The European Securities and Markets Authority (Esma) has provided further information relating to its broader Opinion, published in May (see below), that more precisely outlines its thoughts on the principles it expects the asset management sector to adhere to as it adjusts to a post Brexit environment.
The Authority is seeking “consistency in authorisation, supervision and enforcement related to the relocation of entities, activities and functions from the United Kingdom” that it expects following the referendum that took place in the UK on 23 June 2016, and which led to the triggering of Article 50 negotiations in Brussels between the UK and the EU27 on the terms of its exit.
Esma says that the latest updated Opinions are intended to provide “practical tools” for in particular national competent authorities (NCAs) which are responsible for implementing the European securities and markets regime at the individual member state level. Esma is concerned that the NCAs
The opinions, building on the general opinion issued in May, are practical tools to support supervisory convergence in the context of requests from UK financial market participants seeking to relocate to the EU27. They are addressed to national competent authorities (NCAs) and are relevant for market participants considering relocating.
They provide guidance to NCAs aimed at ensuring a consistent interpretation of the requirements relating to authorisation, supervision and enforcement in order to avoid the development of regulatory and supervisory arbitrage risks.
This arbitrage risk was flagged up by Esma chair Steven Maijoor at the Alfi European Asset Management Conference 2017, which took place in March. This preceded the official Opinion published in May, which put down a marker for EU member state governments not to engage in activity that could seek to entice business away from London, but be done in a way that could constitute a threat to the objectives of regulatory harmonisation.
The latest guidance and principles are outlined in an Esma document here: https://www.esma.europa.eu/sites/default/files/library/esma71-99-526_esma_issues_sector-specific_principles_on_relocations_from_the_uk_to_the_eu27.pdf
However, there may still be concerns around this guidance. The last Opinion note drew criticism from specialist lawyers, who warned that the Opinion itself could create problems in respect of existing regime implementation by EU institutions (see below).