Global firms ‘may be sensible’ to shift from UK

As a result of Britain voting to leave the European Union, foreign firms that have selected the UK as their European base may well move to mainland Europe, according to advisory firm Duff & Phelps.

Global firms which have chosen to become fully AIFMD and UCITS compliant by basing their operations, regulatory permissions and status in the UK may have to re-evaluate their operating model, said Julian Korek, global head of financial regulation and compliance at the firm.

“It may be sensible to consider using a European base to set up operations permanently, or until the UK can obtain a third-country passport,” Korek said in a statement from the firm.

“The implication for UK fund managers depends heavily on what products they offer and the location and nature of their clients. As many funds and managers raise assets globally, the asset management industry has proven resilient to pressures before,” he added.

One of the central distinctions drawn in the Alternative Investment Fund Managers Directive is between European fund managers, which have access to EU marketing passports, and non-European fund managers, which do not.

After Brexit, UK managers and funds will become third-country and classed as non-EU fund managers, said Korek. “The biggest impact will likely be in respect of marketing, solicitation, passporting and operational issues. The future effect on the industry of such issues will inevitably depend on the stance the UK takes in its policy negotiation with the EU.”

The possibility of UK fund managers losing the EU passport due to a leave vote poses a number of unanswered questions, including whether there will be a crossover period and at what point fund managers will stop being classed as European fund managers and move into the non-European fund manager category.

Regardless of whether the UK operates under an European Economic Area model, as Noway does, or detaches itself entirely from the Union, AIFMD, MIFID II and MAR would almost certainly continue to apply under UK law after a Brexit, said Korek.