Following the UK vote on 23 June 2016 to leave the EU, ICMA has been working actively with all its members, large and small, sell side and buy side, through its Market Practice and Regulatory Policy Committees, Asset Management and Investors Council, Regional Committees and other Working Groups, as appropriate, to help them prepare for the international capital market implications of Brexit. ICMA’s mission continues to be the promotion of resilient and well-functioning international capital markets. For information on all of ICMA’s activities related to Brexit, please view the main ICMA Brexit page.

AMIC will keep its members up to date with its assessment of relevant new developments and assist its members where possible via its Executive Committee and various working groups as appropriate. Below we have started a compilation of frequently asked questions (FAQs) based on the issues which have been raised with us so far. This list is expected to grow over time.


Q1: Will EU investment funds continue to be able to delegate portfolio management and other functions to the UK after Brexit?

Yes, provided appropriate cooperation arrangements between national regulators are in place UCITS funds and AIFs can delegate portfolio management to third countries.

ESMA, national securities regulators in the EU27 and the FCA announced, on 1 February 2019 that they have agreed Memoranda of Understandings (MoUs) to allow information exchange for effective supervision and enforcement, continued access to UK CCPs and the UK CSD, and continuation of the delegation model. These MOUs would be due to come into effect immediately after the UK became a third country, in the event of a no-deal Brexit.

UCITS funds can delegate portfolio management and other functions, such as custody, subject to complying with the UCITS delegation regime, which involves implementing a remuneration framework similar to the ones provided by the Directive. This also requires cooperation between the FCA and regulators in member states where the UCITS are established. Similarly, AIFs can delegate functions subject to satisfaction of the conditions set out in AIFMD regarding delegation of asset management and regulatory cooperation between the FCA and regulators in member states where AIFs are established. Therefore, it is important that, for both UCITS funds and AIFs, cooperation agreements are put in place between the UK and the EU27 regulators, as delegation may be restricted and current arrangements may be suspended in the absence of such agreements.

Delegation is one of the key pillars supporting the EU’s cross-border investment model which has made UCITS, and increasingly AIFs, a global brand and a European success story. The current fund distribution model in Europe, where assets are managed in local markets and funds are offered across borders, functions well. UCITS is a recognised global brand and a European success story. Together, UCITS and AIFs are recognised in over 75 jurisdictions worldwide including Asia and South America. These funds channel investment into Europe as well as across the rest of the world, funding corporate growth and job creation as well as enabling European savers to benefit from fund management expertise around the globe while enjoying the same level of investment protection as within the EU. UCITS have democratised investment and helped European citizens to invest and save for their retirement by diversifying their portfolios to increase returns and manage risk. Delegation is the key to offering savers best-in-class global investment opportunities, wherever in the world they are located.

Q2: Will EU/UK established investment funds continue to be able to access the UK/EU market under a no-deal Brexit?

In the UK, a Temporary Permissions Regime will be introduced for a limited period in the event of a no-deal Brexit. This will allow inbound firms and funds to continue operating in the UK on the basis of their current permissions for a limited period while seeking full UK authorisation. On 28 February 2019, the Bank of England announced that, in the event of a no-deal Brexit, it will grant transitional relief for UK regulated firms for a period of 15 months after Brexit. This means that, subject to limited exceptions, UK regulated firms do not generally need to take action now to implement changes in UK law arising from a no-deal Brexit. The Bank of England’s approach is in line with the approach taken by the UK FCA.

But at EU27 level, there has so far been no equivalent to the Temporary Permissions Regime. Instead, the European Commission has concluded that only a limited number of contingency measures is necessary to safeguard financial stability in the EU27, and only where preparations by market firms are clearly insufficient to address these risks by the withdrawal date.

The information contained herein is provided for general guidance only and should not be relied upon as advice. Recipients acknowledge that ICMA does not provide legal or other advice and expressly disclaims any responsibility for the information. Recipients should obtain legal or other professional advice as appropriate.

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