Related provisions for PERG 6.4.3

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SUP 11.5.10GRP
When an event occurs (for example, a group restructuring or a merger) as a result of which: (1) more than one firm in a group would undergo a change in control; or(2) a single firm would experience more than one change in control;then, to avoid duplication of documentation, all the firms and their controllers or proposed controllers may discharge their respective obligations to notify the appropriate regulator7 by submitting a single section 178 notice5 to the PRA7 containing
MCOB 12.1.5GRP
The FCA will expect a firm to ensure that charges made to a customer arising from the sale of a repossessed property and charges arising in relation to a saleshortfall1 are not excessive and are subject to the same considerations as apply with respect to arrears charges under this chapter.1
PERG 9.11.1GRP

Table There are some frequently asked questions about the application of the definition of an open-ended investment company in the following table. This table belongs to PERG 9.2.4 G (Introduction).

Question

Answer

1

Can a body corporate be both open-ended and closed-ended at the same time?

In the FCA's view, the answer to this question is 'no'. The fact that the investment condition is applied to BC (rather than to particular shares in, or securities of, BC) means that a body corporate is either an open-ended investment company as defined in section 236 of the Act or it is not. Where BC is an open-ended investment company, all of its securities would be treated as units of a collective investment scheme for the purpose of the Act. A body corporate formed in another jurisdiction may, however, be regarded as open-ended under the laws of that jurisdiction but not come within the definition of an open-ended investment company in section 236 (and vice versa).

2

Can an open-ended investment company become closed-ended (or a closed-ended body become open-ended)?

In the FCA's view, the answer to this question is 'yes'. A body corporate may change from open-ended to closed-ended (and vice versa) if, taking an overall view, circumstances change so that a hypothetical reasonable investor would consider that the investment condition is no longer met (or vice versa). This might happen where, for example, an open-ended investment company stops its policy of redeeming shares or securities at regular intervals (so removing the expectation that a reasonable investor would be able to realise his investment within a period appearing to him to be reasonable). See also PERG 9.7.5 G.

3

Does the liquidation of a body corporate affect the assessment of whether or not the body is an open-ended investment company?

The FCA considers that the possibility that a body corporate that would otherwise be regarded as closed-ended may be wound up has no effect at all on the nature of the body corporate before the winding up. The fact that, on a winding up, the shares or securities of any investor in the body corporate may be converted into cash or money on the winding up (and so 'realised') would not, in the FCA's view, affect the outcome of applying the expectation test to the body corporate when looked at as a whole. The answer to Question 4 explains that investment in a closed-ended fixed term company shortly before its winding up does not, in the FCA view, change the closed-ended nature of the company. For companies with no fixed term, the theoretical possibility of a winding up at some uncertain future point is not, in the FCA's view, a matter that would generally carry weight with a reasonable investor in assessing whether he could expect to be able to realise his investment within a reasonable period.

4

Does a fixed term closed-ended investment company become an open-ended investment company simply because the fixed term will expire?

In the FCA's view, the answer to this is 'no'. The termination of the body corporate is an event that has always been contemplated (and it will appear in the company's constitution). Even as the date of the expiry of the fixed term approaches, there is nothing about the body corporate itself that changes so as to cause a fundamental reassessment of its nature as something other than closed-ended. Addressing this very point in parliamentary debate, the Economic Secretary to the Treasury stated that the "aim and effect [of the definition] is to cover companies that look, to a reasonable investor, like open-ended investment companies". The Minister added that "A reasonable investor's overall expectations of potential investment in a company when its status with respect to the definition is being judged will determine whether it meets the definition. The matter is therefore, definitional rather than one of proximity to liquidation". (Hansard HC, 5 June 2000 col 124).

5

In what circumstances will a body corporate that issues a mixture of redeemable and non-redeemable shares or securities be an open-ended investment company?

In the FCA's view, the existence of non-redeemable shares or securities will not, of itself, rule out the possibility of a body corporate falling within the definition of an open-ended investment company. All the relevant circumstances will need to be considered (see PERG 9.6.4 G, PERG 9.2.8.8G and PERG 9.8.9 G). So the following points need to be taken into account.

  • The precise terms of the issue of all the shares or securities will be relevant to the question whether the investment condition is met, as will any arrangements that may exist to allow the investor to realise his investment by other means.
  • The proportions of the different share classes will be relevant to the impression the reasonable investor forms of the body corporate. A body corporate that issues only a minimal amount of redeemable shares or securities will not, in theFCA's view, be an open-ended investment company. A body corporate that issues a minimal amount of non-redeemable shares or securities will be likely to be an open-ended investment company. A body corporate that falls within the definition of an open-ended investment company is likely to have (and to be marketed as having) mainly redeemable shares or securities. However, whether or not the body corporate does fall within the definition in any particular case will be subject to any contrary indications there may be in its constitutional documents or otherwise.
  • Where shares or securities are only redeemable after the end of a stated period, this factor will make it more likely that the body corporate is open-ended than if the shares or securities are never redeemable.

6

Does "realised on a basis calculated wholly or mainly by reference to..." in section 236(3)(b) apply to an investor buying investment trust company shares traded on a recognised investment exchange because of usual market practice that the shares trade at a discount to asset value?

In the FCA's view, the answer is 'no' (for the reasons set out in PERG 9.9.4 G to PERG 9.9.6 G).

7

Does the practice of UK investment trust companies buying back shares result in them becoming open-ended investment companies?

In the FCA's view, it does not, because its actions will comply with company law: see section 236(4) of the Act and PERG 9.6.5 G.

8

Would a body corporate holding out redemption or repurchase of its shares or securities every six months be an open-ended investment company?

In the FCA's view a period of six months would generally be too long to be a reasonable period for a liquid securities fund. A shorter period affording more scope for an investor to take advantage of any profits caused by fluctuations in the market would be more likely to be a reasonable period for the purpose of the realisation of the investment (in the context of the 'expectation' test, see PERG 9.8 and, in particular, PERG 9.8.9 G which sets out the kind of factors that may need to be considered in applying the test).

9

Would an initial period during which it is not possible to realise investment in a body corporate mean that the body corporate could not satisfy the investment condition?

In the FCA's view, the answer to that question is 'no'. In applying the investment condition, the body corporate must be considered as a whole (see PERG 9.6.3 G). At the time that the shares or securities in a body corporate are issued, a reasonable investor may expect that he will be able to realise his investment within a reasonable period notwithstanding that there will first be a short-term delay before he can do so. Whether or not the 'expectation test' is satisfied will depend on all the circumstances (see PERG 9.8.9 G).
MCOB 9.8.7RRP
MCOB 9.4.18 R is replaced with the following: "Section 1: 'About this information' Under the section heading 'About this information', the following text must be included:"We are required by the Financial Conduct Authority (FCA) - the independent watchdog that regulates financial services - to provide you with this illustration. All firms selling lifetime mortgages are required to give illustrations, like this one, that contain similar information presented in the same way."
PERG 8.9.1GRP
Section 21(2) of the Act sets out two circumstances in which a financial promotion will not be caught by the restriction in section 21(1). These are where the communicator is an authorised person or where the content of the financial promotion has been approved for the purposes of section 21 by an authorised person. Where approval is concerned it must be specifically for the purposes of enabling the financial promotion to be communicated by unauthorised persons free of the restriction
LR 12.4.10GRP
A listed company intending to enter into a transaction that would have an effect on the company similar to that of a purchase of own equity shares should consult with the FCA to discuss the application of LR 12.4.
CASS 7A.3.19RRP
On the failure of a third party with which money is held, a firm must notify the FCA:(1) as soon as it becomes aware of the failure of any bank, intermediate broker, settlement agent, OTC counterparty or other entity with which it has placed, or to which it has passed, client money; and(2) as soon as reasonably practical, whether it intends to make good any shortfall that has arisen or may arise and of the amounts involved.
APER 1.2.3GRP
The Code of Practice for Approved Persons sets out descriptions of conduct which, in the opinion of the FCA3, do not comply with a Statement of Principle and, in the case of Statement of Principle 3, conduct which tends to show compliance within that statement. The Code of Practice for Approved Persons also sets out, in certain cases, factors which, in the opinion of the FCA3, are to be taken into account in determining whether or not an approved person's conduct complies with
DTR 7.2.8GRP
In the FCA's view, the information specified in provisions A.1.1, A.1.2, B.2.4,1 D.2.11 and C.3.3 of the UK Corporate Governance Code1 will satisfy the requirements of DTR 7.2.7 R.111
ICOBS 2.1.4GRP

In practice, private individuals may act in a number of capacities. The following table sets out a number of examples of how an individual acting in certain capacities should, in the FCA's view, be categorised.

Customer classification examples

Capacity

Classification

Personal representatives, including executors, unless they are acting in a professional capacity, for example, a solicitor acting as executor.

Consumer

Private individuals acting in personal or other family circumstances, for example, as trustee of a family trust.

Consumer

Trustee of a trust such as a housing or NHS trust.

Commercial customer

Member of the governing body of a club or other unincorporated association such as a trade body and a student union.

Commercial customer

Pension trustee.

Commercial customer

Person taking out a policy covering property bought under a buy-to-let mortgage.

Commercial customer

Partner in a partnership when taking out insurance for purposes related to his profession.

Commercial customer
MCOB 5.1.10GRP
A firm that finds any rule in MCOB 5.6 (Content of illustrations) inappropriate for the particular kind of regulated mortgage contract that the mortgage lender provides will need to seek from the FCA a waiver of that rule. SUP 8 contains details of the waiver procedure.
FEES 4.1.4GRP
(1) The periodic fees for collective investment schemes reflect the estimated costs to the FCA of considering proposals to change regulated collective investment schemes, maintaining up to date records about them, and related policy work.(2) [deleted]828(3) 4The periodic fees for fee-paying payment service providers , fee-paying electronic money issuers6and issuers of regulated covered bonds7are set out in FEES 4 Annex 11. This annex sets out the activity groups, tariff base,
PERG 4.2.3GRP
A person who is concerned to know whether his proposed activities may require authorisation will need to consider the following questions (these questions are a summary of the issues to be considered and have been reproduced, in slightly fuller form, in the flowchart in PERG 4.18):(1) will I be carrying on my activities by way of business (see PERG 4.3.3 G (The business test))?(2) if so, will my activities relate to regulated mortgage contracts (see PERG 4.4 (What is a regulated
COLL 6.13.4RRP
(1) An authorised fund manager of a UCITS scheme or a UK UCITS management company of an EEA UCITS scheme must ensure the retention of the records referred to in COLL 6.13.2 R and COLL 6.13.3 R for a period of at least five years or, in exceptional circumstances and where directed by the FCA, for a longer period, determined by the nature of the instrument or portfolio transaction, where it is necessary to enable the FCA to exercise its supervisory functions under the UCITS Directive.(2)
GEN 4.2.1BGRP
16This chapter builds upon Principle 7 (Communications with clients), which requires a firm to pay due regard to the information needs of its clients. This assists in the achievement of the statutory objectives, including the FCA's strategic objective of ensuring that relevant markets function well and the consumer protection and integrity objectives.
SUP 18.1.1BGRP
3References to the ‘regulator’ and ‘regulators’ in this chapter means the FCA and/or the PRA.