK consumers unless they are authorised in the UK or operating under the general temporary permissions regime.
  • EEA companies will no longer be able to market ISS of a financial service nature to consumers in the UK.
  • They provide automatic entry into a system that allows companies which provide ISS of a financial service to legally service any pre-existing contracts for a maximum period of five years from the day the E-Commerce Exit Regulations take effect. The Financial Conduct Authority (FCA) will be able to administer the scheme.

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