1. (1)

   2This chapter applies to an ICVC, an ACD, any other director of an ICVC, a depositary of an ICVC, an authorised fund manager3 of an AUT or ACS3 and a depositary3 of an AUT or ACS3, where such AUT, ACS3 or ICVC is a UCITS scheme or a non-UCITS retail scheme in accordance with COLL 7.1.2 R (Table of application).

   33
2. (2)

   COLL 7.7 (UCITS mergers) applies only to a domestic UCITS merger.4

   2

1. (1)

   7This rule applies to the authorised fund manager of a non-UCITS retail scheme if at any time:

   1. (a)

      a standing independent valuer has expressed material uncertainty in accordance with VPS 3 paragraph 2.2(o) and the guidance at VPGA10, RICS Valuation Global Standards 2017 (The Red Book) (effective from 1 July 2017), about the value of one or more immovables under management and that material uncertainty applies to at least 20% of the value of the scheme property; or

   2. (b)

      the authorised fund invests at least 20% of the value of the scheme property in units of one or more other authorised funds for which dealings in units have been temporarily suspended under (2).

2. (2)

   As soon as possible and in any event by the end of the second business day after the day on which this rule starts to apply under (1), the authorised fund manager must temporarily suspend dealings in units in the authorised fund unless (3) applies.

3. (3)

   Dealings in units in the authorised fund may continue provided that:

   1. (a)

      as soon as possible and in any event by the end of the second business day after the day on which this rule starts to apply under (1), the authorised fund manager and the depositary agree that dealings in units in the authorised fund should continue;

   2. (b)

      the authorised fund manager and the depositary have a reasonable basis for determining that a temporary suspension of dealings in units would not be in the best interests of unitholders in the authorised fund; and

   3. (c)

      the authorised fund manager and the depositary do not rely solely on a fair value price adjustment when making their determination under (b).

1. (1)

   7This rule applies where the authorised fund manager of a non-UCITS retail scheme is required to temporarily suspend dealings in units in the authorised fund under COLL 7.2.-3R(2) or COLL 7.2.-1R(3).

2. (2)

   The authorised fund manager must notify the depositary before suspending dealings in units in the authorised fund.

3. (3)

   During the suspension, the authorised fund manager must follow the requirements set out in the following provisions, where applicable:

   1. (a)

      COLL 7.2.1R(2);

   2. (b)

      COLL 7.2.1R(2A);

   3. (c)

      COLL 7.2.1R(2B);

   4. (d)

      COLL 7.2.1R(2C);

   5. (e)

      COLL 7.2.1R(3);

   6. (f)

      COLL 7.2.1R(4A);

   7. (g)

      COLL 7.2.1R(5); and

   8. (h)

      COLL 7.2.1R(6).

4. (4)

   Dealings in units must restart as soon as reasonably practicable after:

   1. (a)

      the standing independent valuer’s material uncertainty assessment applies to less than 20% of the value of the scheme property; and

   2. (b)

      the scheme’sdepositary gives its approval for the temporary suspension to be removed.

5. (5)

   If a non-UCITS retail scheme operates limited redemption arrangements and a suspension has prevented dealings in units at a valuation point, the authorised fund manager must declare an additional valuation point as soon as possible after the restart of dealings in units.

6. (6)

   This rule applies to a sub-fund as it applies to an authorised fund, and:

   1. (a)

      references to the units of the class or classes relate to that sub-fund and to the scheme property attributable to the sub-fund; and

   2. (b)

      this rule can only apply to one or more classes of units without being applied to other classes if the authorised fund manager considers that a suspension of dealings in units of some but not all classes of units is in the best interest of all the unitholders of that authorised fund or sub-fund.

1. (1)

   7This rule applies where the authorised fund manager and the depositary agree that dealings in units in the authorised fund should continue under COLL 7.2.-3R(3) and, if relevant, following a review under this rule.

2. (2)

   During the period of material uncertainty (see (8) below), the authorised fund manager and the depositary must review their agreement not to suspend dealings in units in the authorised fund at least every 14 days.

3. (3)

   Following such a review the authorised fund manager must temporarily suspend dealings in units in the authorised fund unless (4) applies.

4. (4)

   Dealings in units in the authorised fund may continue provided that:

   1. (a)

      the authorised fund manager and the depositary agree that dealings in units in the authorised fund should continue;

   2. (b)

      the authorised fund manager and the depositary have a reasonable basis for determining that a temporary suspension of dealings in units would not be in the best interests of unitholders in the authorised fund; and

   3. (c)

      the authorised fund manager and the depositary do not rely solely on a fair value price adjustment when making their determination under (b).

5. (6)

   The authorised fund manager must inform the FCA of the results of each review.

6. (7)

   This rule applies to a sub-fund as it applies to an authorised fund, and:

   1. (a)

      references to the units of the class or classes relate to that sub-fund and to the scheme property attributable to the sub-fund; and

   2. (b)

      this rule can only apply to one or more classes of units without being applied to other classes if the authorised fund manager considers a suspension of dealings in units of some but not all classes of units is in the best interest of all the unitholders of that authorised fund or sub-fund.

7. (8)

   In this rule, a “period of material uncertainty” is any period during which one or both of COLL 7.2.-3R(1)(a) and (b) applies.

1. (1)

   The authorised fund manager may, with the prior agreement of the depositary, and must without delay, if the depositary so requires, temporarily1 suspend the issue, cancellation, sale and redemption of units in an authorised fund (referred to in this chapter as "dealings in units"), where due to exceptional circumstances it is in the interest of all the unitholders in the authorised fund. Where an authorised fund is a regulated money market fund, the authorised fund manager must ensure that any such suspensions are consistent with the Money Market Funds Regulation.5

2. (1A)

   The authorised fund manager and the depositary must ensure that the suspension is only allowed to continue for as long as it is justified having regard to the interests of the unitholders.1

3. (2)

   On suspension, the authorised fund manager, or the depositary if it has required the authorised fund manager to suspend dealings in units, must:

   1. (a)

      immediately inform the FCA, stating the reason for its action; and

   2. (b)

      as soon as practicable give written confirmation of the suspension and the reasons for it to the FCA.6

4. (2A)

   The authorised fund manager must ensure that a notification of the suspension is made to unitholders of the authorised fund as soon as practicable after suspension commences.1

5. (2B)

   In making the notification set out in (2A), the authorised fund manager must ensure that it:

   1. (a)

      draws unitholders' particular attention to the exceptional circumstance which resulted in the suspension;

   2. (b)

      is clear, fair and not misleading; and

   3. (c)

      informs unitholders how to obtain the information detailed in (2C).1

6. (2C)

   The authorised fund manager must ensure that it publishes (on its website or by other general means) sufficient details to keep unitholders appropriately informed about the suspension including, if known, its likely duration.1

7. (3)

   During a suspension:

   1
   1. (a)

      none of the obligations in COLL 6.2 (Dealing) apply; and1

   2. (b)

      the authorised fund manager must comply with as much of COLL 6.3 (Valuation and pricing) as is practicable in the light of the suspension.1

8. (4)

   The suspension of dealings in units must cease as soon as practicable after the exceptional circumstances referred to in (1) have ceased.

   1
9. (4A)

   The authorised fund manager and the depositary must formally review the suspension at least every 28 days and inform the FCA of the results of this review and any change to the information provided in (2).1

10. (5)

    The authorised fund manager must inform the FCA of the proposed restart of dealings in units and immediately after the restart must confirm this by giving notice to the FCA.6

11. (6)

    The authorised fund manager may agree, during the suspension, to deal in units in which case all deals accepted during, and outstanding prior to, the suspension will be undertaken1 at a price calculated at the first valuation point after restart of dealing1 in units, subject to (8).

    11
12. (7)

    This rule applies to a sub-fund as it applies to an authorised fund, and:

    1. (a)

       references to the units of the class or classes relate to that sub-fund and to the scheme property attributable to the sub-fund; and

    2. (b)

       this rule can only apply to one or more classes of units without being applied to other classes, if it is in the interest of all the unitholders.

13. (8)

    If an authorised fund operates limited redemption arrangements, and the event in (1) has affected a valuation point, the authorised fund manager must declare an additional valuation point as soon as possible after the restart of dealings in units.

2Where:

1. (1)

   an authorised fund manager of a UCITS scheme which is a master UCITS or a qualifying master scheme3temporarily suspends the issue, cancellation, sale and redemption of its units, whether at its own initiative or at the request of the FCA; or

2. (2)

   an operator of an EEA UCITS scheme which is a master UCITS or a qualifying master scheme3temporarily suspends the issue, cancellation, sale or redemption of its units, whether at its own initiative or at the request of its Home State regulator; or3

3. (3)

   3an authorised fund manager of a non-UCITS retail scheme which is a qualifying master scheme temporarily suspends the issue, cancellation, sale or redemption of its units, whether at its own initiative or at the request of the FCA; or

4. (4)

   3the operator of a recognised scheme which is a qualifying master scheme temporarily suspends the issue, cancellation, sale or redemption of its units whether at its own initiative or at the request of its regulator;

the authorised fund manager of each of its feeder UCITS (which is a UCITS scheme) or feeder NURS3is entitled to suspend the issue, cancellation, sale or redemption of its units for the same period of time as the master UCITS or qualifying master scheme.3

In this section, where a sub-fund of an ICVC is being terminated, references to:

1. (1)

   units, are references to units of the class or classes related to the sub-fund to be terminated;

2. (2)

   a resolution, or extraordinary resolution, are references to such a resolution passed at a meeting of unitholders of units of the class or classes referred to in (1);

3. (3)

   scheme property, are references to the scheme property allocated or attributable to the sub-fund to be terminated; and

4. (4)

   liabilities, are references to liabilities of the ICVC allocated or attributable to the sub-fund to be terminated.

1. (1)

   An ICVC must not be wound up except:4

   4
   1. (a)

      under this section; or4

   2. (b)

      as an unregistered company under Part V of the Insolvency Act 1986.4

2. (1A)

   4A sub-fund must not:

   1. (a)

      be terminated except under this section; or

   2. (b)

      wound up except under Part V of the Insolvency Act 1986 (as modified by regulation 33C of the OEIC Regulations) as an unregistered company.

3. (2)

   An ICVC must not be wound up or a sub-fund terminated4 under this section if there is a vacancy in the position of ACD.

4. (3)

   An ICVC must not be wound up or a sub-fund terminated under this section:

   1. (a)

      unless and until effect may be given, under regulation 21 of the OEIC Regulations, to proposals to wind up the affairs of the ICVC or to proposals to make the alterations to the ICVC's instrument of incorporation and prospectus that will be required if a sub-fund is terminated; 8

   2. (b)

      unless a statement has been prepared and sent or delivered to the FCA under COLL 7.3.5 R (Solvency statement) and received by the FCA prior to satisfaction of the condition in (a); and8

   3. (c)

      where a person may have a right to make a repayment claim under sections 9 to 11 of the Dormant Assets Act 2022 in respect of an eligible CIS amount relating to the authorised fund or sub-fund, the ACD and the depositary have ensured that any records required under COLL 6.6.6R(5) and COLL 6.6.6R(6) (Maintenance of records) are:8

      1. (i)

         accessible by the ACD or the depositary and will be preserved; or8

      2. (ii)

         transferred to a dormant asset fund operator or to another authorised person that has undertaken to preserve them.8

5. (4)

   Subject to (3) and the subsequent provisions of this section, the appropriate steps to wind up an ICVC or terminate a sub-fund under this section must be taken:

   1. (a)

      if an extraordinary resolution to that effect is passed; or

   2. (b)

      when the period (if any) fixed for the duration of the ICVC or the sub-fund by the instrument of incorporation expires or any event occurs, for which the instrument of incorporation provides that the ICVC or the sub-fund is to be wound up or terminated4; or

   3. (c)

      on the date stated in any agreement by the FCA in response to a request from the directors for the winding up of the ICVC or a request for the termination of the sub-fund; or5

   4. (d)

      on the effective date of a duly approved scheme of arrangement which is to result in the ICVC ceasing to hold any scheme property; or5

   5. (e)

      in the case of a sub-fund, on the effective date of a duly approved scheme of arrangement which is to result in the sub-fund ceasing to hold any scheme property; or5

   6. (f)

      in the case of an ICVC that is an umbrella, on the date on which all of its sub-funds fall within (e) or have otherwise ceased to hold any scheme property, notwithstanding that the ICVC may have assets and liabilities that are not attributable to any particular sub-fund.5

1. (1)

   Before notice is given to the FCA under regulation 21 of the OEIC Regulations of the proposals referred to in COLL 7.3.4 R (3), the directors must make a full enquiry into the ICVC's or, in the case of termination of a sub-fund, the sub-fund's4 affairs, business and property4 to determine whether the ICVC or the sub-fund4 will be able to meet all its liabilities.

2. (2)

   The ACD must then, based on the results of this enquiry, prepare a statement either:

   1. (a)

      confirming that the ICVC or the sub-fund4 will be able to meet all its liabilities within twelve months of the date of the statement; or

   2. (b)

      stating that such confirmation cannot be given.

3. (3)

   This solvency statement must:

   1. (a)

      relate to the ICVC's or the sub-fund's4 affairs, business and property4 at a date no more than 28 days before the date on which notice is given to the FCA;

   2. (b)

      if there is more than one director, be approved by the board of directors and signed on their behalf by the ACD; and

   3. (c)

      if it contains the confirmation under (2)(a), be signed by at least one other director or, if there is no director other than the ACD, be signed by the ACD.

4. (4)

   A statement which contains the confirmation under (2)(a) must annex a statement signed by the auditor appointed under Schedule 5 to the OEIC Regulations (Auditors) to the effect that, in his opinion, the enquiry required by (1) has been properly made and is fairly reflected by the confirmation.

5. (5)

   The solvency statement must be sent or delivered to the FCA and the depositary no later than 21 days after notice is given to the FCA in accordance with regulation 21 of the OEIC Regulations.

1. (1)

   Winding up or termination must commence once the conditions referred to in COLL 7.3.4 R (3) are both satisfied or, if later, once the events in COLL 7.3.4 R (4) have occurred.

2. (2)

   Once winding up or termination has commenced:

   1. (a)

      COLL 6.2 (Dealing), COLL 6.3 (Valuation and pricing), COLL 6.6.20R to COLL 6.6.24G (Assessment of value)7 and COLL 5 (Investment and borrowing powers) cease to apply to the ICVC or to the units and scheme property in the case of a sub-fund;

   2. (b)

      the ICVC must cease to issue and cancel3units, except in respect of the final cancellation under COLL 7.3.7 R (5);3

      3
   3. (c)

      the ACD must cease to sell or redeem units or to arrange for the issue or cancellation of units, except in respect of the final cancellation under COLL 7.3.7 R (5);3

   4. (d)

      no transfer of a unit may be registered and no other change to the register of unitholders may be made without the sanction of the directors;

   5. (e)

      where winding up an ICVC, the ICVC must cease to carry on its business, except for its beneficial winding up; and

   6. (f)

      the corporate status and corporate powers of the ICVC and (subject to the preceding provisions of this rule) the powers of the directors continue until the ICVC is dissolved.

3. (3)

   4If the ACD has not previously notified unitholders of the proposal to wind up the ICVC or terminate the sub-fund, the ACD must, as soon as practicable after winding up or termination has commenced, give written notice of the commencement of the winding up or termination to the unitholders.

   4

1. (1)

   [deleted]4

   4
2. (2)

   The ACD must, as soon as practicable after winding up or termination has commenced, cause the scheme property to be realised and the liabilities of the ICVC or the sub-fund to be met out of the proceeds.

3. (3)

   The ACD must instruct the depositary how such proceeds (until utilised to meet liabilities or make distributions to unitholders) must be held and those instructions must be prepared with a view to the prudent protection of creditors and unitholders against loss.

4. (4)

   Where sufficient liquid funds are available after making adequate provision for the expenses of the winding up or termination and the discharge of the ICVC's or the sub-fund's remaining liabilities, the ACD may arrange for the depositary to make one or more interim distributions to the unitholders proportionately to the right of their respective units to participate in scheme property at the commencement of the winding up or termination.

5. (5)

   On or before the date on which the final account is sent to unitholders in accordance with COLL 7.3.8 R (Final account and termination account), the ACD must arrange for all units in issue to be cancelled and for3 the depositary to make a final distribution to the unitholders, in the same proportions as provided by (4), of the balance remaining (net of a provision for any further expenses of the ICVC or sub-fund).

6. (6)

   Paragraphs (2) to (5) are subject to the terms of any scheme of arrangement sanctioned by an extraordinary resolution passed on or before the commencement of the winding up or termination.

7. (7)

   Where the ICVC and one or more unitholders (other than the ACD) agree, the requirement in (2) to realise the scheme property does not apply to that part of the scheme property which is proportionate to the right to participate in scheme property of that or those unitholders

8. (8)

   In the case of (7), the ACD must cause the ICVC to distribute that part of the scheme property in specie to that or those unitholders in proportion to their respective rights to participate, this distribution being effected after making adjustments and retaining such provision as appears to the ACD appropriate to ensure that those unitholders bear the proportion of the liabilities and the expenses of the distribution attributable to their units.

9. (9)

   The depositary must notify the FCA once the winding up of the ICVC or the termination of a sub-fund (including compliance with COLL 7.3.8 R is complete and at the same time the ACD or the depositary must request the FCA to revoke the relevant authorisation order (on the winding up of an ICVC) or to update its records (on the termination of a sub-fund of an ICVC).4

10. (10)

    Where any sum of money stands to the account of the ICVC at the date of its dissolution or a sub-fund at the date of its termination4, the ACD must arrange for the depositary to pay or lodge that sum within one month after that date in accordance with regulation 33(4), (5) or (6) of the OEIC Regulations (Dissolution in other circumstances), where relevant, as applied by regulation 33C of the OEIC Regulations (Winding up of sub-funds)8.

11. (11)

    [deleted]4

    4
12. (12)

    [deleted]4

    4
13. (13)

    [deleted]4

    4
14. (14)

    [deleted]4

    4
15. (15)

    [deleted]4

    4

1. (1)

   Once the ICVC's affairs are wound up or termination of the sub-fund has been completed (including distribution or provision for distribution in accordance with COLL 7.3.7 R (5)),3 the ACD must prepare an account of the winding up or termination showing:

   3
   1. (a)

      how it has been conducted; and

   2. (b)

      how the scheme property has been disposed of.

2. (2)

   The account in (1) must be, if there is:

   1. (a)

      more than one director, approved by the board of directors and be signed on their behalf by the ACD and at least one other director; or

   2. (b)

      no director other than the ACD, signed by the ACD.

3. (3)

   Once signed, this account is the "final account" for the purposes of the winding up of an ICVC and the "termination account" for the purposes of the termination of a sub-fund.

4. (4)

   The final account must state the date on which the ICVC's affairs were wound up and the date stated must be regarded as the final day of the accounting period of the ICVC then running ('final accounting period') for the purpose of COLL 4.5.3

   3
5. (4A)

   The termination account must state the date on which the sub-fund's affairs were terminated.3

6. (5)

   The ACD must ensure that the ICVC's auditor makes a report in respect of the final account or termination account, which states the auditor's opinion whether the final account or termination account has been properly prepared for the purpose of (1).

7. (6)

   Within four3months of the date of the completion of the winding up of the ICVC or termination of the sub-fund, the ACD must send a copy of the final account or termination account and the auditor's report on it to the FCA and to each person who was a unitholder (or the first named of joint unitholders) immediately before the winding up or termination commenced.3

   33

1. (1)

   The ACD must use all reasonable endeavours to ensure that all the liabilities of the ICVC or the sub-fund4 are discharged before the completion of the winding up or termination.

2. (2)

   The duty in (1) relates to all liabilities of which the ACD:

   1. (a)

      is, or becomes, aware before the completion of the winding up or termination; or

   2. (b)

      would have become aware before the completion of the winding up or termination had it used all reasonable endeavours to ascertain the liabilities.

3. (3)

   If the ACD rejects any claim against the ICVC or the sub-fund4 in whole or part or against the ICVC or the sub-fund4 in respect of a liability in whole or part, the ACD must immediately send to the claimant written notice of its reasons for doing so.

1. (1)

   [deleted]6

   33333333
2. (1A)

   [deleted]6

   3
3. (2)

   For any annual accounting period or half-yearly accounting period which begins after commencement of the winding up or termination6, a copy of the long report must be supplied free of charge to any unitholder upon request.

   3
4. (3)

   The6ACD must ensure that it keeps unitholders appropriately informed about the winding up or termination including, if known, its likely duration.3

5. (4)

   The ACD must send a copy of the information required by (3) to each person who was a unitholder or the first named of joint unitholders immediately before the winding up or termination commenced, unless a final distribution has been made in accordance with COLL 7.3.7 R (5).3

1. (1)

   Except to the extent that the ACD can show that it has complied with COLL 7.3.9 R (Duty to ascertain liabilities), the ACD is personally liable to meet any liability of an ICVC or a sub-fund, of which it is the ACD, wound up or terminated under this section (whether or not the ICVC has been dissolved or, in the case of the sub-fund, termination has been completed) that was not discharged before the completion of the winding up or termination.4

   4
2. (2)

   Where winding up an ICVC, if the proceeds of the realisation of the assets attributable, or allocated to a particular sub-fund of an umbrella ICVC are insufficient to meet the liabilities attributable or allocated to that sub-fund, the ACD must pay to the ICVC, for the account of that sub-fund the amount of the deficit, unless and to the extent that the ACD can show that the deficit did not arise as a result of any failure by the ACD to comply with the rules in COLL.

3. (3)

   The liabilities of the ACD under this rule create a debt (in England and Wales in the nature of a specialty) accruing due from it on the completion of the winding up or termination and payable upon the demand of the creditor in question (including the ICVC in the circumstances described in (2)).

4. (4)

   The obligations of the ACD under this rule do not affect any other obligation of the ACD under these rules or the general law.

1. (1)

   If:

   1. (a)

      during the course, or as a result, of the enquiry referred to in COLL 7.3.5 R (1) (Solvency statement), the directors become of the opinion that it will not be possible to provide the confirmation referred to in (2)(a) of that rule; or

   2. (b)

      after winding up or termination has commenced, the ACD becomes of the opinion that the ICVC or the sub-fund4 will be unable to meet all its liabilities within twelve months of the date of the statement provided under (a) of COLL 7.3.5 R (2);

   the directors must immediately present a petition or cause the ICVC or sub-fund4 to present a petition for the winding up of the ICVC or sub-fund4 as an unregistered company4 under Part V of the Insolvency Act 1986.

   4
2. (2)

   If, after the commencement of a winding up or termination4 under this chapter and before notice of completion of the winding up or termination4 has been sent to the FCA, there is a vacancy in the position of ACD:4

   4
   1. (a)

      4the directors of the ICVC must immediately present or cause the ICVC or sub-fund to present; or4

   2. (b)

      4if there are no directors, the depositary must immediately present;4

   a petition for the winding up of the ICVC or sub-fund4as an unregistered company 4under Part V of the Insolvency Act 1986.

   4

In this section, where a sub-fund of an AUT is being terminated, references to:

1. (1)

   units, are references to units of the class or classes related to the sub-fund to be terminated;

2. (2)

   a resolution or extraordinary resolution, are references to such a resolution passed at a meeting of unitholders of units of the class or classes referred to in (1);

3. (3)

   scheme property, are references to the scheme property allocated or attributable to the sub-fund to be terminated; and

4. (4)

   liabilities, are references to liabilities of the AUT allocated or attributable to the sub-fund to be terminated.

1. (1)

   Upon the happening of any of the events or dates referred to in (2) and not otherwise:

   1
   1. (a)

      COLL 6.2 (Dealing), COLL 6.3 (Valuation and pricing), COLL 6.6.20R to COLL 6.6.24G (Assessment of value)4 and COLL 5 (Investment and borrowing powers) cease to apply to the AUT or to the units and scheme property in the case of a sub-fund;1

   2. (b)

      the trustee must cease to issue and cancel1units, except in respect of the final cancellation under COLL 7.4.4 R (1) or (2);1

      1
   3. (c)

      the manager must cease to sell and redeem units;

   4. (d)

      the manager must cease to arrange the issue or cancellation of units under COLL 6.2.7 R (Issue and cancellation of units through an authorised fund manager), except in respect of the final cancellation under COLL 7.4.4 R (1) or (2);1

      1
   5. (dA)

      no transfer of a unit may be registered and no other change to the register of unitholders may be made without the approval of the person responsible for the register in accordance with COLL 6.4.4 R (1); and1

   6. (e)

      the trustee must proceed to wind up the AUT or terminate the sub-fund in accordance with COLL 7.4.4 R.

2. (1A)

   If the manager has not previously notified unitholders of the proposal to wind up the AUT or terminate the sub-fund, it must as soon as practicable after winding up or termination has commenced give written notice of the commencement of the winding up or termination to the unitholders.1

3. (1B)
   1. (a)

      5This paragraph applies where a person may have a right to make a repayment claim under sections 9 to 11 of the Dormant Assets Act 2022, in respect of an eligible CIS amount relating to the authorised fund or sub-fund.

   2. (b)

      The AUT must not be wound up nor the sub-fund terminated under this section unless and until the manager and trustee have ensured that any records required under COLL 6.6.6R(5) and COLL 6.6.6R(6) (Maintenance of records) are:

      1. (i)

         accessible by the manager or the trustee and will be preserved; or

      2. (ii)

         transferred to a dormant asset fund operator or to another authorised person that has undertaken to preserve them.

4. (2)

   The events referred to in (1) are:

   1. (a)

      the authorisation order of the AUT is revoked;

   2. (b)

      alterations to the AUT'strust deed and prospectus that will be required if the sub-fund is terminated taking effect in accordance with section 251 of the Act;

   3. (c)

      the passing of an extraordinary resolution winding up the AUT or terminating the sub-fund, provided FCA's prior consent to the resolution has been obtained by the manager or trustee;

   4. (d)

      in response to a request to the FCA by the manager or the trustee for the revocation of the authorisation order, the FCA has agreed, subject to there being no material change in any relevant factor, that, on the conclusion of the winding up of the AUT, the FCA will agree to that request;

   5. (e)

      the expiration of any period specified in the trust deed as the period at the end of which the AUT is to be wound up or the sub-fund is to terminate;

   6. (f)

      the effective date of a duly approved scheme of arrangement, which is to result in the AUT or sub-fund that is subject to the scheme of arrangement being left with no property; or

   7. (g)

      the date on which a relevant pension scheme is notified in writing by The Pensions Regulator 3that the scheme is no longer registered under the Welfare and Pensions Reform Act 1999 as a stakeholder pension scheme.

5. (3)

   This rule is without prejudice to COLL 7.2.1 R(Requirement) and to any order or direction made under section 257 or 258 of the Act.

1. (1)

   Where COLL 7.4.3 R (2) (f) applies, the trustee must cancel all units in issue and1 wind up the AUT or terminate the sub-fund in accordance with the approved scheme of arrangement.

2. (2)

   In any other case falling within COLL 7.4.3 R:

   1. (a)

      once the AUT falls to be wound up or sub-fund terminated, the trustee must realise the scheme property;

   2. (b)

      after paying out or retaining adequate provision for all liabilities payable and for the costs of the winding up or termination, the trustee must cancel all units in issue and1 distribute the proceeds of that realisation to the unitholders and the manager proportionately to their respective interests in the AUT or sub-fund as at the date, or the date of the relevant event referred to in COLL 7.4.3 R; and

   3. (c)

      any unclaimed net proceeds or other cash (including unclaimed distribution payments) held by the trustee after one year from the date on which they became payable must be paid by the trustee in accordance with (2A) or (2B), in either case5 subject to the trustee having a right to retain any expenses properly incurred by them5 relating to that payment.

3. (2A)

   The manager must arrange for the trustee to transfer the unclaimed net proceeds or cash referred to in (2)(c) to a dormant asset fund operator in accordance with sections 8 and 9 of the Dormant Assets Act 2022 where:5

   1. (a)

      the instrument constituting the fund and the prospectus permit the transfer of unclaimed net proceeds or cash as referred to in (2)(c) to a dormant asset fund operator as orphan monies; and5

   2. (b)

      the manager is satisfied that the orphan monies are a dormant asset.5

4. (2B)

   Where, and to the extent that, (2A) does not apply, the unclaimed net proceeds or cash (see (2)(c) above) must be paid by the trustee into court (or, in Scotland, as the court may direct).5

5. (3)

   For an AUT which is a relevant pension scheme, payments must not be made to unitholders in the AUT, the realisation proceeds having to be paid by the trustee in accordance with the trust deed.

6. (4)

   Where the trustee and one or more unitholders agree, the requirement in (2) to realise the scheme property does not apply to that part of the property proportionate to the entitlement of that or those unitholders.

7. (5)

   The trustee must1 distribute the part of the scheme property referred to in (4) in the form of property, after making adjustments or retaining provisions as appears appropriate to the trustee for ensuring that, that or those unitholders bear a proportional share of the liabilities and costs.

   1
8. (6)

   On completion of the winding up in respect of the events referred to in COLL 7.4.3 R (2)(c), COLL 7.4.3 R (2)(d),1COLL 7.4.3 R (2)(e) or COLL 7.4.3 R (2) (f),1 the trustee must notify the FCA in writing and at the same time the manager or trustee must request the FCA to revoke the relevant authorisation order.

1. (1)

   [deleted]2

   1111
2. (1A)

   [deleted]2

   1
3. (2)

   For any annual accounting period or half-yearly accounting period which begins after commencement of the winding up or termination2, a copy of the long report must be supplied free of charge to any unitholder upon request.

   1
4. (2A)

   The2manager must ensure that it keeps unitholders appropriately informed about the winding up or termination, including its likely duration.1

5. (2B)

   The manager must send a copy of the information required by COLL 7.4.5 R (2A) to each person who was a unitholder or the first named of joint unitholders immediately before the winding up or termination commenced, unless a final distribution has been made in accordance with COLL 7.4.4 R (2)(b).1

6. (3)

   [deleted]1

   1
7. (4)

   At the conclusion of the winding up or termination, the accounting period then running is regarded as the final annual accounting period.

8. (5)

   Within four1months after the end of the final annual accounting period or the termination of the sub-fund, the annual reports of the manager and trustee must be published and sent to the FCA. 1

   1
9. (6)

   The manager must, on publication of the annual long report in (5), write to each person who was a unitholder or the first named of joint unitholders immediately before the commencement of winding up or termination to inform them that the annual long report is available free-of-charge on request.1

1. (1)

   In this section, where a sub-fund of a co-ownership scheme is being terminated, references to:

   1. (a)

      units, are references to units of the class or classes related to the sub-fund to be terminated;

   2. (b)

      a resolution, or extraordinary resolution, are references to such a resolution passed at a meeting of unitholders of units of the class or classes referred to in (1);

   3. (c)

      scheme property, are references to the scheme property allocated or attributable to the sub-fund to be terminated; and

   4. (d)

      liabilities, are references to liabilities of the co-ownership scheme allocated or attributable to the sub-fund to be terminated.

2. (2)

   In this section:

   1. (a)

      a "section 261Q case" refers to:

      1. (i)

         a case where a sub-fund of a co-ownership scheme is to be terminated otherwise than in connection with a scheme of arrangement; or

      2. (ii)

         a case where an ACS or a sub-fund of a co-ownership scheme is to be wound up or terminated in connection with a scheme of arrangement; and

   2. (b)

      a "section 261W case" refers to a case where an ACS is to be wound up otherwise than in connection with a scheme of arrangement.

1. (1)

   Upon the happening of any of the matters or dates referred to in (3), and subject to the requirement of (4) being satisfied, and not otherwise:

   1. (a)

      COLL 6.2 (Dealing), COLL 6.3(Valuation and pricing), COLL 6.6.20R to COLL 6.6.24G (Assessment of value)3 and COLL 5 (Investment and borrowing powers) cease to apply to the ACS or to the units and scheme property in the case of a sub-fund of a co-ownership scheme;

   2. (b)

      the depositary must cease to issue and cancelunits, except in respect of the final cancellation under COLL 7.4A.6R (1) or COLL 7.4A.6R (2) (Manner of winding up or termination);

   3. (c)

      the authorised contractual scheme manager must cease to sell and redeem units;

   4. (d)

      the authorised contractual scheme manager must cease to arrange the issue or cancellation of units under COLL 6.2.7 R (Issue and cancellation of units through an authorised fund manager), except in respect of the final cancellation under COLL 7.4A.6R (1) or (2);

   5. (e)

      no transfer of a unit may be registered and no other change to the register of unitholders may be made without the approval of the person responsible for the register in accordance with COLL 6.4.4 R (1) (Register: general requirements and contents); and

   6. (f)

      the depositary must proceed to wind up the ACS or terminate the sub-fund in accordance with COLL 7.4A.6 R.

2. (2)

   If the authorised contractual scheme manager has not previously notified unitholders of the proposal to wind up the ACS or terminate the sub-fund of the co-ownership scheme, it must as soon as practicable after winding up or termination has commenced give written notice of the commencement of the winding up or termination to the unitholders.

3. (3)

   The matters referred to in (1) are:

   1. (a)

      the authorisation order of the ACS is revoked;

   2. (b)

      alterations to the co-ownership scheme'scontractual scheme deed and prospectus that will be required if the sub-fund is terminated taking effect in accordance with section 261Q (Alteration of contractual schemes and changes of operator or depositary) of the Act;

   3. (c)

      the passing of an extraordinary resolution winding up the ACS or terminating the sub-fund, provided the FCA's prior consent to the resolution has been obtained by the authorised contractual scheme manager or depositary;

   4. (d)

      in response to a request to the FCA by the authorised contractual scheme manager or the depositary for the revocation of the authorisation order, the FCA has agreed, subject to there being no material change in any relevant factor, that, on the conclusion of the winding up of the ACS, the FCA will agree to that request;

   5. (e)

      the expiration of any period specified in the contractual scheme deed as the period at the end of which the ACS is to be wound up or the sub-fund is to terminate;

   6. (f)

      the effective date of a duly approved scheme of arrangement, which is to result in the ACS or sub-fund that is subject to the scheme of arrangement being left with no property;

   7. (g)

      in the case of a co-ownership scheme that is an umbrella, the date on which all or the last of its sub-funds fall within (f) or have otherwise ceased to hold any scheme property, notwithstanding that the co-ownership scheme may have assets and liabilities that are not attributable exclusively to any particular sub-fund.

4. (4)

   An ACS must not be wound up nor a sub-fund terminated under this section unless the requirements of (a), (b) and (where relevant) (c)4 are satisfied:

   1. (a)

      An ACS must not be wound up nor a sub-fund terminated under this section unless and until:

      1. (i)

         in a section 261Q case either:

         1. (A)

            the FCA has given written approval to the proposal; or

         2. (B)

            one month has passed since the authorised contractual scheme manager gave notice under section 261Q without the authorised contractual scheme manager or depositary having received from the FCA a warning notice under section 261R in respect of the proposal; or

      2. (ii)

         in a section 261W case, the FCA indicates that, subject to there being no change in any relevant factor, on the conclusion of the winding up of the ACS, the FCA will agree to the request to wind up the ACS.

   2. (b)

      In addition an ACS must not be wound up nor a sub-fund terminated under this section unless a statement has been prepared and sent or delivered to the FCA under COLL 7.4A.5 R (Solvency statement) and received by the FCA prior to the satisfaction of the condition in (a).

   3. (c)
      1. (i)

         This sub-paragraph applies where a person may have a right to make a repayment claim under sections 9 to 11 of the Dormant Assets Act 2022, in respect of an eligible CIS amount relating to the authorised fund or sub-fund.4

      2. (ii)

         The ACS must not be wound up nor the sub-fund terminated under this section unless and until the authorised contractual scheme manager and the depositary have ensured that any records required under COLL 6.6.6R(5) and COLL 6.6.6R(6) (Maintenance of records) are:4

         1. (A)

            accessible by the authorised fund manager or the depositary and will be preserved; or4

         2. (B)

            transferred to a dormant asset fund operator or to another authorised person that has undertaken to preserve them.

5. (5)

   This rule is without prejudice to:

   1. (a)

      COLL 7.2.1 R (Requirement); or

   2. (b)

      any order or direction made under section 261X (Directions) or 261Y (Applications to the court) of the Act; or

   3. (c)

      any alternative method (aside from the rules in this section) of winding up a limited partnership scheme provided for by the law.

1. (1)

   Either before notice is given under section 261Q of the Act or before a request is made under section 261W of the Act in relation to the proposals referred to in COLL 7.4A.4R (4), the authorised contractual scheme manager must make a full inquiry into the ACS's (or, in the case of the termination of a sub-fund of a co-ownership scheme, the sub-fund's) affairs, business and property to establish whether the ACS or the sub-fund will be able to meet all its liabilities.

2. (2)

   The authorised contractual scheme manager must then, based on the results of this enquiry, prepare and sign a statement either:

   1. (a)

      confirming that the ACS or the sub-fund of the co-ownership scheme will be able to meet all its liabilities within twelve months of the date of the statement; or

   2. (b)

      stating that such confirmation cannot be given.

3. (3)

   This solvency statement must relate to the ACS's or the sub-fund's affairs, business and property at a date no more than 28 days before the date on which notice is given to the FCA under section 261Q or a request is made under section 261W.

4. (4)

   A statement which contains the confirmation under (2) must annex a statement signed by the auditor of the ACS to the effect that, in his opinion, the enquiry required by (1) has been properly made and is fairly reflected by the confirmation.

5. (5)

   The solvency statement must be sent or delivered to the FCA and the depositary no later than 21 days after notice is given to the FCA in accordance with section 261Q of the Act or the request made in accordance with section 261W of the Act.

1. (1)

   Where COLL 7.4A.4R (3)(f) applies, the depositary must cancel all units in issue and wind up the ACS or terminate the sub-fund of the co-ownership scheme in accordance with the approved scheme of arrangement.

2. (2)

   In any other case falling within COLL 7.4A.4 R:

   1. (a)

      once the ACS falls to be wound up or sub-fund terminated, the depositary must realise the scheme property;

   2. (b)

      after paying out or retaining adequate provision for all liabilities payable and for the costs of the winding up or termination, the depositary must cancel all units in issue and distribute the proceeds of that realisation to the unitholders and the authorised contractual scheme manager proportionately to their respective interests in the ACS or sub-fund as at the date, or the date of the relevant event referred to in COLL 7.4A.4 R; and

   3. (c)

      any unclaimed net proceeds or other cash (including unclaimed distribution payments) held by the depositary after one year from the date on which they became payable must be paid by the depositary in accordance with (2A) or (2B), in either case4 subject to the depositary having a right to retain any expenses properly incurred by them4 relating to that payment.

3. (2A)

   The authorised contractual scheme manager must arrange for the depositary to transfer the unclaimed net proceeds or cash referred to in (2)(c) to a dormant asset fund operator in accordance with sections 8 and 9 of the Dormant Assets Act 2022 where:4

   1. (a)

      the instrument constituting the fund and the prospectus permit the transfer of unclaimed net proceeds or cash as referred to in (2)(c) to a dormant asset fund operator as orphan monies; and4

   2. (b)

      the authorised contractual scheme manager is satisfied that the orphan monies are a dormant asset.4

4. (2B)

   Where, and to the extent that, (2A) does not apply, the unclaimed net proceeds or cash referred to in (2)(c) must be paid by the depositary into court (or, in Scotland, as the court may direct).4

5. (3)

   For an ACS which is a relevant pension scheme, payments must not be made to unitholders in the ACS. The realisation proceeds must be paid by the depositary in accordance with the contractual scheme deed.

6. (4)

   Where the depositary and one or more unitholders agree, the requirement in (2) to realise the scheme property does not apply to that part of the property proportionate to the entitlement of that or those unitholders.

7. (5)

   The depositary must distribute the part of the scheme property referred to in (4) in the form of property, after making adjustments or retaining provisions as appears appropriate to the depositary for ensuring that that or those unitholders bear a proportional share of the liabilities and costs.

8. (6)

   On completion of the winding up in respect of the matters referred to in COLL 7.4A.4R (3)(c) to (g), the depositary must notify the FCA in writing and at the same time the authorised contractual scheme manager or depositary must request the FCA to revoke the relevant authorisation order.

1. (1)

   The authorised contractual scheme manager must use all reasonable endeavours to ensure that all the liabilities of the ACS or the sub-fund of a co-ownership scheme are discharged before the completion of the winding up or termination.

2. (2)

   The duty in (1) relates to all liabilities of which the authorised contractual scheme manager:

   1. (a)

      is, or becomes, aware before the completion of the winding up or termination; or

   2. (b)

      would have become aware before the completion of the winding up or termination had it used all reasonable endeavours to ascertain the liabilities.

3. (3)

   If the authorised contractual scheme manager rejects any claim or liability against the ACS or the sub-fund in whole or part, the authorised contractual scheme manager must immediately send to the claimant written notice of its reasons for doing so.

1. (1)

   [deleted]2

2. (2)

   [deleted]2

3. (3)

   For any annual accounting period or half-yearly accounting period which begins after commencement of the winding up or termination2, a copy of the long report must be supplied free of charge to any unitholder upon request.

4. (4)

   The2authorised contractual scheme manager must ensure that it keeps unitholders appropriately informed about the winding up or termination, including its likely duration.

5. (5)

   The authorised contractual scheme manager must send a copy of the information required by (4) to each person who was a unitholder or the first named of joint unitholders immediately before the winding up or termination commenced, unless a final distribution has been made in accordance with COLL 7.4A.6R (2)(b).

6. (6)

   At the conclusion of the winding up or termination, the accounting period then running is regarded as the final annual accounting period.

7. (7)

   Within four months after the end of the final annual accounting period or the termination of the sub-fund of the co-ownership scheme, the annual reports of the authorised contractual scheme manager and depositary must be published and sent to the FCA.

8. (8)

   The authorised contractual scheme manager must, on publication of the annual long report in (7), write to each person who was a unitholder or the first named of joint unitholders immediately before the commencement of winding up or termination to inform them that the annual long report is available free of charge on request.

1. (1)

   Except to the extent that the authorised contractual scheme manager can show that it has complied with COLL 7.4A.8 R (Duty to ascertain liabilities), the authorised contractual scheme manager is personally liable to meet any liability of an ACS or a sub-fund of a co-ownership scheme, of which it is the authorised contractual scheme manager, wound up or terminated under this section (whether or not the winding up of the ACS or the termination of the sub-fund has been completed) that was not discharged before the completion of the winding up or termination.

2. (2)

   Where winding up an ACS, if the proceeds of the realisation of the assets attributable or allocated to a particular sub-fund of an umbrellaco-ownership scheme are insufficient to meet the liabilities attributable or allocated to that sub-fund, the authorised contractual scheme manager must pay to the ACS, for the account of that sub-fund, the amount of the deficit, unless and to the extent that the authorised contractual scheme manager can show that the deficit did not arise as a result of any failure by the authorised contractual scheme manager to comply with the rules in COLL.

3. (3)

   The liabilities of the authorised contractual scheme manager under this rule create an accruing debt (in England and Wales in the nature of a specialty) due from it on the completion of the winding up or termination and payable upon the demand of the creditor in question (including the ACS in the circumstances described in (2)).

4. (4)

   The obligations of the authorised contractual scheme manager under this rule do not affect any other obligation of the authorised contractual scheme manager under these rules or the law.

If:

1. (1)

   during the course, or as a result, of the enquiry referred to in COLL 7.4A.5R (1) (Solvency statement), the authorised contractual scheme manager becomes of the opinion that it will not be possible to provide the confirmation referred to in (2)(a) of that rule; or

2. (2)

   after winding up or termination has commenced, the authorised contractual scheme manager becomes of the opinion that the ACS or the sub-fund of a co-ownership scheme will be unable to meet all its liabilities within twelve months of the date of the statement provided under COLL 7.4A.5R (2)(a);

the authorised contractual scheme manager must immediately present a petition or cause the ACS or sub-fund to present a petition for the winding up of the ACS or sub-fund as an unregistered company under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, as modified by the Contractual Scheme Regulations.

1. (1)

   If a scheme of arrangement is entered into in relation to an authorised fund ("transferor fund") or a sub-fund of a scheme which is an umbrella ("transferor sub-fund"), an authorised fund manager must ensure that the unitholders of the transferor fund or sub-fund do not become unitholders of units in a collective investment scheme other than a regulated collective investment scheme.

2. (2)

   For a UCITS scheme or a sub-fund of a UCITS scheme, (1) applies as if the reference to a regulated collective investment scheme excludes any recognised scheme which is not authorised under the UCITS Directive in an EEA State5.

   34
3. (3)

   Where, for the purpose of a scheme of arrangement, it is proposed that scheme property of an authorised fund should become the property of another regulated collective investment scheme or sub-fund of a regulated collective investment scheme, the proposal must not be implemented without the sanction of an extraordinary resolution of the unitholders in the authorised fund, unless (4) applies.

4. (4)

   Where, for the purposes of a scheme of arrangement, it is proposed that scheme property attributable to a sub-fund of an umbrella should become the property of another regulated collective investment scheme or of another sub-fund of a regulated collective investment scheme (whether or not of that umbrella), the proposal must not be implemented without the sanction of:

   1. (a)

      an extraordinary resolution of the unitholders in the sub-fund of that umbrella; and

   2. (b)

      (unless implementation of the scheme of arrangement is not likely to result in any material prejudice to the interests of the unitholders in any other sub-fund of that umbrella) an extraordinary resolution of the unitholders of units in that umbrella.

5. (5)

   If it is proposed that an authorised fund or sub-fund of an umbrella should receive property (other than its first property) as a result of a scheme of arrangement (or an arrangement equivalent to a scheme of arrangement) which is entered into by some other collective investment scheme or sub-fund, or by a body corporate, the proposal must not be implemented without the sanction of an extraordinary resolution of the unitholders in the authorised fund or (as the case may be) of the class or classes of units related to the sub-fund unless (6) applies.

6. (6)

   This paragraph (6) applies if the directors of the ICVC or the authorised fund manager2 and depositary2 of the AUT or ACS2 agree that the receipt of the property concerned for the account of the ICVC,2AUT or ACS2:

   222
   1. (a)

      is not likely to result in any material prejudice to the interests of the unitholders of the authorised fund;

   2. (b)

      is consistent with the objectives of the authorised fund or sub-fund; and

   3. (c)

      could be effected without any breach of a rule in COLL 5(Investment and borrowing powers).

7. (7)

   If it is proposed that the scheme property of an authorised fund or a sub-fund of an umbrella should become the property of a recognised scheme, the authorised fund manager of the authorised fund or sub-fund must ensure that the document it provides to unitholders setting out the proposal contains a prominent statement of the matters required to be disclosed by COLL 9.5.5R and COLL 9.5.6R (Preparation and maintenance of a prospectus relating to an OFR recognised scheme).5

1. (1)

   6This rule applies where:

   1. (a)

      a scheme of arrangement is entered into in relation to a transferor fund or a transferor sub-fund;

   2. (b)

      a person who is or was at any time the authorised fund manager or (where relevant) the depositary of the transferor fund or transferor sub-fund transferred eligible CIS amounts as dormant assets to a dormant asset fund operator; and

   3. (c)

      such dormant assets are or were attributable to the transferor fund or transferor sub-fund.

2. (2)

   The authorised fund manager of the transferor fund or transferor sub-fund must ensure that under the terms of the scheme of arrangement the records required under COLL 6.6.6R(5) and COLL 6.6.6R(6):

   1. (a)

      will be properly maintained;

   2. (b)

      will be updated, where appropriate; and

   3. (c)

      will remain accessible,

   so that the amount of any repayment claim can be readily calculated and verified by the appropriate person.

3. (3)

   In this rule, ‘transferor fund’ and ‘transferor sub-fund’ have the same meanings as in COLL 7.6.2R.

1This section applies to an ICVC, an authorised fund manager of an AUT, ACS3 or ICVC, any other director of an ICVC and the depositary of any such scheme where, in each case, the AUT, ACS3 or ICVC is a UCITS scheme that is a party to:

1. (1)

   a domestic UCITS merger.6

2. (2)

   [deleted]6

In this section references to:

1. (1)

   a UCITS scheme, a merging UCITS or to a receiving UCITS6 include the sub-fund of any such scheme.6

2. (2)

   [deleted]6

A domestic UCITS merger between two or more UCITS schemes6 is permissible provided:

1. (1)

   it is effected in accordance with the requirements of:

   1. (a)

      the UCITS Regulations 2011, which include the need for the FCA to have made a prior order approving the proposed merger (which may be made subject to (2)); and

   2. (b)

      this chapter; and

2. (2)

   in the case of a UCITS scheme that is:

   1. (a)

      a merging UCITS6, an extraordinary resolution is approved by unitholders in accordance with COLL 7.6.2 R (3) and (4) (Schemes of arrangement: requirements); and

   2. (b)

      a receiving UCITS6, the authorised fund manager3 and depositary3 of the AUT or ACS3 and the directors of the ICVC comply with COLL 7.6.2 R (5) and (6).

      33

1. (1)

   The authorised fund manager of a UCITS scheme that is a merging UCITS or a receiving UCITS in a proposed UCITS merger, must in conjunction with any other authorised fund manager 6draw up common draft terms of the proposed UCITS merger.

2. (2)

   The common draft terms in (1) must set out the following particulars:

   1. (a)

      6the UCITS involved;

   2. (b)

      the background to and the rationale for the proposed UCITS merger;

   3. (c)

      the expected impact of the proposed UCITS merger on the unitholders of both the merging UCITS and the receiving UCITS;

   4. (d)

      the criteria adopted for valuation of the assets and, where applicable, the liabilities of the UCITS on the date for calculating the exchange ratio as referred to in regulation 13 (Consequences of a merger) of the UCITS Regulations 2011;

   5. (e)

      the calculation method of the exchange ratio;

   6. (f)

      the planned effective date of the UCITS merger;

   7. (g)

      the rules applicable respectively to the transfer of assets and the exchange of units; and

   8. (h)

      in the case of a UCITS merger where the receiving UCITS or the sub-fund is being specially formed for the purpose, the instrument constituting the fund5 of the newly constituted receiving UCITS.

      5

1. (1)

   8This rule applies where:

   1. (a)

      a person who is or was at any time the authorised fund manager or (where relevant) the depositary of a merging UCITS transferred eligible CIS amounts as dormant assets to the dormant asset fund operator; and

   2. (b)

      such dormant assets are or were attributable to the merging UCITS.

2. (2)

   The authorised fund manager of the merging UCITS must ensure that under the terms of the proposed UCITS merger the records required under COLL 6.6.6R(5) and COLL 6.6.6R(6):

   1. (a)

      will be properly maintained;

   2. (b)

      will be updated, where appropriate; and

   3. (c)

      will remain accessible,

   so that the amount of any repayment claim can be readily calculated and verified by the appropriate person.

The depositary of a UCITS scheme that is either a merging UCITS or a receiving UCITS in a proposed UCITS merger must verify that the statements in the common draft terms of merger required under COLL 7.7.7 R (2)(a), (f) and (g), to the extent they relate to the scheme for which it is the depositary, conform with the provisions of the regulatory system and the instrument constituting the fund.5

1. (1)

   The authorised fund manager of a UCITS scheme that is a merging UCITS or a receiving UCITS in a proposed UCITS merger must ensure that a document containing appropriate and accurate information on the merger is provided to the unitholders of that scheme so as to enable them to:

   1. (a)

      make an informed judgment about the impact of the proposal on their investment;

   2. (b)

      exercise their rights under regulation 12 (Right of redemption) of the UCITS Regulations 2011; and

   3. (c)

      where applicable, exercise their right to vote on whether or not to approve the merger in accordance with COLL 7.7.4 R (2)(a) (UCITS mergers).

2. (2)

   Where a UCITS scheme is the merging UCITS in a domestic UCITS merger6 its authorised fund manager must provide the information document in (1):

   1. (a)

      to the unitholders of the merging UCITS and (in the case of a domestic UCITS merger) the receiving UCITS only after the FCA has given its approval to the UCITS merger proposal under regulation 9 of the UCITS Regulations 2011,6

   2. (b)

      [deleted]6

   6

   at least 30 days before the last date by which unitholders may request repurchase or redemption of their units or, where applicable, conversion without additional charge.

3. (3)

   The information document to be provided to the unitholders of the merging UCITS and the receiving UCITS under (1) must include the following:

   1. (a)

      the background to and the rationale for the proposed UCITS merger;

   2. (b)

      the possible impact of the proposed UCITS merger on unitholders, including but not limited to any material differences in respect of investment policy and strategy, costs, expected outcome, periodic reporting, possible dilution in performance, and, where relevant, a prominent warning to investors that their tax treatment may be changed following the UCITS merger;

   3. (c)

      any specific rights unitholders have in relation to the proposed UCITS merger, including but not limited to:

      1. (i)

         the right to obtain additional information;

      2. (ii)

         the right to obtain a copy of the report of the independent auditor or the depositary on request prepared for the purposes of regulation 11 of the UCITS Regulations 20116;

         4
      3. (iii)

         the right to request the repurchase or redemption or, where applicable, the conversion of their units without charge under regulation 12 of the UCITS Regulations 20116; and

      4. (iv)

         the last date for exercising that right;

   4. (d)

      the relevant procedural aspects and the planned effective date of the merger; and

   5. (e)

      a copy of the key investor information of the receiving UCITS.

4. (4)

   If a UCITS marketing notification in respect of the merging UCITS or receiving UCITS has been made, the information document referred to in (3) must be provided in the official language, or one of the official languages, of the relevant EEA State6 in which units of the UCITS scheme have been6 marketed, or in a language approved by the overseas regulator in that EEA State6. The authorised fund manager of the relevant UCITS scheme must provide an accurate translation of the information document.

1. (1)

   The information document that must be provided to unitholders under COLL 7.7.10 R (Information to be given to unitholders) by the authorised fund manager of a UCITS scheme must be written in a concise manner and in non-technical language.

2. (2)

   [deleted]6

3. (3)

   The information to be provided to the unitholders of the merging UCITS must meet the needs of investors who have no prior knowledge of the features of the receiving UCITS or of the manner of its operation, drawing their attention to the key investor information of the receiving UCITS and emphasising the desirability of reading it.

4. (4)

   The information to be provided to the unitholders of the receiving UCITS must focus on the operation of the merger and its potential impact on the receiving UCITS.

1. (1)

   The6 information document that the 6 authorised fund manager of a merging UCITS6 must provide to its unitholders under COLL 7.7.10 R (3)(b) must also include:

   1. (a)

      details of any differences in the rights of unitholders of the merging UCITS before and after the proposed UCITS merger takes effect;

   2. (b)

      if the key investor information of the merging UCITS and the receiving UCITS show synthetic risk and reward indicators in different categories, or identify different material risks in the accompanying narrative, a comparison of those differences;

   3. (c)

      a comparison of all charges, fees and expenses for both schemes, based on the amounts disclosed in their respective key investor information;

   4. (d)

      if the merging UCITS applies a performance-related fee, an explanation of how it will be applied up to the point at which the merger becomes effective;

   5. (e)

      if the receiving UCITS applies a performance-related fee, how it will subsequently be applied to ensure fair treatment of those unitholders who previously held units in the merging UCITS;

   6. (f)

      in cases where costs associated with the preparation and the completion of the merger may be charged to either the merging or the receiving UCITS or any of their unitholders, details of how those costs are to be allocated; and

   7. (g)

      an explanation of whether the authorised fund manager of the merging UCITS itself intends to undertake any rebalancing of the portfolio before the merger takes effect.

2. (2)

   The information to be provided under COLL 7.7.10 R (3)(c) must also include:

   1. (a)

      details of how any accrued income in each scheme is to be treated; and

   2. (b)

      an indication of how the report of the independent auditor or the depositary may be obtained.

3. (3)

   The information to be provided in accordance with COLL 7.7.10 R (3)(d) must include:

   1. (a)

      where required by COLL 7.6.2 R (Schemes of arrangement: requirements), the procedure by which unitholders will be asked to approve the merger proposal, and what arrangements will be made to inform them of the outcome;

   2. (b)

      the details of any intended suspension of dealing in units to enable the merger to be carried out efficiently; and

   3. (c)

      when the merger will take effect in accordance with regulation 13 of the UCITS Regulations 2011.

4. (4)

   The information to be provided to the unitholders of the merging UCITS must include:

   1. (a)

      the period during which those unitholders will be able to continue making subscriptions and requesting redemptions of units in the scheme;

   2. (b)

      the time when those unitholders not making use of their rights granted under regulation 12 of the UCITS Regulations 2011, within the relevant time limit, will be able to exercise their rights as unitholders of the receiving UCITS; and

   3. (c)

      an explanation that once the merger proposal is approved by the resolution of a general meeting of the unitholders of the merging UCITS, those unitholders who vote against the proposal or who do not vote at all, and who do not make use of their rights granted under regulation 12 of the UCITS Regulations 2011 within the relevant time limit, will become unitholders of the receiving UCITS.

5. (5)

   If a summary of the key points of the merger proposal is provided at the beginning of the document providing information on the merger proposal, it must cross-refer to the parts of the document where further information is provided.

1. (1)

   The6 information that the 6 authorised fund manager of a receiving UCITS6 must provide to its unitholders under COLL 7.7.10 R (3)(b) must also include an explanation of whether the authorised fund manager expects the merger to have any material effect on the portfolio of the receiving UCITS, and whether it intends to undertake any rebalancing of the portfolio either before or after the merger takes effect.

2. (2)

   In addition to (1), the authorised fund manager of the receiving UCITS must provide to its unitholders the information referred to in COLL 7.7.13 R (2), (3), and (5).

The authorised fund manager of a merging UCITS must provide an up-to-date version of the key investor information of the receiving UCITS to its existing unitholders.

Between the date when the information required under COLL 7.7.10 R is provided to unitholders and the date when the merger takes effect, the information document and the up-to-date key investor information of the receiving UCITS must be provided to each person who purchases or subscribes for units in either the merging UCITS or the receiving UCITS or who asks to receive copies of the instrument constituting the fund,5prospectus or key investor information of either scheme.

The authorised fund manager of the merging UCITS and the receiving UCITS must provide the information required by COLL 7.7.10 R to COLL 7.7.14 R to unitholders in a durable medium.

The authorised fund manager of a UCITS scheme that is either a merging UCITS or a receiving UCITS must ensure that any legal, advisory, administrative or any other costs associated with the preparation and completion of the UCITS merger are not charged to either scheme or to any of its unitholders.

The authorised fund manager of 6the receiving UCITS in a domestic UCITS merger6 must confirm in writing to the depositary of the UCITS scheme and the FCA that the merger transfer is complete.

1. (1)

   1Subject to (2), this section applies to:

   1. (a)

      the authorised fund manager of an AUT, ACS or an ICVC;

   2. (b)

      any other director of an ICVC;

   3. (c)

      the depositary of an AUT, ACS or an ICVC; and

   4. (d)

      an ICVC,

   which is a UCITS scheme or a non-UCITS retail scheme.

2. (2)

   This section does not apply to a scheme which is a regulated money market fund.

1. (1)

   1If all the conditions in (2) are satisfied, the authorised fund manager of a scheme holding affected investments in the scheme property may, after consulting with the depositary, create a side pocket class.

2. (2)

   The conditions are:

   1. (a)

      The authorised fund manager has determined that the affected investment in (1) is:

      1. (i)

         a sanctioned investment;

      2. (ii)

         a unit in a collective investment scheme or a share in an AIF within the meaning of paragraph (2)(b)(vii) of the definition of ‘affected investment’; or

      3. (iii)

         to the extent not in (i) or (ii), an affected investment for which there are no accurate, reliable and regular prices.

   2. (b)

      The authorised fund manager has determined that:

      1. (i)

         creating the side pocket class will protect the interests of unitholders;

      2. (ii)

         the rights of any unit in a side pocket class will not be unfairly prejudicial to the interests of unitholders generally or to the unitholders of any other class of units in the scheme;

      3. (iii)

         the issue of units in the side pocket class will be in the best interests of unitholders, the authorised fund and the integrity of the market; and

      4. (iv)

         all the unitholders in the authorised fund will be treated fairly.

   3. (c)

      The instrument constituting the fund and the prospectus:

      1. (i)

         provide for the issue of units in a side pocket class; and

      2. (ii)

         set out the terms on which that class will operate,

      in accordance with the rules in, and applied by, this section (see in particular COLL 7.8.13R (Modified application of COLL 4.2 (Pre-sale notifications)).

3. (3)

   Before making the determination in (2)(b), the authorised fund manager must consider:

   1. (a)

      at least each of the matters specified in COLL 7 Annex 1 (Matters to be considered by the authorised fund manager before creating a side pocket class); and

   2. (b)

      whether it would be in the interest of all the unitholders in the authorised fund to suspend dealings in units in accordance with COLL 7.2.1R (Requirement) instead of creating a side pocket class.

4. (4)
   1. (a)

      The decision to create a side pocket class pursuant to (1) must be taken by the authorised fund manager’s governing body.

   2. (b)

      The authorised fund manager must make a record of the governing body’s decision and the reasons for it.

1. (1)

   1The authorised fund manager may:

   1. (a)

      issue units in a new class to unitholders in the authorised fund; or

   2. (b)

      convert a unit in an existing class into units in one or more new classes.

2. (2)

   Where the authorised fund manager has taken an action pursuant to (1)(a) or (1)(b), it must determine the price of units of each existing and new class by reference to a valuation of the portions of capital property and income property represented by either:

   1. (a)

      one or more affected investments held in the scheme property; or

   2. (b)

      the scheme property excluding some or any such affected investments,

   as provided for in the instrument constituting the fund and the prospectus.

3. (3)

   A new class within (2)(a) is referred to as a ‘side pocket class’.

4. (4)

   The authorised fund manager must determine the date and time on which the units in the new class are to be issued.

5. (5)

   On the date and time specified in (4):

   1. (a)

      the combined net asset value of all units of the new class and all units of the existing class; or

   2. (b)

      the combined net asset value of any new classes of unit issued by conversion from an existing class of unit,

   must equal the net asset value of all units of the class or classes that existed immediately before the specified date and time.

6. (6)

   On the date and time specified in (4), the number of units held by a unitholder in a new class must be proportionate to the number of units held by them in an existing class immediately before such date and time.

1The prospectus of the authorised fund must limit the issue of units in a side pocket class after the date and time specified in COLL 7.8.5R(4) (see COLL 7.8.30R(5) (Modified application of COLL 6.2 (Dealing)).

1The rules and guidance in COLL 3 (Constitution) apply to an authorised fund with a side pocket class subject to the modifications specified in COLL 7.8.11R.

1In COLL 3.3.5R (Rights of unit classes), paragraphs (2) and (3) do not prohibit the issue of units in a side pocket class.

1The rules and guidance in COLL 4 (Investor relations) apply to an authorised fund with a side pocket class, subject to:

1. (1)

   the modifications in COLL 7.8.13R to COLL 7.8.21R; and

2. (2)

   the additional requirements in COLL 7.8.22R and COLL 7.8.24R.

1In relation to a side pocket class, the information required to be included in the prospectus under COLL 4.2.5R (Table: contents of prospectus) must cover at least the additional matters set out in (1) to (4).

1. (1)

   In COLL 4.2.5R(5) (Characteristics of units):

   1. (a)

      a general description of the affected investments to be allocated to the side pocket class (or side pocket classes);

   2. (b)

      an explanation of how the scheme property (both capital property and income property) will be allocated between the side pocket class (or side pocket classes) and other classes at the outset and on an ongoing basis; and

   3. (c)

      information which explains:

      1. (i)

         that the authorised fund manager will seek to dispose of all the affected investments over time, on terms that it judges to be in the best interests of unitholders; and

      2. (ii)

         that the units in the side pocket class (or side pocket classes) will be cancelled when this has been done, indicating where possible what options may be offered to unitholders for exiting the side pocket class (or side pocket classes) under the process.

2. (2)

   In COLL 4.2.5R(16) (Valuation and pricing of scheme property), the frequency at which:

   1. (a)

      affected investments allocated to the side pocket class will be valued; and

   2. (b)

      the prices of units in the side pocket class will be calculated, where these differ from other classes of the scheme.

3. (3)

   In COLL 4.2.5R(17) (Dealing):

   1. (a)

      that the issue of units in the side pocket class is limited, and the circumstances and conditions for issuing them;

   2. (b)

      a statement of when the dealing days for the side pocket class will be;

   3. (c)

      details of any cut-off point for the receipt of dealing instructions prior to the valuation point for the relevant dealing day; and

   4. (d)

      if applicable, details of:

      1. (i)

         any special arrangements put in place for redemptions of units in the side pocket class, including any extended time period for settlement and any facility to pay the proceeds of redemption to a person other than the unitholder;

      2. (ii)

         whether redemption proceeds can be reinvested in units of other classes of the scheme or in units of other schemes; and

      3. (iii)

         any facility for a unitholder to dispose of an interest in units by transferring title to them to another person (other than by operation of law), as a donation or for financial consideration.

4. (4)

   In COLL 4.2.5R(27)(b) (Additional information):

   1. (a)

      an explanation that there is no certainty that any affected investment will ever recover its value to a significant extent, or at all, and that the authorised fund manager may be unable to realise any material value for unitholders in respect of units held in the side pocket class;

   2. (b)

      if applicable, that the costs and charges for operating the side pocket class may significantly erode the returns from any realisable value from the affected investments over time; and

   3. (c)

      whether the authorised fund manager has undertaken to bear all the costs and charges associated with operating the side pocket class from its own resources and, if not, a statement explaining:

      1. (i)

         the risk that costs and charges might cause the cash position of the side pocket class to become overdrawn;

      2. (ii)

         that a liability arising as a result of (i) would be accounted for against the scheme property allocated to the other classes in the scheme; and

      3. (iii)

         the steps the authorised fund manager would take to ensure unitholders in other classes do not bear such a liability.

1The authorised fund manager need not treat the creation of a side pocket class as a fundamental change for the purposes of COLL 4.3.4R (Fundamental change requiring prior approval by meeting) provided the authorised fund manager is satisfied on reasonable grounds that the foreseeable costs of this course of action are not disproportionate to the benefits.

1If the authorised fund manager considers that the creation of a side pocket class constitutes a significant change, the authorised fund manager:

1. (1)

   may, but need not, give prior written notice to unitholders under COLL 4.3.6R(1) (Significant change requiring pre-event notification); and

2. (2)

   is not required to comply with COLL 4.3.6R(3).

1. (1)

   1COLL 4.4.8R (Voting rights) applies to an authorised fund with a side pocket class with the modifications set out in (2) and (3) below.

2. (2)

   Before a resolution is put to a vote at a unitholder meeting, it must be made clear whether the resolution relates to or affects:

   1. (a)

      all the classes of unit in the authorised fund;

   2. (b)

      those classes of unit in the authorised fund excluding the side pocket class; or

   3. (c)

      only the side pocket class.

3. (3)

   On a poll, the votes of a unitholder may only be counted to the extent that the unitholder’s voting rights are attached to units in the class or classes to which the resolution relates or which the resolution affects in accordance with (2).

1The rules in COLL 4.7.2R (Key investor information) do not require an authorised fund manager to draw up a key investor information document or a NURS-KII document in relation to a side pocket class.

1The authorised fund manager must provide a written notification to unitholders which meets the requirements of (1) to (3).

1. (1)

   The notification must be provided to unitholders in a timely way, either shortly before the side pocket class is created or as soon as practicable afterwards.

2. (2)

   If the unitholder has a financial adviser, the requirement to provide the notification in (1) may be satisfied by sending it to the financial adviser.

3. (3)

   The notification must explain in a comprehensive manner:

   1. (a)

      the reasons for the authorised fund manager’s decision to create a side pocket class, including the expected benefits and the costs and charges;

   2. (b)

      the effect on unitholders’ ability to exercise their rights;

   3. (c)

      if applicable, the basis on which the authorised fund manager has satisfied itself as to the cost impact of its decision under COLL 7.8.14R;

   4. (d)

      a description of the main features of the side pocket class;

   5. (e)

      practical information that unitholders will need to understand about the changes to their investment in the authorised fund; and

   6. (f)

      each of the matters specified in COLL 7.8.13R(4) (Modified application of COLL 4.2 (Pre-sale notifications)).

4. (4)

   The notification must:

   1. (a)

      be written in clear and plain language;

   2. (b)

      be provided in a durable medium; and

   3. (c)

      be accessible by existing and prospective unitholders (e.g. by publishing a copy in a prominent location on the authorised fund manager’s website).

1The authorised fund manager must, as soon as reasonably practicable after the date on which the side pocket class is created, send a written statement to each unitholder confirming the number and type of units of each class the unitholder holds in the authorised fund as a result of the creation of the side pocket class.

1. (1)

   1COLL 5 (Investment and borrowing powers) applies to the side pocket property, subject to the modifications in this rule.

2. (2)

   Subject to (4) to (6), in the case of a UCITS scheme, the authorised fund manager must comply with as much of COLL 5.1 (Introduction), COLL 5.2 (General investment powers and limits for UCITS schemes) and COLL 5.3 (Derivative exposure) as is practicable having regard to the limited purpose for which the side pocket class was created.

3. (3)

   Subject to (4) to (6), in the case of a non-UCITS retail scheme, the authorised fund manager must comply with as much of COLL 5.1 (Introduction) and COLL 5.6 (Investment powers and borrowing limits for non-UCITS retail schemes) as is practicable having regard to the limited purpose for which the side pocket class was created.

4. (4)

   The authorised fund manager may only enter into a derivative or a forward transaction which:

   1. (a)

      is a ‘class hedging transaction’ within the meaning of COLL 3.3.5R(4)(d); and

   2. (b)

      falls within COLL 3.3.5AR (Hedging of unit classes) (see also COLL 3.3.5BG (Guidance on hedging of unit classes)),

   and all provisions of COLL 5 relevant to such transactions apply.

5. (5)

   COLL 5.5.3R (Cash and near cash) applies, except that references to the ‘investment objectives’ of the scheme should be read as references to the objective in COLL 7.8.33R(2)(b) (Modified application of COLL 6.6 (Operating duties and responsibilities)).

6. (6)

   The following rules apply:

   1. (a)

      COLL 5.5.4R (General power to borrow);

   2. (b)

      COLL 5.5.5R (Borrowing limits);

   3. (c)

      COLL 5.5.6R (Restrictions on lending of money);

   4. (d)

      COLL 5.5.7R (Restrictions on lending of property other than money);

   5. (e)

      COLL 5.5.8R (General power to accept or underwrite placings); and

   6. (f)

      COLL 5.5.9R (Guarantees and indemnities).

1. (1)

   1This rule applies to the authorised fund manager and depositary of an authorised fund with a side pocket class.

2. (2)

   For the purpose of interpreting references to the ‘scheme property’ in COLL 5 in relation to the part of the scheme which is not a ‘side pocket’, the authorised fund manager and depositary may disregard the side pocket property.

3. (3)

   The reference to a ‘side pocket’ in (2) is a reference to a part of the scheme which is represented by units in a side pocket class.

1The rules and guidance in COLL 6 (Operating duties and responsibilities) apply in relation to an authorised fund with a side pocket class subject to the modifications specified in COLL 7.8.30R (Modified application of COLL 6.2 (Dealing)) to COLL 7.8.36R (Modified application of COLL 6.7 (Payments)).

1. (1)

   1COLL 6.2 (Dealing) applies to a side pocket class subject to the modifications specified in this rule.

2. (2)

   For the purposes of COLL 6.2.8R (Issue and cancellation of units through an authorised fund manager), if the authorised fund manager redeems a unit in a side pocket class from a unitholder, the authorised fund manager must immediately cancel the unit or, in relation to an AUT or ACS, instruct the depositary to do so.

3. (3)
   1. (a)

      Subject to (b) and (c), the requirement in COLL 6.2.13R (Payment for units issued) may be satisfied by the authorised fund manager allocating such proportion of the scheme property to that class as the authorised fund manager may determine.

   2. (b)

      Before making the allocation of scheme property in (a), the authorised fund manager must consult the depositary and take its views into account.

   3. (c)

      After being consulted under (b), the depositary must consider the proposed allocation of the scheme property and inform the authorised fund manager if it considers that the allocation is not appropriate, having regard to the purpose of the side pocket class.

4. (4)

   In COLL 6.2.16R (Sale and redemption), in relation to the redemption of units in a side pocket class:

   1. (a)

      paragraphs (4) and (5) apply unless the prospectus makes alternative provision for how unitholders may be paid; and

   2. (b)

      paragraphs (5A), (6) and (7) do not apply.

5. (5)

   The authorised fund manager must apply COLL 6.2.18R (Limited issue) as follows:

   1. (a)

      COLL 6.2.18R(1) applies to the issue of units in a side pocket class;

   2. (b)

      COLL 6.2.18R(2) does not apply to a side pocket class, and the authorised fund manager must not provide for the further issue of units in the same class; and

   3. (c)

      COLL 6.2.18R(3) applies where a scheme has a side pocket class.

1. (1)

   1COLL 6.3 (Valuation and pricing) applies in relation to a side pocket class subject to the modifications specified in this rule (see also COLL 7.8.32G).

2. (2)

   For the purpose of COLL 6.3.5R (Price of a unit), the authorised fund manager must ensure that the price of a unit in a side pocket class is calculated:

   1. (a)

      by reference to the net value of the side pocket property; and

   2. (b)

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

3. (3)

   Notwithstanding COLL 6.3.11R (Publication of prices), the authorised fund manager must make public in an appropriate manner the price of a unit in the side pocket class after every valuation point (see COLL 6.3.4R (Valuation points)), even if the authorised fund manager is not holding itself out to deal in such units at that valuation point.

1. (1)

   1COLL 6.6 (Operating duties and responsibilities) applies to the authorised fund manager and depositary of an authorised fund with a side pocket class, subject to the modifications specified in this rule and COLL 7.8.34R (Modified application of the assessment of value rules).

2. (2)

   For the purposes of COLL 6.6.3R(3)(a) (Functions of the authorised fund manager), the authorised fund manager must make decisions as to the constituents of the scheme property:

   1. (a)

      in accordance with the investment objectives and policy of the scheme, but may disregard any affected investment in the side pocket property; and

   2. (b)

      with a view to disposing of those affected investments over time as and when the authorised fund manager considers this can be done in the best interests of unitholders.

3. (3)

   For the purposes of COLL 6.6.4R(1) (General duties of the depositary), the depositary must take reasonable care to ensure that the scheme is managed by the authorised fund manager in accordance with the matters specified in COLL 6.6.4R(1)(a) to (e) as modified by the rules in this section, and COLL 6.6.4R(2) is to be read accordingly.

4. (4)
   1. (a)

      The duty in COLL 6.6.14R(2) (Duties of the depositary and the authorised fund manager: investment and borrowing powers) requiring the authorised fund manager to rectify at its own expense a breach of COLL 5 (Investment and borrowing powers), or any provision of the instrument constituting the fund or the prospectus, does not apply to the extent that:

      1. (i)

         the breach relates to affected investments in the side pocket property; and

      2. (ii)

         the depositary is satisfied that it is not practicable for the authorised fund manager to comply with the relevant rule in COLL 5, the provision of the instrument constituting the fund or the prospectus.

   2. (b)

      COLL 6.6.14R(4), (5) and (6) do not apply to the extent that the breach falls within (a) above.

1When conducting an assessment of value for the purposes of COLL 6.6.20R (Assessment of value) in relation to a scheme that has a side pocket class, the authorised fund manager:

1. (1)

   must consider each of the matters included in COLL 6.6.21R (Table: minimum considerations – assessment of value) in relation to the scheme as a whole, including the side pocket class, but may adopt a proportionate approach to the assessment as it applies specifically to the side pocket class;

2. (2)

   in relation to the side pocket class, need not consider a matter included in COLL 6.6.21R if, in all the circumstances, it is not relevant to that class;

3. (3)

   must consider whether, to the extent that payments are being made out of the scheme property attributable to the side pocket class or are being accrued for that purpose, those payments:

   1. (a)

      are justified in terms of the value delivered to unitholders in the side pocket class; and

   2. (b)

      are not prejudicial to the interests of unitholders of other classes; and

4. (4)

   must consider whether it remains in unitholders’ best interests for the side pocket class to continue in operation.