UK Law and Practice Contributed by: Sam Kay, Philippa List, Mark Stapleton and Nicolas Kokkinos, Dechert LLP
3.1.4 Disclosure Requirements Certain pre-investment disclosures must be made to investors. Under UK regulation, every manager is required to provide comprehensive information to help investors make a balanced and informed decision about any retail fund prior to investing. In most cases, this information is contained within the prospectus. Investors in open-ended funds must have access to an up- to-date prospectus at all times. In addition, for a UCITS, a KID must be prepared and made available to potential investors under the UCITS Directive (the UCITS KID). The UCITS KID requirements differ from those for the docu - ment that has to be produced under the PRIIPs Regulation. For example, the UCITS KID must be provided to all potential investors, not just those in the EEA; it must also be provided to both potential retail and professional investors, whereas the PRIIPs KID is only required to be made available to retail investors. 3.2 Fund Investment 3.2.1 Types of Investors in Retail Funds Open-ended funds, particularly OEICs, are pop - ular with individual investors, insurance compa - nies and pension funds. ACSs are increasingly popular for institutional investments and pension funds. The new open-ended fund vehicle introduced in the UK in 2021 – the LTAF (see 2.1.1 Fund Structures ) – is primarily aimed at defined contri - bution pension schemes, but is also available to retail clients if they are sophisticated investors or certified high net worth individuals. Since 3 July 2023, a unit in an LTAF has been categorised as a Restricted Mass Market Instrument and may be distributed to a wider market, including retail investors.
3.2.2 Legal Structures Used by Fund Managers
The legal structure used for the management entity of retail funds varies and will depend on a number of factors, such as tax considerations. The most common structure used is a corporate vehicle. 3.2.3 Restrictions on Investors Other than general marketing/financial pro - motion rules in the UK, there are generally no restrictions under UK legislation on the type of parties that can invest in a retail fund. However, PAIFs cannot have a corporate investor with an interest of 10% or more (but see 3.1.1 Fund Structures in relation to the use of feeder vehi- cles to address this issue). 3.3 Regulatory Environment 3.3.1 Regulatory Regime The manager of a UCITS or other authorised fund must be authorised by the FCA to carry out this role. 3.3.2 Requirements for Non-Local Service Providers Each open-ended fund must also have a deposi - tary. In the UK, this is a regulated activity for which the depositary must hold the appropriate FCA permissions. The UK’s authorised fund governance regime goes further than is required under the UCITS Directive in that it places a number of additional responsibilities upon depositaries and requires them to be independent (so as to avoid and manage any potential conflicts of interest). Depositaries in the UK are also required to undertake a wide variety of oversight activities, and are subject to extensive conduct of business rules and other regulatory requirements.
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