Article

Brexit: Impact on the cross-border marketing of investment funds in preparation for the end of the Brexit transition period

The United Kingdom (“UK”) left the European Union (“EU”) on 31 January 2020 and entered into a transition period, which will apply until 31 December 2020, during which the EU marketing passport regime is still applicable. There will be no changes to the current procedures during this time. After the Brexit transition period, the marketing passport regime will no longer be applicable to the marketing of funds domiciled in the European Economic Area (“EEA”) in the UK or the marketing of funds domiciled in the UK in the EEA. Instead, the Temporary Permissions Regime (TPR) for inbound passporting EEA investment funds will take effect at the end of the transition period.

Consequently, EEA funds seeking to be marketed in the UK after the Brexit transition period will have to obtain permanent market access in the UK. EEA UCITS will need to obtain recognition under the new Overseas Funds Regime to be marketed to retail investors in the UK or notify the Financial Conduct Authority (“FCA”) under the National Private Placement Regime (NPPR) to be marketed to professional investors.

The marketing of UK funds in EEA countries after the Brexit transition period will depend on the rules and measures put in place by each country.

Marketing of EEA funds in UK after the Brexit transition period: TPR and the Overseas Funds Regime (OFR) (Focus on OFR for retail funds)

At present, foreign funds seeking to be marketed to retail investors in the UK must obtain recognition under section 264 or section 272 of the Financial Services and Markets Act 2000 (FSMA). Section 264 of the FSMA implemented the UCITS marketing passport regime thereby allowing EEA UCITS to be recognised for marketing to UK retail investors. Section 264 will be repealed at the end of the Brexit transition period. EEA UCITS that are currently recognised under section 264 will be able to benefit from the TPR while they seek permanent market access in the UK.

The TPR was put in place by the UK Government to avoid disruption to financial services at the end of the transition period. The TPR is a grandfathering period, which will allow EEA funds that benefit from the EU marketing passport regime to continue being marketed in the UK while they seek permanent market access under an applicable UK regime. In order to continue to market EEA funds in the UK temporarily, a specific notification must be submitted to the FCA before 30 December 2020.

Fund managers should submit their notification with a full list of the (sub-)funds they wish to continue marketing in the UK after the end of the transition period. If an EEA UCITS is divided into sub-funds, the fund manager must notify the FCA of each of the sub-funds that it wishes to enter into the TPR. Only these sub-funds will keep their marketing rights. If you expect that you will market additional (sub-)funds before the TPR notification window closes, you should wait until you have an exhaustive list before submitting it to the FCA, as each manager can only submit one TPR notification. Fund managers who wish to update their previously submitted TPR notification should contact the FCA by 9 December 2020 at the latest, confirming their intention to update their TPR notification. For more information on how to submit your TPR notification, please contact us.


Key information on the TPR:

Eligible funds

EEA-domiciled UCITS that have used the marketing passport to be marketed to all investor types in the UK; and EEA AIFs, entitled to be marketed to professional investors under Article 32 in the UK using the marketing passport granted to their EEA AIFMs.

Notification requirement

Funds which do not submit a TPR notification during the notification window will not be able to continue marketing their fund under the marketing passport at the end of the Transition period. Fund managers should wait until they have an exhaustive list before submitting their TPR notification to the FCA as each manager can only submit one TPR notification.

Duration

The TPR is expected to last for a maximum of 3 years, although there is a legislative proposal to extend the TPR to 5 years.

Landing slots

During the TPR, funds will receive a “landing slot” to apply for recognition under the OFR or section 272 of FSMA to market to retail investors or notify the FCA to use the National Private Placement Regime (NPPR) to market to professional investors only. The application must be done during this period.

Addition of (sub-)funds

The addition of new funds and sub-funds to the TPR is not permitted, with the exception of newly authorised sub-funds of a UCITS.

Changes to targeted investors

Changes or extensions to the category of investors to which the fund is marketed while in the TPR are not permitted.


The following overview and the document available for download focus solely on the OFR, the new equivalence regime for foreign investment retail funds introduced by the Financial Services Bill in the UK. For more information on the TPR, recognition for retail funds under section 272 of the FSMA and marketing under the NPPR, please contact us.

The Financial Services Bill is currently going through the usual processes of legislative scrutiny in both Houses of the UK Parliament (the House of Commons and the House of Lords). The Financial Services Bill will not have received Royal Assent (the point at which the Bill will become law) by the end of the Brexit transition period and the OFR will not be immediately available as a market entry route for foreign retail funds seeking permanent market access in the UK from 1 January 2021.

Before the entry into force of the Bill, both foreign retail and money market funds targeting retail investors seeking to be marketed in the UK after 1 January 2021, and that are not sub-funds of an EEA UCITS umbrella in the TPR, will have to obtain recognition under section 272 of the Financial Services and Markets Act 2000 (without the proposed amendments to this section contained in the Bill).

Brexit OFR retail

Marketing of EEA funds in Gibraltar after the Brexit transition period

The Gibraltar Financial Services Commission (GFSC) confirmed that if no further negotiated outcomes result from the political negotiations between the UK and the EU, the Gibraltar temporary permissions regime (Gibraltar TPR), which is a separate one from the UK regime, will allow EEA funds currently marketed in Gibraltar under a marketing passport to continue being marketed in Gibraltar. Foreign funds within the Gibraltar TPR will be invited to apply for permanent market access in Gibraltar by the GFSC at a later stage.

We understand that EEA funds, which are currently marketed in Gibraltar under a passport, should notify the GFSC before the end of the Brexit transition period in order to benefit from the Gibraltar TPR. The notification is carried out by completing a short Excel form (available here) and submitting it to the GFSC by e-mail to brexit@gfsc.gi.

EEA funds seeking to be marketed in Gibraltar after the Brexit transition period will be able to apply in accordance with the rules currently applicable to non-EEA countries.

Marketing of UK funds in EEA countries after the Brexit transition period

 

Countries

Possibility for UK domiciled UCITS/AIFs and AIFs managed by a UK AIFM currently marketed under the EU passport regime to continue being marketed in this host country after the Brexit transition period?

Key points for the marketing of a UK UCITS to retail investors

Austria

Yes - for UK UCITS and AIFs, it is possible if a notification for NPPR under the AIFMD is duly completed.

In order to continue being marketed to the general public, a notification under Article 43 of the AIFMD is needed. A notification for marketing to retail under Article 43 AIFMD is conditional upon a marketing notificiation to professional investors under the NPPR. The FMA has four months after receiving a complete notification to communicate to the AIFM if marketing of the fund in Austria to retail investors is permitted.

Belgium

Belgium

Yes - for UK UCITS and AIFs, it is possible if a notification for NPPR under the AIFMD is duly completed.

In order to continue being marketed to the general public, a notification under Article 43 of the AIFMD is needed.

Czech Republic

Yes - for UK UCITS and AIFs, it is possible if a notification for NPPR under the AIFMD.

Waiting for regulator's confirmation

Finland

Finland

Yes - for UK UCITS and AIFs and for UK AIFMs, it is possible if a notification for NPPR under the AIFMD.

Marketing of an non-EU AIF to retail investors will be prohibited after the transition period.

Germany

Yes - for UK UCITS and AIFs, it is possible if a notification for NPPR under the AIFMD is duly completed. BaFin confirmed that a notification for NPPR can already be initiated before the end of the transition period to avoid any discontinuity in the marketing of UK funds.

In practice, it is impossible to notify a non-EU AIF for marketing to retail investors in Germany.

Greece

Yes - for UK UCITS and AIFs, it is possible if a notification for NPPR under the AIFMD is duly completed.

Marketing to retail investors will be prohibited after the transition period.

Ireland

Yes - for UK UCITS and AIFs, it is possible if a notification for NPPR under the AIFMD is duly completed.

In order to continue being marketed to the general public, a notification under Article 43 of the AIFMD is needed.

Italy

No - Professional investors or High Net Worth Individuals may, however, remain invested in UK funds that were marketed in Italy before the end of the transition period.

Marketing to retail investors will be prohibited after the transition period.



Luxembourg

Yes - for UK UCITS and AIFs, it is possible if a de-notification for the marketing under the passporting regime and re-registration process under NPPR under the AIFMD is duly completed.

Yes - it is possible if a de-notification for the marketing under the passporting regime and re-registration process under art Article 100(1) of the Law of 2010 for funds other than of the closed ended type managed by a UK manager (UK or non-UK funds) or under Article 46 of the Law of 2013 for UK funds managed by a EU-27 manager. Only regulated funds can be marketed under these articles.

Norway

Yes - for UK UCITS and AIFs, it is possible if the relevant simplified procedure is completed and submitted to the Finanstilsynet (local competent authority) by 6 December 2020.

In order to continue being marketed to retail investors, the relevant simplified procedure must be submitted to the Finanstilsynet (local competent authority) by 6 December 2020.



Portugal

Yes - for UK UCITS and AIFs, it is possible if a notification for NPPR under the AIFMD is duly completed. The CMVM confirmed that a notification for NPPR can already be initiated before the end of the transition period to avoid any discontinuity in the marketing of UK funds.

In order to continue being marketed to the general public, a notification under Article 43 of the AIFMD is needed.

Spain

No - UK UCITS and AIFs will have to cease marketing after the Brexit transition period. They will only be able to apply for marketing under the NPPR from the 1 January 2021. The CNMV will not accept applications before this date.

In practice, it is impossible to notify a non-EU AIF for marketing to retail investors in Spain.

Sweden

Sweden

Yes - for UK UCITS and AIFs, it is possible if a notification for NPPR under the AIFMD is duly completed.

In order to continue being marketed to the general public, a notification under Article 43 of the AIFMD is needed.


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