United Kingdom and European Union Reach Consensus on Forming a Co-regulatory Financial Body
The United Kingdom and the European Union have concluded technical discussions on a Memorandum of Understanding (MoU) for financial services regulation. This significant development comes after the UK's departure from the EU, as the EU is considering changes to the pre-Brexit regulatory framework to reflect the UK's third country status.
The MoU, which was concluded on March 26, 2021, will establish the Joint UK-EU Financial Regulatory Forum. This platform will serve as a platform for dialogue and cooperation on financial services issues between the two parties.
The regulatory cooperation within the MoU will focus on discussing how to move forward with equivalence determinations, a decision that ultimately rests with political authorities. The Forum does not commit either the EU or the UK to any equivalence findings.
The MoU codifies the framework for regulatory cooperation proposed by the Joint Declaration, and the institutions involved in the Joint UK-EU Financial Regulatory Forum typically include financial regulatory authorities from both the United Kingdom and the European Union. These are likely to be the UK's Financial Conduct Authority (FCA) and the EU's European Securities and Markets Authority (ESMA), among others.
The UK is considering tailoring its regulatory approach to financial services for its markets, and there are clear indications that the UK and EU regulatory frameworks are likely to diverge over time.
A Financial Regulatory Alert about compliance requirements for UK Investment Managers and Advisers was published by Gump on January 5, 2021.
For further information, please contact Helen Marshall at London 44 20.7661.5378 or Ezra Zahabi at London 44 20.7661.5367. The contribution of Andrea Gonzaga is gratefully acknowledged.
An ambition for the future of UK financial services was set out by the Chancellor on November 9, 2020. The MoU, once signed, will create a framework for voluntary regulatory cooperation between the UK and the EU, providing a foundation for continued collaboration in this crucial sector.
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