PS26/7: Progressing fund tokenisation

Policy Statement
PS26/7
Progressing Fund Tokenisation
April 2026

This relates to
Consultation Paper 25/28 which is available on our website at www.fca.org.uk/publications Email:
cp25-28@fca.org.uk
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Contents
Chapter 1 Background and summary . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
Chapter 2 Accelerating tokenisation of authorised funds. . . . . . . . . . . . . . . Page 9
Chapter 3 A new direct dealing model . . . . . . . . . . . . . . . . . . . . . . . . . . Page 16
Chapter 4 Near-term steps for fund tokenisation . . . . . . . . . . . . . . . . . . Page 25
Chapter 5 Future tokenisation models . . . . . . . . . . . . . . . . . . . . . . . . . Page 31
Chapter 6 Cost benefit analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 36
Annex 1 List of respondents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 39
Annex 2 Abbreviations used in this paper. . . . . . . . . . . . . . . . . . . . . . . . . Page 42
Appendix 1 Made rules (legal instrument)

Chapter 1
Background and summary
1.1 The UK asset management sector is a global leader with £16.5trn assets under
management. Asset managers play an important role in the economy and support the financial wellbeing of millions of people. Tokenisation and distributed ledger technology (DLT) have the potential to make fund management more efficient, help firms meet changing consumer needs, open new routes to distribute funds and broaden access to private markets and infrastructure investment.
1.2 Tokenisation could improve consumer choice and enhance competition in the market
for product and service offerings. Our proposals are intended to create a positive change environment and encourage growth through improved productivity and increased global competitiveness of UK firms.
1.3 We committed to progressing a roadmap for digital assets starting in asset
management in our January 2025 letter to the Prime Minister, and our Strategy 2025-2030. We want to support innovation in the UK asset management sector, including the uptake of tokenisation. The development of the asset management sector can in turn support the growth of the UK economy. Our roadmap includes a vision for how UK wholesale capital markets might adopt DLT, and our thinking on regulatory principles. We will seek views on this later in 2026.
1.4 We want to see change led by commercial propositions. We do not want regulation to
stand in the way of change if there is demand and opportunity. This Policy Statement (PS) therefore builds on work by The Investment Association and pilot work by UK firms. We will continue this collaboration with industry through our participation in HM Treasury’s Investment Management Taskforce, the UK Wholesale Financial Markets Digital Strategy, and The Investment Association’s Investment Fund 3.0 (IF3) Lab.
1.5 In Consultation Paper 25/28 (CP25/28) we proposed new guidance to support firms
seeking to launch tokenised authorised funds in the UK using the industry‑led ‘Blueprint’ model. The guidance is intended to support firms who want to use the model by providing certainty on how they could think about their regulatory obligations in a DLT context.
1.6 In the CP, we also proposed rules to introduce a new direct dealing model for all
authorised funds to promote fund efficiency and aid tokenisation models. This PS summarises the feedback we received on our tokenisation guidance and direct dealing proposals, our response to this feedback, and our final guidance and rules.
1.7 We also asked a series of discussion questions on near- and long-term roadmaps for
fund tokenisation in the UK to help inform our future work. Here we share feedback on these discussion questions and set out how we will be taking forward the main themes raised.

1.8 The CP also set out our positions on the development of a broader tokenisation
eco-system and alignment with our broader cryptoasset regime. It confirmed:

• A consistent approach on the use of natively permissionless public DLT networks
  (e.g. Ethereum Layer One) with cryptoasset firms as set out in CP25/25.
• The range of Money Market Funds (MMFs), including tokenised MMFs, that are
  eligible collateral for uncleared trades under UK European Market Infrastructure Regulation (UK EMIR).
• Our rules do not prevent UK authorised funds from investing in tokenised forms of
  eligible assets, including the Treasury’s Digital Gilt Pilot (DIGIT), a UK Government debt instrument issued on DLT.
• That we are open to applications to modify or waive existing rules to allow the use of
  stablecoins to settle unit deals as an interim regime for funds before final stablecoin standards are introduced in October 2027. Summary of feedback and our response
  1.9 We received 64 responses, with good representation from traditional financial
  services firms, digital/crypto firms, fintechs and service providers, trade associations, standard-setting bodies, consumer groups, and law firms.
  1.10 Respondents almost universally supported our approach and ambition to accelerate
  fund tokenisation in the UK. They agreed with our proposed Handbook guidance on the operation of tokenised authorised funds, and how this would help firms meet the outcomes in our rules. Many firms gave constructive and detailed feedback on additional areas we may need to address to support use-cases.
  1.11 In response, we’ve updated our proposed guidance to confirm that an on‑chain record of
  transactions may be considered the primary books and records for unit deals, and that a firm doesn’t need to maintain a full ‘mirror’ off‑chain record of this information if it has appropriate resiliency plans in place. We’ve also set out additional guidance on our rules on share classes, where units within a class are recorded on multiple blockchains.
  1.12 Respondents supported introduction of the new direct dealing model, direct to
  fund, noting the operational efficiency gains and the effect of enhancing the UK’s competitiveness. They agreed that the new single-stage process would facilitate tokenisation, by removing the requirement for units to be issued to the fund manager before being transferred to unitholders, enabling atomic settlement on-chain for newly-issued units.
  1.13 We received significant feedback on two elements of our proposals, intended to ensure
  that umbrella-level cash accounts for processing of unit deals are operated within the UK’s protected cell legislation on ringfencing of assets and liabilities of sub‑funds in umbrella schemes, as set out in the Financial Services and Markets Act 2000 (FSMA) and the Open-Ended Investment Companies (OEIC) Regulations.

1.14 We proposed that all cash movements should be attributed to a given sub-fund,
with unattributable payments either returned or moved to a client money account. Responses to the consultation argued that the costs of maintaining a standby client money account would be excessive. We have therefore decided not to proceed with the client money account proposal. Instead, we will apply enhanced rules on the reconciliation of umbrella cash accounts.
1.15 We also proposed not allowing overdrafts on omnibus accounts, or for sums received
ahead of settlement date on one sub-fund to cover unpaid sums on another. We considered this necessary to ensure compliance with the protected cell legislation. We had a range of industry stakeholder feedback. Some respondents argued that overdrafts and fungible use of cash in omnibus accounts could comply with the protected cell regime, provided there are controls to ensure all cash flows creating a settled cash balance are attributed to a particular sub-fund. We have considered this further with the industry and are working with HMT to clarify the application of the protected cell legislation in respect of omnibus accounts. Firms wishing to utilise omnibus accounts to support direct dealing schemes will need to individually assess any proposed operating model to ensure compliance.
1.16 We do not consider that the changes made to the final instrument from the draft
instrument has an impact on the compatibility statement we provided in that consultation paper.
1.17 In our discussion chapters, we asked how we can support use-cases for fund
tokenisation, as well as where our rules may require further development. Here we set out how we will support firms and the industry to generate interest in the wider use of DLT in fund management and financial markets. Chapter 5 then sets out how we intend to progress the composable finance framework as set out in our CP as part of our wider tokenisation roadmap. Who this affects
1.18 This policy statement applies to:

• UCITS management companies.
• UK Alternative Investment Fund Managers (AIFM) managing authorised funds.
• Depositaries of authorised funds.
  1.19 This paper might also be of interest to:
• AIFMs and depositaries of unauthorised funds.
• Portfolio managers providing services to both professional and retail investors.
• Investment platform providers.
• Financial advisers and investment consultants.
• Custodians and cryptoasset custodians.
• Fintech firms, stablecoin issuers and stablecoin backing asset pool providers.

1.20 We received feedback from consumer advocacy groups and the FCA’s Financial Services
Consumer Panel. This engagement reflects the potential impact on the consumer experience that tokenised funds may introduce. We have considered the interests of consumers throughout our work, and our guidance and rules reflect our commitment to ensuring tokenised authorised funds are held to the same standards as conventional authorised funds. Measuring success
1.21 We want our Handbook to offer greater flexibility to firms so that they can design
products in a way that better meets their own and their clients’ needs.
1.22 We do not intend to conduct a formal review of this intervention, nor do we propose
to collect data systematically or introduce new reporting requirements. However, we will continue to liaise closely with firms to monitor whether our rules have the desired impact. We hope to see more activity using these optional regimes, including:

• launching of new tokenised authorised funds.
• adoption of the direct dealing model for authorised funds.
• greater pilot activity in future tokenisation models.
  Equality and diversity considerations
  1.23 Overall, we do not consider that our final rules and guidance will materially impact any
  of the groups with protected characteristics under the Equality Act 2010 (in Northern Ireland, the Equality Act is not enacted but other antidiscrimination legislation applies).
  1.24 As evidenced in Chapter 1 of CP25/25, we’ve seen that certain demographics are
  over-represented in cryptoasset ownership. Our tokenisation related proposals are targeted at authorised funds, which are regulated investment products and do not present the same risks as unbacked cryptoassets such as Bitcoin. At the same time, similar technology and infrastructure is used for recording ownership and trading. This may result in similar demographic trends, particularly among early adopters of the technology.
  1.25 Access to tokenised funds may require use of a digital wallet or the ability to understand
  how encryption operates using public and private keys. This may be unsuitable for consumers who face challenges adopting new technology, which may include some with age characteristics under the Equality Act. Our final guidance on operating a tokenised fund register explains how fund managers ought to retain authority for the register, so that firms can meet our existing requirements for conventional funds. This might include alternative options to contact the manager, where some target investors are uncomfortable initiating on-chain transactions.

Environmental, social & governance considerations
1.26 In developing the rules and guidance in this policy statement, we considered the
environmental, social and governance (ESG) implications of our proposals and our duty under ss. 1B(5) and 3B(c) of the FSMA to have regard to contributing towards the Secretary of State achieving compliance with the net-zero emissions target under
section 1 of the Climate Change Act 2008 and environmental targets under s. 5 of the
Environment Act 2021.
1.27 On balance, we do not think that there is any contribution rules and guidance can make
to these targets.
What you need to do next
1.28 Our rules on the new direct dealing model for authorised funds are optional. Firms
should determine whether and when they might adopt the new dealing model in respect of new or existing schemes.
1.29 We have also made Handbook guidance for fund managers seeking to maintain the
unitholder register on DLT. Firms should consider this where they look to launch a tokenised authorised fund.
1.30 The new rules and guidance will enter force with immediate effect.

Chapter 2
Accelerating tokenisation of authorised funds
2.1 In CP25/28 we reported on our tokenisation initiatives with industry. This included
the industry‑led Technology Working Group of the previous government’s Asset Management Taskforce (AMT). The working group set out how firms could operate a tokenised unitholder register within our existing legal and regulatory frameworks, known as the Blueprint model. We authorised the first tokenised UK UCITS scheme under the Blueprint in January 2025.
2.2 We consulted on guidance to clarify how managers could meet existing regulatory
obligations when operating funds, using both the Blueprint and more advanced models, to provide confidence to firms, ensure consumer protection and maintain market integrity. This chapter summarises stakeholder feedback.
2.3 In response to industry questions, we also confirmed in the CP that firms could
use public networks, so long as they have appropriate controls in place to meet the outcomes in our rules and comply with relevant regulations, such as data privacy. Authority of Manager
2.4 Under our existing framework the person responsible for the register must retain
authority over it, including to process decisions of a court or to resolve consumer issues. We believe this is an important consumer and market integrity expectation, including in a tokenised setting.
2.5 We asked:
Question 1: Does the proposed guidance provide adequate clarity on how firms can use DLT to support the operation of fund registers? Question 2: Are there any challenges in meeting the current requirements where DLT platforms are used, or in respect of emerging use-cases?
2.6 Responses supported our ‘outcomes‑based’ approach. Most respondents agreed
the Authorised Fund Manager (AFM) must retain authority over the register to correct errors, assist investors and process court decisions. Firms gave examples of how this outcome could be achieved, even where public DLT networks are used.
2.7 A number of respondents asked for confirmation that the guidance was illustrative.
Some respondents asked us to confirm that recording units in the same class on separate blockchains did not create a new class of unit, even if gas fees were different.

2.8 Some respondents pointed out that firms may wish to use freeze/unfreeze functionality
to pause transactions or restrict movements of digital assets, or the ability to force transfers, in addition to burn and mint procedures.
2.9 Depositaries asked for additional guidance for their oversight of on-chain activity.
Our response
The guidance is illustrative. Alternative ledger-based mechanisms or verifiable governance options can be used where consistent with our register rules and the OEIC Regulations. We have included guidance on adding token freeze/unfreeze and forced transfer functionality as a way in which a firm may be able to effectively manage unitholder processes, effect decisions of a court, or resolve register management problems. We intend our guidance to be interpreted on an outcomes basis, and firms may comply with our rules and the OEIC Regulations using other technological means. This additional guidance should give firms with more flexibility to select appropriate solutions for their target market, product, network choice or circumstance. Existing depositary oversight rules are independent of fund legal structures and technology. This has allowed depositaries to assess and enhance oversight models to reflect contemporary conventional products and frameworks. We therefore do not propose to provide formal FCA guidance right now and instead will work with industry and trade associations where questions arise. Our existing rules allow for unitholders to use different methods for submitting instructions to sell or redeem units, for example online or telephone orders, but do not allow the AFM to differentiate between unitholders or potential unitholders. The AFM may apply different cut-off times for instructions to sell or redeem units based on the method used. The cost of processing unit deals and other register operations may vary depending on the method used, for example online vs faxed or telephone instructions. Consistent with this, we have amended our guidance to clarify that units in a given class may be issued on multiple blockchains provided that the underlying rights of holders, and the nature of charges and expenses that may be taken from scheme property, remain the same. Our general rules on payments out of scheme property still apply. These rules do not permit payments to third parties for the safekeeping or administration of units on behalf of unitholders rather than on behalf of the authorised fund.

Smart contracts and eligibility verification
2.10 We proposed guidance on how firms can use technology solutions, including smart
contracts, to perform unitholder processes and support Know Your Customer (KYC) controls. We also consulted on how firms should think about data confidentiality and privacy legislation, and using technology controls to meet those obligations.
2.11 We asked:
Question 3: Do our existing rules and proposed guidance provide sufficient flexibility to allow for firms operating the register to use smart contracts for the purposes above? Question 4: What role can regulators play in supporting the development of token standards that promote effective governance and positive consumer outcomes?
2.12 Respondents agreed on the importance of strong and robust KYC controls, and
welcomed the outcomes-based approach.
2.13 Firms also welcomed our guidance on using technological controls, such as smart
contracts or token standards, to meet our expectations for unitholder processes. Our response We will finalise the guidance as consulted on. Managing network risks
2.14 We consulted on guidance relating to risks which may arise from maintaining the fund
register on DLT. We focused our proposals on operational resilience concerns, financial crime controls, and transparency questions.
2.15 We asked:
Question 5: Do our COLL rules and proposed guidance provide sufficient flexibility to support fund tokenisation use-cases that use public networks?
2.16 Respondents welcomed our statement that firms could use public DLT networks to
maintain the fund register where the controls are compliant with our standards, and our intention to apply a consistent approach to our wider cryptoasset proposals in CP25/25. This included that we do not view the use of public DLT networks within fund management as outsourcing.

2.17 Several respondents asked us to confirm if they needed to maintain ‘mirror’ records
of on-chain information off-chain, where they could meet our operational resiliency requirements using on-chain data as the primary day-to-day record of this information. Our response We have taken on board feedback and altered our guidance to confirm that firms need not maintain a duplicate ‘mirror’ of on‑chain information where our requirements are met. The on-chain record of transactions may be considered the primary books and records for this activity. We proposed guidance to highlight the risk that an interruption to the DLT network could prevent the firm responsible for operating the register from establishing the position of unitholders. Our rules require that an investor or any other entity wishing to inspect the register can do so. We have altered our finalised guidance to refer also to investors and any entities inspecting the register or effecting/instructing transactions in units. We have decided not to proceed with some proposed guidance in the ‘Money Laundering Regulations’ section of the proposed legal instrument: COLL 6 Annex 4.29 – 4.32. We want to make sure the guidance is helpful and proportionate and does not add to Handbook text unnecessarily. The guidance repeats firms’ existing obligations which are well-understood. We will retain the reference to firms needing to consider whether they require Money Laundering Regulations (MLR) registration. Additional areas of feedback
2.18 Tokenisation affects many sectors. Respondents shared feedback about additional
areas which will influence the uptake of fund tokenisation in the UK. Many of these issues are outside of the scope of our proposed guidance for fund registers maintained on DLT and are therefore not in scope of the final guidance.
2.19 Token and network standards: Several respondents noted the importance of
consistent, high-quality and international standards to support regulation, enable interoperability (between firms and networks) and projects to scale. They referred to several areas where industry-agreed standards may be useful, such as:
i. token standards to support compliance, data-sharing, and auditability
ii. digital legal identifiers
iii. consistent data and messaging standards, particularly for cross-chain
interoperability
iv. digital token identifiers for traceability, auditability and data consistency.
2.20 Firms also explained that consistent token and on-chain data standards across networks
would support the composable finance vision in Chapter 5.

2.21 Respondents were divided on our role in developing standards. Some called on us to
set particular standards in regulation or guidance. Others called on industry forums to develop common standards for regulators to endorse, or highlighted the role of standard setting bodies.
2.22 Secondary trading: Several respondents observed that tokenisation has immediate
potential to increase secondary market transactions in fund units, enabling existing holders to sell their units to another person, via a payment method agreeable to both parties. Peer-to-peer trades (P2P) can allow the parties to update the identity of the registered holder directly on a DLT register.
2.23 On-chain ID: Respondents outlined that it would be desirable to use digital solutions to
support KYC processes and create operational efficiencies.
2.24 Tax: Firms requested further clarity on the tax implications of some blockchain
transactions, for example whether tax events would be crystallised if a fund unit was transferred between blockchains. We understand that industry participants are working with HM Revenue and Customs on these points. Our response We acknowledge that standards have an important role in facilitating the development of tokenisation markets, including in the funds industry. Common standards can support automation, compliance with financial and data regulations, and facilitate inter operability. We are guided by the principle of outcomes-based regulation, therefore we do not – at this stage – see a need for the FCA to set specific standard that firms must follow. Depending on different business and client needs, different standards may be used. At the same time, we encourage firms and industry forums to consider standards and we encourage consistency. The availability of P2P trading raises a number of issues including the need for clear and proportionate disclosures on the implications of different tokenisation models. If trading is permitted on a continuous or near-continuous basis, it should be clear when settlement is finalised. For example, if P2P transfers over a weekend were reflected on Monday, or if the DLT record at the time of the transfer during that weekend can be considered evidential, subject to any whitelisting or other arrangements. Firms should also ensure that where P2P trading is permitted, investors are informed of adequate information on the price of units, such as through the release of indicative prices using an Oracle or conventional equivalent. Fund disclosures should also specify whether costs associated with such transfers, including gas fees, are borne by unitholders and whether these vary based on the volume of transactions on a particular blockchain. We are interested in hearing further from firms on what regulatory standards or industry good practices should be in place where this functionality is used by authorised funds.

We acknowledge the importance of on-chain solutions to identify investors in facilitating digital markets and supporting the distribution of tokenised funds. We agree that the appropriate way to progress this priority is through industry forums or standard setting bodies, given its impact on the digital retail investment journey. The current MLR registration requirement, while outside the scope of the CP, was highlighted by many respondents who called on the UK authorities to deliver a streamlined path for authorised firms or for HMT to remove the obligation. These responses were submitted before the Treasury laid the final statutory provisions in Parliament to create a new financial services regulatory regime for cryptoassets, including issuance of stablecoins and the safeguarding (custody) of qualifying cryptoassets and specified investment cryptoassets, which will come into force in October 2027.
Part 6 included consequential amendments to the MLRs to account
for the relevant new regulated cryptoasset activities. Firms authorised for the new regulated cryptoasset activities or specified investment cryptoasset firms will not be required to register additionally as “cryptoasset exchange providers” or “custodian wallet providers” under the MLRs. They will need to notify us if they intend, or have begun, to act as a cryptoasset exchange provider or a custodian wallet provider either before or within 28 days of doing so. They will also need to notify the FCA if they cease to act as a cryptoasset exchange provider or a custodian wallet provider within 28 days of ceasing to act as such. Other than the requirement to register, the existing requirements of the MLRs will continue to apply to these authorised firms in full, as they would have done previously when the firms were required to register. Under the amended regulations, a specified investment cryptoasset firm is a person who has permission to carry on a regulated activity other than one specified by Chapter 2B of Part 2 of the Regulated Activities Order and carries on activity under that permission in relation to specified investment cryptoassets. A firm carrying on regulated activities specified by Chapter 10 (Collective Investment Schemes) of the Regulated Activities Order (RAO), in respect of units in a collective investment scheme that is a cryptoasset, would not need to register additionally with effect from the commencement day of the amended regulations in respect of that activity. Firms also requested an Article 72AA-like exemption so that UCITS/ AIF managers do not need to apply for multiple overlapping permissions under the new regime, for example when operating the register of a fund. Under the existing article 72AA of the RAO, activities carried on by a person with or for the purposes of managing a UK UCITS or AIF, are excluded from any other activity specified by Part 2 of the RAO. This includes the new cryptoasset activities.

These provisions address the feedback firms raised at the time of consultation. In CP26/13, we’re consulting on draft guidance, setting out how the new legislation applies to cryptoassets and activities when the regime goes live in October 2027. This will help firms understand what permissions they might need. We’re seeking feedback on our interpretation of the new regulated cryptoasset activities, including issuing qualifying stablecoins, trading, dealing, safeguarding and staking. We are seeking responses by 3 June 2026.

Chapter 3
A new direct dealing model
3.1 This chapter sets out feedback on our proposals to introduce a new direct dealing
model, referred to as ‘direct to fund’ (D2F), for processing unitholder deals in units of authorised funds, and our response. We also include feedback and our response on some of the related fund efficiency or technical changes proposed in Chapter 3.
3.2 D2F is applicable to both existing conventional funds and tokenised funds. We noted that
introducing the model at this time might allow firms to consider changes to platforms and other operational changes in respect of tokenisation, D2F and T+1 settlement collectively. We asked:
Question 6: Do the proposals in this chapter provide adequate flexibility for firms considering tokenisation and the migration to T+1 securities settlement?
3.3 Respondents welcomed the introduction of D2F as an optional alternative model.
They noted that it is an attractive proposition to firms operating in multiple domiciles by allowing a broadly consistent process across their fund ranges. Many noted this consistency would aid firms responding to market changes such as shortened settlement and tokenisation.
3.4 Many responses observed that D2F may be particularly helpful in simplifying atomic
settlement on-chain for primary deals in authorised fund units, with a number of responses suggesting that D2F is required for atomic settlement of new units. Firms and consumer representatives observed that tokenisation and shortened settlement of underlying assets could help align fund and asset settlement cycles and reduce operational risk. We also received feedback that D2F would simplify reconciliation processes and aid real-time reconciliation.
3.5 A number of respondents reflected on our proposal to prohibit AFMs from dealing as
principal in the units of a fund using D2F. They noted that the prohibition as drafted could prevent the AFM from providing liquidity in fund units where a tokenised fund allows 24/7 settlement of units in a secondary market. Our response We will continue to monitor the progress of firms implementing T+1 project plans. In May 2025, key asset management trade associations recommended that firms alter their fund settlement timings to T+2 from 11 October 2027. We support the trade bodies’ recommendation and have communicated our position that where UK authorised funds and recognised schemes invest predominantly in markets that will operate on T+1 settlement, moving unit transactions to T+2 settlement would be in investors’ interests.

Following feedback, we have amended our rules as consulted on to allow firms to deal as principal in units of a fund using D2F, and the use of different dealing models within a fund or sub-fund. Direct dealing in authorised funds
3.6 Under current UK market practice, the AFM acts as principal in unit deals with
unitholders of authorised funds, buying units from redeeming investors (redemptions) and selling units to subscribing investors (sales). The AFM maintains a float of units commonly known as the manager’s ‘box’ in each fund to do so, and initiates separate, but often back-to-back, transactions to issue or cancel units with the fund or depositary to manage the level of units of each fund held in the box. We set out details of the controls in our existing rules on box operations in Chapter 3 of CP25/28.
3.7 In the D2F model the fund or its depositary, rather than the AFM, acts as principal in
unit deals with unitholders. Investor deals are effected through a single-stage issue and cancellation of units in the fund, in exchange for settlement of cash between investors and the fund. This is technically permitted under our current rules. However, many of our rules are drafted on the basis of current market practice whereby the AFM deals as principal.
3.8 We proposed to introduce D2F as an optional, alternative process. We indicated we
would continue to support use of both direct dealing, including in the form of D2F, and the existing box/principal model, both of which are effective means of delivering good consumer outcomes. We intend to allow all AFMs flexibility to adopt the most efficient unit dealing model for their funds.
3.9 We asked:
Question 7: Do you support the introduction of an optional regime to allow for direct dealing in authorised funds?
3.10 Respondents overwhelmingly supported introducing D2F, because of its increased
efficiency and consistency with fund operations in other jurisdictions. It enables firms to streamline and simplify fund operations, which could enhance the competitiveness of UK funds and firms in the sector.
3.11 Feedback focused on three points which respondents indicated were key to the uptake
of the new model:

• our proposal that unattributable payments should be transferred to a client money
  account of the AFM;
• controls on use of umbrella-level cash accounts; and
• the role of the depositary in relation to anti-money laundering (AML) controls.

3.12 A number of firms and trade bodies also suggested clarificatory changes on the draft
legal instrument.
3.13 Responses from depositaries and fund service providers highlighted that they would
also bear implementation costs if they chose to support such funds. Depositaries also requested further clarity on the allocation of AML responsibilities for end investors in authorised unit trusts (AUTs) and authorised contractual schemes (ACSs) under the D2F model. They noted that some responsibilities could pass to the depositary, and that in the CP we had said we did not have a definitive view pending further work with industry participants. A number of these responses reported on work between AFMs, depositaries and the Joint Money Laundering Steering Group, and called on us to support this. Our response We welcome the broad support for D2F, and are finalising our rules largely as consulted on in the CP. Recognising the efficiency of the new model, the potential benefits for UK competitiveness, and the optional status of the model, our rules will be effective immediately. In the CP we said that where it was proposed to operate an AUT or ACS using D2F, identifying the relevant person or persons responsible for AML controls on end investors may require specific analysis, based on the instrument constituting the scheme and the effect of broader UK legislation. In many cases it may not be economically viable or practical for the depositary to take on responsibility for such obligations. We indicated our intention to explore this further with industry participants, given the specific challenges where a scheme does not have legal personality and is itself unable to act as a responsible person. We remain supportive of the industry work to provide clarity on this point. Firms proposing to launch new funds using direct dealing, or convert existing funds to direct dealing, will need to ensure scheme documents specify who is responsible for AML and will carry out this activity. Issues and cancellations account
3.14 The D2F model uses a specific bank account, an ‘Issues and Cancellations Account’ (or
IAC), to receive payments from, and make payments to, investors. This is consistent with practice in other fund centres. We proposed to recognise the purpose of the IAC in COLL and the respective responsibilities of the AFM and depositary, given the IAC would constitute scheme property of the relevant fund.
3.15 We proposed to allow firms to operate omnibus IAC accounts at umbrella level, subject
to certain safeguards including rules to ensure compliance with the UK’s protected cell legislation in the OEIC Regulations and FSMA. In broad terms, this requires that the assets of a sub-fund of an investment company with variable capital (ICVC) or ACS must

belong exclusively to that sub-fund and cannot be used to discharge liabilities of any other person, including the umbrella itself or another sub-fund. Any legal agreements an ACS or ICVC enters into must reflect this segregated liability, and any provisions or activity that is inconsistent with this are void. Umbrella AUTs are managed in accordance with trust law.
3.16 We proposed not allowing overdrafts on omnibus accounts, or for sums received ahead
of settlement date on a sub-fund to cover unpaid sums on another (use of cash).
3.17 We also proposed a set of general requirements to ensure that use of an umbrella IAC
would not pose undue risk to unitholders. We proposed guidance in COLL, consistent with practice in other jurisdictions, on steps an AFM should take when making this assessment. This included considering the use of leverage within the sub-funds of the umbrella and whether the intended investors in the target market of the fund could give reason for the AFM to anticipate higher than normal volumes of late payments. We asked:
Question 8: Do our proposed requirements for operation of the IAC provide a proportionate control environment while ensuring funds are operated, and overseen, in line with principles of segregated liability? Question 9: Do you agree with our proposals in respect of overdrafts and limits on fund exposure to a given bank or group? If not, why?
3.18 Respondents agreed that the operation of any umbrella level IAC must ensure
compliance with the protected cell legislation (PCL). But views varied on our interpretation of this legislation. Some responses argued that the PCL could accommodate an accounting or attribution-based approach to determining the assets and liabilities of a sub-fund where cash is held in an omnibus account, rather than requiring tracing of the settled cash balance. They observed that given the volume and timing of payments from the account, if an attribution basis is not permitted, many firms would be unable to operate an omnibus account within the PCL. This would significantly limit uptake of the new model. Responses referred to similar legislation and guidance in other jurisdictions which allow an attribution approach. Our response We have engaged extensively with industry participants, trade bodies, and the Treasury on interpretation of the PCL. This includes the implications of the voiding of agreements, contracts and legal documents that are inconsistent with the applicable legislation. There remains significant doubt as to whether operational processes that could result in overdrafts on, or fungible use of cash in, the IAC can be utilised in respect of funds subject to the PCL, without this resulting in either breaches of the PCL, or the potential for breaches and voiding of terms. We understand that in practice, this would require firms using D2F to operate individual sub-fund IACs. There may be limited circumstances where all expected payments

could be sequenced, for example in a non-daily dealing fund with a small group of investors, and firms may wish to explore, including with legal advisors, whether such schemes could use an omnibus IAC and comply with the PCL. We want to ensure that D2F can be efficiently utilised by all forms of authorised fund in a way consistent with international practice. We are exploring options with the Treasury on how to accommodate broader use of D2F. We and fund management industry stakeholders consider that it may be necessary to amend the OEIC Regulations and FSMA to provide a clearer legal basis for D2F that is consistent with the PCL. In the interim, we have amended our rules to reflect the PCL more closely to minimise conflicts and overlapping terms with the PCL. We acknowledge that most firms managing an umbrella will need to use individual sub-fund IACs in order to ensure compliance with the existing PCL. Where a firm proposes to use an omnibus IAC, for example where all cash movements in that omnibus IAC can be sequenced, this should be supported by legal advice on whether the proposed model can be operated at all times in compliance with the relevant PCL. We have amended our draft rules to incorporate this and provided additional guidance on the factors firms should consider when assessing any proposed model against the PCL. This provides a first stage for firms to adopt the model, and setting out our overall rules now will allow other firms and service providers to commence development of operational procedures while further work continues.
3.19 We also proposed withdrawing our existing guidance in COLL 5.2.11AG (3) and COLL
5.6.7AG (3), so that all cash held by the depositary of a UCITS or a non‑UCITS retail scheme (NURS) is included when calculating exposure to the depositary for the purpose of limiting the spread of risk. We indicated we would provide a 12-month period for firms to adjust operational processes if this guidance were withdrawn. We asked:
Question 10: Do you agree we should include all cash held at a given bank within our spread of risk rules for UCITS and NURS? If not, why?
3.20 Firms generally supported or did not comment on our proposal to withdraw our existing
guidance. Respondents agreed with our commentary in CP25/28 on remediation of inadvertent breaches arising from processing of large issue and cancellation orders, through processing of relevant payments on the relevant settlement date. Our response We will proceed with our proposals as consulted upon.

Implications of the IAC forming part of scheme property
3.21 We proposed to retain or extend the application of existing rules and principles to
cash held in an umbrella. We set out draft rules governing the conditions for use, reconciliation and operation of IAC accounts. We proposed that sums in the IAC that have been attributed to a sub-fund following reconciliation should appear in the accounts for that sub-fund, and unattributed sums should be promptly removed from the IAC by the AFM and returned to sender or placed into a client money account of the AFM.
3.22 We also proposed that, notwithstanding the controls above, or pending performance
of reconciliations, any cash held as scheme property that could not be attributed to a specific sub-fund would be subject to existing rules requiring it to be allocated between sub-funds in a manner which is fair to unitholders in the umbrella.
3.23 We proposed that these sums, whether attributed or allocated, should appear in
exposure calculations to the bank operating the relevant account, as the fund would still bear credit risk to that bank. However, to avoid pricing errors, we proposed that sums the AFM reasonably believes could not be attributed to a sub-fund should not be included in the price of any sub-fund. We noted that firms may choose to use alternative pricing processes where this achieved the same outcome. We asked:
Question 11: Do you agree with our proposed accounting controls in respect of use of the IAC? If not, why?
3.24 Most responses supported our pricing and spread of risk calculation proposals. A
number of responses considered how these operations might work in a tokenised environment, for example fractional share issuance, or use of smart contracts to refund excess payments to investors or apply equalisation if payments occur prior to Net Asset Value (NAV) calculation. Some argued that the IAC should not be considered scheme property, but an account operated by the manager.
3.25 We received significant feedback from firms and trade associations on our proposal to
require unattributable payments to be returned or paid into a client money account. They indicated that use of a client money account in this way would detract from the overall objective of the model and severely limit its adoption. Many argued that using an AFM client money account would offer no greater protection than the IAC and could complicate returning payments to the remitter. Firms and trade bodies noted that the money would not have been paid to the AFM, so using this route could add compliance costs, including bringing the IAC within the AFM’s CASS audit.
3.26 Depositaries and custodians asked whether cash held in the IAC counts as scheme
property in registered form under our registration-of-title rules (e.g. COLL 6.6.12R). They also sought clarity on whether a transfer agent would act as a depositary’s delegate rather than the fund manager’s, and on how register or transfer agent functions should be performed or overseen.

Our response
We can confirm our position that all cash held in the IAC should be considered scheme property. We are proceeding with our proposed rules on how unattributable sums are to be treated for fund pricing and spread of risk purposes. Cash in the IAC is not scheme property in ‘registered form’ for the purposes of our registration of title rules. Some other jurisdictions do permit optional use of a client money account to hold unattributable sums. However, following feedback, we have determined that requiring use of a client money account is not the right default approach for unattributable sums. The proposal aimed to address payments outside normal unit-dealing processes, including large unreconcilable payments into the IAC that could expose the fund and its investors to excess credit risk. Our final rules include updated requirements in COLL for cash held as scheme property in the IAC. We have also incorporated stronger controls on reconciliations. The manager must reconcile any IAC daily, or as often as the fund deals. Any money received into an omnibus account must be allocated promptly – and no later than 5 business days after receipt. Until it is allocated to a sub-fund or investor, it should be recorded as unattributed money and handled as described in paragraph 3.22 above. If the money is still unattributed after 5 business days, the AFM must instruct it to be returned to the sender. The AFM may also move such payments to a designated bank account within scheme property at any time, and must do so if instructed by the depositary. These changes strengthen reconciliation requirements and provide an appropriate degree of protection to investors. Our existing rules require scheme documents to specify responsibility for unit dealing and register operations, including any delegation. We have made consequential amendments to certain definitions in the instrument to ensure this position is retained.
3.27 We proposed to introduce direct dealing for LTAFs and QISs in the same way as for
UCITS schemes and NURS. We also suggested updating our valuation rules so that, when Long‑Term Asset Funds’ (LTAF) use omnibus or individual IACs, the AFM can value cash or liquid assets like gilts in the usual way. We asked:
Question 12: Do you agree with our proposal to provide additional clarity on cash held by LTAF and the requirement to appoint an external valuer? If not, why?

3.28 Most firms agreed with the proposal, saying it would improve clarity and make practices
more consistent across the industry. Some respondents suggested expanding it to include near-cash assets, like short-term deposits and money market instruments. Others noted that, although they support the change, LTAF managers already usually carry out valuations themselves under existing rules (COLL 15.2.6(2)), with help from an independent valuer if required.
3.29 Several responses noted that, in future, valuations could come from on-chain data –
such as oracle feeds – and from tools provided by non-financial tech companies. Our response We will proceed with our proposed amendment on cash held by LTAFs. We note the comments on the scope for and accountability of on-chain data providers and will consider this in future phases of our tokenisation work. Investor disclosures and changes to existing schemes
3.30 We found no need for major changes to our rules on scheme instruments or fund
prospectuses. We proposed some consequential amendments, including requiring direct dealing fund prospectuses to explain briefly what happens if an investor or the fund becomes insolvent or cannot make payments. We also proposed that any unattributed sums in an IAC must be resolved before any scheme of arrangement involving scheme property of a direct dealing fund can take effect.
3.31 We suggested that introducing direct dealing could be treated as a ‘notifiable’ change,
provided that the AFM has properly assessed the potential risk of contagion where an omnibus IAC is used, and the specific requirements of the PCL. For example, the AFM should ensure no sub-funds in the umbrella with a substantially different risk use the same IAC. We asked:
Question 13: Do you agree with our proposals in respect of investor disclosures and communications? If not, why?
3.32 Firms mostly agreed with our proposals on investor disclosures and how scheme
changes for D2F should be classified. They also agreed that disclosures should be clear and transparent to help investors make informed decisions. Our response We have made final rules generally as consulted on. We have amended our existing rule on the contents of the instrument constituting a scheme to reflect changes in how units in a AUT or ACS can be issued by the AFM.

Treatment of cancelled deals
3.33 The AFM can cancel deals in fund units if an investor fails to complete them. When the
manager acts as principal and chooses not to recover costs from that investor, it must absorb those costs itself. We proposed that, for direct-dealing funds, the manager should also bear any interest costs – above a de minimis level agreed with the depositary – when the AFM decides not to cancel the deals. We asked:
Question 14: Do you agree that fund AFMs should bear the cost of exercising discretion for late payments? If not, why? Question 15: Are there scenarios where this may not be appropriate or such costs should be allocated differently?
3.34 Respondents generally supported the proposal, noting that AFMs are best placed to
decide for how long an investor should be given a grace period before a trade must be cancelled.
3.35 Respondents said firms may agree terms allowing them to recover interest or
losses from the investor but should not pass any fees to the fund that would unfairly disadvantage compliant investors.
3.36 Most respondents did not give examples of when it would be inappropriate for the
AFM to bear these costs or when costs should be allocated differently. Those who did so generally agreed with the principle but said the AFM should not pay when delays are caused by factors outside its control, such as banking issues, investor settlement failures, or cross-border transfer problems. Our response We will finalise the rules as consulted on.

Chapter 4
Near-term steps for fund tokenisation
4.1 In Chapter 4 of CP25/28 we summarised feedback to Chapter 7 of CP23/28, ‘Updating
the regime for Money Market Funds’ and set out our early thinking on barriers to the uptake of tokenised funds. We asked discussion questions on:

• how funds could operate fully on-chain using money or money-like instruments that
  operate with programmable ledgers for settlement.
• authorised funds’ ability to hold tokenised investments.
• the use of public DLT networks.
  Tokenised money market funds and response to CP23/28
  4.2 In our response to feedback on CP23/28, we confirmed we are supporting firms
  exploring use of tokenised assets to aid collateral mobility and are working with the Bank of England to take this forward. We also confirmed the categories of MMF which are eligible for collateral for uncleared transactions under UK EMIR. Respondents welcomed our statement of support for collateral initiatives and our work with the industry and standard-setting bodies.
  4.3 Respondents welcomed the clarification on which kinds of MMF can currently be used
  as collateral for uncleared UK EMIR trades. However, they noted that the existing rules would exclude most widely-used MMFs. In particular, the look-through haircut requirement makes the use of certain MMFs impractical. They also pointed out that many MMFs hold commercial paper and bank deposits, while public debt MMFs rely on reverse repos. Firms and trade bodies asked UK authorities to consider technical fixes and encouraged a more holistic approach for cleared transactions, referencing recent work by the Bank of England and the US Treasury on gilt and Treasury clearing.
  4.4 In our response to CP23/28 feedback, we noted that any extension of eligible MMF
  categories must be within an acceptable risk tolerance and must ensure that collateral remains safe, liquid and accessible during market events. We intend to take this discussion forward in collaboration with the Bank of England, the Treasury and firms via the Wholesale Financial Markets Digital Strategy. Supporting use of stablecoins to settle unit deals
  4.5 In Chapter 4 of CP25/28, we looked at how authorised funds could use digital assets
  for non-investment purposes, such as settling unit transactions, paying distributions, and covering gas fees on DLT networks. We explained how our rules might be adapted to allow these uses. We also suggested that an interim approach could be introduced through rule modifications or waivers – where the legal conditions are met – before making formal rule changes later. The CP included a template showing how this could work.

4.6 We asked:
Question 17: Are there any other purposes for which funds, fund managers, or investors may need to hold cryptoassets to support fund operations on-chain? Question 18: Would our potential amendments to COLL provide sufficient flexibility for firms to use digital cash and money like instruments for operational purposes, including unit dealing? Question 19: Would a limited sandbox or standard waivers/modifications be appropriate routes to allow us to develop a final regime in collaboration with industry? What features may be desirable in such a regime? Question 20: Do any other areas of our rules conflict with or prevent use of digital cash instruments or money-like instruments for unit dealing, distribution payments, or for payment of charges and fees?
4.7 There was strong support for allowing authorised funds to use digital cash and
money-like instruments for operational purposes. Respondents suggested other uses such as governance tokens, staking to speed up transaction validation, supporting cross-chain activity with wrapped tokens, making payments to service providers, and settling trades in the fund’s underlying assets.
4.8 Firms noted that some stablecoins can be used to pay gas fees on Ethereum and that
certain layer 2 chains accept Ether as non-native payment for gas. Some firms noted that the definition of ancillary liquid asset in the draft template should have included ‘or’ rather than ‘and’ when distinguishing between settlement utility and payment of gas fees.
4.9 Some depositaries supported the flexibility but asked for additional clarity on the
interaction with other FCA requirements, such as our Client Asset Sourcebook (CASS) rules on custody, segregation of client assets and reconciliation of records. They also asked us to clarify our expectations on depositary oversight of the fund manager.
4.10 Respondents had mixed views on using a sandbox or waiver/modification process. Many
supported these as a flexible way to adapt to changing market practice, while others urged quick implementation of final rules to give certainty. Firms also warned that limiting stablecoin use to UK-issued products could reduce accessibility.

Our response:
We want to support the development of on-chain cash instruments and fully on-chain funds in the UK. We agree that some funds might require use of stablecoins for a broader range of operational purposes, including settlement of trades in assets held by the fund. Firms are exploring this while wider stablecoin and cryptoasset regulatory changes are underway. We are open to further discussion with stakeholders on specific product requirements or what an interim regime might involve. We do not plan to restrict stablecoins to UK-issued products at this time, but will monitor market developments. This includes assessing other instruments and the use of stablecoins for settling securities. This will recognise the differing systemic relevance of fund settlement vs securities, and the instruments eligible for settlement in the Digital Securities Sandbox (DSS). Firms may use the template as a baseline to support applications to waive or modify our rules. This will allow funds to hold digital cash and money-like instruments to support the use-cases set out in CP25/28, including settling unit deals, maintenance of the fund register, processing of eligible payments from scheme property, and the settlement of eligible underlying investments. We are also open to consideration of applications to modify our rules on unit dealing to allow for settlement other than via cash. The draft modification was intended to address the holding of assets that, without the modification, would not be eligible investments for an authorised fund. Where assets constitute an existing eligible form of scheme property our existing COLL rules would apply, rather than the ancillary digital assets modification. For example, a tokenised instrument that constitutes a deposit would be subject to our applicable rules on the proportion of scheme property that can consist of deposits with a single body and the status of that body. The template was drafted to allow firms to hold such assets only to the extent reasonably necessary to undertake the set activities. This includes holding a de minimis float of such assets in order to avoid frequent acquisition and disposal. Under article 72AA of the RAO, firms managing a UK UCITS or AIF are exempt from other RAO activities where such other activities are carried on in connection with or for the purposes of managing the relevant fund. The Cryptoasset Regulations keep this exemption for the new cryptoasset activities. This means that these firms can safeguard qualifying cryptoassets and relevant specified investment cryptoassets (SICs) without needing the new 9N authorisation (safeguarding of qualifying cryptoassets and specified investment cryptoassets) if carrying on the cryptoasset activity falls within the scope of the exemption. In CP26/4, we consulted on safeguarding rules for client

cryptoassets and SICs, including how this extended exemption applies to the new CASS 17 rules for both full-scope and small AIFMs. Under existing provisions in Article 42A of the RAO, a firm with permission to act as a depositary of an AIF or UCITS is excluded from the activity of carrying out safeguarding and administration of investments, or arranging safeguarding and administration of investments, in respect of that AIF or UCITS. The Cryptoasset Regulations extend this to safeguarding qualifying cryptoassets and related SICs. These firms will therefore not need the new 9N authorisation when acting as a depositary. Subject to future consultation, we expect CASS 17 to apply to depositaries when safeguarding qualifying cryptoassets and SICs, in line with how CASS 6 applies to UCITS and AIF depositaries. Our rules require assets of a UCITS or an AIF managed by a full-scope AIFM to be entrusted to a depositary for safekeeping, in accordance with our custody rules, or through verification and record-keeping processes. For authorised funds, additional obligations apply on registration of title to scheme property. Where a cryptoasset does not constitute a UCITS or AIF custodial asset, or a specified investment held by the depositary of a UCITS or authorised AIF managed by a full-scope AIFM, our rules on verification and record-keeping would apply. Firms acting for authorised funds will need to assess if a cryptoasset constitutes registrable property for the purposes of our registration of title rules. Question 21: Would our existing rules, including the Consumer Duty, provide enough protection for investors if we allow a fund to hold cryptoassets for settlement and fund operational purposes only?
4.11 Respondents broadly agreed that the Consumer Duty and our existing rules
provide effective investor protection in an environment enabling innovation. Many responses also observed that equivalent risks exist in conventional markets, for example interim settlement exposures to banks. Consumer groups and many firms suggested disclosures should be proportionate and focus on material risks from using cryptoassets in fund operations or settlement, consistent with expectations for conventional products. Our response We intend to allow firms to use cryptoassets for non-investment purposes as set out above, while remaining open to discussion with individual firms and trade bodies on alternative approaches. We agree that disclosures should be proportionate and targeted, and focused on outcomes. For example, firms should use plain language to explain the impacts of using stablecoins for settlement, including the loss or compromise of private keys.

Tokenised financial assets
4.12 In the consultation, we confirmed that we did not see any regulatory barriers preventing
UK authorised funds from investing in tokenised forms of eligible assets. This was intended to give firms confidence to explore more fully on-chain funds investing in tokenised assets. We asked:
Question 22: Are there other associated regulatory, operational or commercial barriers to investing in tokenised assets? What could we do to address these issues?
4.13 Respondents generally agreed that our rules do not discriminate against tokenised and
non-tokenised assets in terms of investment and borrowing powers for UK authorised funds. Some firms raised concern that transactions in tokenised financial assets could require them to apply for registration as a cryptoasset exchange or custodian wallet provider under the MLRs.
4.14 Respondents raised commercial and operational concerns around the limited uptake
of investments in tokenised assets, ranging from simple liquidity concerns on the secondary market to valuation and pricing challenges where tokenised assets trade on a continuous basis.
4.15 Custodians and depositaries asked us to clarify our expectation of their safekeeping
duties in the context of tokenised assets, such as multi-party authentication and key management and recovery procedures. Depositaries requested clarity on how to evidence control and ownership of tokenised assets. Our response We note that responses to the CP closed before the Treasury published the Cryptoasset Regulations, which provides a new framework and certain exemptions from registration under the MLRs. Part 6 of the Treasury’s final instrument includes consequential amendments to the MLRs to account for the relevant new regulated activities. In effect, firms authorised for the new cryptoasset activities or specified investment cryptoasset firms will not be required to additionally register as “cryptoasset exchange providers” or “custodian wallet providers” under the MLRs – they only need to notify the FCA. The legislation also extends the 72AA exemption for managers of UCITS and AIFs to include new cryptoasset activities. Firms will be able to operate a register maintained on DLT without the additional MLR registration, or new cryptoasset activity permissions. We have consulted on our frameworks to authorise and supervise the new cryptoasset regulated activities, including safeguarding of specified investment cryptoassets. This will include new perimeter guidance, for example, for the custody of specified investment cryptoassets. We’ll consider feedback from this consultation as part of that work.

We acknowledge commercial and operational concerns may limit fully on‑chain funds. We are engaged in the Treasury’s UK Investment Management Taskforce, which is focusing on supporting retail investment in a digital marketplace. Solutions and conventions may develop as we see more activity in the UK. We will follow these developments closely, including working with the relevant accounting bodies. Public DLT networks
4.16 We made a statement that firms could use public DLT networks for fund management,
where they have adequate controls, including of operational resilience. As mentioned in
Chapter 2, respondents welcomed this confirmation. Many firms responded positively to
the alignment between our expectations and the proposals in CP25/25. We will include feedback from this paper is also reflected in the forthcoming non‑Handbook Guidance for firms using public DLT networks, as flagged in CP25/25.

Chapter 5
Future tokenisation models
5.1 We included the discussion chapter on future tokenisation models to elicit
cross-industry views on some longer-term ambitions for the future of retail investment offerings where DLT would be deeply integrated into firms’ products and services. This included commentary on a three‑stage process in which ‘composability’ – breaking down products/services and technological processes into modular components – may enable firms to offer services akin to individual portfolio management at retail scale.
5.2 We wanted to gauge:

• how widespread industry interest is in such initiatives.
• what the opportunities and risks are of doing further work in this area for
  industry and for us.
• how we could begin to support responsible innovation in this area.
• what this might mean for the future of financial markets and regulation.
  Changing consumer demands
  5.3 We wanted to understand how future tokenisation models could align with our
  consumer objectives and ongoing consumer investment initiatives. We asked:
  Question 23: How are changing investor habits and expectations influencing the design of tokenised products?
  5.4 Respondents confirmed that digitisation is reshaping consumer expectations of
  financial services, with demand growing for low‑cost, accessible, ‘on‑demand’ investing via smartphones. Some believe well-designed tokenised products and composable finance can support this, while others warn that composable models may over-complicate investing, require higher levels of management than investing in a collective vehicle.
  5.5 Respondents mentioned some additional investor priorities which products and
  services may need to accommodate in future. These include a ‘bring‑your‑own‑wallet’ capability, rather than requiring clients to hold tokens through a firm’s portal connected to a wallet, or through a particular wallet provider with which a product or service is only compatible. Some also suggested investors want performance and fees calculated only for the exact period an investor is in the fund, rather than between valuation points.
  5.6 Some firms noted that ‘on demand’ investing is not the only desired end‑state. Other
  priorities may drive composable finance frameworks. Pension funds, for example, may prefer customised portfolios to exactly match liabilities, while long-term retail clients might prioritise lower costs over immediate access.

Three stages to progress tokenisation
5.7 We sought to gauge how popular and achievable the composable finance vision was,
following interest in the UK IF3 Lab and Project Guardian forums. To help us explore this, we also wanted to understand firms’ existing priorities. We asked:
Question 24: Do you agree with the three phases described? Are these developments industry is looking to pursue? Question 25: What processes within the fund and investment management lifecycle do firms want to begin to make ‘composable’? Question 26: How does ‘composability’ impact the liquidity profile of assets we currently think of as less liquid or illiquid? Question 27: How might the tokenised portfolio management vision enhance consumer outcomes?
5.8 Respondents were divided in support for the three-stage composable finance vision.
Some championed the potential for greater personalisation of investments via portfolio management arrangements to better meet client needs; others championed the cost savings that smart-contract and protocol-driven investment processes could achieve compared to collective vehicles today.
5.9 Several firms mentioned that the three proposed phases could progress in a
linear fashion, with many firms noting that they could simultaneously progress proofs-of-concept for tokenised fund and tokenised portfolio management projects. Respondents expect these projects to take off once financial instruments are issued on-chain, such as the UK government’s DIGIT.
5.10 Respondents also defended the fundamental benefit of investing in a collective vehicle –
a single investment, providing managed exposure to a portfolio based on an investment objective within a tax-efficient wrapper. This is attractive for retail investors who are not deeply engaged in their portfolio. Relatedly, several firms raised concern that smart-contact and protocol-enabled investing may require investors to understand technological risk as much as investment risk. This could potentially overload investors with risk information and discourage them from investing.
5.11 Respondents generally supported the direction set out in the three stages. Many
called on industry groups to focus on areas offering the most operational efficiency gains, including:

• Dealing: Standardised modules for subscriptions, redemptions and transfers across
  multiple blockchains and distribution channels.

• Fund events: Standardised modules to process corporate actions or income
  accruals while layering specifics (eg pro-rata allocations) on top.

• Eligibility and onboarding: investor and fund eligibility, and AML/KYC verification,
  could benefit from standardised information.
  5.12 Respondents agreed that composability would not change the liquidity or suitability
  of the underlying asset for retail investors. Tokenisation may, however, allow assets to be more quickly transferred, which may assist in helping the liquidity of an investor or a portfolio.
  5.13 Respondents who supported the three stages said tokenised cash-flow portfolio
  management in stage 3 could help firms provide hyper-personalised investment offerings, meeting investors’ exact needs (financial, cultural, religious, or social, etc.). Embedded compliance – automated/encoded controls which the technology enforces – may help firms be certain that investors are being treated in accordance with the regulatory standards, including investor eligibility, position limits, or notice periods. Changing roles of asset managers
  5.14 We sought to understand how asset managers’ roles may change throughout the three
  stages. For example, what roles might not exist in future, and what consumer and market implications may need to be considered. We asked:
  Question 28: Do you foresee any other major changes to the role of asset managers or other market participants in a tokenised flows ‘end-state’? What are the opportunities and risks?
  5.15 Many respondents expected an increase in client-facing roles, such as advisers. This
  is because they would set out a personalised plan of financial objectives, needs and liabilities and will be required to turn plans into on-chain instructions, in co-ordination with the portfolio manager.
  5.16 A handful of respondents reflected that the increased retailisation of portfolio
  management may have negative market impacts, such as where asset managers today provide crucial functions in the wider economy, such as corporate engagement and stewardship, which individual investors or cash-flow token holders may not want to perform.
  5.17 Respondents raised new roles that an asset manager may need to take on or outsource
  to new entities as part of their service, akin to third-party fund administration services today. In future, there may be a need for smart contract administrators, token-data utilities and inter-operability facilitators. Respondents generally suggested that protocol-based workflows, such as smart contracts, should not exist without some kind of responsibility and oversight.

Changing regulations
5.18 We sought feedback on how regulations may need to evolve in response to
these changes in consumer demands, market structures and roles of asset managers. We asked:
Question 29: How might market integrity and financial stability risks evolve in the future tokenised portfolio management model? Question 30: What areas of the current funds framework will need to be recreated in the future vision? What areas could be simplified across different parts of the Handbook? Question 31: What areas of the Handbook, or wider rules and legislation, do we need to reconsider to support the growth of the proposed tokenisation models? Question 32: What should the FCA’s role look like in this future vision?
5.19 Respondents noted opportunities to reduce – or even eliminate – some existing
financial stability risks. In their view, tokenised portfolio management does not have the same risk of structural liquidity mismatch as open-ended collective vehicles. Other respondents noted that direct holdings of tokens representing legal entitlement may make instances of insolvency clearer where ownership is not mediated through a chain of complex structures.
5.20 At the same time, respondents mentioned financial stability risks which may increase
in future visions. Atomic settlement automation may increase volatility and downward pressures in stressed markets. This may require firms, market infrastructure providers and regulators to develop new capabilities, such as circuit-breakers and supervisory overrides.
5.21 Respondents also mentioned that some existing operational and cyber risks associated
with DLT will increase in importance as the technology becomes more deeply embedded in financial markets – for example, private key management, coding errors and smart contract malfunctioning.
5.22 Respondents also raised a number of market cleanliness issues. DLT networks which
have a public ‘mempool’ – where pending transactions are queued for validators to order – can be at risk of arbitrage strategies. For example, Maximal Extractable Value (MEV) bots are automated programs which can detect large orders then submit their own transactions with higher gas fees to execute before others (‘front‑running’). Respondents noted that such arbitrage strategies were less common on some networks than others.

5.23 Respondents were divided on the future approach we could take to regulation
in a composable finance end-state. Many conventional financial services firms confirmed they wanted to continue to see our outcomes-based rules which are technology-agnostic. On the other hand, many cryptoasset firms called on us to set more prescriptive technology standards. FCA-set token and smart contract standards would drive consistency and composability, but also set technology-based standards for compliance. Some firms set out a middle ground, where we articulate target outcomes, but recognise some specific standards as valid ways of meeting such outcomes.
5.24 Several respondents suggested we explore embedded compliance standards, such as
investor eligibility, and consider how automating standards could change our rulebook. Some also noted that in future, we and other regulators may want to operate a node which receives regulatory information and reporting automatically, or operate an observer node to monitor key activities.
5.25 In the meantime, respondents agreed that our existing rulebook for portfolio
management was sufficient to allow firms to begin experimenting with these concepts. Next steps
5.26 We encourage firms exploring tokenised portfolio management and composable
finance to take advantage of our open-door policy. We want to hear what initiatives firms currently have, and how composable finance may fit into firms’ existing roadmaps. We also offer our Innovation Services, if required, to support firms looking to explore use-cases.
5.27 Our digital assets roadmap also includes work on a vision for how UK wholesale capital
markets might adopt DLT, including our thinking on regulatory principles and red lines. Composability is a potential component of this work. We intend to seek views from firms on this later in 2026.
5.28 The UK Investment Management Taskforce’s Technology Working Group will take
forward work to progress fund tokenisation and retail digital markets.

Chapter 6
Cost benefit analysis
6.1 This chapter sets out the feedback we received on the cost benefit analysis (CBA) in
CP25/28 and our response.
Approach to the CBA
6.2 In CP25/28, we provided a CBA of our proposals to implement Direct to Fund (D2F), an
optional, simpler, single-stage unit dealing process for authorised funds, which will help facilitate fund tokenisation. Our baseline assumed that we do not intervene and firms do not benefit from this additional flexibility. The cost estimates only reflect familiarisation costs and use our Standardised Cost Model (SCM). We estimated benefits based on our assessment of current fees, and the likely efficiencies D2F could provide to market participants. We approximated these benefits through a 2.5% reduction in costs associated with operating the fund register.
6.3 The cost estimates in our CBA reflected the expenses of introducing D2F. We have
assumed that firms will adopt D2F if it proves to be cost-effective for them. Accordingly, we defined costs as those associated with familiarisation, specifically referring to the time and resources that firms and service providers dedicate to reviewing and understanding the new regulatory documents. We treated this as a one-time expense occurring when the materials are published.
6.4 If a firm were to implement D2F, it would likely incur additional higher costs beyond
familiarisation. Our proposals will not require firms to adopt D2F and we assume they will only do so if it is cost efficient for (i.e. the potential savings exceed the upfront costs). As a result, we have not included these non-familiarisation costs in our CBA, as firms will not incur them if they choose not to implement D2F.
6.5 However, we have decided to increase the familiarisation costs to reflect that some
firms may require additional legal advice when considering whether to adopt D2F. We assume that these firms will incur additional costs associated with obtaining legal advice, whether provided externally or internally. For the purposes of our analysis, we assume that legal advisers will require approximately 10 hours to review the relevant materials we publish, prepare a written summary, and explain the implications to fund managers. On this basis, we estimate an additional cost of £76,000.
6.6 Our SCM suggests a total one-off cost of £176k, and an average cost per firm of
£1.3k. Our SCM identifies 132 firms eligible for D2F benefits.

Table 1. Estimated total and average per firm costs
Regulatory requirement
Transition costs
(per firm)
Transition costs
(population)
Ongoing
Costs
(per firm)
Ongoing
Costs
(population)
Total
Population cost
Familiarisation costs
£1.3k (average*) £176k £0 £0 £176K
Total costs £1.3k (average*) £176k £0 £0 £176K
* Firm average is based on the number of firms impacted, accounting for their size.
6.7 We concluded that the increased efficiency from allowing D2F would outweigh the costs
mentioned earlier.
Our response to feedback on the CBA
6.8 We asked:
Question 33: Do you agree with our assumptions and findings as set out in this CBA on the relative costs and benefits of the proposals contained in this consultation paper? Please give your reasons.
6.9 We received two responses to this question. One respondent raised concerns that costs
may have been underestimated, noting that the expenses required for depositaries to implement the model may not have been fully considered. Conversely, the other respondent acknowledged that certain benefits depend on the introduction of specific regulatory changes. This respondent sought clarification regarding the application of Consumer Duty and CASS. Our response Our cost estimates are based on use of our standardised cost model, as described in our statement of policy. We have assumed all relevant firms will read the proposed new rules, and as a result, incur costs (related to compliance and legal staff time). One respondent stated that the CBA under-estimates costs by overlooking major implementation and ongoing expenses for depositaries adopting the model. However, under the existing model, depositaries already oversee transactions made by fund managers using varied dealing models. There will be no additional mandatory costs to them as a result of our proposed changes. The same respondent also states that adopting the model will introduce new AML monitoring requirements, increasing depositary costs. We note that industry participants are working to clarify this.

Another respondent suggested that for benefits to accrue, some legal clarifications are needed with respect to the application of Consumer Duty and CASS when adopting the D2F. We are working with the industry on this and to make sure benefits accrue. We remain confident that our assessment of the costs and benefits of our proposals is valid, particularly as we did not receive any new information that would warrant changes to our methodology or estimates.

Annex 1
List of respondents
We are obliged to include a list of the names of respondents to our consultation who have consented to the publication of their name. That list is as follows:
Alternative Investment Management Association (AIMA) Apex Group Binance BlackRock Bank of New York (BNY) Brian Kennedy British Standards Institution (BSI) Capital Group CertiK CFA Society of the United Kingdom and CFA Institute Chainlink Labs Circle Internet Financial LLC Coinbase Global, Inc and CB Payments Ltd. CryptoUK Dimensional Fund Advisors Ltd. DTI Foundation Eversheds Sutherland LLP Fabric and Ledger Federates Hermes Ltd. Financial Services Consumer Panel Franklin Templeton Future Law Firm S.t.a.r.l S.B. Global Digital Finance

Hargreaves Lansdown
Innovate Finance
Institutional Money Market Fund Association (IMMFA) International Securities Lending Association (ISLA) International Swaps and Derivatives Association (ISDA) Investment Company Institute Janus Henderson Lloyds Banking Group Loan Market Association London Stock Exchange Group Mobius Life Limited NatWest Trustee and Depositary Services Nomos Research RAMDVG Ltd. Ripple Robinson and Bitstamp Schroders Settley SLIX Finance Ltd. SS&C State Street The Association of British Insurers (The ABI) The Investment Association Thiago Oliviera UK Cryptoasset Business Council UK Depositary Association UK Finance

UK Private Capital
UK Shareholder Association
World Gold Council
ZILO Technology Ltd.

Annex 2
Abbreviations used in this paper
Abbreviation Description
ACS Authorised Contractual Scheme
AFM Authorised Fund Manager
AIF Alternative Investment Fund
AIFM Alternative Investment Fund Manager
AML Anti-Money Laundering
AUT Authorised Unit Trust
CASS Client Assets Sourcebook
CBA Cost-Benefit Analysis
COLL Collective Investment Schemes Sourcebook CP Consultation Paper D2F Direct to Fund DIGIT The Treasury’s Digital Gilt Pilot DLT Distributed Ledger Technology DSS Digital Securities Sandbox ESG Environmental, Social and Governance FCA Financial Conduct Authority FSMA Financial Services and Markets Act HMT His Majesty’s Treasury IAC Issues and Cancellations Account ICVC Investment Company with Variable Capital

Abbreviation Description
IF3 Investment Association’s Investment Fund 3.0 Lab KYC Know Your Customer LTAF Long-Term Asset Fund MEV Maximal Extractable Value MLR Money Laundering Regulations MMF Money Market Fund NAV Net Asset Value NURS Non-UCITS Retail Scheme OEIC Open-Ended Investment Company P2P Peer-to-Peer PCL Protected Cell Legislation PS Policy Statement RAO Regulated Activities Order SCM Standardised Cost Model SIC Specified Investment Cryptoasset Undertakings for Collective Investment in Transferable Securities UCITS Directive UK United Kingdom

Appendix 1
Made rules (legal instrument)

FCA 2026/24
COLLECTIVE INVESTMENT SCHEMES SOURCEBOOK (USE OF DISTRIBUTED LEDGER TECHNOLOGY IN AUTHORISED FUNDS) INSTRUMENT 2026 Powers exercised A. The Financial Conduct Authority (“the FCA”) makes this instrument in the exercise of the powers and related provisions in or under:
(1) the following sections of the Financial Services and Markets Act 2000 (“the Act”); (a) section 137T (General supplementary powers); (b) section 139A (Power of the FCA to give guidance); (c) section 247 (Trust scheme rules); and (d) section 261I (Contractual scheme rules); and (2) regulation 6(1) (FCA rules) of the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228). Commencement B. This instrument comes into force on 30 April 2026. Amendments to the Handbook
C. The Collective Investment Schemes sourcebook (COLL) is amended in accordance
with the Annex to this instrument.
Citation
D. This instrument may be cited as the Collective Investment Schemes Sourcebook (Use of Distributed Ledger Technology in Authorised Funds) Instrument 2026. By order of the Board 23 April 2026

FCA 2026/24
Annex
Amendments to the Collective Investment Schemes sourcebook (COLL) In this Annex, underlining indicates new text and striking through indicates deleted text, unless stated otherwise. 6 Operating duties and responsibilities …
6.4 Title and registers
Application
6.4.1 R …
(2) COLL 6.4.9 COLL 6.4.9R (Plan registers) also applies to the ACD, any other director and the depositary of an ICVC. 6.4.1A G COLL 6.4.10G (Using distributed ledger technology to operate the unitholder register) and COLL 6 Annex 4 (Use of distributed ledger technology for the operation and maintenance of registers for authorised funds) apply to the ACD of an ICVC, the authorised fund manager of an AUT or ACS, and the depositary of an authorised fund. … Plan registers
6.4.9 R …
Using distributed ledger technology to operate the unitholder register
6.4.10 G COLL 6 Annex 4 provides guidance on the use of distributed ledger
technology for the operation and maintenance of the register of an authorised fund. Insert the following new Annex, COLL 6 Annex 4, after COLL 6 Annex 3 (Guidance notes on UK UCITS management company of UCITS schemes: Derivative Use Report (FSA042:
UCITS)). The text is not underlined.
6 Use of distributed ledger technology for the operation and maintenance of
Annex registers for authorised funds
Application and interpretation
6 G (1) This Annex applies to the authorised fund manager and the depositary
Annex of an AUT, ACS or ICVC which is a UCITS scheme or a non-UCITS
4.1 retail scheme.

FCA 2026/24
(2) In this Annex, the person who is responsible for maintaining the register for an authorised fund is referred to as the ‘responsible firm’. Purpose 6 G The guidance sets out the FCA’s views on how distributed ledger technology
Annex (DLT) may be used in the operation and maintenance of the register of an
4.2 authorised fund. It also identifies a number of other matters which firms
should consider.
6 G The guidance is designed for authorised fund managers and depositaries of
Annex authorised funds that are using or considering using DLT in this way.
4.3
6 G In COLL 6 Annex 4.32G to COLL 6 Annex 4.34G (Personal data and other
Annex information recorded on a register using DLT), a reference to a ‘data
4.4 controller’ has the same meaning as in data protection legislation.
Using a DLT network as the primary record of transactions 6 G Where the responsible firm utilises DLT to establish and maintain a register of
Annex unitholders in compliance with the rules and guidance in COLL (including in
4.5 this Annex) and, where applicable, the requirements of the OEIC Regulations,
the on-chain DLT record of transactions may be considered the primary books and records for this activity. Powers of the responsible firm to make changes to the register 6 G The rules in COLL and provisions of the OEIC Regulations require the
Annex authorised fund manager or the depositary of the authorised fund to establish
4.6 and maintain a register of unitholders and ensure it is complete and up to date.
6 G The requirements on the responsible firm to establish and maintain a register
Annex in relation to a UCITS scheme or a non-UCITS retail scheme and keep it up to
4.7 date are set out in the following places:
(1) in relation to schemes that are AUTs or ACSs, COLL 6.4.4R (Register:
general requirements and contents); and
(2) in relation to an ICVC, paragraphs 1 and 3 of Schedule 3 to the OEIC Regulations. 6 G To ensure that a register recorded on DLT is accurate and kept up to date, the
Annex responsible firm will need to have the power and the ability to make
4.8 amendments to the register. Where the register is recorded on DLT, or utilises
records on DLT, the responsible firm will need to ensure that it can amend that register as necessary without requiring the consent or agreement of any third party. This does not extend to consents or agreements that support the normal operation of the DLT network, such as standard consensus mechanisms that validate the authority of those providing instructions to the network.

FCA 2026/24
6 G The ability of the responsible firm to make unilateral changes to such a
Annex register may not exist by default. Such functionality could be delivered
4.9 through ‘smart contracts’ (see COLL 6 Annex 4.14G to COLL 6 Annex 4.18G
(Smart contracts and eligibility verification)), or through off-chain functionality embedded into contractual terms with unitholders. The responsible firm may also be able to effect updates to the register through direct control of private keys, or a ‘master-node’ function. 6 G The responsible firm may utilise multiple DLT networks to establish and
Annex maintain a register of unitholders, even within the same class of units,
10 provided the arrangements are consistent with our rules and the broader regulatory regime. For example, some units in a given class may utilise blockchain A, while other units in the same class may utilise blockchain B. The underlying rights of unitholders, and the charges per unit taken from scheme property, should remain the same within a class. 6 G COLL 6.7.4R(4) does not permit payments to third parties for the safekeeping
Annex or administration of units on behalf of unitholders, rather than on behalf of the
4.11 authorised fund itself.
Remedying changes to a register made by a third party 6 G In addition to being used to operate a register, DLT may provide other
Annex opportunities. For example, DLT may allow distributors or unitholders to
4.12 instruct or request amendments to the register. Records on DLT are formed by
reference to a series of transactions, including ‘burning’ and ‘minting’ tokens representing units, or functionality to ‘freeze’ or ‘unfreeze’ or effect a forced transfer of tokens. DLT may allow distributors or unitholders to instruct or request amendments to the register by submitting new records to the DLT. 6 G In the FCA’s view, the use of DLT to allow parties other than the responsible
Annex firm to alter the register of an authorised fund may still be compatible with the
4.13 rules and the OEIC Regulations, provided the responsible firm is able to make
unilateral changes to the register – for example, to reverse incorrect entries or create new ones. The responsible firm will also need to have processes and procedures in place to identify incorrect entries and take remedial action. Smart contracts and eligibility verification 6 G The use of DLT may enable unitholders to transfer units between themselves
Annex or to third parties. This gives rise to risks that the register is incomplete and
4.14 not up to date and also that a unit may be transferred to a person who is not an
eligible unitholder under the rules, the Act, the instrument constituting the fund or the prospectus. 6 G To address these risks, the responsible firm should consider whether additional
Annex technology controls are required to ensure that the units are transferred only
4.15 to, from, or between eligible unitholders.

FCA 2026/24
6 G One way in which such transfers of units could be controlled is through
Annex arrangements whereby tokens are transferred only to known account numbers
4.16 that the authorised fund manager has verified as belonging to a person who is
an eligible unitholder. This is often referred to as ‘whitelisting’, or having an ‘allow list’ that references a set of addresses on the DLT enabled through ‘smart contracts’. 6 G Such functionality could also be used to keep track of a unitholder’s tax status
Annex or their right to access certain classes of unit with a particular fee rate or
4.17 minimum investment limit. A firm may utilise accepted token standards that
allow for the verification of a unitholder’s identity and ensure that they have the necessary capacity and credentials to hold units. 6 G Where the responsible firm relies on smart contracts for the verification of
Annex unitholder addresses or the operation or management of the fund, these smart
4.18 contracts should be regularly audited to meet evolving industry standards – for
example, in relation to security. This will help the responsible firm demonstrate compliance with its obligations under Principle 2, which requires a firm to conduct its business with due skill, care and diligence, and Principle 3, which requires a firm to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems. Aggregation of units 6 G In broad terms the COLL rules and the OEIC Regulations also require that a
Annex register specifies the number of units in each class held by a unitholder (see
4.19 COLL 6.4.4R(3)(b)) and paragraph 6(1)(c) of Schedule 3 to the OEIC
Regulations).
6 G This may be challenging where an authorised fund uses DLT. For example,
Annex transactions may be recorded across blocks on a blockchain and a unitholder
4.20 may hold positions through different wallets represented by different
addresses.
6 G To comply with the requirements referred to in COLL 6 Annex 4.19G, the
Annex responsible firm should ensure there are systems in place (whether on or off
4.21 DLT) that can aggregate the information held on the DLT.
Management of network risks and outsourcing 6 G An interruption to a DLT network could prevent the authorised fund manager,
Annex unitholders or the responsible firm from inspecting the register, or prevent
4.22 unitholders from effecting or instructing transactions in units.
6 G As already noted, Principle 3 requires a firm to take reasonable care to
Annex organise and control its affairs responsibly and effectively, with adequate risk
4.23 management systems. Firms are also required to assess and manage risks
including operational risks under the requirements in one or more of SYSC 7 (Risk control), COLL 6.11 (Risk control and internal reporting), COLL 6.12 (Risk management policy and risk measurement), FUND 3.7 (Risk management) and articles 38 to 45 of the AIFMD level 2 regulation.

FCA 2026/24
Annex
4.24
G To comply with these requirements, the FCA expects the responsible firm to include within its risk management policies and procedures the risks of DLT network outages. An authorised fund manager should ensure that it has appropriate operational and business resilience plans that enable it to manage such risks.
Annex
4.25
G The authorised fund manager should have alternative processes and contingencies in place to allow for unitholders to buy, sell or transfer their units in the event of a network outage, including where use of fiat money or off-chain processes may be necessary.
Annex
4.26
G In exceptional circumstances where the DLT network becomes unavailable for an extended period of time, the authorised fund manager and the depositary should have processes and procedures in place to allow the authorised fund to be wound up in accordance with the rules in COLL 7, by realising the assets and distributing the proceeds to unitholders proportionately to their respective interests. Inspection of the register
Annex
4.27
G COLL 6.4.4R(6)(c) requires the responsible firm to make the register available for inspection free of charge in the United Kingdom. Paragraph 9 of Schedule 3 to the OEIC Regulations requires the register to be kept available for inspection at the company’s head office or at another place in that part of the United Kingdom where the company is registered and which has been notified to the FCA under regulation 36(3)(b).
Annex
4.28
G To comply with these requirements, a firm should use systems that combine both on-chain and off-chain records where this cannot be achieved fully on DLT. Public or consortium-based DLT networks
Annex
4.29
G Where public or consortium-based DLT networks are utilised to establish and maintain a register of units, this activity may take place overseas or the location of this activity may be uncertain. The responsible firm should consider whether any use of such DLT networks affects the scheme’s domicile. Compliance with the Money Laundering Regulations
Annex
4.30
G The responsible firm will need to ensure it complies with the requirements of the Money Laundering Regulations and applicable sanctions regimes.
Annex
4.31
G A firm may need to be registered as a cryptoasset exchange provider or custodian wallet provider under the Money Laundering Regulations where it is carrying on an activity which requires registration under the Money Laundering Regulations.

FCA 2026/24
Personal data and other information recorded on a register using DLT 6 G Where an authorised fund uses DLT to operate the register, the responsible
Annex firm and/or any other person who is the data controller of the personal data in
4.32 the register (if different) will need to ensure they comply with data protection
legislation. This is particularly the case where public networks are used, and recorded information is not secured through encryption by default. 6 G When considering how to comply with the data protection legislation, the
Annex responsible firm and any other person who is a data controller should consider
4.33 inherent risks, such as the permanence of records on the DLT network, and
that emerging technology, such as quantum computing, could compromise information about unitholders. 6 G Information on DLT may also allow trading strategies to be identified or
Annex deduced. For example, where transactions in units are recorded or instructed
4.34 on DLT before execution at a future valuation point, it may be possible for
third parties to anticipate large deals in underlying securities. Where relevant, a firm should consider the implications of this in product design and ongoing liquidity monitoring controls and ensure that unitholders are not adversely affected. Amend the following text as shown. 8 Qualified investor schemes …
8.5 Powers and responsibilities
…
8.5.8 R …
Using distributed ledger technology to operate the unitholder register 8.5.8A G (1) COLL 6 Annex 4 provides guidance on the use of distributed ledger technology for the operation and maintenance of the register of an authorised fund. (2) The guidance referred to in (1) applies to the authorised fund manager and the depositary of an authorised fund subject to the rules in this
chapter as if:
(a) references to a ‘UCITS scheme’ or ‘non-UCITS retail scheme’ were references to a qualified investor scheme; (b) in COLL 6 Annex 4.7G(1), the reference to ‘COLL 6.4.4R (Register: general requirements and contents)’ was a reference to ‘COLL 8.5.8R (The register of unitholders: AUTs or ACSs)’; and

FCA 2026/24
(c) COLL 6 Annex 4.11G was omitted.
…
15 Long-term asset funds
…
15.7 Powers and responsibilities of the authorised fund manager and the
depositary
…
15.7.12 R …
Using distributed ledger technology to operate the unitholder register
15.7.12 G (1) COLL 6 Annex 4 provides guidance on the use of distributed ledger
A technology for the operation and maintenance of the register of an authorised fund. (2) The guidance referred to in (1) applies to the authorised fund manager and the depositary of an authorised fund subject to the rules in this
chapter as if:
(a) references to a ‘UCITS scheme’ or ‘non-UCITS retail scheme’ were references to a long-term asset fund; (b) in COLL 6 Annex 4.7G(1), the reference to ‘COLL 6.4.4R (Register: general requirements and contents)’ was a reference to:
(i) ‘COLL 15.7.11CR (The register of unitholders: AUTs or ACSs (schemes made available to retail clients who are not limited protection LTAF investors))’; or (ii) (if COLL 15.7.11CR does not apply to the scheme) ‘COLL 15.7.12R (The register of unitholders: AUTs or ACSs (schemes intended only for limited protection LTAF investors)’; and (c) either:
(i) in COLL 6 Annex 4.11G, the reference to ‘COLL 6.7.4R(4)’ was a reference to ‘COLL 15.8.15CR(4) (Payments out of scheme property)’; or (ii) (if COLL 15.8.15CR(4) does not apply in relation to the scheme) COLL 6 Annex 4.11G was omitted. …

FCA 2026/25
COLLECTIVE INVESTMENT SCHEMES SOURCEBOOK (DIRECT DEALING) INSTRUMENT 2026 Powers exercised A. The Financial Conduct Authority (“the FCA”) makes this instrument in the exercise of the powers and related provisions in or under:
(1) the following sections of the Financial Services and Markets Act 2000 (“the Act”):
(a) section 137A (The FCA’s general rules); (b) section 137T (General supplementary powers); (c) section 139A (Power of the FCA to give guidance); (d) section 247 (Trust scheme rules); (e) section 248 (Scheme particulars rules) (f) section 261I (Contractual scheme rules); and (g) section 261J (Contractual scheme particulars rules); (2) regulation 6(1) (FCA rules) of the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228); and (3) the other rule and guidance making powers listed in Schedule 4 (Powers exercised) to the General Provisions of the FCA’s Handbook. B. The rule-making provisions listed above are specified for the purposes of section 138G(2) (Rule-making instruments) of the Act. Commencement
C. This instrument comes into force on 30 April 2026.
Amendments to the Handbook
D. The Glossary of definitions is amended in accordance with Annex A to this instrument. E. The Collective Investment Schemes sourcebook (COLL) is amended in accordance with Annex B to this instrument. Notes F. In the Annexes to this instrument, the notes (indicated by “Editor’s note:”) are included for the convenience of readers but do not form part of the legislative text.

FCA 2026/25
Citation
G. This instrument may be cited as the Collective Investment Schemes Sourcebook (Direct Dealing) Instrument 2026. By order of the Board 23 April 2026

FCA 2026/25
Annex A
Amendments to the Glossary of definitions
In this Annex, underlining indicates new text and striking through indicates deleted text, unless otherwise stated. Insert the following new definitions in the appropriate alphabetical position. The text is not underlined. direct dealing (in COLL) the direct issue and cancellation of units in accordance with:
(a) COLL 6.2.7AR (Issue and cancellation of units by a direct dealing scheme); or (b) COLL 6.2.7AR as applied by COLL 8.5.10R (Issue and cancellation of units) or COLL 15.8.5R (Issue and cancellation of units). direct dealing an authorised fund or a sub-fund which operates, or intends to operate:
scheme
(a) direct dealing arrangements; and
(b) an issue and cancellation account. issue and a bank account held by, or for or on behalf of, an authorised fund or a cancellation sub-fund, the purpose of which is to receive money for the issue of account units and to pay out money for the cancellation of units. omnibus issue an issue and cancellation account held by an authorised fund that is an and cancellation umbrella, for or on behalf of more than one sub-fund. account unattributed has the meaning given in COLL 6.2.7BR(2)(d) (Operation of an issue scheme money and cancellation account). Amend the following definitions as shown. cancellation (in COLL) (in relation to units) a cancellation of a unit by:
(a) an ICVC; or
(b) the trustee, or the authorised unit trust manager where permitted by the trust deed, of an AUT; or (c) the depositary, or the authorised contractual scheme manager where permitted by the contractual scheme deed, of an ACS.

FCA 2026/25 cancellation price (in COLL) (in relation to the cancellation of units in a dual-priced authorised fund) the price for each unit payable by the depositary or the ICVC to the authorised fund manager on that cancellation. issue (in relation to units) the issue of new units by:
(a) the trustee, or the authorised unit trust manager where permitted by the trust deed, of an AUT,; or (b) the depositary, or the authorised contractual scheme manager where permitted by the contractual scheme deed, of an ACS; or by (c) an ICVC. issue price (in relation to the issue of units of a dual-priced authorised fund) the price for each unit payable by the authorised fund manager to the depositary or the ICVC on that issue. limited redemption arrangements (1) (in relation to an authorised fund that is not a direct dealing scheme) the arrangements operated by an authorised fund manager for the redemption of units in an authorised fund where the authorised fund manager holds himself itself out to redeem units in that scheme less frequently than twice in a calendar month in accordance with COLL 6.2.19R (Limited redemption). (2) (in relation to an authorised fund that is a direct dealing scheme) the arrangements operated for the cancellation of units less frequently than twice in a month in accordance with COLL 6.2.19R (Limited redemption). redemption (1) (in relation to units in an authorised fund that is not a direct dealing scheme) the purchase of them units from their holder by the authorised fund manager acting as a principal. (2) (in relation to units in an authorised fund that is a direct dealing scheme) the cancellation of units by:
(a) the ICVC; or
(b) in relation to an AUT or ACS, the depositary or, where permitted by the instrument constituting the fund, the authorised fund manager. sale (1) (in COLL) (in relation to units in an authorised fund that is not a direct dealing scheme) the sale of units by the authorised fund manager acting as a principal. (2) (in COLL) (in relation to units in an authorised fund that is a direct dealing scheme) the issue of units by:

FCA 2026/25
(a) the ICVC; or
(b) in relation to an AUT or ACS, the depositary or, where permitted by the instrument constituting the fund, the authorised fund manager.

FCA 2026/25
Annex B
Amendments to the Collective Investment Schemes sourcebook (COLL) In this Annex, underlining indicates new text and striking through indicates deleted text, unless stated otherwise. 3 Constitution …
3.2 The instrument constituting the fund
…
Table: contents of the instrument constituting the fund
3.2.6 R This table belongs to COLL 3.2.4R (Matters which must be included in the
instrument constituting the fund).
…
Issue or cancellation directly through the ICVC or depositary of an AUT or ACS Direct issue and cancellation of units 11 Where relevant, a statement authorising the issue or cancellation of units to take place directly through the ICVC, or the depositary, or the authorised fund manager of an AUT or ACS. … Restrictions on sale, issue, cancellation and redemption 13 Where relevant, the restrictions which will apply in relation to the sale, issue, cancellation and redemption of units under COLL 6.2.16R (Sale and redemption). … ACSs: UCITS and NURS eligible investors … 27F A statement that the authorised contractual scheme manager must redeem, or in respect of a direct dealing scheme effect the cancellation of, units as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of

FCA 2026/25 subscription or transfer of units) other than a person meeting the criteria in paragraph 27E. … … 4 Investor Relations …
4.2 Pre-sale notifications
…
Table: contents of the prospectus
4.2.5 R This table belongs to COLL 4.2.2R (Publishing the prospectus).
…
Characteristics of the units
…
5A ACSs: UCITS and NURS eligible investors
…
(b) A statement that the authorised contractual scheme manager must redeem, or in respect of a direct dealing scheme effect the cancellation of, units as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in paragraph 5A(a). … Dealing 17 The following particulars:
(a) the procedures, the dealing periods and the circumstances in which the authorised fund manager will effect:
…
(ii) any direct issue or cancellation of units:

FCA 2026/25
(A) by an ICVC or in the case of an AUT or ACS by the depositary of an AUT or ACS (as appropriate) through the authorised fund manager or, where permitted by the instrument constituting the fund, the authorised fund manager in accordance with COLL 6.2.7R(2) (Issue Direct issue and cancellation of units through an authorised fund manager); or (B) in relation to a direct dealing scheme, by an ICVC or, for an AUT or ACS, by the depositary or, where permitted by the instrument constituting the fund, the authorised fund manager in accordance with COLL 6.2.7AR (Issue and cancellation of units by a direct dealing scheme); (b) the circumstances in which the redemption or cancellation of units may be suspended; … (g) the circumstances and procedures for the limitation or deferral of redemptions or cancellations in accordance with COLL 6.2.19R (Limited redemption) or COLL 6.2.21R (Deferred redemption); … (i) whether a unitholder may effect transfer of title to units on the authority of an electronic communication and if so the conditions that must be satisfied in order to effect a transfer; and (j) if the authorised fund manager deals as principal in units of the scheme and holds them for that purpose, a statement of its policy for doing so and, where applicable:
…
(ii) a statement of non-accountability as referred to in COLL 6.7.16G.; and (k) if an issue and cancellation account is used, an explanation of the potential consequences if a person with whom money in the issue and cancellation account has been placed on deposit becomes insolvent or is otherwise unable to make payments.

FCA 2026/25
…
…
5 Investment and borrowing powers
…
5.2 General investment powers and limits for UCITS schemes
…
5.2.5 R …
Valuation guidance
5.2.5A G One of the effects of COLL 5.2.5R(1) is that, for the purposes of this
chapter, sums in an issue and cancellation account which the authorised
fund manager reasonably believes are not attributable to a particular sub￾fund or scheme are excluded from the valuation of scheme property of any sub-fund or scheme (as applicable) (see COLL 6.3.3R(3) (Valuation)). … Spread: general
5.2.11 R …
(3)
(3A) Money in an issue and cancellation account attributed to a sub-fund in accordance with COLL 6.2.7BR(2)(c) or which should be allocated to a sub-fund in accordance with COLL 6.7.17R (Allocation of scheme property) must be included in the value of scheme property for the purposes of (3) for that sub-fund. … … Guidance on spread: general 5.2.11A G … (3) In applying the spread limit of 20% in value of scheme property which may consist of deposits with a single body, all uninvested cash comprising capital property that the depositary holds should be included in calculating the total sum of the deposits held by it and other companies in its group on behalf of the scheme. [deleted] …

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Investment in collective investment schemes
5.2.13 R A UCITS scheme must not invest in units in a collective investment scheme
(“second scheme”) unless the second scheme satisfies all of the following conditions, and provided that no more than 30% of the value of the UCITS scheme scheme property is invested in second schemes within (1)(b) to (e):
…
…
5.5 Cash, borrowing, lending and other provisions
…
Cash and near cash
5.5.3 R (1) Cash and near cash must not be retained in the scheme property
except to the extent that this may reasonably be regarded as necessary in order to enable:
…
(b) redemption of dealing in units; or
…
…
…
Borrowing limits
…
5.5.5A G An authorised fund manager should ensure when calculating the authorised fund’s borrowing for COLL 5.5.5R(1) that:
(1) the figure calculated is the total of all borrowing in all currencies by the authorised fund; and (2) long and short positions in different currencies are not netted off against each other.; and (3) any borrowing in an issue and cancellation account is attributed to a scheme or sub-fund, but any sums in an issue and cancellation account which the authorised fund manager reasonably believes are not attributable to a particular sub-fund or scheme are excluded from the value of the scheme property of any sub-fund or scheme (as applicable). …

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5.6 Investment powers and borrowing limits for non-UCITS retail schemes
…
Spread: general
5.6.7 R …
(2) …
(2A) Money in an issue and cancellation account attributed to a sub-fund in accordance with COLL 6.2.7BR(2)(c) or which should be allocated to a sub-fund in accordance with COLL 6.7.17R (Allocation of scheme property) must be included in the value of scheme property for the purposes of (2) for that sub-fund. … Guidance on spread: general 5.6.7A G … (3) In applying the spread limit of 20% in value of scheme property which may consist of deposits with a single body, all uninvested cash comprising capital property that the depositary holds should be included in calculating the total sum of the deposits held by it on behalf of the scheme. [deleted] …
5.7 Investment powers and borrowing limits for NURS operating as FAIFs
…
Guidance on spread: general
5.7.6 G …
(3) In applying the spread limit of 20% in value of scheme property which may consist of deposits with a single body, all uninvested cash comprising capital property that the depositary holds should be included in calculating the total sum of the deposits held by it on behalf of the scheme. [deleted] … 6 Operating duties and responsibilities …
6.2 Dealing

FCA 2026/25
…
Purpose
6.2.2 G …
(2) An authorised fund manager of an AUT, ACS or ICVC is responsible for arranging for the issue and the cancellation of units for the authorised fund. An authorised fund manager of an AUT, ICVC or co-ownership scheme is permitted to sell and redeem units for its own account. An authorised fund manager of a limited partnership scheme is only permitted to sell and redeem units as agent for the scheme. The rules in this section are intended to ensure that the authorised fund manager treats the authorised fund fairly when arranging for the issue or cancellation of units, and treats clients fairly when dealing or arranging for they purchase or sell dealing in units. (3) This section also sets out common standards for how the amounts in relation to unit transactions are to be paid. These arrangements, which may vary according to whether or not the authorised fund manager deals as principal, include the initial offer of units, and the exchange of units for scheme property and issues and cancellations of units by an ICVC, or by the depositary of an AUT or ACS, carried out directly with the unitholder. … … Issue and cancellation of units in an AUT or ACS
6.2.6 R (1) The Either:
(a) the depositary when instructed by the authorised fund manager; or (b) where permitted by the instrument constituting the fund, the authorised fund manager, must issue or cancel units in an AUT or ACS when instructed by the authorised fund manager by making a record of the issue or cancellation and of the number of the units of each class concerned. (2) Any instructions given by the authorised fund manager under (1)(a) must state, for each class of unit to be issued or cancelled, the number to be issued or cancelled, expressed either as a number of units or as an amount in value (or as a combination of the two).

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(2A) The authorised fund manager must notify the depositary upon any issue or cancellation of units by the authorised fund manager under (1)(b). (3) If the depositary is the person responsible for issuing or cancelling units and is of the opinion that it is not in the interests of unitholders that any units should be issued or cancelled or that to do so would not be in accordance with the trust deed, contractual scheme deed or prospectus, it must notify the authorised fund manager of that fact and it is then relieved of the obligation to issue or cancel those units. … Issue Direct issue and cancellation of units through an authorised fund manager
6.2.7 R (1) The authorised fund manager of an authorised fund that is not a
direct dealing scheme may require, on agreement with the depositary, or may permit, on the request of the investor, direct issues and cancellations of units by:
(a) an the ICVC; or by
(b) (where the scheme is an AUT or ACS) the depositary of an AUT or ACS or, where permitted by the instrument constituting the fund, the authorised fund manager. (2) … Issue and cancellation of units by a direct dealing scheme 6.2.7A R The authorised fund manager and depositary of a direct dealing scheme, and an ICVC and any other director of an ICVC that is a direct dealing scheme, must ensure that:
(1) the issue and cancellation of units is made only by:
(a) the ICVC; or
(b) (where the scheme is an AUT or ACS) the depositary or, where permitted by the instrument constituting the fund, the authorised fund manager; (2) the direct dealing scheme operates an issue and cancellation account in accordance with COLL 6.2.7BR (Operation of an issue and cancellation account); (3) the instrument constituting the fund provides for the arrangements described in (1) and (2);

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(4) the prospectus provides details of the procedures to be followed, which must be consistent with the rules in this section; and (5) all classes of units in a sub-fund, or in a scheme which is not an umbrella, use the same issue and cancellation account. Operation of an issue and cancellation account 6.2.7B R (1) An authorised fund manager, a depositary, an ICVC and any other director of an ICVC that is a direct dealing scheme which uses an issue and cancellation account, must ensure that the authorised fund manager has effective controls over the operation of the issue and cancellation account. (2) The controls referred to in (1) must ensure that:
(a) subject to (b), a reconciliation is performed each business day on which money is received in or paid out of the issue and cancellation account; (b) where the scheme has fewer than 2 regular valuation points for the purposes of dealing in units in any month, reconciliations are performed at a frequency consistent with the frequency of such valuation points; (c) money received in the issue and cancellation account is attributed promptly to a specific sub-fund, or to the scheme if it is not an umbrella; (d) money which cannot be attributed under (c) is recorded in the scheme’s books and records as ‘unattributed scheme money’ and instructed to be returned to the sender by close of the fifth business day following receipt; and (e) where, following the instruction in (d), unattributed scheme money cannot be returned to the sender, it may be paid, or is paid if instructed by the depositary, into a separate bank account of the scheme operated for the specific purpose of holding unattributed scheme money. Operation of an omnibus issue and cancellation account 6.2.7C R (1) Use of an omnibus issue and cancellation account is permitted in so far as it is operated in compliance with (where applicable) regulation 11A of the OEIC Regulations (Segregated liability of sub-funds) and section 261P of the Act (Segregated liability in relation to umbrella co-ownership schemes) and trust law relevant to an AUT (‘relevant laws on segregated liability’). (2) Where an omnibus issue and cancellation account is used, the authorised fund manager must ensure it has received legal advice

FCA 2026/25 that the intended operation of the account is in accordance with relevant laws on segregated liability. 6.2.7D G (1) In broad terms, the relevant laws on segregated liability referred to in COLL 6.2.7CR(1) provide that assets of one sub-fund belong exclusively to that sub-fund and must not be used to meet liabilities of another sub-fund. The legislation also says that any provision whether in a contract, agreement, document or otherwise which is inconsistent with the protected cell legislation is void. (2) An authorised fund manager proposing to operate an omnibus issue and cancellation account should give careful consideration as to whether the account can be operated at all times in compliance with relevant laws on segregated liability. In this assessment, an authorised fund manager should, among other things, consider its ability to:
(a) monitor payments into and out of an omnibus issue and cancellation account; (b) comply with COLL 6.2.7BR(2) in a range of circumstances including under times of stress; (c) impose minimum balances or sequence payments in an omnibus issue and cancellation account to the extent necessary to ensure money allocated to a sub-fund is not paid or otherwise used in a way that is inconsistent with the relevant laws on segregated liability; and (d) identify payment issues such as late or failed payments. 6.2.7E R In determining whether any sub-funds of an umbrella should share an omnibus issue and cancellation account, the authorised fund manager must be satisfied such use presents minimal risk of adverse consequences for unitholders. 6.2.7F G The matters an authorised fund manager should consider in COLL 6.2.7ER include:
(1) contagion risk;
(2) the strategy, risk profile and target market of each sub-fund and its use of leverage; and (3) whether individual unitholders within the target market of the sub￾funds are likely to make prompt payment in respect of issued units. 6.2.7G G An authorised fund manager should ensure that all errors which result in a breach of COLL 6.2.7AR to COLL 6.2.7ER are recorded. As soon as an error is discovered, the authorised fund manager should report the fact to

FCA 2026/25 the depositary, together with details of the action taken, or to be taken, to avoid repetition of the error. … Box management errors guidance
6.2.12 G Explanatory table: This table belongs to COLL 6.2.2G(4) (Purpose).
Correction of box management errors
…
3 Recording and reporting of box management errors … (3) A depositary should also make a return returns to the FCA (in the manner prescribed by SUP 16.6.8R SUP 16.6.6R) on a quarterly basis. Payment for units issued
6.2.13 R (1) The authorised fund manager of a scheme that is not a direct dealing
scheme must, by the close of business on the fourth business day following the issue of any units, arrange for payment to the depositary of an AUT or ACS or the ICVC of:
…
…
(3) …
(4) The authorised fund manager of a direct dealing scheme must ensure adequate arrangements are in place for unitholders or their agents to make timely payments to the ICVC or the depositary of the AUT or ACS. (5) Where an investor in a direct dealing scheme has not made payment to the ICVC or the depositary of the AUT or ACS within the period specified in the prospectus, the authorised fund manager must reimburse the authorised fund for any lost interest unless the amount involved is not, in the depositary’s opinion, material to the authorised fund. Payment for cancelled units
6.2.14 R (1) On cancelling units the authorised fund manager must, before the
expiry of the fourth business day following the cancellation of the

FCA 2026/25 units or, if later, as soon as practicable after delivery to the depositary of the AUT or ACS or the ICVC of such evidence of title to the units as it may reasonably require, require the depositary to pay, or arrange for payment of:
…
(1A) The depositary or authorised fund manager must pay arrange for payment of the amount in (1), as relevant:
…
(b) where relevant, to the unitholder;
…
…
…
Sale and redemption
6.2.16 R (1) …
(1A) Paragraphs (2), (3), (4), (6) and (7) of this rule do not apply to a direct dealing scheme. (2) … (2A) The authorised fund manager of a direct dealing scheme must ensure that, at all times during the dealing day, the issue of units in the authorised fund is effected at the request of an investor, in accordance with the conditions in the instrument constituting the fund and the prospectus, unless:
(a) it has reasonable grounds to refuse such issue; or (b) the issue of units is prevented under COLL 6.2.18R (Limited issue). (3) … (3A) Subject to COLL 6.2.19R (Limited redemption) and COLL 6.2.21R (Deferred redemption), the authorised fund manager of a direct dealing scheme must ensure that, at all times during the dealing day, the cancellation of units in the authorised fund is effected at the request of a qualifying unitholder, in accordance with the conditions in the instrument constituting the fund and the prospectus, unless it has reasonable grounds to refuse such cancellation. (4) …

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(4A) On agreeing to a cancellation of units in (3A), the authorised fund manager of a direct dealing scheme must ensure that the unitholder is paid the appropriate proceeds of the cancellation within the period specified in (5), unless it has reasonable grounds for requiring all or any part of the proceeds to be withheld. (5) Except where (5A) applies, the period in (4) or, as applicable, (4A) expires at the close of business on the fourth business day following the later of:
(a) the valuation point at which the price for the redemption or cancellation was determined; or (b) the time when the authorised fund manager person responsible for redeeming or cancelling units has all the duly executed instruments and authorisations to effect (or enable the authorised fund manager to effect) the transfer of title to the those units or their cancellation. … (6) … (6A) Except where (7A) applies, and subject to COLL 6.2.21R (Deferred redemption), the person responsible for the issue and cancellation of units for a direct dealing scheme must issue or cancel them at a price determined no later than the end of the business day immediately following the receipt and acceptance of an instruction to do so, or at the next valuation point for the purposes of dealing in units if later. (7) … (7A) Where the authorised fund operates limited redemption arrangements, the person responsible for the issue and cancellation of units in a direct dealing scheme must issue or cancel them at a price determined no later than the expiry of a period of 185 days from the date of the receipt and acceptance of the instruction to issue or cancel. … (11) Paragraph Paragraphs (4) and (4A) does do not apply where COLL 6.2.17AR (Transfers under the Dormant Assets Act 2022) applies. Sale and redemption: guidance
6.2.17 G (1) The prospectus of an authorised fund may allow the authorised fund
manager to identify a point in time in advance of a valuation point (a cut-off point) after which it will not accept instructions to sell, issue, cancel or redeem units at will not be accepted for that valuation point. In order to protect customers’ interests, the cut-off point should be no earlier than the close of business on the business day before the

FCA 2026/25 valuation point it relates to. If there is more than one valuation point in a day the cut-off should not be before any previous valuation point. … (3) Where (1) applies, different cut-off points may be used to differentiate between the methods of submitting dealing instructions to sell or redeem to the authorised fund manager but not to differentiate between unitholders or potential unitholders. … … Limited redemption
6.2.19 R …
(2) Where (1) applies, the scheme must provide for sales and redemptions or (in the case of a direct dealing scheme) issues and cancellations at least once in every six months. (3) Within a scheme, unit classes may operate different arrangements for sales, issues, cancellations and redemptions of units provided there is no prejudice to the interests of any unitholder, subject to COLL 6.2.7AR(5) (Issue and cancellation of units by a direct dealing scheme). (4) The scheme may provide for issues or sales of units of any class to be executed at a greater frequency than redemptions or cancellations of units of the same class. … Deferred redemption
6.2.21 R (1) Subject to (1A), (3), and (4), the instrument constituting the fund and
the prospectus of an authorised fund which has at least one valuation point on each business day may permit deferral of redemptions or (in the case of a direct dealing scheme) cancellations at a valuation point to the next valuation point where the requested redemptions or cancellations exceed 10%, or some other reasonable proportion disclosed in the prospectus, of the authorised fund’s value. (1A) Subject to (3) the instrument constituting the fund and the prospectus of a non-UCITS retail scheme operating as a FAIF may permit deferral of redemptions or (in the case of a direct dealing scheme) cancellations at a valuation point to a following valuation point where the requested redemptions or cancellations exceed 10%, or some other reasonable proportion disclosed in the prospectus, of the authorised fund’s value.

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(2) Any deferral of redemptions or (in the case of a direct dealing scheme) cancellations under (1) or (1A) must be undertaken in accordance with the procedures explained in the prospectus which must ensure:
(a) the consistent treatment of all unitholders who have sought to redeem or cancel units at any valuation point at which redemptions or cancellations are deferred; and … … …
6.3 Valuation and pricing
…
Valuation
6.3.3 R (1) To determine the price of units the authorised fund manager must
carry out a fair and accurate valuation of all the scheme property in accordance with the instrument constituting the fund and the prospectus. (2) … (3) For the purposes of (1), sums in an issue and cancellation account which the authorised fund manager reasonably believes are not attributable to a particular sub-fund or scheme are excluded from the valuation of scheme property of any sub-fund or scheme (as applicable). … Dilution
6.3.8 R (1) Subject to (1A), when arranging to sell, redeem, issue or cancel units,
or when units are issued or cancelled under COLL 6.2.7R(1) (Issues Direct issue and cancellation of units through an authorised fund manager) or COLL 6.2.7AR (Issue and cancellation of units by a direct dealing scheme), an authorised fund manager is permitted to:
…
…
(3) A dilution levy becomes due and payable at the same time as payment or transfer of property becomes due for the issue, sale, redemption or cancellation and any such payment in respect of a dilution levy must be

FCA 2026/25 paid to the depositary to become part of scheme property as soon as practicable after receipt. … … Publication of prices
6.3.11 R Where the authorised fund manager is prepared to deal in units, or is willing
to issue or cancel units, under COLL 6.2.7 COLL 6.2.7R or where the authorised fund is a direct dealing scheme (see COLL 6.2.7AR), it the authorised fund manager must make the dealing prices public in an appropriate manner. … 7 Suspension of dealings, termination of authorised funds and side pockets …
7.2 Suspension and restart of dealings
Requirement
7.2.-3 R (1) …
(1A) Sums in an issue and cancellation account which the authorised fund manager reasonably believes are not attributable to a particular sub￾fund or scheme are excluded from the value of the scheme property of any sub-fund or scheme (as applicable). … …
7.3 Winding up a solvent ICVC and terminating or winding up a sub-fund of an
ICVC
…
Manner of winding up or termination
…
7.3.7A G For the purposes of this section an ICVC may be treated as having been wound up or a sub-fund terminated upon completion, where relevant, of all of the steps in (1) to (3):
…

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(2) the scheme property being realised or distributed in accordance with COLL 7.3.7R(8), which should include appropriate resolution of unattributed scheme money; and … …
7.4 Winding up an AUT and terminating a sub-fund of an AUT
…
When an AUT is to be wound up or a sub-fund terminated
7.4.3 R (1) Upon the happening of any of the events or dates referred to in (2) and
not otherwise:
…
(d) the manager must cease to issue or cancel, or to arrange the issue or cancellation of units under COLL 6.2.7R (Issue Direct issue and cancellation of units through an authorised fund manager) or COLL 6.2.7AR (Issue and cancellation of units by a direct dealing scheme), except in respect of the final cancellation under COLL 7.4.4R(1) or (2); … … Manner of winding up or termination
7.4.4 R (1) Where COLL 7.4.3R(2)(f) applies, the trustee or, where permitted by
the trust deed, the manager must cancel all units in issue and the trustee must wind up the AUT or terminate the sub-fund in accordance with the approved scheme of arrangement. … 7.4.4A G For the purposes of this section, an AUT may be treated as having been wound up or a sub-fund terminated upon completion, where relevant, of all of the steps in (1) to (3):
…
(2) the scheme property being realised or distributed in accordance with COLL 7.4.4R(5), which should include appropriate resolution of unattributed scheme money; and … …

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7.4A Winding up a solvent ACS and terminating a sub-fund of a co-ownership scheme … When an ACS is to be wound up or a sub-fund of a co-ownership scheme terminated 7.4A.4 R (1) Upon the happening of any of the matters or dates referred to in (3), and subject to the requirement of (4) being satisfied, and not otherwise:
…
(d) the authorised contractual scheme manager must cease to issue or cancel, or to arrange the issue or cancellation of units under COLL 6.2.7R (Issue Direct issue and cancellation of units through an authorised fund manager) or COLL 6.2.7AR (Issue and cancellation of units by a direct dealing scheme), except in respect of the final cancellation under COLL 7.4A.6R(1) or (2); … … … Manner of winding up or termination 7.4A.6 R (1) Where COLL 7.4A.4R (3)(f) applies, the depositary, or where permitted by the contractual scheme deed, the authorised contractual scheme manager must cancel all units in issue and wind up the ACS or terminate the sub-fund of the co-ownership scheme in accordance with the approved scheme of arrangement. … 7.4A.7 G For the purposes of this section, an ACS may be treated as having been wound up or a sub-fund of a co-ownership scheme terminated upon completion, where relevant, of all of the steps in (1) to (3):
…
(2) the scheme property being realised or distributed in accordance with COLL 7.4A.6R(5), which should include appropriate resolution of unattributed scheme money; and … …

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7.6 Schemes of arrangement
…
Schemes of arrangement: requirements
7.6.2 R …
(7) …
(8) Unattributed scheme money should not form part of any scheme of arrangement under this rule. … 8 Qualified investor schemes
8.1 Introduction
Application
8.1.1 R …
(2) …
(3) In this chapter, references to the ‘value of the scheme property’ or the ‘value of the fund’ mean the net value determined in accordance with COLL 8.5.9R (Valuation, pricing and dealing). …
8.5 Powers and responsibilities
…
Valuation, pricing and dealing
8.5.9 R (1) The value of the scheme property is the net value of the scheme
property after deducting any outstanding borrowings (including any capital outstanding on a mortgage of an immovable). … (11) … (12) For the purposes of (1), sums in an issue and cancellation account which the authorised fund manager reasonably believes are not attributable to a particular sub-fund or scheme are excluded from the valuation of the scheme property of any sub-fund or scheme (as applicable). …

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Issues Issue and cancellations cancellation of units
8.5.10 R …
(3) The authorised fund manager must arrange ensure adequate arrangements are in place for the issue and cancellation of units and pay payment of money or assets to or from the scheme, depositary, or where relevant, unitholders for the account of the scheme as required by the prospectus, and, where applicable, in accordance with the Money Market Funds Regulation. … (6) … (7) COLL 6.2.7AR to COLL 6.2.7GG apply in relation to a qualified investor scheme that is a direct dealing scheme as they apply in relation to a UCITS scheme and a non-UCITS retail scheme. … Transfer of units in an ACS … 8.5.10C G The FCA recognises that some transfers of units arise by operation of law (such as upon death or bankruptcy of the unitholder, or otherwise) and are accordingly outside the control of the authorised contractual scheme manager. The authorised contractual scheme manager is expected to comply with its responsibilities under COLL 8.5.10ER (Redemption of ACS units in a QIS by an authorised contractual scheme manager) in those cases by redeeming redeeming, or arranging for the cancellation of, those units. … Redemption of ACS units in a QIS by an authorised contractual scheme manager 8.5.10E R The authorised contractual scheme manager of a qualified investor scheme which is an ACS must redeem, or arrange for the cancellation of, units in the scheme as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in COLL 8 Annex 2(1) and (2) (ACS Qualified Investor Schemes: eligible investors). Sale and redemption
8.5.11 R (-1) Paragraphs (1), (2) and (3) of this rule do not apply in relation to a
direct dealing scheme.
(1) …

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(1A) The authorised fund manager of a direct dealing scheme must ensure that, at all times during the dealing day, the issue of units in the authorised fund is effected at the request of an eligible investor (within any conditions in the instrument constituting the fund and the prospectus which must be fair and reasonable as between all unitholders and potential unitholders) for whom the authorised fund manager does not have reasonable grounds to refuse such sale. (2) … (2A) The authorised fund manager of a direct dealing scheme must ensure that, at all times during the dealing day, the cancellation of units owned by any eligible unitholder in the authorised fund is effected at the request of that unitholder (within any conditions in the instrument constituting the fund and the prospectus), unless the authorised fund manager has reasonable grounds to refuse such cancellation. (3) … (3A) On agreeing to a cancellation of units within (2A), the authorised fund manager must ensure that the unitholder is paid the appropriate proceeds of the cancellation within any reasonable period specified in the instrument constituting the fund or the prospectus, unless it has reasonable grounds for requiring all or any part of the proceeds to be withheld. (4) Payment of proceeds on redemption must be made by the authorised fund manager in any manner provided for in the prospectus which must be fair and reasonable as between redeeming unitholders and continuing unitholders. … 15 Long-term asset funds …
15.2 Eligibility to act as the authorised fund manager
…
Appointment of external valuer or authorised fund manager with knowledge, skills and experience of valuing long-term assets
15.2.6 R …
(5) The authorised fund manager need not appoint an external valuer under (1) if:
(a) the scheme property of the long-term asset fund is constituted solely of units or shares in other collective investment schemes

FCA 2026/25 or AIFs, excluding cash and other liquid assets used for non￾investment purposes such as unit dealing; and (b) an external valuer performs the valuation function of each such collective investment scheme or AIF. … …
15.3 Constitution
…
Table: contents of the instrument constituting the fund
15.3.6 R This table belongs to COLL 15.3.5R.
…
3 Constitution
The following statements:
…
(9) for an ACS:
(a) the contractual scheme deed:
…
(v) states that the authorised contractual scheme manager of an ACS must redeem or arrange for the cancellation of units as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in (iv)(A) and (B); … … … …
15.4 Prospectus and other pre-sale notifications

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…
Table: contents of a long-term asset fund prospectus
15.4.5 R This table belongs to COLL 15.4.2R.
…
13 Valuation of scheme property and due diligence … (2) A description of the valuation procedure and of the pricing methodology for valuing assets, including the methods used in valuing hard-to-value assets, in line with FUND 3.9 (Valuation), and details as to:
(a) how frequently and at what times of the day the scheme property will be regularly valued to determine the price at which units in the scheme may be purchased from or redeemed by the authorised fund manager dealt and a description of any circumstance where the scheme property may be specially valued; … … … 16 Dealing The procedure and conditions for the issue, sale, redemption and cancellation of units or shares including details of the following, in fair, clear and plain language, using worked examples to explain how these procedures might apply to unitholders in practice:
(1) the dealing days and times in the dealing day on which the authorised fund manager will receive and determine requests for the issue, sale, and redemption and cancellation of units, including any cut-off point for receiving redemption or cancellation requests before the authorised fund manager makes the next redemption determination (see COLL 15.8.12R(2)(a) (Dealing: redemption of units)); (2) the procedures for effecting the issue and cancellation of units and settlement of transactions involving unitholders; …

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(4) the steps required to be taken by a unitholder in redeeming for units in the long-term asset fund to be redeemed or cancelled (see COLL 15.8.12R (Dealing: redemption of units)), using worked examples to explain how these arrangements may affect unitholders in the scheme, including:
…
…
17 Issue of units in ACSs: eligible investors … (2) A statement that the authorised contractual scheme manager of an ACS must redeem or arrange for the cancellation of units as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in (1). … … …
15.6 Investment and borrowing powers
Application
…
15.6.2 R …
(2) …
(3) Where this section refers to value of scheme property, that scheme property is to be valued in accordance with COLL 15.8.2R (Valuation, pricing and dealing). 15.6.2A G One of the effects of COLL 15.8.2R(11) (Valuation, pricing and dealing) is that, for the purposes of this chapter, sums in an issue and cancellation account which the authorised fund manager reasonably believes are not attributable to a particular sub-fund or scheme are excluded from the valuation of scheme property of any sub-fund or scheme (as applicable). … Investment limits for immovables

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15.6.21 R The following limits apply in respect of immovables held as part of the
scheme property:
…
(3) the total of all premiums paid for options to purchase immovables must not exceed 10% of the scheme value of the scheme property in any 12- month period, calculated at the date of the granting of the option. …
15.8 Valuation, pricing, dealing and income
…
Valuation, pricing and dealing
15.8.2 R …
(10) …
(11) For the purposes of (1), sums in an issue and cancellation account which the authorised fund manager reasonably believes are not attributable to a particular sub-fund or scheme are excluded from the valuation of scheme property of any sub-fund or scheme (as applicable). … Issue and cancellation of units
15.8.5 R …
(3) The authorised fund manager must arrange ensure adequate arrangements are in place for the issue and cancellation of units and pay for the payment of money or assets to or from the scheme, depositary or where relevant, unitholders, for the account of the scheme as required by the prospectus. … (5) The Except in respect of a direct dealing scheme, the authorised fund manager may arrange for the ICVC, or instruct the depositary of the AUT or ACS, to issue or cancel units where the authorised fund manager would otherwise be obliged to sell or redeem the units in the manner set out in the prospectus. (6) …

FCA 2026/25
(7) COLL 6.2.7AR to COLL 6.2.7GG apply in relation to a long-term asset fund that is a direct dealing scheme as they apply in relation to a UCITS scheme and a non-UCITS retail scheme. … Transfer of units in an ACS …
15.8.8 G The FCA recognises that some transfers of units arise by operation of law
(such as upon death or bankruptcy of the unitholder, or otherwise) and are accordingly outside the control of the authorised contractual scheme manager. The authorised contractual scheme manager is expected to comply with its responsibilities under COLL 15.8.10R (Redemption of ACS units in an LTAF by an authorised contractual scheme manager) in those cases by redeeming or arranging for the cancellation of those units. … Redemption of ACS units in an LTAF by an authorised contractual scheme manager
15.8.10 R The authorised contractual scheme manager of a long-term asset fund which
is an ACS must redeem or arrange for the cancellation of units in the scheme as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in COLL 15 Annex 1R(1) and (2) (ACS Long￾Term Asset Funds: eligible investors). … Dealing: redemption of units
15.8.12 R …
(2) The redemption arrangements for a long-term asset fund must ensure the following:
…
(h) The authorised fund manager must redeem the units at the price determined in accordance with (f) and pay the unitholder, or arrange for payment to the unitholder of, the appropriate proceeds of redemption in accordance with paragraphs (4) and (5). (3) Subject to COBS 2.1.4R (AIFMs’ best interests rule), COLL 6.2.7AR(5) (Issue and cancellation of units by a direct dealing scheme) (as applied by COLL 15.8.5R) and COLL 15.3.2R (Classes of unit), where the long-term asset fund has more than one class of unit, the

FCA 2026/25 arrangements for the redemption of units may differ between classes provided the arrangements for all classes of unit ensure the matters specified in (2). (4) After having effected a redemption request, the authorised fund manager must pay or arrange payment of the full proceeds of the redemption to the unitholder within any reasonable period specified in the prospectus, unless it has reasonable grounds for withholding payment or requiring payment to be withheld. (5) Payment of proceeds on redemption must be made, or arranged, by the authorised fund manager in any manner provided for in the prospectus which must be fair and reasonable as between redeeming unitholders and continuing unitholders. … … TP 1 Transitional Provisions (1) (2) Material to which the transitional provision applies (3) (4) Transitional provision (5) Transitional provision:
dates in force
(6)
Handbook provision:
coming into force
…
67 … … … … …
Amendments made by the Collective Investment Schemes (Direct to Fund) Instrument 2025 68 The deletion of COLL 5.2.11AG(3), COLL 5.6.7AG(3) and COLL 5.7.6G(3) G The deletion of the guidance specified in column (2) may be disregarded. From 30 April 2026 to 29 April 30 April

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Pub ref: 2-009070
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