The Financial Conduct Authority (FCA) has announced that is has agreed Memoranda of Understanding (MoUs) with the European Securities and Markets Authority (ESMA) and EU regulators.
These regulatory cooperation agreements are a prerequisite to allow EU fund managers (including AIFMs and UCITS managers) to delegate portfolio management services to a third party in another country outside the EU.
Following Brexit, the UK will become a third country, meaning that EU fund managers can only delegate portfolio management to UK entities if these cooperation agreements are in place.
This will be good news to many firms whose Brexit planning involves delegation to a UK entity following either a hard Brexit or soft Brexit on terms under which the UK loses its existing financial services passport rights (as it would under the Government's current proposals).
The MoUs cover cooperation and exchange of information in the event the UK leaves the EU without a withdrawal agreement and implementation period. Until an agreement is reached the FCA will continue to plan for a range of scenarios, including if the UK leaves the EU without an agreement.