This, vicariously, leads me to the issue of EEA financial advisers and the passporting rules.
- When is a trip not a trip?
- When is a branch not a branch
- Where does the buck stop ( my last blog )?
It seems the passporting rules are turning into as much of a comedy as “Passport to Pimlico”
What is passporting?
Well, EEA advisers can apply for authorisation to provide insurance or investment services to another EEA country.
- Freedom of Services- this is where the financial adviser firm provides services to another EEA country but has no physical presence there. This may take the form of phone/email contact or an adviser ‘tripping in’ to another country on an adhoc basis to see clients.
- Freedom of Establishment- this is where the financial adviser firm holds a physical presence in the other EEA country.
One definition – ‘ Establishment means participation, on a stable and continuous basis, in the economic life of a Member State other than the financial institution’s State of origin . If a financial institution provides its services in the territory of the EEA country on a stable and continuous basis, it is exercising the right of establishment.’
Another one - ‘Any permanent presence of an undertaking in the territory of a Member State shall be treated in the same way as an agency or branch, even if that presence does not take the form of a branch or agency, but consists merely of an office managed by the undertaking’s own staff or by a person who is independent but has permanent authority to act for the undertaking as an agency would. Although this is the only definition of a branch to emphasise the element of permanency, there are no reasonable grounds for not applying this element to other financial market sectors in the light of the case-law of the Court of Justice of the European Union and the interpretative communications of the European Commission.’
Suffice it to say, there appears to be total confusion among the investing EU public and financial advisers as to which passport is needed to provide proper regulation.
What should expats do?
Well, find out if the firm they are dealing with has an office in that country. Then, check the local financial regulator’s register to see if the firm is registered with the regulator on an establishment basis or via a foreign EEA country on a freedom of services passport. Then ask the adviser firm for clarification if you have any questions.
The existence of an office or some form of infastructure does not necessarily constitute the exercise of the right of establishment. Nevertheless, the freedom to provide services may not be abused for the purpose of avoiding the rules which would be applicable to the financial institution if it were established in that country (C-205/84 European Commission vs. Germany).
In a nutshell
There is no ‘in a nutshell’ answer that is 100% correct. But, broadly speaking, if the firm has an office in the country and that office ( or separate legal entity ) is registered with the local tax office, I think we can assume an establishment licence in required and that the excuse of tripping in with a freedom of services passport is not going to wash.
On that last point, on the day Pimlico returned to England, it typically poured down with rain - Welcome home!