The UK Overseas Funds Regime - HMT and FCA publish a Roadmap

What´s new?

On 1 May 2024, the FCA and HM Treasury (HMT) jointly published a Roadmap on the implementation of the UK’s Overseas Funds Regime (OFR). At the same time, HMT published an alert, while the FCA updated its OFR webpage.

The aim of the OFR is to allow streamlined access for overseas schemes, such as EEA UCITS, to market to UK retail investors.

It 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 - this came to an end when the UK left the EU.

Publication of the Roadmap follows the UK Government's announcement in January 2024 that it had found the EEA states, including the EU member states, equivalent under the OFR in relation to UCITS funds (see our article here).

What's in the Roadmap?

The key takeaways include:

Timing

A detailed time line can be found at page 5 of the Roadmap.

The main dates to note are:

• September 2024 - the OFR will open for non-Temporary Marketing Permissions Regime (TMPR) firms, without a landing slot

• October 2024 - the OFR opens to TMPR stand-alone schemes

• November 2024 - the OFR opens for TMPR umbrella schemes

• Q3 2024 - HMG to consult on extending the UK Sustainability Disclosure Requirements (SDR) to overseas firms

• December 2026 - the TMPR will cease, although the UK Government may choose to extend it. (This means that it should be possible to market funds recognised under the TMPR to UK retail customers until at least the end of 2026).

Application process

All operators of EEA UCITS (i.e., the UCITS ManCo or a self-managed investment company, as applicable) must

• complete an application form and

• pay the FCA a one-off application fee.

Applications must be made online using the FCA Connect system.

The FCA has confirmed that it will publish links to 'How to' guides on how to complete these forms, and details of additional documentation (e.g. fund prospectus) to submit as part of the application on its website in due course.

The FCA has two months in which to decide whether to recognise (or refuse to recognise) the scheme. On recognition, the fund operator will be able to access the market immediately under the OFR.

When can applications to transition funds from the TMPR to the OFR be made?

Stand-alone and umbrella funds new to the UK market

• These can apply at any stage after the gateway opens in September 2024.

Funds in the TMPR

• New landing slots will open each month in an overlapping sequence.

  The FCA will issue a binding 'direction' to each fund operator in the TMPR, giving it a three month 'landing slot' and telling it how to apply.

  The landing slots will be allocated by alphabetical order of fund operator name - the fund operator will have to apply for recognition for all its (non-MMF) TMPR funds before the landing slot closes.

  An application can be made at any point during the landing slot, but no later.

The FCA webpage contains an important section, headed "Check OFR landing slot dates", which sets out the relevant three month tranches.

• The landing slot for TMPR standalone schemes runs from 1 October 2024 to 31 December 2024.

• For fund operators whose name begins with 'A', the landing slot will open on 1 November 2024 and close on 31 January 2025. This period covers the Christmas and New Year holidays and, for many firms, it may coincide with their FYE.

  Pay particular note to the warning above about missing the deadline.

  • The landing slot for fund operators

  • whose name begins with 'B' runs from 1 January 2025 to 31 March 2025

  • whose name begins with 'C' runs from 1 March 2025 to 31 May 2025

  and so on, down to

  • fund operators whose name begins with W, W, Y or Z or a digit, who must apply between 1 July 2026 and 30 September 2026.

What if we miss our landing slot?

• Funds which miss their allocated landing slots will be removed from the TMPR.

  If this happens, the fund would cease to be a recognised scheme and, as a result, could not be promoted to retail investors until it has successfully applied under the OFR and becomes recognised. In the interim, the operator and UK distributors would have to take steps to ensure they comply with the financial promotion restrictions.

Obligations for recognised schemes

• Operational rules for the OFR

  Fund operators will be subject to certain operational rules under the OFR.

  The FCA will publish a policy statement setting out the feedback received to its December 2023 consultation paper CP23/26 (see our client briefing here) along with final rules and guidance.

  These are likely to come into effect in July 2024, i.e.,in good time for when the OFR opens to receive applications for recognition

• Disclosure rules

  Fund operators in the OFR marketing a recognised scheme must comply with certain rules, including new disclosure rules.  The Government intends to close the consultation on the application of SDR and labelling for OFR funds in H2 2024, and to lay the relevant legislation in Parliament by the end of the year.

• Financial Promotions

  The FCA webpage flags one important difference from the rights which operators of recognised schemes using the UCITS passport could enjoy while the UK was a member of the EU.

  An overseas person that is not authorised by the FCA can only lawfully issue a financial promotion in the UK by

• making use of an exemption in the Financial Promotions Order or

  • arranging for a UK authorised person to approve the promotion for issue in the UK.

  Approving financial promotions is now a regulated activity for which (unless an exemption applies) a UK firm must hold a specific permission from the FCA.

  Where a fund operator wants to promote OFR funds, it must make arrangements with a suitably authorised UK approver, and this approver must be identified in the application for OFR recognition.

We would strongly urge firms to review any marketing material issued as part of UK marketing efforts to ensure that these will not fall foul of the new rules.

• Money Market Funds

  MMFs are not in scope of the UK Government's equivalence regime for the OFR and a more permanent access route for overseas MMFs is in the process of being developed. MMFs in the TMPR can continue to market while it is in place. Although due to end in December 2026, the UK Government may extend it further in order to avoid any potential 'cliff edge' risks for these products.

• The UK National Private Placement Regime under AIFMD NPPR and s.272 FSMA 2000

  These existing UK frameworks remain in place for overseas funds that are not available for recognition under the OFR.

What can you be doing to ensure you are ready?

The FCA will contact firms to invite them to transition funds from the TMPR to the OFR.

You should prepare by:

• reviewing your firm's record on the FCA's register - the FCA register shows the details the FCA holds about you 

• making sure the FCA has the correct contact details, as they may email the firm at the address on the register for the fund operator

• reviewing the fund population the FCA holds for you as fund operator, to check that the list of funds they have recorded in the TMPR matches your own records

If your contact details are wrong you should email: recognisedcis@fca.org.uk.

As always, please do contact us if you would like to discuss this with us in more detail (OFRTaskForce@simmons-simmons.com).

Related articles

February 2022: HM Treasury published regulations to bring the UK's Overseas Funds Regime (OFR) into force. See our article here.

December 2023: FCA consulted on its rules for the OFR under CP23/6 - see our summary article here and our client briefing note here

January 2024: UK Government announced its decision that all EEA states, including the EU member states, equivalent under the OFR in relation to UCITS funds - see our   article here.