Following a speech confirming the introduction of OFR by economic secretary to the Treasury Bim Afolami yesterday (30 January), Investment Week understands the government has determined that the EEA states hold equivalence in relation to financial services regulation.
This means that funds domiciled in the EEA will not have to comply with additional UK rules, including the Consumer Duty.
Treasury facilitates long-term UK market access for European fund managers
However, EEA-domiciled funds will still need to abide by certain retail disclosure requirements.
At the same time, UK-domiciled firms distributing non-UK products including OFR-recognised funds, will need to comply with the Consumer Duty and its requirements.
These will include: ensuring the products and services are suitable to a specific target market; ensuring they provide fair value to consumers; allowing consumers to make effective, timely and informed decision through the firms’ communications; and supporting consumers throughout the product’s entire life cycle.
Similarly, as OFR-recognised funds are likely going to be sold by UK-based distributors, the distributors will fall within the remit of Consumer Duty and as such, they will be required to ensure the OFR products are only distributed to the target market.
Sustainability Disclosure Requirements are currently excluded from the OFR, but the government has set out plans to consult on whether SDR should become applicable to funds recognised under OFR in the future.
The Financial Conduct Authority has been contacted for comment.
