How to Sell Funds under the UK Overseas Fund Regime
The UK FCA has now finalised the rules on the UK Overseas Fund Regime based on the feedback received on the December 2023 consultation.
The final rules on the UK Overseas Fund Regime are now out. The UK FCA finalised the guidance and amendments to the existing regulatory framework based on the feedback received on its first consultation paper issued in December 2023.
The UK Overseas Fund Regime will change radically the way EU and EEA recognised funds will access the UK retail fund market. Changes are not limited exclusively to the newly introduced mechanism to approve marketing authorisation applications. Different areas of existing and forthcoming UK regulation will inevitably come into play in the dynamics related to the sale of EU and EEA funds in the UK retail fund market going forward.
Application for Recognition and Ongoing Maintenance
The recognition process of EU and EEA funds under the UK Overseas Fund Regime is inspired by a principle of investor protection, both at the stage of initial application and on an ongoing basis thereafter. By requesting specific information at the time of an initial application, the UK FCA will be able to identify funds with unusual features, whose access to market would not align with the best interest of UK consumers.
With the ongoing notification of changes to the dataset provided in the initial authorisation phase, the UK FCA will be able instead to spot changes that could trigger suspensions or revocations. Changes notified to the UK FCA will be evaluated from the perspective of the risk of harm for UK consumers. Any suspensions or revocations of recognitions, where resolved by UK authorities, will be in the best interest of UK consumers. Considering that the UK FCA is not the home state authority of any EU and EEA funds recognised under the new regime, it is expected that its interaction with promoters of these funds will be limited. At the same time, instances of refusal or revocation of recognition are deemed to be exceptional, given that recognised funds will be by and large authorised under the UCITS directive.
For what concerns the timing of the notification of changes, the final rules relax the stance adopted with the initial consultation paper issued in December 2023. On the understanding that the UK FCA is not the home state authority of the funds to be recognised and does not need to approve the proposed changes, the thirty days advance notice proposed has been removed. In general terms, notifications shall be made to the UK FCA before any changes takes effect in the UK. This is especially the case for termination of recognised funds or their sub-funds.
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