UK, US To Work Together In Event Of No-Deal Brexit

Market regulators in the United States and the U.K. have finished working on two potential agreements in the event of a no-deal Brexit, according to a report in The Financial Times.

The agreements would be for cooperation and oversight of the fund management industry and the markets. The Securities and Exchange Commission and the Financial Conduct Authority (FCA) will work together to watch derivatives reporting, credit rating organizations and also fund managers. The FCA has made similar agreements with other countries around the world.

The agreements were updated versions of ones that were in place already. One is from 2006 and includes reforms made after the financial crisis, and the other is from 2013 and discusses oversight of players in the investment fund industry.

Andrew Bailey, chief executive of the FCA, and Jay Clayton, chair of the SEC, also discussed the potential breakup issues the trading market could face.

“These memoranda of understandings will ensure the U.K. can continue to be a key market for funds and fund managers. Today’s amendments will ensure continuity and stability for consumers and investors in the U.K. and U.S.,” Bailey said.

Earlier in March, the FCA warned that a no-deal Brexit poses risks to the financial sector and the customers these firms serve, The Financial Times reported.

The U.K. regulatory watchdog said that while worst-case contingency plans have been put in place during the last 24 months, there is still a big risk because there has been no legal agreement to remove that risk. The FCA urged banks and financial firms to take steps during the next week to prepare in case the U.K. exits the European Union without a deal.

The FCA is most concerned with how the contracts that underpin financial products will perform and how trading shares will work if there is a no-deal Brexit, noted the news outlet. According to the report, a lot of firms have not sent the necessary paperwork for the new businesses that will no longer have the right to sell products and services across the bloc to continue to trade.

The Financial Times noted that it reported in February that only 10 percent of the large investment firms’ clients filed the proper paperwork.