The UK’s financial regulator has finalised its rulebook for asset managers and other market players in the event of the UK leaving the EU without agreeing a withdrawal deal.
The announcement comes as UK lawmakers voted against the withdrawal agreement struck between UK and EU negotiators in November – the third time the agreement has been rejected.
The measures finalised by the Financial Conduct Authority (FCA) today relate to companies in the European Economic Area doing business within the UK, and vice versa.
They were mostly unchanged from plans set out a month ago, the FCA said in a statement, and generally allowed for firms to keep operating under existing rules for a limited period of 15 months, despite the potential abrupt end of the UK’s EU membership – now set for 12 April.
Nausicaa Delfas, executive director of international at the FCA, said: “The documents published today are the final stages in our preparations in the event that the UK leaves the EU without an implementation period: they ensure that firms have certainty of the financial regime they will be operating within, and so can plan accordingly to meet the needs of their customers.”
The FCA’s policy statement is available here.
Separately, the FCA has “reaffirmed” a commitment with the US regulator, the Securities and Exchange Commission (SEC), to “continue close cooperation and information sharing” after Brexit.
The memorandum of understanding (MoU) was originally signed in 2006 and relates to all elements of financial regulation between the UK and US.
Andrew Bailey, the FCA’s chief executive, recently met with SEC chairman Jay Clayton to sign two updated MoUs regarding cross-border and international regulation and information sharing.
Bailey said: “As part of our preparations for Brexit we have been working with our partners in the EU and globally to ensure there is minimal disruption. These MoUs will ensure the UK can continue to be a key market for funds and fund managers. Today’s amendments will ensure continuity and stability for consumers and investors in the UK and US.”
Clayton added: “The SEC and the FCA have a long history of effective cooperation on supervisory and other matters. The amended MoUs we entered into today reaffirm this commitment and collaboration with respect to the oversight of our respective registrants for the benefit of each of our markets and investors.”
MPs reject withdrawal agreement again
This afternoon, MPs in the UK’s lower house of parliament voted against the withdrawal agreement for the third time in as many months. The agreement was rejected by a margin of 58 votes.
Donald Tusk, president of the European Council, has called an emergency meeting for 10 April to discuss the implications.
In view of the rejection of the Withdrawal Agreement by the House of Commons, I have decided to call a European Council on 10 April. #Brexit
— Donald Tusk (@eucopresident) March 29, 2019
In a statement, the European Commission said the likelihood of a ‘no-deal’ Brexit had increased because of the result in Westminster today.
“The EU has been preparing for this since December 2017 and is now fully prepared for a ‘no-deal’ scenario at midnight on 12 April,” the Commission said. “The EU will remain united. The benefits of the withdrawal agreement, including a transition period, will in no circumstances be replicated in a ‘no-deal’ scenario. Sectoral mini-deals are not an option.”
The UK had been due to exit the EU today, but the government was twice defeated in its attempts to pass its withdrawal agreement through parliament. The EU extended the Article 50 deadline until 12 April to give the UK government time to explore other options.
‘Deeply disappointing’
Chris Cummings, chief executive of the Investment Association, the lobby group for the UK’s £7.7trn (€8.9trn) asset management industry, described the situation as “deeply disappointing”.
“The immediate and now urgent priority is to avoid a no-deal cliff edge that would be the worst possible outcome for millions of savers and investors and for the asset management industry,” Cummings said.
“It is deeply disappointing that given we are potentially just days away from leaving the EU, we continue to see this political paralysis. Whatever form the next political moves take, the government has to deliver a deal which protects the British economy and does not further damage investors’ confidence in the UK as a place to do business.
“It is now urgent that politicians find a way to work together that protects UK savers, our economy and our international competitiveness.”
Cummings had already called for asset managers to implement their contingency plans for a no-deal scenario, saying earlier this month that they had “no choice” due to parliament’s “paralysis”.
He added today: “The industry also needs certainty about how future regulation will impact us, and our customers. The UK is the largest centre for asset management in Europe and maintaining that position is crucial to the health of the UK economy, so we need the UK to have a strong voice in the rules and regulations that govern us.
“It is also vital that the industry can continue to offer products and services across borders. Currently, UK investors can save into more than 10,000 different funds and we need to maintain that access so that they have the widest possible choice to grow their money.”
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