EU funds selling in Britain face new rules from April

By Huw Jones

LONDON (Reuters) – Britain will roll out its new regime for approving the sale of European Union-based investment funds in the UK from next April, with no decision yet on whether extra requirements would be added, the Financial Conduct Authority said on Thursday.

The overseas funds regime is a post-Brexit legal framework for authorising investment funds based outside Britain to access UK investors, and the FCA is providing the finance ministry with technical advice on how to determine equivalence, or UK market access for European Union-listed funds.

“We are working to open the overseas fund regime from April next year,” Mhairi Jackson, asset management policy lead at the FCA, told a conference held by Luxembourg funds industry body Alfi.

Many of the funds sold in Britain are listed in Luxembourg and Dublin with portfolio managers based in London, and easy market access is seen as key by many in the industry if Britain is to retain its “openness” as a major global financial centre.

A temporary regime, introduced after Britain left the EU, is currently applied to funds, which will need to be authorised for sale in the UK by the FCA under the new rules, Jackson said.

“We are really investing heavily in our systems at the moment to make sure that that process is as streamlined as possible,” she said.

There have been reports that the FCA would slap additional information requirements on overseas funds, such as a UK value assessment.

Jackson said it would be up to the finance ministry to determine any additional requirements, and that a decision has not yet been made.

There will be an FCA consultation soon on what information overseas funds will need to provide, she added.

Britain is keen to encourage pension funds to boost investment in assets such as infrastructure to lift growth and help meet the country’s net-zero economy targets, and has launched a new long-term assets fund (LTAF) product.

Many funds in Britain tout their daily redemption as an attraction, but LTAFs have a far longer 90-day notice period.

“It’s going to take quite a long time for that cultural shift to happen in the UK where funds are actually investing in long term, illiquid assets,” Jackson said.

The FCA is also looking very carefully at the valuations of assets in the funds, she said.

(Reporting by Huw Jones; Editing by Susan Fenton)