UK's FCA proposes 90-day notice period on illiquid assets to curb fund suspensions

Britain’s Financial Conduct Authority (FCA) has proposed a mandatory 90-day notice period for investors withdrawing money from open-ended funds holding inherently illiquid assets, such as property and infrastructure.

The regulatory framework is designed to eliminate the risks associated with rapid, liquidity-driven asset sales that can inflict steep valuation losses during periods of market stress.

Under current rules, many funds allow investors to withdraw capital daily with zero notice, creating structural vulnerabilities that frequently force sudden fund suspensions when cash reserves run low.

The Financial Conduct Authority said the new notice period would give fund managers time to sell assets in an orderly way, making liquidity-driven suspensions less likely

Existing funds would have two years to comply and will have to give investors at least one year’s notice, the regulator said

The new rules are intended to strengthen liquidity risk management and help funds meet redemption requests in line with their terms, while protecting remaining investors and supporting market integrity, the FCA added

It said the proposal brings the UK in line with new international liquidity standards for open-ended funds

By enforcing a minimum 90-day window—or longer if specific fund strategies require it—managers will have adequate time to liquidate underlying holdings in an orderly fashion.

Existing funds would be granted a two-year compliance window, provided they give investors at least one year of advance notice prior to changing redemption terms.

The proposal aligns UK regulatory standards with broader international liquidity guidelines for open-ended investment vehicles.