COLLG 5A.1 Introduction

1. (1)

   COLL is a specialist sourcebook that sits in Block 6 (Specialist Sourcebooks) of the FCA Handbook. It provides the detailed framework within which authorised funds operate and includes requirements relating to recognised schemes.

2. (2)

   The material in COLL (excluding chapter 9) 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 17 of the Act (for AUTs) and giving effect to the relevant parts of the UCITS Directive. This is shown in the diagram at COLLG 5A.1.5 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 (a retail scheme) or is sold to sophisticated investors (a qualified investor scheme).

Some parts of COLL relate only to ICVCs and some parts only to AUTs. However, most of COLL covers 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 terms are:

1. (1)

   "authorised fund manager", which refers to both the ACD of an ICVC and the manager of 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; and

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.

The contents of COLL are outlined below.

1. (1)

   COLL 1 (Introduction) sets out which firms COLL applies to and gives an overview of the types of authorised fund.

2. (2)

   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 FCA in its role as registrar of ICVCs.

3. (3)

   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. (4)

   COLL 4 (Investor relations) includes consumer-facing material relating to authorised funds that are retail schemes. So, material on the prospectus, key investor information document, simplified prospectus (for non-UCITS retail schemes or feeder NURS, where the authorised fund manager opts to produce this), 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 chapter also includes the information to be given to Unitholders of a feeder UCITS in certain circumstances. (A key investor information document is not required for a non-UCITS retail scheme or feeder NURS. However, an authorised fund manager of such a scheme can choose to produce an equivalent document to the key investor information document, which is referred to as a NURS-KII document, by applying for a modification by consent (see http://www.fca.org.uk/firms/being-regulated/waiver/waiver-by-consent). If an authorised fund manager of such a scheme does not choose to produce a NURS-KII document it must produce a key features document, in accordance with the provisions of COBS 13.3 (Contents of a key features document), or opt to produce a simplified prospectus).

5. (5)

   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 5.2 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 2A.1.4 G);

   2. (b)

      COLL 5.4 provides rules on stock lending;

   3. (c)

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

   4. (d)

      COLL 5.6 provides investment rules for non-UCITS retail schemes;

   5. (e)

      COLL 5.7 provides a regime for a non-UCITS retail scheme that is to be operated as a fund of alternative investment funds (FAIF). The authorised fund manager of such a fund must carry out certain additional due diligence procedures in relation to the funds in which the FAIF is to invest;

   6. (f)

      COLL 5.8 sets out investment powers and limits for a UCITS scheme that is to be operated as a feeder UCITS. It also sets out what other provisions in COLL 5 are applicable to a feeder UCITS; and

   7. (g)

      COLL 5.9 specifies the permitted investments for a UCITS scheme or a non-UCITS retail scheme operating as a money market fund or a short-term money market fund. These restrictions reflect CESR's guidelines on a common definition of European money market funds.

6. (6)

   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 and COLL 6.6A imposes certain powers and duties on the authorised fund managers of UCITS schemes and on a UK UCITS management company of an EEA UCITS scheme;

   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;

   8. (h)

      COLL 6.9 gives guidance relating to independence of the depositary and management company, scheme names and the restrictions on the business of the UCITS;

   9. (i)

      COLL 6.10 sets out the oversight responsibilities of senior personnel in relation to a UCITS scheme;

   10. (j)

       COLL 6.11 and COLL 6.12 set out more detail about the risk controls and risk management policy that must be employed in relation to a UCITS scheme; and

   11. (k)

       COLL 6.13 sets out record-keeping requirements in relation to a UCITS scheme.

7. (7)

   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). COLL 7.7 provides rules in relation to mergers subject to the UCITS Directive.

8. (8)

   COLL 8 (Qualified Investor Schemes) provides a framework of rules for a scheme which restricts subscription to certain prescribed categories of investor (principally professional clients and sophisticated investors). For such a scheme, the FCA considers that not all the detailed product rule protections that apply to retail schemes are necessary. This type of scheme, called a qualified investor scheme, satisfies the essential features of an authorised product and so distinguishes itself from an unregulated collective investment scheme, but otherwise is allowed more flexibility in its operation compared to the framework for retail schemes. COLL 2 (Authorised fund applications) contains details of the application procedure for qualified investor schemes.

9. (9)

   COLL 9 (Recognised Schemes) applies to collective investment schemes established outside the United Kingdom. It brings together the material relating to the admission to marketing of such schemes in the United Kingdom, supplementing material in chapter V of Part 17of the Act (Recognised overseas schemes).

10. (10)

    COLL 10 (Fees) is no longer used as the provisions are set out in FEES.

11. (11)

    COLL 11 (Master-feeder arrangements under the UCITS Directive) sets out various Directive requirements applicable to feeder UCITS and master UCITS, including the arrangements for co-ordination and information-sharing between the UCITS management companies, depositaries and auditors of each scheme.

12. (12)

    COLL 12 (Management company and product passports under the UCITS Directive) provides more information about the rules that are applicable to the use of the UCITS management company passport and the UCITS product passport. It sets out which rules in COLL are applicable to an EEA UCITS management company that wishes to operate a UCITS scheme in the UK through the exercise of passporting rights.

13. (13)

    COLL 13 (Operation of a feeder NURS) sets out requirements relating to the operation of a feeder NURS and certain types of qualifying master scheme. Such operational obligations concern, for example, information which is to be obtained and/or provided pre-investment, and the treatment of a charge made to a feeder NURS for acquisition or disposal of units in a qualifying master scheme.

1. (1)

   There are a number of other parts of the 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);

   8. (h)

      DEPP (the Decision Procedure and Penalties manual);

   9. (i)

      DISP (Dispute resolution: complaints); and

   10. (j)

       COMP (Compensation).

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. BIPRU (the Prudential sourcebook for Banks, Building Societies and Investment Firms) applies certain 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)

   IPRU(INV) (the Interim Prudential sourcebook for Investment Businesses) sets out the financial resources requirements for an authorised fund manager of a qualified investor scheme or a non-UCITS retail scheme, unless the authorised fund manager is a BIPRU investment firm, in which case BIPRU (the Prudential sourcebook for Banks, Building Societies and Investment Firms) sets out the financial resources requirements.

4. (4)

   In addition to the listed sourcebooks, Regulatory Guides may also be of relevance. For example EG link 14 (Collective Investment Schemes) sets out the FCA'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.