As outlined in our previous article, the government has introduced a more streamlined entry gateway to the UK market for European Economic Area (EEA) funds authorised under the UCITS (Undertakings Collective Investment in Transferable Securities) Directive. In this Article, we will explain the practical considerations that fund operators (management companies of a UCITS or self-managed investment companies) need to have in mind when applying for funds to be approved under this Overseas Fund Regime (“OFR”).
As previously mentioned, the OFR does not currently include money-market funds and these will remain within the Temporary Marketing Permission Regime (“TMPR”) until further notice.
Applications will be processed through the FCA’s Connect system, meaning that, if they have not already done so, relevant firms will need to register a user on the Connect system ahead of making an application. Firms will also be required to pay an initial application fee upon submission of the application for each fund (expected to be £2,500 for standalone schemes and £5,000 for umbrella schemes).
Preparing for the application
Fund operators may prepare ahead of the application under the OFR, by:
- Reviewing the firm’s records on the FCA Register;
- Making sure that the FCA has the correct contact details;
- Checking that the list of funds that the FCA has recorded in the TMPR matches the fund operators’ own records.
If any contact details are incorrect, firms will need to notify the FCA by emailing recognisedcis@fca.org.uk.
Application ‘landing slots’
For funds that are new to the UK market, the applications may be submitted as soon as the gateway opens in September 2024, and any time afterwards. Remembering of course that these funds cannot be marketed to UK retail clients until approval has been obtained.
Funds currently in the TMPR will be able to apply following a series of three-month ‘landing slots’ that, in the case of umbrella funds, are distributed in alphabetical order based on the operator’s name, starting from October 2024 onwards. Operators of stand-alone EEA UCITS will have to be quick off the mark as theirs is the first landing slot, between 1 October 2024 – 31 December 2024, irrespective of their name. After that, operators of umbrella UCITS will be able to apply according to the pre-determined landing slots, in an alphabetical order of the fund operator’s name, e.g.:
- ‘A’: 1 November 2024 – 31 January 2025
- ‘B’: 1 January 2025 – 31 March 2025
- ‘C’: 1 March 2025 – 31 May 2025
- Etc
If the fund operator fails to submit its application within the allocated three-month window, the fund will be withdrawn from the TMPR, it will no longer be recognised and it will no longer be able to be marketed to UK retail investors until such time as any submitted application is approved by the FCA.
Completing the application
In the application stage, there will be three application forms from which to choose:
- Recognising a stand-alone collective investment scheme under s271A FSMA;
- Recognising an umbrella collective investment scheme under s271A FSMA; or
- Adding a new sub-fund(s) to an umbrella collective investment scheme that is already recognised under s271A FSMA.
The FCA is planning to publish ‘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. It will also issue a binding ‘direction’ to each fund operator in the TMPR, 8 weeks prior to the fund operator’s landing slot opening, and telling the fund operator how to apply.
It is therefore imperative that firms ensure that their details, including contact details, held by the FCA are correct and that any errors are identified and rectified as soon as possible.
Other considerations
Fund operators should consider the impact, including potential tax implications, on UK investors before removing any funds from the TMPR.
The FCA may contact the applicant for further information, and if the fund meets the criteria for recognition, it will confirm this to the applicant by email within two months of receiving a complete application.
The fund will be marketable in the UK as soon as the fund operator has received confirmation of recognition from the FCA. Details of recognised funds will also be published on the FCA Register.
How can Complyport help?
At Complyport we have extensive experience with the reviewing and development of FCA submissions. We are able to offer the following:
- Development and preparation of OFR submissions for operators;
- Review of OFR submissions for applications prepared in-house by operators;
- Advice on best practice and general support for operators preparing applications for submission; and
- Post-OFR implementation support to ensure compliance with the upcoming rules, reviewing policies and procedures.
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