If I look at the various discussions and industry thoughts on all things in regard to running money in Europe, most people are settled that their ability to continue to operate European fund structures is not going to be challenged.
Certainly, the main fund domiciles have said that they will be happy to continue to support UK based investment managers operating pan European funds.
Whilst there may have been some initial fears about people’s ability to even run the funds, there is proof of concept where ultimately European regulators are broadly approving non-European based managers that are considered to be prudentially supervised to the same standards and at no point has anyone said that the Financial Conduct Authority (FCA) isn’t up to standard.
I don’t feel that there are any challenges around where investment teams are based and their ability to manage products that is being impacted by Brexit but it is really MiFiD passporting as it relates to distribution across Europe that is where the industry has put most of its attention and sees the biggest challenges around people, locations and regulatory licenses.
Purely from the perspective of asset manager running investment teams and distribution businesses, distribution is the one area that the industry has really homed in on with the need to provide solutions.
The clean situation would be to simply move people and place them in Europe and some firms may say that their staff just don’t have a choice and have to do that but for those firms who are more boutique in nature and less mercenary in their approach, they might not want to be that dictatorial in terms of what people do.
It is these types of firms who are looking into opening a rep office or finding a secondary regulatory entity that their staff can operate under when they are doing one level of work and continue to be employed in the UK. There is work being done around this operating model and this is where a lot of firms are going to settle.
With this comes a bit of greyness in terms of how they work and how you supervise what they are doing and ensuring that someone who is based in the UK isn’t selling into Europe on any given day and are only doing this when they are sat in a European office.
There is going to need to be client’s oversight and procedures and processes built around this if we are going to continue supporting people living in the UK and conducting regulated activities particularly in the areas of distribution on a pan-European basis.
The largest asset management firms out there will have gone down the route of getting themselves approved in different jurisdictions to account for this but if you are a boutique asset management firm based outside of Europe, it isn’t that straightforward.
Getting yourself approved in different jurisdictions adds a level of compliance and regulatory burden that they may find too high.
It is these firms who are looking at and grappling with the issue and right now no one who is in this camp has done anything yet because they haven’t needed to but as the 31st of January approaches, this may need to change.
