French regulator cranks up Brexit pressure on UK asset managers

BrexitThe French financial regulator has ordered UK asset managers which manage or market investment funds in France to set out their post-Brexit plans.

A round robin letter, seen by Funds Europe, from the Autorité des marchés financiers (AMF) states that, once the UK leaves the European Union next year, UK firms will lose the ability to passport their services into EU member countries.

Recipients of the letter, sent out to UK-based firms over the last fortnight, have been asked to promptly inform the AMF of “the steps that your company intends to take, to anticipate and prepare for the termination of the aforementioned passport mechanisms”.

The letter, from the AMF’s asset management head Xavier Parain, asks firms to state whether they plan to continue to manage or market investment funds in France post Brexit.

If firms do plan to continue operations in France, they are asked to set out which “legal structure” they will put in place “in order to remain in full compliance with rules applicable in France for managing or marketing investment funds”.

“If not,” the letter demands, “could you specify the measures that will allow you to terminate these activities?”

Last month, the European Commission warned of the impact of Brexit on EU-UK cross-border funds as well as Ucits funds domiciled in the UK, which will lose their Ucits status once the UK becomes a “third country”.

The official notice said that, in the absence of any agreement on a possible transitional arrangement with the UK, all UK-domiciled Ucits funds will lose their Ucits status from March 30, 2019.

A spokesperson for the Association of the Luxembourg Fund Industry said that the AMF’s letter appeared to be in line with the Commission’s earlier warning letter.

“UK-based asset managers using the Ucits and/or the AIFM passport to manage funds on the continent are indeed advised to prepare for a scenario in which this passport will no longer be available,” the spokeswoman said.

“Asset managers are already getting ready, as shown by recent examples like Jupiter, M&G and T Rowe Price who have announced that they will strengthen their presence in Luxembourg to continue to benefit from the passport.”

The AMF demand for information comes as the future of the delegation model appears increasingly under threat.

The delegation model allows funds to be set up by asset managers in one EU state while outsourcing the investment management of the fund to managers in another country.

France, which has made no secret of its hopes of attracting more asset managers to Paris, welcomed Commission plans outlined last year to clamp-down on so-called “letterbox” entities, where only a token number of staff are employed within EU member states.

A survey of 55 global asset managers carried out last month found that 51% of firms have strengthened their operations in continental Europe in preparation for an anticipated hard Brexit.

On Tuesday London-based Jupiter Fund Management announced it would, in preparation for Brexit, increase staff numbers at its Luxembourg office.

Chief executive Maarten Slendebroek was reported as saying that the firm has no choice other than to prepare for a hard Brexit.

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