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U.K. Fund Firms Seek Clarity from Regulator on Brexit

British financial services firms are calling on their regulator to offer more transparency on potential changes surrounding European distribution, among other issues, after the U.K. leaves the European Union.

  • Joe McGrath

Financial services firms in the U.K. are not happy with how their market regulator, the Financial Conduct Authority, has communicated with them about the country’s plans to leave the European Union, according to a new survey published by the FCA.

The regulator’s annual Practitioner Panel research survey, which polled 2,080 FCA-regulated businesses across all financial sectors and was published on Wednesday, found that the volume of regulatory change surrounding Brexit has weighed heavily on firms’ resources, and regulated businesses want the FCA to be more transparent about its plans.

Only 14 percent of respondents agreed that the regulator is communicating effectively with firms about the process of preparing to leave the EU. Nearly a third of the respondents disagreed with the statement, while another 53 percent answered that they neither “agree nor disagree” or “don’t know.”

Andrew Bailey, chief executive of the regulator, said in today’s report that “few respondents agreed that the FCA is currently communicating effectively on Brexit. Clearly there is more work to be done in this area.”

Bailey added in a statement accompanying the report that the organization had “committed to be more transparent” so that firms understand the regulator’s role.

[II Deep Dive: Gina Miller: London Investors Need Brexit Wake-up Call ]

A spokeswoman for the Financial Conduct Authority tells Institutional Investor that the regulator has been working hard to improve its interaction with the industry on Brexit-related matters since the survey was conducted in March and April.

One area of particular concern for fund management firms is over rules governing the sale of funds in Europe after the country leaves the EU. The survey found that for investment firms specifically, clarity over passporting — the term for rules that allow U.K. fund managers to offer their products across borders within the EU — remains a top concern.

“One in ten investment management firms would like to see the FCA maintain or improve ‘passporting’ between the UK and the EU,” the report stated.

The findings come amid increasing calls for transparency around Brexit in recent days, with Mike Cherry, chairman of the U.K.’s Federation of Small Business, making a press statement on Tuesday saying that cash from private equity and venture capital funds could dry up, hitting smaller companies’ development, if the rules are not spelled out soon.

“Investor appetite is being dampened by uncertainty. Decision makers need more clarity about the future before they can plan their next moves,” said Cherry in the statement, adding, “Maintaining EU passporting rights for the UK’s private equity and venture capital industries as part of a transitional arrangement is another must.”

Cherry’s comments follow a sustained lobbying effort from Gina Miller, a fund manager and fierce opponent to leaving the EU. In May, she told Institutional Investor that “quite a number of British entities will be harmed by the loss of passporting” and that firms need to be more realistic about the access they will have to European states after Brexit.

Elsewhere in the report, pension company views of the regulator have improved since the last survey was conducted in 2016. This sector’s satisfaction with the regulator rose from 6.9 out of 10 last year to 7.4 this year.

António Simões, chairman of the FCA’s Practitioner Panel — which represents the interests of financial industry practitioners — said that it was encouraging to see that the life and pensions industry had a more favorable opinion of the regulator.

“Last year we identified that there were concerns around the competition objective, and that the life and pensions industry was more generally dissatisfied with the work of the FCA than other sectors,” he said in the report. “To see progress against both these points is a sign that the regulator is heading in the right direction.”