Following the UK’s exit from the European Union (EU) in 2020, European Economic Area (EEA) funds authorised under the UCITS (Undertakings Collective Investment in Transferable Securities) Directive have only been able to market to retail investors in the UK under the Temporary Marketing Permissions Regime (TMPR). In recognition of the importance of these funds to UK markets and investors the UK government subsequently began an assessment of the EEA states, including the EU member states, focusing on UCITS funds but NOT MMF UCITS funds.
The government has subsequently decided to grant equivalence status to these funds, excluding Money-Market Funds (MMF), and, as such, a new and more streamlined entry gateway to the UK market has been established for these funds, the Overseas Funds Regime (OFR).
In May 2024, HM Treasury and the FCA jointly published a roadmap to explain the implementation of the Overseas Funds Regime. The roadmap provides key process stages in implementing the OFR Gateway in the UK.
What is the OFR Gateway
The OFR was legislated in the Financial Services Act 2021 and aims to create a more streamlined process to allow the sale of overseas investment funds to UK retail investors. The Gateway establishes a process of assessment of overseas funds to ensure that standards of regulatory expectation are met, before funds are allowed to market to the UK retail market. If funds do not meet the regulatory standards expected by the FCA then those funds will be rejected and not allowed to market to UK retail investors until regulatory standards are met and the fund is approved.
The Application Process
Fund operators will have to apply to the FCA for their funds to be approved to be recognised under OFR. To do this, fund operators will need to apply through the FCA’s Connect system, meaning that they will need to register a user on the Connect system (if they have not already) ahead of making an application and also pay an application fee.
Funds that are new to the UK market will be able to apply as soon as the gateway opens in September 2024, and any time afterwards.
Funds currently in the TMPR will be provided a series of three-month ‘landing slots’ distributed in alphabetical order based on operator name. The process will be staggered with new landing slots distributed every month with applications having to be submitted within the three-month landing slot. Applications must be complete in order to be considered submitted on time.
If the Application is not submitted within the three-month window, funds will be withdrawn from the TMPR, they will no longer be recognised and they will no longer be able to be marketed to UK retail investors. Operators and distributors of these funds would then need to ensure that they comply with the relevant restrictions on financial promotions.
MMFs are not currently included in scope of the OFR and if they are already recognised under the TMPR, will remain within the TMPR. The TMPR is due to close in December 2026 and MMFs within the regime will be required to go through a separate more permanent access route that is currently undergoing consultation. Where umbrella funds contain a mix of MMF and non-MMFs sub-funds, a landing slot will be provided for submission of information regarding the sub-funds that are not MMFs. The sub-funds that MMFs will remain in the TMPR.
The decision process post application will be completed within two months and if successful, funds will be added to the Recognised Fund Register held by the FCA immediately.
It is also worth noting that reforms to the point-of-sale disclosure requirements for retail-facing financial services is also due to take place as the OFR is implemented, with roll out expected from 1st January 2027 at the latest. This will be included in a new framework for Consumer Composite Investments (the UK replacement for PRIIPS), which will include recognised overseas funds.
Alongside this there is expected to be consultation regarding UK Sustainability Disclosure Requirements and labelling being extending to OFR funds. This is expected in Q3 2024, with any rules expected to be implemented in the second half of 2025.
Key Dates
- July 2024 The final rules are expected to be released in July 2024, which will be based on the draft rules in CP23/26
- September 2024 OFR gateway opens for non TMPR funds
- October 2024 OFR gateway opens for TMPR funds (standalone funds)
- November 2024 OFR gateway opens for TMPR funds (umbrella funds)
- December 2024 Expected Government legislation for SDR and labelling for OFR funds
- September 2026 Final landing slot for non-MMF TMPR schemes
- December 2026 TMPR closes
How can Complyport Help?
At Complyport we have extensive experience with the reviewing and development of FCA submissions. We are therefore 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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