EU-registered funds held in Individual Savings Accounts (ISAs) and Child Trust Funds (CTFs) face the prospect of disqualification from these vehicles, unless they sign-up to the FCA’s Temporary Permissions Regime (TPR) by 30th October.
In the event of a ‘no deal’ Brexit taking place on 31st October 2019, UCITS funds currently registered in a European Economic Area (EEA) state will cease to qualify for ISA and CTF inclusion unless they have entered the FCA’s TPR regime. Funds which do not enter the TPR will no longer be recognised by the FCA and will not be eligible for new investments in ISAs or CTFs.
The FCA has confirmed that it will list, within its Financial Services Register, those funds which have successfully signed-up to the TPR and remain eligible for ISA and CTF investment, within days of a ‘no deal’ Brexit. For those investors holding disqualified funds within their ISAs or CTFs, they will not be required to sell their holdings, but they will not be able to invest further into them.
Mikkel Bates, Regulatory Manager at FE, said: “Obviously, we don’t know if or when a no-deal Brexit will take place, so it is understandably hard for fund managers to plan effectively for the post-Brexit landscape. That said, registering for the TPR now will afford additional time for managers of non-UK funds to ensure they remain compliant in the immediate aftermath of a UK withdrawal.
“In the event of a ‘no deal’ Brexit, the TPR is only the first regulatory step that UCITS funds will have to take, should they wish to be eligible for ISAs and CTFs. A subsequent – and more permanent – regulatory regime will be introduced at a later date, so for longer-term planning, signing-up to the TPR by 30th October will be essential.
“Currently it is unclear how many funds have signed-up to the TPR. The initial deadline was 28th March 2019, in line with the original date for Brexit, so we expect the majority have done so already, but there still could be some who have adopted a ‘wait and see’ approach and will need to act.
“Evidently these regulations will only come into effect should the UK leave the EU without a deal on 31st October but it is advisable that UCITS funds that wish to continue being eligible for ISAs and CTFs should be as prepared as possible for a no-deal eventuality.”