COLLG 5.1 Introduction

1. (1)

   COLL is a specialist sourcebook that sits in Block 6 (specialist sourcebooks) of the FSA Handbook. It provides the detailed framework within which authorised funds operate and includes requirements relating to what certain overseas schemes must provide by way of facilities in order to become recognised schemes.

2. (2)

   The material in chapters 2 to 8 of COLL forms a major part of the product regulation regime for ICVCs and AUTs, supplementing the material in the OEIC Regulations (for ICVCs) and chapter III of Part XVII of the Act (for AUTs) and giving effect to the UCITS Directive. This is shown in the diagram at COLLG 5.1.8 G.

3. (3)

   The sourcebook is designed as a two-tier approach, depending on whether the authorised fund is capable of being promoted to the general public (retail schemes) or is sold to sophisticated investors (qualified investor schemes).

Some parts of COLL relate only to ICVCs and some parts only to AUTs. However, most of COLLcovers both ICVCs and AUTs, so some of the defined terms included relate equally to both ICVCs and AUTs (together defined as "authorised funds"). Other key examples of these terms are:

1. (1)

   "authorised fund manager", which refers to both the ACD of an ICVC and the manager of an AUT (the term "ACD" is used only for an ICVC and the term "manager" is used only for an AUT);

2. (2)

   "depositary", which when used for an authorised fund refers to both the depositary of an ICVC and the trustee of an AUT;

3. (3)

   "unit", which according to the context can refer to a "share" in an ICVC, a "unit" in an AUT, and the rights or interests of participants in other types of collective investment scheme.

1. (-1)

   Retail schemes must be either UCITS schemes or non-UCITS retail schemes. A non-UCITS retail scheme is an authorised fund capable of being promoted to retail investors, and which does not fall within the scope of the UCITS Directive. The contents of COLL in relation to retail schemes are outlined below.

2. (1)

   COLL 2 (Authorised fund applications) sets out the initial application requirements for authorised funds and the rules concerning notifications which need to be made to the FSA in its role as registrar of ICVCs.

3. (2)

   COLL 3 (Constitution) includes requirements regarding the contents of the instrument constituting the scheme for authorised funds that are retail schemes and other matters relating to their constitutional features, such as classes of units.

4. (3)

   COLL 4 (Investor relations) includes consumer-facing material relating to authorised funds that are retail schemes. So, material on the prospectus, simplified prospectus and reports and accounts is included in that chapter, together with rules relating to when Unitholders must be notified of events and when meetings of Unitholders are required. (The simplified prospectus is not required for a non-UCITS retail scheme; the equivalent disclosure requirements for such schemes are set out in COBS.)

5. (4)

   COLL 5 (Investment and borrowing powers) requires authorised funds that are retail schemes, their authorised fund managers and depositaries, to comply with rules on the investment composition of the scheme. It is divided up as follows:

   1. (a)

      COLL 5.1 to COLL 5.3 implement the UCITS Directive requirements which require quality, spread and counterparty limits to be imposed on the assets of funds within the scope of the Directive (as set out in COLLG 2.1.4 G);

   2. (b)

      COLL 5.4 provides ruleson stock lending;

   3. (c)

      COLL 5.5 provides rules on holding cash and near cash, borrowing and lending; and

   4. (d)

      COLL 5.6 provides risk-spreading rules for non-UCITS retail schemes.

6. (5)

   COLL 6 (Operating duties and responsibilities) contains rules on the day-to-day operation of authorised funds that are retail schemes. In particular:

   1. (a)

      COLL 6.2 sets out rules relating to dealing in units, including the issue and cancellation of units;

   2. (b)

      COLL 6.3 sets out how authorised funds must be valued and prices of units calculated and published;

   3. (c)

      COLL 6.4 provides requirements relating to the register of Unitholders in an AUT (see the OEIC Regulations for ICVCs) and any plan register;

   4. (d)

      COLL 6.5 sets out rules relating to the appointment and replacement of the authorised fund manager and depositary;

   5. (e)

      COLL 6.6 imposes certain powers and duties on the authorised fund manager and the depositary, as described in COLLG 1.1.6 G;

   6. (f)

      COLL 6.7 lays down conditions concerning charges and expenses that may be taken when investors buy or sell units, and what payments may be made out of the scheme property;

   7. (g)

      COLL 6.8 provides rules and guidance on the calculation and distribution of income; and

   8. (h)

      COLL 6.9 gives guidance relating to ongoing obligations imposed by the Act.

7. (6)

   COLL 7 (Suspension of dealings and termination of authorised funds) includes the requirements for suspension of dealing in the units of authorised funds and how they may be wound up (including termination of sub-funds).

8. (7)

   [deleted]

9. (8)

   [deleted]

10. (9)

    [deleted]

1. (1)

   If subscription to a scheme is to be restricted to certain prescribed categories of investor (principally professional clients and sophisticated investors), the FSA considers that not all the detailed product rule protections that apply to retail schemes are necessary. So, COLL provides a framework of rules for such a scheme, called a "qualified investor scheme", which satisfies the essential features of an authorised product and so distinguishes it from unregulated collective investment schemes, but otherwise allows more flexibility in its operation compared to the framework for retail schemes.

2. (2)

   COLL 2 is relevant for achieving authorisation. COLL 8 provides the framework mentioned in (1) and, compared to retail schemes, places more emphasis on the contents of the prospectus to describe the operating procedures.

For collective investment schemes constituted outside the United Kingdom (referred to in COLLG 3.1.9 G to COLLG 3.1.12 G), COLL 9 brings together the material relating to the admission to marketing of such schemes in the United Kingdom, supplementing material in chapter V of Part XVII of the Act (Recognised overseas schemes).

1. (1)

   There are a number of other parts of the FSA's Handbook that are particularly relevant to those having a responsibility in relation to authorised funds. These include:

   1. (a)

      PRIN (The Principles for Businesses);

   2. (b)

      SYSC (Senior Management Arrangements, Systems and Controls);

   3. (c)

      APER (The Statements of Principle and Code of Practice for Approved Persons);

   4. (d)

      FEES (the Fees manual), which includes details of the application and periodic fees payable for authorised funds and recognised schemes;

   5. (e)

      COBS (the Conduct of Business sourcebook);

   6. (f)

      CASS (the Client Assets sourcebook);

   7. (g)

      SUP (the Supervision manual); and

   8. (h)

      DEPP (the Decision Procedure and Penalties manual).

2. (2)

   UPRU (The Prudential sourcebook for UCITS firms) sets out the financial resources requirements for an authorised fund manager of a UCITS scheme where that manager is undertaking only scheme management activity and ancillary activities. BIPRU (The Prudential sourcebook for Banks, Building Socieities and Investment Firms) applies equivalent requirements to the authorised fund manager of a UCITS scheme where that manager is a UCITS investment firm. Both sourcebooks include certain requirements of the UCITS Directive.

3. (3)

   In addition to the listed sourcebooks, Regulatory Guides may also be of relevance. For example EG 14 sets out the FSA's policies and procedures concerning the use of its enforcement powers in relation to regulated collective investment schemes.

This diagram provides a general description of the products covered by COLL and the relevant legislation and sections of COLL.