FCA plans changes to individually recognised overseas schemes regime
The UK Financial Conduct Authority (FCA) has published its latest Quarterly Consultation Paper (No. 37). The document includes proposed changes to the individually recognised overseas schemes regime.
In the future, there will be two gateways for overseas collective investment schemes to obtain ‘recognised’ status enabling them to be marketed in the UK.
One of the gateways is set out in sections 272 to 282C of Financial Services and Markets Act 2000 FSMA (the ‘s.272 regime’).
It is a long-standing regime which involves the Financial Conduct Authority (FCA) making scheme-by-scheme assessments of individual overseas collective investment schemes. If the FCA is satisfied that the tests set out in FSMA have been met, including that adequate protection will be afforded to participants in the scheme (ie, investors), the FCA can declare it a ‘recognised scheme’. Recognition enables the scheme to be marketed to the general public in the UK.
The other gateway – the Overseas Funds Regime (OFR) – is not yet operational. It was introduced via Financial Services Act 2021 (FS Act 2021) as part of the government’s post-Brexit commitment to provide a streamlined regime that would avoid the need for overseas funds to be assessed under the s.272 regime where those schemes are eligible to be ‘recognised’ under the OFR.
Her Majesty’s Treasury amended the s.272 regime in FS Act 2021 to enhance its efficiency, but without changing the fundamental features of the in-depth assessments required for schemes accessing the UK market through this route.
The FS Act 2021 introduced changes to the s.272 regime, including:
- a new power for the FCA to make rules specifying which kinds of proposed alteration to a scheme will count as ‘material’ and therefore should be notified to us in writing by the scheme’s operator in accordance with section 277
- the addition of a power of censure, to enable the FCA to inform investors of any wrongdoing by operators of overseas funds recognised under section 272. Its addition ensures consistency with the FCA power of censure against funds recognised under the OFR, under section 271R
To reflect these changes in the Handbook, the FCA proposes to amend the Collective Investment Schemes sourcebook (COLL), the Decision Procedure and Penalties manual (DEPP), the Enforcement Guide (EG) and the Glossary of definitions.
The regulator would like your feedback on these proposed changes by 10 October 2022. Should the FCA decide to make these changes following consultation, it intends the changes to take effect from 1 January 2023.