Following its policy statement containing final rules and guidance for implementing the Overseas Funds Regime (OFR), the FCA has published a document setting out its approach to recognition of funds under the OFR.
As well as providing key preparation steps for applications, the FCA lists specific information that will be required under each of the following information categories:
- Information identifying the fund;
- Information on the fund’s profile;
- Fees and charges at fund and share class level;
- Characteristics of unit / share classes to be promoted in the UK;
- Name and LEI (or other unique indicator) or parties connected to the scheme; and
- Information about marketing and distribution.
The guidance also sets out the process from submission of an application, and next steps for applications that have been approved or rejected. The FCA notes that an applicant can withdraw its application at any time during the recognition process, and that the FCA has an obligation to refuse an application for recognition if it is desirable in order to protect the interests of investors and potential investors in the UK.
The FCA highlights that some funds may exhibit certain features it considers unlikely to be compatible with its standards, which will be considered as grounds for refusal save for in exceptional circumstances. In particular, the guidance sets out the FCA’s rationale and expectations in relation to the following features:
- Funds with unsuitable names;
- Funds that invest in or have economic exposure to:
- Cannabis-related investments;
- Crypto-currency; or
- Contingent convertible bonds;
- Liquid funds that charge permanent redemption / exit charges;
- Funds that make promotional payments to third parties out of the scheme property;
- Inappropriate charging structures;
- Bearer shares;
- Segregation of liability between sub-funds not insured in umbrella schemes;
- Unitholder’s liability to pay not limited;
- Investment in related second schemes could permit double-charging;
- Inappropriate liquidity management tools;
- Depositary independence not demonstrated;
- Fund application was refused by the FCA or withdrawal was encouraged; and
- Individual / firm prohibited from carrying out regulated activities in the UK.