Getting authorised to offer most types of financial services is a lengthy process at the best of times. But, realistically, there's no chance of getting a new application approved by an EU27 regulator in time for a "hard Brexit" on 29 March 2019. Without a withdrawal agreement and agreed transition period, passporting from the UK will end on that date. So, as the likelihood of a 'hard Brexit' increases, firms are suddenly interested in alternative ways to establish a new presence to trade in and from the EU27.
The choices are either to get an entity appointed as the agent of a firm that has an appropriate existing authorisation (while applying for your own in parallel); or a merger or acquisition.
The trouble with M&A activity is that it is an uncertain process in itself and any change in control of a regulated firm requires regulatory approval. It might also prove to be overkill if a transition period is agreed during which authorisation could be obtained in the ordinary course. Even where M&A activity might be an option, however, agreeing an agency arrangement in the short term would provide the perfect opportunity for the parties to get to know each other and their joint market opportunity - without the added pressure of a looming Brexit.
Firms with existing authorisations for many types of regulated activities are entitled to appoint and register other firms as their agents to carry out regulated activities on their behalf (some of which are known as "tied agents" (or "appointed representatives" in the UK).
An agent can only do what the principal is authorised to do (and can only act within the scope of its agency), while there are some also some regulatory activities that cannot be done through an agent (e.g. actually issue e-money). So it's important to consider the nature of the authorisation and permissions required, the operational integration involved in actually delivering the services to clients; and how quickly the principal might be able to vary or add to its permissions to accommodate the proposed relationship.
It's possible for a firm that is authorised in one EEA member state to appoint an agent that is based in another EEA state, using any available "passport" rights, and for the agent to provide its services under the principal's passports. This would involve a three month passport notification process in tandem with the agency registration.
It is also possible to choose the law of a third EEA member state to govern the client contracts (e.g. switching contracts written in English under English law and courts to Irish law and courts).
The authorised firm (principal) must register each agent with its regulator and provide certain information about the agent, including a description of the policies and governance arrangements that will enable the firm to effectively supervise the agent's activities. This is an important 'hygiene' factor in any event, however, since the principal is responsible - and accountable to the regulator - for the agent's activities.
The nature of agency also means that customers have their ultimate contractual relationship with the principal, and can avail themselves of the principal's complaints procedure if dissatisfied with the agent's conduct. But it's usual for the agent to trade under its own name and brand, using a 'white label' approach where the principal's details are disclosed in the service terms and website/email footer and/or on a 'powered by' basis for marketing purposes.
Of course, there will very likely be fees payable to the principal to cover the additional administration and use of its authorisation; as well as the need to exchange of confidential and otherwise sensitive commercial information between the parties, the need to consider whether the firms are in direct competition (actually quite rare) and the need to carefully manage the relationship and the regulatory risks and so on. But such concerns are generally manageable in the short term - and worthwhile in light of the upsides.
Most of the work required in setting up an agency relationship will be useful in the context of the agent getting its own authorisation in the medium term...
...realistically, there's no chance of getting a new application approved by an EU27 regulator in time for a "hard Brexit" on 29 March 2019.