Arthur Cox’s Hodgson: ‘Section 272 cloud lingers over ETFs under OFR’

UCITS ETFs face being in “two different positions under the same regime”

Jamie Gordon

James Hodgson, senior associate at Arthur Cox, said UCITS ETFs that opted to apply for Section 272 to enter the UK market face continued uncertainty under the Overseas Fund Regime (OFR).

In a recent ETF Stream webinar, titled ETF Investigations: Brexit’s Impact On The European ETF Market, Hodgson said while the Temporary Marketing Permissions Regime (TMPR) has provided some clarity for managers, ETFs face being in “two different positions under the same regime”.

Newcomers to European ETFs since the end of 2020 have been forced to undergo the lengthy process of applying for recognition under Section 272 of the Financial Services and Markets Act 2000 (FSMA) to market their products to the whole UK market.

“The cloud here is for managers who went for the Section 272. How this will work with the OFR is not currently clear,” he said.

“We have a number of managers that have incurred costs and time to get themselves into the UK and are subject to some specific requirements such as the value for money assessment.

“Funds under OFR will not be subject to those requirements, so we have ended up with a situation where you have UCITS ETFs, all authorised by the Central Bank of Ireland, in two different positions under the same regime.”

Speakers in this webinar include:

  • Peter Capper, senior adviser of international fund regulation at The Investment Association

  • James Hodgson, senior associate at Arthur Cox

ETF Investigations is a new webinar series from ETF Stream that examines the key issues facing ETF investors in Europe. To watch a full replay of this webinar, click here.

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