COLL 6.6A Duties of AFMs in relation to UCITS schemes and EEA UCITS schemes

1. (1)

   1This section applies to:

   1. (a)

      an authorised fund manager of a UCITS scheme, a depositary, an ICVC and any other director of an ICVC which is a UCITS scheme.3

   2. (b)

      [deleted]3

2. (2)

   [deleted]3

3. (3)

   [deleted]3

An authorised fund manager of a UCITS scheme 2 3 must:

1. (1)

   ensure that the unitholders of any such scheme it manages are treated fairly;

2. (2)

   refrain from placing the interests of any group of unitholders above the interests of any other group of unitholders;

3. (3)

   apply appropriate policies and procedures for preventing malpractices that might reasonably be expected to affect the stability and integrity of the market;

4. (4)
   1. (a)

      ensure that fair, correct and transparent pricing models and valuation systems are used for each scheme it manages, in order to comply with the duty to act in the best interests of the unitholders; and

   2. (b)

      be able to demonstrate that the investment portfolio of each such scheme it manages is accurately valued; 2

5. (5)

   act in such a way as to prevent undue costs being charged to any such scheme it manages and its unitholders; and2

6. (6)

   in carrying out its functions act: 2

   1. (a)

      honestly, fairly, professionally and independently; and2

   2. (b)

      solely in the interests of the UCITS scheme and its unitholders.2

An authorised fund manager of a UCITS scheme 3 must:

1. (1)

   ensure a high level of diligence in the selection and ongoing monitoring of scheme property, in the best interests of the scheme and the integrity of the market;

2. (2)

   ensure it has adequate knowledge and understanding of the assets in which any scheme it manages is invested;

3. (3)

   establish written policies and procedures on due diligence and implement effective arrangements for ensuring that investment decisions on behalf of any UCITS scheme 3 it manages are carried out in compliance with the objectives and the investment strategy and risk limit system of the scheme;

4. (4)

   when implementing its risk management policy, and where it is appropriate after taking into account the nature of a proposed investment:

   1. (a)

      formulate forecasts and analyse the investment’s impact on the portfolio composition, liquidity and risk and reward profile of the scheme before carrying out the investment; and

   2. (b)

      carry out the analysis in (a) only on the basis of reliable and up-to-date information, both in quantitative and qualitative terms;

5. (5)

   exercise due skill, care and diligence when entering into, managing or terminating any arrangement with third parties in relation to the performance of risk management activities; and

6. (6)

   before entering into any arrangements of the type referred to in (5):

   1. (a)

      take the necessary steps in order to verify that the third party has the ability and capacity to perform the risk management activities reliably, professionally and effectively; and

   2. (b)

      establish methods for the on-going assessment of the standard of performance of the third party.

The authorised fund manager of a UCITS scheme 3 must comply with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of its investors and the integrity of the market.

1. (1)

   An authorised fund manager of a UCITS scheme 3 must develop adequate and effective strategies for determining when and how voting rights attached to ownership of scheme property, 3are to be exercised, to the exclusive benefit of the scheme concerned.

2. (2)

   The strategy referred to in (1) must determine measures and procedures for:

   1. (a)

      monitoring relevant corporate events;

   2. (b)

      ensuring that the exercise of voting rights is in accordance with the investment objectives and policy of the relevant scheme; and

   3. (c)

      preventing or managing any conflicts of interest arising from the exercise of voting rights.

3. (3)

   An authorised fund manager of a UCITS scheme 3 must make available to unitholders:

   1. (a)

      a summary description of the strategies referred to in (1); and

   2. (b)

      free of charge and on their request, details of the actions taken on the basis of the strategies referred to in (1).

2An authorised fund manager of a UCITS scheme3 must (for each scheme it manages) ensure that:

1. (1)

   a single depositary is appointed; and

2. (2)

   the assets of the UCITS scheme3 are entrusted to the depositary for safekeeping in accordance with COLL 6.6B.18R and COLL 6.6B.19R.3

[Note: article 22(1) and (5) of the UCITS Directive]

2An authorised fund manager must ensure that the depositary it appoints under COLL 6.6A.7R is a firm established in the United Kingdom that has the Part 4A permission of acting as trustee or depositary of a UK UCITS4 and is one of the following:

1. (1)

   a national central bank; or

2. (2)

   a credit institution; or

3. (3)

   a firm which:

   1. (a)

      [deleted]5

   2. (b)

      either:

      1. (i)

         is a MiFID investment firm5; or

      2. (ii)

         is an investment management firm to which IPRU(INV) 5 applies; and

   3. (c)

      satisfies the non-bank depositary organisational requirements in COLL 6.6B.11R.

[Note: article 23(2)(a), (b) and (c) (first sentence) of the UCITS Directive]

1. (1)

   2An authorised fund manager of a UCITS scheme3 must ensure that the appointment of the depositary is evidenced by a written contract.

2. (2)

   The contract must regulate the flow of information deemed necessary to allow the depositary to perform its functions for the scheme.

[Note: article 22(2) of the UCITS Directive]