The European Securities and Markets Authority (ESMA) today issued a statement urging firms to consider the timing for authorisation applications. In particular, it emphasises that firms wishing to have a continued presence in the EU beyond 30 March 2019 should consider the possibility of a hard Brexit. ESMA states that it has seen an increase in the number of authorisation requests submitted to the remaining 27 EU authorities (the "EU27"). Therefore, ESMA is concerned that firms planning to relocate should submit their application for authorisation in their chosen EU member state as soon as possible since they must be fully authorised by 30 March. Some EU member states have already communicated to firms that applications must be received by June / July to gain authorisation on time.
Crucially, ESMA defines relocation as also including cases where an existing entity in the EU27 is restructured (for example, through an increase in the number of personnel), consequently some firms with an existing EU entity may have less breathing space than they previously anticipated. Without ratification of transitional provisions, ESMA is undoubtedly hoping that this announcement may prompt firms into action. The European Banking Authority published a similar warning on 25 June 2018 in which it stressed that agreement on a transition period does not provide any legal certainty until the withdrawal agreement is ratified.
The timing of ESMA's announcement is interesting, following quickly after the UK Government's Chequers statement and Michel Barnier's reaction to it, particularly given the description of "relocation" as including simply increasing the number of personnel in an existing EU27 regulated firm. ESMA also seeks to impress a sense of urgency on firms in its statement:
"ESMA reminds entities that the time required to analyse an authorisation request depends primarily on the quality of the application file and encourages entities to be complete and accurate in their filing for authorisation. ESMA invites entities to contact the relevant NCAs, or ESMA in the case of CRAs / TRs, as soon as possible in case they have not yet done so."
ESMA emphasises the importance of the timeline to submit requests for authorisation to the National Competent Authorities (NCAs) and ESMA for regulated entities (entities) wishing to relocate in the context of the United Kingdom withdrawing from the European Union. On 30 March 2019, firms must have a fully authorised legal entity located in the EU27 to continue providing services in the EU27.