The FSA is proposing measures to expand the range of investments allowed in recognised unit trusts and Oeics.
Fund managers claim the move will let them compete on a more even keel with their European rivals.
CP135, New Collective Investment Scheme Products, proposes allowing fund managers to cap the number of units in funds marketed in the UK. Previously to do this the funds had to be registered offshore in places like Dublin or Luxembourg.
The FSA also wants to extend the range of investments in UK funds which can be marketed in Europe including deposits, derivatives and fund of funds.