Add Sub-funds in the UK Temporary Permission Regime
So, you are most likely one of the wise fund managers or promoters to have had your UCITS authorised for marketing in the UK under the European passport regime, just on time before the end of the transition period. You also most likely were able to carry out a notification directly with the UK FCA to have your UCITS recognised under the so-called Temporary Permission Regime. This means that for the next five years you will be able to continue marketing your UCITS in the UK, until you will have allocated a slot for your UCITS to switch to a local marketing authorisation directly with the UK FCA.
But there is more good news to come. The notification to the UK FCA to have your UCITS recognised under the Temporary Permission Regime will allow you to add new sub-funds of the same UCITS in the Temporary Permission Regime if the conditions below are met.
Get in touch here with your contacts at Veneziano & Partners to see how we can help you add sub-funds in the UK Temporary Permission Regime.
The Conditions to Add Sub-funds in the UK Temporary Permission Regime
Further to an amendment to the UK Collective Investment Schemes Regulations (CIS Regulations) made in 2019, a wide-ranging Temporary Permission Regime was introduced for all UCITS already authorised for marketing in the UK under the EU passporting regime by the so-called IP Completion Day, being 11 pm on December 31st 2020. According to the amended version of the CIS Regulations, the recognition under the Temporary Permission Regime can also be extended to newly established sub-funds under UCITS umbrellas, already so authorised for marketing in the UK and recognised under the Temporary Permission Regime.
The conditions imposed by the CIS Regulations in order to add new sub-funds in the UK Temporary Permission Regime are straightforward and apply both at the level of the umbrella UCITS and the sub-funds to be added in the Temporary Permission Regime. As far as the umbrella UCITS is concerned, at least one existing sub-fund under the umbrella shall be already authorised for marketing under the passport regime in the UK and recognised under the Temporary Permission Regime at the IP Completion day. As far as the sub-fund is concerned, the sub-fund shall have been established on or after the IP Completion day.
For any sub-funds under a UCITS umbrella that were already in existence before the IP completion day, but that were not authorised for marketing under the passport regime, it will be still possible to obtain a marketing authorisation outside of the Temporary Permission Regime under article 272 of the Financial Services and Markets Act. Whilst the process is less straightforward and will likely take more time, it is the only avenue possible for as long as the new Overseas Schemes Regime is not in place yet in the UK.
The Notification Process to Add Sub-funds in the UK Temporary Permission Regime
If all the conditions above check, the process to add sub-funds in the Temporary Permission regime entails an electronic notification sent via email directly to the FCA. The notification letter used for the process and currently made available in draft format by the UK FCA is very similar to the notification letter typically used for marketing authorisations under the European passporting regime. Accordingly, the notification letter is divided in three parts.
Part A of the letter shall be filled in with general information about the fund, its management company as well as the confirmation that all the conditions imposed by the CIS Regulations are met. Part B of the letter instead is dedicated to the arrangements adopted in the UK for marketing the sub-fund added in the Temporary Permission Regime. Here, you would most typically include information about existing arrangements adopted already for marketing the other sub-funds under the UCITS umbrella already authorised in the UK. Also, you will be required to indicate the details of the UK Facilities Agent appointed (read more about UK facilities agent here [insert link to previous post]). Part C of the letter contains some general representations and will have to be signed by a representative of the UCITS.
The notification letter will have to be accompanied with the most recent documentation of the fund and emailed to a dedicated email address. Amongst the documents required to be submitted for the notification, it is noteworthy to mention that it will also be required to produce the approval letter or attestation from the National Competent Authority of the Home State of the UCITS confirming the authorisation of the new sub-fund. This is required in order to ensure that the conditions imposed at sub-fund level by the CIS Regulations are met.
Conclusions
Whilst both the directive issued by the UK FCA describing the process to add new sub-funds in the Temporary Permission Regime and the related notification letter are still in draft form, we don’t expect that major changes will be made to the versions as currently proposed. Even though there is no express mention to the timeframe to approve complete applications, we presume that the process will be relatively fast for all managers submitting complete applications and will allow them to have access to UK retail investors for new sub-funds created under their existing UCITS umbrellas.
Get in touch here with your contacts at Veneziano & Partners to see how we can help you add sub-funds in the UK Temporary Permission Regime.