You may have seen some coverage in the trade press over the past year or so about changes to FSCS protection as a result of BREXIT. The UK left the EU on 31 January 2020 but nothing much changed as we immediately went into a transition period to enable a future trade agreement to be negotiated. The outcome of those negotiations is still not known at time of writing despite there being only a matter of days before the transition period ends on 31 December 2020. However, it is worth remembering that, even if a trade deal is agreed, it will not cover services and so will make little difference to the regulatory situation after 1 January 2021 in the UK which is basically that all regulation is created under the auspices of the UK not the EU. The FCA has done a lot of work to ‘onshore’ financial regulation and, for most adviser firms and their clients, life will continue as before.

However, there are some changes around consumer protection that firms need to be aware of and, in turn, ensure clients are aware of.

FSCS protection for UK-based customers of UK authorised firms will not change as a result of the UK leaving the European Union (EU). In most cases existing FSCS protection will continue, including after the Brexit transition period ends at 11pm GMT on 31 December 2020.

However, FSCS protection may change if a customer and/or their firm is based in the European Economic Area (EEA). The EEA includes EU countries plus Iceland, Liechtenstein and Norway.

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) set the rules and scope of FSCS protection. The FSCS has published the answers to a few anticipated questions on its website based on those rules. It is worth looking at these as there are many subtly different possible scenarios.

There are around 9,000 EU based funds that will continue to be able to be sold to UK investors even though the FCA will have no regulatory oversight of the products and FSCS protection will probably not be available.

From January, in general, UK investors will have to apply to foreign compensation authorities if a product collapses, including for funds run by UK asset managers but domiciled in a EEA jurisdiction.