On 30 January 2024, the Economic Secretary to the Treasury, Bim Afolami, announced in a statement to the House of Commons that HM Treasury (HMT) has reached a decision regarding the equivalence assessment for EEA states under the UK’s Overseas Funds Regime (OFR).

The Government legislated in the Financial Services Act 2021 for a new OFR to create a more streamlined process for overseas investment funds to be sold to UK investors. In light of the importance of EEA-domiciled funds to the UK market, it was determined that an equivalence assessment of the EEA would be the first to be conducted under that regime.

The statement confirms that, following a detailed assessment, HMT has found the EEA states (including EU Member States) equivalent under the OFR. Secondary legislation will be required to enact this decision, which Mr Afolami notes will be put forward “when parliamentary time allows”.

Other points confirmed in the statement include:

  • The Government does not intend to require the funds assessed to comply with any additional UK requirements as part of the equivalence determination at this time.
  • The decision will apply to undertakings for collective investment in transferable securities (UCITS), except those which are also money market funds as there is ongoing regulatory development in this area.
  • The UK will monitor this equivalence decision on an ongoing basis, in light of UK and EEA regulatory developments.
  • The Government plans to consult on whether to broaden the scope of sustainable disclosure requirements, on which there are ongoing regulatory developments, to include funds recognised under the OFR. It notes that it will ensure that there is adequate time for industry to adapt to any future requirements.

The statement also announces that existing temporary arrangements allowing EEA funds that were marketing into the UK pre-Brexit to continue doing so, which were due to expire at the end of 2025, will be extended until the end of 2026 to ensure funds can smoothly transition to the OFR.

The FCA is already consulting, in CP23/26, on its proposed rules and guidance to implement the OFR in preparation for an equivalence determination being made. For more information on the proposals, please see our previous blog.