FCA publishes framework for the implementation of the overseas funds regime

The OFR will be open for new scheme applications on 2 September, and the first landing slot for firms in the Temporary Marketing Permissions Regime (TMPR) will open from 1 October.

The FCA’s framework (66 pages / 932 KB) enables non-UK domiciled funds to be marketed to UK retail investors, subject to a successful application to the FCA, aiming to foster a more diverse investment landscape.

The OFR relies on decisions of equivalence made by the government following an assessment of whether the jurisdiction offers “adequate co-operation” between the FCA and other national competent authorities. The regime also depends on whether equivalent investor protection outcomes can be provided by these authorities, comparable to UK-authorised schemes.

The FCA recognises that it is not the primary supervisor of overseas funds, and so expects to have limited interaction with these funds and their operators.

Following feedback, the FCA removed the proposed 30 day period between notifying the FCA of changes to the overseas fund and when those changes can take effect. The new rules also provided further clarification and explanation as to the categories of changes that should be notified to the FCA.

The FCA has provided guidance relating to additional information for disclosures in fund prospectus’ and point of sale information and an indicative list of changes and events that the FCA would expect to be notified of. The FCA has also clarified which of the requirements applying to UK authorised fund prospectus will also apply to OFR funds.

FCA expects fund names to be appropriate, clear, fair and not misleading and consistent with the fund’s investment objective and policy. Although applications will not be rejected if there is a UK authorised fund with the same name, the FCA will expect that the fund operator explains how the distribution chains will clarify that this is an overseas fund to reduce the risk of UK investors mistakenly selecting an OFR fund instead of a UK authorised fund with the same name.

Farah Al-Amad, financial services expert at Pinsent Masons, said: “The FCA recognises that it needs to strike a balance between ensuring that overseas retail investor appropriate products continue to be available in the market whilst not overburdening overseas fund managers with additional reporting and governance requirements.”

Operators applying for recognition of eligible ETFs will be required to use the same application form as other funds, but further guidance will be published on this at a later date.

There will be a fee for OFRs to pay on application and on an ongoing basis. The fees will be the same as for UK authorised funds to ensure a level playing-field without creating additional barriers to entry.