Brexit and FinTech



Recent news reports and surveys suggest that UK FinTech firms are more concerned with the loss of EU free movement of labour than the passporting of their services to other EU markets.

In many cases this is true. However, this does not mean that passporting or access to the single market is not a concern at all. That is very much a question for each firm to consider in its own right. For example, peer-to-peer lending, which is a relatively new concept, is not regulated by an EU Directive. This means that firms operating peer-to-peer lending platforms do not need to worry about the loss of passporting rights as they continue to develop their business. However, equity-based crowdfunding, which is a popular alternative to traditional forms of fundraising, is regulated by the EU Markets in Financial Instruments Directive (MiFID) and will subsequently be regulated by MiFID II when it comes into effect in January 2018. Both MiFID and MiFID II provide passporting rights for EEA firms which fall under the remit of the MiFID regime. Accordingly, for UK equity-based crowdfunding firms that have developed, or intend to develop, an EU customer base in reliance on passporting their services into the single market, the loss of passporting rights and access to the single market will be a cause for concern.

Further, a number of issuers that take advantage of equity based crowd funding platforms may be subject to the provisions of Prospectus Directive. Like MiFID, the Prospectus Directive contains passporting rights which issuers subject to the Directive rely on when making an offering of securities to EU Investors. If such issuers were to lose those rights, then equity based crowdfunding platforms would not be able to offer those issuers’ securities to investors across the EU with the same level of ease that they currently enjoy.

The right for EU workers to work and move freely has been viewed as vital for many FinTech firms in the war for talent. Access to a pool of affordable and skilled EU labour avoids the need to undergo expensive, inconvenient and time consuming UK visa and immigration processes. However, it is not necessarily the case that the end of unrestricted EU free movement will result in a shortage of labour in the UK. Firstly, EU workers already in the UK may be permitted to remain in the UK. Secondly, the EU is not the world and it is possible that ending this right will enable the UK’s immigration rules to be less discriminatory against non-EU workers looking to work for FinTech firms in the UK. While overall immigration numbers may fall, it is likely that UK immigration routes for skilled workers will remain open or be improved and the impact for skilled labourers may be benign. FinTech companies should therefore maintain an open mind on this issue.

Furthermore, it is questionable as to whether a FinTech firm needs to physically locate all of its workers to the UK at all, especially given that these businesses tend to be heavily reliant on computer software and the internet. Rapid technological innovation means that many employers (not just FinTech firms) are able to rely upon their employees being able to work remotely from anywhere in the world. Being able to work flexibly from home is reported to be a highly valued benefit among the millennial generation. While remote working cannot be a panacea for the end of free movement and does need to be considered alongside global employment, tax and immigration issues, it may provide part of the solution.

As Brexit draws ever closer, UK FinTech firms should consult their legal counsel to identify their employment and immigration needs and whether they need the ability to passport their services into the EU. This will help them determine what action can be taken to best protect their interests.


Matthew Howse and William Yonge are partners, and Lee Harding is an associate at Morgan Lewis. Mr Howse can be contacted on +44 (0)20 3201 5670 or by email: Mr Yonge can be contacted on +44 (0)20 3201 5646 or by email: Mr Harding can be contacted on +44 (0)20 3201 5639 or by email:

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Matthew Howse, William Yonge and Lee Harding

Morgan Lewis

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