In this brief interview on Tip TV/Linear Talk we discuss some of the implications of Brexit on the fund management industry, with a focus on EU equivalence assessment of third countries under both AIFMD and MiFID II.
Even though the notification under article 50 of the Lisbon Treaty has been kicked in, it is still far from being certain how the relationship between UK and EU will be shaped along the way of a historical divorce. Inevitable are the changes to occur in many sectors and the fund management will not be immune.
However, if we break down the sector in different segments, we will see how not everything will necessarily require shocking adjustments. Some approaches are nowadays consolidated, especially when it comes at selecting domiciles for the establishment of investment funds under the UCITS and AIFMD directive by managers with a global distribution mindset. Successful fund managers are also the ones who use an approach of reverse engineering and identify their clients first, their respective domiciles and then work their way backwards to choose the most appropriate domicile and product for their strategies.
A few more adjustments might be required for what concerns the portfolio management and marketing functions, core activities carried out predominantly out of the UK. The situation might call for creative solutions from the industry.
Particular emphasis is posed on EU equivalence assessments, introduced both under AIFMD and MiFID II. Equivalence falls under the same category of i) passports; ii) exemption; iii) national treatment; iv) mutual agreements and sees some practice consolidating around it. Equivalence, as the recent paper from the European Commission states, does not liberalise the trade in financial services, rather confirms the fact that Europe is open to international business and has procedures to deal with international elements in the context of European situations.
EU Equivalence assessments will likely have implications for investment services and activities provided cross-border from the UK as well as the appointed representative scheme, which proved to be extremely successful so far.
Please read more about Eu equivalence and AIFMD in our blog:
Please also refer to European Commission working document on EU equivalence decisions in financial services policies.