CIS 4.1 Introduction

The persons to whom each rule and guidance in this chapter applies are stated either at the beginning of the rule or guidance or at the beginning of the section containing the rule or guidance.

1. (1)

   This chapter helps in achieving the regulatory objective of protecting consumers (consumer's interests) as envisaged by sections 2 and 5 of the Act. In accordance with Principle 6, this chapter is intended to ensure the authorised fund manager pays due regard to its customers' interests and treats them fairly.1

2. (2)

   An authorised fund manager is responsible for valuing the scheme property of the authorised fund it manages and for calculating the price of units in the authorised fund. As well as arranging for the issue and the cancellation of units for the account of the authorised fund, the authorised fund manager is permitted to sell and redeem units for its own account. The rules in this chapter are intended to ensure that the price of units is properly related to the net value of the authorised fund and, in accordance with Principle 6, that the authorised fund manager treats customers fairly with investors when they purchase or sell units. This chapter provides common standards for these purposes.

1. (1)

   The rules in this chapter make apparent the extent to which any of them, or any paragraph in any of them, applies only to a single-priced AUT or to an ICVC. In particular, CIS 4.3.3 R (Issue and cancellation of shares by an ICVC) applies only to an ICVC and the following rules apply only to a single-priced AUT: CIS 4.3.4 R (Issue and cancellation of units in an AUT); CIS 4.3.5 R (Trustee's refusal to issue or cancel units); CIS 4.3.6 R (Instructions or notifications between managers and trustees).

2. (2)

   Shares in an ICVC are issued or cancelled when the ACD records the issue or cancellation. Units of an AUT are issued or cancelled by the trustee on the manager's instructions. In the case of an issue, payment in cash of the price of the units or a transfer of assets of an equivalent value must be made to the depositary for the account of the authorised fund concerned. Payment by the depositary for cancelled shares is normally to be made by the close of the fourth business day after the cancellation.

3. (3)

   An authorised fund manager may hold units for its own account (in its 'box'): so a purchaser of units from the authorised fund manager may receive units which have been issued to the authorised fund manager or that have been redeemed (that is repurchased) by the authorised fund manager from a previous holder. In addition to selling and redeeming units for its own account, the authorised fund manager may arrange for the trustee or the ICVC to issue units direct to an investor or to cancel a holder's units.

4. (4)

   The authorised fund manager must be prepared to redeem units of a holder who wishes to realise the value of them. The authorised fund manager can then retain the units in its box or it can cancel them.

5. (5)

   The special provision about initial issues and sales at the start of an authorised fund's life are in CIS 4.2, separately from the rules about issues and sales in an ongoing authorised fund.

6. (6)

   Under this chapter, the price at which a unit is issued, sold, redeemed or cancelled will be a single price. Although certain additions to, or deductions from, the price are provided for and affect payments, they do not affect the single price. Except for the initial issues and sales, the single price will be determined in accordance with CIS 4.3.11 R (Price of a unit) and, in broad outline, will be calculated by valuing the scheme property attributable to the class of units in question and dividing that value by the number of those units in issue. The valuation of the scheme property must be in accordance with CIS 4.8 and with the relevant provisions of the instrument constituting the scheme.

7. (7)

   CIS 4.6 (Dilution and SDRT provision) enables the authorised fund manager to choose whether or not:

   1. (a)

      to require for the benefit of the authorised fund, as an addition to, or deduction from, the single price (but not part of it), a provision (SDRT provision) against certain stamp duty reserve tax that is payable out of the scheme property; and

   2. (b)

      for the purpose of reducing dilution (see CIS 4.6.2 G (1) (Purpose)) either:

      1. (i)

         to require, for the benefit of the authorised fund, a dilution levy as an addition to, or deduction from, the single price (but not part of it); or

      2. (ii)

         to make a dilution adjustment in the calculation of the single price.1

8. (8)

   The requirements in this chapter are to be applied separately to each sub-fund of an umbrella scheme.