On 1 August 2022, the FCA published Consultation Paper 22/14 ‘Broadening retail access to the long-term asset fund’ (CP22/14).

In CP22/14 the FCA sets out proposals for broadening the retail distribution of long-term asset funds (LTAFs) to more categories of retail investors, whilst including further investor protections.

The FCA is proposing to treat a LTAF as a restricted Mass Market Investment in line with its final rules in Policy Statement 22/10 ‘Strengthening our financial promotion rules for high-risk investments and firms approving financial promotions’. The FCA believes that this will enable a broader range of retail investors to access LTAFs whilst ensuring investors understand the risks involved and can absorb potential losses.

The FCA is consulting on proposals to align some LTAF rules with the investor protection rules that apply to other retail authorised funds including:

• Full engagement with unitholders about any proposed fundamental or significant changes to the fund.
• Regular investor updates to be provided in the event of a suspension of dealing.
• Arrangements for the conduct of unitholder meetings.
• Restrictions on what types of payments and charges can be taken from LTAF unit classes made available to retail clients.

Furthermore, the FCA is consulting on proposals to remove the 35% restrictions on illiquid assets in unit-linked products, where the investor is a qualifying default pension scheme. This would enable firms to develop unit-linked products which contain other kinds of illiquid assets, but only under the same terms that currently apply to LTAFs- meaning they can only be sold to default pension schemes.

The deadline for feedback to CP22/14 is 10 October 2022.

Subject to the responses received, the FCA expects to publish a final Policy Statement and final Handbook rules early in 2023.