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European Union FlagThe European Commission (EC) has written to asset managers, warning that UK Ucits funds will cease to carry the Ucits label from 30 March, becoming non-EU alternative investment funds, which can no longer be widely sold to EU retail investors.

The EC has stated that firms need to start thinking about the “legal repercussions that need to be considered” in the event the UK leaves the EU without a withdrawal agreement.

UK Ucits firms will be locked out of the market in the event of a “no deal” Brexit, though EU subsidiaries will still be able to operate in the single market.

The commission is also taking a hard line when it comes to delegation agreements. In the absence of co-operation agreements between EU regulators and the UK, fund managers in the country will not be able to outsource functions like portfolio management to other countries in the European Union.

Related: Brexit will lose banks their passporting rights

London banks have been similarly warned about Brexit consequences. According to Sabine Lautenschlaeger, a member of the executive board of the European Central Bank (ECB), time is running out for institutions that wish to make a move before Brexit comes into force.

Under a hard Brexit, the UK would exit the European Union completely in March 2019, without any free-trade access to the zone. Banks operating in London would lose their automatic right to operate in the EU, including non-UK banks using London as their European gateways.

Banks that plan to relocate, or create a new European HQ, should have already submitted their applications, said Lautenschlaeger. She added that eight banks have already applied and four others have indicated they plan to “substantially increase their activities”.

by Alex Hamilton
Alex is Senior Reporter at IBS Intelligence, follow him on Twitter or contact him at: alexanderh@ibsintelligence.com
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