Update on Overseas Fund Regime for professional and retail investors

      The Overseas Fund Regime (OFR) came into force in February 2022, to allow non-UK funds, Irish and Luxembourg domiciled funds included, to continue to market to UK retail and professional investors post Brexit.

      The Financial Conduct Authority (FCA) has announced that the OFR will be active and in place from April 2024, in order to facilitate the transition of investment funds from the Temporary Marketing Permissions Regime (TMPR) to the OFR.

      The recent announcement by the FCA of the opening of the regime has been welcomed by the industry. As the TMPR covers only those funds launched before the Brexit transition period, the April 2024 timeline is seen as overdue by many. For new UCITS launches that could not avail themselves of the TMPR, the Section 272 regime allows access to UK investors. The Section 272 regime is, however, a lengthy and cumbersome process, making it difficult for asset managers to market to UK investors.

      It is expected that all funds that availed themselves of the TMPR regime will be allocated a landing slot to go through the OFR new rule process. It is anticipated that the FCA will provide guidance on the requirements for OFR over the coming weeks. This is a positive step for new fund launches that previously fell outside the TMPR, particularly for more recently authorised UCITS funds and we await clarity on whether or not these can apply immediately to the OFR for recognition. Additionally, we await confirmation as to whether the OFR will apply to EEA domiciled funds which currently avail of the UK National Private Placement Regime (NPPR) and whether these funds will be allowed to de-register from NPPR and register with the OFR. Funds availing themselves of the UK NPPR, including Cayman-domiciled funds, allows for access to the UK market for institutional and professional investors.

      The conditions of the OFR application process are likely to focus on the circumstances in which managers must report material changes to the FCA, and disclosures to investors, such as redress mechanisms. Given the importance placed by the UK on its assessment of value regime, it is likely that the OFR will require funds to carry out an annual Assessment of Value.

      If you have any questions, or require guidance in relation to the Overseas Fund Regime and the UK Assessment of Value, please reach out to your usual Waystone representative, or contact us below.

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