CIS 2.7 Undesirable and misleading names

1. (1)

   Under section 243 of the Act and regulation 15 of the OEIC Regulations:

   1. (a)

      the name of an authorised fund must not be undesirable or misleading; and

   2. (b)

      in the case of an ICVC, its aims must be reasonably capable of being achieved and, in the case of an AUT, its purpose must be reasonably capable of being successfully carried into effect.

2. (2)

   In order to be satisfied that section 243 of the Act and regulation 15 of the OEIC Regulations are complied with, the FSA will, when considering an application for authorisation of an ICVC or AUT, or considering an alteration to an authorised fund under section 251 of the Act or Regulation 21 of the OEIC Regulations, take into account the principles in (3) and (4).

3. (3)

   The name of an authorised fund should not include the word "guaranteed" unless:

   1. (a)

      the guarantee is given by an authorised person or a person authorised by a Home State regulator or a person subject to prudential supervision by a regulatory body in accordance with provisions equivalent to the Capital Adequacy Directive or the Insurance Directives other than the authorised fund manager or the depositary;

   2. (b)

      the authorised fund manager can demonstrate that the guarantor has the authority and resources to honour the terms of the guarantee;

   3. (c)

      the guarantee covers all holders within the authorised fund and the guarantee is legally enforceable by each holder who is intended to benefit from it or by a person acting on that holder's behalf;

   4. (d)

      the guarantee relates to the total amount paid for a unit which for these purposes includes any preliminary charge or redemption charge or any other costs of buying or selling units in the authorised fund;

   5. (e)

      the guarantee provides for payment at a specified date or dates and is unconditional although reasonable commercial exclusions such as force majeure may be included; and

   6. (f)

      where the guarantee applies to different classes of unit, the guarantee is identical in its application to all classes except for the differences attributable to income already received or charges already suffered by the different classes of unit.

4. (4)

   The name of an authorised fund may indicate a guaranteed capital return or income return or both but only if the total amount paid for a unit is guaranteed in accordance with (3).

5. (5)

   The name of an authorised fund should not include words implying a degree of capital security (such as "capital protected" or anything with a similar meaning) unless the degree of capital security is apparent from the name and clearly stated in the prospectus and (a) or (b) below is satisfied:

   1. (a)

      the principles in (3) are satisfied except that for the purposes of (3)(d) the guarantee may relate to an amount not materially less than the total amount paid for a unit; or

   2. (b)

      the investment objective and investment policy for the authorised fund are such as to show a clear intention to provide a material degree of security in respect of the total amount paid for a unit.

6. (6)

   When determining whether (5) is complied with, the FSA will take into account whether the degree of capital security implied by the name fairly reflect the nature of the arrangements for providing that security. This assessment will take place on a case by case basis.1

When deciding whether CIS 2.7.3 R is complied with the FSA will take into account the principles in CIS 2.7.2 G(3), (4) and (5) as if they related to the name of a sub-fund or share class as well as to the name of an authorised fund. However, it should be noted that CIS 2.7.3 R applies generally and not just to the names that include the words "guaranteed" or "capital protected".1