Legal Updates

The FCA updated its website on 4 December 2023 to open a consultation on proposed changes to its rules to allow overseas funds to be recognised under the Overseas Fund Regime (OFR). The OFR is based on a determination by the UK Government on jurisdictional equivalence. The UK Government is currently reviewing the equivalence of EEA UCITS. The FCA consultation discusses how the FCA would recognise funds for offer in the UK following an equivalence determination by the UK Government under the OFR.

The consultation allows stakeholders the opportunity to comment on the FCA proposals and provides advance notice for firms to plan for any changes.

Pending an equivalence decision from the UK Government, operators of Schemes in the TMPR will be given landing slots in which to apply under the OFR. Further information about landing slots will be published on the FCA website.

The key proposals include:

• Collection of data on the funds recognised under the OFR (Appendix I);
• New obligations for 30 days prior notice to the FCA for specified proposed changes to the scheme (Appendix II);
• Details of information to be provided to the FCA on an ongoing basis;
• Requirements for pre-sale disclosure in the Fund Prospectus, financial promotions and KIIDs in relation to the lack of, or limitations, on the UK Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS) coverage for UK investors, including alternative provisions afforded under the home Member State of the fund;
• The requirement that financial promotions relating to funds recognised under the OFR be communicated or approved by a UK authorised firm unless an exemption applies;
• A proposal for investor facilities to be provided electronically from a non-UK address;
• The process for public censure of an OFR recognised scheme.
• Application and periodic fees applicable to funds in the OFR.

The data to be provided to the FCA as part of the OFR application, and on an ongoing basis, is detailed in Appendix II and include legal identifiers information on fees and charges, identification of key parties linked to the fund, including those with an ongoing relationship or with influence on its management or who have played a crucial role in its establishment (e.g. Directors, service providers, persons approving financial promotions in the UK, sponsors).

The FCA has invited feedback to the Consultation Paper by Monday 12 February 2024. It is anticipated that a final policy statement and final rules will be published in the first half of 2024.

The FCA reiterates its request that operators of UCITS in the TMPR to review contact information and details of funds operated by them and advise any changes that need to be made.

Appendix 1

Information	Action required
Contact information	Check current contact information is up-to-date and amend if it is not
Fund population	Check on FCA Register and email recognisedcis@fca.org.uk if any changes are needed.

Information Category	Specific requirements
Information identifying the scheme	• Name, including sub-fund names • PRN • LEI, including sub-fund LEIs • Domicile • Structure and fund type • Name and address of scheme operator
Information on the scheme’s profile	• Investment objective, policy & strategy • Value of AUM in £ sterling • Fund category and main categories of asset class • Information on use of derivatives • Use of benchmarks, and whether actively/passively managed • Availability of liquidity management tools (including whether there has been any suspension of dealing in the last 5 years) • Dealing frequency • Target investors • Minimum investment amount • Any particular ESG focus
Fees and charges at scheme and share class level	• Initial and exit/redemption charges payable to scheme operator/its associate • Ongoing charges figure • Performance fees • Any other relevant fee or charge • Amount of annual management charge retained by the management company
Characteristics of unit/share classes	• Name/designation • ISIN
Parties connected to the scheme	• Management company • Depositary • Delegated portfolio manager, and any sub-delegates appointed • UK representatives • Authorised person approving financial promotions on behalf of the scheme • Any sponsor or other person influencing the scheme’s design or management

Appendix 2

When is the notification required?	Type of change
Notification n required at least 30 days before the change could take effect in UK	• Change to a scheme’s name • Change to a scheme’s legal structure • Termination of scheme / sub-fund in home jurisdiction, or a request to de-recognise the scheme / sub-fund when remaining in existence but the operator no longer wishes it to be marketed in the UK • Supervisory sanctions imposed by the scheme’s home regulator on the operator / scheme itself. Any voluntary restrictions on their activities agreed by them • Suspension of dealing in scheme’s units / shares • Fundamental change to a scheme’s investment objective, policy or strategy • Matters that would likely cause significant negative effect on UK investors • Scheme’s target UK investors • Material change in scheme minimum investment applicable to UK investors • Unique identifiers (including LEI) • Benchmark • Connected parties
Notification required as soon as is reasonably possible	• Change of scheme operator, trustee / depositary or representative of the UK operator • Change of name or address of scheme operator, trustee / depositary or representative of UK operator • Change of address of place in UK for services of notices • Scheme operator becomes aware that it has contravened or expects to contravene any requirement imposed on it by FSMA