Post-Brexit UK Fund Regulation: Equivalence, Divergence or Convergence?

Abstract

The UK’s collective investment scheme (‘CIS’) sector is a key aspect of UK financial services. With the UK’s departure from the EU, it has also become a politically salient topic, with various Member States competing to lure business to their financial centres in the light of Brexit. Brexit prompts hard choices and a key question arising for the CIS industry is whether the UK should continue to shadow EU law or whether elements of regulatory divergence could be envisaged. The paper suggests that, over the short to medium term, the UK should ensure it is likely to be deemed equivalent under EU law. Be that as it may, the paper also suggests that there may be areas within UK CIS regulation where some limited divergence can be considered. This would be provided that the UK remains in line with international standards, and (ideally) continues to be recognisably similar to remain equivalent. This certainly holds true in the event that equivalence is interpreted as more of a holistic assessment that could extend to embrace an element of regulatory competition. Any such divergence could also be framed as being of an optional nature, in order to grant CIS businesses full flexibility with respect to which regime they wish to comply. Writ large, Brexit may also help to stimulate broader conversations about the longer-term challenges the CIS industry faces in today’s world. Viewed in this light, leaving the union could also inspire innovative and proportionate solutions to support and strengthen this pivotal sector.