Fund Distribution Alert 2024-15

On 11 September 2024, the Financial Conduct Authority (FCA) released a series of publications relating to the Overseas Funds Regime (OFR). This includes How-To Guides designed to assist overseas fund operators in submitting their recognition applications under the Overseas Funds Regime (OFR), application form questions and associated data set, an approach to recognition as well as draft disclosure wording. Below is an overview of the principal information provided.

The guides cover the following areas:

-Standalone scheme (not in TMPR)

-Standalone scheme (in TMPR)

-Umbrella scheme (not in TMPR)

-Umbrella scheme (in TMPR)

-Addition of new sub-funds to an umbrella scheme already recognised under the OFR

As confirmed in Policy Statement PS24/7, the required information must be provided at the fund level, sub-fund level (for umbrella funds), and share/unit class level. Only the classes intended to be marketed will need to produce a UCITS KIID. Additionally, all UCITS KIIDs for a standalone fund or a specific sub-fund can be consolidated into a single document before uploading to the FCA website.

The required documents to be included during the recognition process are:

• The latest Prospectus and any relevant addendum/supplements,
• The instrument constituting the fund, as amended,
• The latest annual report and, if more recent, the half-yearly report,
• The Key Investor Information Document / Consumer Composite Information Document,
• The Portfolio Statement for the fund(s).

In addition to the guides, the FCA provided application form questions and associated data set to help with the preparation of submissions, detailing each section of the application forms and specifying in greater detail what the FCA expects for each response.

In a document titled approach to recognition, the FCA outlines its expectations for applicants under the OFR, offering useful information on the application process and decision-making framework. The document includes a section on “What to know before submitting your application”, detailing all the categories of information that will be required and need to be completed. Additionally, the “After submitting your application” section explains the possible outcomes, whether successful or unsuccessful:

-For successful applications, the FCA Register will be updated, and a confirmation email will be sent to confirm the recognition.

-For unsuccessful applications, there are various outcomes: rejections for incomplete applications, where further details are required; withdrawals, if the operator decides to cancel the recognition during the FCA’s review; or refusals, where the application does not meet the FCA’s standards.

Furthermore, the FCA outlines its “Expectations and Approach”, explaining specific cases where a fund may not be recognised. Each case is accompanied by a rationale and the FCA’s expectations, providing clear guidance on how these factors impact recognition.

The FCA also published draft disclosure wording. The document provides a summary of the requirements for OFR recognition applications, specifically focusing on whether consumer redress schemes are available in the UK and abroad. It emphasizes that the FCA has proposed specific wording options for prospectuses to ensure UK investors are clearly informed about the availability (or lack) of mechanisms like the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS).

The FCA outlines two scenarios with suggested wording:

1. Scenario 1: Where the fund, management company, and depositary are all established in the same member state.
2. Scenario 2: Where the management company and fund are established in different member states.

In each scenario, the FCA's proposed wording helps to ensure that UK investors are aware of their rights to seek redress or compensation. The wording also includes clear warnings where these rights are limited or unavailable.

Please feel free to contact us should you require any additional information.

Partner
+352 22 51 51 7892
said.fihri@kpmg.lu

Senior Manager
+352 22 51 51 7417
henrik.olsson@kpmg.lu