Post-Brexit UK Fund Regulation: Equivalence, Divergence or Convergence?
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Post‑Brexit UK Fund Regulation: Equivalence, Divergence or Convergence? Elizabeth Howell1
© The Author(s) 2020
Abstract The UK’s collective investment scheme (‘CIS’) sector is a key aspect of UK financial services. With the UK’s departure from the EU, it has also become a politically salient topic, with various Member States competing to lure business to their financial centres in the light of Brexit. Brexit prompts hard choices and a key question arising for the CIS industry is whether the UK should continue to shadow EU law or whether elements of regulatory divergence could be envisaged. The paper suggests that, over the short to medium term, the UK should ensure it is likely to be deemed equivalent under EU law. Be that as it may, the paper also suggests that there may be areas within UK CIS regulation where some limited divergence can be considered. This would be provided that the UK remains in line with international standards, and (ideally) continues to be recognisably similar to remain equivalent. This certainly holds true in the event that equivalence is interpreted as more of a holistic assessment that could extend to embrace an element of regulatory competition. Any such divergence could also be framed as being of an optional nature, in order to grant CIS businesses full flexibility with respect to which regime they wish to comply. Writ large, Brexit may also help to stimulate broader conversations about the longer-term challenges the CIS industry faces in today’s world. Viewed in this light, leaving the union could also inspire innovative and proportionate solutions to support and strengthen this pivotal sector. Keywords Financial regulation · Fund regulation · Brexit · EU law
1 Introduction The UK’s collective investment scheme (‘CIS’) sector is a key aspect of UK financial services. With the UK’s forthcoming departure from the EU, it has also become a politically salient topic, with various Member States competing to lure business to * Elizabeth Howell [email protected] 1
Assistant Professor of Law, London School of Economics and Political Science, London, UK
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E. Howell
their financial centres in the light of ‘Brexit’.1 Brexit prompts hard choices and a key question arising for the CIS industry is whether the UK should continue to shadow EU law or whether elements of regulatory divergence could be envisaged.2 With a view to a greater understanding of the nuance contained within this issue, this paper considers the case study of the UK’s CIS sector, which is of considerable significance to the UK’s economy.3 Asset management firms invest and manage large sums of money for investors (ranging from individuals to institutions and governments); they invest in a broad range of UK and international enterprises, and make financial decisions that will affect their clients’ financial wellbeing. Asset managers offer expertise, asset diversification, and economies of scale which investors would not be able to obtain investing individually, resulting in lower transaction costs.4 The
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