But UK-based asset managers face a particular threat — a possible overhaul to the EU’s so-called “delegation” regime that allows funds to be domiciled and regulated in another EU country, typically Dublin or Luxembourg, while being actively managed and marketed from London.
Government ministers, Bank of England officials and company executives are worried about Paris-led efforts to tighten delegation rules, in a move that would limit access for British-based fund managers to Dublin and Luxembourg.
Europe has already signalled the rules will be stricter. The European Securities and Markets Authority (Esma), the pan-EU financial watchdog based in Paris, warned last year that fund managers would need so-called substance — or boots on the ground — in the offices where funds were domiciled if they wanted to continue to use delegation rules.
Sean Tuffy, Citigroup’s head of market and regulatory intelligence for Emea, believes possible changes to delegation is the “number one issue” for UK and global asset managers. That’s because any EU efforts to penalise post-Brexit Britain would also be likely to hit other third-party financial centres, notably New York, which rely on EU delegation arrangements.
Changes too would be fought from within the EU by Dublin and Luxembourg, which are keen to preserve their homegrown industries.
Chris Cummings, chief executive of the Investment Association, the UK trade body, says “unpicking of delegation rules” will have reverberations. “The EU could cut itself off from UK portfolio management expertise but also from other international financial centres, from the US to Japan,” he says.
But Mr Cummings’ US counterpart, Paul Schott Stevens of the Investment Company Institute, believes that changes to the delegation rules are already under way.
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