ESMA & Brexit - The Generals start positioning themselves
The two regulatory giants ESMA and the FCA have started to position themselves for the forthcoming exit of the UK from the EU. ESMA & Brexit has started. ESMA has issued an Opinion with the aim of creating a harmonised approach among the EU Member States regulatory authorities (National Competent Authorities or NCAs) in relation to authorisation, supervision and enforcement related to those entities currently established in UK and which are considering to relocate their activities and functions from the UK to an EU Member State.
The opinion identifies nine main principles:
- no automatic recognition of existing authorisations;
- authorisations granted are to be rigorous and efficient;
- verification of the objective reasons for relocation;
- avoidance of letter-box entities[1];
- ensure substance requirements1 are met;
- ensuring sound governance of EU entities;
- effective supervision and enforcement of EU law by the NCA must be in place; and
- outsourcing and delegation to third countries is to be allowed under firm circumstances;
- coordination between the NCAs to ensure effective monitoring by ESMA.
The Opinion also brings to one’s attention that ESMA intends and shall develop additional guidance in areas such as asset management, investment firms and secondary markets and will provide sector specific information on aspects described within the general opinion.
ESMA’s press release may be read in full by clicking here.
On the same day, the Financial Conduct Authority in the UK wrote a letter to twenty (20) of the largest asset managers currently situated in the Kingdom requesting information about their plans as a result of Brexit. As reported by Bloomberg the FCA is quoted as saying:
"It is important for us as supervisors to understand the plans that our regulated firms have regarding Brexit," …… "To help firms prepare for these conversations, we shared the details of the questions we would be asking. This was not a formal data request and was not asking firms to undertake any further work."
[1] The Malta Financial Services Authority (MFSA) already has robust requirements in respect of not allowing letter box entities on the Island. In fact it places very strong emphasis on local substance and operations in terms of personnel, systems et. seq
