UK and European overview

Whether the general election set for 12 December will bring an end to the political rollercoaster that is Brexit remains to be seen. At the time of writing this update the media reported that the only survey to forecast the hung parliament in the last election predicts a Conservative win of 359 seats translating into a majority of 68. If this result were achieved it would be plausible to expect the new Conservative government to push through the legislation approving the revised withdrawal deal that Boris Johnson agreed in October before or just after Christmas.

Once the UK has completed its ratification process it will be left to the European Parliament and then the Council to sign off on the withdrawal deal. Currently, there have been no noises from the European Parliament suggesting that ratification will be a problem. Should the withdrawal deal be finalised, the UK and the EU will move onto negotiating the arrangements for its future relationship. This phase of the negotiations may prove to be more tricky than the withdrawal deal. Significantly, the Political Declaration on the future UK / EU relationship does not say too much as regards financial services, so we are all a little in the dark as to what will happen next, although it is noticeable that despite the amendments that were agreed in October the original commitment to conclude equivalence assessments by the end of June 2020 remains. Obviously this is a very tight timetable, and it remains to be seen if it will be achieved. The Political Declaration is not legally binding so the requirement is not set in stone and for fund managers equivalence is only a partial solution in the sense that, for example, the UCITS directives don’t contain equivalence provisions.

Regardless of where we end up, the UK regulators will continue to engage with the future EU agenda. This is not only because the UK rulebooks start from the same place, but also because they also share common regulatory priorities, challenges and concerns.

Turning to next year, and aside from Brexit, what is generally on the horizon?

Significant regulatory reform is on the horizon principally in the form of the new EU prudential regime for asset managers as set out in the Investment Firms Directive and Investment Firms Regulation. In this issue, Simon Lovegrove, Jochen Vester and Arup Sen consider the new requirements of the regime which will be supplemented by level 2 measures which will be published during the course of next year. As we all know with EU legislation, the devil is in the detail and this will be no exception. Another key area of regulatory reform is sustainable finance. In this issue Flupke van den Bogart, from our Brussels’ Government Relations team, provides an update on how the EU is progressing with its sustainable finance action plan.

Whilst getting ready for the new prudential regime and sustainable finance reforms, asset managers will also have to digest in 2020 the delayed European Commission report on the functioning of the AIFMD. The AIFMD review is not, however, the only review in town next year. Asset managers will also have to keep an eye on the reviews of MiFID II, UCITS, the Benchmarks Regulation and the Market Abuse Regulation. In this issue, Imogen Garner touches on the AIFMD review together with other recent EU regulatory developments when introducing our global asset management webinar series.

Moving away from Europe for a moment, regulatory reform impacting asset managers continues in other parts of the world. For instance, in his Australia update, Matthew Farnsworth covers the proposed new regime for foreign financial services providers dealing with Australian wholesale clients. In Hong Kong, Etelka Bogardi and Amy Chang cover new SFC guidance on the use of external electronic data storage. In their usual United States SEC update, Steven Howard and others discuss, among other things, proposed amendments to enhance retail investor protections. In Canada, Daniel Lesie consider FINTRAC’s recent announcement to publicly name violators of anti-money laundering rules.