The FCA has today set out plans to make it easier for overseas funds to access UK investors in preparation for the new Overseas Funds Regime (OFR).

It has asked interested parties to comment on the proposals by 12 February.

The regulator said the OFR will allow investment funds outside of the UK to be recognised by the FCA when the existing permission regime ends at the end of 2025.

The proposals detail the categories of information that overseas schemes will need to submit to become recognised by the FCA under the OFR. It includes key information about the scheme’s investment objective and policy, and the main categories of assets that it invests in.

The FCA said it has sought to design a regime that is efficient and effective. 

The FCA has estimated that advisers and distributors would face one-off familiarisation and legal costs of £2.6m if the proposals are adopted. They would also face ongoing disclosure costs of informing investors about lack of FSCS/FOS coverage of between £56,000 and £74,000.

The FCA has also put forward new measures to ensure investors are aware of the protections they have, such as access to the Financial Ombudsman Service and the Financial Services Compensation Scheme, if they invest in an overseas fund.  

Overseas funds will need to make it clear when these customer protections are not available to help consumers make informed decisions about which funds best meet their needs. 

Sarah Pritchard, executive director of markets at the FCA, said: “We want to balance making the transition into the new regime as smooth as possible for firms, while also meeting our primary objective to protect UK retail investors. With our proposed rules and guidance, we set out what we think a strong but proportionate model looks like.”

You can read the FCA’s consultation paper Implementing the Overseas Funds Regime here.

The new rules mainly relate to exchange-traded funds (ETFs), the open-ended schemes whose shares are admitted to trading on the London Stock Exchange main market and other regulated markets, and which are widely bought and sold by market participants to gain access to an index or basket of securities.

The UK market for ETFs is largely comprised of overseas funds authorised under the UCITS Directive. After Brexit, the Temporary Marketing Permissions Regime (TMPR) has allowed EEA UCITS with ‘UK recognised’ status to market their units to investors in the UK but that comes to a close at the end of 2025.

The Government has created the OFR to allow designated categories of recognised overseas schemes to continue be marketed to the UK public in the UK after 2025.

The FCA said there were 8,366 overseas schemes that are part of the TMPR that are established and authorised in the Republic of Ireland or Luxembourg and have ‘UK recognised’ status which allows them to be sold in the UK.

It said: “We assume that the majority of the 8,366 EEA UCITS that are currently registered in the TMPR would wish to participate in the OFR.”