Mind the Gap. UK Facilities Agent Services and TPR Notification
The UK is today still fictitiously part of the EU during what is defined, in Brexit jargon, Transition Period. With no hopes for the Transition Period to be extended beyond the original 31st December 2020 deadline, fund managers have still the choice to use the Temporary Permission Regime (TPR) for UCITS marketing in the UK after a hard Brexit, on the basis of their existing EU marketing passport.
In this article, we will talk about UCITS marketing in the UK and the direct notification to the UK FCA required under the TPR. We will also discuss the requirement of a UK Facilities Agent for UCITS marketing passport authorisations in the UK. Get in touch here with your contacts at Veneziano & Partners to see how we can help.
Background
It is useful to give some background context to the TPR. In essence, the TPR is a legal fiction allowing for any EU passport obtained in the UK until the end of the Transition Period to be used for a maximum of three years after a hard-Brexit, before a local authorisation will be required. From the perspective of the UK legal framework, the EU (Withdrawal) Act 2018, introducing the TPR, will repeal the European Communities Act and by doing so incorporate and convert the relevant EU law into UK law on the effective date when the UK leaves the EU. In this context, two draft statutory instruments were published by the HM Treasury on 8th October 2018 to amend the relevant EU law related to investment funds and entities managing investment funds. One of the statutory instruments covers the AIFM Directive whilst the other covers the UCITS Directive. These draft statutory instruments design and introduce the TPR, which will ensure that UCITS and AIF marketing in the UK before Brexit can continue for a definite period of time after Brexit, subject to a notification to be made by fund managers in advance of withdrawal day. You can find these draft instruments here.
The TPR Direct Notification to the FCA
To enter the TPR, the promoter or manager of a UCITS, authorised for marketing in the UK already before the UK leaves the EU, will have to notify directly the UK FCA of its intention to continue marketing under the TPR. The notification will have to be made on a dedicated web portal maintained by the UK FCA, so called Connect, and specifically include all of the sub-funds that are intended to retain access to the UK market. Once registered for access to the Connect portal, managers can see the funds currently authorised and select them as part of the direct TPR notification process. According to the latest news released by the UK FCA, the window to notify the intention to avail of the TPR is open from September 30th 2020 until the end of December.
Marketing UCITS Funds in the UK and the UK Facilities Agent
Is there still time to apply for a UCITS marketing passport in the UK? The answer to this question, asked these days by many UCITS managers, is yes. In fact, in order to use the TPR a UCITS must already be authorised for marketing in the UK under a passport before the end of the transition period, which is the end of December 2020 as discussed above. Since the passport regime will no longer be available in the UK after the end of the Transition period, fund managers have until the end of December 2020 to passport their UCITS funds in the UK.
This is where the requirement of the UK Facilities Agent comes into play. In fact, in order to obtain a marketing passport, COLL 9.4 of the FCA Handbook imposes several obligations that must be discharged by foreign managers intending to market their UCITS funds in the UK. Amongst others, they are required to maintain an address and facilities for investors in the UK. Whilst some UCITS managers might have already a physical presence in the UK and might want to act as their own UK Facilities Agent, most UCITS managers intending to obtain a UCITS marketing passport in the UK will have to appoint an external UK Facilities Agent.
What does the UK Facilities Agent do in practice and how to choose the one that is most suitable to your UCITS? Local UK investors will go to the UK Facilities Agent named in the prospectus of a UCITS in order to obtain information about the specific UCITS. This include fund documentation, NAV prices, contacts for redemptions and complaints. Whilst the UK Facilities Agent doesn’t deal with requests of redemptions itself – and as such doesn’t deal in client moneys in UK FCA parlance – will be the primary point of contact for local UK investors intending to get in touch with the administrator of the UCITS to obtain such redemptions.
It would be advisable for UCITS managers looking to appoint a UK Facilities Agent for their UCITS to look at providers which can ensure both understanding of the dynamics of a UCITS fund as well as the framework, both regulatory and commercial, for UCITS marketing in the UK.
Conclusions
There is still some time before the end of December and today is still possible to apply for a UCITS marketing passport in the UK and also notify for a TPR in order to keep on marketing in UK your UCITS after a potential hard Brexit. Please get in touch with here with your contacts at Veneziano & Partners to see how we can help and to learn more about our solutions for UCITS marketing in the UK as well as UK Facilities Agent.