LONDON, July 13 (Reuters) - Regulators should not authorise investment firms seeking to set up in one jurisdiction in order to avoid stricter controls in their home state, the European Union’s markets watchdog said on Thursday.
EU supervisory authorities are concerned about a “race to the bottom” as financial services firms move operations after Britain leaves the bloc.
National securities regulators should “mitigate the risk of letter-box entities and ensure that any relocation is effective”, the European Securities and Markets Authority (ESMA) said in an ‘opinion’, or formal guidance.
If regulators believe that firms are not genuinely operating in their home jurisdiciton, “this may provide grounds for not granting or withdrawing authorisation”, ESMA said.
In a separate opinion on trading platforms, ESMA said decision-making for the trading firms’ operation should not be outsourced outside the European Union. (Reporting by Carolyn Cohn, editing by Maiya Keidan)