Related provisions for LR 15.4.3A
1 - 20 of 142 items.
1LR 15.2.6 R and LR 15.4.6 R are not intended to require the closed-ended investment fund to be able to control or direct the master fund or intermediary (as the case may be). But if the closed-ended investment fund becomes aware that the master fund or intermediary (as the case may be) is not investing or managing its investments in accordance with that rule it will need to immediately consider withdrawal of its funds from the master fund or intermediary (as the case may be)
Unless LR 15.4.8A R applies, a6closed-ended investment fund must :666166(1) submit any proposed material change to its published investment policy to the FCA for approval; and6(2) having obtained the FCA's approval, obtain the prior approval of its shareholders to any material change to its published investment policy.6
6A closed-ended investment fund is not required to seek the FCA’s approval for a material change to its published investment policy if:(1) the change is proposed to enable the winding up of the closed-ended investment fund; and(2) the winding up: (a) is in accordance with the constitution of the closed-ended investment fund; and(b) will be submitted for approval by the shareholders of the closed-ended investment fund at the same time as the proposed material change to the investment
In considering what is a material change to the published investment policy, the closed-ended investment fund should have regard to the cumulative effect of all the changes since its shareholders 1last had the opportunity to vote on the investment policy or, if they have never voted, since the admission to listing.1
(1) Unless authorised by its shareholders1, a closed-ended investment fund may not issue further shares of the same class as existing shares (including issues of treasury shares) for cash at a price below the net asset value per share of those shares unless they are first offered pro rata to existing holders of shares of that class.1(2) When calculating the net asset value per share, treasury shares held by the closed-ended investment fund should not be taken into account.
MIPRU 4.2F sets out the risk weights that a firm should apply to exposures in the form of loans secured on real estate property, other loans, exposures in the form of funds, and past due items, when calculating risk weighted exposure amounts for calculating the credit risk capital requirement under MIPRU 4.2.23 R.
This section is broadly organised according to the type of exposure class.(1) Exposures secured by mortgages on residential property (MIPRU 4.2F.4 R to MIPRU 4.2F.36 R)(2) Exposures secured by mortgages on commercial property (MIPRU 4.2F.37 R)(3) Exposures to other loans (MIPRU 4.2F.38 R)(4) Exposures to funds (MIPRU 4.2F.39 R to MIPRU 4.2F.49 R)(5) Exposures to past due items (MIPRU 4.2F.50 R to MIPRU 4.2F.56 G)
Exposures in the form of funds for which a credit assessment by a nominated ECAI is available must be assigned a risk weight using:(1) the table in MIPRU 4.2E.14 R to determine the credit quality step associated with that credit assessment; and(2) the table in MIPRU 4.2F.41 R to determine the risk weight to be applied to the rated position, based on the associated credit quality step.
Table: Exposures in the form of funds for which a credit assessment by a nominated ECAI is available
This table belongs to MIPRU 4.2F.40 R.
Credit quality step |
1 |
2 |
3 |
4 |
5 |
6 |
Risk weight |
20% |
50% |
100% |
100% |
150% |
150% |
Other examples of high-risk funds are:(1) those in which a substantial element of the fund's property is made up of items that would attract a risk weight of over 100%; and(2) those whose mandate (as referred to in MIPRU 4.2F.46 R would permit it to invest in a substantial amount of items that would attract a risk weight of over 100%.
The eligibility criteria in MIPRU 4.2F.45 R are:(1) the fund's prospectus or equivalent document includes: (a) the categories of assets in which the fund is authorised to invest; and(b) if investment limits apply, the relative limits and the methodologies to calculate them; and(2) the business of the fund is reported on at least an annual basis to enable an assessment to be made of the assets and liabilities, income and operations over the reporting period.
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.
Exposures in the form of funds that are not past due items, that have been assigned a risk weight of 150% or greater, and for which value adjustments have been established, may be assigned a risk weight of: (1) 100% if value adjustments are no less than 20% of the exposure value gross of value adjustments; or(2) 50%, if value adjustments are no less than 50% of the exposure value gross of value adjustments
(1) This section helps in achieving the statutory objective of securing an appropriate degree of protection for consumers. In accordance with Principle 6, this section is also concerned with ensuring the authorised fund manager pays due regard to its clients' interests and treats them fairly.(2) An authorised fund manager of an AUT, ACS or ICVC7 is responsible for arranging for the issue and the cancellation of units for the authorised fund. An authorised fund manager of an AUT,
(1) During the initial offer period, units may only be issued at the initial price.(2) The length of any initial offer should not be unreasonable when considered alongside the characteristics of the authorised fund.(3) The authorised fund manager must, as soon as practicable after receiving the initial price from the purchaser and no later than the fourth business day following the end of the initial offer, pay the depositary in respect2 of any unit it has agreed to sell during
3If an authorised fund has two or more classes of unit in issue, the authorised fund manager may treat any or all of those classes as one for the purpose of determining the number of units to be issued or cancelled by reference to a particular valuation point, if:(1) the depositary gives its prior agreement; and(2) the relevant classes:(a) have the same entitlement to participate in, and the same liability for charges, expenses and other payments that may be recovered from, the
(1) As the authorised fund manager normally controls the issue, cancellation, sale and redemption of an authorised fund'sunits, it occupies a position that could, without appropriate systems and controls, involve a conflict of interest between itself and its clients.(2) SYSC 3.1.1 R (Systems and controls) requires that a firm take reasonable care to establish and maintain such systems and controls as are appropriate to its business and Principle 8 requires a firm to manage conflicts
(1) Where the authorised fund manager has not complied with COLL 6.2.8 R (1) (Controls over the issue and cancellation of units), it must correct the error as soon as possible and must reimburse the authorised fund any costs it may have incurred in correcting the position.(2) The authorised fund manager need not reimburse the authorised fund when:(a) the amount under (1) is not, in the depositary's opinion, material to the authorised fund;(b) the authorised fund manager can demonstrate
(1) The authorised fund manager must, by the close of business on the fourth business day following the issue of any units, arrange for payment to the depositary of an AUT or ACS7 or the ICVC of:227(a) 2in the case of a single-priced authorised fund, the price of the units and any payments required under 9COLL 6.3.8 R (Dilution); or(b) 2in the case of a dual-priced authorised fund, the issue price of the units9.(2) The authorised fund manager must make the payment referred to
(1) On cancellingunits the authorised fund manager must, before the expiry of the fourth business day following the cancellation of the units or, if later, as soon as practicable after delivery to the depositary of the AUT or ACS7 or the ICVC of such evidence of title to the units as it may reasonably require, require the depositary to pay:27(a) 2in the case of a single-priced authorised fund, the price of the units (less any deduction required under 9COLL 6.3.8 R); or(b) 2in
(1) In accordance with COLL 4.2.5R (17) (Table: contents of the prospectus), the authorised fund manager must describe the arrangements for the sale and redemption of units in the prospectus.(2) The authorised fund manager must, at all times during the dealing day, be willing to effect the sale of units in the authorised fund, in accordance with the conditions in the instrument constituting the fund8 and the prospectus unless:8(a) it has reasonable grounds to refuse such sale;
(1) The prospectus of an authorised fund9 may allow the authorised fund manager to identify a point in time in advance of a valuation point (a cut-off point) after which it will not accept instructions to sell or redeemunits2 at that valuation point. In order to protect customers' interests, the cut-off point should be no earlier than the close of business on the business day before the valuation point it relates to. If there is more than one valuation point in a day the cut-off
(1) If an authorised fund limits the issue of any class of unit, the prospectus of an authorised fund must provide for the circumstances and conditions when units will be issued.(2) Where (1) applies, the authorised fund manager may not provide for the further issue of units unless, at the time of the issue2, it2is satisfied on reasonable grounds that the proceeds of that subsequent issue can be invested without compromising the scheme's investment objective or materially prejudicing
(1) Subject to (1A) and (3) the5instrument constituting the fund8 and the prospectus of an authorised fund which has at least one valuation point on each business day, may permit deferral of redemptions at a valuation point to the next valuation point where the requested redemptions exceed 10%, or some other reasonable proportion disclosed in the prospectus, of the authorised fund's value.58(1A) 5Subject to (3) the instrument constituting the fund8 and the prospectus of a non-UCITS
(1) 4The authorised fund manager of a property authorised investment fund must take reasonable steps to ensure that no body corporate holds more than 10% of the net asset value of that fund (the "maximum allowable").(2) Where the authorised fund manager of a property authorised investment fund becomes aware that a body corporate holds more than the maximum allowable, he must:(a) notify the body corporate of that event; (b) not pay any income distribution to the body corporate;
4Reasonable steps to monitor the maximum allowable include:(1) regularly reviewing the register; and(2) taking reasonable steps to ensure that unitholders are kept informed of the requirement that no body corporate may hold more than 10% of the net asset value of a property authorised investment fund.
A firm, on receiving any client money, must promptly place this money into one or more accounts opened with any of the following: (1) a central bank;(2) a CRD credit institution;(3) a bank authorised in a third country6; (4) a qualifying money market fund.[Note: article 4(1) of the MiFID Delegated Directive6]
(1) A firm that does not deposit client money with a central bank must exercise all due skill, care and diligence in the selection, appointment and periodic review of the CRD credit institution, bank or qualifying money market fund where the money is deposited and the arrangements for the holding of this money. 6(2) The firm must consider the need for diversification as part of its due diligence under (1).6[Note: article 4(2) first sub-paragraph of the MiFID Delegated Directi
When a firm makes the selection, appointment and conducts the periodic review of a CRD credit institution, a bank or a qualifying money market fund, it must take into account:(1) the expertise and market reputation of the third party with a view to ensuring the protection of clients’ rights6; and(2) any legal or regulatory6 requirements or market practices related to the holding of client money that could adversely affect clients' rights. [Note: article 4(2) second sub-paragraph
In complying with CASS 7.13.8 R and CASS 7.13.10 R, a firm should consider, as appropriate, together with any other relevant matters:(1) the capital of the CRD credit institution or bank;(2) the amount of client money placed, as a proportion of the CRD credit institution or bank's capital and deposits, and, in the case of a qualifying money market fund, compared to any limit the fund may place on the volume of redemptions in any period;(3) the extent to which client money that
A firm must take the necessary steps to ensure that client money deposited, in accordance with CASS 7.13.3 R, in a central bank, a credit institution, a bank authorised in a third country6 or a qualifying money market fund is held in an account or accounts identified separately from any accounts used to hold money belonging to the firm.[Note: article 2(1)(e) of the MiFID Delegated Directive6]
(1) 6In CASS 7.13.20R to CASS 7.13.25Rclient money means money deposited under CASS 7.13.3R and therefore includes money deposited under CASS 7.13.3R: (a) in an account opened with a qualifying money market fund; or (b) invested in units or shares of a qualifying money market fund.(2) But client money held under CASS 7.14.2R does not fall within the scope of the diversification provisions at CASS 7.13.20R to CASS 7.13.25R.
For the purpose of CASS 7.13.20 R an entity is a relevant group entity if it is:(1) (a) a CRD credit institution; or 6(b) a bank authorised in a third country; or6(c) a qualifying money market fund; or6(d) the entity operating or managing the qualifying money market fund; and6(2) a member of the same group as that firm. [Note: article 4(3) first sub-paragraph of the MiFID Delegated Directive]6
(1) A firm must make a record of the grounds upon which it satisfies itself as to the appropriateness of its selection and appointment of a bank or a qualifying money market fund under CASS 7.13.8 R. The firm must make the record on the date it makes the selection or appointment and must keep it from that date until five years after the firm ceases to use that particular person for the purposes of depositing client money under CASS 7.13.3 R.(2) A firm must make a record of each
(1) A firm must inform a client that money placed with a qualifying money market fund will not be held in accordance with the requirements for holding client money.6(2) A firm must ensure that, having provided the information to the client under (1), the client gives its explicit consent to the placement of their money in a qualifying money market fund. 6[Note: article 4(2) third sub-paragraph to the MiFID Delegated Directive6]
If the charity authorised investment fund has an advisory committee the authorised fund manager must ensure that: (1) the instrument constituting the fund sets out the role and responsibilities of the advisory committee; and(2) the prospectus contains at least the following information about the advisory committee:(a) a description of its role and responsibilities; (b) its membership;(c) how its members are nominated and how their membership is terminated; and(d) how meetings
The statement may address matters such as:(1) how the advisory committee is discharging its role and responsibilities as set out in the instrument constituting the fund;(2) any observations the committee may have on how the authorised fund manager has carried out its functions during the annual accounting period; and(3) any other matters the committee considers of interest to the unitholders of the charity authorised investment fund.
(1) The authorised fund manager or depositary must convene a general meeting of unitholders if it receives a notice from the advisory committee of a charity authorised investment fund which:(a) states the objects of the meeting;(b) is dated; and(c) is signed by or on behalf of the advisory committee. (2) The authorised fund manager or the depositary must ensure the general meeting of the authorised fund takes place no later than eight weeks after receipt of the notice in (1)
Where the surplus arising from business is shared between policyholders and shareholders in different ways for different blocks of business, it may be necessary to maintain a separate fund to ensure that policyholders are, and will be, treated fairly. For example, if a proprietary company writes some business on a with-profits basis, this should be written in a with-profits fund separate from any business where the surplus arising from that business is wholly owned by shareho
Where a firm merges separate funds for different types of business, it will need to ensure that the merger will not result in policyholders being treated unfairly. When considering merging the funds, the firm should consider the impact on its PPFM (see COBS 20.32) and on its obligations to notify the FCA8 (see SUP 15.3). In particular, a firm would need to consider how any inherited estate would be managed and how the fund would be run in future, such that policyholders are treated
INSPRU 1.1.27 R provides8 further constraints on the transfer of assets out of a with-profits fund. INSPRU 1.1.27 R requires a firm to have admissible assets in each of its with-profits funds to cover the technical provisions and other long-term insurance liabilities relating to all the business in that fund. 7
The purposes of the long-term insurance business include the payment of claims, expenses and liabilities arising from that business, the acquisition of lawful access to fixed assets to be used in that business and the investment of assets. The payment of liabilities may include repaying a loan but only where that loan was incurred for the purpose of the long-term insurance business. The purchase or investment of assets may include an exchange at fair market value of assets (including
INSPRU 3.1.57 R requires a firm to cover, as closely as possible, its property-linked liabilities by the property to which those liabilities are linked. In order to comply with this rule, a firm should identify the assets it holds to cover property-linked liabilities and should not apply those assets (as long as they are needed to cover the property-linked liabilities) for any purpose other than to meet those liabilities.
(1) This section covers techniques relating to transferable securities and approved money-market instruments which are used for the purpose of efficient portfolio management. It3 permits the generation of additional income for the benefit of the authorised fund, and hence for its investors, by entry into stock lending transactions for the account of the authorised fund.(2) The specific method of stock lending permitted in this section is in fact not a transaction which is a loan
(1) 6An authorised fund may only enter into a stock lending arrangement or repo contract in accordance with the rules in this section if the arrangement or contract is: (a) for the account of and for the benefit of the scheme; and(b) in the interests of its unitholders. (2) An arrangement or contract in (1) is not in the interests of unitholders unless it reasonably appears to the ICVC or authorised fund manager of an authorised fund to be appropriate with a view to generating
(1) An ICVC, or the depositary of an authorised fund acting in accordance with the instructions 6of the authorised fund manager4, may enter into a repo contract, or a1stock lending arrangement of the kind described in section 263B of the Taxation of Chargeable Gains Act 1992 (without extension by section 263C), but only if:444(a) all the terms of the agreement under which securities are to be reacquired by the depositary for the account of the ICVC, AUT or ACS4 are in a form which
(1) Collateral is adequate for the purposes of this section only if it is:(a) transferred to the depositary or its agent;(aa) 6for a UCITS scheme, received under a title transfer arrangement;(ab) 6for a UCITS scheme, at all times equal in value to the market value of the securities transferred by the depositary plus a premium;(b) for a non-UCITS retail scheme, at all times 6at least equal in value 6to the value of the securities transferred by the depositary; and(c) for a non-UCITS
5As regards the collateral adequacy of a UCITS scheme and restrictions on collateral that take the form of cash for a UCITS scheme, authorised fund managers are referred to paragraph 43 of the ESMA Guidelines to competent authorities and UCITS management companies on ETFs and other UCITS issues (ESMA 2012/832)7https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_guidelines_on_etfs_and_other_ucits_issues.pdf7Revision of the provisions on diversification of
5Authorised fund managers of UCITS schemes are advised that ESMA has issued guidelines which, in accordance with the UCITS implementing Directive, authorised fund managers should comply with in applying the rules in this section in relation to UCITS schemes:Guidelines to competent authorities and UCITS management companies on ETFs and other UCITS issues (ESMA 2012/832)7https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_guidelines_on_etfs_and_other_ucits_issues.pdf7Revision
(1) Cash and near cash must not be retained in the scheme property except to the extent that this may reasonably be regarded as necessary in order to enable:(a) the pursuit of the scheme's investment objectives; or(b) redemption of units; or(c) efficient management of the authorised fund in accordance with its investment objectives; or(d) other purposes which may reasonably be regarded as ancillary to the investment objectives of the authorised fund.(2) During the period of the
(1) The ICVC or depositary of an AUT or ACS4 (on the instructions of the authorised fund manager4) may, in accordance with this rule and COLL 5.5.5 R (Borrowing limits), borrow money for the use of the authorised fund on terms that the borrowing is to be repayable out of the scheme property.44(2) Paragraph (1) is subject to the obligation of the authorised fund to comply with any restriction in the instrument constituting the fund.55(3) The ICVC or depositary of an AUT or ACS4
(1) The authorised fund manager must ensure that the authorised fund's borrowing does not, on any day, exceed 10% of the value of the scheme property.(2) This rule does not apply to "back to back" borrowing under COLL 5.3.5 R (2)(Borrowing).(3) In this rule, borrowing includes, as well as borrowing in a conventional manner, any other arrangement (including a combination of derivatives) designed to achieve a temporary injection of money into the scheme property in the expectation
6An authorised fund manager should ensure when calculating the authorised fund’s borrowing for COLL 5.5.5R(1) that:(1) the figure calculated is the total of all borrowing in all currencies by the authorised fund; and(2) long and short positions in different currencies are not netted off against each other.
(1) None of the money in the scheme property of an authorised fund may be lent and, for the purposes of this prohibition, money is lent by an authorised fund if it is paid to a person ("the payee") on the basis that it should be repaid, whether or not by the payee.(2) Acquiring a debenture is not lending for the purposes of (1); nor is the placing of money on deposit or in a current account.(3) Paragraph (1) does not prevent an ICVC from providing an officer of the ICVC with funds
(1) The scheme property of an authorised fund other than money must not be lent by way of deposit or otherwise.(2) Transactions permitted by COLL 5.4 (Stock lending) are not to be regarded as lending for the purposes of (1).(3) The scheme property must not be mortgaged.(4) Where transactions in derivatives or forward transactions are used for the account of the authorised fund in accordance with any of the rules in this chapter, nothing in this rule prevents the ICVC or the depositary
(1) Any power in this chapter to invest in transferable securities may be used for the purpose of entering into transactions to which this rule applies, subject to compliance with any restriction in the instrument constituting the fund.55(2) This rule applies to any agreement or understanding which:(a) is an underwriting or sub-underwriting agreement; or(b) contemplates that securities will or may be issued or subscribed for or acquired for the account of the authorised fund.(3)
(1) An ICVC or a depositary for the account of an authorised fund must not provide any guarantee or indemnity in respect of the obligation of any person.(2) None of the scheme property of an authorised fund may be used to discharge any obligation arising under a guarantee or indemnity with respect to the obligation of any person.(3) Paragraphs (1) and (2) do not apply to:(a) any indemnity or guarantee given for margin requirements where the derivatives or forward transactions
(1) This section assists in securing the statutory objective of protecting consumers through requirements which govern the payments out of scheme property and charges imposed on investors when buying or selling units.(2) The requirements clarify the nature of permitted charges and payments and ensure the disclosure for unitholders of any increases in charges and payments to the authorised fund manager.(3) The prospectus should make adequate provision for payments from an authorised
(1) The only payments which may be recovered from the scheme property of an authorised fund are those in respect of: (a) remunerating the parties operating the authorised fund;(b) the administration of the authorised fund; or(c) the investment or safekeeping of the scheme property.(2) No payment under this rule can be made from scheme property if it is unfair to (or materially prejudices the interests of) any class of unitholders or potential unitholders.(3) Paragraphs (1) and
(1) For the authorised fund manager's periodic charge or for payments out of scheme property to the investment adviser, the prospectus may permit a payment based on a comparison of one or more aspects of the scheme property or price in comparison with fluctuations in the value or price of property of any description or index or other factor designated for the purpose (a "performance fee").(2) Any performance fee should be specified in the appropriate manner in the prospectus and
(1) To introduce a new charge for the sale or redemption of units, or any new category of remuneration for its services or increase the rate stated in the prospectus, the authorised fund manager will need to comply with COLL 4.2.5 R (Table: contents of prospectus) and COLL 4.3 (Approvals and notifications).(2) A redemption charge may be expressed in terms of amount or percentage. It may also be expressed as diminishing over the time during which the unitholder has held the units
(1) The authorised fund manager must determine whether a payment is to be made from the income property or capital property of an authorised fund, and in doing so the authorised fund manager must:(a) pay due regard to whether the nature of the cost is income related or capital related and the objective of the scheme; and(b) agree the treatment of any payment with the depositary.(2) Where, for any class of units5 for any annual accounting period, the amount of the income property
(1) Any payment as a result of effecting transactions for the authorised fund should be made from the capital property of the scheme.(2) Other than the payments in (1), all other payments should be made from income property in the first instance but may be transferred to the capital account in accordance with COLL 6.7.10 R (1) (Allocation of payments to income or capital).(3) For payments transferred to the capital property of the scheme in accordance with (2), the prospectus
2(1) No payment may be made from scheme property to any person, other than a payment to the authorised fund manager permitted by the rules in COLL, for the acquisition or promotion of the sale of units in an authorised fund.2(2) 2Paragraph (1) does3 not apply to the costs an authorised fund incurs3 preparing and printing the11key investor information document6, NURS-KII document or key information document11, provided the prospectus states, in accordance with COLL 4.2.5 R (13)
(1) Where the property of an authorised fund is transferred to a second authorised fund (or to the depositary for the account of the authorised fund) in consideration of the issue of units in the second authorised fund to unitholders in the first scheme, (2) applies.(2) The ICVC or the depositary of the ICVC, ACS or8AUT as the successor in title to the property transferred, may pay out of the scheme property any liability arising after the transfer which, had it arisen before
(1) An annual long report on an authorised fund, other than a scheme which is an umbrella, must contain:(a) the accounts for the annual accounting period which must be prepared in accordance with the requirements of the IMA SORP;3(b) the report of the authorised fund manager in accordance with COLL 4.5.9 R (Authorised fund manager's report);(c) comparative information12 in accordance with COLL 4.5.10 R (Comparative information12);1212(d) the report of the depositary in accordance
(1) A half-yearly long report on an authorised fund, other than for a scheme which is an umbrella, must contain:(a) the accounts for the half-yearly accounting period which must be prepared in accordance with the requirements of the IMA SORP; and3(b) the report of the authorised fund manager in accordance with COLL 4.5.9 R (Authorised fund manager's report).(2) A half-yearly long report on a scheme which is an umbrella must be prepared for the umbrella as a whole and2 must contain:(a)
The matters set out in (1) to (13)2 must be included in any authorised fund manager's report, except where otherwise indicated:2(1) the names and addresses of :(a) the authorised fund manager;(b) the depositary;(c) the registrar;(d) any investment adviser;(e) the auditor; and(f) for a scheme which invests in immovables, the standing independent valuer;(2) (for an ICVC), the names of any directors other than the ACD;(3) a statement of the authorised status of the scheme;(4) (for
The comparative information12 required by
COLL 4.5.7 R12
(Contents of the annual long report) and COLL 8.3.5A R (Contents of the annual report) must be shown for the last three annual accounting periods (or all of the authorised fund'sannual accounting periods, if fewer than three) and must set out:1212(1) [deleted]1212(1A) for a unit of each class in issue, a comparative table as at the end of the period to which the report relates, prepared in accordance with the requirements
(1) The depositary must make an annual report to unitholders which must be included in the annual report.(2) The annual report must contain:(a) a description, which may be in summary form, of the duties of the depositary under COLL 6.6.4 (General duties of the depositary) and in respect of the safekeeping of the scheme property; and(b) a statement whether, in any material respect:(i) the issue, sale, redemption and cancellation, and calculation of the price of the units and the
The authorised fund manager must ensure that the report of the auditor to the unitholders includes the following statements:33(1) whether, in the auditor's opinion, the accounts have been properly prepared in accordance with the IMA SORP, the rules in this sourcebook, and the instrument constituting the fund;1010(2) whether, in the auditor's opinion, the accounts give a true and fair view of the net revenue3and the net capital 3gains or losses on3the scheme property of the authorised
(1) The authorised fund manager must, within four months after the end of each annual accounting period and two months after the end of each half-yearly accounting period respectively, make available and publish the long reports2 prepared in accordance with COLL 4.5.7R (1) to (3)2 (Contents of the annual long report) and COLL 4.5.8R (1) to (2)2 (Contents of the half-yearly long report).22(2) The reports referred to in (1) must:(a) be supplied free of charge to any person on request2;2(b)
(1) In accordance with Principle 6, this section is intended to ensure that the authorised fund manager pays due regard to its clients' interests and treats them fairly.(2) An authorised fund manager is responsible for valuing the scheme property of the authorised fund it manages and for calculating the price of units in the authorised fund. This section protects clients by:(a) setting out rules and guidance1 to ensure the prices1 of units in both a single-priced authorised fund
1(1) To determine the price of units the authorised fund manager must carry out a fair and accurate valuation of all the scheme property in accordance with the instrument constituting the fund9 and the prospectus.19(2) 1For a dual-priced authorised fund, each valuation of the scheme property must consist of two parts, carried out on an issue basis and a cancellation basis respectively.
(1) An authorised fund must not have fewer than two regular valuation points in any month and if there are only two valuation points in any month, the regular valuation points must be at least two weeks apart.(2) The prospectus of a scheme must contain information about its regular valuation points for the purposes of dealing in units in accordance with COLL 4.2.5R (16) (Table: contents of the prospectus).(3) Where a scheme operates limited redemption arrangements, (1) does not
(1) An authorised fund manager must ensure that the1price of a unit of any class is calculated:1(a) 1by reference to the net value of the scheme property; and(b) 1in accordance with the provisions of both the instrument constituting the fund9 and the prospectus.9(2) Any unit price calculated in accordance with (1) must be expressed in a form that is accurate to at least four significant figures.(3) 1For each class of units in a single-priced authorised fund, a single price must
1The authorised fund manager of a single-priced authorised fund must not: (1) sell a unit for more than the price of a unit of the relevant class at the relevant valuation point, to which may be added any preliminary charge permitted and any payment made under 10COLL 6.3.8 R; or(2) redeem a unit for less than the price of a unit of the relevant class at the relevant valuation point, less any redemption charge permitted and any deduction under 10COLL 6.3.8 R.
(1) 1The authorised fund manager of a dual-priced authorised fund must not:(a) sell a unit for more than the maximum sale price of a unit of the relevant class at the relevant valuation point10; or (b) redeem a unit for less than the cancellation price of a unit of the relevant class at the relevant valuation point, less any redemption charge permitted10.(2) The maximum sale price of units under (1)(a) is the total of:(a) the issue price; and(b) the current preliminary charge.(3)
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. |
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3The authorised fund manager of a qualifying money market fund or a short-term money market fund valuing scheme property on an amortised cost basis7 must: (1) carry out a valuation of the scheme property on a mark to market basis at least once every week and at the same valuation point used to value the scheme property on an amortised cost basis; and(2) ensure that the value of the scheme property when valued on a mark to market basis does not differ by more than 0.5% from the
3The authorised fund manager should advise the depositary when the mark to market value of a qualifying money market fund or a short-term money market fund valuing scheme property on an amortised cost basis 7varies from its amortised cost value by 0.1%, 0.2% and 0.3% respectively. The authorised fund manager of a qualifying money market fund or short-term money market fund7 should agree procedures with the depositary designed to stabilise the value of the scheme in these even
(1) In this chapter, the value of the scheme property of a UCITS schememeans the net value determined in accordance with COLL 6.3 (Valuation and pricing), after deducting any outstanding borrowings, whether immediately due to be repaid or not.(2) When valuing the scheme property for the purposes of this chapter:(a) the time as at which the valuation is being carried out ("the relevant time") is treated as if it were a valuation point, but the valuation and the relevant time do
7A unit in a closed end fund shall be taken to be a transferable security for the purposes of investment by a UCITS scheme, provided it fulfils the criteria for transferable securities set out in COLL 5.2.7A R, and either:(1) where the closed end fund is constituted as an investment company or a unit trust:(a) it is subject to corporate governance mechanisms applied to companies; and(b) where another person carries out asset management activity on its behalf, that person is subject
(1) 7An authorised fund manager should not invest the scheme property of a UCITS scheme in units of a closed end fund for the purpose of circumventing the investment limits set down in this section.(2) When required to assess whether the corporate governance mechanisms of a closed end fund in contractual form are equivalent to those applied to companies, the authorised fund manager should consider whether the contract on which the closed end fund is based provides its investors
(1) 7The authorised fund manager should assess the liquidity of a money-market instrument in accordance with CESR's UCITS eligible assets guidelines with respect to article 4(1) of the UCITS eligible assets Directive.(2) Where an approved money-market instrument forms part of the scheme property of a qualifying money market fund, short-term money market fund or money market fund,12 the authorised fund manager should adequately monitor that the instrument continues to be of high
12The ability to hold up to 10% of the scheme property in ineligible assets under COLL 5.2.8 R (4) is subject to the following limitations:(1) for a qualifying money market fund, the 10% restriction is limited to high quality money market instruments with a maturity or residual maturity of not more than 397 days, or regular yield adjustments consistent with such a maturity, and with a weighted average maturity of no more than 60 days;(2) for a short-term money market fund or a
(1) This rule applies in respect of a transferable security or an approved money-market instrument (“such securities”) that is issued by:21(a) 21an EEA State;(b) 21a local authority of an EEA State;(c) 21a non-EEA State; or(d) 21a public international body to which one or more EEA States belong.(2) Where no more than 35% in value of the scheme property is invested in such securities issued by any one body, there is no limit on the amount which may be invested in such securities
(1) Where:(a) an investment or disposal is made under COLL 5.2.15 R; and(b) there is a charge in respect of such investment or disposal;the authorised fund manager of the UCITS scheme making the investment or disposal must pay the UCITS scheme the amounts referred to in (2) or (3) within four business days following the date of the agreement to invest or dispose. (2) When an investment is made, the amount referred to in (1) is either:14(a) any amount by which the consideration
(1) 7An index based on derivatives on commodities or an index on property may be regarded as a financial index of the type referred to in COLL 5.2.20R (2)(f) provided it satisfies the criteria for financial indices set out in COLL 5.2.20A R.(2) If the composition of an index is not sufficiently diversified in order to avoid undue concentration, its underlying assets should be combined with the other assets of the UCITS scheme when assessing compliance with the requirements on
(1) In relation to a UCITS scheme which is an umbrella, the provisions in COLL 5.2 to COLL 5.5 apply to each sub-fund as they would for an authorised fund, except the following rules which apply at the level of the umbrella only:(a) COLL 5.2.27 R (Significant influence for ICVCs);(b) COLL 5.2.28 R (Significant influence for authorised fund managers of AUTs or ACSs17); and17(c) COLL 5.2.29 R (Concentration).(2) A sub-fund may invest in or dispose of units of14 another sub-fund
19Authorised fund managers of UCITS schemes are advised that ESMA has issued guidelines which, in accordance with the UCITS implementing Directive, authorised fund managers should comply with in applying the rules in this section in relation to UCITS schemes:Guidelines concerning eligible assets for investment by UCITS: The classification of hedge fund indices as financial indices (CESR/07-434)20https://www.esma.europa.eu/sites/default/files/library/2015/11/07_434.pdf20Guidelines
112(1) LR 11.1.7 R to LR 11.1.11 R do not apply to an arrangement between a closed-ended investment fund and its investment manager or any member of that investment manager's group4 where the arrangement is such that each invests in or provides finance to an entity or asset and the investment or provision of finance is either:2(a) made at the same time and on substantially the same economic and financial terms; or2(b) referred to in the closed-ended investment fund's published
8The FSCS may at any time impose a MERS levy provided that the FSCS has reasonable grounds for believing that the funds available to it to meet relevant expenses are or will be insufficient, taking into account relevant expenses incurred or expected to be incurred in the 12 months following the date of the levy.
(1) The authorised fund manager and the depositary of a charity authorised investment fund may establish an income reserve account for the scheme if this is provided for in:(a) the instrument constituting the fund; and (b) the prospectus.(2) (a) The authorised fund manager may instruct the depositary to transfer up to 15% of the income available for allocation or distribution on an annual income allocation date to the income reserve account. (b) Any income transferred under (a)
The authorised fund manager of a charity authorised investment fund with an income reserve account must not allow a payment that has been allocated to income property in the first instance to be made from the capital account if that payment could be met, in whole or in part, by transferring income from the income reserve account to the income account.
(1) The authorised fund manager and depositary of a charity authorised investment fund may adopt a total return approach to the allocation or distribution of income where this is provided for in:(a) the instrument constituting the fund; and (b) the prospectus.(2) Under a total return approach the authorised fund manager may make transfers between the capital account and the income account in addition to those in COLL 6.8.3R(3A)(c).(3) The authorised fund manager and depositary
If the charity authorised investment fund has adopted a total return approach to the allocation or distribution of income, the authorised fund manager must ensure that the prospectus contains:(1) the pre-determined target of the income available for allocation or distribution in any annual accounting period; and(2) an explanation of how the target amount is consistent with the investment objective and policy and the distribution policy of the scheme.
(1) No more than 10%, in aggregate, of the value of the total assets of an applicant1 at admission may be invested in other listed5closed-ended investment funds.15(2) The restriction in (1) does not apply to investments in closed-ended investment funds which themselves have published investment policies to invest no more than 15% of their total assets in other listed5closed-ended investment funds.5
1(1) If an applicant principally invests its funds in another company or fund that invests in a portfolio of investments (a "master fund"), the applicant must ensure that:1(a) the master fund's investment policies are consistent with the applicant's published investment policy and provide for spreading investment risk; and1(b) the master fund in fact invests and manages its investments in a way that is consistent with the applicant's published investment policy and spreads investment
The board of directors or equivalent body of the applicant must be able to act independently:11(1) of any investment manager appointed to manage investments of the applicant; and11(2) if the applicant (either directly or through other intermediaries) has an investment policy of principally investing its funds in another company or fund that invests in a portfolio of investments ("a master fund"), of the master fund and of any investment manager of the master fund.11
1For the purposes of LR 15.2.11 R and LR 15.2.12-A R, the following are not independent:33(1) directors, employees, partners, officers or professional advisers of or to:(a) an investment manager of the applicant; or(b) a master fund or investment manager referred to in LR 15.2.11R (2); or(c) any other company in the same group as the investment manager of the applicant; or(2) directors, employees or professional advisers of or to other investment companies or funds that are:(a)
In addition to the requirements in LR 9.8 (Annual financial report), a closed-ended investment fund must include in its annual financial report:(1) a statement (including a quantitative analysis) explaining how it has invested its assets with a view to spreading investment risk in accordance with its published investment policy; (2) a statement, set out in a prominent position, as to whether in the opinion of the directors, the continuing appointment of the investment manager
(1) This rule applies to a closed-ended investment fund that has no executive directors.(2) A closed-ended investment fund's statement required by LR 9.8.6R (6) need not include details about the following principles and provisions of the UK Corporate Governance Code3 except to the extent that those principles or provisions relate specifically to non-executive directors:3(a) Principle D.12 (including Code Provisions D.1.12 to D.1.5):2 and222(b) Principle D.22 (including Code Provisions
A closed-ended investment fund must notify to 1a RIS within five business days of the end of each quarter a list of all investments in other listedclosed-ended investment funds, as at the last business day of that quarter, which themselves do not have stated investment policies to invest no more than 15% of their total assets in other listedclosed-ended investment funds.11
1This chapter applies to: (1) an authorised fund manager of a charity authorised investment fund; (2) an ICVC that is a charity authorised investment fund;(3) the depositary of a charity authorised investment fund; and(4) the authorised fund manager and the depositary of an authorised fund that was previously registered as a charity with the Charity Commission.
(1) 1The restrictions in this section apply in relation to the following investments:(a) a contingent convertible instrument; or(b) a security issued by a CoCo fund; or(c) a beneficial interest in either of (a) or (b).(2) A firm must not:(a) sell an investment to a retail client in the EEA; or(b) communicate or approve an invitation or inducement to participate in, acquire or underwrite an investment where that invitation or inducement is addressed to or disseminated in such a
(1) For the purposes of any assessments or certifications required by the exemptions in COBS 22.3.2R, any references in COBS 4.12 provisions to non-mainstream pooled investments must be read as though they are references to contingent convertible instruments or CoCo funds, as relevant.(2) If the firm is relying on the high net worth investor, the sophisticated investor or the self-certified sophisticated investor exemption to comply with this section, the statement the investor
A firm wishing to certify a retail client as a sophisticated investor for the purposes of this section should note that, in the FCA’s view, it is likely that the only retail clients with the requisite sophistication in relation to contingent convertible instruments or CoCo funds are those with significant experience with investment in multiple types of complex financial instruments and who have sufficient understanding of how credit institutions are run, including risks to the
A firm which carries on an activity which is subject to this section must comply with the following record-keeping requirements:(1) the person allocated the compliance oversight function in the firm must make a record at or near the time of the activity certifying it complies with the restrictions set out in this section;(2) the making of the record required in (1) may be delegated to one or more employees of the firm who report to, and are supervised by, the person allocated
(1) The diagram in COLL 4.3.3 G explains how an authorised fund manager should treat changes it is proposing to a scheme and provides an overview of the rules and guidance in this section.(2) Regulation 21 of the OEIC Regulations (The Authority's approval for certain changes in respect of a company), section 261Q of the Act (Alteration of contractual schemes and changes of operator or depositary)5 and section 251 of the Act (Alteration of schemes and changes of manager or trustee)
(1) Any change may be fundamental depending on its degree of materiality and effect on the scheme and its unitholders. Consequently an authorised fund manager will need to determine whether in each case a particular change is fundamental in nature or not.(2) For the purpose of COLL 4.3.4R (2)(a) to COLL 4.3.4R (2)(c) a fundamental change to a scheme is likely to include:(a) any proposal for a scheme of arrangement referred to in COLL 7.6.2 R (Schemes of arrangement: requirements);(b)
(1) Changes may be significant depending in each case on their degree of materiality and effect on the scheme and its unitholders. Consequently the authorised fund manager will need to determine whether in each case a particular change is significant in nature or not.(2) For the purpose of COLL 4.3.6 R a significant change is likely to include:(a) a change in the method of price publication;(b) a change in any operational policy such as dilution policy or allocation of payments
(1) The circumstances causing a notifiable change may or may not be within the control of the authorised fund manager.(2) For the purpose of COLL 4.3.8 R (Notifiable changes) a notifiable change might include:(a) a change of named investment manager where the authorised fund has been marketed on the basis of that individual's involvement;(b) a significant political event which impacts on the authorised fund or its operation;(c) a change to the time of the valuation point;(d) the