The European Union and UK’s market watchdogs have signed a Memorandum of Understanding to ensure that asset managers can continue operating smoothly in the event of a ‘no-deal’ Brexit.
The agreement signed between the UK’s Financial Conduct Authority (FCA), the European Securities and Markets Authority (Esma) covers cooperation and exchanges of information in the event that the UK leaves the EU – scheduled for March 29 – without the necessary deals in place.
Esma said on Friday that the MoU would allow it to continue to meet its mandate regarding investor protection, orderly markets and financial stability in the EU. The EU markets watchdog also said it had it had also reached agreement with the FCA on sharing information to allow cross-border asset management activities to continue if Britain leaves the bloc with no deal.
More than 90% of EU assets under management make use of ‘delegation’ rules which allow a fund registered in one country to outsource its asset management to another country.
Most European funds are registered in Dublin or Luxembourg, but a lot of asset management takes place globally, with the majority ‘delegated’ to London. UK-based asset managers currently enjoy ‘passporting’ rights as part of the EU single market allowing them to sell services across the EU without regulatory barriers.
The European fund and asset management association (Efama) said the announcement has been met with a sigh of relief by asset managers on both sides of the Channel as it removes a great deal of legal uncertainty in their preparation for the worst-case scenario of a no-deal Brexit.
Efama’s director general Tanguy van de Werve said: “This is a very important step that Efama has been calling for many months, as it will help avoid disruptions in the provision of asset management activities.
“Ensuring that delegation continues to be authorised as it is today is of paramount importance to the asset management industry. It brings comfort to the industry in their Brexit contingency planning but, most importantly, it ensures that EU investors will continue to access world leading expertise in the management of their savings.”