LONDON (Reuters) – Seeking to quell industry unease, the European Union’s securities watchdog said on Friday there is no call for a fundamental change in how investment funds in the European Union can be run by asset managers based outside the bloc.
The European Securities and Markets Authority (ESMA) alarmed the global funds industry in August when it said that safeguards introduced ahead of Brexit on cross-border delegation of stock picking should be reinforced.
The asset managers that select stocks and other assets for many of the funds listed in Dublin and Luxembourg are based in London, New York or Asia.
ESMA Chair Steven Maijoor told a conference held by European funds industry body EFAMA on Friday that his comments in August were not a recommendation to change EU law on funds delegation, but to clarify parts of it.
“We are very much in favour of delegation, we know it provides access to expertise that would otherwise not be available. It’s part of the business model and we fully recognise that,” Maijoor said.
Fund managers fear that the EU would require more staff where the funds are domiciled, bumping up costs.
After Britain voted in 2016 to leave the EU, many asset management firms in the United Kingdom set up hubs in the bloc and ESMA issued guidance to ensure they didn’t end up being “empty shells” that left most activity based in London.
Under EU rules, the amount of activity delegated to managers outside the bloc should not exceed the amount of activity inside the bloc by a substantial margin.
Maijoor said there is a need to define more precisely what substantial margin means.
(Reporting by Huw Jones; editing by Emelia Sithole-Matarise)