EU watchdog seeks to quell worry over cross-border investment funds
The EU’s securities watchdog has said there is no call for a fundamental change in how investment funds in the European Union can be run by asset managers based outside the bloc.
The European Securities and Markets Authority (ESMA) alarmed the global funds industry in August when it said that safeguards introduced ahead of Brexit on cross-border delegation of stock picking should be reinforced. Maijoor’s latest comments reflect an attempt to quell industry unease.
The asset managers that select stocks and other assets for many of the funds listed in Dublin and Luxembourg are based in London, New York or Asia.
ESMA Chair Steven Maijoor told a conference held today by European funds industry body EFAMA that his comments in August were not a recommendation to change EU law on funds delegation, but to clarify parts of it.
“We are very much in favor of delegation, we know it provides access to expertise that would otherwise not be available. It’s part of the business model and we fully recognize that,” Maijoor said.
Fund managers fear that the EU would require more staff where the funds are domiciled, bumping up costs.
The 2016 Brexit vote many asset management firms in the UK set up hubs in the bloc and ESMA issued guidance to ensure they did not end up being “empty shells” that left most activity based in London.
Under EU rules, the amount of activity delegated to managers outside the bloc should not exceed the amount of activity inside the bloc by a substantial margin.
Maijoor said there is a need to define more precisely what substantial margin means.
Last week the UK’s financial regulator the Financial Conduct Authority (FCA) said it would allow firms to continue from January trading all shares on trading venues from the EU where they choose to do so, rather than limiting themselves to platforms headquartered in the UK.
The FCA’s stance was a odds with ESMA, which had previously said that investors from the bloc can only trade sterling-denominated shares in London.