FCA CP26/35: 90-Day Notice Periods for Illiquid NURS Funds

FCA CP26/35, Fair redemption terms for authorised funds investing in illiquid assets, opened on 8 October 2026 and takes comments until 11 December 2026. It would require non-UCITS retail schemes (NURS) with at least 50% of scheme property in inherently illiquid assets to redeem no more than once a month and to apply a redemption notice period of at least 90 days, the same minimum terms the long-term asset fund (LTAF) regime already sets. The FCA’s press release presents these as new rules for long-term investment funds such as property. They are proposals: the FCA expects to publish final rules in the first half of 2027, and existing funds would then have two years to change their dealing terms, with at least one year’s notice to investors.

The directly affected population is small. The FCA’s cost benefit analysis counts 17 funds, including feeders, that would be classified as funds investing in inherently illiquid assets (FIIAs) under the amended definition, with aggregate net asset value of about £7.22bn at December 2025, of which roughly £3.07bn is attributed to retail investors. The work spreads well beyond those authorised fund managers (AFMs). Depositaries pick up FIIA oversight duties, and platforms, advisers, SIPP operators and unit-linked insurers would have to carry a 90-day redemption cycle through processes built around daily dealing.

For fund operations and regulatory reporting teams, three questions decide the workload: whether a fund passes the FIIA test once the current carve-out for limited-redemption funds goes, which of the staggered implementation clocks applies to it, and how its documents, notices and dealing records have to change. Everything below describes the FCA’s draft, and the final instrument can differ.

Related reading: FCA Asset Management Reform: The £128m Rulebook Package

FCA CP26/35 dates and implementation clocks

Every implementation period in CP26/35 counts from the date the FCA makes its final rules. The FCA expects to publish those rules in the first half of 2027, so none of the clocks below has a calendar date yet.

Two neighbouring deadlines sit inside the same window. PS26/17, the FCA’s August 2026 policy statement on liquidity risk management for UCITS schemes and NURS, takes effect on 1 February 2027, with transitional provisions until 1 August 2027 for prospectus updates and the shorter derogation period for recently issued securities. CP26/26 on Fund Reporting for Asset Management Entities (FRAME) and the consultation chapters of CP26/28 on the UK AIFM regime both close on 22 October 2026, about seven weeks ahead of CP26/35.

If the rules are made in the first half of 2027, the two-year window for existing funds would end somewhere in the first half of 2029. That is my arithmetic. The commencement provisions in the final instrument will set the real date, and any 2029 date pencilled into a project plan today rests on a number the FCA has not published.

Why the FCA is reconsulting six years after CP20/15

CP26/35 is the second attempt. In August 2020 the FCA published CP20/15, which proposed notice periods of between 90 and 180 days for NURS holding at least 50% of scheme property in real estate, grouped into a new category called funds predominantly investing in property (FPIPs). The FCA paused that consultation for two reasons it repeats in chapter 2 of the new paper: stakeholders doubted the fund distribution system could cope with notice periods, and IOSCO and the Financial Stability Board were still writing new international liquidity standards.

Both standards now exist. The FSB published revised policy recommendations on liquidity mismatch in open-ended funds on 20 December 2023, grouping funds by the liquidity of their assets and attaching expectations on redemption terms to each group. IOSCO followed in May 2025 with revised recommendations for liquidity risk management in collective investment schemes. CP26/35 says the affected NURS fall into IOSCO’s Category 3 illiquid funds, for which IOSCO recommends restricting liquidity through long notice or settlement periods. The FCA had also committed, in its May 2026 Regulatory Initiatives Grid, to consult on implementing the IOSCO guidelines, including the residual work on retail funds invested in illiquid assets.

Three differences from 2020 matter for scoping. The new proposal covers all inherently illiquid assets, so infrastructure and illiquid fund-of-funds exposure count alongside real estate. The FPIP category is dropped, and the existing FIIA regime is amended instead. New and existing funds would be treated alike, after stakeholders objected to the CP20/15 plan that would have left existing real estate funds with limited redemption arrangements outside the new rules.

The market has shrunk in the meantime. The cost benefit analysis records 31 affected funds in 2020 and 17 FIIAs now, a 45% fall, and links the contraction to fund closures and to managers moving funds onto hybrid strategies below the 50% line. Over the past seven years the FCA counts 7 liquidity-driven NURS suspensions, all in funds that would have fallen within the proposed FIIA scope, alongside 12 suspensions driven by valuation issues. It also reports cash holdings in daily-dealt illiquid NURS materially above, in some cases more than double, the average of around 6% in comparable funds that have 90-day notice periods.

Which NURS the FIIA test would capture

The current Handbook definition of a FIIA catches a NURS whose investment objectives and policy aim to invest at least 50% of scheme property in inherently illiquid assets, or which has actually held at least 50% in those assets for at least 3 continuous months in the last 12 months. It then excludes a NURS whose limited redemption arrangements already reflect the time needed to sell those assets, where limited redemption means the AFM redeems units less than twice a month.

CP26/35 removes that exclusion. A fund’s existing redemption terms would become irrelevant to the classification, and FIIA status would depend only on what the portfolio holds. A monthly-dealt property NURS that sits outside the FIIA regime today because of its dealing terms would therefore come inside it, with its AFM and depositary picking up the existing FIIA rules one year after the new rules are made.

The 3-month buffer survives. Several NURS real estate funds moved to hybrid strategies after CP20/15, holding less than 50% of NAV in direct property, and the FCA notes that some of them may drift above the threshold temporarily after large redemptions. It proposes keeping the rule that a fund only becomes a FIIA if it stays above 50% for at least 3 continuous months in the last 12. Where the AFM thinks there is a risk that the portfolio would regularly exceed 50% for substantial periods of the year, the FCA says it should consider whether a different structure would better align strategy, liquidity profile and redemption policy.

Falling below 50% does not close the question either. The FCA proposes new guidance at COLL 6.2.20AG stating that a NURS that is not a FIIA may still need limited redemption arrangements, and it says AFMs of NURS with material exposure to inherently illiquid assets should expect detailed scrutiny of their redemption terms at the Fund Authorisations gateway regardless of the 50% test. For a fund near the line, it expects the AFM to have good grounds for confidence that the portfolio will not stay above the threshold for more than 3 continuous months in a year. I read that as an evidence standard, and the natural record behind it is a dated series of the illiquid-asset percentage at each valuation point.

Three populations sit outside the substantive proposals. Qualified investor schemes (QIS) will be considered in the FCA’s second consultation on the UK AIFM regime. LTAFs already carry minimum redemption terms of their own. The redemption-term proposals are limited to NURS, so UCITS schemes are untouched. Within NURS, the FCA expects the change to land mainly on direct real estate funds and on some NURS funds of alternative investment funds (FAIFs).

The amended definition of an inherently illiquid asset

The 50% test is only as good as its numerator, and CP26/35 rewrites several limbs of the Glossary definition of an inherently illiquid asset. The changes most likely to move a classification calculation are summarised below; the full draft definition is in Appendix 1 of the consultation.

The LTAF row can change a classification without anyone touching the portfolio. A NURS FAIF holding LTAF units would count each unit as inherently illiquid, whatever the LTAF itself owns, unless that LTAF is in the process of winding up or termination. The FCA also proposes aligning the COLL 5.7 rule for FAIFs: a relevant NURS FAIF would need FIIA-prescribed limited redemption arrangements if at least 50% of scheme property is in any inherently illiquid assets, where today the trigger looks only at units in LTAFs.

Two clarifications belong in the classification methodology. Transferable securities admitted to trading on an exchange that pass the COLL 5 approved-security tests would not be inherently illiquid, although PS26/17 has already removed the listed asset presumption and the AFM must still factor the liquidity of less liquid securities into its liquidity risk management. Exchange-traded derivatives are not expected to raise significant liquidity risk. For OTC derivatives, the FCA considers that existing COLL rules minimise the liquidity risk, because COLL 5.2.23R(2)(b), applied to NURS by COLL 5.6.15R, permits a NURS to invest in one only where the AFM can close the position at fair value at any time. It accepts that limb (4) of the definition could in theory capture some OTC derivatives, for example where sale and purchase transactions are typically negotiated on a one-off basis, but considers it unlikely that they would be the deciding factor in whether a NURS reaches the FIIA threshold.

How monthly dealing and a 90-day notice would run

The core of CP26/35 is a proposed new rule, COLL 6.2.19AR, applied through the existing limited redemption rule in COLL 6.2.19R. The AFM of a FIIA could have no more than one dealing day per month for redemptions, and the notice period for a redemption request would have to start at least 90 days before the relevant dealing day. The FCA calls these the FIIA-prescribed limited redemption arrangements. They are minimums. An AFM could set longer notice or less frequent dealing, up to a proposed maximum redemption period of 185 days, the ceiling that already applies to NURS with limited redemption arrangements and to FAIFs.

The 90 days mirrors the LTAF. CP20/15 floated a range of 90 to 180 days; since then the FCA has built the LTAF regime around monthly dealing and a 90-day minimum, and it proposes the same pair for FIIAs in the hope that consistency helps firms implement the change. The FCA accepts that 90 days will not be enough to sell some of the less liquid assets in a FIIA, and says it would not expect to authorise a fund with a 90-day notice period if the AFM intends to invest substantially in assets that take longer than that to sell. Proposed guidance at COLL 6.2.20G(2)(b) and (c) ties the choice of terms to the reasonable expectations of the target investor group and to the fund’s objective, policy and strategy, and points to the full-scope UK AIFM’s duty under FUND 3.6.2R to keep investment strategy, liquidity profile and redemption policy consistent.

A 90-day notice period does not mean the investor is paid on day 90. Today the general rule in COLL 6.2.16R(6) prices a redemption by the end of the business day after the AFM receives and accepts the instruction, or at the next valuation point if that is later. NURS with limited redemption arrangements are carved out of that rule and must instead price no later than 185 days after acceptance under COLL 6.2.16R(7). CP26/35 would add COLL 6.2.16R(7)(b), requiring the unit price to be set at the first valuation point after the end of the notice period. The FCA’s own illustration is a monthly-dealt fund with a 3-month notice period, which would redeem units at the third valuation point after accepting the request.

The outer limits tighten slightly at the same time. The valuation deadline in COLL 6.2.16R(7) would move from 185 to 182 days, and the 185-day settlement limit in COLL 6.2.16R(5A), which today applies only to NURS FAIFs, would extend to every NURS operating limited redemption arrangements. The FCA’s reasoning is that the gap between accepting a redemption and paying it already cannot exceed six months for these funds, because COLL 6.2.19R(2) requires them to provide for sales and redemptions at least once every 6 months, and the three-day difference leaves time to calculate the price, execute the deal and pay before day 185.

Subscriptions are treated differently. In line with the LTAF rules, the FCA does not propose restricting how often a FIIA accepts subscriptions, but an AFM that accepts subscriptions more often than redemptions would need to value the fund at each subscription point. The FCA says it wants to hear whether AFMs regard that as a desirable business model.

Deferrals, suspensions and revocations under the proposals

A notice period changes how three tools that operations teams already run would behave, and each has its own draft rule.

Deferral beyond one business day

Under COLL 6.2.21R today, the AFM of a UCITS scheme, or of a NURS with at least one valuation point on each business day, may defer redemptions to the next valuation point where requests exceed 10% of the fund’s value or another reasonable proportion disclosed in the prospectus, in effect a one-business-day deferral. NURS FAIFs can already defer to a following valuation point within the 185-day settlement limit. CP26/35 would extend that longer power to every NURS with limited redemption arrangements and define the following valuation point for those funds as the next valuation point at least one month after the one at which the request should have been carried out. The FCA treats deferral as a complement to the notice period and says AFMs should not rely on it for day-to-day liquidity management. In the first instance an AFM should not defer by more than a month, although it could defer again if it still cannot meet the request at the next valuation point.

Suspensions would count towards the notice period

CP26/35 keeps two positions from 2020, and respondents raised concerns about the first. Under proposed COLL 7.2.1-AR(2), the AFM of a NURS with limited redemption arrangements would have to accept a redemption request made after a suspension starts, unless it has reasonable grounds to refuse, although it could not execute the deal. Under COLL 7.2.1-AR(3), time spent in suspension would count towards the notice period, and under COLL 7.2.1-AR(4) a request whose notice period ends during a suspension would be priced at the first valuation point after dealing restarts. Respondents to CP20/15 pointed out that COLL 7.2.1R(3)(a) disapplies the COLL 6.2 obligations during a suspension and that platform systems cannot currently accept redemption requests while a fund is suspended. The FCA’s view is that platforms can make this change when they rebuild for notice periods, and it asks whether doing so would be a material extra burden.

The FCA would also delete COLL 7.2.2G(1B), the guidance that currently allows a lower bar for FIIA suspensions where redemptions cannot be met without significantly depleting liquidity or selling at a substantial discount. Once FIIAs operate the prescribed terms, short-term liquidity shortfalls or difficulty realising assets quickly should not normally justify a suspension on their own. The requirement to suspend for material valuation uncertainty under COLL 7.2.-3R would continue to apply to every NURS, FIIA or not.

Revoking an accepted request

CP20/15 would have made a redemption request irrevocable once accepted. CP26/35 softens that. A new COLL 6.2.16R(3B) would make a request irrevocable unless the AFM agrees to the revocation and is satisfied it would not prejudice other investors, and the FCA expects the AFM to specify a point after which a request can no longer be cancelled. The same test would reach LTAFs through an amendment to COLL 15.8.12R(2)(e). That is one of only two LTAF changes in the paper; the other is a set of consequential COLL 15 amendments for the Direct-to-Fund dealing model introduced by PS26/7 in April 2026.

Risk warnings, prospectus text and the unitholder notice

The existing FIIA risk warning in COBS 4.5.16R tells investors that the fund “invests in assets that may at times be hard to sell” and that they may experience a delay or receive less than expected when selling. CP26/35 says that wording would no longer fit a fund with a fixed notice period. In its place, any financial promotion for a NURS with limited redemption arrangements, other than the scheme’s prospectus, would have to explain in plain language that an investor who requests a redemption will not receive the money until the end of the notice period, and will bear market risk during that period, so the amount received may be lower than at the time of the request. The AFM would choose the words but must make them prominent, taking into account the content, size and orientation of the promotion.

The scope is wider than FIIAs. The FCA proposes the new warning for every NURS with limited redemption arrangements, on the basis that those investors also wait for their money even where the portfolio is less illiquid. The prospectus follows the same pattern. COLL 4.2.5R(17) already requires a NURS to explain the circumstances and procedures for limiting or deferring redemptions; CP26/35 would add how long a unitholder will normally wait for proceeds after the AFM accepts an instruction (including any notice period or cut-off point), when the AFM may defer or limit redemptions and what that means for the unitholder, and that the AFM may extend the notice period while dealing is suspended. A small change to COLL 3.2.6R(13) would require the instrument constituting the fund to take account of any limitation under COLL 6.2.18R (limited issue), COLL 6.2.19R (limited redemption) and COLL 6.2.21R (deferred redemption).

The Consumer Composite Investments (CCI) regime in the Product Disclosure sourcebook adds a second layer. The manager of an illiquid fund, including a FIIA, already adds 1 to the risk score under DISC 5.6.5R(1); a CCI with low liquidity, or that is not regularly priced, carries a warning under DISC 5.8.1R(10); and DISC 5.8.2G cites the COBS 4.5.16R FIIA warning as an example of an applicable warning under DISC 5.8.1R(15). Because the CCI rules cross-refer to the FIIA warning, the FCA says the AFM would need to make sure the FIIA product summary explains the fund’s key features adequately once that warning changes.

Introducing limited redemption arrangements is currently treated as likely to be a fundamental change under COLL 4.3.4R (see COLL 4.3.5G(2)(f)), which needs prior approval at a meeting of unitholders. Where the change is forced by the FIIA rules, CP26/35 proposes treating it as a significant change that does not need unitholder approval, because the AFM has no choice in the matter. The counterweight is a transitional requirement to give existing investors at least 1 year’s notice. For every NURS operating limited redemption arrangements, including a FIIA once the new terms are in place, a significant change unrelated to redemption terms would need prior notice of at least 60 days plus the number of days the prospectus specifies as the fund’s notice period or cut-off, so investors have time to decide, ahead of the cut-off for the next redemption dealing day, whether to stay invested. The approval relief is drafted for the FIIA case only; my reading is that a non-FIIA NURS choosing limited redemption arrangements voluntarily stays on the fundamental-change route.

During the two-year window, the FCA expects AFMs of FIIAs to make it sufficiently clear to prospective investors that redemption terms will change. It does not prescribe how, and points instead to the consumer understanding outcome of the Consumer Duty.

Depositary oversight once a fund becomes a FIIA

Depositaries appear in the paper’s list of readers for a specific reason. The amended definition would bring some existing NURS into the FIIA regime for the first time, and the existing FIIA rules would then apply to both the AFM and the depositary one year after the new rules are made. For the AFM, CP26/35 names the additional functions of an AFM of a FIIA in COLL 6.6.3CR to COLL 6.6.3FR and the guidance on suspension and restart of dealings in COLL 7.2.2G(1B). For the depositary, it names the rules and guidance on oversight of a FIIA’s liquidity management in COLL 6.6.4BR to COLL 6.6.4DG and the duty to inform the FCA in COLL 6.6.11G.

Two carve-outs come with that one-year clock. The FCA would not apply the existing FIIA risk warnings in COBS 4.5A.17R or COBS 4.5.16R to newly captured funds, since updating marketing material with a warning that changes again a year later would be disproportionate. And the redemption terms themselves would not need to change until two years after the rules are made.

One drafting point is worth raising in a response. Chapter 2 lists COLL 7.2.2G(1B) among the existing FIIA provisions that newly captured funds would follow after one year, while chapter 5 proposes deleting that same guidance. The draft transitional provision in Appendix 1 (COLL TP 1.1.72R) does not list COLL 7.2.2G(1B) among the provisions that apply to newly captured funds, and the draft instrument deletes it, so the draft text appears to follow chapter 5, although the chapter 2 wording is inconsistent with it.

What platforms, advisers and SIPP operators would have to absorb

The FCA’s position on distribution is direct: platforms and other intermediaries must adapt to up-to-date rules, and operational difficulty will not stop it dealing with the liquidity mismatch. Its cost benefit analysis estimates that 13 investment platforms and 3 additional unit-linked providers distribute the affected funds, that at least £2bn of the investment in these funds is distributed through advised channels (about 65% of retail NAV), and that around 4,490 financial advisers may need to consider the proposals, because the FCA cannot identify which advisers recommend these funds.

Chapter 7 lists the platform problems the FCA already knows about from LTAF distribution: notice periods complicate and delay transfers between platforms, long deferrals often need a manual workaround behind the scenes, a switch out of a notice-period fund cannot complete until the notice period ends, and model portfolios cannot rebalance quickly. On model portfolios, the FCA notes that some providers rebalance quarterly and some already hold LTAFs, and it estimates that 4 of the 6 retail-marketed FIIAs are in model portfolios today. It also warns that replacing a FIIA with a fund that has similar exposure and no notice period needs care, because real estate securities may not be an appropriate substitute for direct real estate.

A notice period would not turn a FIIA into a restricted mass market investment (RMMI). The FCA says an LTAF is an RMMI because of its wider investment powers as well as its dealing terms, and its proposals would not make a FIIA an RMMI. Distributors would still decide case by case whether a FIIA is a complex or non-complex product, as they do now, but the FCA states that a notice period in itself should not lead a firm to conclude that a FIIA is automatically a complex product.

SIPP operators get a transitional fix. A SIPP operator’s capital requirement depends on the assets it administers, and in CP20/15 the FCA noted that funds with mandatory notice periods would not be readily realisable within 30 days, so operators might need to hold more capital. CP26/35 proposes that existing FIIA units held in SIPPs can continue to be treated as standard assets for prudential purposes for 3 years, ahead of a separate consultation on whether authorised funds with notice periods should be treated as non-standard at all. In the draft IPRU-INV transitional provision the relief covers units held by a firm whose permitted business includes establishing, operating or winding up a personal pension scheme immediately before the FIIA began operating limited redemption arrangements, provided the unit has not since been transferred, and the 3 years run from the date the instrument comes into force.

Unit-linked providers face a commercial decision. The proposals would not apply directly to unit-linked policies that reference FIIAs, and the FCA does not propose changing the permitted link rules in COBS 21: a NURS with a notice period remains a permitted link, while an LTAF is only a conditional permitted link subject to restrictions such as the 10% limit in COBS 21.3.16A. An insurer offering daily dealing in a mirror fund would have to decide whether to keep doing so and carry the price risk during the notice period, or change the terms of its contracts. The FCA estimates that around 5 unit-linked providers give exposure to 6 affected FIIAs through about 17 mirror funds.

Options the FCA considered and set aside

Chapter 3 records the alternatives the FCA has already weighed and rejected, with its reasons for each. Question 9 asks for comments on those options and on the FCA’s reasons for not proceeding with them.

• A deferral-only model, letting FIIA managers defer redemptions for more than 100 days with no compulsory notice period. The FCA is concerned that investors may presume they would receive their money back in a matter of days, only to be told the redemption will be deferred for months, and that the model would not address first-mover advantage.
• A higher threshold such as 75%. The concern is that such a high threshold could give retail investors the impression that funds with around 50% in illiquid assets are generally liquid, because they sit outside the FIIA regime and so have no notice periods.
• Requiring FIIAs to convert into LTAFs. Only a full-scope AIFM can manage an LTAF, LTAFs have wider investment powers and different diversification rules, and the FCA wants a lower-risk authorised route into assets such as real estate to remain available.
• Keeping the old terms for existing investors through a separate unit class. The FCA does not see how the AFM could manage the fund’s liquidity fairly across the two groups.
• A power to waive the notice period for life events or hardship. The FCA considers qualifying events too hard to define and evidence consistently across AFMs, distributors and platforms, and a waiver a source of perceived unfairness between unitholders.

The FCA does say it is open to feedback on whether a single authorised fund structure for retail exposure to inherently illiquid assets would simplify the regime.

The reporting thread: FRAME liquidity buckets and LMT data

The consultation chapters of CP26/35 propose no new regulatory return. The data questions arrive through the FCA’s other fund work. Annex 4 sets out how the FCA will judge success: notice periods implemented with as little disruption as possible, growth in the asset value of funds with notice periods, suspensions becoming rarer in the illiquid NURS sector, and lower cash buffers in some FIIAs. The cost benefit analysis adds that the FCA intends to monitor liquidity-driven suspensions, fund closures, asset flows and NAV across affected FIIAs and, where data is available, their cash and other liquid asset holdings.

The link is FRAME. Annex 4 notes that the FCA has reviewed the existing portfolio liquidity reporting for AIFs, which distributes a fund’s portfolio into time buckets showing how quickly it could reasonably be liquidated without a discount, and proposes including it in the essential requirements that every fund reporting under FRAME completes. For managers of authorised funds subject to enhanced reporting requirements, the FCA proposes collecting data on the availability and use of selected liquidity management tools: quantity-based tools such as deferral of redemptions, gating and suspensions, and anti-dilution tools such as dilution adjustments, dilution levies and dual pricing. FRAME’s consultation deadline has been extended to 22 October 2026, with final rules expected in the first half of 2027 and full implementation targeted for 2028. Our FCA asset management reform and FRAME overview covers the wider package.

That connects directly to FIIA classification. A fund’s liquidity time buckets and its proportion of inherently illiquid assets are different measures, but both describe the same portfolio, and the cost benefit analysis already sized the FIIA population from FCA regulatory data, with its NAV distribution drawn from AIFMD reporting. My working assumption is that an AFM running a hybrid fund near the 50% line should be able to reconcile the record it keeps for the 3-continuous-month test with the liquidity profile it reports, and explain any difference in a sentence.

Firms with EU funds will recognise the theme. The EU approach runs through harmonised liquidity management tools and supervisory notifications, covered in our AIFMD II liquidity management tools guide and, for Luxembourg, the CSSF LMT activation module for redemptions-only suspensions. CP26/35 is a UK COLL proposal that prescribes redemption terms for one class of UK authorised fund, and it makes no reference to the EU tool list. Draft provisions such as COLL 6.2.19AR exist only in Appendix 1 of the consultation until the FCA makes the instrument, so a rule-mapping feed built on the FCA Handbook API, which serves current Handbook text, will not show them yet.

Frequently Asked Questions

Our property NURS already deals monthly with a 90-day notice period. Is there anything to do?

Probably, though less than for a daily-dealt fund. The FCA counts 3 funds, including 1 feeder, with aggregate NAV of about £0.87bn that already operate a 90-day notice period. Because the proposal removes the limited-redemption carve-out from the FIIA definition, a fund like that would become a FIIA if it meets the 50% inherently illiquid asset test, and if it sits outside the regime today its AFM and depositary would pick up the existing FIIA rules one year after the rules are made. The new risk warning, the expanded prospectus disclosure, the revocation rule and the suspension provisions are all proposed for every NURS with limited redemption arrangements, so documents and dealing procedures still need a review.

Do existing investors get a chance to leave on the old terms?

They get time, with no special exit route. Existing investors would receive at least 1 year’s notice of the move to FIIA-prescribed terms, and the fund’s current dealing terms continue to apply until the new ones take effect. The FCA has rejected keeping the old terms for existing holders through a separate unit class. The paper does not say when within the two-year window the notice must be sent beyond the one-year minimum, so my reading is that it has to go out no later than one year before the new terms start.

Will FIIAs stay eligible for a Stocks and Shares ISA?

That is unresolved. The FCA notes that NURS with notice periods would be eligible for the Innovative Finance ISA, records strong industry feedback that they should remain eligible for the Stocks and Shares ISA and be treated consistently with the LTAF, and says it will take ISA eligibility into account when deciding if and when to make final rules. Its cost benefit analysis assumes FIIAs remain eligible for Stocks and Shares ISAs in every scenario. Question 1 asks whether two years is enough for investors holding FIIA units in a Stocks and Shares ISA to decide what to do.

Can the AFM let a redeeming investor out early if a new subscriber takes their place?

Not under the proposals. The FCA accepts that some netting of subscriptions against redemptions should still be possible, but it would not allow the AFM to waive the notice period in that situation, because some investors would then receive proceeds before the end of the minimum notice period and others would not. Secondary-market transfers of tokenised units are a separate question, which chapter 9 raises for discussion without proposing rules.

What happens to a request submitted the day before the fund suspends?

Under proposed COLL 7.2.1-AR the suspension period would count towards the notice period. If the suspension is still running when the notice period ends, the units would be priced at the first valuation point after dealing restarts. The investor could withdraw the request only if the AFM agreed and was satisfied the revocation would not prejudice other investors, the same test that applies outside a suspension.

Does CP26/35 change anything for QIS managers?

Not directly. The FCA will consider QIS redemption terms in its second consultation on the UK AIFM regime and says it is minded to leave QIS managers more flexibility, since a full-scope UK AIFM managing a QIS must already align dealing terms with asset liquidity and the funds are mainly for professional investors. A QIS can still matter to a NURS that holds it: under the amended definition, units in a QIS that aims to invest at least 50% in inherently illiquid assets would count as inherently illiquid for the NURS, whatever the QIS’s own redemption terms, unless the QIS is in the process of winding up or termination.

Related Articles

• FCA Asset Management Reform: The £128m Rulebook Package: the July 2026 package of CP26/26 (FRAME), CP26/27 and CP26/28, including the proposed fund reporting model.
• AIFMD II Liquidity Management Tools: What Changes April 2026: the EU tool selection, calibration and CSSF notification framework that applies from 16 April 2026.
• CSSF LMT Activation Module: Notifying a Redemptions-Only Suspension: how Luxembourg managers log activations and deactivations of redemptions-only suspensions in eDesk.
• UK Money Market Fund Reform: What FCA Managers Must Watch: the FCA’s liquidity proposals for UK money market funds, including weekly liquid asset expectations.
• FCA Handbook API: How to Query UK Rules Programmatically: what the Handbook API returns, and why it cannot replace retained records of past rule versions.

Key Takeaways

• Responses to CP26/35 are due by 11 December 2026; Questions 2, 6 and 7 test the 50% threshold, the monthly dealing cap and the 90-day minimum directly.
• Re-run every NURS classification against the draft definition now: limited-redemption funds lose their carve-out, LTAF units count as illiquid in full unless the LTAF is in the process of winding up or termination, and recognised schemes gain their own limb.
• Tag each fund with the clock that applies to it (6 months, 1 year, 2 years, or 6 plus 6 months); none becomes a calendar date until the policy statement, expected in the first half of 2027.
• Plan the move to prescribed terms as a significant change with at least one year’s investor notice; on the draft as written, voluntary adoption by a non-FIIA still looks like a fundamental change needing unitholder approval.
• Inventory financial promotions, CCI product summaries and prospectuses for every NURS with limited redemption arrangements, since the new warning and disclosure text reach beyond FIIAs.
• For platforms, the build question is whether systems can accept redemption instructions during a suspension; Question 14 asks whether AFMs should be required to accept them and whether the suspension should count towards the notice period, and paragraph 5.5 invites views on the platform burden.
• Keep a dated record of the illiquid-asset percentage at each valuation point for hybrid funds near 50%, reconcilable to the liquidity time buckets proposed for FRAME’s essential requirements.

Sources and References

• FCA press release, New rules to make long-term investment funds clearer (8 October 2026): fca.org.uk
• FCA CP26/35, Fair redemption terms for authorised funds investing in illiquid assets, consultation page: fca.org.uk
• FCA CP26/35 consultation paper (PDF, October 2026), including Annex 2 cost benefit analysis, Annex 3 compatibility statement, Annex 4 measuring success and Appendix 1 draft Handbook text: fca.org.uk
• FCA CP26/35 online response form: fca.org.uk
• FCA CP20/15, Liquidity mismatch in authorised open-ended property funds (3 August 2020): fca.org.uk
• FCA PS26/17, Enhancing fund liquidity risk management (rules effective 1 February 2027): fca.org.uk
• FCA CP26/26, Fund Reporting for Asset Management Entities (FRAME): fca.org.uk
• FCA CP26/28, The UK AIFM Regime: fca.org.uk
• Financial Stability Board, Revised Policy Recommendations to Address Structural Vulnerabilities from Liquidity Mismatch in Open-Ended Funds (20 December 2023): fsb.org
• IOSCO, Revised Recommendations for Liquidity Risk Management for Collective Investment Schemes (May 2025): iosco.org
• FCA Handbook Glossary, current definitions of fund investing in inherently illiquid assets and inherently illiquid asset
• FCA Handbook, current COLL rules cited: COLL 4.2, COLL 4.3, COLL 5.2, COLL 5.6, COLL 5.7, COLL 6.2, COLL 6.6, COLL 7.2 and COLL 15.8
• FCA Handbook, current COBS, DISC and FUND rules cited: COBS 4.5, COBS 4.5A, COBS 21.3, DISC 5.6, DISC 5.8 and FUND 3.6
• FCA PS26/7, Progressing fund tokenisation (30 April 2026): fca.org.uk

Before the 11 December CP26/35 deadline

The consultation window runs for just over nine weeks. The most useful outputs from it are a fund-by-fund classification under the draft definition, a list of the documents and dealing processes each implementation clock touches, and evidence on the questions where operational cost is real: whether two years is long enough (Question 1), whether platforms can take redemption instructions during a suspension (paragraph 5.5, alongside Question 14 on accepting requests during a suspension) and what obstacles a notice period creates for anti-dilution tools (Question 23). Responses go to the FCA by 11 December 2026 through its online response form or by email to cp26-35@fca.org.uk.

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