If the country is, as seems increasingly likely, heading for a ‘hard Brexit’ – a more accurate description than the competing ‘clean Brexit’ terminology – you could have been forgiven for looking on the bright side at one point last week.
The 548 pages of the Financial Conduct Authority’s consultation paper on Mifid II, published on September 29, merely represented the third of its four papers on the subject.
This missive was by far the most important for advisers and wealth managers, but the scope (and paperwork) of the directive as a whole indicates the extent to which the EU regulation influences domestic financial services.
Whatever the content might prove to be, avoiding the legwork involved in the future Mifid IIIs, IVs and Vs must have looked enticing last Thursday.
And sentiments of this kind, prevalent well before the referendum campaigns got underway, can still be heard across the industry now. How much easier it might be when we’re finally able to throw off the yoke of European regulation for good.
There are two misconceptions with this line of thinking. The first is that financial firms would still have to display regulatory “equivalence” with the EU in order to trade there, even if they left the single market.
In practice, that would probably mean at least as much work as is now involved, and effectively conforming to the same rules.
The second error is to assume the FCA would automatically take an easier line than its European equivalents.
Certainly, there are some areas where this may have proved to be the case: you get the feeling it would have taken a more common-sense approach to the ‘complex product’ scenario (see page 6) than first prevailed in Mifid II.
But last week’s paper also underlined how the watchdog is often happy to crack down harder.
Not just on reforming how fund managers pay for broker research – the FCA was blazing a trail here long before Mifid’s reforms came into view – but also on recording calls with clients.
Advisers were already facing more stringent requirements here, and the regulator is now proposing to extend these to discretionary managers and a wide range of other areas of financial services.
Martin Wheatley may have left last summer, but these are not the actions of a soft-touch watchdog. When it comes to regulation, at least, Brexit is looking like a case of being careful what you wish for.
Dan Jones is editor of Investment Adviser