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UK regulator sets new rules for funds investing in 'inherently illiquid assets'

The U.K. Financial Conduct Authority published new rules on Sept. 30 for funds that invest in hard-to-sell assets such as property, saying investors must get "clear and prominent information" about the risks they face.

The British watchdog said it will introduce a new category of funds investing in inherently illiquid assets, or FIIA, from September 2020.

These funds will be subject to additional requirements, including standard risk warnings in financial promotions, enhanced depositary oversight, and a requirement to produce liquidity risk contingency plans, it said.

The FCA has come under pressure from lawmakers to intervene after high-profile fund manager Neil Woodford blocked redemptions from his flagship £3.7 billion equity income fund June 3.

It said its new rules do not apply to EU-regulated funds known as UCITS, such as the Woodford fund, but added that the suspension of the Woodford fund "underlines the importance of effective liquidity management in open-ended funds more generally."