Dublin-based investment funds expert Gayle Bowen of Pinsent Masons, the law firm behind Out-Law.com, said: "This is a welcome development not only for UK investors who will continue to have access to European UCITS and AIFMD-compliant funds, but also to investment managers with European funds, such as Irish UCITS, as it gives them more clarity and certainty for the next three years - which is particularly important during the uncertainty of a potential 'hard Brexit' scenario."
The UK Treasury has published an updated version of the draft Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations (32-page /760KB PDF), giving effect to the change in policy. The change follows lobbying by the asset management industry, in particular the Investment Association.
The Treasury has also updated the explanatory information accompanying the draft regulations. This defines the "new sub-funds of an umbrella fund" covered by the change in policy as "those which become authorised in accordance with the UCITS Directive by their EEA home state regulator on or after exit day".
"For those new sub-funds to enter the TPR after exit day, at least one other sub-fund of the new sub-fund's umbrella fund must have notified to enter the TPR before exit day," the explanatory information states.
The TPR will allow EU-based firms and funds which currently access the UK market by way of an inbound 'passport' to continue to serve their UK customers for up to three years in the event that the UK exits the EU without agreeing a formal implementation period, giving them time to apply for full authorisation. No reciprocal temporary permissions regime has yet been proposed by the EU for UK firms and funds which currently rely on outbound passports to serve customers in other EU member states.
The UK intends to maintain the existing investment rules for funds that are currently sold to retail investors under the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive. The draft regulations also introduce a 'UK UCITS' regime for funds established and authorised in the UK, which will lose their legal status as UCITS funds according to EU law once the UK exits the EU.