On 23 June 2016, the British electorate voted by a margin of 52%-48% to leave the European Union. Following this, the Prime Minister triggered Article 50 of the Treaty of Lisbon on 29 March 2017, meaning that the UK will leave the EU by 29 March 2019 unless there is unanimous agreement from Member States to extend this period.
AIMA is actively engaging with policymakers, regulators and other industry bodies to ensure that the voice of the alternative investment management industry is heard at every stage of the Brexit process. AIMA has established a Brexit Task Force consisting of fund manager and sponsoring partner service provider members to help guide our Brexit policy work.
In addition to undertaking a Brexit Survey mapping the exposures of members globally, the Brexit Task Force published a position paper in December 2016 intended for UK politicians and regulatory authorities that sets out our priorities for Brexit and the value of the industry to the UK. We also propose a future UK/EU relationship based on equivalence, non-discrimination and reciprocity. In May 2017 AIMA published a detailed breakdown of the respsective EU and UK institutional negotiating positions for Brexit, as well as a paper on the Brexit related tax concerns and opportunities for hedge fund managers.
NCA responses to AIMA Brexit Transition Questions
AIMA has written to the EU27 national competent authorities (NCAs) to enquire about there answers to a series of 46 specific questions related to UK AIFMs transitioning from the transposed regimes related to the use of Articles 32, 33 and 36 of the AIFMD to use of any available Article 42 national private placement regime or to another relevant status. Please find here a table of questions and responses from the Central Bank of Ireland relating to marketing of UK AIFs in Ireland by UK AIFMs following the Brexit transition period. A list of these questions and the answers we have received so far can be accessed by members here.
FCA response to AIMA Brexit Transition Questions
AIMA has written to the UK’s Financial Conduct Authority (FCA) to enquire about their answers to a series of specific questions related to status changes that will come into effect immediately following the end of the transition period (1 January 2021 or such later date as may ultimately be agreed). At the end of this period, an AIFM could go from being an EEA AIFM (a category which will cease to exist) to being a third country AIFM. This raises a number of practical questions as set out in the letter. A list of these questions and the answers we have received from the FCA can be accessed by members here.
AIMA has in the first weeks of 2019 held a series of roundtable discussions devoted to the topic of Brexit and exploring how investment managers can manage its impact. Recordings of the sessions, as well as printed materials, are available here.
Documents and articles
- Note from Central Bank of Ireland – communicated to AIMA (15 December 2020)
- HM Treasury consults on Future Regulatory Framework - AIMA Summary (23 October 2020)
- AIMA Summary - FCA Response to Brexit Questions (04 August 2020)
- March CEO Blog: Seven key regulatory themes for 2020 (05 March 2020)
- AIMA Brexit Briefing Note on Onshoring Financial Services Legislation (Feb 2020) (04 February 2020)
- AIMA summary of Data Protection and Transfer Post-Brexit (28 January 2020)
- AIMA Briefing Note: UK General Election Result and Brexit - Next Steps (13 December 2019)
- Summary of Brexit National Contingency Measures (22 October 2019)
- AIMA Briefing Note on Onshoring Financial Services Legislation - October (01 October 2019)
- Brexit: ESMA and FCA News Releases - October (01 October 2019)
- Brexit: National Contingency Measures - October (01 October 2019)
- Getting cross-border concerns back on the global policy agenda: An AIMA perspective (25 June 2019)
- CEO blog: May 2019 notes (31 May 2019)
- CEO blog: February 2019 notes (01 March 2019)
- Brexit - Tax and the alternative investment management industry - Guidance to members (31 January 2019)
- CEO blog: January 2019 notes (31 January 2019)
- AIMA Response to FCA Consultation Paper CP18/28 (07 December 2018)
- AIMA Response to FCA Consultation Paper CP18/29 (07 December 2018)
- Brexit Update - November 2018 (19 November 2018)
- CEO blog: November 2018 notes (16 November 2018)
- Report on Brexit Survey 2.0 - October 2018 (31 October 2018)
- AIMA Brexit Update - Q3 2018 (27 July 2018)
- Brexit, Blockchain & Tax Reform (17 July 2018)
- Brexit and Alternative Asset Managers - Managing the impact in the EEA (11 July 2018)
- UK legislative approach to Brexit implementation - AIMA briefing note (09 July 2018)
- CEO blog: April 2018 Notes (10 April 2018)
- Inside AIMA's 2018 Global Policy & Regulatory Forum (10 April 2018)
- Brexit and Alternative Asset Managers: Managing the Impact (09 April 2018)
- CEO blog: December Notes (13 December 2017)
- ESMA sector-specific principles on relocations from the UK to the EU27 - AIMA Summary (18 July 2017)
- CEO blog: Hedge funds, Brexit and the EU (03 July 2017)
- Communication on Market Infrastructure - AIMA Response - European Commission (07 June 2017)
- Brexit negotiating positions - AIMA briefing note (17 May 2017)
- UK tax concerns and opportunities for alternative investment managers post-Brexit - AIMA briefing note (17 May 2017)
- Five things we learned at AIMA’s flagship regulatory forum (10 May 2017)
- CEO Blog: Brexit position paper - The path of least upheaval (19 December 2016)
- Developing Alternative Investment Management in the UK - Brexit and Beyond (19 December 2016)
- Markets Regulation and Brexit - AIMA Briefing Paper (15 July 2016)
- AIMA note - The implications for the alternative asset management industry of the UK decision to leave the European Union (28 June 2016)
- CEO Blog: 'So now we know, but there's a lot we don't...' (24 June 2016)
- CEO Blog: Brexit, offshore funds and other things (14 April 2016)
Article 50 of the Lisbon Treaty defines the process by which a Member State can leave the EU, requiring a formal notification to be made by that Member State to the European Council of its desire to leave. This involves a two-year period during which a withdrawal agreement is to be negotiated and concluded by the UK and European Council acting by qualified majority, with the consent of the European Parliament. Upon the entry into force of the withdrawal agreement or, failing that, the expiry of the two year period, the EU Treaties will cease to apply to the UK unless an extension is agreed unanimously by the European Council.
Future relationship between the UK and EU
The UK has accepted that it is unrealistic for the EU to permit full Single Market access for the UK whilst the UK does not accept all four freedoms, most importantly the free movement of persons which the UK government has confirmed will end when the UK formally leaves the EU. The UK has also set out its intention to leave the Single Market and the Customs Union in order to be able to sign bilateral free-trade agreements with other countries post-Brexit. Despite leaving the EU, the UK government has confirmed its intention to maintain a close partnership with the EU and to remove trading frictions to as great a degree as possible. However, it is still too early to tell the precise form or shape of this future agreement. The EU is currently united in refusing to discuss the future trading relationship until fundamental matters, namely the UK Brexit financial settlement, are agreed.
The latest documents on the EU/UK negotiations can be found on the European Commission's website - here.
Implications for the hedge fund industry
There will be various direct and indirect consequences of Brexit for the alternative asset management industry, posing both risks and opportunities. Unanswered questions include:
the future of delegation arrangements between the EU and third-countries, and possible location policies for central clearing of Euro denominiated derivative contracts;
the willingness of the UK legislators and regulators to place asset management at the front of their thinking as a UK growth industry post-Brexit;
the willingness of the EU to grant equivalence to the UK as a third-country under various pieces of EU financial services legislation;
the future policy direction of existing and future EU financial services legislation, in particular the maintenance of private placement regimes under AIFMD and the Capital Markets Union project; and
the degree of access in the UK to skilled employees from the EU and beyond.
From the perspective of the hedge fund industry, greater legislative sovereignty for the UK government and regulatory authorities upon leaving the EU provides an opportunity for the UK to tailor its domestic fund management rules to improve their proportionality and global competitiveness, potentially by aligning them more closely with those of other international financial services centres such as the US, Hong Kong and Singapore. However, this coincides with the loss of influence over the rules applied to a significant market of potential investors.
If you have any questions in relation to AIMA’s Brexit work, please contact the Markets team on at [email protected].