The FCA policy statement published on 17 July, although largely about the procedural aspects of the Overseas Funds Regime (OFR), marks a very important development for EU fund managers, as it should mean that the long promised UK 'streamlined' overseas fund recognition regime is finally within grasp, says Raza Naeem, partner in Linklaters’ financial regulation team.
The OFR will replace the current Temporary Marketing Permissions Regime (TMPR), which has allowed European UCITS funds to access the UK market following Brexit. This is set to expire in December 2025, but the government has the ability to extend it further, if necessary.
In its OFR policy paper published on 17 July, the FCA said that funds currently operating under the TMPR will need to apply for recognition under the OFR to continue marketing in the UK.
Overall the final rules largely mirror the FCA's consultation proposals, with some helpful relaxations.
In particular, overseas fund managers no longer need to give advance notice of changes to the FCA where they can demonstrate this would be impractical (overseas managers would nevertheless need to build in a process to identify 'fundamental' or 'significant' changes that are notifiable to the FCA, based on the COLL guidance that currently applies to UK authorised funds) and the FCA have also made it clear that overseas funds with an identical name to UK funds won't automatically have their application rejected (as was initially suggested).
The OFR gateway is expected to open later this year, and overseas fund managers therefore need to be prepared for the significant operational uplift to transition their funds into the OFR.
It is unclear at this stage how "streamlined" the new OFR recognition process will be in practice – noting, by way of example, the level of scrutiny UK fund managers have been facing with the FCA in the context of SDR label applications and overseas fund managers in the context of the s272 regime.
The final rules also don't say anything more concrete on the extension of the SDR to overseas funds, how and to what extent the SDR will apply is still to be determined
By Raza Naeem, Partner in Linklaters’ financial regulation team
