What’s happening?
The UK Government is currently consulting on measures that will allow UK investors to continue to access EU-domiciled funds after the Brexit transition period at the end of 2020. Feedback on the consultation will close on 11 May. The Government will analyse responses to this consultation and will respond in due course; it will then bring forward a Financial Services Bill which will include the OFR.
A document published alongside March’s Budget announcements explained that the UK’s Temporary Permissions Regime allowed for continued access to retail vehicles such as UCITS funds during the transition period to take account of the end of passporting on 31 December 2020. However, the Government is now proposing a streamlined regime for overseas funds, based on an equivalence regime and known as the Overseas Funds Regime (OFR), which will establish “a more appropriate basis for recognising overseas retail funds”.
What do you need to do?
The proposals would see two regimes under the Overseas Funds Regime based on the principle of equivalence, with one specifically for retail funds and the other for money market funds (which are generally used as a cash management tool by financial institutions, corporates, and governments). It will allow HM Treasury, having taken the FCA’s advice, to grant equivalence to a given country, thereby easing its access to marketing in the UK. For retail funds, it would enable the Treasury to apply additional requirements to funds from equivalent countries not previously covered by existing legislation.
Once equivalence is granted, individual funds wishing to market in the UK will need to register with or notify the FCA. Retail funds from a country with an equivalence determination, and which fall within the specified category of funds, will need to register with the FCA to gain recognition.
For new funds requesting recognition, the FCA will ordinarily have two months following receipt of a completed registration form to either confirm a fund’s recognition or provide reasons why the fund is not eligible. The retail fund registration process is intended to be simple and straightforward and the FCA will not be responsible for verifying funds’ compliance with the overseas regulatory framework, reflecting the fact that the equivalence determination will already have confirmed that funds in the specified category offer equivalent investor protection.
How can we help you?
If you’d like further information, to arrange a review of your planned fund permission arrangements, or to discuss any other aspect of the Overseas Funds Regime, our expert team is here to help. Contact us today on 0207 436 0630 or email info@thistleinitiatives.co.uk.