UK-based asset managers that expected to deal with a post-Brexit environment via a “letterbox” presence in the EU should revisit their plans due to recent EU guidance, reported Reuters.

EU regulators will scrutinize situations where non-EU-based asset managers oversee assets based in the EU.

Any new subsidiaries must no delegate tasks to another country to the extent that exceeds by a “substantial” margin the tasks will be carried out locally, according to the European Securities and Markets Authority. However, ESMA has not provided a definitive interpretation of what “substantial” means in this case.

“It means that each situation has to be assessed on a case-by-case basis, based on the issued outlined in the opinion,” a spokesman for the Paris-based EU agency told Reuters.

Meanwhile across the Channel, UK regulators view ESMA’s recent opinion as a direct threat to the delegation model, which has been in place for years.

“This is a model that works effectively,” Andrew Bailey, chief executive of the Financial Conduct Authority told reporters earlier this month. “There is no need for it to change. I would put the question back to my ESMA colleagues, ‘Why do you think Brexit requires these changes?’.”

The ESMA guidance may not be legally binding, but French market regulator AMF does not want the delegation model to continue without asset managers having a significant local presence.

“We are vigilant that entities based in France or Europe wishing to delegate will have sufficient means to control all investments delegated. In that respect, we welcome the opinion released by ESMA,” the AMF told Reuters.

Jean-Louis Laurens, an “ambassador” for the French asset management sector, estimated that 5,000 to 10,000 asset management jobs would eventually move from London to the EU. “In France, we want to attract the money managers and analysts,” he added.

In the short term, ESMA’s guidance does not eliminate the delegation model, but it does raise the minimum investment that London-based asset managers will need to invest in their new subsidiaries on the continent, according to Peter Astleford, an attorney at Dechert.

It also could encourage them to hire less experienced staff as well as few products to EU investors, he added.