This chapter applies to:

1. (1)

   an authorised fund manager of an AUT or an ICVC;

2. (2)

   any other director of an ICVC;

3. (3)

   a depositary of an AUT or an ICVC; and

4. (4)

   an ICVC,

where such AUT or ICVC is a UCITS scheme or a non-UCITS retail scheme.

1. (R

   This section applies to an authorised fund manager, a depositary, an ICVC and any other director of an ICVC.

1. (1)

   During the initial offer period, units may only be issued at the initial price.

2. (2)

   The length of any initial offer should not be unreasonable when considered alongside the characteristics of the authorised fund.

3. (3)

   The authorised fund manager must, as soon as practicable after receiving the initial price from the purchaser and no later than the fourth business day following the end of the initial offer, pay the depositary in respect2 of any unit it has agreed to sell during the period of the initial offer:

   2
   1. (a)

      2in the case of a single-priced authorised fund, the initial price of that unit; or

   2. (b)

      2in the case of a dual-priced authorised fund, the initial price of that unit less, where relevant, an amount not exceeding the amount of any preliminary charge stated in the prospectus.

4. (4)

   The period of the initial offer comes to an end if the authorised fund manager reasonably believes the price that would reflect the current value of the scheme property would vary by more than 2% from the initial price.

1. (1)

   Units in an ICVC are issued or cancelled by the ACD making a record of the issue or cancellation and of the number of the units of each class concerned, and cannot be issued or cancelled in any other manner, unless COLL 3.2.6R (11) (Table: contents of the instrument constituting the scheme) applies.

2. (2)

   The time of the issue or cancellation under (1) is the time when the record is made.

1. (1)

   The trustee must issue or cancelunits in an AUT when instructed by the manager.

2. (2)

   Any instructions given by the managermust state, for each class of unit to be issued or cancelled, the number to be issued or cancelled, expressed either as a number of units or as an amount in value (or as a combination of the two).

3. (3)

   If the trustee is of the opinion that it is not in the interests of unitholders that any units should be issued or cancellation or that to do so would not be in accordance with the trust deed or prospectus, it must notify the manager of that fact and it is then relieved of the obligation to issue or cancel those units.

3If an authorised fund has two or more classes of unit in issue, the authorised fund manager may treat any or all of those classes as one for the purpose of determining the number of units to be issued or cancelled by reference to a particular valuation point, if:

1. (1)

   the depositary gives its prior agreement; and

2. (2)

   the relevant classes:

   1. (a)

      have the same entitlement to participate in, and the same liability for charges, expenses and other payments that may be recovered from, the scheme property; or

   2. (b)

      differ only as to whether income is distributed or accumulated by periodic credit to capital, provided the price of the units in each class is calculated by reference to undivided shares in the scheme property.

1. (1)

   The authorised fund manager may require, on agreement with the depositary, or may permit, on the request of the investor, direct issues and cancellations of units by an ICVC or by the trustee of an AUT.

2. (2)

   If (1) applies:

   (a) the instrument constituting the scheme must provide for this; and

   (b) the prospectus must provide details of the procedure to be followed which must be consistent with the rules in this section.

1. (1)

   An authorised fund manager must ensure that at each valuation point there are at least as many units in issue of any class as there are units registered to unitholders for that class.

2. (2)

   An authorised fund manager must not:

   1. (a)

      for an AUT, when giving instructions to the trustee2 for the issue or cancellation of units; or

      2
   2. (b)

      for an ICVC, when arranging for the issue or cancellation of units;

   do, or omit to do, anything that2 would, or might, confer on itself2 or an associate a benefit or advantage at the expense of a unitholder or a potential unitholder.

3. (3)

   For the purpose of (1), the authorised fund manager may take into account instructions to redeemunits at the following valuation point received before any time agreed with the depositary for such purpose.

1. (1)

   Any instruction for the issue or cancellation of units under COLL 6.2.5 R (Issue and cancellation of units by an ICVC) or COLL 6.2.6 R (Issue and cancellation of units in an AUT) may be modified but only if the depositary agrees and has taken reasonable care to determine that:

   1. (a)

      the modification corrects an error in the instruction; and

   2. (b)

      the error is an isolated one.

2. (2)

   Any error in (1) must be corrected within the payment period applicable under COLL 6.2.13 R (Payment for units issued) or COLL 6.2.14 R (Payment for cancelled units).

1. (1)

   Where the authorised fund manager has not complied with COLL 6.2.8 R (1) (Controls over the issue and cancellation of units), it must correct the error as soon as possible and must reimburse the authorised fund any costs it may have incurred in correcting the position.

2. (2)

   The authorised fund manager need not reimburse the authorised fund when:

   1. (a)

      the amount under (1) is not, in the depositary's opinion, material to the authorised fund;

   2. (b)

      the authorised fund manager can demonstrate that it has effective controls in place over box management, including all of the areas that affect the figures which are included in the box management calculations; and

   3. (c)

      the requirements of COLL 6.2.10 R (Modification to number of units issued or cancelled) are complied with.

1. (1)

   The authorised fund manager must, by the close of business on the fourth business day following the issue of any units, arrange for payment to the trustee or the ICVC of:2

   2
   1. (a)

      2in the case of a single-priced authorised fund, the price of the units and any payments required under COLL 6.3.7 R (SDRT provision) and COLL 6.3.8 R (Dilution); or

   2. (b)

      2in the case of a dual-priced authorised fund, the issue price of the units and any payment required under COLL 6.3.7 R.

2. (2)

   The authorised fund manager must make the payment referred to in (1) in cash or cleared funds unless COLL 6.2.15 R (In specie issue and cancellation) applies.

3. (3)

   Where the authorised fund manager has not complied with (1), it must reimburse the authorised fund for any lost interest unless the amount involved is not, in the depositary's opinion, material to the authorised fund.

1. (1)

   On cancellingunits the authorised fund manager must, before the expiry of the fourth business day following the cancellation of the units or, if later, as soon as practicable after delivery to the trustee or the ICVC of such evidence of title to the units as it may reasonably require, require the depositary to pay:2

   1. (a)

      2in the case of a single-priced authorised fund, the price of the units (less any deduction required under COLL 6.3.7 R and COLL 6.3.8 R); or

   2. (b)

      2in the case of a dual-priced authorised fund, the cancellation price of the units (less any deduction required under COLL 6.3.7 R);

   to the authorised fund manager or, where relevant, the unitholder or, for a relevant pension scheme, in accordance with the relevant provisions of the trust deed.

2. (2)

   If the authorised fund manager has not ensured that the scheme property includes or will include sufficient cash in the appropriate currency (or a sufficient facility to borrow without infringing any restriction in COLL 5 (Investment and borrowing powers)) within the period in (1), that period is extended, for any relevant currency, until the shortage is rectified.

3. (3)

   If (2) applies, the authorised fund manager must take reasonable steps to rectify the currency shortage as quickly as possible.

4. (4)

   This rule does not apply where COLL 6.2.15 R is in operation.

5. (5)

   Nothing in this section requires an ICVC, a depositary or an authorised fund manager to part with money or to transfer scheme property for a cancellation or redemption of units where any money due on the earlier issue or sale of those units has not been received.

The depositary may take into or pay out of scheme property assets other than cash2 as payment for the issue or cancellation of units2 but only if:

1. (1)

   it has taken reasonable care to ensure that the property concerned would not be likely to result in any material prejudice to the interests of unitholders; and

2. (2)

   the instrument constituting the scheme so provides.

1. (1)

   In accordance with COLL 4.2.5R (17) (Table: contents of the prospectus), the authorised fund manager must describe the arrangements for the sale and redemption of units in the prospectus.

2. (2)

   The authorised fund manager must, at all times during the dealing day, be willing to effect the sale of units in the authorised fund, in accordance with the conditions in the instrument constituting the scheme and the prospectus unless:

   1. (a)

      it has reasonable grounds to refuse such sale; or

   2. (b)

      the issue2 of units2 is prevented under COLL 6.2.18 R (Limited issue).

3. (3)

   Subject to COLL 6.2.19 R (Limited redemption) and COLL 6.2.21 R (Deferred redemption), the authorised fund manager must, at all times during the dealing day, on request of any qualifying unitholder, effect the redemption of units in accordance with the conditions in the instrument constituting the scheme and the prospectus unless it has reasonable grounds to refuse such redemption.

4. (4)

   On agreeing to a redemption of units in (3), the authorised fund manager must pay the unitholder the appropriate proceeds of redemption within the period specified in (5) unless the authorised fund manager has reasonable grounds for withholding all or any part of the proceeds.

5. (5)

   Except where (5A) applies the5 period in (4) expires at the close of business on the fourth business day following the later of:

   5
   1. (a)

      the valuation point at which the price for the redemption was determined; or

   2. (b)

      the time when the authorised fund manager has all the duly executed instruments and authorisations to effect (or enable the authorised fund manager to effect) the transfer of title to the units.

6. (5A)

   5Where a non-UCITS retail scheme operating as a FAIF operates limited redemption arrangements, the period in (4) expires no later than the expiry of a period of 185 days from the date of receipt and acceptance of the instruction to redeem.

7. (6)

   Except where (7) applies, and subject to COLL 6.2.21 R (Deferred redemption), the authorised fund manager must sell or redeemunits at a price determined no later than the end of the business day immediately following the receipt and acceptance of an instruction to do so, or at the next valuation point for the purposes of dealing in 2units if later (or, for a sale or redemption at an historic price, at the price determined at the last valuation point).

   2
8. (7)

   Where the authorised fund operates limited redemption arrangements, the authorised fund manager must sell or redeemunits at a price2 determined no later than the expiry of a period of 185 days from the date of the receipt and acceptance of the instruction to sell or redeem.

9. (8)

   [deleted]2

   2
10. (9)

    [deleted]2

    2
11. (10)

    Paragraphs (4), (5) and COLL 6.3.5AR (2) (Sale and redemption prices for single-priced authorised funds)2 do not apply where the authorised fund manager is buying units2 as principal on an investment exchange (for an AUT in accordance with a power in the trust deed) and settlement will be made in accordance with the rules of that exchange.

    2

1. (1)

   If an authorised fund limits the issue of any class of unit, the prospectus of an authorised fund must provide for the circumstances and conditions when units will be issued.

2. (2)

   Where (1) applies, the authorised fund manager may not provide for the further issue of units unless, at the time of the issue2, it2is satisfied on reasonable grounds that the proceeds of that subsequent issue can be invested without compromising the scheme's investment objective or materially prejudicing existing unitholders.

3. (3)

   Within a scheme, unitclasses may operate different arrangements for the issue of units provided there is no prejudice to the interests of any unitholder.

1. (1)

   The instrument constituting the scheme and the prospectus of a non-UCITS retail scheme2 operating as a FAIF, or5 that invests substantially in immovables2 or whose investment objective is to provide a specified level of return, may provide for limited redemption arrangements appropriate to its aims and objectives.

2. (2)

   Where (1) applies, the scheme must provide for sales and5redemptions at least once in every six months.

3. (3)

   Within a scheme, unit classes may operate different arrangements for sales and redemptions5 of units provided there is no prejudice to the interests of any unitholder.

   5
4. (4)

   5The scheme may provide for sales of units of any class to be executed at a greater frequency than redemptions of units of the same class.

1. (1)

   Subject to (1A) and (3) the5instrument constituting the scheme and the prospectus of an authorised fund which has at least one valuation point on each business day, may permit deferral of redemptions at a valuation point to the next valuation point where the requested redemptions exceed 10%, or some other reasonable proportion disclosed in the prospectus, of the authorised fund's value.

   5
2. (1A)

   5Subject to (3) the instrument constituting the scheme and the prospectus of a non-UCITS retail scheme operating as a FAIF may permit deferral of redemptions at a valuation point to a following valuation point where the requested redemptions exceed 10%, or some other reasonable proportion disclosed in the prospectus, of the authorised fund's value.

3. (2)

   Any deferral of redemptions under (1) or (1A)5 must be undertaken in accordance with the procedures explained in the prospectus which must ensure:

   1. (a)

      the consistent treatment of all unitholders who have sought to redeemunits2 at any valuation point at which redemptions2are deferred; and

   2. (b)

      that all deals relating to an earlier valuation point are completed before those relating to a later valuation point are considered.

4. (3)

   5Any deferral under (1A) is subject to the limitations on payments to unitholders in COLL 6.2.16 R (5A).

1. (1)

   4The authorised fund manager of a property authorised investment fund must take reasonable steps to ensure that no body corporate holds more than 10% of the net asset value of that fund (the "maximum allowable").

2. (2)

   Where the authorised fund manager of a property authorised investment fund becomes aware that a body corporate holds more than the maximum allowable, he must:

   1. (a)

      notify the body corporate of that event;

   2. (b)

      not pay any income distribution to the body corporate; and

   3. (c)

      redeem or cancel the body corporate's holding down to the maximum allowable within a reasonable time-frame.

3. (3)

   For the purpose of (2)(c), a reasonable time-frame means the time-frame which the authorised fund manager reasonably considers to be appropriate having regard to the interests of the unitholders as a whole.

1. (1) 8

   This section applies to an authorised fund manager, a depositary, an ICVC and any other director of an ICVC.

2. (2)

   COLL 6.3.3A R to COLL 6.3.3D R (Accounting procedures):

   1. (a)

      apply to:

      1. (i)

         a UK UCITS management company providing collective portfolio management services for an EEA UCITS scheme from a branch in another EEA State or under the freedom to provide cross border services; and

      2. (ii)

         an EEA UCITS management company providing collective portfolio management services for a UCITS scheme from a branch in the United Kingdom;

         in addition to applying in accordance with (1); but

   2. (b)

      do not apply to an EEA UCITS management company providing collective portfolio management services for a UCITS scheme under the freedom to provide cross border services.8

1. (1)

   To determine the price of units the authorised fund manager must carry out a fair and accurate valuation of all the scheme property in accordance with the instrument constituting the scheme and the prospectus.1

2. (2)

   1For a dual-priced authorised fund, each valuation of the scheme property must consist of two parts, carried out on an issue basis and a cancellation basis respectively.

1. (1)

   8An authorised fund manager of a UCITS scheme or a UK UCITS management company of an EEA UCITS scheme must ensure the employment of the accounting policies and procedures referred to in SYSC 4.1.9 R (Accounting policies), so as to ensure the protection of unitholders.

2. (2)

   Accounting for the scheme shall be carried out in such a way that all assets and liabilities of the scheme can be directly identified at all times.

3. (3)

   If the scheme is an umbrella, separate accounts must be maintained for each sub-fund.

8An authorised fund manager of a UCITS scheme or a UK UCITS management company of an EEA UCITS scheme must have accounting policies and procedures established, implemented and maintained, in accordance with the accounting rules of the UCITS Home State, so as to ensure that the calculation of the net asset value of each scheme it manages is accurately effected, on the basis of the accounting, and that subscription and redemption orders can be properly executed at that net asset value.

8An authorised fund manager of a UCITS scheme or a UK UCITS management company of an EEA UCITS scheme must establish appropriate procedures to ensure the proper and accurate valuation of the assets and liabilities of each scheme it manages.

1. (1)

   An authorised fund must not have fewer than two regular valuation points in any month and if there are only two valuation points in any month, the regular valuation points must be at least two weeks apart.

2. (2)

   The prospectus of a scheme must contain information about its regular valuation points for the purposes of dealing in units in accordance with COLL 4.2.5R (16) (Table: contents of the prospectus).

3. (3)

   Where a scheme operates limited redemption arrangements, (1) does not apply and the valuation points must be stated in the prospectus but must not be set more than six months apart.

4. (4)

   Where a scheme operates limited redemption arrangements, it must be valued and prices published in the manner set out in COLL 6.3.11 R (Publication of prices) at least once in every month.

5. (5)

   In (4), a valuation point for the purpose of publishing prices only, does not make it a valuation point for the purpose of (2) unless it is disclosed as such in the prospectus.

6. (6)

   Higher volatility funds must have at least one valuation point every business day except where the scheme is a non-UCITS retail scheme operating as a FAIF.6

7. (6A)

   3Qualifying money market funds must have at least one valuation point every business day at which the valuation is carried out on an amortised cost basis.

8. (6B)

   UCITS schemes operating as short-term money market funds must have at least one valuation point every business day at which the valuation is carried out on an amortised cost or mark to market basis.7

9. (6C)

   Non-UCITS retail schemes operating as short-term money market funds must have at least one valuation point every business day or, where the scheme is marketed solely through employee savings schemes or to a specific category of investors that is subject to redemption restrictions, at least one every week at which the valuation is carried out on an amortised cost or mark to market basis.7

10. (6D)

    Money market funds must value with the appropriate frequency as required in (6B) or (6C) on a mark to market basis.7

11. (7)

    No valuation points are required during the period of any initial offer.

12. (8)

    The authorised fund manager may determine to have an additional valuation point for an authorised fund as a result of market movement under COLL 6.3.9 (Forward and historic pricing) or otherwise, in which case it1must inform the depositary.

1. (1)

   An authorised fund manager must ensure that the1price of a unit of any class is calculated:1

   1. (a)

      1by reference to the net value of the scheme property; and

   2. (b)

      1in accordance with the provisions of both the instrument constituting the scheme and the prospectus.

2. (2)

   Any unit price calculated in accordance with (1) must be expressed in a form that is accurate to at least four significant figures.

3. (3)

   1For each class of units in a single-priced authorised fund, a single price must be calculated at which units are to be issued and cancelled.

1The authorised fund manager of a single-priced authorised fund must not:

1. (1)

   sell a unit for more than the price of a unit of the relevant class at the relevant valuation point, to which may be added any preliminary charge permitted and any payments required under COLL 6.3.7 R and COLL 6.3.8 R; or

2. (2)

   redeem a unit for less than the price of a unit of the relevant class at the relevant valuation point, less any redemption charge permitted and any deductions under COLL 6.3.7 R and COLL 6.3.8 R.

1. (1)

   1The authorised fund manager of a dual-priced authorised fund must not:

   1. (a)

      sell a unit for more than the maximum sale price of a unit of the relevant class at the relevant valuation point, to which may be added any payment required under COLL 6.3.7 R; or

   2. (b)

      redeem a unit for less than the cancellation price of a unit of the relevant class at the relevant valuation point, less any redemption charge permitted and any deduction under COLL 6.3.7 R.

2. (2)

   The maximum sale price of units under (1)(a) is the total of:

   1. (a)

      the issue price; and

   2. (b)

      the current preliminary charge.

3. (3)

   The sale price of units under (1)(a) must not be less than the relevant redemption price under (1)(b).

4. (4)

   The redemption price under (1)(b) must not exceed the relevant issue price of the relevant units.

5. (5)

   Subject to COLL 6.7.9 R (Charges for the exchange of units in an umbrella), in the case of an umbrella:

   1. (a)

      the maximum price at which units in one sub-fund that is a dual-priced authorised fund may be acquired in exchange for units in another sub-fund must not exceed the relevant maximum sale price (less any preliminary charge) of the new units; and

   2. (b)

      the minimum price at which the old units in a sub-fund that is a dual-priced authorised fund may be taken in exchange must not be less than the equivalent cancellation price.

1. (1)

   The authorised fund manager may, in accordance with the prospectus, require the payment of an SDRT provision for the issue or sale of units or any class of units or the deduction of an SDRT provision for the redemption or cancellation of units or any class of units.

2. (2)

   Any such payment or deduction becomes due at the same time as payment or transfer of property becomes due for the issue, sale, redemption or cancellation.

3. (3)

   Any payment referred to in (1) must be paid to the depositary to become part of scheme property as soon as practicable after receipt.

4. (4)

   As soon as practicable after each valuation point, the authorised fund manager must notify the depositary of the transactions, or types of transactions for which an SDRT provision is applied and the amounts or rates of those SDRT provisions.

1. (1)

   When arranging to sell, redeem, issue or cancel units, or when units are issued or cancelled under COLL 6.2.7 R (1) (Issues and cancellations through an authorised fund manager), an authorised fund manager is permitted to:

   1. (a)

      require the payment of a dilution levy; or

   2. (b)

      make a dilution adjustment; or

   3. (c)

      neither require a dilution levy nor make a dilution adjustment;

   in accordance with its statements in the prospectus required by COLL 4.2.5R (18) (Table: contents of the prospectus).

2. (2)

   An authorised fund manager operating either a dilution levy or a dilution adjustment, must operate that measure in a fair manner to reduce dilution and solely for that purpose.

3. (3)

   A dilution levy becomes due at the same time as payment or transfer of property becomes due for the issue, sale, redemption or cancellation and any such payment in respect of a dilution levy must be paid to the depositary to become part of scheme property as soon as practicable after receipt.

4. (4)

   A dilution adjustment may be made as part of the calculation of the unit price for the purpose of reducing dilution in the scheme or to recover any amount which it had already paid or reasonably expects to pay in the future in relation to the issue or cancellation of units.

5. (5)

   Where the authorised fund manager decides to make or not to make a dilution adjustment, it must not do so for the purpose of creating a profit or avoiding a loss for the account of an affected person.

6. (6)

   As soon as practicable after a valuation point, the authorised fund manager must provide the depositary with the amount or rate of any dilution adjustment made to the price or any dilution levy applied.

1. (1)

   For the sale and redemption of units, the authorised fund manager must, in accordance with the prospectus of an authorised fund, operate on the basis of forward price only or historic prices.

2. (2)

   If forward prices only are to be used, all deals1 must be at a forward price.

3. (3)

   Forward prices for the sale and redemption of units must be used:

   1. (a)

      for a higher volatility fund;

   2. (b)

      where the regular valuation points are more than one business day1 apart;

   3. (c)

      if the request to deal1 reaches the authorised fund manager through the post or by any similar form of non-interactive communication;

   4. (d)

      for an issue or cancellation under COLL 6.2.7 (Issue and cancellation of units through an authorised fund manager);

   5. (e)

      if the applicant for the sale or redemption so requests; or

   6. (f)

      where the authorised fund manager has reason to believe at any time that the price that would reflect the current value of the scheme property would vary by more than 2% from the last calculated price, unless the authorised fund manager has decided to carry out an additional valuation.

4. (4)

   If an authorised fund manager operates historic prices, the prospectus must detail the circumstances under which deals in the authorised fund, individually or otherwise, will nevertheless be carried out on a forward price basis or when the authorised fund will elect to move to forward prices or declare an additional valuation point.

5. (5)

   Where the authorised fund elects to move to forward prices temporarily in accordance with (4), such election will only apply until the next valuation point.

6. (6)

   All sub-funds of a scheme which is an umbrella must adopt the same pricing basis, but this does not apply merely because of a requirement to price on a forward price basis temporarily under this rule.

Where the authorised fund manager is prepared to deal1 in units, or is willing to issue or cancel1units, under COLL 6.2.7, it must make the dealing1prices public in an appropriate manner.

3The authorised fund manager of a qualifying money market fund or a short-term money market fund valuing scheme property on an amortised cost basis7 must:

1. (1)

   carry out a valuation of the scheme property on a mark to market basis at least once every week and at the same valuation point used to value the scheme property on an amortised cost basis; and

2. (2)

   ensure that the value of the scheme property when valued on a mark to market basis does not differ by more than 0.5% from the value of the scheme property when valued on an amortised cost basis.

1. (1)

   This section applies to a manager and a trustee of an AUT.

2. (2)

   COLL 6.4.9 (Plan registers) also applies to the ACD, any other director and the depositary of an ICVC.

1. (1)

   Either the manager or the trustee (as nominated in the trust deed) must establish and maintain a register of unitholders as a document in accordance with this section.

2. (2)

   The manager or trustee in accordance with their duties under (1) must exercise all due diligence and take all reasonable steps to ensure the information contained on the register is at all times complete and up to date.

3. (3)

   The register must contain:

   1. (a)

      the name and address of each unitholder (for joint unitholders, no more than four need to be registered) other than units represented by bearer certificates;

   2. (b)

      the number of units of each class held by each unitholder (other than units represented by bearer certificates);

   3. (c)

      the date on which the unitholder was registered for units standing in his name (other than units represented by bearer certificates); and

   4. (d)

      the number of units of each class currently in issue, including bearer certificates and the number of units of those bearer certificates.

4. (4)

   No notice of any trust, express, implied or constructive which may be entered in the register is binding on the manager or trustee, but this does not affect their obligations under COLL 6.4.9 R (1) (Plan registers).

5. (5)

   The register is conclusive evidence of the persons entitled to the units entered in it.

6. (6)

   The person responsible for the register in (1) must:

   1. (a)

      take reasonable steps to alter the register on receiving written notice of a change of name or address of any unitholder;

   2. (b)

      in relation to a change of name in (a) where a certificate has been issued, either endorse the existing certificate or issue a new one;

   3. (c)

      make the register available for inspection free of charge in the United Kingdom by or on behalf of any unitholder (including the manager), during office hours, but it may be closed for periods not exceeding 30 business days in any one year;

   4. (d)

      supply free of charge to any unitholder or his authorised representative a copy of the entries on the register relating to that unitholder on request;

   5. (e)

      where a unitholder defaults on paying for the issue or sale of units, make an alteration or deletion in the register to compensate for the default after which the manager becomes entitled to those units (until those units are either cancelled or re-sold and paid for); and

   6. (f)

      carry out any conversion of units allowed for by COLL 6.4.8 R (Conversion of units) after consultation with the manager or trustee, as appropriate.

1. (1)

   If no person is entered in the register as the unitholder of a unit, the manager must be treated as the unitholder of each such unit which is in issue (other than a unit which is represented by a bearer certificate).

2. (2)

   Where units are transferred to the manager, they need not be cancelled and the manager need not be entered on the register as the new unitholder.

1. (1)

   Every unitholder is entitled to transfer units held on the register by an instrument of transfer in any form that the person responsible for the register may approve, but that person is under no duty to accept a transfer unless:

   1. (a)

      it is permitted by the trust deed or prospectus; and

   2. (b)

      the transfer is excluded by Schedule 19 of the Finance Act 1999 from a charge to stamp duty reserve tax, or there has been paid to the trustee, for the account of the AUT, an amount agreed between the trustee and the manager not exceeding the amount that would be derived by applying the rate of stamp duty reserve tax to the market value of the units being transferred.

2. (2)

   Every instrument of transfer of units must be signed by, or on behalf of, the unitholder transferring the units (or, for a body corporate, sealed by that body corporate or signed by one of its officers (or in Scotland, two of its officers)) authorised to sign it and, unless the transferee is the manager, the transferor must be treated as the unitholder until the name of the transferee has been entered in the register.

3. (3)

   Every instrument of transfer (stamped as necessary) must be left for registration, with the person responsible for the register, accompanied by:

   1. (a)

      any necessary documents that may be required by legislation; and

   2. (b)

      any other evidence reasonably required by the person responsible for the register.

4. (4)

   The details of instruments of transfer must be kept for a period of six years from the date of its registration.

5. (5)

   On registration of an instrument of transfer, a record of the transferor and the transferee and the date of transfer must be made on the register.

1. (1)

   Following the sale of units or as a result of COLL 6.4.6 R (Transfer of units by act of parties) a document recording title to those units may be issued in such a form as the trust deed permits.

2. (2)

   The person responsible for the register must issue any document in (1) or provide relevant information in a timely manner where the procedures for redeeming units require the unitholder to surrender that document.

3. (3)

   Bearer certificates may only be issued if they are permitted by the instrument constituting the scheme.

Where there is more than one class of units offered for issue or sale, the unitholder has a right to convert from one to the other, provided that doing so would not contravene any provision in the prospectus.

1. (1)

   The ACD and any other directors of an ICVC or the person responsible for the register of an AUT may arrange for a plan register to be established and maintained.

2. (2)

   Where payments are made out of scheme property to establish and maintain a plan register, plan investors must be treated as unitholders for the purposes of COLL 4.3 to COLL 4.5 and COLL 6.4.4 R (Register: general requirements and contents).

This section applies in accordance with COLL 6.5.2 R (Table of application).

1. (1)

   The directors (or director) of an ICVC must take all practicable steps to ensure the ICVC has at all times as its ACD a person who is qualified to act as ACD.

2. (2)

   If the ICVC ceases to have any director, the depositary must exercise its powers, under the OEIC Regulations, to appoint a person to be an ACD of the ICVC.

3. (3)

   For an ICVC that holds annual general meetings under the OEIC Regulations, the1 appointment of an ACD (other than the first ACD), under (1) or (2), must terminate at the close of the next annual general meeting following the date of the appointment or (if later) upon the expiration of 12 months from the date the appointment takes effect, unless the appointment has been approved by a resolution of the unitholders before the close of that annual general meeting or expiration of that 12 month period (as the case may be).

   1
4. (4)

   An ACD must not voluntarily terminate its appointment as ACD unless the termination is effective at the same time as the commencement of the appointment of a successor ACD.

5. (5)
   1. (a)

      In the event of:

      1. (i)

         any person becoming or ceasing to be a director;

      2. (ii)

         the appointment of an ACD being terminated;

      3. (iii)

         a new ACD being appointed; or

      4. (iv)

         a corporate director (including the ACD) becoming aware of any change of its controller;

      the FSA must immediately be notified in accordance with (b).

   2. (b)

      In the case of:

      1. (i)

         (a)(i), by the ACD;

      2. (ii)

         (a)(ii), by the ACD whose appointment is being terminated;

      3. (iii)

         (a)(iii), by the new ACD; and

      4. (iv)

         (a)(iv), by the corporate director concerned.

1. (1)

   The appointment of an ACD terminates immediately upon it ceasing to be a director.

2. (2)

   The appointment of an ACD terminates if a notice of termination of that appointment, the terms of which have been approved by a resolution of the board of directors of the ICVC, is given to the ACD.

3. (3)

   If there is no director other than the ACD, the appointment of the ACD terminates if a notice of termination of that appointment is given by the depositary to the ACD and to the ICVC, following any of the following events:

   1. (a)

      the calling of a meeting to consider a resolution for winding up the ACD;

   2. (b)

      an application being made to dissolve the ACD or to strike it off the Register of Companies;

   3. (c)

      the presentation of a petition for the winding up of the ACD;

   4. (d)

      the making of, or any proposals for the making of, a composition or arrangement with any one or more of the ACD's creditors;

   5. (e)

      the appointment of a receiver to the ACD (whether an administrative receiver or a receiver appointed over particular property);

   6. (f)

      anything equivalent to (a) to (e) above occurring in respect of the ACD in a jurisdiction outside the United Kingdom.

4. (4)

   Any termination under (2) or (3) takes effect when the notice is given, or on any subsequent time for its effect stated in the notice, or, if later, the time at which the termination is permitted to take effect under regulation 21 of the OEIC Regulations (The Authority's approval for certain changes in respect of a company).

5. (5)

   The depositary must (unless the termination takes effect at the same time as the appointment of a successor ACD) ensure that the unitholders are informed of the termination of the appointment of an ACD.

6. (6)

   The depositary is entitled to be reimbursed out of the scheme property for its out of pocket expenses in complying with (5).

1. (1)

   Any directors of an ICVC other than the ACD must exercise reasonable care to ensure that the ACD undertakes the responsibilities allocated under COLL 6.6.3 R (1) (Functions of the authorised fund manager) in a competent manner and the ACD must give those directors the information and explanations they consider necessary for this purpose.

2. (2)

   A director of an ICVC must not appoint an alternate director.

3. (3)

   When there is no person acting as ACD, the directors of an ICVC have the functions of an ACD under COLL 6.6.3 R (1) , but this does not affect the powers of the directors under COLL 6.6.15 R (Committees and delegation).

4. (4)

   When (3) applies, the directors must retain the services of one or more authorised persons to assist them in performing the functions referred to in COLL 6.6.3 R (1) and COLL 6.6.3 R (2) .

If the ICVC ceases to have any directors, the depositary may:

1. (1)

   retain the services of an authorised person to carry out the functions referred to in COLL 6.6.3 R (3)(a) and (b); or

2. (2)

   manage the scheme property itself on behalf of the ICVC until a director is appointed or the winding up of the ICVC is commenced provided it is not prohibited from doing so by any law or rule.

1. (1)

   The manager of an AUT is subject to removal by written notice by the trustee upon any of the following events:

   1. (a)

      the calling of a meeting to consider a resolution for winding up the manager;

   2. (b)

      an application being made to dissolve the manager or to strike it off the Register of Companies;

   3. (c)

      the presentation of a petition for the winding up of the manager;

   4. (d)

      the making of, or any proposals for the making of, a composition or arrangement with any one or more of the manager's creditors;

   5. (e)

      the appointment of a receiver to the manager (whether an administrative receiver or a receiver appointed over particular property);

   6. (f)

      anything equivalent to (a) to (e) above occurring in respect of the manager in a jurisdiction outside the United Kingdom;

   7. (g)

      the trustee forming the reasonable opinion, and stating in writing, that a change of manager is desirable in the interest of unitholders;

   8. (h)

      a resolution of unitholders being passed to remove the manager; or

   9. (i)

      the unitholders of three quarters in value of all of 2the units then in issue2(excluding units held or treated as held by the manager or by any associate of the manager) making a request in writing to the trustee that the manager should be removed.

      2
2. (2)

   On receipt of a notice by the trustee under (1), the manager of the AUT ceases to be the manager; and the trustee must by deed appoint another person eligible under the Act to be the manager of the AUT upon and subject to that other entering into such deed or deeds as the trustee may require.

3. (3)

   If the name of the AUT contains a reference to the name of the former manager, the former manager is entitled to require the new manager and the trustee immediately on receipt of a notice under (1) to propose a change in the name of the AUT

1. (1)

   The manager of an AUT has the right to retire in favour of another person eligible under the Act and approved in writing by the trustee upon:

   1. (a)

      the retiring manager appointing that person by deed as manager in its place and assigning to that person all its rights and duties as such a manager; and

   2. (b)

      the new manager entering into such deeds as the trustee reasonably considers necessary or desirable to be entered into by that person in order to secure the due performance of its duties as the manager of the AUT.

2. (2)

   Upon retirement, the retiring manager:

   1. (a)

      subject to (3), is released from all further obligations under the rules in this sourcebook and under the trust deed; and

   2. (b)

      may retain any consideration paid to it in connection with the change without having to account for it to any unitholder.

3. (3)

   Sub-paragraph (2)(a) does not affect the rights of the trustee or any other person in respect of any act or omission on the part of the retiring manager before his retirement.

1. (1)

   Upon the removal or retirement of the manager, the removed or retiring manager:

   1. (a)

      is entitled to be recorded in the register for those units continued to be held or treated as held by it; and

   2. (b)

      may require the trustee to issue to it a certificate for those units (if not previously issued).

2. (2)

   (Paragraph (1) is subject to any restriction in the prospectus relating to the permitted categories of unitholders.

1. (1)

   The depositary of an authorised fund may not retire voluntarily except upon the appointment of a new depositary.

2. (2)

   The depositary of an authorised fund must not retire voluntarily unless, before its retirement, it has ensured that the new depositary has been informed of any circumstance of which the retiring depositary has informed the FSA.

3. (3)

   When the depositary of an authorised fund wishes to retire or ceases to be an authorised person, the authorised fundmanager may, subject to section 251 of the Act (Alteration of schemes and changes of manager or trustee) or regulation 21 of the OEIC Regulations (The Authority's approval for certain changes in respect of a company) appoint another person eligible to be the depositary in its place.

This section applies in accordance with COLL 6.6.2 R (Table of application).

1. (1)

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

   1. (a)

      the instrument constituting the scheme;

   2. (b)

      the rules in this sourcebook;

   3. (c)

      the most recently published prospectus; and

   4. (d)

      for an ICVC, the OEIC Regulations.

2. (2)

   The authorised fund manager must take such steps as necessary to ensure compliance with the rules in this sourcebook that 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 manager to the trustee; or

      5. (v)

         by the trustee (for the account of the AUT) to the manager.

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)

   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); and

   5. (e)

      any provision of the instrument constituting the scheme or prospectus that relates to the provisions referred to in (a) to (d).

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 ; 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 COLL 6.3.7 R (SDRT provision) or COLL 6.3.8 R (Dilution) (as the case may be) and, if applicable, the rate or amount of any SDRT provision, dilution 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)

   The depositary of a UCITS scheme must ensure that in transactions involving the scheme property of a UCITS scheme, any consideration is remitted for the account of the scheme within the usual time limits.8

6. (6)

   Where the UCITS scheme is being managed by an EEA UCITS management company, the depositary must enter into a written agreement with the management company regulating the flow of information deemed necessary to allow it to perform its functions in accordance with COLL 6.6.5 R.8

7. (7)

   The agreement in (6):

   1. (a)

      may cover more than one UCITS scheme; and

   2. (b)

      must as a minimum contain the information set out in COLL 6 Annex 1.

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 scheme are in addition to the powers and duties under the general law.

2. (2)

   Paragraph (1) applies only in so far as the relevant general law is not qualified by the rules in this sourcebook or the instrument constituting the scheme or the OEIC Regulations.

9Where reasonable grounds exist for an ACD of an ICVC which is an umbrella to consider that a foreign law contract entered into by the ICVC may have become inconsistent with the principle of limited recourse stated in the instrument of incorporation of the ICVC (see COLL 3.2.6 R (22A) (ICVCs: Umbrella schemes - principle of limited recourse)) the ACD 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.

1. (1)

   This 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; and

   2. (b)

      subject to (2), a UKUCITS management company providing collective portfolio management services for an EEA UCITS scheme under the freedom to provide cross border services.

2. (2)

   COLL 6.6A.6 R ((Strategies for the exercise of voting rights) also applies to a UKUCITS management company providing collective portfolio management services for an EEA UCITS scheme from a branch in another EEA State, as well as applying in accordance with (1).

3. (3)

   This section does not apply to an EEA UCITS management company providing collective portfolio management services for a UCITS scheme under the freedom to provide cross border services.

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

1. (1)

   The manager of an AUT must, upon any vacancy for the position of auditor for an AUT, with the approval of the trustee, appoint as auditor for the AUT a person qualified for appointment as auditor of an authorised person.

2. (2)

   The audit fees of the auditor are determined by the manager with the approval of the trustee.

3. (3)

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

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 scheme, 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.

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 a person retained by it under COLL 6.6.15 R (1) (Committees and delegation);

   3. (c)

      take into its custody 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.

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 manager of the AUT 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.

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 scheme or the prospectus as referred to in COLL 5.2.4 R (Investment powers:general), and COLL 5.6.4 R (Investment powers: general)2, except to the extent permitted by (3)(b).

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 scheme 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 manager (other than an EEA UCITS management company) of an AUT or an ICVC where such AUT or ICVC is a UCITS scheme or a non-UCITS retail scheme; and

   2. (b)

      a UK UCITS management company providing collective portfolio management services for an EEA UCITS scheme from a branch in another EEA State or under the freedom to provide cross border services.

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 IV 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 EEA firm, co-operation is ensured between the FSA 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).

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; and

   2. (b)

      subject to (2), a UKUCITS management company providing collective portfolio management services for an EEA UCITS scheme under the freedom to provide cross border services.

2. (2)

   COLL 6.6A.6 R (Strategies for the exercise of voting rights) also applies to a UKUCITS management company providing collective portfolio management services for an EEA UCITS scheme from a branch in another EEA State, as well as applying in accordance with (1).

3. (3)

   This section does not apply to an EEA UCITS management company providing collective portfolio management services for a UCITS scheme under the freedom to provide cross border services.

An authorised fund manager of a UCITS schemes or a UK UCITS management company of an EEA UCITS scheme 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; and

5. (5)

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

An authorised fund manager of a UCITS scheme or a UK UCITS management company of an EEA UCITS scheme 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 or EEA UCITS scheme 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 or the UK UCITS management company of an EEA UCITS scheme 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 or a UK UCITS management company of an EEA UCITS scheme must develop adequate and effective strategies for determining when and how voting rights attached to ownership of scheme property, or the instruments held by an EEA UCITS scheme, are 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 or a UK UCITS management company of an EEA UCITS scheme 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).

This section applies in accordance with COLL 6.7.2 R (Table of application).

1. (1)

   The only payments which may be recovered from the scheme property of an authorised fund are those in respect of:

   1. (a)

      remunerating the parties operating the authorised fund;

   2. (b)

      the administration of the authorised fund; or

   3. (c)

      the investment or safekeeping of the scheme property.

2. (2)

   No payment under this rule can be made from scheme property if it is unfair to (or materially prejudices the interests of) any class of unitholders or potential unitholders.

3. (3)

   Paragraphs (1) and (2) do not apply to any payments in relation to any taxation payable by the authorised fund.

4. (4)

   Paragraphs (1) and (2) do not permit payments to third parties for the safekeeping or administration of units on behalf of unitholders rather than on behalf of the authorised fund.4

1. (1)

   No person other than the authorised fund manager may impose charges on unitholders or potential unitholders when they buy or sell units.

2. (2)

   An authorised fund manager must not make any charge or levy in connection with:

   1. (a)

      the issue or sale of units except where a preliminary charge is made in accordance with the prospectus of the scheme which must be either a fixed amount or calculated as a percentage of the price of a unit; or

   2. (b)

      the redemption or cancellation of units, except a redemption charge made in accordance with the prospectus current at the time the relevant units were purchased by the unitholder.

3. (3)

   This rule is subject to COLL 6.3.7 R (SDRT provision),6COLL 6.3.8 R (Dilution) and COLL 11.3.11 R (Obligations of the master UCITS).6

For a scheme which is an umbrella, an authorised fund manager must not make a charge on an exchange of units in one sub-fund for units in another sub-fund unless the amount of the charge is not more than the amount stated in the current prospectus.

1. (1)

   The authorised fund manager must determine whether a payment is to be made from the income property or capital property of an authorised fund, and in doing so the authorised fund manager must:

   1. (a)

      pay due regard to whether the nature of the cost is income related or capital related and the objective of the scheme; and

   2. (b)

      agree the treatment of any payment with the depositary.

2. (2)

   Where, for any class of units5 for any annual accounting period, the amount of the income property is less than the income distributed, the shortfall must, as from the end of that period, be charged to the capital account and must not subsequently be transferred to the income account.

1. (1)

   No payment may be made from scheme property to any person, other than a payment to the authorised fund manager permitted by the rules in COLL, for the acquisition or promotion of the sale of units in an authorised fund.2

2. (2)

   2Paragraph (1) does3 not apply to the costs an authorised fund incurs3 preparing and printing the simplified prospectus, key investor information document6, key features document or key features illustration3, provided the prospectus states, in accordance with COLL 4.2.5 R (13) and (14) (Table: contents of the prospectus), that these costs are properly payable to the authorised fund manager from scheme property.

   333

An ICVC must not incur any expense for the use by it of any movable or immovable property except to the extent that such property is necessary for the direct pursuit of its business or held in accordance with its investment objectives.

1. (1)

   Where the property of an authorised fund is transferred to a second authorised fund (or to the depositary for the account of the authorised fund) in consideration of the issue of units in the second authorised fund to unitholders in the first scheme, (2) applies.

2. (2)

   The ICVC, its depositary or the trustee of the AUT as the successor in title to the property transferred, may pay out of the scheme property any liability arising after the transfer which, had it arisen before the transfer, could properly have been paid out of the property transferred, but only if:

   1. (a)

      there is nothing in the instrument constituting the scheme of the authorised fund expressly forbidding the payment; and

   2. (b)

      the authorised fund manager is of the opinion that proper provision was made for meeting such liabilities as were known or could reasonably have been anticipated at the time of the transfer.

For a scheme which is an umbrella, any assets to be received into, or any payments out of, the scheme property which are not attributable to one sub-fund only, must be allocated by the authorised fund manager between the sub-funds in a manner which is fair to the unitholders of the umbrella generally.

1. (1)

   This section applies to an authorised fund manager.

2. (2)

   COLL 6.8.4 R (1) (Unclaimed, de minimis and joint unitholder distributions) also applies to the depositary of an authorised fund.

3. (3)

   Except in the case of COLL 6.8.2 R (1) (Accounting periods) and COLL 6.8.3 R (1) (Income allocation and distribution), COLL 6.8 applies as if each sub-fund were a separate authorised fund.

1. (1)

   An authorised fund must have:

   1. (a)

      an annual accounting period;3

      3
   2. (b)

      a half-yearly accounting period; and

   3. (c)

      an accounting reference date.

2. (2)

   A half-yearly accounting period begins when3 an annual accounting period begins3 and ends on:

   13
   1. (a)

      the day which is six months before the last day of that annual accounting period; or

   2. (b)

      some other reasonable date as set out in the prospectus of the scheme.1

3. (3)

   The first annual accounting period of a scheme must begin:

   1. (a)

      on the first day of any period of initial offer; or

   2. (b)

      in any other case, on the date of the relevant authorisation order;

   and in either case must end on the next accounting reference date, except where (4) applies.1

4. (4)

   When the accounting reference date of a scheme falls less than six months after the beginning of the first annual accounting period, that period may be extended until the subsequent accounting reference date.1

5. (5)

   Each annual accounting period of a scheme subsequent to the first period must begin immediately after the end of the previous period and must end on the next accounting reference date3, except where (6) or (6A)3 applies.1

   3
6. (5A)

   3Each annual accounting period or half-yearly accounting period must end either at the end of the day determined under this rule or, if the authorised fund manager so decides, at the last valuation point on that day.

7. (6)

   Following a revision to the prospectus of the scheme that includes a change to the accounting reference date, the annual accounting period may be shortened, or extended by up to six months, so as to end on the new accounting reference date.1

8. (6A)

   3If the authorised fund manager notifies the depositary that a particular annual accounting period or half-yearly accounting period is to end on a specified day, which is not more than seven days after, and not more than seven days before, the day on which the period would otherwise end under this rule, that notice is to have effect provided it is given before the day on which the period would otherwise end.

9. (7)

   The authorised fund manager must consult the depositary and the scheme's auditor before shortening or extending an accounting period in accordance with (4) or (6).1

5The allocation or distribution of the income of a UCITS scheme must be determined in accordance with its instrument constituting the scheme, its prospectus and the general law of the United Kingdom.

1. (1)

   An authorised fund must have an annual income allocation date, which must be within four months of the end of the relevant annual accounting period.3

   3
2. (2)

   An authorised fund may have interim income allocation dates and one or more interim accounting periods for each of those dates2 and, if it does, the interim income allocation date must be within four months of the end of the relevant interim accounting period(s).2

   2
3. (3)

   An authorised fund must have a distribution account to which the amount of income allocated to classes of units that distribute income3 is transferred as3 at the end of the relevant accounting period.

   3
4. (3A)

   3The amount available for income allocations must be calculated by:

   1. (a)

      taking the net revenue after taxation determined in accordance with the IMA SORP;

   2. (b)

      making any transfers, to the extent permitted by the prospectus, between the income account and the capital account in order that the amount available for income allocations is calculated as if the revenue from debt securities had been determined disregarding the effect of:

      1. (i)

         the change in the Retail Prices Index during the period, provided that the policy is to invest predominantly in index-linked securities and the transfer relates only to amounts in respect of index-linked gilt-edged securities; or

      2. (ii)

         amortisation, provided that the amount available for income allocations is not less than if such transfers had not been made;

   3. (c)

      making any other transfers between the income account and the capital account that are required in relation to:

      1. (i)

         stock dividends;

      2. (ii)

         income equalisation included in income allocations from other collective investment schemes;

      3. (iii)

         the allocation of payments in accordance with COLL 6.7.10 R (Allocation of payments to income or capital);

      4. (iv)

         taxation;

         4
      5. (v)

         the aggregate amount of income property included in unitsissued and unitscancelled during the period; and4

      6. (vi)

         amounts determined by the authorised fund manager to be the reportable income of other collective investment schemes.4

5. (4)

   If income is allocated during an accounting period:

   3
   1. (a)

      with effect from the end of the relevant annual or interim accounting period3, the amount of income allocated to classes of units3 that accumulate income becomes part of the capital property and requires an adjustment to the proportion of the value of the scheme property to which they relate if other classes of units are in issue during the period;

      33
   2. (b)

      the adjustment in (a) must ensure the price of units remains unchanged despite the transfer of income; and

   3. (c)

      the amount of any interim allocation3 may not be more than the amount which, in the opinion of the authorised fund manager, would be available for allocation if the interim accounting period and all previous interim accounting periods in the same annual accounting period, taken together, were an annual accounting period.

      3