On 7 January 2019, the FCA announced the opening of its notification window for the Temporary Permissions Regime (“TPR”) for EEA-based firms and EEA-domiciled funds to continue with existing inbound passporting arrangements in the event of the UK leaving the EU on 29 March 2019 (the so-called “no-deal” scenario).
Given that the notification window will definitely close on 28 March 2019, investment managers should urgently review their business models to consider whether a notification on behalf of their investment funds is required.
Why are the FCA doing this?
The TPR is designed explicitly to deal with the no-deal Brexit scenario. Without it, EEA firms and investment funds would effectively find that the UK is closed for business from 29 March until a permanent arrangement is put in place.
In the event that the proposed transitional deal between the UK and the EU does proceed, then the TPR is effectively made redundant. For all practical purposes, the status quo for all parties would continue until the end of 2020, or whenever the transitional arrangement comes to an end.
The counterpoint to this concession by the FCA is that there can be no expectation of an extension to the notification window or it being repeated in the foreseeable future – this is a one-off opportunity for relevant entities.
Which funds are caught by this?
The TPR is available for the following EEA-domiciled fund vehicles:
- UCITS schemes; and
- Alternative Investment Funds (“AIF”), including European Venture Capital Funds (“EUVECA”), European Social Entrepreneurship Funds (“EUSEF”), European Long-term Investment Funds (“ELTIF”) and AIFs authorised as Money Market Funds (“MMF”).
The TPR for investment funds is only relevant in the context of marketing to UK-based investors – in other words, replacing the current (inbound) EU passport.
For the avoidance of doubt, the domicile of the investment manager is irrelevant (apart from, of course, UK managers who do not need a passport to operate in their own jurisdiction). Therefore, this is potentially applicable to both EU and non-EU managers alike.
Does this affect non-EEA funds?
No, non-EEA AIFs will continue to use the UK’s private placement regime.
We are about to launch a new fund – can I register it?
The FCA advises that firms currently launching a new fund, and expect to have completed this before 28 March, should wait until they have a full list of funds before making the notification. Although this guidance may well suit the timetable of the FCA’s Fund Authorisations department, it seems unlikely that it will be strictly adhered to in the event that firms’ plans change following an initial notification.
I’m not currently marketing these funds in the UK – should I do anything?
No action is required, although you should recognise that there is a “now or never” element to these arrangements. As above, managers may want to reconsider their marketing plans for the UK investor market with a view to bringing these forward. It should be noted however that the FCA do not like to see firms apply for such permissions without a clear intention to actually use them.
How do I register the relevant funds for TPR?
Notifications must be made via the FCA’s Connect system, so firms not already registered for this will need to do so first (this will include providing contact information). The notification is straightforward and entails the provision of the full name of the relevant fund(s) being marketed in the UK. There is a helpful FCA Guide to assist with the notification process. Further information is available on the dedicated FCA article.
The notification window is open up to, and including, 28 March 2019. Failure to meet this deadline may mean that UK investors are out of reach to your firm for at least the foreseeable future!
So, once I have made the notification, I have nothing to do for three years, right?
Unfortunately, that is not correct! TPR is designed as a temporary stop-gap – a concession by the FCA to prevent a cliff-edge to current marketing arrangements. Although the FCA has yet to announce full details, managers who have registered their funds for TPR will be provided with a “landing spot” (expected to be from late 2019 onwards), at which time they will be invited to apply for permanent recognition.
How ACA Can Help
To speak to one of our experts for further guidance or assistance with the notification process itself, please complete our form, or contact our enquiries team at +44 (0) 20 7042 0560.