CP23/12: Expansion of the Dormant Assets scheme – second phase

The Financial Conduct Authority (FCA) has published a new consultation paper (CP23/12) as regards the Dormant Assets Scheme in UK. The scheme provides the legal framework for the dealing with dormant assets, that is unclaimed assets held in (bank) accounts where the owner of the funds / assets or his or her descendants cannot be determined. The framework is provided for in the Dormant Assets Act 2022 which was passed and enacted in 2022 and which replaced the previous Dormant Bank and Building Society Accounts Act 2008 to path the way for the inclusion of a large variety of client assets and funds.
In its consultation paper, the FCA is now proposing to extend the applicability of the scheme to cover investment assets such as fund units and client moneys (e.g. money held with depositories on behalf of clients or money held in accounts of investment firms). For this purpose, it is necessary to modify the above noted FCA sourcebooks and manual accordingly.
Before providing more detail on the proposed extension, it shall be noted that participation in the Dormant Assets Scheme is voluntary which is why no additional burdens can be expected for fund managers, custodians, or investment firms opting out of participation. Also, it shall be noted that the expansion would NOT apply to overseas recognized schemes and to unregulated collective investment schemes such as hedge funds or other alternative investment vehicles. As far as client moneys are concerned, Individual Savings Accounts (ISAs) would also be excluded from the scheme.
#### Expansion of the scheme
As far as collective investment schemes are concerned, for fund units to be considered dormant it will be necessary that no communication has taken place between the unit holder or anyone else acting on behalf of the client and the authorized fund manager (AFM) or custodian within the past six years. This restriction is extended to a no-communication period of 12 years for registered holdings of units. Once these periods have passed, the units may be redeemed and the proceeds from the redemption transferred to the Authorised Reclaim Fund (ARF), adjusted for any charges and fees incurred in the redemption process. Subsequent to the transfer, the funds may be reclaimed by eligible persons from the ARF as if the redemption had never taken place.
As far as client moneys are concerned, firms would be offered a second alternative as to the treatment of dormant funds. Currently, after a six year period, such dormant funds may be „given away“ to charities, provided that certain conditions are met (reasonable efforts to identify the fund holders, for instance). By expanding the scheme to client moneys, such firms may transfer the funds to the ARF after same period, providing their currently non-identifiable clients with the option to reclaim their funds at a future point in time.