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How to Distribute Funds in the UK

The appetite for funds in the UK remains very high, with over £1.5 trillion of assets invested into funds. This makes marketing funds into the UK from overseas particularly attractive. In some cases, firms with an existing presence in the UK will be reassessing their strategies following the introduction of the Offshore Funds Regime. Others may be looking to enter the market for the first time, bringing investment expertise or products that differentiate from those commonly used by advisers, portfolio managers and investors.

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Distributing effectively into the UK market requires three key elements

1- Good products with credibility and brands that are attractive and visible to investors.

 

2- Effective distribution via the common channels, such as fund platforms, which requires regulatory recognition via application to the FCA, effective governance and comprehensive information provision.

 

3- An existing regulatory presence in the UK or a partnership with an existing firm, such as The Funds Collective.

Overview of the Overseas Funds Regime (OFR)

The Overseas Funds Regime (OFR) allows certain non-UK investment funds to be marketed in the UK. Funds recognised under the OFR can be promoted similarly to UK-based authorised collective investment schemes. The OFR applies to most funds established in EEA and EU member states under the UCITS Directive, excluding money-market funds. Both new and existing funds currently operating under the Temporary Marketing Permissions Regime (TMPR) can apply. You can read more about the OFR here…

Financial Promotions Approval

Financial promotions must be approved by a UK-authorised entity before being communicated to investors. This ensures that all promotional materials meet the stringent standards set by the FCA, including clarity, fairness, and non-misleading information.

To achieve this, financial promotions must be submitted to a UK-authorised entity for approval. They must clearly state the risks and benefits of the investment, providing balanced information and should be regularly reviewed and updated to reflect any changes in the fund's status or regulatory environment.

Assessing Value and Undue Costs

Funds must assess and disclose any costs to investors, ensuring transparency and value for money. This involves evaluating all fees and charges associated with the fund, ensuring they are not excessive and provide fair value to investors in the context of the outcomes delivered. The expectations for non-UK funds are driven largely by the needs of distributors, such as fund platforms. With the full Assessment of Value regime for UK funds now well established, it drives much of the distributor markets’ expectations for non-UK funds. We can provide and deliver the framework and process for such a review, taking account of the regulatory requirements, distributor expectations and our own learning from involvement in the process since it inception in the UK.

Sustainability Disclosure Requirements (SDR)

Funds must comply with the UK's Sustainability Disclosure Requirements (SDR). This includes providing detailed disclosures on how environmental, social, and governance (ESG) factors are integrated into investment processes. The FCA roadmap outlines specific requirements and timelines for compliance. This is a complex and evolving set of requirements which benefits from our closeness to the UK funds regime and the regulatory environment. Getting this wrong can have significant regulatory, financial and reputational consequences.

Providing Information to Distributors

Clear and comprehensive communication with UK distributors and platforms is essential. This includes providing all necessary information for distributors to effectively market the funds, such as product details, risk factors, and performance data. Regular updates and transparent communication help maintain compliance and support distributor efforts. With distributors, such as platforms, being the primary gatekeepers for funds sales in the UK it is essential that their information needs are met. Failure to do that can easily lead to delisting.

Ongoing Compliance

Recognised funds must adhere to ongoing UK regulatory requirements. This includes regular disclosure rules, maintaining updated records, and notifying the FCA of any significant changes. Financial promotions must be approved by a UK-authorised entity to ensure they meet local standards. 

 

For detailed guidance, including application forms and further requirements, refer to the FCA OFR Update.

Consumer Duty Considerations

Although the FCA's Consumer Duty requirements do not directly apply to non-UK funds under the OFR, they are critical for UK-authorised firms that approve financial promotions and for UK distributors, such as fund platforms.

Distributors must align with Consumer Duty principles, maintaining high standards of care and communication to meet investor needs and expectations. The price and value outcomes add weight to the need for a robust and transparent approach to assessing value delivered to investors.

In approving financial promotions, the authorised entity in the UK will need to have a thorough understanding of the products referenced, how customers are supported and how clearly and accessibly the products’ features and risks are articulated.

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Are You Ready to Enter The UK Market?

Partner with The Funds Collective today and unlock the full potential of your fund distribution in the UK. Get in touch to learn more about how we can help you achieve your goals.

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