Related provisions for MCOB 11.6.61
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(2A) |
Schemes investing in approved money-market instruments5should value such instruments on an amortised cost basis on condition that:5
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[Note:CESR's UCITS eligible assets guidelines with respect to article 4(2) of the UCITS eligible assets Directive] |
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(2B) |
Short-term money market funds may value approved money-market instruments on an amortised cost basis.7 |
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[Note: paragraph 21 of CESR's guidelines on a common definition of European money market funds]7 |
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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, 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 |
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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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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. |
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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 one or more third parties5. 5 |
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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 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. |
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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 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. |
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(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. |
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(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. |
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5 |
The rectification of pricing breaches |
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(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. |
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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 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. |
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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. |
Table: FCA-prescribed senior management responsibilities for third-country relevant authorised persons.
FCA-prescribed senior management responsibility in relation to the branch |
Explanation |
Equivalent PRA-prescribed UK branch senior management responsibility |
(1) Responsibility for the firm’s performance of its obligations under the senior management regime |
The senior management regime means the requirements of the regulatory system applying to relevant authorised persons insofar as they relate to SMF managers performing designated senior management functions, including SUP 10C (FCA senior management regime for approved persons in relevant authorised persons). This responsibility includes: (1) compliance with conditions and time limits on approval; (2) compliance with the requirements about the statements of responsibilities (but not the allocation of responsibilities recorded in them); and (3) compliance by the firm with its obligations under section 60A of the Act (Vetting of candidates by relevant authorised persons). |
PRA-prescribed UK branch senior management responsibility 6.2(1) |
(2) Responsibility for the firm’s performance of its obligations under the employee certification regime |
The employee certification regime means the requirements of sections 63E and 63F of the Act (Certification of employees) and all other requirements of the regulatory system about the matters dealt with in those sections, including SYSC 5.2 (Certification Regime) and the corresponding PRA requirements. |
PRA-prescribed UK branch senior management responsibility 6.2(2) |
(3) Responsibility for compliance with the requirements of the regulatory system about the management responsibilities map |
This responsibility does not include allocating responsibilities recorded in it. |
PRA-prescribed UK branch senior management responsibility 6.2(3) |
(4) Responsibility for management of the firm’s risk management processes in the UK |
PRA-prescribed UK branch senior management responsibility 6.2(4) |
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(5) Responsibility for the firm’s compliance with the UKregulatory system applicable to the firm |
PRA-prescribed UK branch senior management responsibility 6.2(5) |
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(6) Responsibility for the escalation of correspondence from the PRA, FCA and other regulators4 in respect of the firm to the governing body and/or the management body of the firm or, where appropriate, of the parent undertaking or holding company of the firm’sgroup |
This includes taking steps to ensure that the senior management of the firm and, where applicable, the group, are made aware of any views expressed by the regulatory bodies and any steps taken by them in relation to the branch, firm or group. |
PRA-prescribed UK branch senior management responsibility 6.2(6) |
(7) Local responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime |
(A) This includes the function in SYSC 6.3.8R (a firm must allocate overall responsibility to a director or senior manager within the firm for the establishment and maintenance of effective anti-money laundering systems and controls), if that rule applies to the firm. (B) The firm may allocate this FCA-prescribed senior management responsibility to the MLRO but does not have to. (C) If the firm does not allocate this FCA-prescribed senior management responsibility to the MLRO, this FCA-prescribed senior management responsibility includes responsibility for supervision of the MLRO. (D) Local responsibility is defined in SYSC 4.8.10R (Local responsibility for a branch’s activities, business areas and management functions). |
None |
(8) Local responsibility for the firm’s compliance with CASS |
(A) This responsibility only applies to a firm to which CASS applies. (B) A firm may include in this FCA-prescribed senior management responsibility whichever of the following functions apply to the firm: (1) CASS 1A.3.1R (certain CASS compliance functions for a CASS small firm); (2) CASS 1A.3.1AR (certain CASS compliance functions for a CASS medium firm or a CASS large firm); (3) CASS 11.3.1R (certain CASS compliance functions for certain CASS small debt management firms); or (4) CASS 11.3.4R (certain CASS compliance functions for a CASS large debt management firm); but it does not have to. (C) If the firm does not include the functions in (B) in this FCA-prescribed senior management responsibility, this FCA-prescribed senior management responsibility includes responsibility for supervision of the person performing the functions in (B) that apply to the firm. (D) Local responsibility is defined in SYSC 4.8.10R (Local responsibility for a branch’s activities, business areas and management functions). |
None |