EU Seeks Tighter Asset-Manager Rules as Brexit Date Looms
EU Seeks Tighter Asset-Manager Rules With Brexit Date Looming
(Bloomberg) --
The European Union’s top markets regulator is asking for rule changes that could limit London’s role as a hub for asset management.
It comes as the deadline for Brexit trade talks approaches, threatening to heighten tension at a fraught moment in the negotiations. The EU has previously warned that it’s not planning to grant easy cross-border access to markets in the short-term, and that banks and other financial firms must prepare to do more business from their offices in the bloc.
EU-based funds routinely delegate portfolio management to teams in London, New York and other places outside the bloc. The European Securities and Markets Authority said this practice increases risk, and is recommending a rule change to limit it. The regulator is also seeking to reduce the use of so-called seconded staff from professional services firms or consultancy businesses based outside the region.
The recommendations are “an attack on London,” according to Jake Green, financial regulatory partner at law firm Ashurst. It “could lead to serious repercussions, because it may materially impact current structures and flexibility in using U.K.-based portfolio managers and expertise,” he said in an emailed statement.
ESMA’s suggestions are part of a review of EU rules for so-called alternative investment funds, a category that includes private equity, real estate and hedge funds.
The EU has been tightening the rules on asset managers ever since the U.K. voted in mid-2016 to leave the bloc. Regulators have said they want to keep firms from having thinly staffed “letterbox” companies in the EU to gain access to the single market, while in fact running the funds from countries that aren’t subject to the bloc’s rules.
The recommendations could have implications beyond London and result in “collateral damage to U.S. and other global managers” who are delegated work from EU funds, according to Leonard Ng, a London-based partner at Sidley Austin LLP.
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