COLL 6.6 Powers and duties of the scheme, the authorised fund manager, and the depositary

1. (1)

   Subject to (2), this section applies in accordance with COLL 6.6.2 R (Table of application).16

2. (2)

   Where a scheme is a regulated money market fund, COLL 6.6.3R and COLL 6.6.14R apply to the authorised fund manager and depositary of that scheme to the extent the provisions are consistent with the requirements of the Money Market Funds Regulation.16

1. (1)

   The authorised fund manager must manage the scheme in accordance with:

   1. (a)

      the instrument constituting the fund;11

      11
   2. (b)

      the 13applicable rules13;

   3. (c)

      the most recently published prospectus; 16

   4. (d)

      for an ICVC, the OEIC Regulations; and16

   5. (e)

      where applicable, the Money Market Funds Regulation.16

2. (2)

   The authorised fund manager must take such steps as necessary to ensure compliance with the rules13that impose obligations upon the ICVC.

3. (3)

   The authorised fund manager must:

   1. (a)

      make decisions as to the constituents of the scheme property in accordance with the investment objectives and policy of the scheme;

   2. (b)

      instruct the depositary in writing how rights attaching to the ownership of the scheme property are to be exercised, but not where COLL 6.6.13 R (2) (Exercise of rights in respect of the scheme property) applies; and

   3. (c)

      take action immediately to rectify any breach of COLL 6.3 and, where the breach relates to the incorrect pricing of units or to the late payment in respect of the issue of units, the rectification must, (unless the depositary otherwise directs under (4)), extend to the reimbursement or payment, or arranging the reimbursement or payment, of money:

      1. (i)

         by the authorised fund manager to unitholders and former unitholders;

      2. (ii)

         by the ACD to the ICVC;

      3. (iii)

         by the ICVC to the ACD;

      4. (iv)

         by the authorised fund manager to the depositary of the AUT or ACS;10 or

         10
      5. (v)

         by the depositary10 (for the account of the AUT or ACS) to the authorised fund manager.10

         1010
4. (4)

   Rectification under (3)(c) need not, unless the depositary so directs, extend to any such reimbursement or payment where it appears to the depositary such breach, is of minimal significance.

1. (1)

   10The authorised contractual scheme manager of an authorised contractual scheme which is a UCITS scheme or a non-UCITS retail scheme must take reasonable care to ensure that ownership of units in the scheme is only recorded in the register for a:

   1. (a)

      professional ACS investor; or

   2. (b)

      large ACS investor; or

   3. (c)

      person who already holds units in the scheme.

2. (2)

   The authorised contractual scheme manager of an authorised contractual scheme must take reasonable care to ensure that rights or interests in units in the scheme are not acquired by any person from or through an intermediate unitholder, unless that person meets the criteria within (1)(a) to (c).

3. (3)

   The authorised contractual scheme manager will be regarded as complying with (1) and (2) to the extent that it can show that it was reasonable for it to rely on relevant information provided by another person.

10The authorised contractual scheme manager of an authorised contractual scheme must redeemunits in the scheme as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in COLL 6.6.3AR (1)(a) to (c).

18The authorised fund manager of a FIIA must establish, implement and maintain an adequate liquidity management contingency plan for exceptional circumstances which sets out:

1. (1)

   how the authorised fund manager will respond to a liquidity risk crystallising;

2. (2)

   the range of liquidity tools and arrangements which it may deploy in such exceptional circumstances, any operational challenges associated with the use of such tools and the likely consequences for investors;

3. (3)

   the procedures for working with the depositary in the event the authorised fund manager must deploy these tools and arrangements;

4. (4)

   how the authorised fund manager will work with its delegates, such as third-party administrators, and other relevant third parties including intermediate unitholders, to:

   1. (a)

      deploy the liquidity management tools and arrangements;

   2. (b)

      communicate their use in a timely way to unitholders; and

   3. (c)

      implement any other part of this contingency plan;

5. (5)

   any operational challenges likely to arise from working with relevant third parties identified at (4); and

6. (6)

   communication arrangements for internal and external concerned parties (including the FCA, investors and the media where necessary).

1. (1)

   18The authorised fund manager of a FIIA must obtain written confirmation from any relevant third party identified in the contingency plan under COLL 6.6.3CR(4) that the third party will be able to undertake the matters specified in (2) as soon as is reasonably practicable.

2. (2)

   The matters specified for the purpose of (1) are that the relevant third party will, where necessary, be able to:

   1. (a)

      deploy any liquidity management tools and arrangements on which the authorised fund manager plans to rely as part of its contingency plan;

   2. (b)

      in a timely way, communicate the authorised fund manager’s use of any such tools and arrangements to unitholders; and

   3. (c)

      carry out any other part of the contingency plan which the authorised fund manager has identified as requiring action by that third party.

18The authorised fund manager of a FIIA must provide the depositary on an ongoing basis with all relevant information it needs to comply with its obligations under COLL 6.6.4BR.

1. (1)

   The depositary of an authorised fund must take reasonable care to ensure that the scheme is managed by the authorised fund manager in accordance with:

   1. (a)

      COLL 5 (Investment and borrowing powers);

   2. (b)

      COLL 6.2 (Dealing);

   3. (c)

      COLL 6.3 (Valuation and pricing);

   4. (d)

      COLL 6.8 (Income: accounting, allocation and distribution); 16

   5. (e)

      any provision of the instrument constituting the fund11 or prospectus that relates to the provisions referred to in (a) to (d); and16

      11
   6. (e)

      where applicable, the provisions of the Money Market Funds Regulation relating to investment and borrowing powers, dealing, valuation and pricing, and income.16

2. (2)

   The depositary must, in so far as not required under (1)(c), take reasonable care to ensure on a continuing basis that:

   1. (a)

      the authorised fund manager is adopting appropriate procedures to ensure that the price of a unit is calculated for each valuation point in accordance with COLL 6.3 or, where applicable, the Money Market Funds Regulation16; and

   2. (b)

      the authorised fund manager has maintained sufficient records to show compliance with COLL 6.3 .

3. (3)

   The depositary, when acting in its capacity as depositary, must act solely in the interests of the unitholders.

4. (4)

   The depositary:

   1. (a)

      must also take reasonable care to ensure that;

      1. (i)

         the authorised fund manager considers whether or not to exercise the power provided by 13COLL 6.3.8 R (Dilution) 13and, if applicable, the rate or amount of any 13dilution levy or dilution adjustment that is imposed;

      2. (ii)

         the authorised fund manager has in relation to (i), taken account of all factors that are material and relevant to the authorised fund manager's decision; and

      3. (iii)

         when the authorised fund manager considers whether or not to exercise the power under COLL 6.3.8 R, the authorised fund manager has acted in accordance with the restrictions imposed by that rule; and

   2. (b)

      has no duty in respect of the authorised fund manager's exercise of the discretion referred to in (a).

5. (5)

   [deleted]12

   8
6. (6)

   [deleted]12

   8
7. (7)

   [deleted]12

18The depositary of a FIIA must:

1. (1)

   regularly make its own assessment of the liquidity profile of the FIIA and the liquidity risks presented by the scheme property of a FIIA;

2. (2)

   take reasonable care to oversee the authorised fund manager’s liquidity management systems and procedures on an ongoing basis, using the assessment it has made under (1), to ensure the FIIA is managed in accordance with the following COLL rules and, in the case of a FIIA managed by a full-scope UK AIFM, the following FUND rules and provisions in the AIFMD level 2 regulation:

   1. (a)

      COLL 4.2.5R(3)(pa);

   2. (b)

      COLL 6.6.3CR and COLL 6.6.3ER;

   3. (c)

      FUND 3.2.2R(8);

   4. (d)

      FUND 3.2.5R;

   5. (e)

      FUND 3.6.3R;

   6. (f)

      article 44(1) and (2)(c) of the AIFMD level 2 regulation;

   7. (g)

      articles 46 to 49 of the AIFMD level 2 regulation; and

   8. (h)

      article 108 of the AIFMD level 2 regulation; and

3. (3)

   establish an escalation procedure when instances of potential non-compliance with the rules and provisions set out in paragraph (2) are identified, the details of which must be made available to the FCA upon request.

18The depositary of a FIIA managed by a small authorised UK AIFM must not delegate its functions under COLL 6.6.4BR to one or more third parties, except in relation to supporting administrative or technical tasks that are linked to these functions.

1. (1)

   The duties and powers of the authorised fund manager, the directors of an ICVC and the depositary under the rules in this sourcebook and under the instrument constituting the fund11 are in addition to the powers and duties under the general law.

   11
2. (2)

   Paragraph (1) applies only in so far as the relevant general law is not qualified by the rules in this sourcebook, the16instrument constituting the fund, the OEIC Regulations, or the Money Market Funds Regulation16.

   1111

9Where reasonable grounds exist for an ACD of an ICVC or an authorised contractual scheme manager of a co-ownership scheme10 which is an umbrella to consider that a foreign law contract entered into by the ICVC or authorised contractual scheme manager on behalf of the co-ownership scheme10 may have become inconsistent with the principle of limited recourse stated in the instrument constituting the fund11 of the ICVC or co-ownership scheme10 (see COLL 3.2.6 R (22A) (ICVCs: Umbrella schemes - principle of limited recourse) and COLL 3.2.6 R(22B) (Co-ownership schemes: Umbrella schemes - principle of limited recourse)10) the ACD or authorised contractual scheme manager of the co-ownership scheme10 must:

1. (1)

   promptly investigate whether there is an inconsistency; and

2. (2)

   if the inconsistency still appears to exist, take appropriate steps to remedy that inconsistency.

1. (1)

   The authorised fund manager must make and retain for six years such records as enable:

   1. (a)

      the scheme and the authorised fund manager to comply with the rules in this sourcebook and the OEIC Regulations; and

   2. (b)

      it to demonstrate at any time that such compliance has been achieved.

2. (2)

   The authorised fund manager must make and retain for six years a daily record of the units in the scheme held, acquired or disposed of by the authorised fund manager, including the classes of such units, and of the balance of any acquisitions and disposals.

3. (3)

   Where relevant, an authorised fund manager must make and retain for a period of six years a daily record of:

   1. (a)

      how it calculates and estimates dilution; and

   2. (b)

      its policy and method for determining the amount of any dilution levy or dilution adjustment.

4. (4)

   The authorised fund manager must on the request of the depositary immediately supply it with such information concerning the management and administration of the authorised fund as the depositary may reasonably require.

The ACD must immediately notify the FCA in writing if the ICVC's capital falls below the minimum or exceeds the maximum stated in the instrument of incorporation.

1. (1)

   The authorised fund manager10 of an AUT or ACS10 must, upon any vacancy for the position of auditor for an AUT or ACS10, with the approval of the depositary,10 appoint as auditor for the AUT or ACS10 a person qualified for appointment as auditor of an authorised person.

   1010
2. (2)

   The audit fees of the auditor are determined by the authorised fund manager10 with the approval of the depositary10.

   1010
3. (3)

   The authorised fund manager of an AUT or ACS10 may, with the approval of the depositary10, at any time, remove the auditor of an AUT or ACS10; this power exists notwithstanding anything in any agreement between the persons concerned.

   1010

The manager of an AUT must prepare and supply to the trustee the returns required to be submitted by the trustee to HM Revenue and Customs1.

1. (1)

   The authorised fund manager may give instructions to deal in the property of the scheme.

2. (2)

   The authorised fundmanager must obtain the consent of the depositary for the acquisition or disposal of immovable property.

3. (3)

   Where the depositary is of the opinion that a deal in property is not within the rules in this sourcebook and the instrument constituting the fund11, the depositary may require the authorised fund manager to cancel the transaction or make a corresponding disposal or acquisition to secure restoration of the previous situation and to meet any resulting loss or expense.

   11
4. (4)

   Where the depositary is of the opinion that:

   1. (a)

      an acquisition of property necessarily involves documents evidencing title being kept in the custody of a person other than the depositary; and

   2. (b)

      the depositary cannot reasonably be expected to accept the responsibility which would otherwise be placed upon it if it were to permit custody by that other person;

   the authorised fund manager must, if the depositary so requests, either cancel the transaction or make a corresponding disposal.

1. (1)

   The depositary of an authorised fund is responsible for the safekeeping of all of the scheme property (other than tangible movable property) entrusted to it and must:

   1. (a)

      take all steps and complete all documents needed to ensure completion of transactions properly entered into for the account of the scheme;

   2. (b)

      ensure that scheme property in registered form is, as soon as practicable, registered in the name of the depositary, its nominee, or (in the case of a non-UCITS retail scheme managed by a small authorised UK AIFM)19 a person retained by it under COLL 6.6.15R(4)19 (Committees and delegation);

   3. (c)

      take into its custody12 or under its control documents of title to the scheme property other than for transactions in derivatives or forward transactions; and

   4. (d)

      ensure that any transaction in derivatives or a forward transaction is entered into so as to ensure that any resulting benefit is received by the depositary.

2. (2)

   The depositary is responsible for the collection of income due to be paid for the account of the authorised fund.

3. (3)

   The depositary must keep for six years such records as are necessary:

   1. (a)

      to enable it to comply with the rules in this sourcebook; and

   2. (b)

      to demonstrate that it has achieved such compliance.

4. (4)

   19Where the authorised fund is a UCITS scheme, this rule applies to the scheme’s depositary to the extent the provisions are consistent with the requirements of the UCITS level 2 regulation.

5. (5)

   19Where the authorised fund is a non-UCITS retail scheme managed by a full-scope UK AIFM, this rule applies to the scheme’s depositary to the extent the provisions are consistent with the requirements of the AIFMD level 2 regulation.

19[Note: Articles 12 to 14 of the UCITS level 2 regulation and articles 88 to 90 of the AIFMD level 2 regulation make provision relating to custody and safekeeping of scheme property. The AIFMD level 2 regulation does not apply to the depositary of a non-UCITS retail scheme managed by a small authorised UK AIFM.]

1. (1)

   The depositary must take all necessary steps to ensure that instructions given to it by the authorised fund manager for the exercise of rights attaching to the ownership of scheme property are carried out.

2. (2)

   Where the scheme property of an authorised fund contains units in any other scheme managed or otherwise operated by the authorised fund manager10 of the AUT or ACS10 or, as the case may be, by any director of the ICVC or by any associate of either, the depositary must exercise any voting rights associated with those units in accordance with what he reasonably believes to be the interests of the unitholders in the authorised fund.

   10

1. (1)

   The authorised fundmanager must avoid the scheme property being used or invested contrary to COLL 5, or any provision in the instrument constituting the fund11 or the prospectus as referred to in COLL 5.2.4 R (Investment powers:general), 16COLL 5.6.4 R (Investment powers: general) and, where the scheme is a regulated money market fund, the Money Market Funds Regulation16, except to the extent permitted by (3)(b).

   112
2. (2)

   The authorised fund manager must, immediately upon becoming aware of any breach of a provision listed in (1), take action, at its own expense, to rectify that breach, unless the breach occurred as the result of any of the circumstances within (3).

3. (3)

   The authorised fund manager must restore compliance with COLL 5 as soon as reasonably practicable having regard to the interests of the unitholders and, in any event, within the period specified in (5) or, when applicable, (6) where:

   1. (a)

      the scheme property is:

      1. (i)

         used or invested contrary to COLL 5 (other than a provision excusing a failure to comply on a temporary basis); and

      2. (ii)

         the contravention is beyond the control of both the authorised fund manager and the depositary; or

   2. (b)

      there is a transaction ("subsequent transaction") deriving from a right (such as the right to convert stock or subscribe to a rights issue) attributable to an investment ('original investment') of the scheme if:

      1. (i)

         the subsequent transaction, but for this rule would constitute a breach of COLL 5; and

      2. (ii)

         at the time of the acquisition of the original investment, it was reasonable for the authorised fund manager, to expect that a breach would not be caused by the subsequent transaction; and

      in this rule the reference to the exercise of a right includes the taking effect of a right without any action by or on behalf of the depositary or the authorised fund manager.

4. (4)

   Immediately upon the depositary becoming aware of any breach of any provision listed in (1), it must ensure that the authorised fund manager complies with (2).

5. (5)

   The maximum period for restoration of compliance under (3) starts at the date of discovery of the relevant circumstance and lasts, subject to any extension under (6):

   1. (a)

      for six months; or

   2. (b)

      where the transaction in question was a transaction in derivatives or a forward transaction under COLL 5.2.20 R (Permitted transactions (derivatives and forwards)) or COLL 5.6.13R (Permitted transactions (derivatives and forwards)), until the close of business five business days later; or

   3. (c)

      where the transaction relates to an immovable, for two years.

6. (6)

   The period specified at (5)(b) is extended where:

   1. (a)

      the transaction involved a delivery of a commodity, from five to twenty business days;

   2. (b)

      the reason for the contravention in (3)(a) is the inability of the authorised fund manager to close out a transaction because of a limit in the number or value of transactions imposed by an eligible derivatives market, until five business days after:

      1. (i)

         the inability resulting from any such limit is removed; or

      2. (ii)

         it becomes, to the knowledge of the authorised fund manager, reasonably practicable and reasonably prudent for the transaction to be closed out in some other way.

1. (1)

   The directors of an ICVC may delegate to any one or more of their number any of the directors' powers or duties but remain responsible for the acts or omissions of any such directors.

2. (1A)

   The directors of an ICVC have the power to retain the services of anyone to assist in the performance of their functions, subject to the duty of the ACD to comply with COLL 6.6.15A R.8

3. (2)

   [deleted]8

4. (3)

   [deleted]8

   8
5. (4)

   The depositary of a non-UCITS retail scheme managed by a small authorised UK AIFM12 may delegate any function to any person save:

   1. (a)

      the ICVC or any director of the ICVC or the authorised fund manager of a scheme, to assist the depositary to perform:

      1. (i)

         any function of oversight in respect of the scheme, its directors or the authorised fund manager as the case may be; or

      2. (ii)

         any function of custody or control of the schemeproperty;

   2. (b)

      an associate of the ICVC or of any of the directors of the ICVC or of the authorised fund manager of the scheme (as the case may be) to assist the depositary to perform any function in (a)(i); or

   3. (c)

      a nominee company or anyone else to assist it to perform the function of being a custodian of documents evidencing title to scheme property of the scheme unless the arrangements with the custodian prohibit the custodian from releasing the documents into the possession of a third party without the consent of the depositary.

6. (5)

   Where a depositary retains services under (4):

   1. (a)

      if it retains the services of a director of the ICVC, or an associate of such a director or its own associate, or the authorised fund manager of a scheme or that authorised fund manager'sassociate,7 then its liability for those services shall remain unaffected; and

      7
   2. (b)

      in any other case, it will not be held responsible by virtue of the rules in COLL for any act or omission of the person so retained if it can show that:

      1. (i)

         it was reasonable for it to obtain assistance to perform the function in question;

      2. (ii)

         the person retained was and remained competent to provide assistance in the performance of the function in question; and

      3. (iii)

         it had taken reasonable care to ensure that the assistance in question was provided by the person retained in a competent manner.

7. (6)

   Where COLL 6.5.5 R (4) (Other directors) applies, the directors have, in respect of the functions of the ACD under COLL 6.6.3 R (Functions of the authorised fund manager), the same rights and responsibilities as for an ACD under this rule and COLL 6.6.15A R.8

1. (1)

   8This rule applies to:

   1. (a)

      an authorised fund manager17of an AUT, ACS10 or an ICVC where such AUT, ACS10 or ICVC is a UCITS scheme13; and17

   2. (aa)

      13a small authorised UK AIFM that is the authorised fund manager of an AUT, ACS or an ICVC that is a non-UCITS retail scheme.17

   3. (b)

      [deleted]17

2. (2)

   The authorised fund manager has the power to retain the services of any person to assist it in the performance of its functions, provided that:

   1. (a)

      a mandate in relation to managing investments of the scheme is not given to:

      1. (i)

         the depositary; or

      2. (ii)

         any other person whose interests may conflict with those of the authorised fund manager or unitholders; or

      3. (iii)

         an authorised person operating from an establishment in the United Kingdom unless such person has a Part 4A permission to manage investments; or

      4. (iv)

         any other person operating from an establishment in a country other than the United Kingdom unless such person:

         1. (A)

            is authorised or registered in such country for the purpose of asset management; and

         2. (B)

            is subject to prudential supervision in such country;

            and in addition if that person is not an a UK firm17, co-operation is ensured between the FCA and the overseas regulator of that person;

   2. (b)

      the authorised fund manager ensures that at all times it can monitor effectively the relevant activities of any person so retained;

   3. (c)

      the mandate permits the authorised fund manager to:

      1. (i)

         give further instructions to the person so retained; and

      2. (ii)

         withdraw the mandate with immediate effect when this is in the interests of the unitholders;

   4. (d)

      the mandate does not prevent effective supervision of the authorised fund manager and it must not prevent the authorised fund manager from acting, or the scheme from being managed, in the best interests of the unitholders; and

   5. (e)

      having regard to the nature of the functions to be carried out under the mandate, the person to whom the mandate is given must be qualified and capable of undertaking those functions.

3. (3)

   Subject to the provisions of the OEIC Regulations and COLL 6.6.15 R (1) and (1A), where services are retained under (2), the responsibility which the authorised fund manager had in respect of such services prior to that retention of services will remain unaffected.

1. (1)

   The authorised fund manager, any other director of an ICVC and the depositary must take reasonable care to ensure that a transaction within (a) to (f) is not carried out on behalf of the scheme:

   1. (a)

      putting cash on deposit with an affected person unless that person is an eligible institution or an approved bank and the arm's length requirement in (2) is satisfied;

   2. (b)

      lending money by an affected person to, or for the account of, the scheme, unless the affected person is an eligible institution or an approved bank, and the arm's length requirement in (2) is satisfied;

   3. (c)

      the dealing in property by an affected person, to, or with, the scheme (or the depositary for the account of the scheme), unless (3) applies;

   4. (d)

      the vesting of property (other than cash) by an affected person in the scheme or the depositary for the account of the scheme against the issue of units in the scheme, unless:

      1. (i)

         (3) applies; or

      2. (ii)

         the purpose of the vesting is that the whole or part of the property of a body corporate or a collective investment scheme becomes the first property of the scheme and the unitholders of shares or units in the body corporate or collective investment scheme become the first unitholders in the scheme;

   5. (e)

      the acquisition of scheme property by an affected person from the scheme (or the depositary acting for the account of the scheme), unless COLL 6.2.15 R (In specie issue and cancellation) applies, or unless (3) applies; and

   6. (f)

      transactions within COLL 5.4 (Stock lending) by an affected person with, or in relation to, the scheme unless the arm's length requirement in (2) is satisfied.

2. (2)

   Any transaction in (1)(a),(b) or (f) must be at least as favourable to the scheme as any comparable arrangement on normal commercial terms negotiated at arm's length between the affected person and an independent party.

3. (3)

   There is no breach of (1)(c), (d) or (e) if the transaction meets the requirements of (4) (best execution on-exchange), (5) (independent valuation) or (6) (arm's length transaction).

4. (4)

   There is best execution on-exchange for the purposes of (3) if:

   1. (a)

      the property is an approved security or an approved derivative;

   2. (b)

      the transaction is effected under the rules of the relevant exchange with or through a person who is bound by those rules;

   3. (c)

      there is evidence in writing of the effecting of the transaction and of its terms; and

   4. (d)

      the authorised fund manager has taken all reasonable steps to ensure that the transaction is effected on the terms which are the best available for the scheme.

5. (5)

   There is independent valuation for the purposes of (3) if:

   1. (a)

      the value of the property is certified in writing for the purpose of the transaction by a person approved by the depositary as:

      1. (i)

         independent of any affected person; and

      2. (ii)

         qualified to value property of the relevant kind; and

   2. (b)

      the depositary is of the opinion that the terms of the transaction are not likely to result in any material prejudice to unitholders.

6. (6)

   There is an arm's length transaction for the purposes of (3) if:

   1. (a)

      paragraph (4)(a) is not satisfied;

   2. (b)

      it is not reasonably practicable to obtain an independent valuation under (5); and

   3. (c)

      the depositary has reliable evidence that the transaction is or will be on terms which satisfy the arm's length requirement in (2).

14 COLL 6.6.20R to COLL 6.6.26G apply to:

1. (1)

   an authorised fund manager (other than one which is managing an authorised fund under a temporary permission20) of an AUT, ACS or ICVC.20

2. (2)

   [deleted]20

1. (1)

   14An authorised fund manager must conduct an assessment at least annually for each scheme it manages of whether the payments out of scheme property set out in the prospectus are justified in the context of the overall value delivered to unitholders.

2. (2)

   In carrying out the assessment required by (1), the AFM must, separately for each class of units in a scheme, consider at least the matters set out in COLL 6.6.21R (Table: minimum considerations – assessment of value).

1. (1)

   14An authorised fund manager must ensure that at least one quarter of the members of its governing body are independent natural persons. If the AFM’sgoverning body comprises fewer than eight members, the AFM must instead ensure that at least two of its members are independent natural persons.

2. (2)

   The authorised fund manager, in appointing an independent member of its governing body, must determine whether such a member is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, that member’s judgement.

3. (3)

   The authorised fund manager must take reasonable steps to ensure that independent members appointed to its governing body have sufficient expertise and experience to be able to make judgements on whether the AFM is managing each scheme in the best interests of unitholders.

4. (4)
   1. (a)

      Independent members of an AFM’sgoverning body must be appointed for terms of no longer than five years, with a cumulative maximum duration of ten years.

   2. (b)

      If an independent member is appointed to more than one governing body within an AFM’sgroup, the cumulative maximum duration of ten years referred to in (a) is calculated by adding the durations of each separate appointment and discounting periods during which appointments overlapped to avoid double counting.

   3. (c)

      In relation to a person who served as an independent director of an AFM’sgoverning body before 1 October 2019, the five year term(s) and cumulative maximum duration of ten years run from that date.

5. (5)

   Independent members are not eligible for reappointment to an AFM’sgoverning body until five years have elapsed from the end of the ten year period referred to in (4).

6. (6)

   The terms of employment on which independent members are appointed must be such as to secure their independence.

1. (1)

   15An AFM must allocate responsibility for ensuring its compliance with COLL 6.6.20R, COLL 6.6.25R, and, as applicable, COLL 6.6A.2R or COBS 2.1.4R to an approved person.

2. (2)

   Where the chair of the AFM’sgoverning body is an approved person, the AFM must allocate the responsibility set out in (1) to that person.