Related provisions for BIPRU 7.8.20

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BIPRU 13.6.34RRP
For the purposes of BIPRU 13.6.33 R:(1) in the denominator, EPE must be used as if it were a fixed outstanding amount;(2) a firm must be able to demonstrate that its internal estimates of capture in the numerator material sources of stochastic dependency of distribution of market values of transactions or of portfolios of transactions across counterparties;(3) internal estimates of must take account of the granularity of portfolios.[Note: BCD Annex III Part 6 point 12 (part
BIPRU 13.6.36GRP
In reviewing its estimate of , a firm may not need to perform a full recalculation each quarter if it can demonstrate by other means that the estimate would not be materially different. A full recalculation should however be performed at least annually. If there is a structural change in the firm's portfolio that is likely to have the effect that the existing estimate of will be inappropriate, the firm should also recalculate it. A firm should have procedures in place to identify
BIPRU 13.6.67RRP
(1) A firm'sCCR internal model method model must meet the validation requirements in (2) to (8).(2) The qualitative validation requirements set out in BIPRU 7.10 must be met.(3) Interest rates, foreign currency rates, equity prices, commodities, and other market risk factors must be forecast over long time horizons for measuring CCRexposure. The performance of the forecasting model for market risk factors must be validated over a long time horizon.(4) The pricing models used to
PERG 2.8.6DGRP
(1) 9An activity of a kind specified below is excluded from the regulated activity of operating an electronic system in relation to lending:18(a) dealing in investments as principal;(b) arranging (bringing about) deals in investments;(c) making arrangements with a view to transactions in investments;(d) managing investments; and18(e) advising on investments (except P2P agreements)18.(1A) The regulated activity of advising on P2P agreements does not apply where such advice is given
PERG 2.8.7GRP
The activities of persons appointed under a power of attorney are excluded under article 38 of the Regulated Activities Order, from the regulated activity of managing investments, if specified conditions are satisfied. The exclusion only applies where a person is not carrying on insurance mediation or reinsurance mediation and is subject to further limitations discussed below2. In addition, the following exclusions (outlined in PERG 2.9) apply in specified circumstances where
PERG 2.8.15GRP
A person who agrees to carry on certain other regulated activities (which is itself a regulated activity see PERG 2.7.21 G) does not require authorisation where the person concerned is an overseasperson and the agreement is reached as a result of a legitimate approach (see PERG 2.9.12 G). For this exclusion to apply, the agreement must be one to arrange deals, manage investments, assist in the administration and performance of a contract of insurance, safeguard and administer
COLL 5.6.7RRP
(1) This rule does not apply in respect of a transferable security or an approved money-market instrument to which COLL 5.6.8R (Spread: government and public securities) applies21. (2) Not more than 20% in value of the scheme property is to consist of deposits with a single body.(3) Not more than 10% in value of the scheme property is to consist of transferable securities or money-market instruments issued by any single body subject to COLL 5.6.23 R (Schemes replicating an index).(3A)
COLL 5.6.11RRP
(1) 15Units in a scheme do not fall within COLL 5.6.10 R if that scheme is managed or operated by (or, if it is an ICVC, has as its ACD) the authorised fund manager of the investing non-UCITS retail scheme or by an associate of that authorised fund manager, unless:15(a) the prospectus of the investing authorised fund clearly states that the property of that investing fund may include such units; and(b) the conditions in COLL 5.2.16 R (Investment in other group schemes) are complied
COLL 5.6.23AGRP
(1) 9Replication of the composition of an index shall be understood to be a reference to replication of the composition of the underlying assets of that index, including the use of techniques and instruments for the purpose of efficient portfolio management.(2) The composition of an index is sufficiently diversified if its components adhere to the spread requirements in this section.(3) An index is a representative benchmark if its provider uses a recognised methodology which
COBS 18.9.2GRP
Firms should note that the operator of an ICVC when it is undertaking scheme management activity will be subject to COBS 18.5.2R.
COBS 10.1.1RRP
1This chapter applies to a firm which provides investment services in the course of MiFID or equivalent third country business other than making a personal recommendation and managing investments.
PERG 8.18.1GRP
A person involved in insurance business written at Lloyd’s may be making financial promotions when attracting another person:(1) to effect or carry out contracts of insurance written at Lloyd’s (where the controlled activity which is the subject of the financial promotion is effecting and carrying out contracts of insurance); or(2) to have assets held under funds at Lloyd’s (where the controlled activity may involve dealing in securities and contractually based investments, arranging
BIPRU 1.2.11RRP
Trading intent must be evidenced on the basis of the strategies, policies and procedures set up by the firm to manage the position or portfolio in accordance with BIPRU 1.2.12 R.[Note: CAD 11(3)]
BIPRU 1.2.12RRP
Positions/portfolios held with trading intent must comply with the following requirements:(1) there must be a clearly documented trading strategy for the position/instrument or portfolios, approved by senior management, which must include the expected holding horizon;(2) there must be clearly defined policies and procedures to monitor the position against the firm's trading strategy including the monitoring of turnover and stale position in the firm'strading book; and(3) there
COLL 5.7.8RRP
Feeder schemes which (in respect of investment in units in collective investment schemes) are dedicated to units in a single collective investment scheme must, in addition to the investment in the master scheme, only hold cash or near cash to maintain sufficient liquidity to enable the scheme to meet its commitments, such as redemptions. Feeder schemes may also use techniques and instruments for the purpose of efficient portfolio management, where appropriate, such as forward
COLL 5.7.11GRP
An authorised fund manager carrying out due diligence for the purpose of the rules in this section should make enquiries or otherwise obtain information needed to enable him properly to consider:(1) whether the experience, expertise, qualifications and professional standing of the second scheme's investment manager is adequate for the type and complexity of the second scheme;(2) the adequacy of the regulatory, legal and accounting regimes applicable to the second scheme and its
SYSC 4.1.1BRRP
14A full-scope UK AIFM must, in particular:(1) have rules for personal transactions by its employees or for the holding or management of investments it invests on its own account;(2) ensure that each transaction involving the AIFs may be reconstructed according to its origin, the parties to it, its nature, and the time and place at which it was effected; and(3) ensure that the assets of the AIFs managed by the AIFM are invested in accordance with the instrument constituting the
SYSC 4.1.7RRP
A common platform firm and a management company10 must establish, implement and maintain an adequate business continuity policy aimed at ensuring, in the case of an interruption to its systems and procedures, that any losses are limited, the preservation of essential data and functions, and the maintenance of its regulated activities, or, in the case of a management company, its collective portfolio management activities,10 or, where that is not possible, the timely recovery of
FEES 4.4.9DRP
3To the extent that a firm4 has provided the information required by FEES 4.4.7 D to the FCA as part of its compliance with another provision of the Handbook, it is deemed to have complied with the provisions of that direction.444
IFPRU 4.11.10GRP
Where the rating system is classed as a low default portfolio in accordance with the guidance in this section, a firm should be able to demonstrate that the framework applied adequately considers:(1) economic environment of data used;(2) changes in portfolio composition over time;(3) parameter choices; and(4) model philosophy.
IFPRU 4.11.15GRP
Where the firm has fewer1than 20 defaults in their internal data set, the FCA expects it to be necessary for firms to perform a statistical low default portfolio calibration, as set out in the guidance in this section.1
BIPRU 7.4.31RRP
A firm may use the commodity extended maturity ladder approach to calculate the commodity PRR for a particular commodity provided the firm:(1) has a diversified commodities portfolio;(2) undertakes significant commodities business;(3) is not yet in a position to use the VaR model approach to calculate commodity PRR; and(4) at least twenty business days before the date the firm uses that approach notifies the appropriate regulator in writing of:(a) its intention to use the commodity
BIPRU 7.4.34GRP
For the purposes of BIPRU 7.4.31R(1) a firm has a diversified commodity portfolio where it holds positions in more than one commodity in each of the categories set out in the table in BIPRU 7.4.33R and holds positions across different maturities in those individual commodities. A firm would not have a diversified commodity portfolio if it held positions in only one commodity in each of the categories set out in the table in BIPRU 7.4.33R. This is because the rates in the table
BIPRU 5.4.6RRP
(1) Units in CIUs may be recognised as eligible collateral if the following conditions are satisfied:(a) they have a daily public price quote;4(b) the CIU is limited to investing in instruments that are eligible for recognition under BIPRU 5.4.2 R to BIPRU 5.4.5 R; and4(c) 4if the CIU is not limited to investing in instruments that are eligible for recognition under BIPRU 5.4.2 R to BIPRU 5.4.5 R, units may be recognised with the value of the eligible assets as collateral under
BIPRU 5.4.31RRP
A firm may choose to use the supervisory volatility adjustments approach or the own estimates of volatility adjustments approach independently of the choice it has made between the standardised approach and the IRB approach for the calculation of risk weighted exposure amounts. However, if a firm seeks to use the own estimates of volatility adjustments approach, it must do so for the full range of instrument types, excluding immaterial portfolios where it may use the supervisory
COBS 18.5.4BRRP
6A small authorised UK AIFM of an unauthorised AIF which is not a collective investment scheme must comply with COBS 16.3 (Periodic reporting) with references to managing investments to be construed as providing AIFM investment management functions.
COBS 18.5.4DGRP
7To be an investment manager, a person needs to manage designated investments on a discretionary or non-discretionary basis under the terms of a management agreement. The purpose of COBS 18.5.4C R is to modify COBS 11.6.1 G to COBS 11.6.11 G so that these provisions apply to a full-scope UK AIFM that is an internally managed AIF because such firms manage designated investments on their own account rather than under the terms of a management agreement.
COLL 6.3.3BRRP
8An authorised fund manager of a UCITS scheme or a UK UCITS management company of an EEA UCITS scheme must have accounting policies and procedures established, implemented and maintained, in accordance with the accounting rules of the UCITS Home State, so as to ensure that the calculation of the net asset value of each scheme it manages is accurately effected, on the basis of the accounting, and that subscription and redemption orders can be properly executed at that net asset
COLL 6.3.6GRP

Table: This table belongs to COLL 6.3.2 G (2) (a) and COLL 6.3.3 R (Valuation)1.

Valuation and pricing

1

The valuation of scheme property

(1)

Where possible, investments should be valued using a reputable source. The reliability of the source of prices should be kept under regular review.

(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

3(2A)

Schemes investing in approved money-market instruments5should value such instruments on an amortised cost basis on condition that:5

55

[Note:CESR's UCITS eligible assets guidelines with respect to article 4(2) of the UCITS eligible assets Directive]

(2B)

Short-term money market funds may value approved money-market instruments on an amortised cost basis.7

[Note: paragraph 21 of CESR's guidelines on a common definition of European money market funds]7

(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).

(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, in the case of a single-priced authorised fund,2 be excluded from the value of an investment or other part of the scheme property. In the case of a dual-priced authorised fund, any such payments should be added to the issue basis of the valuation, or subtracted from the cancellation basis of the valuation, as appropriate. Alternatively, the prospectus of a dual-priced authorised fund may prescribe any other method of calculating unitprices that ensures an equivalent treatment of the effect of these payments.2

(5)

Where the authorised fund manager has reasonable grounds to believe that:

it should value an investment at a price which, in its opinion, reflects a fair and reasonable price for that investment (the fair value price);

(6)

The circumstances which may give rise to a fair value price being used include:

  • no recent trade in the security concerned; or
  • the occurrence of a significant event since the most recent closure of the market where the price of the security is taken.
In (b), a significant event is one that means the most recent price of a security or a basket of securities is materially different to the price that it is reasonably believed would exist at the valuation point had the relevant market been open.

(7)

In determining whether to use such a fair value price , the authorised fund manager should include in his consideration:

4(7A)

Where the authorised fund manager, the depositary or the standing independent valuer have reasonable grounds to believe that the most recent valuation of an immovable does not reflect the current value of that immovable, the authorised fund manager should consult and agree with the standing independent valuer a fair and reasonable value for the immovable.

(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.

(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.

2

The pricing controls of the authorised fund manager

(1)

An authorised fund manager needs to be able to demonstrate that it has effective controls over its calculations of unit prices.

(2)

The controls referred to in (1) should ensure that:

  • asset prices are accurate and up to date;
  • investment 1transactions are accurately and promptly reflected in valuations;
  • the components of the valuation (including stock, cash, and units in issue1), are regularly reconciled to their source or prime records and any reconciling items resolved promptly and debtors reviewed for recoverability;
  • the sources of prices not obtained from the main pricing source are recorded and regularly reviewed;
  • compliance with the investment and borrowing powers is regularly reviewed;
  • dividends are accounted for as soon as securities1 are quoted ex-dividend (unless it is prudent to account for them on receipt):
  • fixed interest dividends, interest and expenses are accrued at each valuation point1;
  • tax positions are regularly reviewed and adjusted, if necessary;
  • reasonable tolerances are set for movements in the key elements of a valuation and movements outside these tolerances are investigated;5
  • the fund manager regularly reviews the portfolio valuation for accuracy5; and5
  • the valuation of OTC derivatives is accurate and up to date and in compliance with the methods agreed with the depositary.5

(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.

(4)

Evidence of the exercise of the pricing controls should be retained.

(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.

(6)

Where the pricing1function is delegated to a third party, COLL 6.6.15 R (1) (Committees and delegation) will apply.

3

The depositary's review of the authorised fund manager's systems and controls

(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 one or more third parties5.

5

(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.

(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.

(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.

(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 OTC derivatives,5unapproved 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.

(6)

A depositary should ensure that any issues, which are identified in any such review, are properly followed up and resolved.

4

The recording and reporting of instances of incorrect pricing

(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.

(2)

In accordance with COLL 6.6.11 G (Duty to inform the FCA), the depositary should report any breach of the rules in COLL 6.3 immediately to the FCA. However, notification should relate to instances which the depositary considers material only.

(3)

A depositary should also report to the FCA 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.

(4)

In accordance with SUP 16.6.8 R, a depositary should also make a return to the FCA on a quarterly basis which summarises the number of instances of incorrect pricing1 during a particular period.

5

The rectification of pricing breaches

(1)

COLL 6.6.3R(3)(c)10(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.

(2)

A depositary may consider that the instance of incorrect pricing1is of minimal significance if:

(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.

(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).

(5)

The depositary should satisfy itself that any payments required following an instance of incorrect pricing1 are accurately and promptly calculated and paid.

(6)

If a depositary considers that reimbursement or payment is inappropriate, it should report the matter to the FCA, 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.

(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.

(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.
SUP 1A.3.7GRP
As many firms will not have dedicated, fixed portfolio resource, the first point of contact for many issues for such firms will be handled by the FCA's Contact Centre, with the aim being that fewer issues and queries will need to be referred to the supervisors. To support all firms the FCA will also provide regional workshops and road shows to clarify its expectations on these risks and issues that are particularly important to the FCA.
COBS 9.3.1GRP
(1) A transaction may be unsuitable for a client because of the risks of the designated investments involved, the type of transaction, the characteristics of the order or the frequency of the trading.(2) In the case of managing investments, a transaction might also be unsuitable if it would result in an unsuitable portfolio. [Note: recital 57 to the MiFID implementing Directive]
COLL 12.3.4RRP
(1) An EEA UCITS management company which applies to manage a UCITS scheme under paragraph 15A(1) of Schedule 3 to the Act must provide the FCA with the following documents:(a) the written contract3 that has been entered into with the depositary3 of the scheme, as referred to in article 22(2) of the UCITS Directive3; (b) information on any delegation arrangements it has made regarding the functions of investment management and administration, as referred to in Annex II of the
MIPRU 4.2F.47RRP
Where a firm is not aware of the underlying exposures of a fund, it may calculate an average risk weight for the fund in the following manner: (1) it will be assumed that the fund first invests, to the maximum extent allowed under its mandate, in the exposure classes attracting the highest capital resources requirement; and(2) then continues making investments in descending order until the maximum total investment limit is reached.
CASS 9.5.1GRP
Firms are reminded that, under COBS 16.4, they are required to send to each of their clients at least once a year a statement in a durable medium of those designated investments and/or client money they hold for that client. A firm which manages investments may provide this statement in its periodic statement, as required under COBS 16.3.