Further progress on access for retail customers to alternative investments
22nd February 2008The Financial Services Authority (FSA) today set out further progress on allowing UK retail consumers to invest in funds of hedge funds and other alternative investments authorised in the UK.
A Consultation Paper confirms the policy of introducing retail-oriented Funds of Alternative Investment Funds (FAIFs) into the FSA's regulatory regime. It also initiates a further round of consultation on a number of important issues which have been raised by fund managers and other interested parties during consultation, and which require resolution before the final regime is introduced.
Dan Waters, FSA Director Retail Policy and Themes and Asset Management Sector Leader, said:
"Permitting consumers access to a wider range of innovative investment strategies through authorised onshore vehicles will allow more choice and a better opportunity for risk diversification, while maintaining consumer protection through our proportionate rules on the operation of the product. We aim to make the final adjustments to the new regime before the end of the year, including the additional areas on which we are consulting today.
"As we have previously stated, there are a number of difficult tax issues involved in the operation of onshore FAIFs regime. Following constructive discussions with the Treasury on tax issues we welcome the publication today of their tax framework, setting out a new elective regime which aims to allow FAIFs to operate competitively within the UK retail market."
To avoid any regulatory regime being used to gain unintended tax advantages the FSA also propose to include a 'genuine diversity of ownership' condition in its rules. This condition is similar to those proposed in the Property Authorised Investment Funds discussion paper issued by the Treasury in December 2007.
The new consultation will close on 22 May 2008. The FSA will then finalise the draft rules in light of the responses and publish a Policy Statement giving feedback towards the end of the year. This will set out the finalised rules for FAIFs as whole and the date on which they will come into effect.
