Funds domiciled in the EEA will not have to comply with additional UK rules, including the Consumer Duty.
Funds from the European Economic Area will not be required to comply with additional UK rules, including the Consumer Duty, under the Overseas Funds Regime, Investment Week understands.
Following a speech confirming the introduction of OFR by economic secretary to the Treasury Bim Afolami yesterday (30 January), the government has determined that the EEA states hold equivalence in relation to financial services regulation.
This means that funds domiciled in the EEA will not have to comply with additional UK rules, including the Consumer Duty, Investment Week understands
Treasury facilitates long-term UK market access for European fund managers
However, EEA-domiciled funds will still need to abide by certain retail disclosure requirements.
Sustainability Disclosure Requirements are currently excluded from the OFR, but the government has set out plans to consult on whether SDR should become applicable to funds recognised under OFR in the future.
UK distributor obligations
However, Investment Week understands that UK-domiciled firms wishing to distribute EEA-domiciled funds will remain subject to all UK rules, including Consumer Duty, for any products they offer.
As such, any UK distributor that wishes to offer an EEA-domiciled fund to UK investors will need to ensure the fund complies with Consumer Duty, while an EEA-domiciled distributor remains outside this jurisdiction.
Some of the requirements UK firms will need to comply with include: ensuring the products and services are suitable to a specific target market; ensuring they provide fair value to consumers; allowing consumers to make effective, timely and informed decision through the firms' communications; and supporting consumers throughout the product's entire life cycle.
The Financial Conduct Authority is currently consulting on OFR, and industry players will be able to send submissions on the matter until 12 February 2024.
