Fidelity’s New Restrictions for US-Connected Clients
In 2025, Fidelity began notifying US citizens, green card holders, and taxpayers, collectively known as US-connected persons, that they can no longer hold collective investments such as OEICs, unit trusts, and ETFs domiciled outside the US.
This affects clients holding a Fidelity General Investment Account (GIA), ISA, SIPP or offshore bond, who are US taxpayers under FATCA or PFIC rules.The decision follows growing pressure from US regulators and custodians over foreign account compliance and PFIC exposure. For years, Fidelity and Fidelity were the last major UK platforms allowing US-connected investors to hold these funds, despite their tax complexity. That door has now closed.
What This Means for Existing Clients
If you have US taxpayer status and hold a Fidelity account, two issues now matter most:
1. You may need to sell existing collective funds
Clients may be required to divest non-US collective investments by a specified date.
✅ Still allowed:
- Cash holdings
- Direct equities (even UK listed)
- Fixed-term deposits and direct money-market instruments
🚫 No longer allowed:
- UK OEICs or unit trusts
- UK/EU-domiciled ETFs or funds
- Offshore insurance-wrapped collectives (unless compliant)
2. You may already have historic PFIC exposure
Even if you sell today, past PFIC holdings have likely already created a reporting obligation to the IRS. PFIC rules apply retroactively, and remediation may require amended tax filings and penalty mitigation strategies.
Cameron James works with US/UK cross-border tax specialists who can help quantify PFIC exposure and get you back into compliance efficiently.
PFIC Rules Explained
A PFIC is any non-US corporation that either:
- Earns 75% or more of its income from passive sources, or
- Holds 50% or more of its assets in passive investments such as shares or bonds.
That definition includes almost all UK and European collective funds.
PFIC Tax Treatments
| PFIC Treatment | Description | Common Issues |
| Default (Excess Distribution) | Applies automatically if no election is made | Most punitive, high tax + interest |
| QEF Election (Qualified Electing Fund) | Requires US-compliant reporting from fund manager | Rarely available in UK funds |
| Mark-to-Market Election | Annual taxation on unrealised gains | Complex and administratively heavy |
The key issue: UK and European funds rarely issue the US tax statements needed for the QEF option, leaving most investors trapped using the Mark to Market election, which is very time intensive, or remain in the default regime.
Options for US-Connected Investors in 2025
If you are US-connected and affected by Fidelity’s policy, you generally have three pathways:
1. Keep your Fidelity account, but move to direct investments
You can retain your Fidelity SIPP as is and trade as normal at least for the time being, and your GIA/ISA if you hold only direct shares, bonds, or cash. Collective holdings inside a non-SIPP wrapper are subject to PFIC rules, so should be sold down with the help of a tax advisor.
However, diversification and global exposure will suffer unless managed carefully. You’ll still need to rectify historic PFIC filings, which can be costly but necessary.
2. Transfer to a US-compliant investment platform
If you live in the US, you can move to a platform offering:
- US-domiciled ETFs and mutual funds (under the Investment Company Act of 1940)
- Form 1099 tax reporting
- SEC-registered advisers for regulatory compliance
If you’re resident in the UK or EU, note that MiFID II rules prevent direct purchases of US-listed ETFs, limiting this route unless structured via an SEC-authorised investment manager.
3. Transfer to a new UK based platform and use an SEC authorised Investment Manager to manage a PFIC compliant portfolio
This is the preferred solution for most US-connected investors.
Cameron James USA can:
- Construct PFIC-compliant portfolios using US instruments
- Manage them under SEC and FCA dual regulation, where relevant
- Ensure full FATCA and IRS reporting alignment
All options should come with a full review of historic PFIC exposure with a cross-border CPA
A US/UK tax adviser can:
- Identify prior PFIC holdings
- Estimate liability
- File using Protective, Late, or Amnesty routes to reduce penalties
How Cameron James USA Helps US-Connected Clients
Cameron James USA provides fee-based, transparent, and dual-regulated financial advice for US-connected investors across the UK, US, EU, and beyond.
Our SEC- and FCA-regulated advisers can:
✅ Manage US-reportable accounts in line with FATCA and PFIC rules
✅ Design PFIC-compliant portfolios under MiFID II and SEC frameworks
✅ Transfer existing Fidelity accounts to suitable platforms
✅ Work alongside US-qualified CPAs for coordinated tax reporting
Next Steps for US-Connected Clients
If you’ve received a notification from Fidelity or suspect PFIC exposure, take action now.
Cameron James USA can:
- Review your Fidelity holdings
- Identify PFIC reporting obligations
- Map out SEC/FCA-compliant options
📞 Book your consultation today with one of our dual-regulated advisers to make sure your investments remain compliant, tax-efficient, and globally diversified.
Key Takeaways
| Issue | Impact for US-Connected Clients | Recommended Action |
| Fidelity collective investment ban | No more OEICs, unit trusts, or EU ETFs | Review holdings immediately |
| Historic PFIC exposure | Possible US tax filings and penalties | Seek US-qualified tax advice |
| Future investing | Must use PFIC Compliant Portfolios | Move to PFIC Compliant Portfolio |
| Regulation | FCA alone is insufficient for US clients | Engage dual FCA/SEC adviser |
Frequently Asked Questions
Is Fidelity allowed to restrict US persons?
Yes. Platforms are permitted to limit services where compliance risk is excessive — PFIC exposure is a prime example.
Does this affect Fidelity SIPPs?
No. Whilst PFIC rules apply inside and outside most pension wrappers for US taxpayers, the UK is an exception.
Can a UK adviser still help a US-connected Fidelity client?
Only if they understand US tax law and are correctly authorised and insured. They will need to likely use the services of an SEC Authorised Investment Manager though, if not SEC authorised themselves.
Does selling PFIC funds fix the problem?
No. Past PFIC reporting will likely still be required.
