Table 2ZA: AIFMD activities |
Part II RAO Activities |
Part III RAO Investments |
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1. |
Article 51ZC |
N/A (activity relates to property of any kind) |
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2. |
Management of portfolios of investments, including those owned by pension funds and institutions for occupational retirement in accordance with article 19(1) of Directive 2003/41/EC, in accordance with mandates given by investors on a discretionary client-by-client basis (Note 2). |
Articles 14, 21, 25, 37, 40 (arranging only), 64 |
Articles 76 to 81, 82B,12 83 to 85, 89 |
3. |
Investment advice (Note 2). |
Articles 53(1)10, 64 |
Articles 76 to 81, 82B,12 83 to 85, 89 |
4. |
Safe-keeping and administration in relation to shares or units of collective investment undertakings. |
Articles 40, 45, 64 |
Articles 76 to 81, 82B,12 83 to 85, 89 |
5. |
Reception and transmission or orders in relation to financial instruments. |
Articles 25(1), 64 |
Articles 76 to 81,82B,12 83 to 85, 89 |
Note 1. See FUND 1.4.2 R to FUND 1.4.4 R for further information in relation to the activities that full-scope UK AIFMs are able to perform. |
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Note 2. See FUND 1.4.5 G for the position with respect to assets which are not financial instruments. |
Related provisions for IPRU-INV 11.3.17
1Sections 87A(2), (2A), 2(3) and (4) of the Act provide for the general contents of a prospectus:
(2) |
The necessary information is the information necessary to enable investors to make an informed assessment of – |
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(a) |
the assets and liabilities, financial position, profits and losses, and prospects of the issuer of the transferable securities and of any guarantor; and |
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(b) |
the rights attaching to the transferable securities.2 |
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2(2A) |
If, in the case of transferable securities to which section 87 applies, the prospectus states that the guarantor is a specified EEA State, the prospectus is not required to include other information about the guarantor. |
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(3) |
The necessary information must be presented in a form which is comprehensible and easy to analyse. |
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(4) |
The necessary information must be prepared having regard to the particular nature of the transferable securities and their issuer.6 266 |
1Liquid Capital Requirement = Initial Capital Requirement + Capital Surcharge Calculation of Initial Capital Requirement ICR = (√AUA) x K1 |
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Where |
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ICR |
means Initial Capital Requirement |
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AUA |
means Assets Under Administration calculated as the sum of the most recent annual valuations over the preceding 12 months of the personal pension schemes administered by the firm, and adjusted to include any revaluation of assets that may occur between the date of the most recent annual valuation and the date when the firm must calculate its AUA. A firm must calculate its AUA quarterly in line with the dates when it has to submit its regulatory capital reporting form in accordance with SUP 16.12 (Integrated Regulatory Reporting). Where it is not possible to value an asset (for example because there is no readily available market price), the most recent market valuation should be used. Where it would be reasonable to assume that the value of the asset has changed by more than 15% since the most recent market valuation, a firm should instead use a reasonable estimate. This is without prejudice to any requirement on a firm to provide a personal pension scheme member with accurate and timely valuations of their portfolios. |
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K1 |
is set subject to the firm’s AUA as specified in the below table: |
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AUA |
K1 constant to be applied |
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<£100m |
10 |
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£100-£200m |
15 |
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>£200m |
20 |
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When K1 changes due to an increase in AUA, in accordance with the thresholds in this table, the firm must apply the new K1 value within six months following the date on which its AUA exceeded the threshold of its previous K1 value. |
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Calculation of Capital Surcharge |
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CS =(√P) x K2 x ICR |
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Where |
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CS |
means Capital Surcharge |
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P |
means the fraction of personal pension schemes administered by the firm which contain one or more asset types which do not appear in the list of Standard Assets below, at the most recent quarter end. For example, if a quarter of personal pensions contained non-Standard Assets, this would be inputted in to the formula as 0.25. |
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K2 |
is set at 2.5. |
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ICR |
means the Initial Capital Requirement calculated as above. |
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Standard Assets The List of Standard Assets is as follows (subject to Note 1): Cash Cash funds Exchange traded commodities Government & local authority bonds and other fixed interest stocks Investment notes (structured products) Shares in Investment trusts Managed pension funds National Savings and Investment products Permanent interest bearing shares (PIBs) Physical gold bullion Real estate investment trusts (REITs) Securities2 admitted to trading on a regulated venue UK commercial property |
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NOTE 1: |
A Standard Asset must be capable of being accurately and fairly valued on an ongoing basis and readily realised within 30 days, whenever required. |
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NOTE 2: |
In addition to complying with the provisions of IPRU-INV 5.8, in accordance with IPRU-INV 5.3.2R, a firm must hold its liquid capital in financial resources as follows: |
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ICR |
realisable within 12 months; and |
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CS |
realisable within 30 days |
Table There are some frequently asked questions about the application of the definition of an open-ended investment company in the following table. This table belongs to PERG 9.2.4 G (Introduction).
Question |
Answer |
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1 |
Can a body corporate be both open-ended and closed-ended at the same time? |
In the FCA's view, the answer to this question is 'no'. The fact that the investment condition is applied to BC (rather than to particular shares in, or securities of, BC) means that a body corporate is either an open-ended investment company as defined in section 236 of the Act or it is not. Where BC is an open-ended investment company, all of its securities would be treated as units of a collective investment scheme for the purpose of the Act. A body corporate formed in another jurisdiction may, however, be regarded as open-ended under the laws of that jurisdiction but not come within the definition of an open-ended investment company in section 236 (and vice versa). |
2 |
Can an open-ended investment company become closed-ended (or a closed-ended body become open-ended)? |
In the FCA's view, the answer to this question is 'yes'. A body corporate may change from open-ended to closed-ended (and vice versa) if, taking an overall view, circumstances change so that a hypothetical reasonable investor would consider that the investment condition is no longer met (or vice versa). This might happen where, for example, an open-ended investment company stops its policy of redeeming shares or securities at regular intervals (so removing the expectation that a reasonable investor would be able to realise his investment within a period appearing to him to be reasonable). See also PERG 9.7.5 G. |
3 |
Does the liquidation of a body corporate affect the assessment of whether or not the body is an open-ended investment company? |
The FCA considers that the possibility that a body corporate that would otherwise be regarded as closed-ended may be wound up has no effect at all on the nature of the body corporate before the winding up. The fact that, on a winding up, the shares or securities of any investor in the body corporate may be converted into cash or money on the winding up (and so 'realised') would not, in the FCA's view, affect the outcome of applying the expectation test to the body corporate when looked at as a whole. The answer to Question 4 explains that investment in a closed-ended fixed term company shortly before its winding up does not, in the FCA view, change the closed-ended nature of the company. For companies with no fixed term, the theoretical possibility of a winding up at some uncertain future point is not, in the FCA's view, a matter that would generally carry weight with a reasonable investor in assessing whether he could expect to be able to realise his investment within a reasonable period. |
4 |
Does a fixed term closed-ended investment company become an open-ended investment company simply because the fixed term will expire? |
In the FCA's view, the answer to this is 'no'. The termination of the body corporate is an event that has always been contemplated (and it will appear in the company's constitution). Even as the date of the expiry of the fixed term approaches, there is nothing about the body corporate itself that changes so as to cause a fundamental reassessment of its nature as something other than closed-ended. Addressing this very point in parliamentary debate, the Economic Secretary to the Treasury stated that the "aim and effect [of the definition] is to cover companies that look, to a reasonable investor, like open-ended investment companies". The Minister added that "A reasonable investor's overall expectations of potential investment in a company when its status with respect to the definition is being judged will determine whether it meets the definition. The matter is therefore, definitional rather than one of proximity to liquidation". (Hansard HC, 5 June 2000 col 124). |
5 |
In what circumstances will a body corporate that issues a mixture of redeemable and non-redeemable shares or securities be an open-ended investment company? |
In the FCA's view, the existence of non-redeemable shares or securities will not, of itself, rule out the possibility of a body corporate falling within the definition of an open-ended investment company. All the relevant circumstances will need to be considered (see PERG 9.6.4 G, PERG 9.2.8.8G and PERG 9.8.9 G). So the following points need to be taken into account.
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6 |
Does "realised on a basis calculated wholly or mainly by reference to..." in section 236(3)(b) apply to an investor buying investment trust company shares traded on a recognised investment exchange because of usual market practice that the shares trade at a discount to asset value? |
In the FCA's view, the answer is 'no' (for the reasons set out in PERG 9.9.4 G to PERG 9.9.6 G). |
7 |
Does the practice of UK investment trust companies buying back shares result in them becoming open-ended investment companies? |
In the FCA's view, it does not, because its actions will comply with company law: see section 236(4) of the Act and PERG 9.6.5 G. |
8 |
Would a body corporate holding out redemption or repurchase of its shares or securities every six months be an open-ended investment company? |
In the FCA's view a period of six months would generally be too long to be a reasonable period for a liquid securities fund. A shorter period affording more scope for an investor to take advantage of any profits caused by fluctuations in the market would be more likely to be a reasonable period for the purpose of the realisation of the investment (in the context of the 'expectation' test, see PERG 9.8 and, in particular, PERG 9.8.9 G which sets out the kind of factors that may need to be considered in applying the test). |
9 |
Would an initial period during which it is not possible to realise investment in a body corporate mean that the body corporate could not satisfy the investment condition? |
In the FCA's view, the answer to that question is 'no'. In applying the investment condition, the body corporate must be considered as a whole (see PERG 9.6.3 G). At the time that the shares or securities in a body corporate are issued, a reasonable investor may expect that he will be able to realise his investment within a reasonable period notwithstanding that there will first be a short-term delay before he can do so. Whether or not the 'expectation test' is satisfied will depend on all the circumstances (see PERG 9.8.9 G). |