COLL 6.11 Risk control and internal reporting

1This section applies to an authorised fund manager of a UCITS scheme.2

An authorised fund manager of a UCITS scheme 2 must establish and maintain a permanent risk management function.

The function referred to in (1) must be hierarchically and functionally independent from operating units, except where such independence would not be appropriate and proportionate in view of the nature, scale and complexity of the authorised fund manager’s 2 business and of each scheme it manages.

The authorised fund manager 2 must be able to demonstrate that:

1. (a)

   appropriate safeguards against conflicts of interest have been adopted so as to allow an independent performance of risk management activities; and

2. (b)

   its risk management process satisfies the requirements of COLL 6.12.3 R (Risk management process)2.

The permanent risk management function must:

1. (a)

   implement the risk management policy and procedures;

2. (b)

   ensure compliance with the risk limit system, including statutory limits concerning global exposure and counterparty risk, as required by COLL 5.2 (General investment powers and limits for UCITS schemes) and COLL 5.3 (Derivative exposure)2;

3. (c)

   provide advice to the governing body, as regards the identification of the risk profile of each scheme it manages;

4. (d)

   provide regular reports to the governing body and, where it exists, the supervisory function on:

   1. (i)

      the consistency between the current level of risk incurred by each scheme it manages and the risk profile agreed for that scheme;

   2. (ii)

      the compliance of each scheme it manages with the risk limit system referred to in (b); and

   3. (iii)

      the adequacy and effectiveness of the risk management process, indicating in particular whether appropriate remedial measures have been taken in the event of any deficiencies;

5. (e)

   provide regular reports to the senior personnel outlining the current level of risk incurred by the relevant scheme and any actual or foreseeable breaches to their limits, so as to ensure that prompt and appropriate remedial action can be taken; and

6. (f)

   review and support, where appropriate, the arrangements for the valuation of OTC derivatives, as referred to in COLL 5.2.23 R (OTC transactions in derivatives), COLL 5.2.23C R (Valuation of OTC derivatives) and in this rule2.

The permanent risk management function must have the authority and access to all relevant information necessary to fulfil the duties set out in (1).