Chaperoning as a means to market in EU post-Brexit under threat

The financial trade press (e.g. see Financial News) is reporting that certain EU regulators have questioned the ability for a UK firm to rely on the “chaperoning” model to market in the EU post-Brexit.

Marketing activities in certain EU member states are deemed MiFID regulated activities. Pre-Brexit, a UK firm could rely on obtaining a MiFID passport to carry out such marketing activities in the EU. This is no longer available post-Brexit. UK firms have been exploring numerous options to permit them to continue to market in the EU post-Brexit. Chaperoning is one of these options. It involves an EU regulated firm carrying out the activities but with the UK personnel being part of such activities. The UK personnel must be chaperoned at all times by an individual from the EU regulated firm.

Apparently the Irish and Dutch regulators, the Central Bank of Ireland and AFM, have both questioned whether the chaperone model works from a regulatory perspective or undermines the position that the EU entity is carrying out the marketing activities.

As seen by recent EU legislation (e.g. the Cross Border Distribution of Fund Regulation), there is a move by EU regulators to ensure that certain marketing activities carried out in the EU are conducted by EU regulated entities. The approach of the Irish and Dutch regulators to the chaperone model is therefore not a surprise. We anticipate EU legislatures and regulators to continue to focus on this, in particular, with AIFMD II on the horizon. UK firms seeking to carry out marketing activities in the EU will continue to have to adapt to ensure they meet such regulatory pressures.