On January 30, 2024, the HM Treasury has confirmed that European Economic Area (EEA) states will be considered as “equivalent” under the new Overseas Fund Regime (OFR) for UCITS, excluding money market funds. The OFR is expected to be rolled out in April 2024 to replace the Temporary Marketing Permission Regime (TMPR) within a prolonged transition period until December 2026 to smoothen the transition. The new OFR shall remove post-Brexit barriers for newly launched EU-domiciled funds and ETFs to enter the U.K. market when the products meet the necessary retail disclosure requirements.
Even further, the U.K. government does not intend to require the funds assessed to comply with any additional U.K. requirements as part of the equivalence determination at this time. This means that funds and ETFs registered under the OFR won’t have to comply with the U.K. value assessment requirements.
Nevertheless, secondary legislation is required to implement this equivalence decision and will be monitored on an ongoing basis to take account of possible changes to U.K. and EEA legislation. With regard to this, it is noteworthy that the U.K. government will start a consultation on broadening the scope of the Sustainable Disclosure Regulation (SDR) to include funds and ETFs under the OFR.
The announcement of the equivalence was welcomed by the (continental) European fund industry, especially since there will be no additional rules applied to European UCITS funds, since it ends a period of uncertainty and offers great mutual benefit.
The views expressed are the views of the author and not necessarily those of LSEG.
