SEC, FCA Sign Brexit Cooperation Arrangements

Regulators agree to continue cooperation uninterrupted after the UK leaves the EU.

US and UK regulators have signed two updated memoranda of understanding (MOUs) aimed at ensuring their ability to cooperate and consult with each after the UK leaves the European Union (EU).

SEC Chairman Jay Clayton met with FCA Chief Executive Officer Andrew Bailey in London for the MOU signing, and discussed the risks posed by jurisdictional share trading obligations, which they said could increase market fragmentation and impose unnecessary costs on investors.

“The SEC and the FCA have a long history of effective cooperation on supervisory and other matters,” Clayton said in a release. “The amended MOUs we entered into today reaffirm this commitment and collaboration with respect to the oversight of our respective registrants for the benefit of each of our markets and investors.”

The first MOU, which was first signed in 2006, is a comprehensive supervisory arrangement that covers regulated entities operating across national borders. The MOU was updated to include firms that conduct derivatives, credit rating, and derivatives trade repository businesses to incorporate post-financial crisis reforms related to derivatives. It was also updated to reflect the FCA’s assumption of responsibility from the European Securities and Markets Authority for overseeing credit rating agencies and trade repositories if the UK withdraws from the EU.

The second MOU, which is required under the UK Alternative Investment Fund Managers Regulations, was originally signed in 2013 and provides a framework for supervisory cooperation and exchange of information relating to the supervision of covered entities in the alternative investment fund industry.

The updated MOU is intended to ensure that investment advisers, fund managers, and other covered entities in the alternative investment fund industry regulated by the SEC and the FCA will be able to continue to operate on a cross-border basis without interruption, regardless of the outcome of the UK’s withdrawal from the EU.

The MOUs will come into force when EU legislation ceases to have direct effect in the UK. Earlier in April, the EU agreed to extend the date for the UK’s withdrawal from the EU until Oct. 31 to help the country avoid leaving without a deal.

According to the Organization for Economic Co-operation and Development (OECD), if the UK leaves the EU without a deal, the country will be plunged into a recession, and growth would fall to below 1%. The UK hasn’t registered growth of less than 1% since the financial crisis. 

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