An overview to Overseas Funds Regime (OFR)

What has happened?

In July 2024, the FCA set out in its Policy Statement PS 24/7 the final rules and guidance necessary to implement the Overseas Funds Regime (the OFR) and responded to feedback to CP23/26.

What are the key points of this Policy Statement?

In 2021, the UK Government legislated to create the Overseas Funds Regime, which allows overseas funds deemed to be equivalent by the Government to gain streamlined access to UK retail investors. The Government announced in January 2024 that EEA UCITS (except for money market funds) had been assessed as equivalent.

The gateway for eligible funds to apply for recognition under the OFR is scheduled to open in September this year for new schemes and starting from October for funds currently in the temporary marketing permissions regime (TMPR) – see the FCA’s Roadmap to implementing Overseas Funds Regime.

The new rules are intended to promote effective competition in the interests of consumers by offering UK retail investors a broad choice of investment funds. They will primarily be of interest to:

• EEA UCITS and the management companies of such funds that currently market to UK investors or that plan to do so
• Distributors of EEA UCITS marketed to UK investors
• Investment advisers
• Firms providing facilities to UK investors in EEA UCITS
• Firms approving financial promotions on behalf of EEA UCITS

The Handbook rules and guidance to support the implementation of the OFR will come into force on 31 July 2024.

The OFR gateway is expected to open later this year for EEA UCITS (except for money market funds). Operators with funds currently in the TMPR are advised to check the FCA website for details of when they can apply for landing slots for OFR recognition of those funds. In scope fund managers will need to give consideration to developing a plan covering when and how they will provide the following necessary registration information; including: 

• Basic information, including the fund’s name, regulatory status and legal structure; this information will be made available on the FCA’s Register
• Details of the fund investment objective, policy and strategy to enable the FCA to assess the suitability of the investment strategy and ensure that the fund’s investment objective, policy and strategy are aligned
• Fees and charges, to assist the FCA in assessing whether consumers are likely to achieve fair value
• Parties connected to the fund, e.g. delegated representatives and entities with an ongoing influence or who were involved in designing the fund
• The marketing and distribution strategy to enable the FCA to understand the intended target market and which UK authorised firm will approve the fund’s financial promotions (unless an exemption applies)
• Arrangements for paying the application fee for each fund seeking OFR recognition, and an ongoing periodic fee for each OFR fund recognised by the FCA. The fees would be in line with the fees charged for UK authorised funds
• Dealing with notifications to the FCA where details of the fund are changed

How can we help you?

Thistle Initiatives has supported fund firms for over 10 years as a trusted compliance and regulatory adviser. In addition to assisting these firms as-and-when, our team of specialists can serve as your right hand in meeting and complying with FCA regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your Overseas Funds Regime arrangements, or more general compliance questions? If so, we can help in any of the following ways;

Assistance in applying for recognition under the OFR and the information that the FCA will require, and on disclosing any subsequent changes to the fund’s features

• The implications of recognition for firms’ Consumer Duty arrangements and the assessment of fair value in particular
• Requirements for disclosures to UK retail investors
• The extent of the FCA’s powers in relation to OFR firms