Brexit: AIC recommends ‘layered’ approach to funds regulation

Under such an approach, the UK would create a tailored UK regime for funds not actively marketed to European investors.  European rules would only be imposed if, and to the extent, that funds are marketed within the EU.

Ian Sayers, Chief Executive of the Association of Investment Companies (AIC) said:

“It makes sense to maximise the opportunity provided by Brexit to create a tailored UK regime for funds which are not actively marketed to EU investors.  Currently around 95% of investment company investors are from the UK.  A ‘layered’ approach would provide an opportunity to simplify the current unhelpful patchwork of EU regulation.  It would maintain strong regulatory standards for investors but also reduce unnecessary compliance burdens. It would maximise the UK’s ability to reduce costs, enhance competition and support investment in the UK economy.  Where funds actively seek EU investors, EU rules would be overlaid.

“We are cautious about seeking a full passport for EU-wide access ‘at all costs’.  The rules allowing investment companies to market into individual EU countries work well and can be used to target additional demand effectively.  It is likely that the additional compliance costs that come with a full passport would outweigh the benefits of any extra marginal demand.  Even UCITS, which have had a full EU passport for many years, have limited cross-border distribution in practice.”

Layered approach to funds regulation

The layered approach to funds regulation would involve setting different rules for:

Funds marketed in the UK and globally but not in the EU

These funds would only have to apply UK rules.  European investors would still be able to purchase investment company shares, as at present, when this is on their own initiative.

Funds accessing the EU on a country-by-country basis (‘national private placement’)

These funds would apply both the UK rules and some additional obligations currently required by the AIFM Directive. Currently these involve making certain regulatory disclosures and adhering to the ‘private equity’ provisions.  The EU country concerned could also set additional requirements.

Accessing the EU on a passport basis

Funds opting for a full passport would have access to all EU countries, but would also be subject to all EU funds regulation on top of the UK rules.  Investment companies currently do not have access to a full EU passport, unlike UCITS funds.  Whilst the UK may seek a full passport for other funds, the AIC recommends that this is not pursued if it means ending access on a country-by-country basis as under the current regime.


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  1. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed ended investment companies, incorporating investment trusts and other closed ended investment companies and VCTs.  The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help Members add value for shareholders over the longer term. The AIC has 345 members and the industry has total assets of approximately £150.7 billion.
  2. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance.  The value of investment company shares, and the income from them, can fall as well as rise.  You may not get back the full amount invested and, in some cases, nothing at all.