COLLG 1
Overview
COLLG 1.1
Introduction
- 01/12/2004
About this guide
COLLG 1.1.1
See Notes
(1) This Collective Investment Scheme Information Guide (
COLLG
) contains some key facts on the regulation of collective investment schemes in the United Kingdom. It will
be of interest primarily to those who wish to gain a general understanding
of the regulatory regime governing these schemes.
(2) This guide is intended to complement the rules and guidance in the Collective Investment Schemes sourcebook (COLL).
It also explains
how an authorised firm should
go about applying for authorisation of a scheme under
the Act and
the OEIC Regulations.
(3) This guide does not contain information on unregulated schemes. Such schemes cannot be marketed to the general
public and are otherwise restricted in their promotion.
(4) The material in this guide is intended only as a summary of a number of significant legal provisions
affecting authorised collective
investment schemes. It does not constitute guidance under sections 157 and 158 of the Act and does not have the
status of the guidance in the Handbook.
This also means that GEN 2.2 (Interpreting
the Handbook) does not apply. If you have any doubt about any legal provision
you should seek appropriate legal advice.
(5) This guide italicises words that are defined in the Glossary that forms part
of the Handbook.
For the full definition of the term, the reader should consult the Glossary.
(6) The Overview is current as of January 2009. The Overview does not remove the need
for
firms
to keep up-to-date with regulatory developments
and to consider the potential impact on business of proposed changes - for example, the regulatory framework
of changes required by further European initiatives.
Structure of collective investment regulation in the United Kingdom
COLLG 1.1.2
See Notes
(1) There are three broad levels of regulation of collective investment schemes in the United Kingdom. These can be summarised as European regulation, UK legislation and regulation by the FSA. They should be viewed as a hierarchy of rules that, at each level, deals with more specific aspects of collective investment scheme regulation.
(2) European collective investment scheme product regulation was introduced in 1985 by the UCITS Directive and has been updated on several occasions by amendments to that Directive. If a scheme is established and authorised in the United Kingdom and complies with the UCITS Directive's provisions, it is a UCITS scheme and can be promoted throughout the EEA. However not all regulated collective investment schemes are UCITS schemes. COLLG 2 provides more detail on the scope and contents of the UCITS Directive.
(3) The main UK legislation is the Act (under which AUTs operate) and the OEIC Regulations (under which ICVCs operate). COLLG 3 provides details on the FSA's responsibilities under the Act; how a firm may go about applying for authorisation of a unit trust scheme or recognition of an overseas scheme; and what notifications are required to the FSA in terms of changes to those schemes . COLLG 4 provides details on the FSA's responsibilities under the OEIC Regulations; how a firm may go about applying for authorisation of an ICVC; and what notifications are required to the FSA in respect of changes to the ICVC.
What are regulated collective investment schemes?
COLLG 1.1.3
See Notes
Under section 238 of the Act (Restrictions
on promotion), only certain kinds of collective
investment schemes may be promoted to the public by authorised persons. These
are:
(1)
authorised funds
, which are authorised unit trust schemes (AUTs) or ICVCs constituted in the United
Kingdom as described in more detail below; and
(2)
recognised
schemes, which are
collective
investment schemes constituted outside the United Kingdom and recognised by the FSA under:
(a) section 264 of the Act (Schemes
constituted in other EEA
States) - these are schemes that
qualify under the UCITS
Directive; or
(b) section 270 of the Act (Schemes
authorised in designated countries or territories); and
(c) section 272 of the Act (Individually
recognised overseas schemes).
What are ICVCs?
COLLG 1.1.4
See Notes
(1) An ICVC is the UK-based form of an open-ended investment company as defined by section 236 of the Act (Open-ended investment companies). Section 262 of the Act (Open-ended investment companies) empowers the Treasury to make provisions relating to open-ended investment companies (the OEIC Regulations) which enable the establishment of ICVCs. Paragraph 1 (3) of Schedule 5 to the Act states that an authorised open-ended investment company is an authorised person. So, an ICVC is an authorised person. The FSA may authorise an ICVC by making an authorisation order under regulation 14 of the OEIC Regulations.
(2) An ICVC is constituted by an instrument of incorporation. Regulation 15(4) of the OEIC Regulations requires an ICVC to have at least one director. Where there is only one director, that director must be a body corporate with a permission to act as a sole director of an ICVC. COLL refers to this person as an authorised corporate director ('ACD'). A depositary must take responsibility for the safekeeping of the scheme property. The depositary must be independent of the ICVC and each of its directors.
(3) The directors and the depositary are required to comply with the OEIC Regulations and the rules in COLL and, in accordance with paragraph 6(1) of Schedule 2 to the OEIC Regulations, are also bound by the provisions of the instrument of incorporation.
What are AUTs?
COLLG 1.1.5
See Notes
(1) Under section 237 of the Act, (Other definitions), a unit trust scheme is a collective investment scheme under which the property is held on trust for the participants by the trustee. An AUT is constituted by a trust deed, entered into by the manager and trustee. Under section 243(4) of the Act (Authorisation orders) they must be independent of each other and COLL 6.9 (Ongoing responsibilities) provides guidance on what the FSA considers independence to mean. The FSA may authorise an AUT by making an authorisation order.
COLLG 1.1.6
See Notes
(1) [deleted]
(2) [deleted]
Powers and duties of the scheme, the authorised fund manager, and the depositary
COLLG 1.1.7
See Notes
(1)
COLL 6.6 includes rules:
(b) requiring the depositary to
check that the authorised
fund manager carries out certain of its functions in accordance
with the applicable rules in
COLL
;
(d) requiring firms to
avoid conflicts of interest that could prejudice investors; and
(2) [deleted]
(3) The directors (including
the ACD) and
the depositary of
an ICVC, and the manager and trustee of an AUT, may each to the extent permitted by
COLL
, retain the services of others to assist
them to perform their respective functions.
(4)
COLL makes provision for
how the authorised fund
manager and the depositary may
retire from their role and be replaced. It also provides for how an ICVC should be managed
where there is a vacancy in the position of an ACD, and where there are no directors.
Authorisation to carry on regulated activities
COLLG 1.1.8
See Notes
(1) The following
constitute regulated activities:
(2) No person may carry on a regulated activity by
way of business in the United
Kingdom, or purport to do so, unless he is an authorised person (or an exempt person). This prohibition is referred
to in the Act as
the general prohibition. Guidance for persons considering carrying
on regulated activities in
the United Kingdom can
be found in PERG.
The FSA website "How do I get authorised" gives guidance on
how to apply to the FSA for
a Part IV permission.
This authorisation is
different to the authorisation of an ICVC or
of an AUT,
as referred to in COLLG 1.1.4G and COLLG
1.1.5 Grespectively.
(3) The FSA maintains a public
register of persons who
have a permission to
carry on a regulated activity.
The register also contains details of all regulated collective investment schemes.
It can be consulted on the FSA's website
at www.fsa.gov.uk/pages/register.
- 11/02/2009
COLLG 2
European Legislation
COLLG 2.1
Introduction
- 01/12/2004
Background and scope
COLLG 2.1.1
See Notes
(1) This section summarises the scope and content of the UCITS Directive, as amended ("the Directive"). The Directive establishes a degree of harmonisation of EEA States' laws governing:
(a) the activities of management companies;
(b) the schemes they manage; and
(2) The main topics governed by the Directive and summarised in this section concern:
(a) the general scope of the Directive;
(b) obligations of the UCITS management company and depositary;
(c) investment and borrowing powers and limits;
(d) information for investors,
(e) how the management company passport works; and
(f) marketing requirements.
General scope of the UCITS Directive
COLLG 2.1.2
See Notes
(1) The Directive applies to any open-ended collective vehicle that is established and authorised in an EEA State and that falls
within its scope, regardless of whether it is promoted in any other EEA State. However, the
Directive applies only to schemes that promote
to the general public within the EEA, so schemes
that are restricted in their promotion fall outside the Directive's
scope.
(2) Furthermore,
the Directive
does not cover collective
investment schemes that are authorised in an
EEA State
with different
investment and borrowing powers to those covered by the Directive. So,
schemes that invest in
(for example) real
property or commodities are not
within the Directive's scope.
Obligations on the management company and depositary
COLLG 2.1.3
See Notes
(1) The Directive assigns certain functions and requirements to a management company and a depositary . As a result, the FSA has identified the authorised fund manager as the UCITS management company. So, a UK firm which wishes to operate UCITS schemes must first seek authorisation as a UCITS management company.
(2) In addition, the Directive imposes certain conduct of business and financial resources rules on the UCITS management company. These are set out in other parts of the Handbook, as listed in COLLG 5.1.7 G.
(3) The Directive states that the depositary must be subject to 'public control' and provide 'sufficient financial and professional guarantees'. The depositary is responsible for the safe keeping of a scheme's assets, and for ensuring that the issue sale, redemption and cancellation of units and calculation of the value of units are effected in accordance with the law and rules of the scheme.
(4) Two principal rules govern the relationship between the UCITS management company and the depositary of a scheme. First, no single company may act in both capacities. Second, they must act independently of each other and, apart from management of a UCITS scheme, a UCITS management company cannot engage in any activities other than:
(a) management of other collective investment schemes;
(b) managing investments; and
(c) advising on investments and carrying out safeguarding and administration of collective investment scheme units, but in either case only where it also has permission to manage investments.
COLLG 2.1.4
See Notes
[not used]
Investment and borrowing powers and limits
COLLG 2.1.5
See Notes
(1) The Directive states the types of assets a scheme can invest in. These are:
(c) deposits;
(d) derivatives and forwards; and
(e) units in other collective investment schemes.
(1A) The UCITS eligible assets Directive, which came into effect in July 2008, clarifies the definition of terms used in the Directive by setting out criteria for determining which types of transferable securities, approved money-market instruments and derivatives are eligible to be held by a UCITS scheme.
(2) Within this range of investment assets there are some detailed spread and concentration rules. The main requirements can be summarised as:
(a) no more than 5% in transferable securities or approved money-market instruments with one issuer - this can be raised to 10% but only in respect of a maximum of 40% of the scheme value;
(b) no more than 20% in deposits with one body;
(c) 100% may be invested in other schemes provided:
(i) they meet the requirements of the Directive, otherwise there is a limit of 30% in schemes offering equivalent protection to investors; and
(ii) no more than 20% may be invested in any one scheme, provided the scheme being invested into limits investment in other schemes (by way of a provision in its instrument constituting the scheme) to no more than 10% of its value;
(d) no more than 20% in transferable securities and approved money-market instruments within one group;
(e) no more than 20% with a single body from any combination of transferable securities or approved money-market instruments, deposits, or OTC derivatives, and
(f) no more than 5% OTC derivative exposure to one counterparty, or 10% where the counterparty is an approved bank.
(3) Where a scheme has the investment objective of replicating the composition of a qualifying index, it may have an exposure of up to 20% in any issuer or exceptionally up to 35% (but only for one issuer). A qualifying index is one which has a sufficiently diversified composition, is a representative benchmark for that market, and is published in an appropriate manner.
(4) The authorised fund manager must employ a specific risk management process to monitor the risk of all investment positions. Where derivatives are to be used within a scheme, the authorised fund manager must notify details of this risk management process and any significant change to it to the FSA. The exposure to all derivative transactions must not exceed the current net asset value of the scheme. The underlying assets representing any derivative position must be taken into account in applying the spread of limits above. This does not apply in the case of any derivative which is on a qualifying index.
(5) A scheme may borrow up to 10% in value of its assets, provided the borrowing is on a temporary basis.
Information to investors
COLLG 2.1.6
See Notes
(1) The Directive sets out which documents must be made available or offered to investors. The three main documentary requirements are:
(a) the full prospectus,
(b) the simplified prospectus; and
(c) the annual and half-yearly reports and accounts.
(2) The full prospectus requirements are included in Annex A of the Directive and provide detailed information on the main parties involved in operating the scheme, the investment objectives and policy of the scheme, and general day-to-day operating matters such as dealing times and income allocation.
(3) In addition to the full prospectus, the management company must publish a simplified prospectus. This is intended to be a standardised document used for selling schemes that meet the requirements of the UCITS Directive throughout the EEA. It must be offered to any prospective investor free of charge before the conclusion of any contract for the purchase of units in the scheme. Most of the required contents for the simplified prospectus are set out in Schedule C of the Directive. A Recommendation (2004/384/EC) was issued in 2004 by the European Commission in relation to those requirements.
(4) Reports and accounts must be prepared on a half-yearly and annual basis and the latest report must be supplied to investors free of charge on request. They must also be available at the places specified in the full and simplified prospectuses. The required contents for the report and accounts are set out in Schedule B of the Directive.
The management company passport
COLLG 2.1.7
See Notes
(1) Section III of the Directive provides the framework for a UCITS management company to provide services in another EEA State by way of a branch or cross border services.
(2) UK firms which are UCITS management companies can operate in other EEA states similarly to MiFID firms. SUP 13 explains the process such firms need to follow to begin providing services in other EEA states.
(3) A non-UK management company is defined in the Handbook as an EEA UCITS management company. It will be a UCITS qualifier, and so be an authorised person under Schedule 5 to the Act, if it only carries out scheme management activity and activity in connection with the operation of the scheme. If the manager of such a scheme wishes to undertake the passported activities of managing investments (other than of collective investment schemes), advising on investments, or safeguarding and administering investments, as provided by Article 5(3) of the Directive, as well as scheme management activity, it will need to do so in accordance with an authorisation conferred by Schedule 3 to the Act and should refer to the procedures in SUP 13A and SUP 14 accordingly.
Marketing requirements (for UK firms)
COLLG 2.1.8
See Notes
(1) Section VIII of the Directive provides the framework for a UCITS scheme to undertake marketing in another EEA State. A UCITS scheme is required to comply with the marketing and advertising rules in the relevant Host State (Article 44) and is also required to maintain facilities in the Host State (Article 45). The European Commission issued an Interpretative Communication in 2007 (COM (2007) 112) clarifying the respective powers of the Home State and Host State regulators in relation to marketing of UCITS schemes.
(2) Certain documents must be provided to the Host State regulator in the relevant EEA State at the same time as notification of the proposal to market there. The UCITS scheme may begin marketing two months following notification (Article 46) unless the Host State regulator objects within that period.
(3) The relevant information and documents distributed in the Host State are required to be the same as those that the UCITS scheme provides in its Home State. The documents must be published in an official language of the Host State or another language if approved by the relevant Host State regulator (Article 47). So, COLL 4.2 (Pre-sale notifications) and COLL 4.5 (Report and accounts) will apply.
(4) The publication of prices in the Host State is also required (Article 34). COLL 6.3.11 (Publication of prices) will be applicable in this case.
COLLG 3
The FSA's responsibilities under the Act
COLLG 3.1
Introduction
- 01/12/2004
COLLG 3.1.1
See Notes
Part XVII of the Act deals specifically with
collective investment schemes. The main features
and practical effects of Part XVII, and how the FSA exercises its responsibilities, are described below.
References to sections are to the numbered sections of Part XVII.
Marketing of schemes in the UK (section 238)
COLLG 3.1.2
See Notes
Application for authorisation (sections 242 and 243)
COLLG 3.1.3
See Notes
(1) The FSA requires an application for authorisation of a unit trust scheme to be made jointly by the manager and trustee, who must be:
(b) independent of each other (see COLL 6.9 (Ongoing obligations) which provides guidance on independence).
(c) [deleted]
(d) [deleted]
(e) [deleted]
(f) [deleted]
(g) [deleted]
(2) The application must contain details of the manager and trustee, of the scheme itself, and of other persons to whom functions are to be delegated (e.g. the registrar and the investment adviser).
(3) Application forms are available free of charge from the forms page at FSA/form_links.jsp#collAnc.
(5) The following items must be provided with the application:
(a) a copy of the trust deed;
(b) a solicitor's certificate stating that the trust deed complies with the rules made under section 247 of the Act (Trust scheme rules);
(c) a copy of the prospectus, with a checklist indicating the location of the information required by COLL to be contained in it;
(d) in the case of a UCITS scheme, a copy of the simplified prospectus; and
(e) if applicable, documents evidencing any guarantee arrangement.
Determining and refusing applications (sections 244 and 245)
COLLG 3.1.3A
See Notes
(1) Under section
244 of the Act (Determination
of applications), the FSA has
up to 6 months in
which to consider a completed application following its receipt and must inform
the manager and trustee of its decision
within that timescale. In practice, the FSA aims
to process 75% of completed applications relating to a UCITS scheme within 6 weeks. If the FSA is satisfied with
the application, an authorisation
order is issued for the scheme.
(2) If the FSA proposes to refuse
an application, it must give a warning
notice which will contain the reasons for the refusal. If,
having given the warning
notice, it decides to refuse the application, a decision notice will be
sent and the applicant may refer the matter to the Tribunal.
- 11/02/2009
Revocation of authorisation (section 254)
COLLG 3.1.4
See Notes
(1) The FSA can
revoke an authorisation
order declaring a
unit trust
scheme
to be authorised if:
(a) the requirements of authorisation are no longer satisfied; or
(b) the manager or trustee has contravened
any provision of the Act or
any rules or
regulations made under it, or has given false or misleading information to
the FSA;
or
(c) no regulated
activity is being carried on in relation to the scheme and the period
of that inactivity began at least twelve months earlier;
or
(d) it is undesirable for investors or potential investors that the
unit trust scheme should
continue.
(2) The FSA may
refuse to revoke an authorisation
order if it considers that:
(a) any matter should be investigated prior to revocation;
(b) revocation would not be in the interests of investors; or
(c) revocation would be incompatible with the UCITS Directive.
(3) If the FSA proposes
to revoke an authorisation
order, a separate warning
notice will be sent to the manager and trustee. The same procedures
as stated for refusal of authorisation, in relation to the
warning notice
and
decision notice, will apply.
Notification of changes to unit trusts (section 251)
COLLG 3.1.5
See Notes
(1) The manager must
give written notice to the FSA when:
(a) an alteration to the
unit trust
scheme
is proposed; or
(b) it is proposed that the trustee should retire
and be replaced.
(2) Any proposal that involves a change in the trust deed must be accompanied by a solicitor's
certificate stating that the change will not affect the compliance of the
deed with the rules.
Powers of intervention (sections 257 and 281)
COLLG 3.1.6
See Notes
The FSA has powers of intervention if there is a breach of the Act or COLL, or if it is in the interests of unitholders or potential unitholders in a scheme. In respect of an AUT, directions can be made for the manager to suspend the issue and redemption of units or to wind up the scheme.
Scheme particulars (section 248)
COLLG 3.1.7
See Notes
The Act empowers
the FSA to
require a manager to
publish scheme particulars.
COLL 4 (Investor
relations) which refers to the scheme
particulars as a prospectus, sets out details
of the required contents, the timing of publication, and how and when the
prospectus must be offered to prospective investors.
Recognition of overseas schemes
COLLG 3.1.8
See Notes
(1) Recognition by the FSA enables
overseas schemes to
be marketed to
the public in the United
Kingdom.
(2) [deleted]
(3) [deleted]
(4) [deleted]
(5) [deleted]
Recognition of schemes constituted in other EEA states (section 264)
COLLG 3.1.8A
See Notes
(1) Section 264
covers schemes constituted
in another EEA State that
are certified by their Home
State regulator as meeting the requirements of the UCITS Directive. The scheme becomes recognised
unless the FSA,
within two months of
receiving written notice of the intention to market into the United Kingdom, notifies
the applicant and its Home
State regulator that the manner in which the invitation is to
be made (to the public) does not comply with UK law. Such schemes cannot be marketed to the public in the United Kingdom before
the two month period
is over.
- 11/02/2009
Recognition of schemes authorised in designated territories (section 270)
COLLG 3.1.8B
See Notes
(1) Section 270
covers schemes that
are managed in and authorised under the law of a country or territory outside
the United Kingdom that
has been designated for this purpose by an order made by the Treasury ("the
Designation Order"). These are currently Jersey, Guernsey, the Isle
of Man and Bermuda. It should be noted that the Treasury:
(a) retains responsibility
for the designation of countries or territories and must be satisfied that
their laws and practices relating to the authorisation and regulation of their collective investment schemes provide
a level of protection at least equivalent to that provided under the Act;
(b) must be content
that adequate arrangements exist for co-operation between regulators in each
country or territory and the FSA;
and
(c) may request
the FSA to
provide a report on the regimes of regulation in existing or prospective designated
territories.
(2) Notification
forms are available, free of charge, at the FSA website and COLL 9.3 (Section 270 and 272 recognised schemes) provides further information
on the documents to
be supplied to the FSA.
The scheme becomes
recognised on the FSA's
written approval, or automatically after two months from notification.
- 11/02/2009
Recognition of individual overseas schemes (section 272)
COLLG 3.1.8C
See Notes
(1) Section 272
covers overseas schemes that
are not recognised by virtue of section 264 or section 270. The FSA may make an order
declaring the scheme to
be recognised if it is satisfied that the scheme will afford adequate protection
(i.e. a similar level of protection to that provided under the Act) for investors, and
the arrangements for the scheme's constitution
and management, and the powers and duties of the operator and of any trustee or depositary, are also "adequate".
In deciding what is adequate, the FSA will
consider the rules applicable
to AUTs or ICVCs.
(2) A section 272
application requires detailed and rigorous analysis of all aspects of the scheme and the level
of investor protection provided by the regime under which the scheme operates, so the FSA has 6 months in which to determine
a completed application. Details of the information and documents required for a section 272 application
can be found in COLL 9.3 (Section 270 and
272 recognised schemes).
- 11/02/2009
Subsequent notification in respect of schemes recognised under sections 270 and 272 of the Act
COLLG 3.1.9
See Notes
(1) The FSA wishes
to be informed of changes in the information supplied by the operator of a section
270 or section 272 scheme under COLL
9.3.1 D
(2) Any revised documents sent
under (1) should be certified as true copies of the originals and accompanied,
where relevant, by written evidence of the approval of the overseas regulator to the change.
- 01/12/2004
Refusal of approval: schemes recognised under sections 270 and 272 of the Act
COLLG 3.1.10
See Notes
- 01/12/2004
Revocation of recognition of overseas schemes (section 279)
COLLG 3.1.11
See Notes
(1) If the operator of
a scheme recognised
under section 264 gives written notice to the FSA under section 264(6) that it desires
the scheme to
no longer be recognised, then the scheme ceases
to be recognised.
(2) Under section 279, the FSA may
direct that a
scheme
shall cease to be recognised under section
270, or revoke its recognition under section 272, on similar grounds to those
provided for in the revocation of authorised
funds under section 254.
(3) If the
FSA proposes to give a direction
under section 279 or to revoke a scheme's recognition,
it will give a warning
notice. Should the FSA decide
to give a direction or revoke recognition, it will issue a decision notice. Thereafter, the matter may
be referred to the Tribunal.
Scheme facilities in the United Kingdom (section 283)
COLLG 3.1.12
See Notes
- 01/12/2004
COLLG 4
The FSA's Responsibilities under the OEIC Regulations
COLLG 4.1
Introduction
- 01/12/2004
COLLG 4.1.1
See Notes
Section 262 of the Act provides for the Treasury to make regulations
governing the establishment and regulation of ICVCs. Rather than merely adopting various
parts of UK company
law, the Treasury chose a 'stand alone' approach for its OEIC Regulations. The
main features and practical effects of those regulations are outlined below.
- 01/12/2004
Applications for authorisation (Regulations 12 - 17)
COLLG 4.1.2
See Notes
(1) The FSA requires
an application for authorisation of an ICVCto be made jointly by the ACD and
depositary, who must be:
(b) independent of each other.
(c) [deleted]
(d) [deleted]
(e) [deleted]
(f) [deleted]
(g) [deleted]
(2) The application must contain details of the ACD and depositary,
and any other person proposed
as a director of
the ICVC,
of the scheme itself,
and of other persons to
whom functions are to be delegated (e.g. the registrar and the investment adviser).
(3) Application
forms are available free of charge from the forms page at FSA/form_links.jsp#collAnc
(5) The following
items must be provided with the application:
(b) a solicitor's
certificate stating that the instrument
of incorporation complies with Schedule 2 to the OEIC Regulations and with COLL;
(c) a copy of the prospectus, with a checklist
indicating the location of the information required by COLL to be contained in it;
(e) if applicable,
documents evidencing any guarantee arrangement.
(6) The name of
the ICVC must
not be undesirable or misleading and must not be the same as that of an existing
company. Regulation 19 includes a list of words and expressions that are
prohibited from inclusion within the name of an ICVC and further guidance can be found in COLL 6.9 (Ongoing obligations). As with an AUT, the aim of the ICVC must be reasonably
capable of being achieved.
(7) As with an AUT, the FSA has up to 6 months to determine a completed application,
but aims to process 75% of applications for UCITS schemes within six weeks. If the FSA is satisfied with
the application, an authorisation
order is issued. The ICVC becomes
incorporated when the authorisation
order is issued.
Notification of changes to ICVCs (Regulation 21)
COLLG 4.1.3
See Notes
(1) The
FSA's
approval is required before the following
changes can take place:
(a) any alteration to the instrument
of incorporation;
(b) any significant alteration to
the prospectus;
(c) any reconstruction or amalgamation involving the ICVC;
(d) any proposal to wind up the ICVC otherwise
than by the court;
(e) any proposal to replace a director, appoint an additional director, or decrease
the number of directors in
post; and
(f) any proposal to replace the depositary.
(2) Any notice proposing to change the instrument of incorporation must be accompanied
by a solicitor's certificate confirming that the change will not affect
compliance of the instrument with Schedule2 to the OEIC
Regulations and
COLL
as they relate to the contents of the
instrument.
Revocation of authorisation (Regulation 23)
COLLG 4.1.4
See Notes
The FSA can revoke or refuse to revoke an authorisation order on similar grounds to those for an AUT. If it proposes to do so, similar procedures for warning notices and decision notices as for AUTs apply (see COLLG 3.1.4 G (2)).
Power of intervention (Regulation 25)
COLLG 4.1.5
See Notes
The FSA has
a power of intervention if it appears there is a breach of the Act or COLL, or if it is desirable to give a direction to protect the interests of
investors in the ICVC.
Directions can be given to cease the issue or redemption of units or any
class
of unit in
the ICVC or
for the winding up of the ICVC.
Corporate Code
COLLG 4.1.6
See Notes
(1) Certain provisions of the Companies Acts will apply to ICVCs, as they are incorporated
bodies (especially, but not exclusively, regarding the holding of meetings).
(2) Regulations 34 to 70 lay down the corporate code for ICVCs. The code contains
provisions dealing with the operation of ICVCs and
includes a number of general company law provisions, for example personal
liability for contracts and deeds and punishment for fraudulent trading. The
operation of an ICVC is
also governed by COLL.
- 01/12/2004
The FSA's registration function
COLLG 4.1.7
See Notes
In accordance with Part IV of the OEIC Regulations, the FSA is required to maintain
a register of ICVCs,
allocate to each a registered number, and carry out certain other registration
functions.
COLLG 5
The COLL sourcebook
COLLG 5.1
Introduction
- 01/12/2004
COLLG 5.1.1
See Notes
(1) COLL is a specialist sourcebook that sits in Block 6 (specialist sourcebooks) of the FSA Handbook. It provides the detailed framework within which authorised funds operate and includes requirements relating to what certain overseas schemes must provide by way of facilities in order to become recognised schemes.
(2) The material in chapters 2 to 8 of COLL forms a major part of the product regulation regime for ICVCs and AUTs, supplementing the material in the OEIC Regulations (for ICVCs) and chapter III of Part XVII of the Act (for AUTs) and giving effect to the UCITS Directive. This is shown in the diagram at COLLG 5.1.8 G.
(3) The sourcebook is designed as a two-tier approach, depending on whether the authorised fund is capable of being promoted to the general public (retail schemes) or is sold to sophisticated investors (qualified investor schemes).
Definition of terms in COLL
COLLG 5.1.2
See Notes
Some parts of
COLL
relate only
to ICVCs and
some parts only to AUTs.
However, most of
COLL
covers both ICVCs and AUTs, so some of the defined terms included relate equally to both ICVCs and AUTs (together defined
as "authorised funds").
Other key examples of these terms are:
(1) "authorised
fund manager", which refers to both the ACD of an ICVC and
the manager of
an AUT (the term "ACD" is used only
for an ICVC and
the term "manager"
is used only for an AUT);
(2) "depositary",
which when used for
an authorised fund refers to both the depositary of an ICVC and the trustee of an AUT;
(3) "unit",
which according to the context can
refer to a "share"
in an ICVC,
a "unit"
in an AUT, and the rights or interests of participants in other
types of collective investment
scheme.
Outline of the content of COLL
COLLG 5.1.3
See Notes
(-1) Retail schemes must be either UCITS schemes or non-UCITS retail schemes. A non-UCITS retail scheme is an authorised fund capable of being promoted to retail investors, and which does not fall within the scope of the UCITS Directive. The contents of COLL in relation to retail schemes are outlined below.
(1) COLL 2 (Authorised fund applications) sets out the initial application requirements for authorised funds and the rules concerning notifications which need to be made to the FSA in its role as registrar of ICVCs.
(2) COLL 3 (Constitution) includes requirements regarding the contents of the instrument constituting the scheme for authorised funds that are retail schemes and other matters relating to their constitutional features, such as classes of units.
(3) COLL 4 (Investor relations) includes consumer-facing material relating to authorised funds that are retail schemes. So, material on the prospectus, simplified prospectus and reports and accounts is included in that chapter, together with rules relating to when unitholders must be notified of events and when meetings of unitholders are required. (The simplified prospectus is not required for a non-UCITS retail scheme; the equivalent disclosure requirements for such schemes are set out in COBS.)
(4) COLL 5 (Investment and borrowing powers) requires authorised funds that are retail schemes, their authorised fund managers and depositaries, to comply with rules on the investment composition of the scheme. It is divided up as follows:
(a) COLL 5.1 to COLL 5.3 implement the UCITS Directive requirements which require quality, spread and counterparty limits to be imposed on the assets of funds within the scope of the Directive (as set out in COLLG 2.1.4 G);
(5) COLL 6 (Operating duties and responsibilities) contains rules on the day-to-day operation of authorised funds that are retail schemes. In particular:
(a) COLL 6.2 sets out rules relating to dealing in units, including the issue and cancellation of units;
(b) COLL 6.3 sets out how authorised funds must be valued and prices of units calculated and published;
(c) COLL 6.4 provides requirements relating to the register of unitholders in an AUT (see the OEIC Regulations for ICVCs) and any plan register;
(d) COLL 6.5 sets out rules relating to the appointment and replacement of the authorised fund manager and depositary;
(e) COLL 6.6 imposes certain powers and duties on the authorised fund manager and the depositary, as described in COLLG 1.1.6 G;
(f) COLL 6.7 lays down conditions concerning charges and expenses that may be taken when investors buy or sell units, and what payments may be made out of the scheme property;
(6) COLL 7 (Suspension of dealings and termination of authorised funds) includes the requirements for suspension of dealing in the units of authorised funds and how they may be wound up (including termination of sub-funds).
(7) [deleted]
(8) [deleted]
(9) [deleted]
Qualified investor schemes
COLLG 5.1.3A
See Notes
(1) If subscription
to a scheme is
to be restricted to certain prescribed categories of investor (principally professional clients and
sophisticated investors), the FSA considers
that not all the detailed product rule protections
that apply to retail schemes are
necessary. So, COLL provides
a framework of rules for
such a scheme,
called a "qualified investor
scheme", which satisfies the essential features of an authorised
product and so distinguishes it from unregulated
collective investment schemes, but otherwise allows more flexibility
in its operation compared to the framework for retail schemes.
(2)
COLL 2 is relevant for achieving authorisation. COLL 8 provides the framework mentioned in (1) and, compared to retail schemes, places more
emphasis on the contents of the prospectus to
describe the operating procedures.
- 11/02/2009
Recognised schemes
COLLG 5.1.3B
See Notes
For collective
investment schemes constituted outside the United Kingdom (referred to in COLLG
3.1.9 G to COLLG
3.1.12 G), COLL 9 brings together the material relating to the admission
to marketing of
such schemes in
the United Kingdom,
supplementing material in chapter V of Part XVII of the Act (Recognised overseas schemes).
- 11/02/2009
Related Sourcebooks
COLLG 5.1.4
See Notes
(1) There are a number of other parts of the FSA's Handbook that are particularly relevant to those having a responsibility in relation to authorised funds. These include:
(a) PRIN (The Principles for Businesses);
(b) SYSC (Senior Management Arrangements, Systems and Controls);
(c) APER (The Statements of Principle and Code of Practice for Approved Persons);
(d) FEES (the Fees manual), which includes details of the application and periodic fees payable for authorised funds and recognised schemes;
(e) COBS (the Conduct of Business sourcebook);
(f) CASS (the Client Assets sourcebook);
(g) SUP (the Supervision manual); and
(h) DEPP (the Decision Procedure and Penalties manual).
(2) UPRU (The Prudential sourcebook for UCITS firms) sets out the financial resources requirements for an authorised fund manager of a UCITS scheme where that manager is undertaking only scheme management activity and ancillary activities. BIPRU (The Prudential sourcebook for Banks, Building Socieities and Investment Firms) applies equivalent requirements to the authorised fund manager of a UCITS scheme where that manager is a UCITS investment firm. Both sourcebooks include certain requirements of the UCITS Directive.
(3) In addition to the listed sourcebooks, Regulatory Guides may also be of relevance. For example EG 14 sets out the FSA's policies and procedures concerning the use of its enforcement powers in relation to regulated collective investment schemes.
COLLG 5.1.5
See Notes
(1) [deleted]
(2) [deleted]
COLLG 5.1.6
See Notes
[deleted]
- (1) [deleted]
- (2) [deleted]
- (3) [deleted]
- (4) [deleted]
COLLG 5.1.7
See Notes
(1) [deleted]
(2) [deleted]
Regulated schemes: explanatory diagram
COLLG 5.1.9
See Notes
