The FCA clarifies the treatment of investors in EU funds managed in the UK (sort of)

Darren Sinden

In the interim large swathes of the managed fund market in the UK are effectively unregulated and unprotected from a UK investor perspective

No more regulatory passporting

Another gap resulting from the UK’s exit from the EU has come to light forcing the FCA to clarify its position on the matter.

This time the issue concerns funds that distributed throughout the European Union but which are managed from the UK.

The specific issue was whether or not retail investors in those funds would continue to enjoy the protection of the Financial Services Compensation Scheme (FSCS) which offers eligible investors protection against fraud or failure to a value of up to £85,000.

As recently as December it appeared that retail clients who had invested in UK managed funds, sold and distributed in Europe, would be exempt from FSCS coverage and UK officials had remained tight-lipped about exactly what status investors in these funds would enjoy.

The FCA appears to have had a change of heart, or at least a partial rethink on the matter and has said that these investors will now be covered by the scheme in an update on its website.

However, no formal statement has been issued nor has any guidance or explanation been forthcoming as to how exactly this arrangement would work or on how these funds and their retail investors would be categorised now that the UK is no longer part of the EU.

As part of that process, the FCA has lost its automatic ability to intervene and apply pressure to other European regulators on behalf of UK investors. As a result of which an asymmetry has developed.

For example, UK authorities have recognised 9,000 EU based funds and will allow them to continue to operate and market to UK investors. However, the FCA will have no regulatory oversight of those businesses neither will these funds be covered by the FSCS. What’s more EU authorities have not recognised the equivalent UK funds or accorded them the same privileges to operate on the continent.

These mismatches may turn out to temporary, if a reciprocal agreement, between the UK and the EU over the treatment of financial services, can be agreed. Perhaps in broad terms initially with the finer detail to be inked in later.

In the interim, however, large swathes of the managed fund market in the UK are effectively unregulated and unprotected from a UK investor perspective and that can’t be a good thing and certainly isn’t something that should be allowed to continue unchecked in the longer term.

Read this next

Retail FX

Overcharts partners with dxFeed for CME Group Market Depth

“More and more traders are using Market Depth while conducting volume analysis. Its primary function is to help traders identify potential support and resistance levels.”

Digital Assets

CoinGecko expands collaboration with CER.live security rating

CoinGecko, one of the earliest crypto data aggregators, has integrated the security score data from the CER.live rating. The trust assessments given to crypto projects will be integrated into their pages on CoinGecko website to draw users’ attention to the importance of security.

Metaverse Gaming NFT

Klaytn taps Parity Technologies to build infrastructure for Klaytn-Substrate

Klaytn has initiated a collaboration with blockchain infrastructure company Parity Technologies to strengthen its tech stack and meet the demands of enterprises looking to harness the crypto technology.

Retail FX

US Retail FX brokers suffer steep fall in client deposits, Trading.com racked up $46K

Retail FX deposits at US brokerages, which have been struggling to eke out a profit in a strict regulatory environment, dropped in March 2022 by $35 million, CFTC data showed.

Retail FX

eToro supports Immutable X (IMX), Livepeer (LPT) and Cartesi (CTSI)

Israeli social trading network eToro has added support for trading three new tokens. Immutable X (IMX), Livepeer (LPT) and Cartesi (CTSI) are the next coins to join eToro’s list of featured digital assets.

Executive Moves

LiquidityBook hires Fintech veteran Jonathan Cross to lead EMEA business

LiquidityBook, a provider of FIX and OMS trading solutions for both the buy and sell-side, has added Jonathan Cross to its business team for the EMEA region.

Retail FX

Interactive Brokers’ traders now have direct access to TradingView

Professional charting and trading platform, TradingView has integrated the US-listed brokerage firm Interactive Brokers as the latest online trading partner.

Digital Assets

This Web3 infrastructure provider is on the verge of a radical upgrade

The crypto industry fueled the anticipation of the arrival of web3 with the introduction of Decentralized Finance, Metaverse, and more. And today, that web3 is finding support from various developers looking to build and develop the space to extract the most benefits out of it.

Digital Assets

Crypto bots: trading assistant 

The cryptocurrency market is a volatile one, with huge gains and dramatic dips. However, the most informed traders can use automated tools to maximize profits while minimizing risks. 

<