On 30 January 2024, the Economic Secretary of the Treasury issued a statement to Members of Parliament on the long-awaited first equivalence assessment under the Overseas Funds Regime (“OFR“). Following a “detailed assessment,” the European Economic Area (“EEA“) states were considered equivalent under OFR.
The OFR, introduced under the Financial Services Act 2021, governs the provision of non-UK funds to UK retail investors post-Brexit. This decision applies to UCITS domiciled within the EEA, including European Union member states, and provides welcome clarity for fund managers.
At this time, funds do not need to comply with any additional UK requirements as part of the equivalence determination. The statement said the decision would be monitored taking into account regulatory developments in the UK and the EEA.
In particular, the temporary marketing agreement, which was scheduled to expire at the end of 2025, will be extended until the end of 2026 to enable a smooth transition to OFR.
Due to ongoing regulatory developments in this area, this decision does not apply to money market funds. The statement also makes reference to sustainable disclosure requirements and says the UK government will consult on whether to extend the scope to include funds recognized under OFR.
The FCA's consultation on the OFR Framework is expected to close on 12 February 2024. Walker will issue an update once the final policy statement and final handbook rules are published.
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