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Magazine Issues » December 2022

Association column: UK/Ireland 'stronger than ever'

Irish fundsIrish Funds visited the UK in November, and regulatory ties were strengthened, reports Piyasi Mitra.

Close ties between the UK and Ireland were reasserted when Irish Funds rolled into London in November.

The importance of maintaining alignment between the UK and EU’s regulatory frameworks was a core theme at the Irish Funds Annual UK Symposium, Irish Funds said.

Jonathan Lipkin, director of policy, strategy and innovation at UK trade body The Investment Association, said: “Relations between the UK-Ireland industries have been an integral part of the delivery chain and are stronger than ever.”

One of the topics covered at the conference was the delegation of fund management activities. This was raised during the Update on Regulation panel, which Lipkin took part in. The UK’s regulatory decision-making apparatus is treating delegation with “importance”, he said.

Delegation refers to certain fund management activities, such as fund administration, being carried out in countries other than where a fund is domiciled and sometimes to third parties. The topic in recent years has centred on portfolio management amid concerns that the EU would require the activity to be carried out in major fund domiciles such as Ireland and Luxembourg and away from financial centres such as London and Frankfurt.

The UK’s departure from the EU intensified the topic, particularly for UK-based asset managers.

Regulatory change, in general, is imminent, the symposium heard, because the UK is no longer a part of a single market, and Lipkin highlighted a rise in the potential for cross-border friction.

“There is deepening of some consumer-focused manufacturing and distribution requirements initially reflected in the assessment of value (AoV), and eventually in Consumer Duty expected to come into force next year,” said Lipkin.

AoV refers to a requirement in the UK for funds to produce proof of their value to investors. But Lipkin urged stakeholders to “take a close look” at the Financial Conduct Authority (FCA) Consumer Duty, which is expected to set higher and clearer standards of consumer protection across financial services and requires firms to put their customers’ needs first. Lipkin said this would entail a series of responsibilities to be undertaken by the entire funds ecosystem – distributors, platforms, advisers, wealth managers – with respect to price and value.

“Regardless of where you get to with the overseas fund regime and make decisions about assessment of value for manufacturers, there will be a set of requirements in place for distributors that is likely to impact domestic and overseas fund managers,” said Lipkin.

Divergence is never far from discussions on regulation. Tara Newbery, head of legal, Emea, at Northern Trust Asset Management, said that for firms such as Northern Trust – which have UK-based operations but also Irish Ucits-regulated funds – to look at both frameworks in parallel is a challenging task.

All of the panellists – among them Federico Cupelli, deputy director of regulatory policy at the European Fund and Asset Management Association (Efama) – agreed that regardless of differences, delegation should be an intrinsic aspect between jurisdictions.

In an address to the conference, Derville Rowland, deputy governor, consumer and investor protection at the Central Bank of Ireland, said it was important for the EU and UK to continue working closely together on regulation to ensure as much as possible the “consistent and stable application of our frameworks”.

“As the challenges of the past few years have shown, strengthening our alliances with like-minded partners is more important than ever,” she said.

“ We don’t just welcome your continued engagement – we see it as essential to our mission of serving the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers, investors and the wider economy.”

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