UK/EU Regulatory Divergence – Asset Management Industry Outlook

General Background
In the wake of the UK leaving the EU, the UK’s Brexit Freedoms Bill introduced powers to make it easier to amend retained EU regulations. This, coupled with the UK and the EU both now taking their own direction on financial regulation moving forward means that divergence between the UK and the EU is increasing. This brings into focus that asset managers face an increasingly complex set of rules to comply with where domiciled in, or having clients across both regions, meaning they are exposed to both sets of regulation simultaneously, often implementing at different times.

Over time, as the EU and the UK diverge further, complexity will increase. For firms operating in both jurisdictions, the challenges in keeping up with all regulatory change and compliance will become increasingly difficult to manage. Firms should consider their regulatory change capabilities to help manage the burden

Aspects of Divergence

Inside the Investment Process – ESG and consumer regulations are affecting the investment process and services provided by Investment Managers, whilst EMIR and MiFID continue to add to the operational burden. How will firms manage the divergence of regulation for their products and their investment in assets which apply in both jurisdictions?

Outside the Investment Process – regulations like Operational Resilience and IFPR are not about the investment process itself, but rather about the jurisdiction in which the firm is incorporated. For some firms, this might include incorporation in both jurisdictions. How does a firm meet both sets of regulation best? Does it seek to meet each jurisdiction differently, or adopt a “gold-plated” approach to satisfy both jurisdictions simultaneously

ISC plans to make further posts on the subject of UK/EU regulatory divergence. Watch this space for future posts on this topic as we drill into more specific regulations.

Please get in touch with Jonathan Boswell should you wish to discuss how Investment Solutions Consultants (ISC) Ltd can help you