The European Securities and Markets Authority (ESMA) has published an opinion which sets out general principles on supervisory approach in relation to relocations of entities from the United Kingdom (UK) to the remaining 27 EU members states (EU27).
ESMA has issued its Opinion in response to increased requests from the financial market participants seeking to relocate to the EU27 and addresses concerns raised by national regulators that some EU member states could allow for the creation of letterbox entities in order to attract UK based asset managers. These concerns are especially relevant where UK based entities may seek to relocate to the EU27 by relying on the outsourcing or delegation of certain activities or functions to UK based entities including affiliates.
By issuing its Opinion, ESMA has delivered a clear message: new authorisations must comply with EU law in a coherent manner across all EU27 and any outsourcing or delegation arrangement from entities authorised in the EU27 to third country entities should be “strictly framed and consistently supervised”. Such outsourcing or delegation arrangement should not result in those entities becoming letterbox entities.
The Opinion is addressed to the national competent authorities (“NCAs”) and is aimed at fostering consistency in relation to authorisation, supervision and enforcement. The Opinion covers activities of alternative investment fund managers (AIFMs), undertakings for collective investment in transferrable securities directive (UCITS) and investment firms authorised pursuant to markets in financial instruments directive (MiFID).
