UPDATE 1-UK watchdog toughens rules for property funds from Sept. 2020

(Adds more detail)

LONDON, Sept 30 (Reuters) - Britain's markets watchdog
published tougher rules on Monday for funds that invest in hard
to sell assets like property, saying investors must get better
warnings about the risks they face.

The Financial Conduct Authority (FCA) said it will introduce
a new category of funds investing in inherently illiquid assets,
or FIIA, from September 2020.

These funds will be subject to additional requirements,
including standard risk warnings in financial promotions,
enhanced depositary oversight, and a requirement to produce
liquidity risk contingency plans, it said.

The watchdog published draft rules in October 2018 to reduce
harm for retail investors in funds that hold illiquid assets.

Funds investing in property had to be "gated" to suspend
redemptions during market stress immediately after the result of
Britain's referendum to leave the European Union in June 2016.

The funds were unable to meet daily redemption requests.

The FCA has come under pressure from lawmakers to intervene
after high-profile fund manager Neil Woodford suspended his
flagship equity income fund (WEIF) in June, which promised daily
redemptions.

The Woodford fund was unable to meet a flood of redemptions
and was found to have breached a rule limiting how much it can
invest in illiquid assets.

The FCA said on Monday it has assessed whether there were
any lessons that might be relevant to the issues covered in its
new rules.

It said its new rules don't apply to EU-regulated funds
known as UCITS, that include the Woodford fund.

"The suspension of the WEIF underlines the importance of
effective liquidity management in open-ended funds more
generally," the FCA said.

(Reporting by Huw Jones, editing by Carolyn Cohn)