On 11 July 2018, the FCA published Policy Statement 18/17: The European Money Market Funds (MMF) Regulation (PS18/17). In PS18/17 the FCA sets out final rules and its response to the feedback it received to Consultation Paper 18/4: The European Money Market Funds (MMF) Regulation (CP18/4).
A money market fund (MMF) is a fund that invests in short-term debt, such as treasury bills, commercial paper and certificates of deposit. The EU MMF Regulation came into force on 21 July 2017, and takes effect on 21 July 2018. From that date, new MMFs will need to be authorised as an MMF by their national competent authority (NCA).
As the EU MMF Regulation is directly applicable, Member States do not need to implement it. The FCA has identified provisions in its Handbook, principally in the Collective Investment Schemes sourcebook (COLL), that need to be amended, deleted or dis-applied to MMFs to avoid conflicting with the EU MMF Regulation.
The FCA reports in PS18/17 that it has proceeded with its main proposals in CP18/4, for example to remove provisions in COLL 5.9 and elsewhere that refer to the investment powers of MMFs. The FCA has also modified its approach on certain issues following respondents’ comments but in other areas it has not. For example, the FCA has decided not to amend its existing provisions relating to the requirement for a MMF to disclose its status as a qualifying MMF in connection with the protection of clients’ assets.
The new FCA rules (set out in Appendix 1 of PS18/17) will come into force on 20 July 2018.
From 21 July 2018, new MMFs will need to be authorised as an MMF by their NCA. Existing funds that are already branded as MMFs and operating under the regime set out in the European Securities and Markets Authority guidance, and any existing funds that are substantially similar to MMFs as defined in the EU MMF Regulation, will have to apply for authorisation under the EU MMF Regulation by 21 January 2019.
The FCA has updated its application forms to account for the introduction of the EU MMF Regulation.
Most existing MMFs operate under the UCITS Directive, but some operate under the Alternative Investment Fund Managers Directive. The EU MMF Regulation will not amend either Directive, and their managers will need to remain authorised under either one of them.