On July 13, the European Securities and Markets Authority (ESMA) published three opinions (Opinions) to support supervisory convergence (i.e., a consistent approach to authorization, supervision and enforcement) in the European Union in light of the potential relocation of entities from the United Kingdom to the remaining 27 member states of the EU (EU27) following Brexit.

Each of the Opinions address regulatory and supervisory arbitrage risks in relation to different sectors, namely:

  • the relocation of investment firms subject to the original revised Markets in Financial Instruments Directive (Investment Firm Opinion);
  • the relocation of Undertakings for Collective Investment in Transferable Securities (UCITS) management companies subject to the UCITS IV Directive and alternative investment fund managers subject to the alternative investment fund managers directive (Investment Management Opinion); and
  • the relocation of trading venues (regulated markets, multilateral trading facilities and organized trading facilities) from countries outside of the EU27, relocating to within the EU27 (Secondary Markets Opinion).

Steven Maijoor, chair of ESMA, stated that the Opinions set out the standards to be observed by national authorities of the EU27 when considering relocation requests. He went on to state that the Opinions themselves do not apply new or different standards or requirements, but apply existing legislative and supervisory practices to the specific case of the United Kingdom leaving the European Union.

While Brexit negotiations are ongoing, the Opinions assume that the United Kingdom will become a “third country” after its withdrawal from the European Union, but are without prejudice to any specific arrangements that may be agreed between the EU27 and the United Kingdom, and to any future ESMA opinions or other convergence tools.

The Investment Firm Opinion, Investment Management Opinion and Secondary Markets Opinion are available here, here and here respectively.