Related provisions for CREDS 3A.5.9

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DEPP 6.5A.2GRP
(1) The FCA2 will determine a figure that reflects the seriousness of the breach. In many cases, the amount of revenue generated by a firm from a particular product line or business area is indicative of the harm or potential harm that its breach may cause, and in such cases the FCA2 will determine a figure which will be based on a percentage of the firm’s revenue from the relevant products or business areas. The FCA2 also believes that the amount of revenue generated by a firm
DEPP 6.5A.3GRP
(1) The FCA2 may increase or decrease the amount of the financial penalty arrived at after Step 2, but not including any amount to be disgorged as set out in Step 1, to take into account factors which aggravate or mitigate the breach. Any such adjustments will be made by way of a percentage adjustment to the figure determined at Step 2.2(2) The following list of factors may have the effect of aggravating or mitigating the breach:(a) the conduct of the firm in bringing (or failing
PERG 7.3.1GRP
6(1) Article 53(1) of the Regulated Activities Order (Advising on investments) deals with giving advice in relation to a security, a structured deposit or a relevant investment.9(2) A summary can be found in PERG 8.24 (Advising on investments). PERG 8.25 to PERG 8.30B give more detail.9(3) As described in PERG 8.24, for certain firms, the regulated activity only covers giving personal recommendations.9
PERG 7.3.4GRP
In the FCA's view, for a person to be carrying on the business of advising on investments or advising on a home finance transaction1 he will usually need to be doing so with a degree of regularity and for commercial purposes – that is to say, he will normally be expecting to gain some kind of a direct or indirect financial benefit. But, in the FCA's view it is not necessarily the case that advice provided free of charge will not amount to a business. Advice is often given 'free'
SYSC 19B.1.6RRP
An AIFM must ensure that its remuneration policy is in line with the business strategy, objectives, values and interests of the AIFM and the AIFs it manages or the investors of such AIFs, and includes measures to avoid conflicts of interest.[Note: paragraph 1(b) of Annex II of AIFMD]
SYSC 19B.1.17RRP
(1) Subject to the legal structure of the AIF and the instrument constituting the fund, an AIFM must ensure that a substantial portion, and in any event at least 50% of any variable remuneration, consists of units or shares of the AIF concerned, or equivalent ownership interests, or share-linked instruments or equivalent non-cash instruments. However, if the management of AIFs accounts for less than 50% of the total portfolio managed by the AIFM, the minimum of 50 % does not apply.(2)
PERG 5.8.2GRP
For advice to fall within article 53(1)2, it must:(1) relate to a particular contract of insurance (that is, one that a person may enter into);(2) be given to a person in his capacity as an investor or potential investor;(3) be advice (that is, not just information); and(4) relate to the merits of a personbuying, selling, subscribing for or underwriting (or exercising any right to do so) a contract of insurance or rights to or interests in life policies.
PERG 5.8.6GRP
For the purposes of article 53(1)2, advice must be given to a person in that person’s’3 capacity as an investor or potential investor (which, in the context of contracts of insurance, will mean as policyholder or potential policyholder). So, article 53(1)2 will not apply where advice is given to persons who receive it as:(1) an adviser who will use it only to inform advice they give3 to others; or(2) a journalist or broadcaster who will use it only for journalistic purposes
COLL 6.6B.17RRP
The depositary must ensure that the cash flows of each UCITS scheme are properly monitored and that:(1) all payments made by, or on behalf of, investors upon the subscription of units of the scheme have been received; (2) all cash of the scheme has been booked in cash accounts which are: (a) opened in the name of:(i) the scheme; or(ii) the authorised fund manager, acting on behalf of the scheme; or(iii) the depositary acting on behalf of the scheme; and(b) at:(i) a central bank;
COLL 6.6B.26RRP
A depositary may delegate custody tasks in relation to UCITS custodial assets to an entity in another4 country even though that entity does not satisfy the conditions in COLL 6.6B.25R(4)(b)(i) if: (1) the law of that 4 country requires those UCITS custodial assets to be held in custody by a local entity; (2) no local entity satisfies the conditions in COLL 6.6B.25R(4)(b)(i);(3) the depositary delegates its functions to such a local entity only: (a) to the extent required by the
SUP App 3.9.5GRP

3Table 2: MiFIDinvestment services and activities

Part II RAO Activities13

Part III RAO Investments

A MiFIDinvestment services and activities

1.

Reception and transmission of orders in relation to one or more financial instruments

Article 252

Article 76-81, 82B,12 83-85, 89

2.

Execution of orders on behalf of clients

Article 14, 21

A Article 76-81,82B,12 83-85, 89

3.

Dealing on own account

Article 14

Article 76-81, 82B,12 83-85, 89

4.

Portfolio management

Article 37 (14, 21, 25 - see Note 1) 2

Article 76-81, 82B,12 83-85, 89

5.

Investment advice

Article 53(1)10

Article 76-81, 82B,12 83-85, 89

6.

Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis

Article 14, 21

Article 76-81, 82B,12 83-85, 89

7.

Placing of financial instruments without a firm commitment basis

Article 21, 25

Article 76-81, 82B,12 83-85, 89

8.

Operation of Multilateral Trading Facilities

Article 25D5 (see Note 2)

5

Article 76-81, 82B,12 83-85, 89

12 9.

Operation of an OTF

Article 25DA (see Note 3)

Article 77, 77A, 78, 79, 80, 81, 82B, 83-85, 89

Ancillary services

Part II RAO Activities

Part III RAO Investments

1.

Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management

Article 40, 45, 64

Article 76-81, 82B,12 83-85, 89

2.

Granting credits or loans to an investor to allow him to carry out a transaction in one or more of the relevant instruments where the firm granting the credit or loan is involved

3.

Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings

Article 14, 21, 25, 53(1)10, 64

Article 76-80, 82B,12 83-85, 89

4.

Foreign exchange services where these are connected with the provision of investment services

Article 14, 21, 25, 53(1)10, 64

Article 83-85, 89

5.

Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments

Article 53(1)10, 64 (see Note 4)13

Article 76-81, 82B,12 83-85, 89

6.

Services related to underwriting

Article 25, 53(1)10, 64

Article 76-81, 82B,12 83-85, 89

7.

Investment services and activities as well as ancillary services of the type included under Section A or B of Annex I related to the underlying of the derivatives included under Section C 5, 6, 7 and 10-where these are connected to the provision of investment or ancillary services.

Article 14, 21, 25, 25D,5 37, 53(1)10, 64

5

Article 83 and 84

Note 1. A firm may also carry on these other activities when it is managing investments.2

Note 2. A firm operating an MTF under article 25D5 does not need to have a permission covering other regulated activities, unless it performs other regulated activities in addition to operating an MTF.

5

Note 3. A firm operating an OTF under article 25DA does not need to have a permission covering other regulated activities, unless it performs other regulated activities in addition to operating an OTF.12

13Note 4: A firm which provides investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments does not need permission under article 53(1) of the Regulated Activities Order if it is appropriately authorised (see article 53(1) to (1D) of the Regulated Activities Order).

SUP App 3.9.5AGRP

Table 2ZA: AIFMD activities

Part II RAO Activities

Part III RAO Investments

1.

AIFM management functions.

Article 51ZC

N/A (activity relates to property of any kind)

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.

Note 2. See FUND 1.4.5 G for the position with respect to assets which are not financial instruments.
COLL 4.7.2RRP
(1) An authorised fund manager must6 draw up a short document in English containing key investor information6 for investors:6(a) in each UCITS scheme which it manages (a key investor information document); and6(b) in each KII-compliant NURS which it manages (a NURS-KII document).6(2) The words "key investor information" must be clearly stated in the key investor information document and NURS-KII document6.(3) Key investor information must include appropriate information about
COLL 4.7.6GRP
(1) Section 90ZA of the Act (Liability for key investor information) provides that a person will not incur civil liability solely on the basis of the key investor information document, including any translation of it, unless it is misleading, inaccurate or inconsistent with the relevant parts of the prospectus.(2) Article 20 of the KII Regulation prescribes the wording of a warning to investors that must be included in the "practical information" section of the key investor information
BIPRU 7.2.48HGRP
3Originators, investors and sponsors of securitisations in the trading book will have to meet the requirements of BIPRU 9.3.1A R, BIPRU 9.3.15 R to BIPRU 9.3.20 R and BIPRU 9.15.
BIPRU 7.2.48IGRP
(1) 3Subject to BIPRU 7.2.48J G, BIPRU 9.15.9 R and BIPRU 9.15.10 R, where the investor, originator or sponsor of a securitisation fails to meet any of the requirements in BIPRU 9.3.18 R to BIPRU 9.3.20 R (Disclosure requirements) and BIPRU 9.15.11 R to BIPRU 9.15.16 R (investor due diligence requirements) in any material respect by reason of its negligence or omission, the appropriate regulator will use its powers under section 55J (Variation etc. on the Authority's own initiative)
PERG 2.6.11AGRP
6Alternative finance investment bonds (defined in article 77A of the Regulated Activities Order and referred to in the Handbook as alternative debentures) are a form of Sharia compliant bond (known as sukuk in the plural or sakk in the singular) which are intended to be regulated in an equivalent manner to conventional debt securities, where appropriate. Sukuk arrangements allow assets to be held for the benefit of investors in certificates issued by a company. The benefits
PERG 2.6.11HGRP
  1. (1)

    The main provision within the definition of alternative debenture arrangements that seeks to ensure that only instruments that display the characteristics of a debt security can be alternative debentures is set out at PERG 2.6.11CG (5). It provides that the amount of additional payments under the arrangements must not exceed an amount which would, at the time the bond is issued, be a reasonable commercial return on a loan of capital. Where the return is not fixed at the outset, it is the maximum possible amount of the additional payments that must be considered in deciding this question. The following example demonstrates how this condition should be approached.

    2. Example

    ABC Ltd is a property development company. It wishes to increase its portfolio on a short-term basis. It issues 5-year sukuk to investors and uses the proceeds to buy the head lease of a commercial property. The rental income from the lease is distributed to investors in proportion to their holdings without a cap on the level of return. After 5 years, the head lease is sold on at a profit and the proceeds shared between investors.

    In this example, the investors participate directly in the success or failure of the underlying property business. The sakk is not really in the nature of a debt instrument. It is unlikely to be an alternative debenture as:

    • additional payments under the arrangements would exceed a reasonable commercial return on a loan of the capital.

      Further, where the return is not fixed at the outset, it is the maximum possible amount of the additional payments that must be considered. Here, the issue terms of the sukuk impose no upper limit on the amount of the periodic distributions: a sakk holder subscribing 1,000 may, in a year, get back 200 or 2,000 or nothing depending on the rental market. The maximum potential return is clearly in excess of a reasonable commercial return on a loan of 1,000; and

    • the arrangements have not been admitted to an official list or admitted to trading on a regulated market or recognised investment exchange (see PERG 2.6.11CG (6)).
  2. (2)

    If, in the above example, investors returns were capped at 500 per sakk per year, then this is the amount that must be considered in deciding whether the return exceeds a reasonable commercial return on a loan, even where the amounts actually received turn out to be far lower.

  3. (3)

    In applying the reasonable commercial return test, the sakk should be compared to a hypothetical loan to the issuer on similar terms and carrying similar risks. For example, a conventional security convertible into shares will normally carry a lower rate of interest because the conversion right has a value. The return on an exchangeable or convertible sakk should be measured against the return on an equivalent exchangeable or convertible debt security.

  4. (4)

    The risk to investors in sukuk may vary slightly from that of a conventional bond in some instances. This may be due to the fact that sukuk holders only have recourse to the bond assets or some other structural feature which results in the risk profile being higher. In such instances it may be justifiable for the rate of return to be slightly higher than that of a conventional loan.

  5. (5)

    As with any financial instrument, the pricing of sukuk will depend on the issuers view of the market at the time of issue and reasonable commercial return may vary depending on the issuer and the economic circumstances prevalent at the time of issue.

COLL 4.5.8ABUKRP

21

Transparency of collective investment undertakings in periodical reports

1.

UCITS management companies, UCITS investment companies, and AIFMs shall inform investors on the use they make of SFTs and total return swaps in the following manner:

(a)

for UCITS management companies or UCITS investment companies in the half-yearly and annual reports referred to in [COLL 4.5.3R (Preparation of long reports)]21;

(b)

for AIFMs in the annual report referred to in [FUND 3.3.2R (Provision of annual report).]21

2.

The information on SFTs and total return swaps shall include the data provided for in Section A of the Annex.

[Note: article 13(1) and 13(2) of the Securities Financing Transactions Regulation and article 3 for relevant definitions]
COLL 4.5.15RRP
(1) 4The authorised fund manager of a UCITS scheme which is a feeder UCITS must:(a) where requested by an investor, provide copies of the annual and half-yearly long reports of its master UCITS free of charge; and(b) file copies of the annual and half-yearly long reports of its master UCITS with the FCA .(2) Except where an investor requests paper copies or the use of electronic communications is not appropriate, the annual and half-yearly long reports of its master UCITS may
COLL 5.6.10ARRP
(1) 21A non-UCITS retail scheme that is not a feeder NURS may, if the conditions in (2) to (5) are met, invest in units of:(a) a feeder UCITS; or(b) a feeder NURS; or(c) a schemededicated to units in a single property authorised investment fund; or(d) a schemededicated to units in a recognised scheme.(2) (a) The relevant master UCITS must comply with COLL 5.2.13R(2), (3) and (4) as if it were the second scheme for the purpose of that rule.(b) The relevant qualifying master scheme,
COLL 5.6.10BGRP
21When determining whether an investment is no less advantageous for COLL 5.6.10AR(5)(b), an authorised fund manager should have regard in particular to: (1) the risk profile of the non-UCITS retail scheme; (2) the total costs borne by the non-UCITS retail scheme; and (3) the benefits to investors of investing in units of one or more schemes permitted under COLL 5.6.10AR (1)(a) to (d).
COLL 12.3.5RRP
An EEA UCITS management company that manages a UCITS scheme must comply with the rules of the FCAHandbook which relate to the constitution and functioning of the UCITS scheme (the fund application rules), as follows:(1) the setting up and authorisation of the UCITS scheme (COLL 1 (Introduction), COLL 2 (Authorised fund applications), COLL 3 (Constitution), COLL 6.5 (Appointment and replacement of the authorised fund manager and the depositary), COLL 6.6 (Powers and duties of
PERG 9.4.3GRP
In the FCA's view, it is the very existence of the body corporate that is the collective investment scheme. There are a number of statutory references that support this view. For example, it is clear that paragraph 21 of the Schedule to the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (SI 2001/1062) (Arrangements not amounting to a collective investment scheme) is drafted on the basis that it is the body corporate itself that is (or would
GEN 4.2.2GRP
There are other pre-contract information requirements outside this chapter, including:(1) for financial promotions, inthe financial promotion rules;55(2) for designated investment business, inCOBS 8 and COBS 8A14 (Client agreements), COBS 5 (Distance Communications), COBS 6 (Information about the firm, its services and remuneration), COBS 13 and 14 (which relate to product information)5 and CASS (Client assets);5(2A) for PRIIPs, a requirement under the PRIIPs Regulation to provide
COLL 8.6.5RRP
In relation to an ICVC, ACS2 or an AUT which is a qualified investor scheme, the provisions in COLL 7.6 (Schemes of arrangement) will apply as appropriate to the authorised fund manager, any other directors of the ICVC and the depositary as if COLL 7.6 applied to a qualified investor scheme and did not exclude unitholders becoming unitholders in another qualified investor scheme.
RCB 1.1.5GRP
Investors in regulated covered bonds may be able to take advantage of different regulatory treatments depending on what type of investor they are.
COLL 12.4.5RRP
(1) The authorised fund manager of a UCITS scheme whose units are being marketed in a Host State must ensure that investors within the territory of that Host State are provided with all the information and documents which it is required by the Handbook to provide to investors in the United Kingdom.(2) The information and documents referred to in (1) must be provided to investors in the way prescribed by the laws, regulations or administrative provisions of the Host State and in
LR 4.2.1GRP
Section 80 (1) of the Act (general duty of disclosure in listing particulars) requires listing particulars submitted to the FCA to contain all such information as investors and their professional advisers would reasonably require, and reasonably expect to find there, for the purpose of making an informed assessment of:(1) the assets and liabilities, financial position, profits and losses, and prospects of the issuer of the securities; and(2) the rights attaching to the securi
PERG 8.11.6GRP
Some exemptions are based on the communicator believing on reasonable grounds that the recipient meets certain conditions. For example, articles 19(1)(a), 44, 47 and 49. What are reasonable grounds for these purposes will be a matter for the courts to decide. In the FCA's view, it would be reasonable for a communicator to rely on a statement made by a potential recipient that he satisfies relevant conditions. This is provided that there is no reason to doubt the accuracy of the
REC 2.1.4GRP

Location of recognition requirements and guidance

Recognition Requirements Regulations

Subject

Section in REC 2/other parts of the Handbook5

Regulation 6

Method of satisfying recognition requirements

2.2

Part I of the Schedule

UK RIE recognition requirements

Paragraph 1

Financial resources

2.3

Paragraph 2

Suitability

2.4

5Paragraphs 2A and 2B

Management Body

2.4A

Paragraphs 3, 3A, 3B, 3C, 3D, 3E, 3G and 3H5

Systems and controls, market making agreements, halting trading, direct electronic access, co-location services, fee structures, algorithmic trading, tick size regimes, synchronisation of business clocks5

2.5

Paragraphs 4(1), 4(2)(aa) and 4C5

22

General safeguards for investors and publication of data regarding execution of transactions5

2.6

Paragraph 4(2)(a)

Access to facilities

2.7

5

5

5

Paragraph 4(2)(c)

Availability of relevant information

2.12

Paragraph 4(2)(d)

Settlement

2.8

Paragraph 4(2)(e)

Transaction recording

2.9

2Paragraph 4(2)(ea)

Conflicts

2.5

Paragraph 4(2)(f) and 4(2)(fa)5

Financial crime and market abuse

2.10

Paragraph 4(2)(g)

Custody

2.11

Paragraph 4(3)

Definition of relevant information

2.12

5

2

5

5

5

2

5

5

Paragraph 6

Promotion and maintenance of standards

2.13

Paragraph 7

Rules and consultation

2.14

Paragraphs 7A and 9ZB (regulated markets only)5

2

Admission of financial instruments to trading

2.12

Paragraphs 7B, 7C and 9ZC (regulated markets only)5

2

Access to facilities

2.7

5Paragraphs 7BA & 7BB

Position management and position reporting re commodity derivatives

2.7A

2Paragraph 7D

Settlement and clearing facilitation services5

2.8

Paragraphs 7E and 7F5

2

Suspension and removal of financial instruments from trading

2.6

Paragraph 8

Discipline

2.15

Paragraph 9

Complaints

2.16

Paragraphs 9A, 9B, 9C, 9D, 9E, 9F, 9G, 9H and 9ZD5

2

Operation of a multilateral trading facility or an organised trading facility5

2.16A/MAR 5 and MAR 5A

5Paragraph 9ZA (regulated markets only)

Order execution

2.6

5Paragraph 9K

Provision of data reporting services

2.16B/ MAR 9

Part II of the Schedule

UK RIE default rules in respect of market contracts

2.174