COLLG 5.1 Introduction

1. (1)

   COLL is a specialist sourcebook that sits in Block 5 (specialist sourcebooks) of the FSAHandbook. 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 recognised schemes.

2. (2)

   Until 13 February 2007, COLL is optional for any person seeking authorisation of a scheme, as they may apply for authorisation of the scheme under the Collective Investment Schemes sourcebook (CIS). CIS will cease to apply after 13 February 2007 and firms already operating schemes under CIS will need to comply with COLL by that date.

Some parts of this sourcebook relate only to ICVCs and some parts only to AUTs. However, most of this sourcebookcovers 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, or the rights or interests of participants in other types of collective investment scheme.

1. (1)

   COLL 2 (Authorised funds 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.

2. (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.

3. (3)

   COLL 4 (Investor relations) includes consumer-facing material relating to authorised funds that are retail schemes. So, material on the 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.

4. (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 split into three:

   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 funds investing in asset classes covered by the Directive;

   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 schemes that are not UCITS schemes but are nevertheless authorised funds capable of being promoted to retail investors (for non-UCITS retail schemes).

5. (5)

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

   1. (a)

      COLL 6.2 sets out rules relating to dealing in units of authorised funds;

   2. (b)

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

   3. (c)

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

   6. (f)

      COLL 6.7 lays down conditions concerning charges and expenses when investors buy or sell units and when such payments are 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.

6. (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).

7. (7)

   COLL 8 (Qualified investor schemes) provides requirements for authorised funds which cannot be promoted to retail investors.

8. (8)

   COLL 9 (Recognised schemes) includes rules and guidance on notification procedures for recognised schemes.

9. (9)

   FEES 1, FEES 2, FEES 3 and FEES 4 set out the application and periodic fees payable.

1. (1)

   Establishing, operating or winding up a collective investment scheme constitutes a regulated activity. 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 AUTH. AUTH 3 (Applications for Part IV permission) gives guidance on how to apply to the FSA for a Part IV permission. This authorisation is different to the authorisation of an AUT under Part XVII of the Act, or of an ICVC (for which see Schedule 5 of the Act and Regulation 14 of the OEIC Regulations (Authorisation), guidance on which is provided in this guide and COLL.

2. (2)

   There are a number of other parts of the FSA'sHandbook 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)

      COB (The Conduct of Business sourcebook);

   5. (e)

      SUP (The Supervision manual);

   6. (f)

      DEPP (The Decision Procedure and Penalties Manual); and

   7. (g)

      CASS (The Client Assets sourcebook).

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 investmentschemes.

1. (1)

   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 5.1.7 G.

2. (2)

   The sourcebook is designed as a two-tier approach depending on whether the authorisedscheme is promoted to the general public (retail schemes) or to institutions and expert private customers (qualified investor schemes).

Retail schemes must be either UCITS schemes or non-UCITS retail schemes and COLL provides material relating to:

1. (1)

   matters relating to authorisation and notification (COLL 2);

2. (2)

   the constitution (COLL 3), investment powers (COLLG 5) and general management (COLL 6) of schemes and the arrangements for investor notification and participation (COLL 4);

3. (3)

   how an authorised fund or sub-fund may suspend dealing in units or be wound up (COLL 7); and

4. (4)

   fees payable in respect of them (FEES 1, FEES 2, FEES 3 and FEES 4).

1. (1)

   If a scheme is to be restricted in its promotion or subscription to sophisticated investors, the FSA considers that not all the detailed product rule protections that apply to retail schemes are necessary. So, the sourcebook provides a framework of rules for such schemes which satisfies the essential features of an authorised product and so distinguishes them from unregulated collective investment schemes, but otherwise allows more flexibility in the scheme's operation compared to the framework provided 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 and referred to in COLLG 1.1.3 G (2) the sourcebook 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). This material can be found at COLL 9 and FEES 1, FEES 2, FEES 3 and FEES 4.

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