Treasury is consulting on the process for allowing overseas investment funds to be marketed in the UK. It says the current regime (Brexit apart) is not viable in the long-term, and proposes two new regimes, one for retail and one for money market funds.
- on the retail side, there are currently around 8,000 EEA UCITS that passport into the UK, which still have the ability to do so until the end of the year, provided they have made the right notifications, but will thereafter lose the ability to do so. They would then fall back on the existing regime for third party funds, under s272 FSMA, which requires an in-depth assessment of individual funds. Given that most passporting-in funds are benefiting from the TPR, this is an indication that they are likely to want to continue to market, and to make individual assessments of each under the current regime would be a significant operational challenge for the funds and FCA. So Treasury is proposing the Overseas Funds Regime;
- in addition, the OFR will include market access provisions for MMFs – again, most of which are EEA domiciled.
The OFR will operate under an equivalence regime, whereby the UK must grant equivalence to a jurisdiction, which will enable funds from those jurisdictions to benefit from the OFR. Treasury does not propose to repeal s272 FSMA, which will remain available for funds that are not eligible for the OFR because they do not have an equivalence determination.
An equivalence determination will allow eligible retail funds to become “recognised” and able to be marketed in the UK, including to retail investors, and FCA will be able to rely on self-certifications from the funds that they are eligible. FCA will also have greater powers to impose additional requirements on the incoming funds.
In terms of financial promotions, Treasury proposes that the funds will not be considered authorised persons, and therefore an authorised person will need to approve their financial promotions, unless they fall within an exemption. Treasury is also seeking views on whether there may be any need to include these funds within the FOS and FSCS.
Consultation closes on 11 May.