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Markets and Securities Services |
International
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in another EU Member State if provided by
investment managers located in London. While
the answer ought to remain focused on where
the services are performed, some Member States
are taking the view that one should focus on
is where the recipient of the service is located.
In the absence of certainty of interpretation,
managers are likely to ensure that there is a
MiFID firm that can ease its way to passporting
MiFID services around Europe in the future.
There are therefore two options to consider:
• Whether additional services can be offered by a
UCITS ManCo under Articles 6(3)/(4) provisions
or by an AIFM under the terms of Article 6(4)
of the AIFMD – hence the interest in developing
the notion of “SuperManCos — but this approach
does likely have its limitations.
• And whether most managers wishing to
do a full service will likely set up their own
individual MiFID firms in another EU Member
State, the choice of State being dependent on
the manager’s historic connections and other
individual preferences.
The differences between the debates on
UCITS ManCo and AIFM substance
requirements and a MiFID firm’s substance
should be considered carefully.
To take the Irish scenario, a MiFID firm must
satisfy the Central Bank that its head office
is in Ireland. There is no definition of what
constitutes a head office. The Central Bank is
of the view that it means the location of the
mind and management of the firm and the
place where the day-to-day decisions about the
direction of the MiFID firm’s business are taken.
In effect, this means that a certain number of
directors and senior managers must be located
in Ireland. The Central Bank would usually
expect to see certain key functions located
within the head office, such as financial control,
legal and compliance, and risk management.
The Central Bank acknowledges that a MiFID
firm may be integrated into its overall corporate
group structure as this can be a source of
significant strength and resilience. Accordingly
the Central Bank’s precise requirements will
be informed by the size and complexity of the
MiFID firm’s business.
Crown dependencies
UK asset managers have traditionally set
up funds in the UK plus either or both of
Luxembourg and Dublin, and also various
offshore centres. Of those offshore centres,
Jersey, Guernsey and the Isle of Man (Crown
dependencies) have been used by some as
offshore fund domiciles.
The government has indicated it is committed to
engaging with them as it works towards leaving
the EU, but as yet we have no specifics on how.
Aside from such issues, a key challenge that is
emerging concerns the timeline for agreeing
the post-Brexit deal and how it might be
implemented.
A key part of an orderly exit will be a suitable
timeframe. However the negotiations progress,
the two-year process is unlikely to be sufficient.
Some transitional arrangements may in reality
be needed, however well the negotiations
go. As commented in the recent House of
Commons Select Committee Report regarding
any “phased approach”:
There is no precedent for the conclusion of a
major comprehensive bilateral or multilateral
FTA covering goods and services within two