A week after prime minister Theresa May triggered Article 50 and Brexit negotiations officially got under way, New City Initiative has warned there are issues with the incoming European regulation Mifid II that require review.
Although the UK government and the regulator have confirmed that all existing and incoming EU laws will be enforced despite Brexit, some fund managers are pushing to use it as an opportunity to review rules.
Lobby group and think tank NCI said that Mifid II, especially its requirements on research payments, ‘hampers UK firms’ ability to compete internationally’.
The UK will need to show that it is a competitive market after an exit from the single market, it added.
Because of Mifid II, the group believes UK fund managers may be at a disadvantage to those in the US and the rest of the world, where research restrictions do not exist.
It pointed out that because of the changed rules on how to pay research, asset managers may end up increasing management fees, directly conflicting with the Financial Conduct Authority’s desire for more competitive pricing, as set out in its Asset Management Market Study.
‘One irony noted by an NCI member was that unbundling brokerage costs is somewhat at odds with the FCA’s recent pronouncement that managers should consider an all in one fee charge for their own clients,’ it noted.
Jonathon Read, head of policy at NCI, said: ‘The NCI has always stressed the importance of maintaining the UK as a world-leader in the asset management industry so that it can continue to promote innovation and consumer choice, while making a positive contribution to the UK economy.
'However, there is a very real risk that Mifid II research restrictions will put UK asset management firms at a competitive disadvantage to firms in the US and the rest of the world, which do not have to comply with the same EU regulations.'