CIS 1.1 Application

This sourcebook applies to investment companies with variable capital (ICVCs), directors and depositaries of ICVCs and managers and trustees of authorised unit trusts (AUTs), except for CIS 16 which includes provisions that also apply to operators of collective investment schemes and CIS 17 which applies only to operators of collective investment schemes which are recognised schemes. CIS 10 also applies to auditors of ICVCs and AUTs.

The general purpose of this sourcebook is to contribute to the FSA meeting its regulatory objective of the protection of consumers (see section 2 and 5 of the Act) by providing a regime of product regulation for ICVCs and AUTs. This regime is intended to ensure a high and uniform standard of protection for investors in those products by specifying a number of features of those products and how they are to be operated. More specific purpose statements covering how the requirements meet the FSA's regulatory objective of the protection of consumers are, where appropriate, given in subsequent chapters.

Under section 238 of the Act only certain collective investment schemes may be promoted to the public. These are:

1. (1)

   ICVCs and AUTs: these are constituted in the United Kingdom and are described in more detail in CIS 1.1.4 G to CIS 1.1.6 G; and

2. (2)

   collective investment schemes constituted outside the United Kingdom and recognised by the FSA under:

   1. (a)

      section 264 of the Act (Schemes constituted in other EEA States): these are schemes that qualify under the UCITS directive;

   2. (b)

      section 270 of the Act (Schemes authorised in designated countries or territories); and

   3. (c)

      section 272 of the Act (Individually recognised overseas schemes).

Section 262 of the Act empowers the Government to make provisions relating to open-ended investment companies (as defined by section 236 of the Act) and they have made the OEIC regulations to permit establishment of ICVCs in Great Britain. Schedule 5.1(3) of the Act states that authorised open-ended investment companies are authorised persons, hence an ICVC is an authorised person.

The ICVC is constituted by an instrument of incorporation, drawn up by its directors. At least one director must be an authorised corporate director ('ACD'). A depositary is also required which is responsible for the safekeeping of the scheme property. In order to comply with section 19 of the Act, the ACD and the depositary must each be authorised persons. The FSA has the power under regulation 14 of the OEIC regulations to authorise the ICVC by making an authorisation order. CIS 16 provides additional guidance on the process of applying to the FSA for authorisation of an ICVC.

Under section 237 of the Act, an AUT is a collective investment scheme under which the property is held on trust for the participants by the trustee and which is authorised by an authorisation order (made by the FSA) in force under section 243 of the Act. The AUT will be constituted by a trust deed, entered into by the manager and trustee, both of whom must, under section 243(7) of the Act, be authorised persons and have permission to act in their respective capacities. CIS 16 provides more detail on the process of applying to the FSA for the authorisation of an AUT.

For collective investment schemes constituted outside the United Kingdom and referred to in CIS 1.1.3 G (2), this sourcebook brings together the material relating to the admission to marketing in the United Kingdom of such schemes, complementing material in Chapter V of Part XVII of the Act (Recognised overseas schemes).

The sourcebook performs three main functions in respect of ICVCs and AUTs, by providing material:

1. (1)

   relating to their constitution and management (including rules and guidance on pricing arrangements, investment powers and on certain information to be provided to investors);

2. (2)

   relating to the process of authorising them; and

3. (3)

   which satisfies the requirements of the UCITS directive (which sets minimum standards for schemes on a basis agreed by all EEA States) thereby enabling ICVCs and AUTs which meet those standards to market elsewhere in the EEA.

Together, the material in Chapters 2 to 15 forms a major part of the product regulation regime for ICVCs and AUTs, complementing material in the OEIC regulations and Chapter III of Part XVII of the Act (for Authorised unit trust schemes).