UK Financial Conduct Authority Publishes Guidance on Approach to Recognition of Funds under the Overseas Funds Regime

The U.K. Financial Conduct Authority has published guidance to assist firms in making an application for an overseas investment fund to be recognised under the Overseas Funds Regime. The OFR will allow certain investment funds established outside the U.K. to be promoted in the U.K., including to retail clients. At the outset, the OFR will be available to most funds established in EEA and EU member states that have been authorised under the Undertakings for Collective Investment in Transferable Securities Directive (other than EEA UCITS that have been authorised as money market funds).

The FCA provides details of the application process and sets out the standards required of funds to be eligible for the regime, including that they are managed in the best interests of investors, hold appropriate investments that align with a clear investment objective and policy and demonstrate good governance. The FCA sets out certain features that funds may exhibit that are unlikely to be compatible with its standards. These include: (i) funds with unsuitable names; (ii) funds that have economic exposure to cannabis-related investments; (iii) funds that have exposure to crypto-currency; (iv) funds that have exposure to contingent convertible bonds; and (v) liquid funds that charge permanent redemption/exit charges.

The FCA has also published a document to provide information on the enhanced disclosures regarding consumer redress schemes and the potential lack of access to the Financial Services Compensation Scheme and Financial Ombudsman Service. Overseas funds in the OFR must provide a prospectus including disclosures relating to whether consumer redress schemes are available in the U.K. and overseas. The FCA has also published guidance in relation to the questions on an umbrella / standalone scheme application.

Return to main website.