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ESMA Publishes Opinions To Support Supervisory Convergence Post-Brexit

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 herehere and here respectively.

©2017 Katten Muchin Rosenman LLP

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About this Author

David A. Brennand, Financial Services Lawyer, Katten Muchin Law Firm
Partner

David Brennand is a partner in the Financial Services practice in Katten Muchin Rosenman UK LLP. David provides advice to a wide range of clients active in asset management on a broad spectrum of matters pertinent to their operations, with a particular focus on advising asset managers on the structuring and ongoing operation of hedge and other alternative fund structures investing in a diverse range of asset classes.

As well as advising on fund structuring and their ongoing operation, David's expertise also extends to advising asset managers and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
Partner

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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