Understanding the FCA's Permanent Operating Regime (POP) for Digital Securities and Fund Issuers

The FCA’s Digital Securities Sandbox and subsequent policy work have made plain that the regulator wants a durable rule set for digital securities rather than a series of ad‑hoc arrangements. The Permanent Operating Regime (POP) concept is intended to set out how digital representations of securities can sit within the UK’s existing regulatory perimeter while ensuring market integrity, consumer protection and interoperability with traditional systems. Key themes include clear allocation of responsibilities between issuers, platform operators and custodians; clarity on the legal status of a digital record; and proportionate conduct rules for firms offering or facilitating tokenised funds. Operationally, POP is expected to address authorisation/registration pathways for market infrastructure and fund issuers, rules for custody and segregation of investor assets, and requirements for disclosure and governance that are tailored to digital instruments. That framework would aim to reduce legal uncertainty for custody arrangements (for example, nominee or trustee models) and to make transfer and settlement rules more predictable. Interoperability considerations — enabling tokenised securities to move between registries, platforms or legacy systems — are likely to be an explicit part of the regime so that secondary market trading and settlement operate safely. For retail investors, the most important outcomes would be clearer protections around custody, dispute resolution and ongoing information rights. POP is oriented toward making the same standards of conduct and disclosure apply regardless of whether a fund share is represented on a distributed ledger or within a traditional register. Until the regime is finalised, retail investors should look for platforms and issuers that explain custody arrangements, valuation policy and how investor rights are enforced in the digital register. Relating this back to fractional digital share investing, a well‑designed POP should reduce legal and operational frictions that have historically hindered wide retail access, by standardising how tokenised fund shares are issued, held and traded while preserving familiar investor safeguards.