Britain left the European Union on Dec. 31 and their post-Brexit trade deal does not cover financial services, effectively cutting off the City of London from its biggest customer base.
Brussels has said it won't consider access for UK-based investment banks for now, prompting them to seek workarounds.
The two sides meet this week and hope to agree on a memorandum of understanding by March on how their financial regulators will cooperate. Britain hopes to unlock broad EU market access for the City.
Jake Green, a financial services partner at Ashurst law firm, called Wednesday's comment from the European Securities and Markets Authority (ESMA) "the first shots fired" after Brexit.
The authority said that, since Dec. 31, "some questionable practices by firms around reverse solicitation, where the product or service is marketed at the client's own exclusive initiative, have emerged."
Reverse solicition allows customers in the bloc to approach an investment firm that has no branch in the EU, but the firm is not allowed to initiate that contact.
Some banks were trying to circumvent this by including general clauses in the terms of business or via online pop-up "I agree" boxes, whereby customers say that any transaction is executed at their exclusive initiative, the watchdog said.
ESMA said a bank outside the bloc that promoted its investment services in the EU did not meet this definition of exclusivity, and that provision of investment services in the EU without proper authorisation "exposes service providers to the risk of administrative or criminal proceedings."
ESMA said touting for business in the EU could include press releases, internet advertising, brochures, phone calls or face-to-face meetings with a client or potential EU client.
Ashurst's Green called ESMA's argument debatable, "although their position is clear".
(Reporting by Huw Jones; Editing by Alison Williams and John Stonestreet)
By Huw Jones
