Finnish Cross-Border Licence and the Transition Period: Still Time to Apply
28 September 2020
As discussed in our earlier blog posts in April and February 2019, the Finnish Investment Services Act allows third-country firms, including UK firms after Brexit, to obtain a cross-border licence to provide investment services to per se professional clients and eligible counterparties in Finland.
By submitting the licence application before UK’s withdrawal from the EU takes effect, a UK firm can continue to provide investment services after the withdrawal to both existing and new professional clients in Finland under its current authorisation until the Finnish Financial Supervisory Authority (the “FIN-FSA”) has processed the application.
Applications submitted during the transition period can still benefit from the temporary permission
The FIN-FSA has confirmed that applications submitted during the transition period (i.e. on or before 31 December 2020) benefit from the temporary permission. This provides an extended opportunity for UK firms to apply for the licence and continue to provide investment services into Finland uninterruptedly post Brexit.
The FIN-FSA must process the licence application within six months from the date the withdrawal takes place provided that the FIN-FSA has received all necessary information and, in any case, within 12 months at the latest. The FIN-FSA has confirmed that these periods begin on 1 January 2021, once the transition period has ended. It is therefore likely that applicants will not hear from the FIN-FSA until sometime next year.
Ongoing obligations under the temporary permission are based on home state rules
During the temporary permission, a UK firm may continue to provide investment services to per se professional clients and eligible counterparties in Finland after the end of the transition period in accordance with, and to the extent covered by, its passport under the Markets in Financial Instruments Directive (“MiFID”) in Finland.
A UK firm must therefore comply with the UK rules only, as was the case under its EU passport prior to Brexit.
Ongoing obligations under the cross-border licence are similar to those of a branch of a third-country firm
A UK firm holding a cross-border licence must comply with the requirements applicable to a branch office of a third-country firm in Finland, excluding the branch requirements that only apply to retail clients and opt-up professional clients.
Most of the requirements applicable to a branch office of a third-country firm are based on MiFID (as implemented into the Finnish Investment Services Act). In general, the Finnish implementation of MiFID does not include any additional national obligations on top of what is set out in the Directive.
Cross-border licence holders must additionally comply with certain local requirements based on Finnish law, such as local rules on damages and criminal sanctions.
MiFIR transaction reporting applies to cross-border licence holders
Cross-border licence holders will need to provide transaction reporting to the FIN-FSA based on the Investment Services Act, which refers to Article 26 of the Markets in Financial Instruments Regulation (“MiFIR”). The FIN-FSA has informally stated that the reporting capability must be in place before it can grant the cross-border licence. Reporting must be conducted in compliance with ESMA’s technical MiFIR Transaction Reporting Instructions.
Hannes Snellman assists with cross-border licence applications
There is no formal application form for the cross-border licence application, as the intention is for the licence application process to be simple and straightforward.
Hannes Snellman is assisting a large number of UK investment firms and credit institutions in applying for the cross-border licence. We recommend that firms start to prepare the licence applications well before the end of the year in order to benefit from the temporary permission.
Our financial services regulation team is available to discuss any questions on the licence and is happy to assist in applying for the licence.