CP26/35: Fair redemption terms for authorised funds investing in illiquid assets
AI Analysis
The FCA opened CP26/35 on 8 October 2026, proposing to require NURS funds predominantly invested in inherently illiquid assets to use redemption terms aligned with the time needed to sell those assets. The central proposal is a minimum 90-day redemption notice period, together with no more frequent than monthly redemption determinations, reflecting the existing LTAF framework and intended to reduce rushed asset sales, liquidity mismatches and potential investor harm.
Key dates
- 2026-10-08
- FCA consultation CP26/35 opened and was first published.
- 2026-12-11 Deadline
- Deadline for responses to the FCA consultation.
Suggested considerations
- AFMs may wish to identify NURS funds with at least 50% exposure to inherently illiquid assets and compare their current dealing frequency, redemption notice periods and liquidity profile with the proposed monthly and 90-day minimum terms.
- AFMs may wish to assess whether fund constitutional documents, prospectuses, application forms, investor communications and distribution agreements would need amendment if the proposals are adopted.
- AFMs may wish to review liquidity risk-management frameworks, asset-sale assumptions, valuation processes, cash-flow stress testing and governance arrangements for consistency between investment strategy, liquidity profile and redemption policy.
- Compliance teams may wish to assess the effect on the FIIA regime, suspension and deferred-redemption tools, depositary oversight and escalation procedures for liquidity mismatches.
- Distributors, platforms, advisers, SIPP operators and unit-linked product providers may wish to assess how longer notice periods and less frequent dealing would be displayed, explained and operationally administered for retail customers.
- Affected firms may wish to submit responses to the FCA by 11 December 2026, focusing on implementation feasibility, customer communications, operational dependencies and the treatment of indirect investors.
- Firms may wish to monitor the FCA's expected final rules in H1 2027 and avoid treating the consultation proposals as currently binding requirements.
What changed
This is a consultation rather than a binding rule change. For NURS funds with at least 50% of scheme property invested in inherently illiquid assets and offering regular liquidity, the FCA proposes minimum redemption terms aligned with LTAF requirements: redemption determinations no more frequently than once a month and a notice period of at least 90 days after acceptance of a redemption request. The FCA also proposes allowing other NURS fund managers to introduce comparable limited redemption arrangements voluntarily, subject to related rule and disclosure changes. The proposals include amendments to the Funds Investing in Inherently Illiquid Assets regime and would permit LTAF investors to revoke redemption requests during the notice period where the AFM is satisfied that doing so would
Compliance impact
The proposals could require material changes to product design, prospectus disclosures, dealing and transfer-agent processes, liquidity governance and distribution communications for affected NURS funds. Although not yet binding, the FCA's proposed 90-day notice period and monthly dealing limit signal a significant supervisory expectation that redemption terms must match the liquidity of underlyin
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original FCA source before acting. Full disclaimer.
What the FCA said
We’re consulting on changes to retail investment fund rules so that a fund’s redemption terms reflect the time it typically takes to sell illiquid assets. ... Read CP26/35 (PDF) ... Why we are consultingWe want to set clear standards for how firms design and operate their investment products and reduce the risk of…
Extract from FCA . Read the full notice at the source for the authoritative text.