Late last year, the FCA published its long-awaited FCA consultation paper on the overseas funds regime (OFR), which is intended to provide a framework for non-UK funds marketing to UK retail investors, say Sebastian Barling, financial regulation partner, and Rahul Manvatkar, investment funds partner at Linklaters.

There is clearly a need for change: currently there are only ~65 overseas funds taking advantage of the overseas funds regime under s.272 of FSMA 2000. This compares to around 9,000 overseas funds taking advantage of the temporary marketing permissions regime (TMPR), which will terminate at the end of 2025.

The absence of a streamlined OFR has been cited as reasons for funds not registering in the UK, and it is well reported that various new European ETFs have faced significant delays in being able to offer these products into the UK.

The newly proposed OFR is intended to be a faster and more streamlined recognition regime than the current one, which has generally been regarded by the market as burdensome and time intensive.

The consultation paper details the proposed framework which includes the application process, disclosure and notification requirements as well as the creation of a register of OFR recognised funds. As part of the application process, overseas funds would need to submit quite extensive information which includes details of the scheme, the fund’s profile, fees and charges, and marketing and distribution arrangements, as well as maintain facilities in the UK.

Arguably, these requirements are similar to the in-depth FCA assessment required under the current regime under s.272 of FSMA 2000, which is designed to ensure that the fund affords adequate protection to UK investors. Funds currently in the TMPR will certainly notice some differences if the FCA’s proposed rules come into force - particularly when contrasted with the former pre-Brexit UCITS passport regime those funds previously used.


Notably, the proposed regime is subject to HM Treasury agreeing that the regulatory environment in an overseas jurisdiction is equivalent to the UK rules and reaching an equivalence decision under s.271A of FSMA.

An equivalence assessment on the EEA UCITS funds is ongoing by the UK Treasury. As any other matter for the government, the timing for such decisions will be dependent on the political climate and aspects such as the possible general election – although we would not expect this assessment to be subject to too much political risk.

Until then, we are left with the current s.272 route for new funds, and the TMPR for those schemes which were eligible. The TMPR was extended until the end of 2025, which was intended to allow enough time for the equivalence assessments to be carried out. The FCA will then allocate “landing slots” to TMPR fund operators so that they can exit the TMPR by either applying for recognition under the OFR or cease marketing in the UK.

Disclosure and SDR

Another key aspect of the FCA’s proposals is that they are looking at how to best address point-of-sale disclosure to UK retail clients for schemes under the OFR; in particular, they are looking at moving away from the current KIID requirement to an approach informed by the UK’s consumer duty.

The likely outcome here will be a very UK-specific approach to point-of-sale disclosure which would represent an additional (and not necessarily immaterial) compliance costs for overseas schemes that have to comply with this. It is clear that this UK-specific approach will not be aligned with the PRIIPS KID regime which EEA UCITS need to comply with.

The interaction of the proposed OFR with the FCA’s Sustainability Disclosure Requirements (SDR) regime is another interesting aspect of the proposed changes, which needs further clarification. The FCA aims to work with HM Treasury to work out how to apply the SDR to overseas funds recognised under the OFR, even though schemes that are domiciled overseas are not in scope currently. How and to what extend the SDR will apply is still to be determined.

Thinking ahead

The consultation period closes on February 12, 2024. It is clear that the FCA and Treasury want to introduce a simpler solution to ensure, among other things, the continued access of “safe” EU funds to the UK in the future. The FCA’s proposals are a cautious starting point, and the OFR as envisioned may well make entry of overseas funds less burdensome and expensive than it currently is – but not to the same extent as under the previous passporting regime.

In order for the UK to really strengthen its position as one of the leading global markets of choice for overseas funds, further streamlining, simplification of the process and certainty in terms of timing would be desirable.

By Sebastian Barling, financial regulation partner, and Rahul Manvatkar, investment funds partner, at global law firm Linklaters.