E-Commerce Directive Statement: explanatory information
Updated 29 October 2019
© Crown copyright 2019
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This publication is available at https://www.gov.uk/government/publications/onshoring-of-elements-of-the-e-commerce-directive-relating-to-financial-services/e-commerce-directive-statement-explanatory-information
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The UK is leaving the EU. This page tells you how to prepare for Brexit and will be updated if anything changes.
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The European Union (Withdrawal) Act 2018 (EUWA) repeals the European Communities Act 1972 on the day the UK leaves the EU and converts into UK domestic law the existing body of directly applicable EU law and saves retained EU derived domestic legislation. The purpose of the EUWA is to provide a functioning statute book on the day we leave the EU.
The EUWA also gives Ministers powers to make Statutory Instruments (SIs) to prevent, remedy or mitigate any failure of EU law to operate effectively, or any other deficiency in retained EU law. We refer to these contingency preparations for financial services legislation as ‘onshoring’.
Onshoring of elements of the E-Commerce Directive relating to financial services
The purpose of the E-Commerce Directive (ECD) was to remove obstacles to cross-border online services, which are those delivered exclusively over the internet, in the EU internal market.
In the financial services sector, the ECD allows EEA Member State firms, excluding Solvency II insurers, to undertake regulated activities in online only financial services in the UK without needing UK authorisation, or being subject to UK regulation. This is on the basis that an EEA firm undertaking this activity will already be required to comply with relevant regulation in its host Member State.
The ECD is mainly transposed in the UK by the Electronic Commerce (EC Directive) Regulations 2002[footnote 1]. However, financial services elements are transposed by the Electronic Commerce Directive (Financial Services and Markets) Regulations 2002[footnote 2], Article 72A of the Financial Services and Markets Act (Regulated Activity) Order 2001[footnote 3], and Article 20B of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005[footnote 4].
Post-Exit, the ECD will no longer apply in the UK. Therefore, EEA firms undertaking regulated financial services activities in the UK delivered solely over the internet will no longer be able to use the exclusion set out in the ECD, which allows them to undertake regulated activities with virtually no UK regulation applying to them.
The relevant provisions in Article 72A of the Financial Services and Markets Act (Regulated Activity) Order 2001 and Article 20B Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 that transpose this exemption, as well as some elements of the Electronic Commerce Directive (Financial Services and Markets) Regulations 2002, will therefore be revoked.
A statutory instrument will be laid before parliament at a later date.
The FCA will undertake changes to its handbook to take into account the changes, and will publish these in due course.