The Financial Conduct Authority proposed a minimum 90-day redemption notice for certain UK retail funds holding illiquid assets. The consultation covers non-UCITS retail schemes with at least half their property invested in inherently illiquid assets, alongside some funds with other limited redemption arrangements. Existing funds would receive two years to comply. The FCA is seeking responses until 11 December 2026.
Some affected funds currently offer daily withdrawals even though assets such as property and infrastructure can take much longer to sell. The FCA said that mismatch can force funds to suspend payments during stress or sell assets quickly at depressed prices. Extra cash held to meet redemptions can also leave less money invested in the fund’s intended assets. The regulator said its proposal would align the UK with new international liquidity standards for open-ended funds.
NOTICE PERIOD WOULD REPLACE DAILY ACCESS
Under the proposal, investors in covered funds would have to give at least 90 days’ notice before receiving their money. Managers could set a longer period where the assets or strategy require it. The FCA said clearer terms should help investors understand how quickly they can withdraw and whether a product suits their needs.
Existing funds would have two years to move into compliance and would need to give investors at least one year’s notice of the change. The consultation applies to authorised fund managers and also matters to distributors, advisers, platforms and depositaries. It does not yet impose a final rule because the FCA is still collecting responses.
FINAL RULES ARE EXPECTED NEXT YEAR
Reuters and the Financial Times reported that the proposal is intended to reduce rushed asset sales and liquidity-driven suspensions. A fixed notice period would shift the promise made to investors from daily access towards a timetable closer to the sale cycle of the underlying assets. Managers would need to assess product terms, communications and operational processes before implementation.
The next formal milestone is the consultation’s 11 December closing date. The FCA expects to publish final rules in the first half of 2027 after considering responses. Until then, investors and managers should treat the 90-day period and transition arrangements as proposals rather than binding requirements.