If the negotiations between the UK and the EU do not result in a (clear) agreement at the end of the Brexit transition period, and the temporary transition regime that was introduced in the Netherlands for UK investment firms (Dutch Transition Regime) back in February 2019 does not enter into effect, UK investment firms will in principle no longer be able to provide their cross-border services or carry on their activities on a cross-border basis in the Netherlands. UK investment firms will instead need to seek alternative solutions, investigate the possibility to rely on one or more existing exemptions or obtain an investment firm licence from the AFM (or from a regulator in another EU Member State).
Prior to the UK’s and the EU’s agreement on the transition period until 31 December 2020, the Dutch Transition Regime was put in place (but did not enter into effect) in light of the possibility of a no-deal Brexit. More specifically, on 12 February 2019 amendments to (Article 10 of) the Exemption Regulation AFS (Vrijstellingsregeling Wft, the Exemption Regulation) introducing a (temporary) exemption for UK investment firms were published in the Dutch Government Gazette (Staatsblad). These amendments – in short – entailed that UK investment firms would be exempt from the Dutch licence obligation for investment firms if the UK and EU would not enter into an agreement on Brexit. This exemption would only be available when providing investment services to professional investors or eligible counterparties in the Netherlands, and/or when carrying on the investment activity of dealing on own account in the Netherlands. A condition was that the UK investment firm would need to be supervised in the UK and register itself with the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM). Despite the fact that the date of entry into force of the Dutch Transition Regime still needed to be set by means of a ministerial decree, UK investment firms were nevertheless urged to register with the AFM as soon as possible using the notification form made available by the AFM (which a significant number of investment firms did). The AFM charged EUR 4,400 per registration.
Update on the Dutch Transition Regime
However, due to the UK’s and the EU’s agreement on Brexit (and the transition period) on 17 October 2019, the Dutch Transition Regime never entered into force. As most market parties are aware, there have been no notable updates on the Dutch Transition Regime (or a similar regime) since then, until recently when the Dutch Minister of Foreign Affairs in an annex to a letter on preparations for the end of the transition period indicated that the Dutch government sees no need to have the Dutch Transition Regime enter into effect after the end of the transition period. According to the Dutch Minister of Foreign Affairs UK investment firms have had sufficient time to amend contracts and/or transfer regulated activities. Besides the brief statement in the aforementioned letter there has been no further communication or publications in this regard, neither by the AFM (besides a brief statement in one of the answers on its Frequently Asked Questions page related to Brexit) nor by the Dutch government. It is our understanding that UK investment firms which previously successfully registered with the AFM have to date not received a letter or email with an update or further information. The Dutch Transition Regime and the relevant notification form are currently still listed on the AFM’s website.