ESMA issues principles on supervisory approach to relocations from the UK
The European Securities and Markets Authority (ESMA) has published an Opinion setting out general principles aimed at fostering consistency in authorisation, supervision and enforcement related to the relocation of entities, activities and functions from the United Kingdom. The opinion is addressed to national competent authorities (NCAs), in particular of the 27 Member States that will remain in the EU (EU27).
The opinion is a practical tool to support supervisory convergence in the context of increased requests from UK financial market participants seeking to relocate to the EU27. It covers all legislation referred to in the ESMA Regulation, in particular the AIFMD, the UCITS Directive, MiFID I and MiFID II.
Steven Maijoor, Chair, said:
“The UK plays a prominent role in EU financial markets and the relocation of entities, activities and functions to the EU27 creates a unique situation requiring a common effort, at EU level, to safeguard investor protection, the orderly functioning of financial markets and financial stability.
“The EU27 have a shared interest in building a common approach to dealing with relocating firms that wish to continue to benefit from access to EU financial markets. Firms need to be subject to the same standards of authorisation and ongoing supervision across the EU27 in order to avoid competition on regulatory and supervisory practices between Member States. Effective and efficient supervision are essential to support the Capital Markets Union.”
Supporting Supervisory Convergence
In the course of the UK withdrawing from the EU, UK-based market participants may seek to relocate entities, activities or functions to the EU27 in order to maintain access to EU financial markets. These may seek to minimise the transfer of the effective performance of those activities or functions in the EU27, i.e. by relying on the outsourcing or delegation of certain activities or functions to UK-based entities, including affiliates. It is therefore necessary to ensure that the conditions for authorisation as well as for outsourcing and delegation do not generate supervisory arbitrage risks.
New authorisations must be granted in full compliance with Union law and in a coherent manner across the EU27. Any outsourcing or delegation arrangement from entities authorised in the EU27 to third country entities should be strictly framed and consistently supervised. Outsourcing or delegation arrangements, under which entities confer either a substantial degree of activities or critical functions to other entities, should not result in those entities becoming letterbox entities nor in creating obstacles to effective and efficient supervision and enforcement.
EU27 NCAs need to prepare for an increase in activities related to authorisation and supervision. ESMA will establish a forum – the Supervisory Coordination Network – to allow NCAs to report on and discuss cases of relocating UK market participants. This will help to promote consistent decisions by NCAs. ESMA is prepared to take further measures to support supervisory convergence, including issuing Q&As, providing additional opinions to NCAs, and conducting peer reviews.
The opinion sets out nine principles:
- No automatic recognition of existing authorisations;
- Authorisations granted by EU27 NCAs should be rigorous and efficient;
- NCAs should be able to verify the objective reasons for relocation;
- Special attention should be granted to avoid letter-box entities in the EU27;
- Outsourcing and delegation to third countries is only possible under strict conditions;
- NCAs should ensure that substance requirements are met;
- NCAs should ensure sound governance of EU entities;
- NCAs must be in a position to effectively supervise and enforce Union law; and
- Coordination to ensure effective monitoring by ESMA.
ESMA intends to develop further guidance in areas such as asset managers, investment firms and secondary markets to provide sector specific details on the aspects described in the general opinion.
Latest News from
EU clears way for the EU Digital COVID Certificate15/06/2021 09:25:00
The Presidents of the three EU institutions, the European Parliament, the Council of the EU and the European Commission yesterday attended the official signing ceremony for the Regulation on the EU Digital COVID Certificate, marking the end of the legislative process.
Council agrees on new rules for cross-border energy infrastructure14/06/2021 16:48:00
The Council recently (11 June 2021) reached a general approach on the revision of the Trans-European Networks for Energy (TEN-E) Regulation.
Council approves conclusions on an EU renovation wave14/06/2021 15:25:00
The Council recently (11 June 2021) approved conclusions on a renovation wave that repairs the economy now, and creates green buildings for the future.
Council approves EU-UK agreement on fishing opportunities14/06/2021 13:25:00
The Council recently (11 June 2021) approved the agreement between the European Union and the United Kingdom on fishing opportunities for 2021 and, for deep-sea stocks, for 2021 and 2022.
EU-U.S Joint statement on the humanitarian emergency in Tigray14/06/2021 09:25:00
EU-U.S Joint statement given recently (10 June 2021) on the humanitarian emergency in Tigray.
Talent Partnerships: Commission launches new initiative to address EU skills shortages and improve migration cooperation with partner countries11/06/2021 16:33:00
Today, the Commission is launching Talent Partnerships, a key initiative under the New Pact on Migration and Asylum that will help to address skills shortages in the European Union and to strengthen mutually-beneficial partnerships on migration with third countries.
Central America and Mexico: EU reaffirms support with €18.5 million in humanitarian and development aid11/06/2021 15:25:00
The EU yesterday announced at the 'Solidarity event for forcibly displaced persons and host communities in Central America and Mexico', that it will allocate €18.5 million in aid. Of this sum, €12 million represents humanitarian funding to Central America, and €6.5 million constitutes development assistance.
Council endorses new EU strategy on adaptation to climate change11/06/2021 14:38:00
The Council yesterday approved conclusions endorsing a new strategy that outlines a long-term vision for the EU to become a climate-resilient society that is fully adapted to the unavoidable impacts of climate change by 2050.
Child Labour: Statement by the European Commission and the High Representative on the World Day against Child Labour11/06/2021 13:25:00
Child Labour: Statement given by the European Commission and the High Representative on the World Day against Child Labour.
Education: EU increases its commitment to Global Partnership for Education with a pledge of €700 million for 2021-202711/06/2021 12:38:00
Ahead of the G7 Summit, President of the European Commission Ursula von der Leyen yesterday announced that the European Union is pledging €700 million for the Global Partnership for Education (GPE) to help transform education systems for more than one billion girls and boys in up to 90 countries and territories.