The FCA consults on rules for the UK OFR

On 4 December 2023, the FCA published CP23/26, "Implementing the Overseas Funds Regime' (the CP).

We will be publishing a client note on the key issues raised in the CP shortly.

What's the background?

As we reported in February last year, HM Treasury published regulations to bring the UK's Overseas Funds Regime (OFR) into force.

The OFR is intended to allow streamlined access for overseas schemes to market to UK retail investors and replaces both the old recognition scheme under s.272 of FSMA 2000 and the ability of EEA schemes to passport into the UK under applicable EU rules (which came to an end when the UK left the EU).

The new CP sets out the FCA's proposals on how it intends to use the powers to operationalise the OFR, allowing overseas funds to apply to the FCA for recognition in the knowledge of which FCA rules they will need to comply with.

What does the CP cover?

The CP sets out proposals for, among other things:

• data to be collected as part of the OFR application process

• information which the FCA intends to collect on an ongoing basis where recognition is granted

• pre-sale disclosure requirements (including on the position regarding FOS and FSCS coverage for UK investors) and

• how the FCA plans to refuse applications for recognition or suspend or revoke a scheme's recognised status, where necessary.

The CP notes that there are currently over 600 ETFs listed or admitted to trading on a regulated market in the UK, with most of these being EEA UCITS in the TMPR regime.

Since ETFs are marketed and distributed to investors differently from other recognised schemes, and need to meet certain requirements to be admitted to trading, the CP specifically asks for feedback on whether the FCA's proposals for data collection and notification of changes are appropriate for ETFs.

Who will be affected by the CP?

The CP will be of relevance to the following

• ManCos of EEA UCITS that either currently market their funds to UK investors or plan to do so 

• Distributors of EEA UCITS that are marketed to UK investors

• Investment advisers

• Firms that provide facilities to UK investors in EEA UCITS

• Firms that approve financial promotions on behalf of EEA UCITS

• Fund managers and distributors of EEA UCITS schemes that are currently in the Temporary marketing permissions regime (TMPR).

What happens next?

The consultation period closes on Monday 12 February 2024.

Taking feedback into account, the FCA intends to publish a final policy statement and final Handbook rules in the first half of 2024.

Do UCITS ManCos in the TMPR need to do anything at the moment?

Note: as we reported at the time, the FCA has recently updated its webpage for funds in the TMPR. The CP flags that ManCos of UCITS in the TMPR should

• ensure that contact information provided to the FCA is up-to-date (and amend it if it is not) and

• check their fund population on the FCA Register, contacting recognisedcis@fca.org.uk if any changes need to be made.