CP22/08: Protecting investors in authorised funds following the Russian invasion of Ukraine

Consultation opened
Consultation closed

We are consulting on rules which will allow Authorised Fund Managers to create separate unit classes (side pockets) for retail investment funds affected by the invasion of Ukraine.

Read CP22/08

Why we are consulting

The Russian invasion of Ukraine has resulted in some investments becoming illiquid or untradeable. Authorised Fund Managers (AFMs) may not be able to produce accurate unit prices for some funds holding those investments, meaning it may be difficult to treat all unit holders fairly. Where the affected investments are a significant proportion of a fund’s assets, some funds have suspended dealing. This means that investors are unable to further invest, or to redeem their assets. 

We want these funds to operate fairly and efficiently in the interests of all investors. So we propose allowing AFMs to use separate new classes of units (side pockets) to hold affected investments. Side pockets could allow:

  • new investors to enter the fund without sharing in the exposure to the affected investments 
  • existing investors to sell the units which relate to assets that are not affected investments 
  • some funds to end their current suspension of dealing 

Who this applies to  

This consultation primarily affects: 

  • managers of UK authorised retail funds with exposure to affected investments 
  • depositaries of these funds 
  • ancillary service providers to authorised fund managers and depositaries 
  • providers of investment services offering access to these funds, including Self-Invested Personal Pension (SIPP) providers, as well as Individual Savings Account (ISA) managers 
  • distributors of these funds 
  • investment intermediaries who advise on or invest in these funds 
  • insurers who offer unit-linked insurance contracts linked to these funds 
  • discretionary wealth managers, including those who offer model portfolios 
  • other professional or institutional investors 

Consumers who have invested directly in UK authorised retail funds holding affected investments, or who are exposed to these funds through their pension contributions or their long-term life assurance policies, are affected by our proposals. We welcome views from individual consumers and groups representing their interests. 

Next steps  

This consultation has now closed. We will publish feedback on responses and issue a Policy Statement once we have reviewed your comments.