In September the Treasury confirmed its plan to ring-fence Oeic sub-funds within umbrella structures by introducing a protected cell regime (PCR).
This will bring increased business to the UK by enhancing the competitiveness of the UK funds industry and give Oeic investors even greater levels of protection. The Treasury laid the necessary legislation at the end of November.
Under current UK law, Oeic sub-funds sitting within an umbrella structure have no separate legal personality. This means that if one sub-fund collapsed with liabilities exceeding its assets the creditors could draw upon the assets of another, totally separate sub-fund to meet its liabilities.
The introduction of a PCR will mean that the assets of one cell are protected and cannot be used to meet the liabilities of another cell. Whilst the current degree of regulation imposed upon Oeic funds makes the risk of collapse near negligible, any extra degree of protection such as this is a good thing.
The government is introducing the PCR to ensure that the UK can continue to complete with other European jurisdictions which already operate protected cell regimes. Introducing the regime will therefore not only increase consumer protection for investors in UK-domiciled funds, but it will also increase the competitiveness of the UK as a fund domicile.
We expect the parliamentary debates on protected cell to take place mid-December. We look forward to the outcome and wholeheartedly support a measure that will mean investors are exposed to less risk and that the UK remains a key fund domicile.
Karen Bowie is a senior adviser for product regulation at the Investment Management Association.