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One step closer to the Overseas Funds Regime

  • United Kingdom
  • Financial services and markets regulation
  • Investment funds and asset management
  • Financial services

03-03-2022

The Overseas Funds Regime (OFR) effectively came into force on 23 February 2022 as a result of HM Treasury commencement regulations issued on 21 February 2022.  This permits HM Treasury to issue regulations which recognise funds authorised in designated countries as capable of being marketed in the UK.  Those countries can include both EU and non-EU countries and, potentially, the OFR can be used to open the UK market to the best regulated overseas funds from anywhere in the world.

The full requirements and procedures of the OFR still need to be finalised before the regime becomes operational.

The following provisions of the Financial Services Act 2021 are now in force:

  • section 24 and Schedule 9 (Collective investment schemes authorised in approved countries)
    • these provisions will enable HM Treasury to issue regulations permitting foreign funds to be marketed in the UK, subject to those foreign funds being authorised in approved countries which are well regulated and offer adequate consumer protections
  • section 25 (Individually recognised overseas collective investment schemes), except for section 25(4)(a)
    • this provision amends the individually recognised CIS rules so that they work with the new rules for approving countries 
  • section 26 (Money market funds authorised in approved countries)
    • this provision will enable HM Treasury to issue regulations permitting foreign money market funds to be marketed in the UK, subject to those foreign funds being authorised in approved countries which are well regulated and offer adequate consumer protection

The following provision of the Financial Services Act 2021 comes into force on 1 January 2023:

  • section 25(4)(a) of the Financial Services Act 2021
    • this provisions refines the individually recognised CIS rules to provide better notice to the FCA of changes to the operator, trustee or depositary of the CIS

The OFR aims to deliver on the government’s commitment to introduce a more streamlined regime for overseas investment funds to market to UK retail investors.  The OFR will permit foreign funds, including EU UCITS and Money Market Funds, deemed equivalent to UK schemes, to be recognised by the Financial Conduct Authority (the FCA) for marketing in the UK.  The OFR can also be used to permit the recognition of funds authorised in non-EU countries which are well regulated, which may include the USA, Switzerland, Singapore, Australia or New Zealand.

We note that the UK government has been working to liberalise its financial services trade with a number of countries, including those referred to above.

For further information on the OFR, please see our previous briefing Open for business: Proposal for a streamlined UK regime for overseas funds post Brexit.

EEA access tracker

With a collective GDP of around US$14 trillion, the European Union (EU) represents the world’s second largest market and a key target for the global asset management industry. However, with 27 separate member states separately implementing and interpreting a number of overlapping Union-wide Directives, the barriers to entry for non-EU financial services firms can be daunting.

To help financial services firms based outside of the European Economic Area (EEA) navigate the myriad of regimes, we have created this high level guide on the key issues across the EU and EEA member states.

Download the tracker >

How Eversheds Sutherland can help

To navigate the significant changes to the process, provisions, and mechanics of cross-border funds marketing by overseas funds to UK investors, Eversheds Sutherland can leverage its market-leading strength and depth of experience in retail funds to guide any queries you may have. Since June 2016, our lawyers, consultants and International Funds Net (FundsNet) team have advised various institutions passporting into the UK from EU27 Member States and passporting from the UK into the EU27 on Brexit planning and Brexit related issues.

For more information or guidance on the provisions, please get in touch with your usual Eversheds Sutherland contact or contact the below: