ESMA’s Brexit guidance exceeds AIFMD requirements

The European regulator's guidance on the relocation of UK financial services firms goes beyond regulatory requirements, according to law firm Debevoise & Plimpton.
 
In some instances the guidance, published by the European Securities and Markets Authority in May, “changes or considerably affects” the Alternative Investment Fund Managers Directive, the law firm said in a client note.
 
ESMA said UK businesses must be able to justify a relocation to another member state for “business reasons” in its nine-point statement.
 
“The AIFMD does not require objective reasons for relocation or require that an enhanced level of scrutiny be applied to applications where an applicant intends to carry on a majority of its activities in Member States other than its home Member State,” Debevoise said.
 
The restrictions ESMA seeks to impose would be restrictions on firms rather than on states, and could affect companies moving from one non-UK member to another.
 
'As such, the guidance risks having an impact that goes beyond Brexit and raises concerns about the extent to which current delegation and advisory practices can be maintained,” the law firm said.
 
National regulators were also warned there cannot be any automatic recognition of the authorization granted by the UK regulator into the EU27. Authorization should only be given if a business can prove that it is not choosing an EU country to avoid stricter standards in force in other EU states, ESMA said.
 
“It is to be hoped that there will be further discussion and that a reasonable interpretation and application of the existing laws will be applied,” Debevoise said.