UCITS deemed ‘equivalent’ for UK’s Overseas Funds Regime

On 30 January 2024, the UK Government published an important statement (the Statement) in respect of EU UCITS and the UK's Overseas Funds Regime (the OFR), confirming that it has found the EEA states, including the EU member states, equivalent under the OFR.

For a summary of the FCA's proposals for rules to operationalise the OFR, see here

The Statement also notes that:

• the Government does not intend to require the funds assessed to comply with any additional UK requirements as part of this equivalence determination at this time;

• to allow for a smooth transition for EU UCITS, the Government is planning to extend the existing TMPR until 2026 (currently due to close at the end of 2025);

• the equivalence assessment does not include UCITS which are also Money Market Funds (MMFs); and

• the UK's sustainable disclosure regime (SDR) is currently in development in the UK - the Government will consult on whether to broaden the scope of SDR to include funds recognised under OFR. Industry will, though, be given adequate time to adapt to any further requirements in this area.

Apart from the possible application of SDR, it would appear that EU UCITS sitting in the UK's Temporary Marketing Permissions Regime (TMPR) will be allowed to transition into the OFR, using the FCA's OFR portal, without triggering any further UK requirements, such as the UK's assessment of value (AOV) requirements.

We regard this as a welcome result for the managers of EU UCITS who market their funds to UK retail clients as the positive equivalence decision will remove a significant concern of disruption to these fund ranges.

The Statement notes that secondary legislation will be required in due course to enact the equivalence decision. It will be necessary to watch the content of this piece of legislation in due course, but there is nothing in the announcement to indicate that the Government will use this exercise to impose further obligations on EU UCITS.

We will be monitoring this and will follow up with further commentary as and when further developments arise.