The Overseas Funds Regime is here!

A new regime for offshore funds is here and the Financial Conduct Authority (FCA) sets out the final rules in the Policy Statement PS24/7 – Implementing the Overseas Funds Regime (July 2024). From October any fund operator of European Economic Area (EEA) UCITS will need to apply to the FCA and register their funds under the OFR to be able to market to UK retail investors.

Many of the funds offered to investors in the UK are from outside the country around so it’s an important development. Over 70,000 offshore share classes are currently registered with the HMRC as having reporting fund status and the vast majority of UCITS are currently accessing the UK market through the Temporary Marketing Permissions Regime (TMPR). These UCITS will need to apply for landing slots to exit the TMPR and enter the OFR. Missing out on this process has repercussions for Fund Operators and Distributors.

????????????????????? If landing slots are missed by Manufacturers, their funds will cease to be recognised schemes and cannot be promoted to retail investors until they successfully apply under the OFR.

????????????????????? If a fund exits the TMPR without seeking OFR recognition, its UK ISA (Individual Savings Account) eligibility may be lost leading to disinvestment from investors (FCA).

Permissions for overseas funds and share classes are likely to change significantly in the coming months as Operators apply to be recognised under the OFR. Distributors – firms which offer, recommend or sells investments or provides investment services to clients - are also required to track changes in FCA registration data. It is up to the Distributor to ensure funds comply with financial promotion restrictions and are still marketable to UK retail investors.

The transition to the OFR creates another operational burden for Distributors. They already face challenges in dealing with the problems that poor fund data quality creates for their operational teams, so this is just another aspect they must solve for.?

At 360 Fund Insight we have created a solution to help Distributors manage the transition of funds from the Temporary Marketing Permissions Regime to the Overseas Funds Regime and ensure are they are tracking any changes in fund registrations. Our solution alleviates any operational burden that will be required to ensure retail investors are protected under the new regime. ??

Katy Gavelas Enrique Pardo, CFA Phil Lindsay Manuel Hernandez Fernandez Pedro Marazuela