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Freshfields Risk & Compliance

| 4 minutes read

OPE springs eternal: UK Treasury calls for evidence on how financial services can be provided by overseas persons

The UK has long allowed non-UK institutions to provide financial services to customers in the UK under a variety of different regimes. 

With the end of the Brexit transition period fast approaching, EU firms that are currently using a "passport" to provide financial services to customers in the UK will no longer be able to do so. This has brought the other regimes that allow firms to provide services to UK customers into sharper focus.  

Bearing in mind the UK Government's clear ambition to support open, global financial markets (underpinned by the highest standards of regulation), HM Treasury has recently announced a call for evidence (closing 11 March 2021) designed to gather information on how the various regimes work in practice, with a view to assessing them against the principles for access to the UK (see below).

There are a number of regimes which the Call for Evidence is particularly interested in:

  • the OPE;
  • Markets in Financial Instruments Regulation (MiFIR) Title VIII;
  • ROIEs;
  • Financial Promotion Order; and
  • overseas long-term insurers.

This blog post focusses on the OPE, as there are a significant number of questions in the Call for Evidence that ask about firms' use of the OPE.

Overarching principles

The Treasury sets out in its Call for Evidence a number of overarching principles. The key ones for firms seeking to provide financial services into the UK are: 

  • facilitate the benefits of maintaining an open and globally integrated financial system, enabling international financial services business by reducing barriers and frictions where practicable;
  • ensure robust, high-quality and proportionate regulation, guided by and consistent with international standards;
  • be transparent and predictable and provide a stable and reliable arrangement for cross-border market access.

Overseas Persons Exclusion

In the UK, the general prohibition broadly provides that a person should not carry on a regulated activity in the UK, by way of business, unless that person is authorised or exempt. Depending on the activity, even where a person providing services is not themselves based in the UK, that person may be deemed to be carrying on the service in the UK.  

The OPE is an exclusion that effectively says that an 'overseas person' does not carry out what would otherwise be a regulated activity as long as that person complies with certain requirements. It is effectively an exclusion from the authorisation requirement. The OPE applies to a range of regulated activities (although not all) and has been in place since 1986. 

An ‘overseas person’ is defined as a person who carries on certain regulated activities but who does not do so, or offer to do so, from a permanent place of business maintained by them in the UK. Reliance on the OPE is not linked to the standards of regulation applied in the home state, or any requirement for firms to be registered or report on the business they undertake.

The OPE is generally available to overseas persons where one of the following two conditions is satisfied: 

  • the regulated activity is done ‘with or through’ an authorised or exempt person (e.g., with an authorised person as a counterparty or through an authorised or exempt person as an agent or arranger); or
  • the regulated activity is carried on as a result of a ‘legitimate approach’, which is broadly an approach to, by, or on behalf of an overseas person that does not contravene the UK's restriction on financial promotions.

As a result, the OPE is a fairly liberal and flexible regime but some elements of the exclusion are unclear.  For example, there is no definition in the legislation on what constitutes a "permanent place of business" - a fundamental part of the definition of 'overseas person'.  

Key questions raised by HM Treasury on the OPE

The Treasury is clearly mindful that the OPE may be difficult to rely on and a large number of the questions asked in the Call for Evidence relate to use of the OPE.  

Looking at the potential difficulty of applying the regime, HM Treasury has asked whether there are changes that firms think should be made to the operation of the OPE, as well as whether there are specific aspects of the OPE which give rise to uncertainty, (for example over its application in some circumstances) and whether the OPE raises any practical challenges in terms of ensuring the firm’s compliance with it. The Call for Evidence asks for ideas on how such challenges might be remedied.

The Treasury also seems to be trying to determine the significance of the OPE - in the absence of a registration regime or reporting requirements, the Treasury has limited ability to determine current reliance on the OPE. Regarding current and future use of the OPE, the Treasury asks a number of quantitative questions - volume of business connected to the OPE, whether there are any benefits such as capital treatment and whether use of the OPE is driven by tax residence considerations (or any other non-regulatory considerations). Unless firms using the OPE respond to the consultation it is not clear whether the Treasury will be able to get an accurate picture of the use of the OPE.

Another area of focus is the use of the OPE in the context of undertaking business with other entities in the firm's group. This is an interesting focus to take, because the UK regime also contains an intragroup exclusion (albeit that the scope of activities covered is not identical to that of the OPE). The Treasury is keen to understand whether firms use the OPE to undertake business with other members of the group, and has also asked how important is the intragroup exemption (and the OPE) for firms' current business models, booking arrangements and use of the UK as a risk management hub. 


With a clear focus on the OPE in this Call for Evidence and the likely increase in the number of firms seeking to rely on the OPE in the absence of EU passporting regimes, the Treasury is clearly considering clarifying, or even changing, how the OPE applies. Given how the regime is currently drafted, it is difficult to see that any changes would further liberalise the regime whilst maintaining the "the highest standards of regulation".  However, it would clearly be beneficial to clarify expectations around the perimeter such that firms can more comfortably rely on the OPE.

Over time, regulatory guidance on how the OPE may be used has been published by HM Treasury and in the FCA’s perimeter guidance manual. However, as this is a complex regime, we understand that firms generally seek legal advice on how to use the OPE.


financial institutions, regulatory, europe, regulatory structuring, investment trading and markets