FCA proposes 90-day notice for some illiquid funds: five checks for managers

The UK Financial Conduct Authority has opened consultation CP26/35 on fair redemption terms for authorised funds investing in illiquid assets. The proposal would make redemption terms better reflect the time it typically takes to sell the underlying assets. For managers assessing tokenized fund structures, one point is clear: a digital register or transferable token does not make property, infrastructure or private-market holdings liquid.

The consultation opened on 8 October 2026 and closes on 11 December 2026. The FCA expects to publish final rules in the first half of 2027. These are proposals, not final rules.

Which funds are in scope?

The FCA identifies authorised fund managers and certain Non-UCITS Retail Schemes (NURS), including NURS with at least 50% of scheme property invested in inherently illiquid assets and NURS with limited redemption arrangements. The consultation also names relevant distributors, advisers, depositaries, SIPP operators and providers of unit-linked life products.

This is not a rule for every fund, private-market vehicle or tokenized asset. Managers should assess the consultation’s detailed scope against each fund’s legal form, portfolio and dealing arrangements, with their UK counsel and depositary.

The proposed notice period

In its accompanying announcement, the FCA describes a proposed 90-day notice period for in-scope funds. It says existing funds would have two years to comply and would need to give investors at least one year’s notice. The precise application depends on the final rules and each fund’s circumstances; managers should read CP26/35 rather than treating the headline as a settled requirement.

Five checks for fund managers

1. Map the legal redemption right. Record dealing frequency, notice, settlement timing, suspension powers and any gates or limits in the prospectus and operating procedures. Keep a token transfer or secondary-market process distinct from the fund’s formal redemption process.
2. Compare terms with asset-sale timelines. Estimate realistic sale and settlement periods for the portfolio under normal and stressed conditions. A token transfer may change ownership records; it does not shorten the time to sell an underlying building, loan or infrastructure interest.
3. Test cash and settlement dependencies. Document how redemption cash is sourced, valued, approved and paid, including the roles of administrators, custodians, banks and any on-chain settlement components. Identify what happens when a token transfer settles before the fund can realise assets.
4. Align disclosures and interfaces. Make the same dealing timetable visible in offering documents, subscription flows, dashboards and investor communications. Avoid presenting transferability as a promise of immediate exit or guaranteed liquidity.
5. Plan change control. Identify which terms, systems, service-provider agreements and investor notices could need updating if the proposals become rules. Track the consultation and wait for final requirements before setting a compliance deadline or making a product claim.

What tokenization changes—and what it does not

Tokenization can support digital recordkeeping, permissions and transfer workflows, depending on a fund’s legal and technical design. It does not, by itself, alter the liquidity of the underlying portfolio, create buyers, guarantee a secondary market, or replace governing documents and applicable regulation. Any claimed operational benefit should be tested against the complete issuance, custody, transfer and redemption process.

If you are evaluating digital fund operations, explore Fundshing’s platform overview. For the source material, read the FCA’s CP26/35 consultation and announcement. This article is general information, not legal or regulatory advice.