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 New Collective Investment Schemes sourcebook (COLL) and 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 as a summary only 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 from your legal adviser.

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 May 2004. 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, HM Government and 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 this has been updated by amendments to the Directive which came into force in February 2004. If a UKscheme complies with the Directive's provisions (a UCITS scheme) it 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 Government 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 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 constituted in the United Kingdom as described in more detail below; and

2. (2)

   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;

   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.

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.A person who is a sole director of an ICVC must be an authorised corporate director ('ACD'). A depositary must take responsibility for the safekeeping of the schemeproperty and the ACD and depositary must be independent of each other. Under regulation 14 of the OEIC Regulations the FSA may authorise an ICVC by making an authorisation order.

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 consider independence means. The FSA may authorise an AUT by making an authorisation order.

1. (1)

   The OEIC Regulations include requirements that the business of an ICVC be managed:

   1. (a)

      in accordance with the FSA rules; and

   2. (b)

      where there is only one director, that director must be a body corporate with the permission to act as a director of an ICVC.

2. (2)

   COLL refers to this person as an ACD.

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 this sourcebook;

   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)

   For an ICVC, the depositary and the directors are required to comply with the OEIC Regulations and the rules in this sourcebook and, in accordance with paragraph 6(1) of Schedule 2 to the OEIC Regulations, are also bound by the provisions of the instrument constituting the scheme.

3. (3)

   The directors (including the ACD) and the depositary of an ICVC may each to the extent permitted by this section, retain the services of others to assist them to perform their respective functions. Where there is a vacancy in the position of an ACD, the directors should appoint one or more authorised persons to assist them in performing the functions that the ACD would otherwise be required to perform. Where there are no directors, the depositary's powers are extended, temporarily, to enable it to manage the scheme property.