Steven Maijoor of the European Securities and Markets Authority speaks during the “European regulatory outlook” on-stage interview at the Alfi European Asset Management Conference, 6 March 2018 LaLa La Photo

Steven Maijoor of the European Securities and Markets Authority speaks during the “European regulatory outlook” on-stage interview at the Alfi European Asset Management Conference, 6 March 2018 LaLa La Photo

Alarm bells rang last summer when the European Securities and Markets Authority issued two papers related to how UK investment funds would be treated in the EU market post-Brexit.

The industry would like UK funds to be able distribute freely, much as funds from other non-member states do, not least from the US. However, these Esma papers seemed to call these arrangements into question. Disquiet increased further when the European Commission launched a review of the way Esma and other pan-European regulators operate.

Could this presage the end of the “delegation” model that the industry argues has worked well for 30 years, and helps to keep costs low while boosting choice for investors?

Steven Maijoor, Esma’s chair, speaking at the Alfi conference sought to calm nerves. “The intention of  issuing those opinions was to add flesh to existing regulations as they are applied now,” he said. Specifically he said that it will give national regulators a common understanding of how rules are applied in areas such as assessing the “substance” of companies to which tasks are delegated cross border. “You need sufficient decision making and management oversight for regulation to be affective,” he said, adding that the aim was to avoid shell companies.

He insisted that there was no intention in these texts to seek to duplicate regulatory functions at the European level. “We are not questioning where the regulatory function should take place: that’s at the national level,” he said, before adding “these authorities should understand, and take into account, the concerns of colleagues from the other member states.” He pointed to regular discussions between the regulators, with formal meetings held every six weeks.

Nevertheless, this could change following the EU’s on-going review of the way European regulators work. Maijoor said opinions should emerge from the European Parliament and the Council of Ministers from September this year.

Previously, a panel of industry representatives from across Europe voiced other concerns; many of these comments would have made for uncomfortable listening for Maijoor. While accepting the need for regulation, there are concerns that decision-makers are losing sight of why they are acting.

“The guiding principle should be to make it easier for Europe’s citizens to save and for businesses to fund themselves,” commented Chris Cummings, CEO of The Investment Association from the UK. “However too often we end up not being able to see the wood for the trees,” he added.

Particular bug-bears of the industry are aspects of the Priips and Mifid II regulations. After their implementation on 1 January 2018 some major problems became apparent. In some extreme occasions industry players are required to supply advisory information to clients despite knowing the figures are false. The industry is gathering data and will present a dossier to regulators and legislators. Maijoor expressed his keenness to work with the industry to iron out these issues.