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Fund passporting rules offer post-Brexit blueprint

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The European Securities and Markets Authority has extended the passporting rules for several non-EU countries, which experts say could be a blueprint for the UK once it leaves the Europen Union.

Esma’s long-awaited passporting rules means asset managers based outside the EU would continue offering services to investors across Europe, replacing the previous system of country-by-country private placement authorisation.

Nine out of 12 countries were deemed to have “no significant obstacles” for the equivalent regulatory schemes under the Alternative Investment Fund Management Directive, including Canada, Guernsey, Japan, Jersey, Australia, Switzerland and the US, Hong Kong and Singapore.

Law firm Kirkland & Ellis partner Lisa Cawley says “broadly” Esma’s advice is “very positive” especially for the UK in the event it loses existing passporting rights after Brexit.

She says: “In a post-Brexit world this is encouraging news for managers based in the UK who can currently avail of a passport – it would be hard to envisage grounds on which Esma could conclude that a passport should not be applied post Brexit to the UK assuming the FCA left the regulatory regime for such managers largely in place.”

Following the recommendations, the UK would have to undertake the same “equivalence” process unless it is able to keep its passporting access to the single market.

The news comes as FCA’s chief Andrew Bailey urges the Government to maintain access to Europe’s single market.

He says: “We will support the Government’s work to put in place new arrangements, and I would include in that, alongside access to the single market, seeking to have in place trade agreements with other countries.

“From an FCA perspective there is, for instance, no doubt that our objective of ensuring healthy competition in UK financial markets is supported by cross-border trade in financial services.”

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