“The European Securities and Markets Authority (ESMA) and European securities regulators have agreed Memoranda of Understanding (MoUs) with the Financial Conduct Authority (FCA) of the United Kingdom (UK). The MoUs form part of authorities’ preparations should the UK leave the EU without a withdrawal agreement, the no-deal Brexit scenario.”
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The fund management industry is not the only one to be concerned by the ramifications of Brexit, but it has plenty to lose. Especially at risk is the successful relationship between the UK and Luxembourg, whereby UK firms perform the majority of investment management activities and Luxembourg provides the administrative, legal, and structuring parts of the business.
The agreement at last provides a degree of certainty for the investment industry in those countries in the case of a no-deal Brexit. The industry has been uncertain on this issue since June 2016, when the UK voted in a referendum to leave the EU. Our hope is for a deal between the UK and the EU to be concluded, but time is fast running out to do so and “no-deal” is more than a remote possibility.
Without the agreement, the UK would have been regarded as a third country in a no-deal, and funds would not have been allowed to delegate key functions to managers based there. This scenario would have put the Luxembourg model at risk and now appears to be off the table, ensuring stability of the key asset management roles performed in Luxembourg.
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