International Funds Legal Update | 9 September 2024
Published on 9th Sep 2024
FCA updates on UCITS authorisation, UK funds gateway opens EU's guidelines on ESG and new ECB reporting rules
The FCA publishes authorisation update for investment managers
The Financial Conduct Authority (FCA) has published information about how to apply for authorisation as a UK UCITS (undertakings for collective investment in transferable securities) management company. This includes information about:
- The application process.
- The relevant prudential requirements.
- The forms required as part of the application.
- When it is necessary to apply for fund authorisation.
- The application fee.
Applications also need to include information on the firm's liquidity management policy, how it will comply with the consumer duty and, if relevant, information on specific environmental, social and governance (ESG) competencies.
The regulator has also updated its information relating to use of sustainability labels.
UK funds gateway opening and TMPR 'landing slots'
The overseas funds regime (OFR) gateway will be open for new schemes from 30 September. These are for funds that are not in the temporary permissions regime (TMPR).
The OFR will provide streamlined access for certain types of investment funds domiciled outside the UK to be marketed to retail investors in the UK, provided they meet specific regulatory standards and obtain the necessary recognition from the regulator.
"Landing slots" for schemes in the TMPR will start this October. They will initially be available for operators of standalone European Economic Area (EEA) UCITS. Subsequent landing slots will be issued by the regulator to operators of umbrella UCITS by alphabetical order of the fund operator's name. This will stagger the sequence of landing slots to help operational efficiency.
New ESG guidelines in force from November
The official translations of the EU's guidelines on funds' names using ESG or sustainability-related terms have been published, meaning they will apply from 21 November 2024.
Despite being guidelines, they include substantial provisions that go beyond ensuring that fund names are not inherently fair, clear and misleading. For example, they include substantial provisions that regulate fund portfolio constituents.
The guidelines have been drafted by the European Securities and Markets Authority (ESMA) and are intended to ensure that investors are protected against unsubstantiated or exaggerated sustainability claims in fund names. They also provide asset managers with clear and measurable criteria to assess their ability to use ESG or sustainability-related terms in fund names.
The financial regulators from each EEA member state must now notify ESMA to what extent they will comply with these requirements.
The guidelines will apply immediately for any new funds created on or after the application date. However, there is a transitional period for funds that existed before the application date and that lasts until 21 May 2025.
New reporting rules for EEA funds
A new European Central Bank (ECB) regulation passed in June requires any EEA collective investment undertakings (including alternative investment funds and retail funds known as UCITS) to provide data reporting. This must be submitted to national central banks and then onwards to the ECB.
The requirements relate to statistical information on funds' assets, liabilities, income received, dividends paid, and fees paid by the investors. This includes security-by-security information to the extent specified by the regulation's annexes, as well as information on the residency and institutional sector of the holders of registered shares and units.
The Alternative Investment Management Association has summarised the new requirements, which can be accessed here. The reporting requirements come into effect 1 December 2025.
