UK financial regime (long-term) developments
““The UK needs to act quickly to preserve its position.” – Kalifa Review of UK Fintech
1. International firm oversight: FCA finalise approach
Anticipating a local stampede of authorisation applications, the FCA has set out their revised approach of how it will regulate international firms. Ongoing, any non-UK firm seeking authorisation will need to prove they are “ready, willing and organised” to meet the relevant minimum standards. The FCA will focus on areas such as the firm’s operations, personnel and decision-making processes, systems / controls, and factors (in relation to the firm’s home state). They will also consider “holistically” how a firm mitigates “risks of harm” (i.e. at retail, wholesale and client asset levels).
2. UK Fund Regime: the IA / AREF co-host roundtable
The UK Investment Association (IA) – with a Kneip as a member – recently co-hosted an event with the Association of Real Estate Funds (AREF) to discuss the UK Treasury’s evolving UK funds regime (under consultation until 20 April).
3. UK Fintech – Kalifa Review published
A GovUK independent review panel has published their 108-page report outlining how the UK are to support the growth and widespread adoption of fintech (both locally and globally). Proposals include ways to promote the digitisation of financial services, including
- A Central Bank Digital Currency (CDBC): with retail and wholesale considerations, for co-administration by the Bank of England, UK Treasury and Information Commissioner Office (ICO).
- Support the digitisation of Financial Markets Infrastructure (“FMI”): including review / extension of EU legislation on-boarded (e.g. trading, settlements, collateral processes).
- Supporting ESG: including “…adopting internationally recognised standards (where appropriate)” and “a common reporting template for the UK industry”.
- New UK crypto-assets regime (regulation): e. as proposed by the Treasury. This would be a customised version of the EU’s draft Markets in crypto-assets regulation (MiCA).
Recent market trends c/o various media channels:
“The EC has no interest whatsoever to disrupt a business model that is working.” – Ugo Bassi, DG FISMA
1. SFDR: UK firms plan compliance (despite EU product classification uncertainty)
Legal firms continue to anticipate a significant number of UK asset managers voluntarily preparing to adhere with this week’s daunting EU sustainable finance disclosure (level 1) regime. This is despite continued ambiguity surrounding specific products in SFDR scope (art. 8 / art. 9), as formally identified by the European Supervisory Authorities (in their previous letter to the EC).
2. EC: ‘not planning’ to introduce disruptive delegation changes
Speaking at a recent Distribution Conference, the director of the EU Commission’s DG FISMA said there were no plans “to introduce changes aimed at disrupting or modifying fund firms’ business models”. This was interpreted by some in the industry as a clear signal that the current EU delegation model (of vital importance to UK investment managers) is likely to continue when revised AIFMD and UCITS proposals are unveiled by the EC later this year.
3. London ‘to remain financial services centre of Europe’
Finally, this week one of the “Big Four” firms is reportedly leading “large number of conversations” with EU-based investment managers and service providers seeking to reinforce UK operations. There is also conflicting opinion that EEA firms will instead seek to collaborate with UK distributors (via the future Overseas Fund Regime [OFR], co-aligned with verified EU delegation rules), in the long-term.
This follows recent analysis of the FCA’s final TPR list of EEA fund firms by a UK consultancy, who conclude that around 1,000 EEA fund firms are poised to open their first UK premises to preserve longer-term access to local investors.