Related provisions for COLL 5.6.6
This table belongs to COLL 7.3.3 G
Summary of the main steps in winding up a solvent ICVC or terminating a sub-fund under FSA rules, assuming FSA approval. Notes: N = Notice to be given to the FSA under regulation 21 of OEIC Regulations E = commencement of winding up or termination W/U = winding up FAP = final accounting period (COLL 7.3.8 R(4)) |
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Step number |
Explanation |
When |
COLL rule (unless stated otherwise) |
1 |
Commence preparation of solvency statement |
N-28 days |
7.3.5 (2) |
2 |
Send audited solvency statement to the FSA with copy to depositary |
By N + 21 days |
7.3.5 (4) and (5) |
3 |
Receive the FSA approval |
N + one month |
Regulation 21 of OEIC Regulations |
4 |
Normal business ceases; publish notices |
E |
7.3.6 |
5 |
Realise proceeds, wind up, instruct depositary accordingly |
ASAP after E |
7.3.7 |
6 |
Prepare final account or termination account & have account audited |
On completion of W/U or termination |
7.3.8 |
7 |
Send final account or termination account and auditor's report to the FSA & unitholders |
Within 2 months of FAP |
7.3.8(6) |
8 |
Request FSA to revoke relevant authorisation order |
On completion of W/U |
7.3.7(9) |
Table: This table belongs to COLL 6.3.2 G (2) (a) and COLL 6.3.3 R (Valuation)1.
Valuation and pricing |
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1 |
The valuation of scheme property |
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(1) |
Where possible, investments should be valued using a reputable source. The reliability of the source of prices should be kept under regular review. |
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(2) |
For some or all of the investments comprising the scheme property, different prices may quoted according to whether they are being bought (offer prices) or sold (bid prices). The valuation of a single-priced authorised fund should reflect the mid-market value of such investments. In the case of a dual-priced authorised fund, the issue basis of the valuation will be carried out by reference to the offer prices of investments and the cancellation basis by reference to the bid prices of those same investments. The prospectus should explain how investments will be valued for which a single price is quoted for both buying and selling.1 1 |
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(3) |
Any part of the scheme property of an authorised fund that is not an investment should be valued at a fair value, but for immovables this is subject to COLL 5.6.20 R (3) (f) (Standing independent valuer and valuation). |
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(4) |
For the purposes of (2) and (3), any fiscal charges, commissions, professional fees or other charges that were paid, or would be payable on acquiring or disposing of the investment or other part of the scheme property should be excluded from the value of an investment or other part of the scheme property. |
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(5) |
Where the authorised fund manager has reasonable grounds to believe that:
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(6) |
The circumstances which may give rise to a fair value price being used include:
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(7) |
In determining whether to use such a fair value price , the authorised fund manager should include in his consideration:
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(8) |
The authorised fund manager should document the basis of valuation (including any fair value pricing policy) and, where appropriate, the basis of any methodology and ensure that the procedures are applied consistently and fairly. |
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(9) |
Where a unit price is determined using properly applied fair value prices in accordance with policies in (8), subsequent information that indicates the price should have been different from that calculated will not normally give rise to an instance of incorrect pricing. |
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2 |
The pricing controls of the authorised fund manager |
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(1) |
An authorised fund manager needs to be able to demonstrate that it has effective controls over its calculations of unit prices. |
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(2) |
The controls referred to in (1) should ensure that:
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(3) |
In exercising its pricing controls, the authorised fund manager may exercise reasonable discretion in determining the appropriate frequency of the operation of the controls and may choose a longer interval, if appropriate, given the level of activity on the authorised fund1or the materiality of any effect on the price. |
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(4) |
Evidence of the exercise of the pricing controls should be retained. |
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(5) |
Evidence of persistent or repetitive errors in relation to these matters, and in particular any evidence of a pattern of errors working in an authorised fund manager's favour, will make demonstrating effective controls more difficult. |
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(6) |
Where the pricing1function is delegated to a third party, COLL 6.6.15 R (1) (Committees and delegation) will apply. |
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3 |
The depositary's review of the authorised fund manager's systems and controls |
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(1) |
This section provides details of the types of checks a depositary should carry out to be satisfied that the authorised fund manager adopts systems and controls which are appropriate to ensure that prices of units are calculated in accordance with this section and to ensure that the likelihood of incorrect prices will be minimised. These checks also apply where an authorised fund manager has delegated all or some of its pricing1 functions to a third party. |
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(2) |
A depositary should thoroughly review an authorised fund manager's systems and controls to confirm that they are satisfactory. The depositary's review should include an analysis of the controls in place to determine the extent to which reliance can be placed on them. |
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(3) |
A review should be performed when the depositary is appointed and thereafter as it feels appropriate given its knowledge of the robustness and the stability of the systems and controls and their operation. |
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(4) |
A review should be carried out more frequently where a depositary knows or suspects that an authorised fund manager's systems and controls are weak or are otherwise unsatisfactory. |
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(5) |
Additionally, a depositary should from time to time review other aspects of the valuation of the scheme property of each authorised fund for which it is responsible, verifying, on a sample basis, if necessary, the assets, liabilities, accruals, units in issue1, securities prices (and in particular the prices of unapproved securities and the basis for the valuation of unquoted securities) and any other relevant matters, for example an accumulation factor or a currency conversion factor. |
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(6) |
A depositary should ensure that any issues, which are identified in any such review, are properly followed up and resolved. |
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4 |
The recording and reporting of instances of incorrect pricing |
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(1) |
An authorised fund manager should record each instance where the price of a unit is incorrect as soon as the error is discovered, and report the fact to the depositary together with details of the action taken, or to be taken, to avoid repetition as soon as practicable. |
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(2) |
In accordance with COLL 6.6.11 G (Duty to inform the FSA), the depositary should report any breach of the rules in COLL 6.3 immediately to the FSA. However, notification should relate to instances which the depositary considers material only. |
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(3) |
A depositary should also report to the FSA immediately any instance of incorrect pricing1where the error is 0.5% or more of the price of a unit, where a depositary believes that reimbursement or payment is inappropriate and should not be paid by an authorised fund manager. |
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(4) |
In accordance with SUP 16.6.8 R, a depositary should also make a return to the FSA on a quarterly basis which summarises the number of instances of incorrect pricing1 during a particular period. |
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5 |
The rectification of pricing breaches |
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(1) |
COLL 6.6.3 R (1) (Functions of the authorised fund manager) places a duty on the authorised fund manager to take action to reimburse affected unitholders, former unitholders, and the scheme itself, for instances of incorrect pricing1, except if it appears to the depositary that the breach is of minimal significance. |
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(2) |
A depositary may consider that the instance of incorrect pricing1is of minimal significance if:
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(3) |
In determining (2), if the instance of incorrect pricing1 is due to one or more factors or exists over a period of time, each price should be considered separately. |
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(4) |
If a depositary deems it appropriate, it may, in spite of the circumstances outlined in (2), require a payment from the authorised fund manager or from the authorised fund to the unitholders, former unitholders, the authorised fund or the authorised fund manager (where appropriate). |
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(5) |
The depositary should satisfy itself that any payments required following an instance of incorrect pricing1 are accurately and promptly calculated and paid. |
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(6) |
If a depositary considers that reimbursement or payment is inappropriate, it should report the matter to the FSA, together with its recommendation and justification. The depositary should take into account the need to avoid prejudice to the rights of unitholders, or the rights of unitholders in a class of units. |
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(7) |
It may not be practicable, or in some cases legally permissible, for the authorised fund manager to obtain reimbursement from unitholders, where the unitholders have benefited from the incorrect price. |
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(8) |
In all cases where reimbursement or payment is required, amounts due to be reimbursed to unitholders for individual sums which are reasonably considered by the authorised fund manager and depositary to be immaterial, need not normally be paid. |
Explanatory table: This table belongs to COLL 6.2.2 G (4) (Purpose).
Correction of box management errors |
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1 |
Controls by authorised fund managers |
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An authorised fund manager needs to be able to demonstrate that it has effective controls over: |
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(1) |
its calculations of what units are owned by it (its 'box'); and |
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(2) |
compliance with COLL 6.2.8 R which is intended to prevent a negative box. |
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2 |
Controls by depositaries |
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(1) |
Under COLL 6.6.4 (General duties of the depositary), a depositary should take reasonable care to ensure that a scheme2 is managed in accordance with COLL 6.2 (Dealing) and COLL 6.3 (Pricing and valuation). |
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(2) |
A depositary should therefore make a regular assessment of the authorised fund manager's box management procedures (including supporting systems) and controls. This should include reviewing the authorised fund manager's controls and procedures when the depositary assumes office, on any significant change and on a regular basis, to ensure that a series of otherwise minor changes do not have a cumulative and a significant effect on the accuracy of the controls and procedures. |
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3 |
Recording and reporting of box management errors |
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(1) |
An authorised fund manager should record all errors which result in a breach of COLL 6.2.8 R (Controls over the issue and cancellation of units) and as soon as an error is discovered, the authorised fund manager should report the fact to the depositary, together with details of the action taken, or to be taken, to avoid repetition of the error. |
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(2) |
A depositary should report material box management errors to the FSA immediately. Materiality should be determined by taking into account a number of factors including:
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(3) |
A depositary should also make a return to the FSA (in the manner prescribed by SUP 16.6.8 R) on a quarterly basis. |
This table belongs to COLL 8.2.5 R
1 |
Description of the authorised fund |
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Information detailing: |
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(1) |
the name of the authorised fund; |
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(2) |
that the authorised fund is a qualified investor scheme; and |
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(3) |
in the case of an ICVC, whether the head office of the company is situated in England and Wales or Wales or Scotland or Northern Ireland. |
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2 |
Constitution |
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The following statements: |
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(1) |
the scheme property of the scheme is entrusted to a depositary for safekeeping (subject to any exception permitted by the rules); |
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(2) |
if relevant, the duration of the scheme is limited and, if so, for how long; |
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(3) |
charges and expenses of the scheme may be taken out of scheme property; |
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(4) |
for an ICVC: |
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(a) |
what the maximum and minimum sizes of the scheme's capital are; and |
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(b) |
the unitholders are not liable for the debts of the company; and |
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(5) |
for an AUT: |
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(a) |
the trust deed: |
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(i) |
is made under and governed by the law of England and Wales, or the law of Scotland or the law of Northern Ireland; |
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(ii) |
is binding on each unitholder as if he had been a party to it and that he is bound by its provisions; and |
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(iii) |
authorises and requires the trustee and the manager to do the things required or permitted of them by its terms; |
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(b) |
subject to the provisions of the trust deed and all the rules made under section 247 of the Act (Trust scheme rules): |
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(i) |
the scheme (other than sums held to the credit of the distribution account) is held by the trustee on trust for the unitholders according to the number of units held by each unitholder or, where relevant, according to the number of individual shares in the scheme property represented by the units held by each unitholder; and |
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(ii) |
the sums standing to the credit of any distribution account are held by the trustee on trust to distribute or apply in accordance with COLL 8.5.15 R (Income); |
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(c) |
a Unitholder is not liable to make any further payment after he has paid the price of his units and that no further liability can be imposed on him in respect of the units he holds; and |
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(d) |
payments to the trustee by way of remuneration are authorised to be paid (in whole or in part) out of the scheme property. |
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3 |
Investment objectives |
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A statement of the object of the scheme, in particular the types of investments and assets in which it and each sub-fund (where applicable) may invest and that the object of the scheme is to invest in property of that kind with the aim of spreading investment risk. |
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4 |
Units in the scheme |
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A statement of: |
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(1) |
the classes of units which the scheme may issue, indicating, for a scheme which is an umbrella, which class or classes may be issued in respect of each sub-fund; and |
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(2) |
the rights attaching to units of each class (including any provisions for the expression in two denominations of such rights). |
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5 |
Limitation on issue of and redemption of units |
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Details as to: |
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(1) |
the provisions relating to any restrictions on the right to redeem units in any class; and |
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(2) |
the circumstances in which the issue of the units of any particular class may be limited. |
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6 |
Income and distribution |
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Details of the person responsible for the calculation, transfer, allocation and distribution of income for any class of unit in issue during the accounting period. |
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7 |
Base currency |
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A statement of the base currency of the scheme. |
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8 |
Meetings |
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Details of the procedures for the convening of meetings and the procedures relating to resolutions, voting and the voting rights for unitholders. |
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9 |
Powers and duties of the authorised fund manager and depositary |
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Where relevant, details of any function to be undertaken by the authorised fund manager and depositary which the rules in COLL require to be stated in the instrument constituting the scheme. |
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10 |
Termination and suspension |
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Details of: |
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(1) |
the grounds under which the authorised fund manager may initiate a suspension of the scheme and any associated procedures; and |
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(2) |
the methodology for determining the rights of unitholders to participate in the scheme property on winding up. |
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11 |
Other relevant matters |
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Details of those matters which enable the scheme, authorised fund manager or depositary to obtain any privilege or power conferred by the rules in COLL which is not otherwise provided for in the instrument constituting the scheme. |