Reset to Today

To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004.

Content Options:

Content Options

View Options:

Alternative versions

  1. Point in time
    2006-07-07

CIS 5A.4 Securities schemes

Application

CIS 5A.4.1R

Securities schemes: general

CIS 5A.4.2R
  1. (1)

    The scheme property of a securities scheme must, except where otherwise provided in the rules in this chapter, only consist of transferable securities.

  2. (2)

    Not more than 10% in value of the scheme property of a securities scheme is to consist of transferable securities which are not approved securities, but there is no limit on the value of the scheme property which is to consist of approved securities.

  3. (3)

    Not more than 5% in value of the scheme property is to consist of transferable securities which are units in collective investment schemes, and those units must fall within CIS 5A.4.5 R(Securities Schemes : Investment in collective investment schemes).

  4. (4)

    Investment under (3) counts towards the limit in (2) (except where the units are approved securities).

  5. (5)

    CIS 5A.4.3 R(Spread: general) and CIS 5A.4.4 R(Spread: government and public securities) do not apply until the earlier of:

    1. (a)

      the expiry of a period of six months after the date of effect of the authorisation order in respect of the authorised fund (or on which the initial offer commenced if later); or

    2. (b)

      the date when the value of the scheme property of the securities scheme first exceeds £2 million (or the equivalent in the base currency of the securities scheme).

  6. (6)

    The following sections also apply to securities schemes:

    1. (a)

      CIS 5A.2(General investment powers and limits for authorised funds);

    2. (b)

      CIS 5A.13(Efficient portfolio management);

    3. (c)

      CIS 5A.14(Stock lending);

    4. (d)

      CIS 5A.15(Cash, borrowing, lending and other provisions); and

    5. (e)

      CIS 5A.16(Cover for sales).

Spread: general

CIS 5A.4.3R
  1. (1)

    This rule (CIS 5A.4.3 R) does not apply to government and public securities.

  2. (2)

    Not more than 5% in value of the scheme property is to consist of transferable securities issued by any one issuer.

  3. (3)

    In applying (2), certificates representing certain securities are treated as equivalent to the underlying security.

  4. (4)

    The figure of 5% in (2) may be increased to 10% in respect of up to 40% of the value of the scheme property.

Spread: government and public securities

CIS 5A.4.4R
  1. (1)

    This rule (CIS 5A.4.4 R) applies to government and public securities ("such securities") only.

  2. (2)

    As long as no more than 35% of the value of the scheme property of an authorised fund is invested in such securities issued by any one issuer, there is no limit on the amount which may be invested in such securities or such securities issued by any one issuer or of any one issue.

  3. (3)

    No more than 35% in value is to be invested in such securities issued by any one issuer unless the authorised fund manager, after consultation with the depositary, considers the issuer of such securities as one which is appropriate in accordance with the investment objectives of the authorised fund.

  4. (4)

    Where more than 35% in value of the scheme property is invested in such securities issued by any one issuer:

    1. (a)

      up to 30% in value of the scheme property may consist of such securities of any one issue;

    2. (b)

      the scheme property must include such securities issued by that or another issuer, of at least six different issues; and

    3. (c)

      the disclosures in (5) must have been duly made.

  5. (5)

    Where it is intended that (3) and (4) may apply, the instrument constituting the scheme, and the most recently published prospectus, must clearly state:

    1. (a)

      the fact that more than 35% in value of the scheme property is or may be invested in government and public securities issued by one issuer; and

    2. (b)

      the names of the States, and of the local authorities or public international bodies or both in whose government and public securities the authorised fund may invest over 35% of its assets.

  6. (6)

    In (2), (3), (4) and (5), in relation to government and public securities:

    1. (a)

      issue, issued and issuer include guarantee, guaranteed and guarantor; and

    2. (b)

      an issue differs from another if there is a difference as to repayment date, rate of interest, guarantor or other material terms of the issue.

Securities schemes: investment in collective investment schemes

CIS 5A.4.5R

A securities scheme may invest in units in a collective investment scheme only if the second scheme is a collective investment scheme that complies with the conditions necessary for it to enjoy the rights conferred by the UCITS directive or is a collective investment scheme that:

  1. (1)

    complies with section 243(10) of the Act (Authorisation orders: entitlement to have units redeemed) or is treated as complying with it by section 243(11) of the Act;

  2. (2)

    is either:

    1. (a)

      a recognised scheme; or

    2. (b)

      a collective investment scheme constituted outside the United Kingdom in which the investments of the scheme consist of units which are approved securities;

  3. (3)

    is dedicated to investing funds raised from the public in transferable securities;

  4. (4)

    operates on the principle of risk spreading; and

  5. (5)

    has terms which prohibit more than 5% in value of the property of the scheme consisting of units in collective investment schemes.

Investment in warrants and nil and partly paid securities

CIS 5A.4.6R
  1. (1)

    A warrant ("the proposed warrant") falls within any power of investment only if, on the assumptions that:

    1. (a)

      there is no change to the scheme property between the acquisition of the proposed warrant and its exercise; and

    2. (b)

      the rights conferred by the proposed warrant and all other warrants forming part of the scheme property at the time of the acquisition of the proposed warrant will be exercised (whether or not it is intended that they will be);

    it is reasonably foreseeable that the right conferred by the proposed warrant could be exercised by the authorised fund without contravening the rules in this chapter.

  2. (2)

    A transferable security on which any sum is unpaid falls within a power of investment only if it is reasonably foreseeable that the amount of any existing and potential call for any sum unpaid could be paid by the authorised fund, at the time when payment is required, without contravening the rules in this chapter.

  3. (3)

    Not more than 5% in value of the scheme property is to consist of warrants.

  4. (4)

    A warrant which is an investment falling within article 80 of the Regulated Activities Order (Certificates representing certain securities) and which is akin to an investment falling within article 79 (Instruments giving entitlement to investments) of the Regulated Activities Order may not be included in the scheme property unless it is listed on an eligiblesecurities market. 1