NEWS & VIEWS
In a paper released last week (July 17), the UK Financial Conduct Authority (FCA) announced the final rules for its new Overseas Funds Regime (OFR).
The regime aims to create a more streamlined process for funds in the European Economic Area (EEA) to be sold to UK retail investors. It will be available to most funds established in EEA and EU member states that have been authorised under the UCITS Directive and replace the Temporary Marketing Permissions Regime (TMPR). Find out how our managed SaaS Bureau solutions can assist with complex fund reporting needs.
The TMPR allowed EEA-based investment funds to continue to be marketed in the UK following Brexit without seeking UK fund recognition from the FCA.
The regulator confirmed that it would extend the existing TMPR so that funds recognized under the TMPR could continue to be marketed to UK retail customers until the end of 2026. However, it said that these funds will need to apply swiftly for recognition under the OFR to continue marketing in the UK.
It warned that exiting the TMPR without seeking OFR recognition “might have adverse consequences for UK investors.” As an example, the FCA said that a fund’s UK ISA eligibility could be lost.
When does the OFR apply?
Stand-alone and umbrella funds new to the UK market can apply to the regime as soon as the gateway opens in September. For funds already in the TMPR, the FCA has said there will be a series of “landing slots” to “smooth” the transition process.
The FCA explained that each fund operator will be allocated a three-month landing slot, likely from October, in which it will be invited to apply for OFR recognition. The process will be staggered, with a new landing slot opening each month.
Funds which miss their allocated landing slots will be removed from the TMPR and cannot be promoted to retail investors until it has made a successful application under the OFR.
The FCA made it clear that money-market funds do not fall in the scope of the new regime. The FCA said that it is designed a more permanent access route for overseas MMFs. In the meantime, MMFs recognized under the TMPR can continue to be promoted. EFTs, meanwhile, will be included in the remit of OFR.
To apply for OFR recognition, fund operators will need to provide the FCA with data related to the fund in question. This includes basic information about the fund such as its name, regulatory status and legal structure. It will also need to include details about its investment objective, policy and strategy, its fees and charges, any parties connected to the fund, and the firm’s marketing and distribution strategy.
What about the new sustainability requirements?
The FCA acknowledged that there will need to be further consultation on whether the UK Sustainability Disclosure Requirements and labelling regime should be extended to include funds recognized under the OFR.
The UK government intends to run a consultation from the third quarter of 2024. The FCA said that if, following consultation, the government does choose to extend the regime to OFR funds, then it will need to make rules reflecting that decision. It noted that this process would run separately.