COLLG 1.1 Introduction

1. (1)

   This Collective Investment Scheme Information Guide (COLLG) contains some key facts on the regulation of collective investment schemes in the United Kingdom. It will be of interest primarily to those who wish to gain a general understanding of the regulatory regime governing these schemes.

2. (2)

   This guide is intended to complement the rules and guidance in the Collective Investment Schemes sourcebook (COLL). It also explains how an authorised firm should go about applying for authorisation of a scheme under the Act and the OEIC Regulations.

3. (3)

   This guide does not contain information on unregulated schemes. Such schemes cannot be marketed to the general public and are otherwise restricted in their promotion.

4. (4)

   The material in this guide is intended only as a summary of a number of significant legal provisions affecting authorised collective investment schemes. It does not constitute guidance under sections 157 and 158 of the Act and does not have the status of the guidance in the Handbook. This also means that GEN 2.2 (Interpreting the Handbook) does not apply. If you have any doubt about any legal provision you should seek appropriate legal advice.

5. (5)

   This guide italicises words that are defined in the Glossary that forms part of the Handbook. For the full definition of the term, the reader should consult the Glossary.

6. (6)

   The Overview is current as of January 2009. The Overview does not remove the need for firms to keep up-to-date with regulatory developments and to consider the potential impact on business of proposed changes - for example, the regulatory framework of changes required by further European initiatives.

1. (1)

   There are three broad levels of regulation of collective investment schemes in the United Kingdom. These can be summarised as European regulation, UK legislation and regulation by the FSA. They should be viewed as a hierarchy of rules that, at each level, deals with more specific aspects of collective investment scheme regulation.

2. (2)

   European collective investment scheme product regulation was introduced in 1985 by the UCITS Directive and has been updated on several occasions by amendments to that Directive. If a scheme is established and authorised in the United Kingdom and complies with the UCITS Directive's provisions, it is a UCITS scheme and can be promoted throughout the EEA. However not all regulated collective investment schemes are UCITS schemes. COLLG 2 provides more detail on the scope and contents of the UCITS Directive.

3. (3)

   The main UK legislation is the Act (under which AUTs operate) and the OEIC Regulations (under which ICVCs operate). COLLG 3 provides details on the FSA's responsibilities under the Act; how a firm may go about applying for authorisation of a unit trust scheme or recognition of an overseas scheme; and what notifications are required to the FSA in terms of changes to those schemes. COLLG 4 provides details on the FSA's responsibilities under the OEIC Regulations; how a firm may go about applying for authorisation of an ICVC; and what notifications are required to the FSA in respect of changes to the ICVC.

4. (4)

   The Handbook includes a specialist sourcebook COLL, which is structured in a way that gives rules and guidance on specific aspects of AUT and ICVC regulation. COLLG 5 provides details of the structure of COLL.

Under section 238 of the Act (Restrictions on promotion), only certain kinds of collective investment schemes may be promoted to the public by authorised persons. These are:

1. (1)

   authorised funds, which are authorised unit trust schemes (AUTs) or ICVCs constituted in the United Kingdom as described in more detail below; and

2. (2)

   recognised schemes, which are collective investment schemes constituted outside the United Kingdom and recognised by the FSA under:

   1. (a)

      section 264 of the Act (Schemes constituted in other EEA States) - these are schemes that qualify under the UCITS Directive; or

   2. (b)

      section 270 of the Act (Schemes authorised in designated countries or territories); and

   3. (c)

      section 272 of the Act (Individually recognised overseas schemes).

1. (1)

   An ICVC is the UK-based form of an open-ended investment company as defined by section 236 of the Act (Open-ended investment companies). Section 262 of the Act (Open-ended investment companies) empowers the Treasury to make provisions relating to open-ended investment companies (the OEIC Regulations) which enable the establishment of ICVCs. Paragraph 1 (3) of Schedule 5 to the Act states that an authorised open-ended investment company is an authorised person. So, an ICVC is an authorised person. The FSA may authorise an ICVC by making an authorisation order under regulation 14 of the OEIC Regulations.

2. (2)

   An ICVC is constituted by an instrument of incorporation. Regulation 15(4) of the OEIC Regulations requires an ICVC to have at least one director. Where there is only one director, that director must be a body corporate with a permission to act as a sole director of an ICVC. COLL refers to this person as an authorised corporate director ('ACD'). A depositary must take responsibility for the safekeeping of the scheme property. The depositary must be independent of the ICVC and each of its directors.

3. (3)

   The directors and the depositary are required to comply with the OEIC Regulations and the rules in COLL and, in accordance with paragraph 6(1) of Schedule 2 to the OEIC Regulations, are also bound by the provisions of the instrument of incorporation.

1. (1)

   Under section 237 of the Act, (Other definitions), a unit trust scheme is a collective investment scheme under which the property is held on trust for the participants by the trustee. An AUT is constituted by a trust deed, entered into by the manager and trustee. Under section 243(4) of the Act (Authorisation orders) they must be independent of each other and COLL 6.9 (Ongoing responsibilities) provides guidance on what the FSA considers independence to mean. The FSA may authorise an AUT by making an authorisation order.

1. (1)

   COLL 6.6 includes rules:

   1. (a)

      relating to the authorised fund manager's duties in respect of the management of the scheme;

   2. (b)

      requiring the depositary to check that the authorised fund manager carries out certain of its functions in accordance with the applicable rules in COLL;

   3. (c)

      relating to the depositary's duties in respect of the safe custody of the scheme property;

   4. (d)

      requiring firms to avoid conflicts of interest that could prejudice investors; and

   5. (e)

      to provide safeguards when certain of the functions of the directors or depositary of an ICVC, or the manager or trustee of an AUT, are carried out by a third party.

2. (2)

   [deleted]

3. (3)

   The directors (including the ACD) and the depositary of an ICVC, and the manager and trustee of an AUT, may each to the extent permitted by COLL, retain the services of others to assist them to perform their respective functions.

4. (4)

   COLL makes provision for how the authorised fund manager and the depositary may retire from their role and be replaced. It also provides for how an ICVC should be managed where there is a vacancy in the position of an ACD, and where there are no directors.

1. (1)

   The following constitute regulated activities:

   1. (a)

      establishing, operating or winding up a collective investment scheme;

   2. (b)

      acting as trustee of an authorised unit trust scheme;

   3. (c)

      acting as depositary of an open-ended investment company; and

   4. (d)

      acting as sole director of an open-ended investment company.

2. (2)

   No person may carry on a regulated activity by way of business in the United Kingdom, or purport to do so, unless he is an authorised person (or an exempt person). This prohibition is referred to in the Act as the general prohibition. Guidance for persons considering carrying on regulated activities in the United Kingdom can be found in PERG. The FSA website "How do I get authorised" gives guidance on how to apply to the FSA for a Part IV permission. This authorisation is different to the authorisation of an ICVC or of an AUT, as referred to in COLLG 1.1.4G and COLLG 1.1.5 Grespectively.

3. (3)

   The FSA maintains a public register of persons who have a permission to carry on a regulated activity. The register also contains details of all regulated collective investment schemes. It can be consulted on the FSA's website at www.fsa.gov.uk/pages/register.