UK Law and Practice Contributed by: Sam Kay, Philippa List, Mark Stapleton and Nicolas Kokkinos, Dechert LLP
On 30 September 2024, the FCA opened its new gateway for applications to be made under the Overseas Funds Regime (OFR), which operates on the principle of equivalence: if the UK gov - ernment deems a jurisdiction equivalent, firms in that jurisdiction may apply to the FCA for the relevant fund to be recognised. The application is less onerous than the process under Section 272 but the FCA still requires significant informa - tion to be submitted as part of the application for recognition. EU UCITS have been recognised by the FCA as equivalent to UK UCITS, and EU UCITS operating under the TMPR are currently being invited to apply for recognition under the OFR. 3.3.7 Marketing of Retail Funds Authorisation of a UK fund by the FCA as a UCITS or NURS entitles it to be marketed to UK retail investors. 3.3.8 Marketing Authorisation/Notification Process Investment funds must be authorised or recog - nised by the FCA in order to be promoted to retail investors in the UK (see 3.3.4 Regulatory Approval Process ). 3.3.9 Post-Marketing Ongoing Requirements Before a fund is made available to retail inves - tors, a KID will need to be drawn up (in English) in the UK in accordance with the UK PRIIPs Reg - ulation (see 3.1.4 Disclosure Requirements ). The UK PRIIPs Regulation requires the KID to be updated regularly, and to be updated when the review indicates that changes need to be made. Currently, however, there is an exemp - tion for UCITS funds, which can continue to use a UCITS KIID until the end of 2026, by which time the FCA is likely to have completed a full overhaul of the KID disclosure regime.
The FCA introduced a consumer duty in 2023, designed to provide a higher level of consum - er protection in retail financial markets, which includes ongoing requirements in respect of the firm-consumer relationship. 3.3.10 Investor Protection Rules In the UK, there are both legal and regulatory requirements for retail funds to produce peri - odic reports every six months. Managers must prepare and publish annual and semi-annual reports, and make them available upon request and free of charge. The FCA has the power to require a manager and/or depositary to compensate an authorised fund in the event of a finding against the man - ager and/or depositary. It also has the power to fine those entities and to fine or ban individuals in those companies. In addition, authorised fund management is cov - ered by the Financial Ombudsman Service and the Financial Services Compensation Scheme, which each deal with investor complaints and can require managers to compensate investors in certain circumstances. 3.3.11 Approach of the Regulator See 2.3.11 Approach of the Regulator . 3.4 Operational Requirements The FCA Handbook sets out stringent require - ments as to the operation of authorised retail funds, including that a depositary must be appointed. The fund must also establish and apply remuneration practices and policies, and publish its remuneration policy. There are also restrictions on authorised retail funds in relation to borrowing and the types of investments such funds can make. NURS have
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