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IPE special report May 2018

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UK asset managers lament 'regulatory imperialism'

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  • UK asset managers lament 'regulatory imperialism'

UK - The UK asset management industry fears "politicised" regulatory change and an overworked European Securities and Markets Authority (ESMA) resulting to problematic regulatory changes, according to the Investment Management Association's (IMA) latest annual survey.

The survey - based on a questionnaire answered by 85 of the association's member companies, as well as interviews with employees of 20 companies - revealed a concern for "regulatory imperialism".

According to the IMA, regulatory changes in the US and Europe have been "inconsistent and at times contradictory", with one unnamed respondent telling the survey: "It's not the logistics of dealing with so many regulators, but the fact some regulators are trying to export their own regulation. Regulatory imperialism has no benefit whatsoever."

Addressing regulatory change in Europe in particular, the IMA said the single market had become a "significant reality" and that the investment management industry had benefitted from changes introduced, referencing the UCITS reforms.

It added that many believed the new European Supervisory Authorities - comprising ESMA, the European Insurance and Occupational Pensions Authority and the European Banking Authority - could have benefits.

"However, there remain concerns that policy development over the coming years will be politicised, and characterised by constrained resources and insufficient regard to the UK, as opposed to continental European business models," the IMA said.

A second anonymous respondent said that European integration was, on the face of it, a positive development, but said the "danger" stemmed from political and other concerns entering the equation.

"The idea of having a deeper, real, single market with access to clients throughout Europe is good, but it depends on the balance and the resources and the backgrounds of the people in ESMA," the respondent said.

"The scale of ESMA is tiny, and the time they are given by their political masters is extremely limited. That is unhelpful."

Richard Saunders, chief executive at the IMA, noted that the G20 had initially agreed for a co-ordinated approach to new regulation, but that differences had developed in different jurisdictions.

"We are seeing a rise in more aggressive extra-territorial regulation, which is adding cost and complexity to the industry and breeding protectionism in different jurisdictions," he said.

"The litmus test for new regulation should be whether it brings real benefits to end investors. Too often, this seems not to be applied."

Survey respondents were responsible for around 90%, or £3.7trn (€4.6trn) of the £4.2trn in assets managed by IMA member firms.

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