How Existing FCA Rules Apply to Tokenised Fund Shares: Authorisation, Safeguards and Record‑keeping

Tokenisation does not operate outside the UK regulatory framework. Firms offering or arranging investments in tokenised fund shares must consider existing FCA regimes that govern regulated activities, client assets and market conduct. Depending on activities, that can include permissions under the Financial Services and Markets Act, rules derived from MiFID where applicable, and FCA handbook obligations on systems and controls.

Custody and record‑keeping expectations are central. The FCA’s client assets rules (CASS) set out standards for segregating and protecting client assets, reconciliation, and client reporting. For tokenised shares this means firms must demonstrate how token custody, private key management, and reconciliation processes meet equivalent protections to traditional custodians — including protection against loss, clear title, and robust audit trails.

Transaction reporting, market abuse surveillance and operational resilience are also relevant. Platforms need governance over trade execution, time‑stamped records, and controls that prevent market abuse or insider dealing regardless of whether ownership is represented on a distributed ledger. Auditability and ability to produce records to the regulator are practical requirements.

For retail savers, the key takeaway is that tokenisation does not remove established legal and regulatory safeguards. Investors should expect platforms to articulate how existing FCA rules around authorisation, custody and client asset protection map to the technical arrangements used to issue, hold and transfer fractional digital shares.