Nobody knows what will happen with Brexit in the following months. But here’s what will happen with Darwinex in relation to it.
As announced last March, we’ve filed an application to create a Spain-based asset management firm. We expect the Spanish regulator (CNMV) to approve it in the following months.
Most of our staff is already working from Spain. Thus, the Spanish entity will have certain benefits for us. The most important benefit in case of Brexit would be of course the Mifid passport. We need this passport to operate in the European Union as a firm regulated not just by the FCA (a non-EU regulator after Brexit) but also by ESMA (the pan-European regulator).
Until the 31st of December 2019 we’re able to use our FCA-based Mifid passport even in the case of a no-deal Brexit. When this expires, we expect to be already in possession of the beforementioned, CNMV-based Mifid passport.
Needless to say, we’ll continue operating from our FCA-regulated entity. London has a powerful ecosystem for start-ups like us. It’ll also continue to be the financial hub it has been for centuries.
What will NOT change
EU-based persons and corporations will continue to be able to become customers of the FCA-regulated firm of the Darwinex group. They can do this under reverse solicitation.
The key legislation regulating access to the Single Market for financial services, MiFID II and AIFMD, contain provisions that recognise reverse solicitation. In the context of MiFID II, this means that where a client requests services on their own exclusive initiative, there is no requirement for the third-country provider to set up a branch (in the case of a retail or elective professional client) or register or be authorised by the European Securities and Markets Authority (ESMA) (in the case of professional clients or an eligible counterparty). AIFMD allows a professional investor established in the EU to invest in alternative investment funds (AIFs) on their own initiative, irrespective of where the alternative investment manager and/or the AIF is established.
Both new and existing customers of the FCA-based entity will continue to enjoy FSCS deposit protection of up to GBP 85,000. It’s even possible that the UK will increase this as a way to compete on the global financial market. They’ll also continue to enjoy free supplementary insurance by Lloyd’ that covers FSCS-eligible clients up to a total of GBP 500,000.
Regarding our product and service offerings, they’ll be exactly the same in all entities of the Darwinex group. Same prices, same DARWIN and DarwinIA conditions, same technology, same support team.
What WILL change
The two entities will be subject to different regulations and laws. The Spanish entity will be subject to European regulation and Spanish commercial law. The FCA will continue to regulate the UK-based entity.
It’s important to be aware that there’s no deposit coverage on the European level. Deposit coverages depend on each Member State. Spain’s FOGAIN will protect customers of Darwinex’s Spain-based entity. We’re looking into extending the Lloyd’s coverage to all entities of the Darwinex group but don’t know yet whether it will be possible. For this, we do have to wait for Brexit to actually happen.
Last, our right to advertise in EU countries will also change. Should the UK leave the EU without a deal on this, the FCA-regulated entity would immediately lose its right to advertise on the EU market. This would not affect us though. We don’t advertise as ads don’t work (at least not for us).
This is all. From now on, we hope to limit ourselves to watch from the sidelines how Brexit unfolds.