Post-Brexit barriers for foreign funds seeking permission to enter the UK retail market
Applications to the UK’s Financial Conduct Authority (FCA) seeking for permission to promote a foreign domiciled fund to institutional investors are relatively straight forward, involving the payment of a small fee per fund and the submission of an application form. Once this application has been submitted, promotion to the target investors can begin.
However, seeking and obtaining permission to promote a foreign domiciled fund to retail investors are a wholly different kettle of fish. Authorisation is increasingly difficult to achieve in a post-Brexit world as assets managers can no longer rely on the UCITS directive. Information required is far more detailed and the associated regulatory fees (and supporting legal fees) are higher.
Recent articles published by Ignites Europe raises alarm with the FCA struggling to manage regulatory applications and processing times with new authorisation applications clocking an average of 276 days per application, while asset managers face pressures to meet “significantly greater demands”.
The application process deterring asset managers’ from entering the UK market
Before the application is submitted it is necessary to approach the FCA with details of the fund that will be seeking permission. Following the FCA’s acknowledgment that they will consider an application is when the fun really starts.
Legal opinion is required regarding the regulatory regime governing the fund in its Home country, compared to a similarly structured fund domiciled in the UK. In addition to this the FCA will require information regarding the structure, operation, management, investment policy and past performance of the fund as well as copies of all fund related documents.
Success for a US boutique asset manager
Recently, FE fundinfo’s Global Fund Registration (GFR) team successfully supported a US boutique asset manager in obtaining permission for an Irish domiciled UCITS fund for sale in the UK.
GFR guided the fund through the application process from the initial outlay of information required by the FCA, assisting with its collection and collation and, in conjunction with the legal opinion, submitting the application to the FCA. The GFR team, then managed and resolved questions and requests raised by the FCA, resulting in the successful approval of the application within 9 months.
This granting of permission to allow promotion to retail investors, is one of only a very few granted by the FCA to foreign funds since Brexit.
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