Understanding the FCA's Permanent Operating Phase for Digital Securities: What Fund Issuers Should Plan For

The FCA has used its Digital Securities Sandbox and related guidance to clarify how existing regulatory requirements apply to tokenised securities. The Permanent Operating Phase (POP) that the FCA has set out in principle will not create a new asset class exemption; instead, digital securities will generally sit within the existing frameworks for regulated activities, client assets, custody, and financial promotions. Fund issuers using tokenisation therefore need to map their model against existing obligations such as client money rules, custody standards and prospectus requirements where applicable. Operational resilience and record keeping are central to the FCAs approach. Regulators have emphasised the need for robust governance, verified audit trails, and clear segregation of duties between issuance, transfer registry, custody and trading functions. For retail investors, that means platforms should be able to demonstrate how records are kept, how transfers are authorised, and what controls protect investor property and data. Issuers should also expect to document incident response plans and disaster recovery arrangements that align with FCA expectations on operational resilience. Disclosure and ongoing reporting remain critical. The FCA has signalled that standard market protections such as clear offer documents, risk disclosures and periodic reporting will apply regardless of whether interests are held as conventional shares or digital tokens. For fund issuers, practical preparation includes aligning legal documentation with the technical design (for example, where a platform uses an internal register versus a distributed ledger), ensuring third-party providers adhere to regulatory standards, and establishing independent oversight for valuations and investor communications.