Asset managers planning tokenized funds need a fund structure that gives investors enforceable rights and assigns each regulated function. A South African or Mauritian investment team proposing a UK fund for professional investors must settle those matters before committing to its ledger or distribution model.
The starting recommendation is to assess a UK authorised fund for the proposed professional investors, with an appropriately authorised manager, depositary and distribution partners. Select the fund category against its assets and liquidity, document a controlled register, and establish cash subscriptions and redemptions. Add stablecoin settlement or organised secondary trading only after their separate legal requirements are resolved.
A defined fund engagement
This service is for overseas sponsors and asset managers deciding how a UK fund will issue, record and distribute tokenised units. The engagement connects the fund documents, operator appointments and investor journey through four concrete outputs.
A portal offering unrelated real-world asset (RWA) investments needs the separate RWA Platforms analysis. A project issuing a token independently of a fund should begin with Token Issuers. Retail distribution, collateral use and expansion into additional countries require their own scope.
1. Fund, operator and distribution structure memorandum
The memorandum classifies the arrangements and investor rights before selecting technology. Where the arrangements constitute a collective investment scheme, its units are specified investments. Recording those units on a ledger does not remove that classification. (Financial Services and Markets Act 2000, s. 235; Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, art. 81.)
For the proposed professional-only offer, assess a qualified investor scheme, or QIS, against the portfolio, risk spreading, eligible investors and redemption model. Consider other authorised categories where the strategy requires them, including a long-term asset fund for an appropriate illiquid portfolio. An authorised structure must satisfy its category's rules. If none fits, a separately scoped alternative investment fund route needs its own operator and marketing analysis. (FCA Handbook, COLL 8.1.3R, 8.4.2R–8.4.4R and 15.1.2G.)
Choose the legal form separately: an open-ended investment company, authorised unit trust or authorised contractual scheme. The memorandum records the proposed manager, delegation chain, depositary and distribution territories, with the permissions and approvals still required.
For the proposed UK alternative investment fund, assess a full-scope UK alternative investment fund manager, or AIFM. Its UK marketing approval is a separate requirement from authorisation of the fund and its distributors. The ordinary UK-fund route also needs adjustment if an overseas master fund is introduced. (Alternative Investment Fund Managers Regulations 2013, regs. 50 and 54; FCA Handbook, FUND 3.12.2D–3.12.4G.)
2. Constitutional, offering and investor-document requirements
This output specifies the provisions needed in the constitution, prospectus, subscription documents and investor terms. It connects unit classes, fees, voting, distributions and redemption rights with the register and settlement process.
The documents must explain dealing days, valuation, payment deadlines, suspension powers and transfer restrictions. For a QIS, valuation and dealing follow its applicable rules and fund documents; a continuously operating ledger cannot promise continuous redemption. (FCA Handbook, COLL 8.5.9R–8.5.11R.)
Investor eligibility needs evidence and an accountable decision-maker. Professional status must meet the applicable classification requirements; a website declaration or large subscription cannot substitute for them. The distribution plan identifies who communicates promotions, accepts orders, arranges transactions and gives any investment advice. (FCA Handbook, COBS 3.5 and COLL 8.1.3R; Financial Services and Markets Act 2000, ss. 19 and 21.)
The fund's ability to issue units gives a technology provider no automatic distribution permission. A facility bringing multiple buyers and sellers together also needs a separate trading-venue assessment. (Regulated Activities Order 2001, arts. 25 and 25D.)
3. DLT register and transfer-control legal specification
The distributed ledger technology (DLT) specification identifies the legal holder, unit rights and record relied upon for ownership. It distinguishes direct registration from a nominee holding and from a contractual claim against a platform. The documents must state how any conflicting records are reconciled and when an issue, transfer or cancellation becomes legally effective.
The register's legal effect depends on the selected form. An open-ended investment company's statutory register is prima facie evidence of recorded matters. A QIS unit trust or contractual scheme has its own register requirements. The same statement about conclusive ownership cannot simply be applied across every fund. (Open-Ended Investment Companies Regulations 2001, Sch. 3, paras. 1–3; FCA Handbook, COLL 8.5.8R.)
FCA guidance explains how DLT records can be used within the authorised-fund framework where the relevant requirements are met. It addresses control, correction, eligible transfers and recovery, and extends to QIS through specific modifications. (FCA Handbook, COLL 6 Annex 4.5G–4.9G, 4.14G–4.28G and 8.5.8AG.)
The legal specification covers:
- Linking identified holders to wallets and aggregating their holdings across addresses.
- Checking subscriptions and transfers against investor, jurisdiction and fund restrictions.
- Authorising key replacement, corrections, freezes and forced transfers on verified evidence and lawful grounds.
- Resolving invalid transfers and preventing duplicate units after cancellation or reissue.
- Maintaining accessible records and a workable recovery process during a network or provider failure.
These controls must be reflected in the documents and tested in the implementation. The firm responsible for maintaining the register needs effective authority over the register, including correction without dependence on an uncooperative vendor. (FCA Handbook, COLL 6 Annex 4.7G–4.9G, 4.12G–4.21G and 4.22G–4.28G, as applied by COLL 8.5.8AG.)
4. Manager, administrator, depositary and technology contract matrix
The matrix assigns each function, decision, liability and evidence requirement to a named contracting entity. It separates the sponsor's commercial role, the manager's regulated responsibilities and any delegated investment discretion.
The administrator's valuation and processing work must connect with the registrar's ownership records. The depositary's portfolio safekeeping and oversight duties need a distinct mandate. Investor wallet custody and vendor control of transfer keys require their own assessment. For a QIS, the manager and depositary remain subject to their respective duties and applicable outsourcing requirements. (FCA Handbook, COLL 8.5.2R, 8.5.4R and 8.5.6G.)
Contracts should address instructions, reconciliations, audit access, incidents, subcontracting, replacement and exit. Distributor agreements must identify the territories, investor classes and activities covered. A provider's title cannot establish its regulatory permissions.
Resolve the cross-border and settlement dependencies
An overseas team may advise or receive delegated investment functions only within the applicable permissions and delegation conditions. For a full-scope UK AIFM, investment delegation requires the relevant authorisation or registration and supervision, or the specified FCA approval route. Non-UK investment delegation also requires supervisory cooperation. The UK manager must retain effective oversight and avoid becoming a letter-box entity. (FCA Handbook, FUND 3.10.2R–3.10.3G and 3.10.7G–3.10.8R.)
For the South African investment team, check the intended provider's Financial Advisory and Intermediary Services (FAIS) licence, approved products and advisory or discretionary mandate. If the UK fund will be solicited in South Africa, assess the separate foreign-scheme approval requirements. A professional audience does not automatically remove them. (Financial Advisory and Intermediary Services Act 37 of 2002, ss. 1 and 7; Collective Investment Schemes Control Act 45 of 2002, ss. 1 and 65; FSCA CIS Notice 1 of 2026, paras. 4–5.)
Map South African seed capital, subscriptions and service fees separately before fixing cross-border payments. The applicable exchange-control route depends on the persons and funds involved. (Exchange Control Regulations 1961, regs. 2, 3 and 10(1)(c); SARB, Currency and Exchanges Manual for Authorised Dealers, 8 October 2026, B.2(B), B.2(C), B.2(H) and B.3(C).)
For Mauritius, match the proposed activity to the applicable securities and financial-services permissions. A Global Business Licence cannot substitute for permission to conduct a regulated financial service. The sponsor's location alone does not establish that the UK fund will be offered locally. (Securities Act 2005, ss. 29–30 and 98; Financial Services Act 2007, ss. 14, 71(2), 79A and 79B.)
For settlement, begin with an agreed bank-cash process. The optional direct-to-fund model requires the prescribed issue and cancellation account and supporting documents; it leaves the manager and depositary framework in place. (FCA Handbook, COLL 6.2.7AR–6.2.7GG and 8.5.10R(7).)
A proposed stablecoin needs separate classification, asset-eligibility and dealing analysis. The FCA's published modification approach supports applications; it is not a general permission to hold or settle in any stablecoin. Any necessary direction must be obtained and its conditions reflected in the operating model. (FCA, PS26/7, Chapter 4, paras. 4.5–4.11 and accompanying response.)
Information needed to scope the work
Provide the group chart and existing licences; proposed assets, liquidity and investor countries; manager and depositary proposals; draft fund and distribution documents; cash and token flow diagrams; and the vendor's register, wallet, recovery and transfer design.
The engagement then proceeds from the structure memorandum to document requirements, the register specification and contract allocation. The final workstream identifies unresolved approvals, evidence and implementation conditions. Regulated fund services remain with the appointed firms. Tax opinions, investment recommendations and technical security testing require separately agreed specialist work.
Questions sponsors ask
Can the overseas team retain investment decisions?
Potentially, through an appropriately permitted and supervised delegation. The agreement must reflect the actual discretion exercised and preserve the UK manager's required control. An advisory label cannot conceal discretionary management. (FCA Handbook, FUND 3.10.2R, 3.10.8R and 3.10.10G.)
Must the blockchain be the legal register?
No. The design can use DLT for the primary record or for functions linked to another compliant record. The selected fund law, documents and operating controls must establish how ownership is recorded and corrected. (FCA Handbook, COLL 6 Annex 4.5G–4.9G.)
Can investors subscribe in stablecoins from launch?
Only after the precise asset, payment route and applicable fund rules have been assessed. An available application route is not an approved waiver. A cash launch remains an option once the fund's other launch conditions are satisfied. (FCA, PS26/7, Chapter 4.)
Can holders trade whenever the network is available?
Network availability cannot establish buyer eligibility, a lawful trading service or immediate fund redemption. Transfer administration, organised trading and redemption need separate treatment. (Regulated Activities Order 2001, arts. 25 and 25D; FCA Handbook, COLL 8.5.9R–8.5.11R.)
Does tokenisation make units usable as collateral?
Collateral use requires a separate review of the recipient, legal control, enforcement and realisation arrangements. The distinct transaction is explored in Singapore tokenized fund units as EU collateral.