AIMA are fielding more member queries about MiFID II (unbundling, call taping, best execution etc.) than anything else, says Deputy CEO Jiri Krol, but there are other important items on the European regulatory agenda. To “strengthen the powers of ESMA to promote the effectiveness of consistent supervision across the EU and beyond” is now priority action #1 of the EU’s CMU mid-term review. ESMA opinions are now focusing on differences between countries’ authorisation and delegation arrangements. These must meet minimum standards, but many regulations, including MiFID II, allow for different application. Some regulators complain about perceived lighter standards applied by others. The UK has historically “gold plated” MiFID whereas other countries stuck to its minimums.
Any shift from a “lowest common denominator” to a “highest common denominator” philosophy for harmonising European regulation could threaten the delegation model that provides the foundation for Europe’s globally competitive asset management industry. “Delegation is vital for the EU asset management industry to survive as a single market that can benefit from specialisation. It encourages member states to group service providers within a single jurisdiction. This lets asset managers inside and outside the EU outsource activities such as the depositary function. The model has worked well and has not caused any issues in terms of financial stability or investor protection,” reflects Krol. “Though some additional conditions are imposed on third countries, delegation criteria are broadly similar for countries inside, and outside, the EU. So a Brazilian fund manager can act as adviser for a UCITS.” AIMA is reiterating the importance of delegation in discussions with ESMA and European Commission officials.