The FCA wants minimum notice periods for illiquid funds, citing lengthy suspensions as proof investors cannot get money back fast. Its own figures count seven such suspensions in seven years and name none, not the £2.1bn M&G fund frozen for 17 months.
Estimated reading time: 7 minutes
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In short. On 8 October 2026 the Financial Conduct Authority published CP26/35, proposing minimum dealing limits and notice periods for retail funds that invest mostly in illiquid assets such as real estate [[1]]. Its stated justification: "Repeated lengthy suspensions in the sector show that AFMs cannot always maintain the promise of quick liquidity" [[2]]. The same paper's own cost-benefit annex counts the real figure: seven liquidity-driven suspensions among NURS funds in the past seven years, against an admitted population of just six affected retail funds today [[2]]. Not one suspended fund is named anywhere in the paper's 129 pages, including the most prominent case on record, M&G's £2.1 billion Property Portfolio fund, frozen for 17 months from December 2019 [[4]]. A second finding: the FCA tried close to the same rule in 2020, paused it because fund distribution platforms were not ready, and now proceeds while its own text says that readiness gap remains open. Two documented mistakes: four stars.
Retail investors who put money into an open-ended fund that holds property or other hard-to-sell assets are promised something the assets themselves cannot deliver: the ability to get their money back on short notice. The Financial Conduct Authority has known this for years. On 8 October 2026 it published Consultation Paper 26/35, "Fair redemption terms for authorised funds investing in illiquid assets," proposing to limit how often these funds can let investors in and out, and to impose minimum notice periods aligned with the regime it already runs for Long-Term Asset Funds [[2]]. The consultation closes on 11 December 2026 [[1]].
A sentence doing more work than the evidence behind it
The paper's case for intervening rests on a short, dramatic line in Chapter 2: "Repeated lengthy suspensions in the sector show that AFMs cannot always maintain the promise of quick liquidity" [[2]]. No number, no date, no fund sits next to that sentence. It reads as an established pattern, not an isolated event.
Seventy pages later, in the cost-benefit annex that regulators are required to produce, the actual count appears: "There have been several suspensions of NURS funds over the past 7 years, of which 12 were driven by valuation-related issues and 7 by liquidity-related reasons. Notably, all 7 liquidity-driven suspensions occurred in funds that would have fallen within scope of the proposed FIIA regime. While there have been relatively few liquidity-related suspensions, FIIAs are particularly susceptible to such events" [[2]]. The paper's own population estimate for the funds this rule targets is six retail-marketed funds, with a combined net asset value of about £3.68 billion [[2]]. Seven suspensions, over seven years, is the entire record behind "repeated lengthy suspensions in the sector."
None of the seven is named. Not one fund, not one date, not one duration, anywhere across the consultation's 129 pages. That matters because the single most prominent case of exactly this harm is a matter of public, independently reported record. M&G's Property Portfolio fund and its feeder suspended redemptions in December 2019 after a wave of outflows compromised its liquidity position, triggered by a valuer's cut to the worth of its retail holdings [[4]]. It did not reopen until 20 April 2021, after the fund manager sold or exchanged 38 properties for £702 million to rebuild cash levels, a suspension of roughly 17 months [[4]]. A paper built around the claim that suspensions show funds "cannot always maintain the promise of quick liquidity" never once mentions the fund that proved it most visibly.
The same obstacle, six years later
This is not the FCA's first attempt at this rule. In August 2020 it published CP20/15, proposing notice periods of 90 to 180 days for property funds on almost identical liquidity-mismatch grounds [[3]]. That consultation did not become a rule. CP26/35 explains why, in its chapter on operational challenges: "In response to CP20/15, stakeholders expressed concern that the wider market that supports and distributes funds was not operationally ready for notice periods. This included platform providers' and advisers' systems" [[2]].
Six years on, the same chapter reports the same problem, only slightly softened: "Retail platforms have made some progress since then, particularly after we introduced the LTAF regime. There are still significant challenges, but we do not believe that this should stop us addressing the liquidity mismatch in FIIAs. Platforms and other intermediaries must adapt to cater for up-to-date rules" [[2]]. The paper's own cost-benefit annex puts a figure on what "adapt" means: a platform provider choosing to keep offering these funds needs around 1,092 person-days of staff time to update its systems, an average one-off cost of about £550,000 per firm, totalling between £4.38 million (low retention) and £8.75 million (high retention) across the industry depending on how many distributors stay in [[2]]. Firms get a two-year implementation window and existing investors get a year's notice [[2]]. What the paper does not set out is what happens if, in two years, platforms report the same "significant challenges" they are reporting now: no stated enforcement step, no review clause, no fallback if the obstacle that stalled this exact proposal in 2020 has still not been cleared.
The claims, tested
| The document's own words | What the record shows | Verdict |
|---|---|---|
| "Repeated lengthy suspensions in the sector show that AFMs cannot always maintain the promise of quick liquidity" [[2]] | The paper's own cost-benefit annex counts seven liquidity-driven suspensions in seven years, among six affected retail funds; none is named, including the 17-month M&G Property Portfolio suspension (Dec 2019 to Apr 2021), independently reported at the time [[2]][[4]] | A sweeping justification resting on an unnamed, lightly-populated record |
| "There are still significant challenges, but we do not believe that this should stop us... Platforms and other intermediaries must adapt" [[2]] | This is the identical obstacle that caused the FCA to pause the near-identical CP20/15 proposal in 2020; the paper proceeds on a 2-year implementation window with £4.38m-£8.75m in platform costs and no stated consequence if readiness again falls short [[2]][[3]] | The 2020 failure condition is acknowledged, not addressed |
Credit where due
The underlying diagnosis is not invented. Daily-dealt funds that hold property or other hard-to-sell assets really do carry a liquidity mismatch, and the paper is honest in places that the harm is narrow: it says plainly that the change "only affects a small number of funds" and that liquidity-related suspensions have been "relatively few" [[2]]. The proposed fix is proportionate to that scale, applying only to NURS funds with at least half their portfolio in inherently illiquid assets, aligning their terms with the Long-Term Asset Fund regime the FCA already runs, rather than inventing a new structure [[2]]. The transition is not abrupt: existing funds get two years to comply and their investors get a year's advance notice of any change to redemption terms [[2]]. And the paper does attempt to measure the benefit as well as the cost, estimating that daily-dealt illiquid NURS funds currently hold cash balances "materially above, in some cases more than double, the average (around 6%)" held by comparable 90-day notice funds, cash that better-matched redemption terms could redirect into the assets investors actually chose [[2]].
Verdict
Four stars, two documented mistakes. The proposal itself is a reasonable, narrowly-scoped response to a real and well-understood structural problem, and the paper is open about how few funds it actually touches. But the sentence doing the public-facing work, "repeated lengthy suspensions... show that AFMs cannot always maintain the promise," reads as a settled pattern while the evidence for it, buried seventy pages later, is seven events in seven years with not one named. And a paper that is explicitly a second attempt at a 2020 proposal, paused then for exactly this reason, now proceeds while admitting the same reason has not gone away, without saying what happens if it is still true in two years' time.
The star score counts two documented mistakes. First, Chapter 2's claim that "repeated lengthy suspensions in the sector show that AFMs cannot always maintain the promise of quick liquidity" is not supported, in scale or specificity, by the paper's own cost-benefit annex, which counts seven liquidity-driven NURS fund suspensions in seven years among six affected retail funds and names none of them, including the independently-documented 17-month suspension of M&G's Property Portfolio fund (December 2019 to April 2021). Second, the paper proceeds with the near-identical proposal that was paused in 2020 over fund-platform readiness while stating that readiness gap remains, without setting out any enforcement step, review point or fallback if platforms are not ready within the proposed two-year window. Two falls in the 1 to 3 band: four stars; the bands are on the ratings page. This piece makes no finding about the conduct of any named individual; Lauren Mumford, chair of M&G's fund ACD, is quoted in her stated professional role regarding the 2021 reopening, not criticised. All four sources below were fetched directly on 11 October 2026; none returned an error.
Sources
- CP26/35: Fair redemption terms for authorised funds investing in illiquid assets, Financial Conduct Authority, first published 8 October 2026
- CP26/35 (PDF), Financial Conduct Authority, October 2026
- CP20/15: Liquidity mismatch in authorised open-ended property funds, Financial Conduct Authority, first published 3 August 2020
- M&G reopens £2.41bn property portfolio, Jon Yarker, Money Marketing, 20 April 2021