Collective Investment Schemes

Collective Investment

Schemes

COLL Contents

COLL 1 Introduction

1.1 Applications and purpose

1.2 Types of authorised fund

COLL 2 Authorised fund applications

2.1 Authorised fund applications

COLL 3 Constitution

3.1 Introduction

3.2 The instrument constituting the fund

3.3 Units

COLL 4 Investor Relations

4.1 Introduction

4.2 Pre-sale notiﬁcations

4.3 Approvals and notiﬁcations

4.4 Meetings of Unitholders and service of notices

4.5 Reports and accounts

4.6 Simpliﬁed Prospectus provisions [deleted]

4.7 Key investor information and marketing communications

4.8 Notiﬁcations for UCITS master-feeder arrangements

4 Annex 1 Total expense ratio calculation [deleted]

4 Annex 2 Portfolio turnover calculation [deleted]

COLL 5 Investment and borrowing powers

5.1 Introduction

5.2 General investment powers and limits for UCITS schemes

5.3 Derivative exposure

5.4 Stock lending

5.5 Cash, borrowing, lending and other provisions

5.6 Investment powers and borrowing limits for non-UCITS retail schemes

5.7 Investment powers and borrowing limits for NURS operating as FAIFs

5.8 Investment powers and borrowing limits for feeder UCITS

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL–i

COLL Contents

COLL 6 Operating duties and responsibilities

6.1 Introduction and Application

6.2 Dealing

6.3 Valuation and pricing

6.4 Title and registers

6.5 Appointment and replacement of the authorised fund manager and the

depositary

6.6 Powers and duties of the scheme, the authorised fund manager, and the

depositary

6.6A Duties of AFMs in relation to UCITS schemes

6.6B UCITS depositaries

6.7 Payments

6.8 Income: accounting, allocation and distribution

6.9 Independence, names and UCITS business restrictions

6.10 Senior personnel responsibilities

6.11 Risk control and internal reporting

6.12 Risk management policy and risk measurement

6.13 Record keeping

6 Annex 2 UK UCITS management company of UCITS schemes: Derivative Use

Report (FSA042: UCITS)

6 Annex 3 Guidance notes on UK UCITS management company of UCITS schemes:

Derivative Use Report (FSA042: UCITS)

COLL 7 Suspension of dealings, termination of authorised funds and side

pockets

7.1 Introduction

7.2 Suspension and restart of dealings

7.3 Winding up a solvent ICVC and terminating or winding up a sub-fund of

an ICVC

7.4 Winding up an AUT and terminating a sub-fund of an AUT

7.4A Winding up a solvent ACS and terminating a sub-fund of a co-ownership

scheme

7.5 Schemes or sub-funds that are not commercially viable

7.6 Schemes of arrangement

7.7 UCITS mergers

7.8 Side pockets

7 Annex 1 Matters to be considered by the authorised fund manager before

creating a side pocket class

COLL 8 Qualiﬁed investor schemes

8.1 Introduction

8.2 Constitution

8.3 Investor relations

8.4 Investment and borrowing powers

8.5 Powers and responsibilities

8.6 Termination, suspension, and schemes of arrangement

8 Annex 2 ACS Qualiﬁed Investor Schemes: eligible investors

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL–ii

COLL Contents

COLL 9 Recognised schemes

9.1 Application and general information

9.3 Section 272 recognised schemes

9.4 Facilities in the United Kingdom for schemes recognised under section

272 of the Act

9.5 OFR recognised schemes

COLL 10 Fees

COLL 11 Master-feeder arrangements for UCITS schemes

11.1 Introduction

11.2 Approval of a feeder UCITS

11.3 Co-ordination and information exchange for master and feeder UCITS

11.4 Depositaries

11.5 Auditors

11.6 Winding up, merger and division of master UCITS

11 Annex 1 Contents of the standard master-feeder agreement

11 Annex 2 Contents of the internal conduct of business rules

COLL 12 Management company and product passports under the UCITS

Directive [deleted]

COLL 13 Operation of feeder NURS

13.1 Introduction

13.2 Operational requirements for feeder NURS

COLL 14 Charity authorised investment funds

14.1 Introduction

14.2 Registration with the Charity Commission

14.3 Advisory committee

14.4 Income allocation and distribution

COLL 15 Long-term asset funds

15.1 Introduction

15.2 Eligibility to act as the authorised fund manager

15.3 Constitution

15.4 Prospectus and other pre-sale notiﬁcations

15.5 Annual report and investor relations

15.6 Investment and borrowing powers

15.7 Powers and responsibilities of the authorised fund manager and the

depositary

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL–iii

COLL Contents

15.8 Valuation, pricing, dealing and income

15.9 Operational requirements for feeder LTAFs

15.10 Termination, suspension, and schemes of arrangement

15 Annex 1 ACS Long-term asset funds: Eligible investors

COLL

Appendix KII Regulation

Appendix 1UK

KII Regulation

COLL

Appendix 2 Modiﬁcations to the KII Regulation for KII-compliant NURS

Transitional provisions and Schedules

TP 1 Transitional Provisions

Sch 1 Record keeping requirements

Sch 2 Notiﬁcation requirements

Sch 3 Fees and other required payments

Sch 4 Powers exercised

Sch 5 Rights of action for damages

Sch 6 Rules that can be waived

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL–iv

COLL Contents

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL–v

Collective Investment Schemes

Chapter 1

Introduction

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 1/1

COLL 1 : Introduction Section 1.1

G1.1.1

R1.1.1A

R1.1.1B

G1.1.1C

G1.1.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 1/2

1.1 Applications and purpose

Application

.....................................................................................................

(1) This sourcebook, except for ■ COLL 9 (Recognised schemes), applies to:

(a) investment companies with variable capital (ICVCs);

(b) ACDs, other directors and depositaries of ICVCs;

and

(cA) authorised fund managers, depositaries and nominated partners

of authorised contractual schemes (ACSs).

(d) [deleted]

(2) ■ COLL 9 applies to operators of schemes that are recognised schemes

and to those seeking to secure recognised status for such schemes.

(3) ■ COLL 11.5 (Auditors) also applies to auditors of master UCITS and

feeder UCITS which are UCITS schemes.

(4) [deleted]

(5) ■ COLL TP 1.1(48) contains transitional provisions that apply in relation

to any scheme that will need to become a regulated money market

fund in accordance with the Money Market Funds Regulation, and

which operates as a scheme prior to 21 July 2018.

[deleted]

Purpose

.....................................................................................................

(1) The general purpose of this sourcebook is to contribute to the FCA

meeting its statutory objectives of the protection of consumers. It

provides a regime of product regulation for authorised funds, which

sets appropriate standards of protection for investors by specifying a

number of features of those products and how they are to be

operated.

COLL 1 : Introduction Section 1.1

G1.1.2A

G1.1.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 1/3

(2) In addition, this sourcebook implemented part of the requirements of

the UCITS Directive relevant to authorised funds and management

companies, along with other requirements implemented in other

parts of the Handbook.

UCITS management company and product passport

.....................................................................................................

[deleted]

The Collective Investment Schemes Information Guide

.....................................................................................................

The Collective Investment Schemes Information Guide COLLG provides some

general background material on the regulatory structure surrounding

scheme regulation in the UK.

COLL 1 : Introduction Section 1.2 : Types of authorised fund

R1.2.1

G1.2.1A

G1.2.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 1/4

1.2 Types of authorised fund

Types of authorised fund

.....................................................................................................

An application for an authorisation order must propose that the scheme be

one of the following types:

(1) a UCITS scheme;

(2) a non-UCITS retail scheme, including:

(a) a non-UCITS retail scheme operating as a fund of alternative

investment funds (FAIF); and

(b) a non-UCITS retail scheme which is an umbrella with sub-funds

operating as:

(i) FAIFs;

(ii) standard non-UCITS retail schemes; or

(iii) a mixture of (i) and (ii);

(3) a qualified investor scheme; or

(4) a long-term asset fund.

Umbrella schemes

.....................................................................................................

Any authorised fund, except for an ACS that is a limited partnership scheme,

may be structured as an umbrella with separate sub-funds.

[Note: article 1(2) second paragraph of the UCITS Directive]

Types of authorised fund - explanation

.....................................................................................................

(1) UCITS schemes must in particular comply with:

(a) ■ COLL 3.2.8 R (UCITS obligations); and

(b) the investment and borrowing powers rules for UCITS schemes set

out in ■ COLL 5.2 to ■ COLL 5.5 .

(2) (a) Non-UCITS retail schemes are schemes that do not comply with all

the conditions necessary to be a UCITS scheme.

(b) A non-UCITS retail scheme is an AIF and must be managed by an

AIFM.

of AIFMD, impose stricter requirements on

COLL 1 : Introduction Section 1.2 : Types of authorised fund

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 1/5

an AIFM or an AIF marketed to retail clients than the

requirements that apply to an AIF marketed only to professional

clients.

(d) This sourcebook contains the stricter requirements for an AIF

which is a non-UCITS retail scheme.

(e) A full-scope UK AIFM must also comply with the requirements in

FUND and any other applicable provisions of AIFMD.

(f) Non-UCITS retail schemes could become UCITS schemes, provided

they are changed, so as to comply with the necessary conditions.

(g) Non-UCITS retail schemes operating as FAIFs have wider powers

to invest in collective investment schemes than other non-UCITS

retail schemes.

(2A) A non-UCITS retail scheme may also be structured as an umbrella with

sub-funds operating as:

(a) FAIFs;

(b) standard non-UCITS retail schemes; or

In these cases, rules relating to investment powers and

borrowing limits apply to each sub-fund as they would to a

scheme.

(3) (a) Qualified investor schemes may be promoted only to:

(i) professional clients; and

(ii) retail clients who are sophisticated investors,

on the same terms as non-mainstream pooled investments (see

■ COBS 4.12B (Promotion of non-mass market investments)).

(b) A qualified investor scheme is an AIF and must be managed by an

AIFM.

(d) This sourcebook contains the stricter requirements for an AIF

which is a qualified investor scheme.

(e) A full-scope UK AIFM must also comply with the requirements in

FUND and any other applicable provisions of AIFMD.

(f) Qualified investor schemes could change to become non-UCITS

retail schemes or UCITS schemes.

(3A) (a) A long-term asset fund may be promoted only to:

(i) professional clients; and

(ii) retail clients who are sophisticated investors, certified high

net worth investors, and those other retail clients to whom

units in long-term asset funds can be promoted without

contravening the rules in ■ COBS 4.12A (Promotion of

restricted mass market investments).

(b) A long-term asset fund is an AIF and must be managed by a full-

scope UK AIFM (see ■ COLL 15.2.2R (Authorised fund manager to

be a full-scope UK AIFM)).

COLL 1 : Introduction Section 1.2 : Types of authorised fund

R1.2.3

R1.2.4

G1.2.5

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 1/6

impose stricter requirements on an AIFM or an AIF marketed to

retail clients than the requirements that apply to an AIF

marketed only to professional clients. This sourcebook contains

stricter requirements for an AIF which is a long-term asset fund.

(d) A full-scope UK AIFM must also comply with the requirements in

FUND and any other applicable provisions of the UK AIFM

regime.

(e) A long-term asset fund could change to become a qualified

investor scheme, a non-UCITS retail scheme or a UCITS scheme,

provided it complies with the necessary conditions. The

authorised fund manager of an LTAF may need to make

significant changes to the LTAF’s constitution, objectives and

investment powers for it to become a UCITS scheme or a non-

UCITS retail scheme.

(f) A qualified investor scheme could become authorised as a long-

term asset fund if the authorised fund manager operates, or

proposes to operate, the scheme in accordance with the rules in

■ COLL 15 (Long-term asset funds).

(g) The nature of the assets that are held (or expected to be held) by

a long-term asset fund means that it will not be able to seek

authorisation as a regulated money market fund, or to have the

characteristics of such a fund without significant changes to its

constitution, objectives and investment powers. See also article 6

of the Money Market Funds Regulation.

(4) The changes referred to in (2), (3) and (3A) require approval by the

FCA.

UCITS schemes

.....................................................................................................

A UCITS scheme is deemed to be established in the United Kingdom,

irrespective of whether it has been established under the laws of England

and Wales, Scotland or Northern Ireland.

[Note: article 4 of the UCITS Directive]

Master UCITS

.....................................................................................................

A master UCITS that has two or more feeder UCITS as its only unitholders

satisfies the requirement that a UCITS scheme must invest capital raised from

the public.

[Note: article 58(4) of the UCITS Directive]

Pension feeder funds

.....................................................................................................

(1) Except for (2), all provisions of the Handbook that apply:

(a) to a feeder UCITS are also applicable to a pension feeder fund

that is constituted as a UCITS scheme; and

COLL 1 : Introduction Section 1.2 : Types of authorised fund

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 1/7

(b) to a feeder NURS are also applicable to a pension feeder fund

that is constituted as a non-UCITS retail scheme.

(2) A pension feeder fund may not invest in units of an EEA UCITS

scheme unless that scheme is a recognised scheme (see ■ COLL 5.6.27R

and ■ COLL 5.8.2AR).

COLL 1 : Introduction Section 1.2 : Types of authorised fund

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 1/8

Collective Investment Schemes

Chapter 2

Authorised fund applications

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 2/1

COLL 2 : Authorised fund Section 2.1 : Authorised fund applications

applications

R2.1.1

G2.1.2

G2.1.3

D2.1.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 2/2

2.1 Authorised fund applications

Application

.....................................................................................................

This chapter applies to any person seeking to arrange for the authorisation

of a scheme.

Purpose

.....................................................................................................

This chapter helps in achieving the statutory objectives of protecting

consumers by ensuring that any application for authorisation of a fund

meets certain standards.

Explanation

.....................................................................................................

(1) This chapter sets out the requirements that a person must follow in

applying for an authorisation order for a scheme under regulation 12

of the OEIC Regulations (Applications for authorisation), section 242

of the Act (Applications for authorisation of unit trust schemes) or

section 261C of the Act (Applications for authorisation of contractual

schemes).

(2) ■ COLLG 3A (The FCA’s responsibilities under the Act) and ■ COLLG 4A

(The FCA’s responsibilities under the OEIC Regulations) provide more

information on what the Act and the OEIC Regulations require in

relation to ongoing notifications to the FCA.

Specific requirements on application

.....................................................................................................

An application for an authorisation order in respect of an authorised fund

must be:

(1) in writing in the manner directed and contain the information

required in the application form available from the FCA;

(2) addressed for the attention of a member of FCA staff responsible for

collective investment scheme authorisation matters; and

(3) delivered to the FCA'saddress by one of the following methods:

(a) posting; or

(b) leaving it at the FCA's address and obtaining a time-stamped

receipt; or

collective investment scheme authorisation matters.

COLL 2 : Authorised fund Section 2.1 : Authorised fund applications

applications

G2.1.5

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 2/3

[deleted]

COLL 2 : Authorised fund Section 2.1 : Authorised fund applications

applications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 2/4

Collective Investment Schemes

Chapter 3

Constitution

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 3/1

COLL 3 : Constitution Section 3.1 : Introduction

R3.1.1

G3.1.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 3/2

3.1 Introduction

Application

.....................................................................................................

This chapter applies to:

(1) an authorised fund manager of an AUT, ACS or an ICVC;

(2) any other director of an ICVC;

(3) a depositary of an AUT, ACS or an ICVC; and

(4) an ICVC,

where the AUT, ACS or ICVC is a UCITS scheme or a non-UCITS retail scheme.

Purpose

.....................................................................................................

This chapter assists in achieving the statutory objective of protecting

consumers. In particular:

(1) ■ COLL 3.2 (The instrument constituting the fund) contains

requirements about provisions which must be included in the

instrument constituting the fund to give a similar degree of

protection for investors in an ICVC, AUT or ACS; and

(2) ■ COLL 3.3 (Units) provides rules and guidance which deal with the

classes of units to ensure that investors in each class are treated

equally.

COLL 3 : Constitution Section 3.2 : The instrument constituting the

fund

R3.2.1

R3.2.2

R3.2.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 3/3

3.2 The instrument constituting the

fund

Application

.....................................................................................................

This section applies to:

(1) an authorised fund manager of an AUT, ACS or ICVC;

(2) any other director of an ICVC;

(3) a depositary of an AUT, ACS or an ICVC;

(4) an ICVC; and

(5) a nominated partner;

except ■ COLL 3.2.8 R(UCITS obligations), which applies only to an ICVC or to

the authorised fund manager of an AUT or ACS where the ICVC, AUT or ACS

is a UCITS scheme.

Relationship between the instrument constituting the fund and

the rules

.....................................................................................................

(1) The instrument constituting the fund must not contain any provision

that:

(a) conflicts with any applicable rule;

(b) prevents units in the scheme being marketed in the United

Kingdom; or

to the unitholders of any class of units.

(2) Any power conferred by the rules on the ICVC, the authorised fund

manager, any other director of the ICVC, or the depositary, whether

in a sole or joint capacity, is subject to any restriction in the

instrument constituting the fund.

The trust deed for AUTs

.....................................................................................................

An AUT must be constituted by a trust deed made between the manager

and the trustee.

COLL 3 : Constitution Section 3.2 : The instrument constituting the

fund

R3.2.3A

R3.2.4

G3.2.5

R3.2.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 3/4

The contractual scheme deed for ACSs

.....................................................................................................

An ACS must be constituted by a contractual scheme deed made between

the authorised contractual scheme manager and:

(1) the depositary, in the case of a co-ownership scheme; or

(2) the nominated partner, in the case of a limited partnership scheme.

Matters which must be included in the instrument constituting

the fund

.....................................................................................................

The statements and provisions required by ■ COLL 3.2.6 R (Table: contents of

the instrument constituting the fund) must be included in the instrument

constituting the fund, where appropriate.

The instrument constituting the fund: OEIC Regulations,

Contractual Scheme Regulations and trust law requirements

.....................................................................................................

(1) Several of the matters set out in ■ COLL 3.2.6 R are required to be

included in the instrument constituting the fund under the OEIC

Regulations, Contractual Scheme Regulations or as a consequence of

relevant trust law. In addition, further statements are required if the

scheme or the authorised fund manager are to take advantage of the

powers under the rules in this sourcebook.

(2) Additional matters which are not contained in ■ COLL 3.2.6 R may be

required to be included in the instrument constituting the fund in

order to comply with the OEIC Regulations, (particularly Schedule 2 -

Instrument of Incorporation), Contractual Scheme Regulations and for

the purposes of making the scheme eligible under relevant tax,

pensions, or charities legislation.

Table: contents of the instrument constituting the fund

.....................................................................................................

This table belongs to ■ COLL 3.2.4 R (Matters which must be included in the

instrument constituting the fund).

Name of scheme

1 A statement of:

(1) the name of the authorised fund; and

(2) whether the authorised fund is a UCITS scheme or a non-UC-

ITS retail scheme.

Investment powers in eligible markets

2 A statement that, subject to any restriction in the rules in this

sourcebook or the instrument constituting the fund, the scheme

has the power to invest in any eligible securities market or deal on

any eligible derivatives market to the extent that power to do so is

conferred by COLL 5 (Investment and borrowing powers).

Unitholder's liability to pay

3 A provision that a unitholder in an AUT, ICVC or co-ownership

scheme is not liable to make any further payment after he has

paid the price of his units and that no further liability can be im-

posed on him in respect of the units which he holds.

COLL 3 : Constitution Section 3.2 : The instrument constituting the

fund

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 3/5

3A A provision that a unitholder in a limited partnership scheme is

not liable for the debts or obligations of the limited partnership

scheme beyond the amount of the scheme property which is avail-

able to the authorised contractual scheme manager to meet such

debts or obligations, provided that the unitholder does not take

part in the management of the partnership business.

3B A provision that the exercise of rights conferred on limited part-

ners by FCA rules does not constitute taking part in the manage-

ment of the partnership business.

Base currency

4 A statement of the base currency of the scheme.

Valuation and pricing

5 A statement setting out the basis for the valuation and pricing of

the scheme.

Duration of the scheme

6 If the scheme is to be wound up after a particular period expires, a

statement to that effect.

Object of the scheme

7 A statement:

(1) as to the object of the scheme, in particular the types of in-

vestments and assets in which it and each sub-fund (where

applicable) may invest; and

(2) that the object of the scheme is to invest in property of

that kind with the aim of spreading investment risk and giv-

ing unitholders the benefits of the results of the manage-

ment of that property.

7A Where the authorised fund is a qualifying money market fund, a

statement to that effect and a statement that the authorised

fund's investment objectives and policies will meet the conditions

specified in the definition of qualifying money market fund.

[deleted]

Government and public securities: investment in one issuer

8 Where relevant, for a UCITS scheme, a statement in accordance

with COLL 5.2.12 R (Spread: government and public securities) with

the names of the individual states, local authorities or public inter-

national bodies issuing or guaranteeing the transferable securities

or approved money-market instruments in which more than 35%

in value of the scheme property may be invested.

Classes of unit

9 A statement:

(1) specifying the classes of unit that may be issued, and for a

scheme which is an umbrella, the classes that may be issued

in respect of each sub-fund; and

(2) if the rights of any class of unit differ, a statement describ-

ing those differences in relation to the differing classes.

Authorised fund manager's charges and expenses

10 A statement setting out the basis on which the authorised fund

manager may make a charge and recover expenses out of the

scheme property.

Issue or cancellation directly through the ICVC or depositary of an

AUT or ACS

COLL 3 : Constitution Section 3.2 : The instrument constituting the

fund

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 3/6

11 Where relevant, a statement authorising the issue or cancellation

of units to take place through the ICVC or depositary of an AUT or

ACS directly.

In specie issue and cancellation

12 Where relevant, a statement authorising payment for the issue or

cancellation of units to be made by the transfer of assets other

than cash.

Restrictions on sale and redemption

13 Where relevant, the restrictions which will apply in relation to the

sale and redemption of units under COLL 6.2.16 R (Sale and re-

demption).

Voting at meetings

14 The manner in which votes may be given at a meeting of unithold-

ers under COLL 4.4.8 R (Voting rights).

Certificates

15 A statement authorising the person responsible for the register to

charge for issuing any document recording, or for amending, an

entry on the register, other than on the issue or sale of units.

Income

16 A statement setting out the basis for the distribution or re-invest-

ment of income.

Income equalisation

17 Where relevant, a provision for income equalisation.

Redemption or cancellation of units on breach of law or rules

18 A statement that where any holding of units by a unitholder is (or

is reasonably considered by the authorised fund manager to be) an

infringement of any law, governmental regulation or rule, those

units must be redeemed or cancelled.

ICVCs: larger and smaller denomination shares

19 A statement of the proportion of a larger denomination share rep-

resented by a smaller denomination share for any relevant unit

class.

ICVCs: resolution to remove a director

20 A statement that the ICVC may (without prejudice to the require-

ments of regulation 21 of the OEIC Regulations (The Authority's ap-

proval for certain changes in respect of a company), by a resolu-

tion passed by a simple majority of the votes validly cast for and

against the resolution at a general meeting of unitholders, remove

a director before his period of office expires, despite anything else

in the ICVC's instrument of incorporation or in any agreement be-

tween the ICVC and that director.

ICVCs: unit transfers

21 A statement that the person designated for the purposes of para-

graph 4 of Schedule 4 to the OEIC Regulations (Share transfers) is

the person who, for the time being, is the ACD of the ICVC.

ICVCs and ACSs: Charges and expenses

22 A statement that charges or expenses of the ICVCor ACS may be

taken out of the scheme property.

COLL 3 : Constitution Section 3.2 : The instrument constituting the

fund

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 3/7

ICVCs: Umbrella schemes - principle of limited recourse

22A For an ICVC which is an umbrella, a statement that the assets of a

sub-fund belong exclusively to that sub-fund and shall not be used

to discharge directly or indirectly the liabilities of, or claims

against, any other person or body, including the umbrella, or any

other sub-fund, and shall not be available for any such purpose.

Co-ownership schemes: umbrella schemes - principle of limited

recourse

22B For a co-ownership scheme which is an umbrella, a statement that

the property subject to a sub-fund is beneficially owned by the par-

ticipants in that sub-fund as tenants in common (or, in Scotland, is

the common property of the participants in that sub-fund) and

must not be used to discharge any liabilities of, or meet any claims

against, any person other than the participants in that sub-fund.

AUTs: governing law for a trust deed

23 A statement that the trust deed is made under and governed by

the law of England and Wales, Wales or Scotland or Northern

Ireland.

AUTs: trust deed to be binding and authoritative

24 A statement that the trust deed:

(1) is binding on each unitholder as if it had been a party to it

and that it is bound by its provisions; and

(2) authorises and requires the trustee and the manager to do

the things required or permitted of them by its terms.

AUTs: declaration of trust

25 A declaration that, subject to the provisions of the trust deed and

all rules made under section 247 of the Act (Trust scheme rules)

and for the time being in force:

(1) the scheme property (other than sums standing to the

credit of the distribution account) is held by the trustee on

trust for the unitholders according to the number of units

held by each unitholder or, where relevant, according to

the number of undivided shares in the scheme property rep-

resented by the units held by each unitholder; and

(2) the sums standing to the credit of the distribution account

are held by the trustee on trust to distribute or apply them

in accordance with COLL 6.8 (Income: accounting, allocation

and distribution).

AUTs: trustee's remuneration

26 Where relevant, a statement authorising payments to the trustee

by way of remuneration for its services to be paid (in whole or in

part) out of the scheme property.

AUTs: responsibility for the register

27 A statement identifying the person responsible under the rules for

the maintenance of the register.

ACSs: governing law for a contractual scheme deed

27A A statement that the contractual scheme deed is made under and

governed by the law of England and Wales, or Scotland or North-

ern Ireland.

ACSs: contractual scheme deed to be binding and authoritative

27B A statement that the contractual scheme deed:

(1) is binding on each unitholder as if it had been a party to it

and that it is bound by its provisions; and

COLL 3 : Constitution Section 3.2 : The instrument constituting the

fund

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 3/8

(2) authorises and requires the depositary and the authorised

contractual manager to do the things required or permitted

of them by its terms.

ACSs: ownership of scheme property

27C A statement that, subject to the provisions of the contractual

scheme deed and all rules made under section 261I of the Act (Con-

tractual scheme rules) and for the time being in force:

(1) the scheme property (other than sums standing to the

credit of the distribution account) is held by, or to the order

of, the depositary for and on behalf of the unitholders ac-

cording to the number of units held by each unitholder or,

where relevant, according to the number of undivided

shares in the scheme property represented by the units held

by each unitholder;

(2) the sums standing to the credit of the distribution account

are held by the depositary to distribute or apply them in ac-

cordance with COLL 6.8 (Income: accounting, allocation and

distribution); and

(3) the scheme property of a co-ownership scheme is benefi-

cially owned by the participants as tenants in common (or,

in Scotland, is the common property of the participants).

ACSs: responsibility for the register

27D A statement identifying the person responsible under the rules for

the maintenance of the register.

ACSs: UCITS and NURS eligible investors

27E For an ACS which is a UCITS scheme or a non-UCITS retail scheme,

a statement that units may not be issued to a person other than a:

(1) professional ACS investor;

(2) large ACS investor; or

(3) person who already holds units in the scheme.

27F A statement that the authorised contractual scheme manager must

redeem units as soon as practicable after becoming aware that

those units are vested in anyone (whether as a result of subscrip-

tion or transfer of units) other than a person meeting the criteria

in paragraph 27E.

ACSs: UCITS and NURS transfer of units

27G (1) A statement whether the transfer of units in the ACS

scheme is either:

(a) prohibited; or

(b) allowed

(2) Where transfer of units is allowed in accordance with (1)(b),

a statement that units may only be transferred in accord-

ance with the conditions specified by FCA rules, including

that units may not be transferred to a person other than a:

(a) professional ACS investor;

(b) large ACS investor; or

(3) For a co-ownership scheme which is an umbrella, a state-

ment in accordance with (1)(a) or (1)(b) and, where appro-

priate, a statement in accordance with (2), must also be

made for the sub-funds. Where individual sub-funds have

differing policies in relation to transfer of units, separate

statements are required.

COLL 3 : Constitution Section 3.2 : The instrument constituting the

fund

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 3/9

Co-ownership schemes: constitution

27H For a co-ownership scheme, a statement that the arrangements

constituting the scheme are intended to constitute a co-ownership

scheme as defined in section 235A(2) of the Act.

Co-ownership schemes: operator's powers

27I A statement that the operator of a co-ownership scheme is au-

thorised to:

(1) acquire, manage and dispose of the scheme property; and

(2) enter into contracts which are binding on unitholders for

the purposes of, or in connection with, the acquisition, man-

agement or disposal of scheme property.

Co-ownership schemes: winding-up

27J A statement that the operator and depositary of a co-ownership

scheme are required to wind up the scheme if directed to do so by

the FCA in exercise of its power under section 261X (Directions) or

section 261Z (Winding up or merger of master UCITS) of the Act.

Limited partnership schemes: participants

27K A statement that the limited partners, other than the nominated

partner, are to be the participants in the scheme.

Limited partnership schemes: resignation of limited partners

27L A statement that the scheme is not dissolved on any person ceas-

ing to be a limited partner or nominated partner provided that

there remains at least one limited partner.

Limited partnership schemes: inability to operate as an umbrella

27M A statement that the limited partnership scheme prohibits pooling

as is mentioned in section 235(3)(a) of the Act in relation to separ-

ate parts of the scheme property, with the effect that the scheme

cannot be an umbrella.

Investment in overseas property through an intermediate holding

vehicle

28 If investment in an overseas immovable is to be made through an

intermediate holding vehicle or a series of intermediate holding

vehicles, a statement that the purpose of that intermediate hold-

ing vehicle or series of intermediate holding vehicles will be to en-

able the holding of overseas immovables by the scheme.

Transfers to a dormant asset fund operator

29 (1) Where relevant, a statement that the authorised fund man-

ager and (if applicable) the depositary may transfer an eli-

gible CIS amount which is a dormant asset to a dormant as-

set fund operator, specifying the particular types of eligible

CIS amounts which may be so transferred.

(2) Where relevant, a statement detailing the power of the au-

thorised fund manager and (if applicable) the depositary to

convert one or more units into a right to payment of an

amount for transfer to a dormant asset fund operator, and

a description of a person’s right to make a repayment claim

in relation to the amount transferred.

(3) Where relevant, a statement that the authorised fund man-

ager and (if applicable) the depositary may transfer un-

wanted asset money to a dormant asset fund operator, and

a description of the circumstances in which such money

may be transferred.

[Note: In relation to transfers to a dormant asset fund oper-

ator, see COLL 3.2.6AR.]

COLL 3 : Constitution Section 3.2 : The instrument constituting the

fund

R3.2.6A

R3.2.7

R3.2.8

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 3/10

Transfers to a dormant asset fund operator

.....................................................................................................

If the authorised fund manager or (where relevant) the depositary intends to

make transfers of eligible CIS amounts that are dormant assets or unwanted

asset money to a dormant asset fund operator, or intends to take a power of

the type referred to in ■ COLL 3.2.6R(29)(2), the applicable statements in

■ COLL 3.2.6R(29)(1), ■ (2) and ■ (3) must be included.

[deleted]

UCITS obligations

.....................................................................................................

(1) The instrument constituting a UCITS scheme may not be amended in

such a way that it ceases to be a UCITS scheme.

(2) [deleted]

(3) [deleted]

COLL 3 : Constitution Section 3.3 : Units

R3.3.1

G3.3.2

G3.3.3

R3.3.4

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 3/11

3.3 Units

Application

.....................................................................................................

This section applies to an authorised fund manager, an ICVC and the

depositary of an AUT or ACS.

Classes of units

.....................................................................................................

(1) The instrument constituting the fund may provide for different classes

of unit to be issued in an authorised fund and, for a scheme which is

an umbrella, provide that classes of units may be issued for each sub-

fund.

(2) In order to be satisfied that ■ COLL 3.2.2 R (Relationship between the

Instrument constituting the fundand the rules) is complied with, the

FCA will take into account the principles in (a) to (c) when

considering proposals for unit classes:

(a) a unit class should not provide any advantage for that class if

that would result in prejudice to unitholders of any other class;

(b) the nature, operation and effect of the new unit class should be

capable of being explained clearly to prospective investors in the

prospectus; and

to the purpose of any part of this sourcebook.

Currency class units

.....................................................................................................

A currency class unit differs from other units mainly in that its price, having

been calculated initially in the base currency, will be quoted, and normally

paid for, in the currency of the designation of the class. Income distributions

will also be paid in the currency of designation of the class.

Currency class units: requirements

.....................................................................................................

For a currency class unit:

(1) the currency of the class concerned must not be the base currency (or,

in the case of a sub-fund which, in accordance with a statement in

the prospectus, is to be valued in some other currency, the currency of

the class may be in the base currency, but must not be in that other

currency);

(2) the price must be expressed in the currency of the class concerned;

COLL 3 : Constitution Section 3.3 : Units

R3.3.5

R3.3.5A

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 3/12

(3) any distribution must be paid in the currency of the class concerned;

and

(4) statements of amounts of money or values included in statements

and in tax certificates must be given in the currency of the class

concerned (whether or not also given in the base currency).

Rights of unit classes

.....................................................................................................

(1) If any class of units in an authorised fund has different rights from

another class of units in that fund, the instrument constituting the

fund must provide how the proportion of the value of the scheme

property and the proportion of income available for allocation

attributable to each such class must be calculated.

(2) For an authorised fund which is not an umbrella, the instrument

constituting the fund must not provide for any class of units in

respect of which:

(a) the extent of the rights to participate in the capital property,

income property or distribution account would be determined

differently from the extent of the corresponding rights for any

other class of units; or

(b) payments or accumulation of income or capital would differ in

source or form from those of any other class of units.

(3) For a scheme which is an umbrella, the provisions in (2)(a) apply to

classes of units in respect of each sub-fund as if each sub-fund were a

separate scheme.

(4) Paragraphs (2) and (3) do not prohibit a difference between the

rights attached to one class of units and to another class of units that

relates solely to:

(a) the accumulation of income by way of periodical credit to capital

rather than distribution; or

(b) charges and expenses that may be taken out of the scheme

property or payable by the unitholders; or

made; or

(d) the use of derivatives and forward transactions entered into for

the purpose of reducing the effect of fluctuations in the rate of

exchange between the currency of a class of units and either the

base currency of the scheme or any currency in which all or part

of the scheme property is denominated or valued (in this section

referred to as a " class hedging transaction").

Hedging of unit classes

.....................................................................................................

A class hedging transaction must:

(1) be undertaken in accordance with the requirements of ■ COLL 5

(Investment and borrowing powers); and

COLL 3 : Constitution Section 3.3 : Units

G3.3.5B

R3.3.6

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 3/13

(2) (for the purposes of valuing scheme property and calculating the

price of units in accordance with ■ COLL 6.3 (Valuation and pricing)) be

attributed only to the class of units for which it is undertaken.

Guidance on hedging of unit classes

.....................................................................................................

(1) Before undertaking a class hedging transaction for a class of units,

the authorised fund manager should:

(a) ensure that the relevant prospectus clearly:

(i) states that such a transaction may be undertaken for the

relevant class of units; and

(ii) explains the nature of the risks that such a transaction may

pose to investors in all classes;

(b) consult the depositary about the adequacy of the systems and

controls it uses to ensure compliance with ■ COLL 3.3.5A R

(Hedging of unit classes); and

determine how:

(i) the transaction will be treated in the scheme's accounts; and

(ii) any consequential tax liability will be met;

(in each case) without prejudice to unitholders of classes other

than the relevant hedged class.

(2) Class hedging transactions should be entered into for the purpose of

reducing risk by limiting the effect of movements in exchange rates

on the value of a unit. Such transactions are not limited to currency

class units. The authorised fund manager should ensure that the total

value of the hedged position does not exceed the value of the

relevant class of units unless there is adequate cover and it is

reasonable for it to do so on a temporary basis for reasons of

efficiency (for example, to avoid the need to make small and

frequent adjusting transactions). In such cases, the difference

between the value of the hedged position and the value of the class

of units should not be so large as to be speculative or to constitute an

investment strategy.

Requirement: larger and smaller denomination shares in an

ICVC

.....................................................................................................

(1) This rule applies whenever the instrument of incorporation of an ICVC

provides, in relation to any class, for smaller denomination shares and

larger denomination shares.

(2) Whenever a registered holding includes a number of smaller

denomination shares that can be consolidated into a larger

denomination share of the same class, the ACD must consolidate the

relevant number of those smaller denomination shares into a larger

denomination share.

(3) The ACD may, to effect a transaction in shares, substitute for a larger

denomination share the relevant number of smaller denomination

shares, in which case (2) does not apply to the resulting smaller

COLL 3 : Constitution Section 3.3 : Units

G3.3.7

R3.3.8

R3.3.9

G3.3.10

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 3/14

denomination shareholding or holdings until immediately after the

completion of the transaction.

Characteristics of larger and smaller denomination shares in

an ICVC

.....................................................................................................

Regulation 45 of the OEIC Regulations (Shares) allows the rights attached to

a share in an ICVC of any class to be expressed in two denominations, in

which case the 'smaller' denomination must be such proportion of the

'larger' denomination (a standard share) as is fixed by the ICVC's instrument

of incorporation as described in ■ COLL 3.2.6R (19). This will enable holdings to

consist of more or less than a complete number of larger denomination

shares.

Sub-division and consolidation of units

.....................................................................................................

(1) The directors of an ICVC or the authorised fund manager of an AUT

or ACS may, unless expressly forbidden to do so by the instrument

constituting the fund, determine that:

(a) each unit of any class is to be subdivided into two or more units;

(b) units of any class are to be consolidated.

(2) The ICVC or theauthorised fund manager of an AUT or ACS must

(unless it has done so before the sub-division or consolidation became

effective) immediately give notice to each unitholder (or the first

named of joint unitholders) of any sub-division or consolidation

under (1).

Guarantees and capital protection

.....................................................................................................

If there is any arrangement intended to result in a particular capital or

income return from a holding of units in an authorised fund, or any

investment objective of giving protection to the capital value of, or income

return from, such a holding:

(1) that arrangement or protection must not be such as to cause the

possibility of a conflict of interest as between:

(a) unitholders and the authorised fund manager or depositary; or

(b) unitholders intended and not intended to benefit from the

arrangement; and

(2) where, in accordance with any statement required by

■ COLL 4.2.5R (27)(c)(iv) (Table: contents of the prospectus), action is

required by the unitholders to obtain the benefit of any guarantee,

the authorised fund manager must provide reasonable notice in

writing to unitholders before such action is required.

Switching rights: umbrella schemes

.....................................................................................................

(1) In accordance with section 235(4) of the Act (Collective investment

schemes), the participants in a scheme which is an umbrella are

entitled to exchange rights in one sub-fund for rights in another sub-

fund of the umbrella.

COLL 3 : Constitution Section 3.3 : Units

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 3/15

(2) To satisfy (1), where any sub-fund in a scheme which is an umbrella

has provisions in its prospectus limiting the issue of units in that sub-

fund, the authorised fund manager should ensure that at least two

sub-funds are able to issue units at any time. In the case of an

umbrella consisting of a single sub-fund that limits the issue of units,

where the ICVC or the authorised fund manager of an AUT or co-

ownership scheme of such an umbrella intends to offer additional

sub-funds, it should ensure that unitholders will have the right to

switch at all times between two or more sub-funds in that umbrella.

COLL 3 : Constitution Section 3.3 : Units

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 3/16

Collective Investment Schemes

Chapter 4

Investor Relations

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/1

COLL 4 : Investor Relations Section 4.1 : Introduction

R4.1.1

G4.1.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/2

4.1 Introduction

Application

.....................................................................................................

This chapter applies to:

(1) an authorised fund manager of an AUT, ACS or an ICVC;

(2) any other director of an ICVC;

(3) a depositary of an AUT, ACS or an ICVC; and

(4) an ICVC,

where such AUT, ACS or ICVC is a UCITS scheme or a non-UCITS retail scheme.

Purpose

.....................................................................................................

This chapter helps in achieving the statutory objective of protecting

consumers by ensuring consumers have access to up-to-date detailed

information about an authorised fund particularly before buying units and

thereafter an appropriate level of investor involvement exists by providing a

framework for them to:

(1) participate in the decisions on key issues concerning the authorised

fund; and

(2) be sent regular and relevant information about the authorised fund.

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

R4.2.1

R4.2.2

R4.2.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/3

4.2 Pre-sale notifications

Application

.....................................................................................................

This section applies to an authorised fund manager, an ICVC and any other

director of an ICVC

Publishing the prospectus

.....................................................................................................

(1) A prospectus must be drawn up in English and published as a

document by the authorised fund manager and, for an ICVC, it must

be approved by the directors.

(2) The authorised fund manager must ensure that the prospectus:

(a) contains the information required by ■ COLL 4.2.5 R (Table:

contents of the prospectus);

(aa) for a non-UCITS retail scheme managed by a full-scope UK AIFM,

contains the information required by:

(i) ■ FUND 3.2.2R and ■ FUND 3.2.3R (Prior disclosure of

information to investors); and

(ii) ■ FUND 3.2.5R and ■ FUND 3.2.6R (Periodic disclosure), unless

the up-to-date information has been published in the

scheme’s most recent annual report or half-yearly report;

(b) does not contain any provision which is unfairly prejudicial to the

interests of unitholders generally or to the unitholders of any

class of units;

rule; and

(d) is kept up-to-date and that revisions are made to it, whenever

appropriate.

Provision and filing of the prospectus

.....................................................................................................

(1) The authorised fund manager of an AUT, ACS or an ICVC must:

(a) provide a copy of the scheme's most recent prospectus drawn up

and published in accordance with ■ COLL 4.2.2 R (Publishing the

prospectus) free of charge to any person on request; and

(b) file a copy of the scheme's original prospectus, together with all

revisions thereto, with the FCA.

(1A) Except where an investor requests a paper copy or the use of

electronic communications is not appropriate, the prospectus may be

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

R4.2.3A

R4.2.3B

R4.2.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/4

provided in a durable medium or by means of a website that meets

the website conditions.

(2) [deleted]

(3) An authorised fund manager must, upon the request of a unitholder

in a UCITS scheme that it manages, provide information

supplementary to the prospectus of that scheme relating to:

(a) the quantitative limits applying to the risk management of that

scheme;

(b) the methods used in relation to (a); and

categories of investment.

[Note: articles 74, 75(1) and 75(2) of the UCITS Directive]

Provision and filing of the prospectus of a master UCITS

.....................................................................................................

(1) The authorised fund manager of a UCITS scheme that is a feeder

UCITS must:

(a) where requested by an investor, provide a copy of the prospectus

of its master UCITS free of charge; and

(b) file a copy of the prospectus of its master UCITS and any

amendments thereto with the FCA.

(2) Except where an investor requests a paper copy or the use of

electronic communications is not appropriate, the prospectus of the

master UCITS may be provided in a durable medium other than paper

or by means of a website that meets the website conditions.

[Note: articles 63(3), 63(5), 75(1) and 75(2) of the UCITS Directive]

Feeder NURS: provision of the prospectus of the qualifying

master scheme

.....................................................................................................

(1) The authorised fund manager of a feeder NURS must, where

requested by an investor or the FCA , provide such person with a copy

of the prospectus of its qualifying master scheme free of charge.

(2) Except where an investor requests a paper copy or the use of

electronic communications is not appropriate, the prospectus of the

qualifying master scheme may be provided in a durable medium

other than paper, or by means of a website that meets the website

conditions.

False or misleading prospectus

.....................................................................................................

(1) The authorised fund manager:

(a) must ensure that the prospectus of the authorised fund does not

contain any untrue or misleading statement or omit any matter

required by the rules in this sourcebook to be included in it; and

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

R4.2.5

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/5

(b) is liable to pay compensation to any person who has acquired any

units in the authorised fund and suffered loss in respect of them

as a result of such statement or omission; this is in addition to

any liability incurred apart from under this rule.

(2) The authorised fund manager is not in breach of (1)(a) and is not

liable to pay compensation under (1)(b) if, at the time when the

prospectus was made available to the public, it had taken reasonable

care to determine that the statement was true and not misleading, or

that the omission was appropriate, and that:

(a) it continued to take such reasonable care until the time of the

relevant acquisition of units in the scheme; or

(b) the acquisition took place before it was reasonably practicable to

bring a correction to the attention of potential purchasers; or

correction was brought to the attention of potential purchasers;

(d) the person who acquired the units was not materially influenced

or affected by that statement or omission in making the decision

to invest.

(3) The authorised fund manager is also not in breach of (1)(a) and is not

liable to pay compensation under (1)(b) if:

(a) before the acquisition a correction had been published in a

manner calculated to bring it to the attention of persons likely to

acquire the units in question; or

(b) it took all reasonable steps to secure such publication and had

reasonable grounds to conclude that publication had taken place

before the units were acquired.

(4) The authorised fund manager is not liable to pay compensation under

(1)(b) if the person who acquired the units knew at the time of the

acquisition that the statement was untrue or misleading or knew of

the omission.

(5) For the purposes of this rule a revised prospectus will be treated as a

different prospectus from the original one.

(6) References in this rule to the acquisition of units include references to

contracting to acquire them.

Table: contents of the prospectus

.....................................................................................................

This table belongs to ■ COLL 4.2.2 R (Publishing the prospectus).

Document status

1 A statement that the document is the prospectus of the authorised

fund valid as at a particular date (which shall be the date of the

document).

Authorised fund

2 A description of the authorised fund including:

(a) its name;

(aa) its FCA product reference number (PRN);

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/6

(b) whether it is an ICVC, ACS or an AUT;

(ba) whether it is a UCITS scheme or a non-UCITS retail scheme;

(bb) a statement that unitholders in an AUT, ICVC or co-ownership

scheme are not liable for the debts of the authorised fund;

(bc) a statement that the scheme property of a co-ownership

scheme is beneficially owned by the participants as tenants in

common (or, in Scotland, is the common property of the par-

ticipants);

(bd) a statement that a unitholder in a limited partnership scheme

is not liable for the debts or obligations of the limited part-

nership scheme beyond the amount of the scheme property

which is available to the authorised contractual scheme man-

ager to meet such debts or obligations, provided that the un-

itholder does not take part in the management of the part-

nership business;

(be) a statement that the exercise of rights conferred on limited

partners by FCA rules does not constitute taking part in the

management of the partnership business;

the place in the United Kingdom for service on the ICVC of

notices or other documents required or authorised to be

served on it;

(ca) for an ACS that is a limited partnership scheme, the address

of the proposed principal place of business of the limited

partnership scheme;

(d) the effective date of the authorisation order made by the

FCA and relevant details of termination, if the duration of

the authorised fund is limited;

(e) its base currency;

(f) for an ICVC, the maximum and minimum sizes of its capital;

(g) the circumstances in which it may be wound up under the

rules and a summary of the procedure for, and the rights of

unitholders under, such a winding up; and

(h) if it is not an umbrella, a statement that it is a feeder UCITS,

a feeder NURS, a fund of alternative investment funds or a

property authorised investment fund, where that is the case.

Umbrella ICVCs or co-ownership schemes

2A The following statements for an ICVC or a co-ownership scheme

which is an umbrella:

(a) for an ICVC, a statement thatits sub-funds are segregated

portfolios of assets and, accordingly, the assets of a sub-fund

belong exclusively to that sub-fund and shall not be used to

discharge directly or indirectly the liabilities of, or claims

against, any other person or body, including the umbrella, or

any other sub-fund, and shall not be available for any such

purpose;

(aa) for a co-ownership scheme, a statement that the property

subject to a sub-fund is beneficially owned by the particip-

ants in that sub-fund as tenants in common (or, in Scotland, is

the common property of the participants in that sub-fund)

and must not be used to discharge any liabilit

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/7

ies of, or meet any claims against, any person other than the

participants in that sub-fund; and

(b) for an ICVC or a co-ownership scheme, a statement that

while the provisions of the OEIC Regulations, and section

261P (Segregated liability in relation to umbrella co-owner-

ship schemes) of the Act in the case of co-ownership schemes,

provide for segregated liability between sub-funds, the con-

cept of segregated liability is relatively new. Accordingly,

where claims are brought by local creditors in foreign courts

or under foreign law contracts, it is not yet known how those

foreign courts will react to regulations 11A and 11B of the

OEIC Regulations or, as the case may be, section 261P of the

Act.

Umbrella Schemes

2B For a UCITS scheme or non-UCITS retail scheme which is an

umbrella:

(a) a statement detailing whether each specific sub-fund

is a feeder UCITS, a feeder NURS, a fund of alternat-

ive investment funds or a property authorised invest-

ment fund, as appropriate; and

(b) the FCA product reference number (PRN) of each sub-

fund.

Investment objectives and policy

3 The following particulars of the investment objectives and policy of

the authorised fund:

(a) the investment objectives, including its financial objectives;

(b) the authorised fund's investment policy for achieving those in-

vestment objectives, including the general nature of the port-

folio and, if appropriate, any intended specialisation;

(c-b) where:

(i) a target for a scheme’s performance has been set, or

a payment out of scheme property is permitted, by

reference to a comparison of one or more aspects of

the scheme property or price with fluctuations in the

value or price of an index or indices or any other sim-

ilar factor (a “target benchmark”); or

(ii) without being a target benchmark, arrangements are

in place in relation to the scheme according to which

the composition of the portfolio of the scheme is, or

is implied to be, constrained by reference to the

value, the price or the components of an index or in-

dices or any other similar factor (a “constraining

benchmark”); or

(iii) without being a target benchmark or a constraining

benchmark, the scheme’s performance is compared

against the value or price of an index or indices or

any other similar factor (a “comparator benchmark”),

a statement providing sufficient information for investors to

understand the choice and use of any target benchmark, con-

straining benchmark or comparator benchmark in relation to

the scheme;

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/8

(c-a) where no target benchmark, constraining benchmark or com-

parator benchmark is used, a statement to that effect and an

explanation of how investors can assess the performance of

the scheme;

(ca) for an authorised fund that has indicated in its name, invest-

ment objectives or fund literature (including in any financial

promotions for the fund), through use of descriptions such as

'absolute return', 'total return' or similar, an intention to de-

liver positive returns in all market conditions (and where

there is no actual guarantee of such returns), additional state-

ments in the authorised fund's investment objectives

specifying:

(i) that capital is in fact at risk;

(ii) the investment period over which the authorised

fund aims to achieve a positive return; and

(iii) there is no guarantee that this will be achieved over

that specific, or any, time period;

(d) the description of assets which the capital property may con-

sist of;

(e) the proportion of the capital property which may consist of

an asset of any description;

(f) the description of transactions which may be effected on be-

half of the authorised fund and an indication of any tech-

niques and instruments or borrowing powers which may be

used in the management of the authorised fund;

(g) a list of the eligible markets through which the authorised

fund may invest or deal in accordance with COLL 5.2.10 R (2)(b)

(Eligible markets: requirements);

(h) for an ICVC, a statement as to whether it is intended that the

scheme will have an interest in any immovable property or

movable property ((in accordance with COLL 5.6.4 R (2) (Invest-

ment powers: general) or COLL 5.2.8 R (2) (UCITS schemes: gen-

eral)) for the direct pursuit of the ICVC's business;

(i) where COLL 5.2.12 R (3) (Spread: government and public securit-

ies) applies:

(i) a prominent statement as to the fact that more than

35% in value of the scheme property is or may be in-

vested in transferable securities or approved money-

market instruments issued or guaranteed by a single

state, local authority or public international body;

and

(ii) the names of the individual states, local authorities

or public international bodies issuing or guaran-

teeing the securities in which more than 35% in

value of the scheme property may be invested;

(k) for an authorised fund which may invest in other schemes,

the extent to which the scheme property may be invested in

the units of schemes which are managed by the authorised

fund manager or by its associate;

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/9

(ka) where a scheme is a feeder scheme (other than a feeder UC-

ITS or a feeder NURS), which (in respect of investment in un-

its in collective investment schemes) is dedicated to units in a

single collective investment scheme, details of the master

scheme and the minimum (and, if relevant, maximum) invest-

ment that the feeder scheme may make in it;

(l) where a scheme invests principally in scheme units, deposits

or derivatives, or replicates an index in accordance with COLL

5.2.31 R or COLL 5.6.23 R (Schemes replicating an index), a prom-

inent statement regarding this investment policy;

(m) where derivatives transactions may be used in a scheme, a

prominent statement as to whether these transactions are for

the purposes of efficient portfolio management (includ-

inghedging) or meeting the investment objectives or both

and the possible outcome of the use of derivatives on the risk

profile of the scheme;

(n) information concerning the profile of the typical investor for

whom the scheme is designed;

(o) information concerning the historical performance of the

scheme, comparing in particular its historical performance

against each target benchmark and each constraining

benchmark used in relation to the scheme, presented in ac-

cordance with COBS 4.6.2R (the rules on past performance);

(p) for a non-UCITS retail scheme which invests in immovables, a

statement of the countries or territories of situation of land

or buildings in which the authorised fund may invest;

(pa) for a fund investing in inherently illiquid assets at least the

following (see FUND 3.2.2R(8) (Prior disclosure of information

to investors)):

(i) an explanation of the risks associated with the

scheme investing in inherently illiquid assets and how

those risks might crystallise;

(ii) a description of the tools and arrangements the au-

thorised fund manager would propose using, includ-

ing those required by FCA rules, to mitigate the risks

referred to in (i); and

(iii) an explanation of the circumstances in which those

tools and arrangements would typically be deployed

and the likely consequences for investors;

(q) for a UCITS scheme which invests a substantial portion of its

assets in other schemes, a statement of the maximum level of

management fees that may be charged to that UCITS scheme

and to the schemes in which it invests;

(qa) where the authorised fund is a qualifying money market

fund, a statement identifying it as such a fund and a state-

ment that the authorised fund's investment objectives and

policies will meet the conditions specified in the definition of

qualifying money market fund;

(r) where the net asset value of a UCITS scheme is likely to have

high volatility owing to its portfolio composition or the port-

folio management techniques that may be used, a prominent

statement to that effect;

(s) for a UCITS scheme, a statement that any unitholder may ob-

tain on request the types of information (which must be

listed) referred to in COLL 4.2.3R (3) (Availability of prospectus

and long report); and

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/10

(t) for a UCITS scheme that is or is intended to be a master UC-

ITS, a statement that it is not a feeder UCITS and will not

hold units of a feeder UCITS.

Reporting, distributions and accounting dates

4 Relevant details of the reporting, accounting and distribution in-

formation which includes:

(a) the accounting and distribution dates;

(b) procedures for:

(i) determining and applying income (including how any

distributable income is paid);

(ii) unclaimed or unwanted distributions, including any

arrangements for the transfer of:

(A) an unclaimed eligible distribution of income

that is a dormant asset (see COLL 6.8.4R (Un-

claimed, de minimis and joint unitholder dis-

tributions)); or

(B) unwanted asset money (see COLL 6.8.4AR (Un-

wanted asset money)); and

(iii) if relevant, calculating, paying and accounting for in-

come equalisation; and

be published in accordance with COLL 4.5.14 R (Publication and

availability of annual and half-yearly long report).

(d) [deleted]

Characteristics of the units

5 Information as to:

(a) where there is more than one class of unit in issue or avail-

able for issue, the name of each such class and the rights at-

tached to each class in so far as they vary from the rights at-

tached to other classes;

(b) [deleted]

these amount to;

(d) where a mandatory redemption, cancellation or conversion

of units from one class to another may be required, in what

circumstances it may be required; and

(e) for an AUT, the fact that the nature of the right represented

by units is that of a beneficial interest under a trust.

5A ACSs: UCITS and NURS eligible investors

(a) A statement that units may not be issued to a person other

than a:

(i) professional ACS investor; or

(ii) large ACS investor; or

(iii) person who already holds units in the scheme.

(b) A statement that the authorised contractual scheme manager

must redeem units as soon as practicable after becoming

aware that those units are vested in anyone (whether as a re-

sult of subscription or transfer of units) other than a person

meeting the criteria in paragraph 5A(a).

5B ACSs: UCITS and NURS transfer of units

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/11

(a) A statement whether the transfer of units in the ACS scheme

is either:

(i) prohibited; or

(ii) allowed;

by the instrument constituting the fund and prospectus.

(b) Where transfer of units is allowed by the instrument consti-

tuting the fund and prospectus in accordance with (a)(ii), a

statement that units may only be transferred in accordance

with the conditions specified by FCA rules, including that un-

its may not be transferred to a person other than a:

(i) professional ACS investor; or

(ii) large ACS investor; or

(iii) person who already holds units in the scheme.

in accordance with (5B)(a)(i) or (ii) and, where appropriate, a

statement in accordance with (5B)(b), must also be made for

the sub-funds. Where individual sub-funds have differing pol-

icies in relation to transfer of units, separate statements are

required.

Authorised fund manager

6 The following particulars of the authorised fund manager:

(a) its name;

(b) the nature of its corporate form;

(d) the address of its registered office;

(e) the address of its head office, if that is different from the ad-

dress of its registered office;

(f) [deleted]

(g) if the duration of its corporate status is limited, when that

status will or may cease; and

(h) the amount of its issued share capital and how much of it is

paid up.

Directors of an ICVC, other than the ACD

7 Other than for the ACD:

(a) the names and positions in the ICVC of any other directors (if

any); and

(b) the manner, amount and calculation of the remuneration of

such directors.

Depositary

8 The following information and particulars concerning the de-

positary:

(a) its name;

(b) the nature of its corporate form;

(d) the address of its head office, if that is different from the ad-

dress of its registered office;

(e) [deleted]

(f) a description of its duties and conflicts of interest that may

arise between the depositary and:

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/12

(i) the scheme; or

(ii) the unitholders in the scheme; or

(iii) the authorised fund manager;

(g) (i) a description of any safekeeping functions delegated

by the depositary;

(ii) a description of any conflicts of interest that may

arise from such delegation; and

(iii) for a UCITS scheme, a list showing the identity of

each delegate and sub-delegate; and

(h) for a UCITS scheme, a statement that up-to-date information

regarding the points covered under (a),(f) and (g), above, will

be made available to unitholders on request.

Investment adviser

9 If an investment adviser is retained in connection with the business

of an authorised fund:

(a) its name; and

(b) where it carries on a significant activity other than providing

services to the authorised fund as an investment adviser,

what that significant activity is.

Auditor

10 The name of the auditor of the authorised fund.

Contracts and other relationships with parties

11 The following relevant details:

(a) for an ICVC:

(i) a summary of the material provisions of the contract

between the ICVC and the ACD which may be relev-

ant to unitholders including provisions (if any) relat-

ing to remuneration, termination, compensation on

termination and indemnity;

(ii) the main business activities of each of the directors

(other than those connected with the business of the

ICVC) where these are of significance to the ICVC's

business;

(iii) if any director is a body corporate in a group of

which any other corporate director of the ICVC is a

member, a statement of that fact;

(iv) the main terms of each contract of service between

the ICVC and a director in summary form; and

(v) for an ICVC that does not hold annual general meet-

ings, a statement that copies of contracts of service

between the ICVC and its directors, including the

ACD, will be provided to a unitholder on request;

(b) the names of the directors of the authorised fund manager

and the main business activities of each of the directors

(other than those connected with the business of

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/13

the authorised fund) where these are of significance to the

authorised fund's business;

tween the ICVC or the manager of the AUT and the deposit-

ary which may be relevant to unitholders, including provi-

sions relating to the remuneration of the depositary;

(ca) in the case of an ACS, a summary of the material provisions

of the contracts between:

(i) the authorised fund manager and the nominated

partner (if any); and

(ii) the authorised fund manager and depositary;

which may be relevant to unitholders, including provisions re-

lating to the remuneration of the depositary;

(d) if an investment adviser retained in connection with the busi-

ness of the authorised fund is a body corporate in a group of

which any director of the ICVC or the authorised fund man-

ager of the AUTor ACS is a member, that fact;

(e) a summary of the material provisions of any contract be-

tween the authorised fund manager or the ICVC and any in-

vestment adviser which may be relevant to unitholders;

(f) if an investment adviser retained in connection with the busi-

ness of the authorised fund has the authority of the au-

thorised fund manager or the ICVC to make decisions on be-

half of the authorised fund manager or the ICVC, that fact

and a description of the matters in relation to which it has

that authority;

(g) a list of:

(i) the functions which the authorised fund manager has

delegated in accordance with FCA rules; and

(ii) the person to whom such functions have been deleg-

ated; and

(h) in what capacity (if any), the authorised fund manager acts in

relation to any other regulated collective investment schemes

and the name of such schemes.

12 Details of:

(a) the address in the United Kingdom where the register of un-

itholders, and where relevant the plan register is kept and

can be inspected by unitholders; and

(b) the registrar's name and address.

Payments out of scheme property

13 In relation to each type of payment from the scheme property, de-

tails of:

(a) who the payment is made to;

(b) what the payment is for;

(d) how it will be calculated and accrued;

(e) when it will be paid;

(f) where a performance fee is taken, examples of its operation

in plain English and the maximum it can amount to; and

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/14

(g) where donations are to be made to one or more registered

charities for Sharia compliance purposes from the income

property of the scheme (in this rule, ‘purification’), in addi-

tion to the details required above, the person who advises

the authorised fund manager on the required percentage of

the income property recognised for purification.

Allocation of payments

14 If, in accordance with COLL 6.7.10 R (Allocation of payments to in-

come or capital), the authorised fund manager and the depositary

have agreed that all or part of any income expense payments may

be treated as a capital expense:

(a) that fact;

(b) the policy for allocation of these payments; and

constrain capital growth.

Moveable and immovable property (ICVC only)

15 An estimate of any expenses likely to be incurred by the ICVC in re-

spect of movable and immovable property in which the ICVC has an

interest.

Valuation and pricing of scheme property

16 In relation to the valuation of scheme property and pricing of units:

(a) either:

(i) in the case of a single-priced authorised fund, a provi-

sion that there must be only a single price for any

unit as determined from time to time by reference to

a particular valuation point; or

(ii) in the case of a dual-priced authorised fund, the au-

thorised fund manager's policy for determining prices

for the sale and redemption of units by reference to

a particular valuation point and an explanation of

how those prices may differ;

(b) details of:

(i) how the value of the scheme property is to be deter-

mined in relation to each purpose for which the

scheme property must be valued;

(ii) how frequently and at what time or times of the day

the scheme property will be regularly valued for

dealing purposes and a description of any circum-

stance in which the scheme property may be specially

valued;

(iii) where relevant, how the price of units of each class

will be determined for dealing purposes;

(iv) where and at what frequency the most recent prices

will be published; and

(v) where relevant in the case of a dual-priced au-

thorised fund, an explanation of what is meant by

large deals and the authorised fund manager's policy

in relation to large deals; and

ment constituting the fund or (where appropriate) supple-

mental trust deed takes effect, a statement of the time

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/15

from which those provisions are to take effect or how it will

be determined.

Dealing

17 The following particulars:

(a) the procedures, the dealing periods and the circumstances in

which the authorised fund manager will effect:

(i) the sale and redemption of units and the settlement

of transactions (including the minimum number or

value of units which one person may hold or which

may be subject to any transaction of sale or redemp-

tion) for each class of unit in the authorised fund;

and

(ii) any direct issue or cancellation of units by an ICVC or

by the depositary of an AUT or ACS (as appropriate)

through the authorised fund manager in accordance

with COLL 6.2.7R (2) (Issue and cancellation of units

through an authorised fund manager);

(b) the circumstances in which the redemption of units may be

suspended;

units;

(d) the circumstances in which the authorised fund manager may

arrange for, and the procedure for the issue or cancellation

of units in specie;

(e) the investment exchanges (if any) on which units in the

scheme are listed or dealt;

(f) the circumstances and conditions for issuing units in an au-

thorised fund which limit the issue of any class of units in ac-

cordance with COLL 6.2.18 R (Limited issue);

(g) the circumstances and procedures for the limitation or defer-

ral of redemptions in accordance with COLL 6.2.19 R (Limited

redemption) or COLL 6.2.21 R (Deferred redemption);

(h) in a prospectus available during the period of any initial

offer:

(i) the length of the initial offer period;

(ii) the initial price of a unit, which must be in the base

currency;

(iii) the arrangements for issuing units during the initial

offer, including the authorised fund manager's inten-

tions on investing the subscriptions received during

the initial offer;

(iv) the circumstances when the initial offer will end;

(v) whether units will be sold or issued in any other cur-

rency; and

(vi) any other relevant details of the initial offer ;

(i) whether a unitholder may effect transfer of title to units on

the authority of an electronic communication and if so the

conditions that must be satisfied in order to effect a transfer;

and

(j) if the authorised fund manager deals as principal in units of

the scheme and holds them for that purpose, a statement of

its policy for doing so and, where applicable:

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/16

(i) a description of when the authorised fund manager

may retain any profits it earns and absorb any losses

it incurs for these activities; and

(ii) a statement of non-accountability as referred to in

COLL 6.7.16G.

Transfers to a dormant asset fund operator

17A If the authorised fund manager or the depositary of the authorised

fund has a power under the instrument constituting the fund to

transfer an eligible CIS amount that is a dormant asset to a dorm-

ant asset fund operator in accordance with sections 8 to 10 of the

Dormant Assets Act 2022, particulars as to:

(a) the types of such eligible CIS amounts which the authorised

fund manager or the depositary may transfer;

(b) the circumstances in which an amount in (a) is a dormant as-

set, and any steps that the authorised fund manager or the

depositary must take before making a transfer;

power to convert a unit into a right to payment of an

amount in accordance with section 9(3) and (5) of the Dorm-

ant Assets Act 2022, an explanation of that power, including

the circumstances in which the power may be exercised;

(d) the consequences for the unitholder of a transfer of an eli-

gible CIS amount, including how the amount of a repayment

claim will be determined;

(e) information about the steps a person would need to take to

establish and make a repayment claim, and to receive pay-

ment of the money; and

(f) the basis on which a person who has made a repayment

claim may apply for the repaid amount or any part of it to be

reinvested in units.

17B If the authorised fund manager or the depositary has a power un-

der the instrument constituting the fund to transfer unwanted as-

set money to a dormant asset fund operator in accordance with sec-

tion 21 of the Dormant Assets Act 2022, particulars as to:

(a) the circumstances in which a person may inform the au-

thorised fund manager or the depositary that they wish an

eligible CIS amount to be transferred as unwanted asset

money to a dormant asset fund operator;

(b) how a person in (a) may obtain information from the au-

thorised fund manager or the depositary about the proced-

ure by which they may ask for such money to be transferred;

money can be transferred as unwanted asset money;

(d) the consequences of the money being transferred to a dorm-

ant asset fund operator; and

(e) what happens if the dormant asset fund operator does not

consent to the transfer of the money.

Dilution

18 In the case of a single-priced authorised fund, details of what is

meant by dilution including:

(a) a statement explaining:

(i) that it is not possible to predict accurately whether di-

lution is likely to occur; and

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/17

(ii) which of the policies the authorised fund manager is

adopting under COLL 6.3.8 (1) (Dilution) together with

an explanation of how this policy may affect the fu-

ture growth of the authorised fund; and

(b) if the authorised fund manager may require a dilution levy or

make a dilution adjustment, a statement of:

(i) the authorised fund manager's policy in deciding

when to require a dilution levy, including what is

meant by large deals and the authorised fund man-

ager's policy on large deals, or when to make a dilu-

tion adjustment;

(ii) the estimated rate or amount of any dilution levy or

dilution adjustment based either on historical data or

future projections; and

(iii) the likelihood that the authorised fund manager may

require a dilution levy or make a dilution adjustment

and the basis (historical or projected) on which the

statement is made.

SDRT provision

[deleted]

Forward pricing

20 An explanation of forward pricing under COLL 6.3.9 (Forward

pricing).

Preliminary charge

21 Where relevant, a statement authorising the authorised fund man-

ager to make a preliminary charge and specifying the basis for and

current amount or rate of that charge.

Redemption charge

22 Where relevant, a statement authorising the authorised fund man-

ager to deduct a redemption charge out of the proceeds of redemp-

tion; and if the authorised fund manager makes a redemption

charge:

(a) the current amount of that charge or if it is variable, the rate

or method of calculating it;

(b) if the amount, rate or method has been changed, that details

of any previous amount, rate or method may be obtained

from the authorised fund manager on request; and

unitholder is to be determined so far as necessary for the pur-

poses of the imposition of the redemption charge.

Property Authorised Investment Funds

22A For a property authorised investment fund, a statement that:

(1) [deleted]

(2) no body corporate may seek to obtain or intentionally main-

tain a holding of more than 10% of the net asset value of

the fund; and

(3) in the event that the authorised fund manager reasonably

considers that a body corporate holds more than 10% of the

net asset value of the fund, the authorised fund manager is

entitled to delay any redemption or cancellation of units if

the authorised fund manager reasonably considers such ac-

tion to be:

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/18

(a) necessary in order to enable an orderly reduction of

the holding to below 10%; and

(b) in the interests of the unitholders as a whole.

General information

23 Details of:

(a) the address at which copies of the instrument constituting

the fund, any amending instrument and the most recent an-

nual and half-yearly long reports may be inspected and from

which copies may be obtained;

(b) the manner in which any notice or document will be served

on unitholders;

(i) the scheme is liable to pay or suffer tax on any appre-

ciation in the value of the scheme property or on the

income derived from the scheme property; and

(ii) deductions by way of withholding tax may be made

from distributions of income to unitholders and pay-

ments made to unitholders on the redemption of

units;

(d) for a UCITS scheme, any possible fees or expenses not de-

scribed in paragraphs 13 to 22, distinguishing between those

to be paid by a unitholder and those to be paid out of

scheme property; and

(e) for an ICVC, whether or not annual general meetings will be

held.

Information on the umbrella

24 In the case of a scheme which is an umbrella with two or more sub-

funds, the following information:

(a) that a unitholder is entitled to exchange units in one sub-

fund for units in any other sub-fund (other than a sub-fund

which has limited the issue of units);

(b) that an exchange of units in one sub-fund for units in any

other sub-fund is treated as a redemption and sale and will,

for persons subject to United Kingdom taxation, be a realis-

ation for the purposes of capital gains taxation;

its in one sub-fund for units in any other sub-fund be given a

right by law to withdraw from or cancel the transaction;

(d) the policy for allocating between sub-funds any assets of, or

costs, charges and expenses payable out of, the scheme prop-

erty which are not attributable to any particular sub-fund;

(e) what charges, if any, may be made on exchanging units in

one sub-fund for units in any other sub-fund; and

(f) for each sub-fund, the currency in which the scheme property

allocated to it will be valued and the price of units calculated

and payments made, if this currency is not the base currency

of the scheme which is an umbrella.

(g) [deleted]

Application of the prospectus contents to an umbrella

25 For a scheme which is an umbrella, information required must be

stated:

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/19

(a) in relation to each sub-fund where the information for any

sub-fund differs from that for any other; and

(b) for the umbrella as a whole, but only where the information

is relevant to the umbrella as a whole.

Information on a feeder UCITS

25A In the case of a feeder UCITS, the following information:

(a) a declaration that the feeder UCITS is a feeder of a particular

master UCITS and as such permanently invests at least 85% in

value of the scheme property in units of that master UCITS;

(b) the investment objective and policy, including the risk profile;

and whether the performance records of the feeder UCITS

and the master UCITS are identical, or to what extent and for

which reasons they differ, including a description of how the

balance of the scheme property which is not invested in units

of the master UCITS is invested in accordance with COLL 5.8.3 R

(Balance of scheme property: investment restrictions on a

feeder UCITS);

vestment objective and policy, including the risk profile, and

an indication of how the prospectus of the master UCITS may

be obtained;

(d) a summary of the master-feeder agreement or where applic-

able, the internal conduct of business rules referred to in

COLL 11.3.2 R (2) (Master-feeder agreement and internal con-

duct of business rules);

(e) how the unitholders may obtain further information on the

master UCITS and the master-feeder agreement;

(f) a description of all remuneration or reimbursement of costs

payable by the feeder UCITS by virtue of its investment in un-

its of the master UCITS, as well as the aggregate charges of

the feeder UCITS and the master UCITS; and

(g) a description of the tax implications of the investment into

the master UCITS for the feeder UCITS.

[Note: article 63(1) of the UCITS Directive]

Information on a feeder NURS

25B In the case of a feeder NURS, the following information:

(a) a declaration that the feeder NURS is a feeder of a particular

qualifying master scheme and as such is dedicated to units in

a single qualifying master scheme and the minimum (and, if

relevant, maximum) investment that the feeder NURS may

make in its qualifying master scheme;

(b) the investment objective and policy of the feeder NURS, in-

cluding its risk profile; and whether the performance records

of the feeder NURS and the qualifying master scheme are

identical, or to what extent and for which reasons they differ,

including a description of how the balance of the scheme

property which is not invested in units of the qualifying mas-

ter scheme is invested in accordance with COLL 5.6.7 R (6A)

(Spread: general);

isation, its investment objective and policy, including the risk

profile, and an indication of how the prospectus of the quali-

fying master scheme may be obtained;

(d) how the unitholders may obtain further information on the

qualifying master scheme;

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/20

(e) a description of all remuneration or reimbursement of costs

payable by the feeder NURS by virtue of its investment in un-

its of the qualifying master scheme, as well as the aggregate

charges of the feeder NURS and the qualifying master

scheme; and

(f) a description of the tax implications of the investment into

the qualifying master scheme for the feeder NURS.

Marketing in another EEA state

26 [deleted]

Investment in overseas property through an intermediate holding vehicle

26A If investment in an overseas immovable is to be made through an

intermediate holding vehicle or a series of intermediate holding

vehicles, a statement disclosing the existence of that intermediate

holding vehicle or series of intermediate holding vehicles and con-

firming that the purpose of that intermediate holding vehicle or

series of intermediate holding vehicle is to enable the holding of

overseas immovables by the scheme.

Sustainability information

26B The following information, as applicable:

(a) where a sustainability label is used in relation to a

scheme, the information set out at ESG 5.3.3R and ESG

5.3.6R, in accordance with ESG 5.3.2R(1);

(b) where a sustainability label is not used in relation to

a scheme, but that scheme uses the terms in ESG

4.3.2R(2) under ESG 4.3.2R(1) in the product’s name or

in a financial promotion relating to that scheme, the

information required under ESG 5.3.2R(2).

Additional information

27 Any other material information which is within the knowledge of

the directors of an ICVC or the authorised fund manager of an AUT

or ACS, or which the directors or authorised fund manager would

have obtained by making reasonable enquiries, including but not

confined to, the following matters:

(a) information which investors and their professional advisers

would reasonably require, and reasonably expect to find in

the prospectus, for the purpose of making an informed judge-

ment about the merits of investing in the authorised fund

and the extent and characteristics of the risks accepted by so

participating;

(b) a clear and easily understandable explanation of any risks

which investment in the authorised fund may reasonably be

regarded as presenting for reasonably prudent investors of

moderate means;

capital or income return from a holding of units in the au-

thorised fund or any investment objective of giving protec-

tion to the capital value of, or income return from, such a

holding:

(i) details of that arrangement or protection;

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

G4.2.5A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/21

(ii) for any related guarantee, sufficient details about

the guarantor and the guarantee to enable a fair as-

sessment of the value of the guarantee;

(iii) a description of the risks that could affect achieve-

ment of that return or protection; and

(iv) details of the arrangements by which the authorised

fund manager will notify unitholders of any action re-

quired by the unitholders to obtain the benefit of

the guarantee; and

(d) whether any notice has been given to unitholders of the au-

thorised fund manager intention to propose a change to the

scheme and if so, its particulars.

Re-

mu-

nera-

tion

Policy

28 For a UCITS scheme and in relation to UCITS Remuneration Code

staff:

(a) up-to-date details of the remuneration policy including, but

not limited to:

(i) a description of how remuneration and benefits are

calculated; and

(ii) the identities of persons responsible for awarding the

remuneration and benefits, including the composi-

tion of the remuneration committee, where such a

committee exists; or

(b) a summary of the remuneration policy and a statement that:

(i) up-to-date details of the matters set out in (a) above

are available by means of a website, including a refer-

ence to that website; and

(ii) a paper copy of that website information will be

made available free of charge upon request.

[Note: A transitional provision applies to row 3(ca) of this table: see

■ COLL TP 1.28.]

Information to be provided on securities financing transactions

and total return swaps

.....................................................................................................

(1) The Securities Financing Transactions Regulation sets out the

additional information which:

(a) an authorised fund manager of a UCITS scheme must include in

the UCITS scheme prospectus; and

(b) an authorised fund manager who is a full-scope UK AIFM of a

non-UCITS retail scheme must make available to investors before

they invest.

(2) ■ COLL 4.2.5BEU and ■ COLL 4.2.5CEU copy out the relevant provisions of

that regulation.

(3) An authorised fund manager who is a full-scope UK AIFM of a non-

UCITS retail scheme should publish the information in the scheme’s

prospectus.

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

UK4.2.5B

UK4.2.5C

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/22

(4) An authorised fund manager of a UCITS scheme or a non-UCITS retail

scheme that does not use securities financing transactions or total

return swaps is not required to include the information in

■ COLL 4.2.5CEU in the prospectus or other pre-sale documents.

[Note: A transitional provision applies to ■ COLL 4.2.5AG: see ■ COLL TP 1.38G]

Transparency of collective investment undertakings in pre-contractual

documents

1. The prospectus referred to in [COLL 4.2.2R], and the disclosure by

AIFMs to investors required by [FUND 3.2.2R] shall specify the SFT and

total return swaps which UCITS management companies or UCITS in-

vestment companies, and AIFMs respectively, are authorised to use

and include a clear statement that those transactions and instru-

ments are used.

2. The prospectus and the disclosure to investors referred to in para-

graph 1 shall include the data provided for in Section B of the

Annex.

[Note: article 14(1) and (2) of the Securities Financing Transactions Regula-

tion and article 3 for relevant definitions]

Information to be included in the UCITS Prospectus and AIF disclosure to

investors:

_ General description of the SFTs and total return swaps used by the

collective investment undertaking and the rationale for their use.

_ Overall data to be reported for each type of SFTs and total return

swaps

_ Types of assets that can be subject to them.

_ Maximum proportion of AUM that can be subject to them.

_ Expected proportion of AUM that will be subject to each of

them.

_ Criteria used to select counterparties (including legal status, country

of origin, minimum credit rating).

_ Acceptable collateral: description of acceptable collateral with re-

gard to asset types, issuer, maturity, liquidity as well as the collateral

diversification and correlation policies.

_ Collateral valuation: description of the collateral valuation methodo-

logy used and its rationale, and whether daily mark-to-market and

daily variation margins are used.

_ Risk management: description of the risks linked to SFTs and total re-

turn swaps as well as risks linked to collateral management, such as

operational, liquidity, counterparty, custody and legal risks and,

where applicable, the risks arising from its reuse.

_ Specification of how assets subject to SFTs and total return swaps

and collateral received are safe-kept (e.g. with fund custodian).

_ Specification of any restrictions (regulatory or self-imposed) on reuse

of collateral.

_ Policy on sharing of return generated by SFTs and total return swaps:

description of the proportions of the revenue generated by SFTs and

total return swaps that is returned to the collective investment under-

taking, and of the costs and fees assigned to the manager or third

parties (e.g. the agent lender). The prospectus or disclosure to in-

vestors shall also indicate if these are related parties to the manager.

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

G4.2.6

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/23

Information to be included in the UCITS Prospectus and AIF disclosure to

investors:

[Note: section B of the annex to the Securities Financing Transactions Regu-

lation and article 3 for relevant definitions.]

[Note: AUM means assets under management.]

Guidance on contents of the prospectus

.....................................................................................................

(1) In relation to ■ COLL 4.2.5R (3)(b) the prospectus might include:

(a) a description of the extent (if any) to which that policy does not

envisage the authorised fund remaining fully invested at all

times;

(b) for a non-UCITS retail scheme which may invest in immovable

property:

(i) the maximum extent to which the scheme property may be

invested in immovables; and

(ii) a statement of the policy of the authorised fund manager in

relation to insurance of immovables forming part of the

scheme property; and

may be made, including restrictions in the extent to which the

authorised fund may invest in any category of asset, indicating (if

appropriate) where the restrictions are more onerous than those

imposed by ■ COLL 5 (Investment and borrowing powers).

(1A) In relation to ■ COLL 4.2.5R(3)(c-b), the prospectus might explain, if it is

the case, that one index or factor may be used for both a target

benchmark and a constraining benchmark in relation to the same

scheme.

(2) In relation to ■ COLL 4.2.5R (13), the type of payments are likely to

include management fees (such as periodic and performance fees),

depositary fees, custodian fees, transaction fees, registrar fees, audit

fees and FCA fees. Expenses which represent properly incurred costs

of the scheme may also be treated as a type of payment for this

purpose.

(3) [deleted]

(4) In relation to ■ COLL 4.2.5 R (16)(a), where the prospectus includes

provisions for both a single-priced authorised fund and a dual-priced

authorised fund, it should state prominently which method of pricing

is applicable to which authorised fund, and explain how the

differences between them may affect unitholders (for example if a

unitholder exchanges units in a single-priced authorised fund for

units in a dual-priced authorised fund, or vice versa).

(4A) In relation to ■ COLL 4.2.5R(3)(pa)(ii) and (iii), the types of liquidity

management tools and arrangements that should typically be

described include:

(a) suspension of dealing under ■ COLL 7.2.-3R, ■ COLL 7.2.-2R,

■ COLL 7.2.-1R and ■ COLL 7.2.1R;

COLL 4 : Investor Relations Section 4.2 : Pre-sale notifications

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/24

(b) fair value price adjustment (see ■ COLL 6.3.3ER, and

■ COLL 6.3.6G(1)(5) to ■ COLL 6.3.6G(1)(7));

■ COLL 6.3.6G(1)(7A) and ■ COLL 6.3.6G(1)(7B)); and

(d) measures to prevent dilution, such as applying a dilution levy (see

■ COLL 6.3.8R).

(5) Additional matters which are not contained in ■ COLL 4.2.5 R may be

required to be included in the prospectus, for example for the

purposes of making the scheme eligible under relevant tax legislation.

(6) The authorised fund manager of a UCITS scheme should consider the

appropriateness of including additional matters in its prospectus as a

result of the ESMA Guidelines on ETFs and other UCITS issues (ESMA

2012/832).

(7) (a) A full-scope UK AIFM that is the authorised fund manager of a

non-UCITS retail scheme should ensure that the prospectus of the

scheme includes the information required under ■ FUND 3.2

(Investor information) and ■ COLL 4.2.5R.

(b) The authorised fund manager need not state the same

information twice to satisfy both sets of requirements.

COLL 4 : Investor Relations Section 4.3 : Approvals and notifications

R4.3.1

G4.3.2

G4.3.3

R4.3.4

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/25

4.3 Approvals and notifications

Application

.....................................................................................................

This section applies to an authorised fund manager.

Explanation

.....................................................................................................

(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) and section 251 of the Act (Alteration of schemes and

changes of manager or trustee) require the prior approval of the FCA

for certain proposed changes to an authorised fund, including a

change of the authorised fund manager or depositary or a change to

the instrument constituting the fund . This should be kept in mind

when considering any proposed change.

Diagram: Change event

.....................................................................................................

This diagram belongs to ■ COLL 4.3.2 G.

Fundamental change requiring prior approval by meeting

.....................................................................................................

(1) The authorised fund manager, must, by way of an extraordinary

resolution, obtain prior approval from the unitholders for any

COLL 4 : Investor Relations Section 4.3 : Approvals and notifications

G4.3.5

R4.3.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/26

proposed change to the scheme which, in accordance with (2), is a

fundamental change.

(2) A fundamental change is a change or event which:

(a) changes the purposes or nature of the scheme; or

(b) may materially prejudice a unitholder; or

(d) introduces any new type of payment out of scheme property.

Guidance on fundamental changes

.....................................................................................................

(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) a change in the investment policy to achieve capital growth from

investment in one country rather than another;

growth through investment in fixed interest rather than equity

investments;

(d) a change in the investment policy to allow the authorised fund to

invest in derivatives as an investment strategy which increases its

volatility;

(e) a change to the characteristics of a scheme to distribute income

annually rather than monthly; or

(f) the introduction of limited redemption arrangements.

Significant change requiring pre-event notification

.....................................................................................................

(1) The authorised fund manager must give prior written notice to

unitholders, in respect of any proposed change to the operation of a

scheme that, in accordance with (2), constitutes a significant change.

(2) A significant change is a change or event which is not fundamental in

accordance with ■ COLL 4.3.4 R but which:

(a) affects a unitholder's ability to exercise his rights in relation to his

investment; or

(b) would reasonably be expected to cause the unitholder to

reconsider his participation in the scheme; or

an authorised fund manager or any other director of an ICVC or

an associate of either; or

(d) materially increases other types of payment out of scheme

property.

COLL 4 : Investor Relations Section 4.3 : Approvals and notifications

R4.3.6A

G4.3.7

R4.3.8

G4.3.9

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/27

(3) The notice period in (1) must be of a reasonable length (and must not

be less than 60 days).

[deleted]

Guidance on significant changes

.....................................................................................................

(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 policy;

through a group savings plan; or

(d) a change in the pricing arrangements for units of the scheme so

as to cause a single-priced authorised fund to become a dual-

priced authorised fund, or vice versa.

(3) Where the directors of an ICVC elect to discontinue holding annual

general meetings under paragraph 37A of the OEIC Regulations, they

are required to give 60 days' written notice to shareholders. For the

purpose of ■ COLL 4.3.6 R this should be treated as a significant change

to the operation of the scheme.

(4) [deleted]

Notifiable changes

.....................................................................................................

(1) The authorised fund manager must inform unitholders in an

appropriate manner and timescale of any notifiable changes that are

reasonably likely to affect, or have affected, the operation of the

scheme.

(2) A notifiable change is a change or event, other than a fundamental

change under ■ COLL 4.3.4 R or a significant change under

■ COLL 4.3.6 R, which a unitholder must be made aware of unless the

authorised fund manager concludes that the change is insignificant.

Guidance on notifiable changes

.....................................................................................................

(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:

COLL 4 : Investor Relations Section 4.3 : Approvals and notifications

R4.3.10

R4.3.11

R4.3.12

G4.3.13

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/28

(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;

(d) the introduction of limited issue arrangements; or

(e) a change of the depositary or a change in the name of the

authorised fund.

(3) The appropriate manner and timescale of notification would depend

on the nature of the change or event. Consequently the authorised

fund manager will need to assess each change or event individually.

(4) An appropriate manner of notification could include:

(a) sending an immediate notification to the unitholder;

(b) publishing the information on a website; or

scheme.

(1) [deleted]

(2) [deleted]

Change events relating to feeder UCITS and feeder NURS

.....................................................................................................

Where the authorised fund manager of either a feeder UCITS or a feeder

NURS is notified of any change in respect of its master UCITS or qualifying

master scheme which has the effect of a change to the feeder UCITS or

feeder NURS, the authorised fund manager must:

(1) classify it as a fundamental change, significant change or a notifiable

change to the feeder UCITS or feeder NURS in accordance with the

rules in this section; and

(2) (a) for a fundamental change, obtain approval from the unitholders

by way of an extraordinary resolution; or

(b) for a significant change, give written notice to unitholders of

that change; or

changes).

The actions required by ■ COLL 4.3.11 R (2)(a) and ■ (b) must be carried out as

soon as reasonably practicable after the authorised fund manager of the

feeder UCITS or feeder NURS has been informed of the relevant change to

the master UCITS or qualifying master scheme.

(1) The authorised fund manager of the feeder UCITS or feeder NURS

should assess the change to the master UCITS or qualifying master

COLL 4 : Investor Relations Section 4.3 : Approvals and notifications

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/29

scheme in terms of its impact on the feeder UCITS or feeder NURS.

For example, a change to the investment objective and policy of the

master UCITS or qualifying master scheme that alters its risk profile

would constitute a fundamental change for the feeder UCITS or

feeder NURS. In order for the feeder UCITS or feeder NURS to

continue investing in the master UCITS or qualifying master scheme,

the authorised fund manager of the feeder UCITS or feeder NURS

should obtain the approval of unitholders by way of an extraordinary

resolution, or else make a proposal to invest in a different master

UCITS or qualifying master scheme. For a feeder UCITS this should be

done in accordance with ■ COLL 11.2.2 R (Application for approval of

an investment in a master UCITS).

(2) Not all changes affecting the master UCITS or qualifying master

scheme will have the same significance for the feeder UCITS or feeder

NURS and its unitholders. For example, a change to how the prices of

the units in the master UCITS or qualifying master scheme are

published might not be a significant change for the feeder UCITS or

feeder NURS if the prices of its own units continue to be published in

the same way.

(3) Where the authorised fund manager of the feeder UCITS or feeder

NURS receives insufficient notice of the intended change to the

master UCITS or qualifying master scheme to be able to seek the prior

approval of unitholders to any fundamental change or to inform

them at least 60 days in advance of any significant change, it should

nevertheless use reasonable endeavours to inform them of the

change as soon as possible so that they can make an informed

judgement about the merits of continuing to invest in the feeder

UCITS or feeder NURS.

COLL 4 : Investor Relations Section 4.4 : Meetings of Unitholders and

service of notices

R4.4.1

R4.4.1A

R4.4.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/30

4.4 Meetings of Unitholders and service

of notices

Application

.....................................................................................................

This section applies to an authorised fund manager, a depositary and any

other director of an ICVC.

In this section:

(1) a ‘physical meeting’ is a general meeting convened at a physical

location where unitholders, or their proxy, must be physically present;

(2) a ‘hybrid meeting’ is a general meeting which allows unitholders, or

their proxy, to be physically present at the location where the

meeting is convened, or to attend and vote remotely; and

(3) a ‘virtual meeting’ is a general meeting where all unitholders, or their

proxy, attend and vote remotely.

General meetings

.....................................................................................................

(1) The authorised fund manager, the depositary or the other directors of

an ICVC may convene a general meeting of unitholders at any time.

(2) The unitholders may request the convening of a general meeting by a

requisition which must:

(a) state the objects of the meeting;

(b) be dated;

unitholders of units representing not less than one-tenth in value

(or such lower proportion stated in the instrument constituting

the fund ) of all of the units then in issue; and

(d) be deposited at the head office of the ICVC or with the

depositary of an AUT or ACS.

(3) The authorised fund manager, the depositary or the other directors of

an ICVC must on receipt of a requisition that complies with (2),

immediately convene a general meeting of the authorised fund for a

date no later than eight weeks after receipt of the requisition.

(4) The advisory committee of a charity authorised investment fund may

also request the convening of a general meeting of unitholders by

giving notice in accordance with ■ COLL 14.3.5R.

COLL 4 : Investor Relations Section 4.4 : Meetings of Unitholders and

service of notices

R4.4.2A

R4.4.2B

R4.4.2C

R4.4.3

R4.4.4

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/31

The instrument constituting the fund may make provision for a general

meeting to be:

(1) a physical meeting;

(2) a hybrid meeting; or

(3) a virtual meeting,

but in any event the authorised fund manager may hold a virtual

meeting or a hybrid meeting if this is not inconsistent with any

provisions in the instrument constituting the fund.

(1) Any unitholder who participates remotely in a hybrid meeting by the

means specified in the notice given under ■ COLL 4.4.5R is deemed to

be present at the meeting and has the same rights as a unitholder

who is physically present at the meeting.

(2) Any unitholder who participates in a virtual meeting by the means

specified in the notice given under ■ COLL 4.4.5R is deemed to be

present at the meeting and has the same rights that the unitholder

would have at a physical meeting.

Any unitholder who participates remotely must be enabled to do so without

having to appoint a proxy and must not be required to submit their vote on

a resolution in advance of the meeting.

Class meetings

.....................................................................................................

This section applies, unless the context otherwise requires, to class meetings

by reference to the units of the class concerned and the unitholders and

prices of such units.

Special meaning of Unitholder in COLL 4.4

.....................................................................................................

(1) Unless a unit in the authorised fund is a participating security, in this

section "unitholders" means unitholders as at a cut-off date selected

by the authorised fund manager which is a reasonable time before

notices of the relevant meeting are sent out.

(2) If any unit in the authorised fund is a participating security, a

registered unitholder of such a unit is entitled to receive a notice of a

meeting or a notice of an adjourned meeting under ■ COLL 4.4.5 R

(Notice of general meetings), if entered on the register at the close of

business on a day to be determined by the authorised fund manager,

which must not be more than 21 days before the notices of the

meeting are sent out.

(3) For the purposes of (2), in ■ COLL 4.4.6 R (Quorum) to ■ COLL 4.4.11 R

(The chair, adjournments and minutes) "unitholders" in relation to

those units means the persons entered on the register at a time to be

determined by the authorised fund manager and stated in the notice

of the meeting, which must not be more than 48 hours before the

time fixed for the meeting.

COLL 4 : Investor Relations Section 4.4 : Meetings of Unitholders and

service of notices

R4.4.5

R4.4.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/32

Notice of general meetings

.....................................................................................................

(1) Where the authorised fund manager, the depositary or the other

directors of an ICVC decide to convene a general meeting of

unitholders:

(a) each unitholder must be given at least 14 days written notice,

inclusive of the date on which the notice is first served and the

day of the meeting;

(b) the notice must specify:

(i) whether the meeting is to be a physical meeting, a hybrid

meeting or a virtual meeting;

(ii) if the meeting is a physical meeting or a hybrid meeting, the

place of the meeting;

(iii) if the meeting is a hybrid meeting or a virtual meeting, the

means by which a unitholder may participate, including any

requirements for unitholders to register before the meeting

begins or to provide proof of their right to attend, and an

explanation of how participating unitholders may vote in a

show of hands or in a poll, if they do not appoint a proxy;

(iv) the day and hour of the meeting;

(v) the terms of the resolutions to be proposed; and

(vi) the address of the website where the minutes of the meeting

will subsequently be published; and

(2) The accidental omission to give notice to, or the non-receipt of notice

by, any unitholder does not invalidate the proceedings at any

meeting.

(3) Notice of an adjourned meeting of unitholders must be given to each

unitholder, stating that while two unitholders are required to be

present – in person, by proxy or remotely – to constitute a quorum at

the adjourned meeting, this may be reduced to one in accordance

with ■ COLL 4.4.6R (3), should two such unitholders not be present

after a reasonable time of convening of the meeting.

(4) Paragraph (1)(a) does not apply to the notice of an adjourned

meeting.

(5) Where the meeting is a hybrid meeting or a virtual meeting, the

authorised fund manager must take reasonable care to ensure that

the necessary supporting technology to enable unitholders to attend

and vote is in place at the start of the meeting and operates

adequately throughout its proceedings, so that unitholders who

attend or vote remotely are not unfairly disadvantaged.

Quorum

.....................................................................................................

(1) The quorum required to conduct business at a meeting of unitholders

is two unitholders, present in person, by proxy or (where applicable)

remotely using the means specified in the notice given under

■ COLL 4.4.5R.

COLL 4 : Investor Relations Section 4.4 : Meetings of Unitholders and

service of notices

R4.4.7

R4.4.8

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/33

(2) If after a reasonable time from the time for the start of the meeting,

a quorum is not present, the meeting:

(a) if convened on the requisition of unitholders, must be dissolved;

and

(b) in any other case, must stand adjourned to:

(i) a day and time which is seven or more days after the day and

time of the meeting; and

(ii) in the case of a physical meeting or a hybrid meeting, a place

to be appointed by the chair.

(3) If, at an adjourned meeting under (2)(b), a quorum is not present

after a reasonable time from the time for the meeting, one person

entitled to be counted in a quorum present at the meeting shall

constitute a quorum.

(4) The chair of a meeting which permits unitholders to attend and vote

remotely must take reasonable care to give such unitholders:

(a) an adequate opportunity to be counted as present in the

quorum; and

(b) sufficient opportunities to participate fully in the proceedings of

the meeting, in particular when a vote is taken on a show of

hands or by poll.

Resolutions

.....................................................................................................

(1) Except where an extraordinary resolution is specifically required or

permitted, any resolution of unitholders is passed by a simple

majority of the votes validly cast at a general meeting of unitholders.

(2) In the case of an equality of, or an absence of, votes cast, the chair is

entitled to a casting vote.

(3) Where a resolution (including an extraordinary resolution) is required

to conduct business at a meeting of unitholders and every unitholder

is prohibited under ■ COLL 4.4.8R (4) from voting, it shall not be

necessary to convene such a meeting and a resolution may, with the

prior written agreement of the depositary to the process, instead be

passed with the written consent of unitholders representing 50% or

more, or for an extraordinary resolution 75% or more, of the units of

the scheme in issue.

Voting rights

.....................................................................................................

(1) On a show of hands every unitholder who is present in person, or

who attends the meeting remotely using the means specified in the

notice in ■ COLL 4.4.5R, has one vote.

(2) On a poll:

(a) votes may be given either personally or by proxy or in another

manner permitted by the instrument constituting the fund;

(b) the voting rights for each unit must be the proportion of the

voting rights attached to all of the units in issue that the price of

COLL 4 : Investor Relations Section 4.4 : Meetings of Unitholders and

service of notices

R4.4.9

R4.4.10

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/34

the unit bears to the aggregate price or prices of all of the units

in issue:

(i) if any unit is a participating security, at the time determined

under ■ COLL 4.4.4R (2) (Special meaning of Unitholder in

■ COLL 4.4);

(ii) otherwise at the date specified in ■ COLL 4.4.4R (1); and

same way.

(3) For joint unitholders, the vote of the most senior who votes, whether

in person, by proxy or remotely by the means referred to in (1), must

be accepted to the exclusion of the votes of the other joint

unitholders. For this purpose seniority must be determined by the

order in which the names stand in the register of unitholders.

(4) No director of the ICVC or the authorised fund manager of an AUT or

ACS can be counted in the quorum of, and no such director or the

authorised fund manager of an AUT or ACS nor any of their

associates may vote at, any meeting of the authorised fund.

(5) The prohibition in (4) does not apply to any units held on behalf of,

or jointly with, a person who, if himself the registered unitholder,

would be entitled to vote and from whom the director, the

authorised fund manager of an AUT or ACS or its associate have

received voting instructions.

(6) For the purpose of this section, units held, or treated as held, by the

authorised fund manager or any other director of the ICVC, must not,

except as mentioned in (5), be regarded as being in issue.

Right to demand a poll

.....................................................................................................

(1) A resolution put to the vote of a general meeting must be

determined on a show of hands unless a poll is (before or on the

declaration of the result of the show of hands) demanded by:

(a) the chair;

(b) at least two unitholders; or

(2) Unless a poll is demanded in accordance with (1), a declaration by the

chair as to the result of a resolution is conclusive evidence of the fact.

Proxies

.....................................................................................................

(1) A unitholder may appoint another person to attend a general

meeting and vote in his place.

(2) Unless the instrument constituting the fund provides otherwise, a

unitholder may appoint more than one proxy to attend on the same

occasion but a proxy may vote only on a poll.

COLL 4 : Investor Relations Section 4.4 : Meetings of Unitholders and

service of notices

R4.4.11

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/35

(3) Every notice calling a meeting of a scheme must contain a reasonably

prominent statement that a unitholder entitled to attend and vote

may appoint a proxy.

(4) For the appointment to be effective, any document relating to the

appointment of a proxy must not be required to be received by the

ICVC or any other person more than 48 hours before the meeting or

adjourned meeting

The chair, adjournment and minutes

.....................................................................................................

(1) A meeting of unitholders must have a chair, nominated:

(a) in the case of an AUT or ACS, by the depositary;

(b) in the case of an ICVC, by a director other than the ACD or an

associate of the ACD or, if no such nomination is made, by the

depositary.

(1) In the case of a physical meeting or a hybrid meeting, the chair must

be physically present at the place of the meeting.

(2) If the chair is not present after a reasonable time from the time for

the meeting, the unitholders present must (subject to (1A)) choose

one of them to be the chair.

(3) The chair:

(a) may, with the consent of any meeting of unitholders at which a

quorum is present; and

(b) must, if so directed by the meeting;

adjourn the meeting from time to time and from place to place,

provided that any arrangements to enable remote participation

at the original meeting are replicated for any adjourned

meeting.

(4) Business must not be transacted at any adjourned meeting, except

business which might have lawfully been transacted at the original

meeting.

(5) The authorised fund manager must ensure that:

(a) minutes of all resolutions and proceedings at every meeting of

unitholders are made and kept; and

(b) any minute made in (a) is signed by the chair of the meeting of

unitholders.

(6) Any minute referred to in (5)(b) is conclusive evidence of the matters

stated in it.

(7) The authorised fund manager must publish the minutes on a website

accessible to the general public without charge, no later than 5

business days after the meeting has taken place (but in the case of an

original meeting which is adjourned, the minutes must be published

no later than 5 business days after the adjourned meeting has taken

place).

COLL 4 : Investor Relations Section 4.4 : Meetings of Unitholders and

service of notices

R4.4.12

R4.4.13

G4.4.14

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/36

Notices to unitholders

.....................................................................................................

(1) Where this sourcebook requires any notice or document to be served

upon a unitholder, it is duly served :

(a) for units held by a registered unitholder, if it is:

(i) sent by post to or left at the unitholder's address as

appearing in the register; or

(ii) sent by using an electronic medium in accordance with

■ COLL 4.4.13 R (Other notices).

(b) [deleted]

(2) Any notice or document served by post is deemed to have been

served on the second business day following the day on which it is

posted.

(3) Any document left at a registered address or delivered other than by

post is deemed to have been served on that day.

(4) Any notice or document served by post on one joint unitholder is

deemed to also have been served on each other joint unitholder

whose address, as appearing on the register, is the same address to

which the notice or document was sent.

Other notices

.....................................................................................................

(1) Any document or notice to be served on or information to be given

to, any person, including the FCA , must be in legible form.

(2) For the purposes of this rule, any form is legible form which:

(a) is consistent with the ICVC's, the directors', the authorised fund

manager's or the depositary's knowledge of how the recipient of

the document wishes or expects to receive the document;

(b) is capable of being provided in hard copy by the authorised fund

manager, the depositary or any other director of the ICVC;

(d) is reasonable in the context.

(3) (a) In this sourcebook, any requirement that a document be signed

may be satisfied by an electronic signature or electronic evidence

of assent.

(b) In relation to an AUT or ACS, where transfer of title to units is to

be effected on the authority of an electronic communication, the

authorised fund manager must take reasonable steps to ensure

that any electronic communication purporting to be made by the

unitholder or his agent is in fact made by that person.

References to writing and electronic documents

.....................................................................................................

In this sourcebook references to writing and the use of electronic media

should be construed in accordance with ■ GEN 2.2.14 R (References to writing)

and its related guidance provisions.

COLL 4 : Investor Relations Section 4.4 : Meetings of Unitholders and

service of notices

G4.4.15

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/37

Service of notice Regulations

.....................................................................................................

The provisions in this section relating to the service and delivery of notices

and documents both to unitholders and to the FCA , disapply the provisions

of The Financial Services and Markets Act 2000 (Service of Notices)

Regulations 2001 (SI 2001/1420) under the power in Regulation 1(6) of those

Regulations.

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

R4.5.1

G4.5.2

G4.5.2A

R4.5.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/38

4.5 Reports and accounts

Application

.....................................................................................................

The rules and guidance in this section apply to an authorised fund manager,

a depositary and any other director of an ICVC.

Explanation

.....................................................................................................

In order to provide the unitholders with regular and relevant information

about the progress of the authorised fund, the authorised fund manager

must:

(1) prepare a long report half-yearly and annually; and

(2) [deleted]

(3) make the long report available to unitholders on request.

Full-scope UK AIFM of a non-UCITS retail scheme

.....................................................................................................

(1) A full-scope UK AIFM that is the authorised fund manager of a non-

UCITS retail scheme should comply with both:

(a) ■ FUND 3.3 (Annual report of an AIF); and

(b) this chapter,

regarding the preparation and publication of annual reports.

(2) The authorised fund manager need not state the same information

twice to satisfy both sets of requirements.

(3) The authorised fund manager, when preparing the half-yearly long

report, needs to comply only with this chapter.

Preparation of long reports

.....................................................................................................

(1) The authorised fund manager must for each annual accounting

period and half-yearly accounting period, prepare a long report for a

scheme.

(2) [deleted]

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

G4.5.4

R4.5.5

G4.5.6

R4.5.7

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/39

(3) Where the first annual accounting period of a scheme is less than 12

months, a half-yearly report need not be prepared.

(4) [deleted]

ICVC requirements

.....................................................................................................

(1) The OEIC Regulations contain requirements for the preparation of

annual and half-yearly reports and make the directors of an ICVC

responsible for the preparation of annual and half-yearly reports on

the ICVC.

(2) Regulations 66 (Reports: preparation), 67 (Reports: accounts) and 68

(Reports: voluntary revision) of the OEIC Regulations also contain a

number of other requirements relating to reports and accounts of an

ICVC.

[deleted]

Contents of the annual long report

.....................................................................................................

(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 SORP;

(b) the report of the authorised fund manager in accordance with

■ COLL 4.5.9 R (Authorised fund manager's report);

(Comparative information);

(d) the report of the depositary in accordance with ■ COLL 4.5.11 R

(Report of the depositary);

(e) the report of the auditor in accordance with ■ COLL 4.5.12 R

(Report of the auditor);

(f) subject to ■ COLL 4.5.7R(1)(g), its public TCFD product report or an

adequately contextualised and prominent cross-reference and

hyperlink to the report’s location on the firm’s website, in

accordance with ■ ESG 2.3.1R;

(g) where applicable, Part B of its public product-level sustainability

report or an adequately contextualised and prominent cross-

reference and hyperlink to the report’s location on the firm’s

website, in accordance with ■ ESG 5.5.5R; and

(h) where applicable, the amounts paid as donations for Sharia

compliance purposes and the registered charities which received

these payments.

(2) An annual long report on a scheme which is an umbrella must be

prepared for the umbrella as a whole and must contain:

(a) for each sub-fund:

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/40

(i) the accounts for the annual accounting period which must be

prepared in accordance with the requirements of the SORP;

(ii) the report of the authorised fund manager in accordance

with ■ COLL 4.5.9 R;

(iii) comparative information in accordance with ■ COLL 4.5.10 R;

(iv) subject to ■ COLL 4.5.7R(2)(a)(v), its public TCFD product report

or an adequately contextualised and prominent cross-

reference and hyperlink to the report’s location on the firm’s

website, in accordance with ■ ESG 2.3.1R;

(v) where applicable, Part B of its public product-level

sustainability report or an adequately contextualised and

prominent cross-reference and hyperlink to the report’s

location on the firm’s website, in accordance with

■ ESG 5.5.5R; and

() where applicable, the amounts paid as donations for Sharia

compliance purposes and the registered charities which

received these payments;

(b) [deleted]

and

(d) the report of the auditor in accordance with ■ COLL 4.5.12 R.

(3) The directors of an ICVC or the authorised fund manager of an AUT

or ACS must ensure that the accounts referred to in (1)(a), (2)(a) and

(4)(a) give a true and fair view of the net revenue and the net capital

gains or losses on the scheme property of the authorised fund, or, in

the case of (2)(a) and (4)(a), the sub-fund, for the annual accounting

period in question and the financial position of the authorised fund

or sub-fund as at the end of that period.

(4) The authorised fund manager of a scheme which is an umbrella may,

in addition to complying with (2), prepare a further annual long

report for any one or more individual sub-funds of the scheme, in

which case it must contain:

(a) in relation to the sub-fund:

(i) the accounts for the annual accounting period which must be

prepared in accordance with the requirements of the SORP;

(ii) the report of the authorised fund manager in accordance

with ■ COLL 4.5.9 R; and

(iii) comparative information in accordance with ■ COLL 4.5.10 R;

(b) the report of the depositary in accordance with ■ COLL 4.5.11 R;

and

(5) An annual long report of a UCITS scheme which is a feeder UCITS

must also include:

(a) a statement on the aggregate of the payments out of scheme

property as set out in the prospectus (in this rule “charges”) of

the feeder UCITS and the master UCITS; and

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/41

(b) a description of how the annual long report of its master UCITS

can be obtained.

[Note: article 63(2) of the UCITS Directive]

(6) An annual long report of a feeder NURS must also include:

(a) a statement on the aggregate charges of the feeder NURS and its

qualifying master scheme; and

(b) a description of how the annual long report (or nearest

equivalent document for a qualifying master scheme that is a

recognised scheme) of its qualifying master scheme can be

obtained.

(7) An annual long report of a UCITS scheme must also include:

(a) (i) the total amount of remuneration paid by the authorised

fund manager to its staff for the financial year, split into

fixed and variable remuneration;

(ii) the number of beneficiaries; and

(iii) where relevant, any amount paid directly by the UCITS

scheme itself, including any performance fee;

(b) the aggregate amount of remuneration broken down by

categories of UCITS Remuneration Code staff;

been calculated;

(d) the outcome of the reviews referred to in ■ SYSC 19E.2.7R(1) and

■ SYSC 19E.2.8R, including any irregularities that have occurred;

and

(e) details of any material changes to the adopted remuneration

policy since the previous annual long report was prepared.

[Note: article 69(3) second paragraph of the UCITS Directive]

(8) An annual long report of an authorised fund must also contain a

statement setting out a description of the assessment of value

required by ■ COLL 6.6.20R including:

(a) a separate discussion and conclusion for the matters covered in

each paragraph of ■ COLL 6.6.21R, and for each other matter that

formed part of the assessment, covering the considerations taken

into account in the assessment, a summary of its findings and the

steps undertaken as part of or as a consequence of the

assessment;

(b) an explanation for any case in which benefits from economies of

scale that were identified in the assessment have not been passed

on to unitholders;

class that is subject to higher charges than those applying to

other classes of the same scheme with substantially similar rights;

(d) the conclusion of the authorised fund manager’s assessment of

whether the charges are justified in the context of the overall

value delivered to the unitholders in the scheme; and

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

G4.5.7A

G4.5.8-A

R4.5.8

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/42

(e) if the assessment has identified that the charges are not justified

in the context of the overall value delivered to the unitholders, a

clear explanation of what action has been or will be taken to

address the situation.

(9) An AFM need not include the statement required by (8) in its annual

long report if it makes the statement available to unitholders

annually in a composite report covering two or more of the

authorised funds it manages, published in the same manner as the

annual long report.

(1) The FCA recognises that the annual long report, including the

remuneration related disclosures in ■ COLL 4.5.7R(7), may be required

to be made available to unitholders before the completion of the

authorised fund manager’s first annual performance period in which

it has to comply with the UCITS Remuneration Code.

(2) Under (1), the FCA expects the authorised fund manager to make

best efforts to comply with ■ COLL 4.5.7R(7) to the extent possible.

(3) The authorised fund manager, having made best efforts to achieve

compliance with ■ COLL 4.5.7R(7), may omit to disclose information

relating to remuneration where the information:

(a) is not available to the authorised fund manager for the relevant

annual accounting period; or

(b) is available but will not provide materially relevant, reliable,

comparable and clear information to unitholders about the

remuneration policy of the authorised fund manager, as it affects

the particular UCITS scheme.

(4) Where disclosure is omitted, the authorised fund manager should

explain the basis for that omission.

An AFM which is not subject to ■ COLL 6.6.20R as a result of

■ COLL 6.6.19R is not required to comply with ■ COLL 4.5.7R(8) or (9).

[deleted]

Contents of the half-yearly long report

.....................................................................................................

(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 SORP;

(b) the report of the authorised fund manager in accordance with

■ COLL 4.5.9 R (Authorised fund manager's report);

adequately contextualised and prominent cross-reference and

hyperlink to the report’s location on the firm’s website in

accordance with ■ ESG 2.3.1R, where the half-yearly long report

most closely follows the reporting deadline of 30 June, under

■ ESG 2.1.1R(1); and

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

G4.5.8A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/43

(d) where applicable, Part B of its public product-level sustainability

report or an adequately contextualised and prominent cross-

reference and hyperlink to the report’s location on the firm’s

website in accordance with ■ ESG 5.5.5R, where the half-yearly

long report is the report that most closely follows the date on

which Part B of the public product-level sustainability report was

published.

(2) A half-yearly long report on a scheme which is an umbrella must be

prepared for the umbrella as a whole and must contain:

(a) for each sub-fund:

(i) the accounts for the half-yearly accounting period which

must be prepared in accordance with the requirements of the

IMA SORP;

(ii) the report of the authorised fund manager in accordance

with ■ COLL 4.5.9 R;

(iii) subject to ■ COLL 4.5.8R(2)(iv), its public TCFD product report or

an adequately contextualised and prominent cross-reference

and hyperlink to the report’s location on the firm’s website,

in accordance with ■ ESG 2.3.1R, where the half-yearly long

report most closely follows the reporting deadline of 30 June,

under ■ ESG 2.1.1R(1); and

(iv) where applicable, Part B of its public product-level

sustainability report or an adequately contextualised and

prominent cross-reference and hyperlink to the report’s

location on the firm’s website, in accordance with

■ ESG 5.5.5R, where the half-yearly long report is the report

that most closely follows the date on which Part B of the

public product-level sustainability report was published.

(b) [deleted]

(3) The authorised fund manager of a scheme which is an umbrella may,

in addition to complying with (2), prepare a further half-yearly long

report for any one or more individual sub-funds of the scheme. Such

reports must contain the accounts and the report of the authorised

fund manager that would be required by (1) if the sub-fund were a

separate authorised fund.

(4) The half-yearly long report of a UCITS scheme which is a feeder UCITS

must also include a description of how the half-yearly and annual

reports of its master UCITS can be obtained.

[Note: article 63(2) second subparagraph of the UCITS Directive]

(5) The half-yearly long report of a feeder NURS must also include a

description of how the half-yearly and annual long reports (or nearest

equivalent documents for a qualifying master scheme that is a

recognised scheme) of its qualifying master scheme can be obtained.

Annual and half-yearly long reports for sub-funds of an

umbrella

.....................................................................................................

The authorised fund manager may, but need not, prepare annual and half-

yearly long reports for any individual sub-fund of an umbrella in accordance

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

G4.5.8AA

UK4.5.8AB

UK4.5.8AC

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/44

with ■ COLL 4.5.7R (4) and ■ COLL 4.5.8R (3) and make them available on

request to any unitholder investing in the relevant sub-fund. However, if the

authorised fund manager does so, this does not relieve it of its duty:

(1) to prepare annual and half-yearly long reports on the umbrella as a

whole (■ COLL 4.5.7R (2) and ■ COLL 4.5.8R (2)); and

(2) to make available and publish the annual and half-yearly long reports

for the umbrella as a whole (■ COLL 4.5.14 R).

Information to be included in annual and half-yearly reports on

securities financing transactions and total return swaps

.....................................................................................................

(1) The Securities Financing Transactions Regulation sets out the

additional information which:

(a) an authorised fund manager of a UCITS scheme must include in

the scheme’s annual and half-yearly reports; and

(b) an authorised fund manager who is a full-scope UK AIFM of a

non-UCITS retail scheme must include in the scheme’s annual

report.

(2) ■ COLL 4.5.8ABEU and ■ COLL 4.5.8ACEU copy out the relevant provisions

of that regulation.

(3) An authorised fund manager of a UCITS scheme or a non-UCITS retail

scheme that has not used securities financing transactions or total

return swaps during the relevant annual accounting period or half-

yearly accounting period is not required to include the information in

■ COLL 4.5.8ACEU in its reports.

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 invest-

ment companies in the half-yearly and annual re-

ports referred to in [COLL 4.5.3R (Preparation of long

reports)];

(b) for AIFMs in the annual report referred to in [FUND

3.3.2R (Provision of annual report).]

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 Regu-

lation and article 3 for relevant definitions]

Information to be provided in the UCITS half-yearly and annual reports

and the AIF’s annual report

Global data:

- The amount of securities and commodities on loan as a propor-

tion of total lendable assets defined as excluding cash and cash

equivalents;

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/45

Information to be provided in the UCITS half-yearly and annual reports

and the AIF’s annual report

- The amount of assets engaged in each type of SFTs and total re-

turn swaps expressed as an absolute amount (in the collective in-

vestment undertaking’s currency) and as a proportion of the col-

lective investment undertaking’s assets under management

(AUM).

Concentration data:

- Ten largest collateral issuers across all SFTs and total return

swaps (break down of volumes of the collateral securities and

commodities received per issuer’s name);

- Top 10 counterparties of each type of SFTs and total return

swaps separately (Name of counterparty and gross volume of

outstanding transactions).

Aggregate transaction data for each type of SFTs and total return swaps

separately to be broken down according to the below categories:

- Type and quality of collateral;

- Maturity tenor of the collateral broken down in the following

maturity buckets: less than one day, one day to one week, one

week to one month, one to three months, three months to one

year, above one year, open maturity;

- Currency of the collateral;

- Maturity tenor of the SFTs and total return swaps broken down

in the following maturity buckets: less than one day, one day to

one week, one week to one month, one to three months, three

months to one year, above one year, open transactions;

- Country in which the counterparties are established;

- Settlement and clearing (e.g., tri-party, Central Counterparty,

bilateral).

Data on reuse of collateral:

- Share of collateral received that is reused, compared to the max-

imum amount specified in the prospectus or in the disclosure to

investors;

- Cash collateral reinvestment returns to the collective investment

undertaking.

Safekeeping of collateral received by the collective investment undertak-

ing as part of SFTs and total return swaps:

Number and names of custodians and the amount of collateral assets safe-

kept by each of the custodians

Safekeeping of collateral granted by the collective investment undertaking

as part of SFTs and total return swaps:

The proportion of collateral held in segregated accounts or in pooled ac-

counts, or in any other accounts

Data on return and cost for each type of SFTs and total return swaps

broken down between the collective investment undertaking, the man-

ager of the collective investment undertaking and third parties (e.g. agent

lender) in absolute terms and as a percentage of overall returns generated

by that type of SFTs and total return swaps

[Note: section A of the annex to the Securities Financing Transactions Regu-

lation and article 3 for relevant definitions]

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

G4.5.8AD

R4.5.8B

R4.5.9

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/46

Additional information that may need to be included in the

annual and half-yearly long report of a UCITS scheme

.....................................................................................................

The annual and half-yearly long reports of a UCITS scheme may be required

to contain additional matters not referred to in ■ COLL 4.5.7 R and

■ COLL 4.5.8 R, such as those required by the ESMA Guidelines on ETFs and

other UCITS issues, which can be found at

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_

guidelines_on_etfs_and_other_ucits_issues.pdf

Signing of annual and half-yearly reports

.....................................................................................................

The annual reports in ■ COLL 4.5.7R (1) and ■ (2), and the half-yearly reports in

■ COLL 4.5.8R (1) and ■ (2), must:

(1) in the case of an ICVC, if there is:

(a) more than one director, be approved by the board of directors

and signed on their behalf by the ACD and at least one other

director; or

(b) no director other than the ACD, be signed by the ACD;

(2) in the case of an AUT or ACS, if the authorised fund manager has:

(a) more than one director, be signed by at least two directors of the

authorised fund manager; or

(b) only one director, be signed by the director of the authorised

fund manager.

Authorised fund manager's report

.....................................................................................................

The matters set out in (1) to (13) must be included in any authorised fund

manager's report, except where otherwise indicated:

(1) the names and addresses of :

(a) the authorised fund manager;

(b) the depositary;

(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 an ICVC) a statement that the unitholders of the ICVC are not

liable for the debts of the ICVC;

(5) the investment objectives of the authorised fund;

(6) the policy and strategy pursued for achieving those objectives;

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

R4.5.10

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/47

(7) a review of the investment activities during the period to which the

report relates;

(7A) a portfolio statement prepared in accordance with the requirements

of the SORP;

(7B) in the case of an umbrella which has more than one sub-fund,

particulars in the form of a table showing, as at the end of the period

to which the report relates:

(a) for each sub-fund, the number of units in that sub-fund that

were held by a second sub-fund of that umbrella; and

(b) the value of each such holding;

or, alternatively, a statement that there were no such holdings as at

the end of that period;

(8) particulars of any fundamental changes in accordance with

■ COLL 4.3.4 R (Fundamental change requiring prior approval by

meeting) made since the date of the last report;

(9) particulars of any significant changes which have occurred in

accordance with ■ COLL 4.3.6 R (Significant change requiring pre-event

notification) since the date of the last report;

(9A) in the case of a UCITS scheme or a KII-compliant NURS that does not

have a significant exposure to immovables, the figure for the

synthetic risk and reward indicator disclosed in its most recent key

investor information document or NURS-KII document and any

changes to that figure that have taken place during the period;

(10) any other information which would enable unitholders to make an

informed judgement on the development of the activities of the

authorised fund during this period and the results of those activities

as at the end of that period;

(11) for a report on an umbrella prepared in accordance with

■ COLL 4.5.7R (2) or ■ COLL 4.5.8R (2) , information required by (1) to (10)

must be given for each sub-fund, if it would vary from that given in

respect of the umbrella as a whole;

(12) for a UCITS scheme which invests a substantial proportion of its assets

in other schemes, a statement as to the maximum proportion of

management fees charged to the scheme itself and to other schemes

in which that scheme invests; and

(13) for a report on an individual sub-fund of a scheme which is an

umbrella prepared in accordance with ■ COLL 4.5.7R (4) or

■ COLL 4.5.8R (3), a statement that the latest long report prepared for

the umbrella as a whole is available on request.

Comparative information

.....................................................................................................

The comparative information required by ■ COLL 4.5.7 R (Contents of the

annual long report), ■ COLL 8.3.5A R (Contents of the annual report), and

■ COLL 15.5.3R (Contents of the annual report) must be shown for the last

three annual accounting periods (or all of the authorised fund's annual

accounting periods, if fewer than three) and must set out:

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

G4.5.10A

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/48

(1) [deleted]

(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 of the SORP; and showing at least:

(a) the performance record of a unit of that class;

(b) an indication of the actual charges and costs borne by the class;

for the unit, taking account of any sub-division or consolidation

of units that occurred during that period;

(d) the net asset value of the unit as at the end of the period;

(e) (i) (for a report of the directors of an ICVC) the number of units

of the class in issue as at the end of the period; or

(ii) (for a report of the authorised fund manager of an AUT or

an ACS) the number of units of the class that are in existence

or treated as in existence as at the end of the period; and

(f) the highest and the lowest prices of the unit during the period;

(2) [deleted]

(2A) for the scheme property, its total net asset value as at the end of the

period; and

(3) if, in the period covered by the information:

(a) the authorised fund has been the subject of any event (such as a

scheme of arrangement) having a material effect on the size of

the authorised fund, but excluding any issue or cancellation of

units for cash; or

(b) there have been changes in the investment objective and policy

of the authorised fund;

an indication, related in the body of the table to the relevant year in the

table, of the date of the event or change in the investment objective and

policy, and a brief description of its nature.

(1) The figure for the "return before operating charges" shown in the

comparative table required by ■ COLL 4.5.10R (1A) should include all

costs and charges actually borne by the class of units it describes.

(2) The indication of actual costs and charges borne by a class of units

should cover pro-rata allocations of the operating charges borne by

the scheme (e.g. annual management fee, fees and expenses payable

to the depositary, auditors and FCA, costs of buying and selling units

in an underlying scheme, etc.), any performance-related fee and

direct transaction-related costs where known to the AFM (e.g. dealing

commission on equity transactions and stamp duty). Where possible,

the operating charges should be presented as a single figure in both

pence per unit and as a percentage of net asset value.

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

R4.5.11

R4.5.12

R4.5.13

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/49

Report of the depositary

.....................................................................................................

(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 application of the

authorised fund's revenue, have not been carried out in

accordance with the rules in this sourcebook and, where

applicable, the OEIC Regulations and the instrument

constituting the fund; and

(ii) the investment and borrowing powers and restrictions

applicable to the authorised fund have been exceeded.

Report of the auditor

.....................................................................................................

The authorised fund manager must ensure that the report of the auditor to

the unitholders includes the following statements:

(1) whether, in the auditor's opinion, the accounts have been properly

prepared in accordance with the SORP, the rules in this sourcebook,

and the instrument constituting the fund;

(2) whether, in the auditor's opinion, the accounts give a true and fair

view of the net revenueand the net capital gains or losses onthe

scheme property of the authorised fund (or, as the case may be, the

scheme property attributable to the sub-fund) for the annual

accounting period in question and the financial position of the

authorised fund or sub-fund as at the end of that period;

(3) whether the auditor is of the opinion that proper accounting records

for the authorised fund (or, as the case may be, sub-fund) have not

been kept or whether the accounts are not in agreement with those

records;

(4) whether the auditor has been given all the information and

explanations which, to the best of his knowledge and belief, are

necessary for the purposes of his audit; and

(5) whether the auditor is of the opinion that the information given in

the report of the directors or in the report of the authorised fund

manager for that period is consistent with the accounts.

[deleted]

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

R4.5.14

R4.5.15

R4.5.16

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/50

Publication and availability of annual and half-yearly long

report

.....................................................................................................

(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 reports prepared in accordance with ■ COLL 4.5.7R (1)

to ■ (3) (Contents of the annual long report) and ■ COLL 4.5.8R (1) to

■ (2) (Contents of the half-yearly long report).

(2) The reports referred to in (1) must:

(a) be supplied free of charge to any person on request;

(b) be available in English, for inspection by the public free of charge

during ordinary office hours at a place specified;

place designated by the authorised fund manager in each EEA

State other than the United Kingdom in which units in the

authorised fund were marketed before IP completion day, in

English and in at least one of that other EEA State's official

languages; and

(d) be sent to the FCA.

[Note: article 74 of the UCITS Directive]

Provision of annual and half-yearly long reports for master and

feeder UCITS

.....................................................................................................

(1) The 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 be provided in a durable

medium other than paper or by means of a website that meets the

website conditions.

[Note: articles 63(3) and 63(5) of the UCITS Directive]

Provision of annual and half-yearly long reports for qualifying

master schemes of feeder NURS

.....................................................................................................

(1) The authorised fund manager of a feeder NURS must, where

requested by an investor or the FCA , provide to such person copies of

the annual and half-yearly long reports (or nearest equivalent

documents for a qualifying master scheme that is a recognised

scheme) of its qualifying master scheme free of charge.

(2) Except where an investor requests paper copies or the use of

electronic communications is not appropriate, the annual and half-

yearly long reports (or nearest equivalent documents for a qualifying

master scheme that is a recognised scheme) of its qualifying master

COLL 4 : Investor Relations Section 4.5 : Reports and accounts

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/51

scheme may be provided in a durable medium other than paper, or

by means of a website that meets the website conditions.

COLL 4 : Investor Relations Section 4.6 : Simplified Prospectus provisions

[deleted]

R4.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/52

4.6 Simplified Prospectus provisions

[deleted]

COLL 4 : Investor Relations Section 4.7 : Key investor information and

marketing communications

R4.7.1

G4.7.1A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/53

4.7 Key investor information and

marketing communications

Application

.....................................................................................................

This section applies to an ICVC, an authorised fund manager of an AUT, ACS

or ICVC and any other director of an ICVC where, in each case, the AUT, ACS

or ICVC is:

(1) a UCITS scheme; or

(2) a non-UCITS retail scheme that is offered to retail clients if the

authorised fund manager or ICVC draws up a NURS-KII document

instead of a key information document for the scheme.

Application of the PRIIPs regulation to NURS

.....................................................................................................

(1) An authorised fund manager of a non-UCITS retail scheme or an ICVC

that is a non-UCITS retail scheme that is offered to retail clients may

draw up either:

(a) a key information document in accordance with the PRIIPs

Regulation; or

(b) until 31 December 2026, a NURS-KII document (in accordance

with the exemption in article 32(2) of the PRIIPs Regulation).

(2) An authorised fund manager of a KII-compliant NURS or an ICVC that

is a KII-compliant NURS will need to comply with ■ COLL Appendix 2R

(Modifications to the KII Regulation for KII-compliant NURS), which

contains a modified version of the KII Regulation for KII-compliant

NURS (see ■ COLL 4.7.3AR).

(3) (a) An authorised fund manager of a KII-compliant NURS or an ICVC

that is a non-UCITS retail scheme that is offered to professional

clients only is not required to comply with the PRIIPs Regulation

or draw up a NURS-KII document.

(b) However, these documents may be used to market the non-UCITS

retail scheme to professional clients.

[Note: Article 32(1) of the PRIIPs Regulation as amended by article 17(1) of

Regulation (EU) 2019/1156 of the European Parliament and of the Council of

20 June 2019]

COLL 4 : Investor Relations Section 4.7 : Key investor information and

marketing communications

R4.7.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/54

Key investor information

.....................................................................................................

(1) An authorised fund manager must draw up a short document in

English containing key investor information for investors:

(a) in each UCITS scheme which it manages (a key investor

information document); and

(b) in each KII-compliant NURS which it manages (a NURS-KII

document).

(2) The words "key investor information" must be clearly stated in the

key investor information document and NURS-KII document.

(3) Key investor information must include appropriate information about

the essential characteristics of the UCITS scheme or KII-compliant

NURS which is to be provided to investors so that they are reasonably

able to understand the nature and risks of the investment product

that is being offered to them and, therefore, to take investment

decisions on an informed basis.

(4) Key investor information must provide information on the following

essential elements in respect of the UCITS scheme or KII-compliant

NURS:

(a) identification of the scheme and that the FCA is the competent

authority of the scheme;

(b) a short description of its investment objectives and investment

policy;

scenarios;

(d) costs and associated charges; and

(e) risk/reward profile of the investment, including appropriate

guidance and warnings in relation to the risks associated with

investments in the scheme.

(5) The essential elements referred to in (4) must be comprehensible to

the investor without any reference to other documents.

(6) A key investor information document or NURS-KII document must

clearly specify where and how to obtain additional information

relating to the proposed investment, including but not limited to

where and how the prospectus and the annual and half-yearly reports

can be obtained on request and free of charge at any time, and the

language in which that information is available to investors.

(6A) A key investor information document must also include:

(a) a statement that the details of the up-to-date remuneration

policy are available by means of a website, including, but not

limited to, the following:

(i) a description of how remuneration and benefits are

calculated; and

(ii) the identities of persons responsible for awarding the

remuneration and benefits, including the composition of the

remuneration committee, where such a committee exists; and

COLL 4 : Investor Relations Section 4.7 : Key investor information and

marketing communications

G4.7.3

R4.7.3A

R4.7.3B

G4.7.3C

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/55

(b) a reference to that website, and that a paper copy of the website

information will be made available free of charge upon request.

(6B) A NURS-KII document must also include a statement that the details

of the up-to-date remuneration policy will be made available free of

charge upon request, including the following:

(a) a description of how remuneration and benefits are calculated;

and

(b) the identities of persons responsible for awarding the

remuneration and benefits, including the composition of the

remuneration committee, where such a committee exists.

(7) Key investor information must be written in a concise manner and in

non-technical language. It must be drawn up in a common format,

allowing for comparison, and must be presented in a way that is

likely to be understood by retail investors.

(8) [deleted]

[Note: article 78 of the UCITS Directive]

Form and content of a key investor information document

.....................................................................................................

The KII Regulation sets out the form and content of a key investor

information document. Under the Regulation an authorised fund manager

must ensure that each key investor information document it produces for a

UCITS scheme complies with the requirements of the Regulation. For ease of

reference the Regulation is reproduced in ■ COLL Appendix 1UK (The KII

Regulation).

Form and content of a NURS-KII document

.....................................................................................................

The following must comply with ■ COLL Appendix 2R (Modifications to the KII

Regulation for KII-compliant NURS), which contains a modified version of the

KII Regulation for KII-compliant NURS, when producing a NURS-KII

document:

(1) an authorised fund manager of a KII-compliant NURS; and

(2) an ICVC that is a KII-compliant NURS.

[deleted]

Feeder NURS that produce a key information document

.....................................................................................................

The authorised fund manager of a feeder NURS, or an ICVC that is a feeder

NURS, that draws up a key information document for a retail client, should

cross refer to documents related to its qualifying master scheme which

enable such clients to understand the qualifying master scheme’s key

particulars including:

(1) its investment strategy;

COLL 4 : Investor Relations Section 4.7 : Key investor information and

marketing communications

G4.7.4

R4.7.5

G4.7.6

R4.7.7

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/56

(2) a description and explanation of any material differences between

the risk profile of the feeder NURS and that of the qualifying master

scheme; and

(3) its charges, including the aggregate of the charges of the feeder

NURS and its qualifying master scheme as disclosed in the feeder

NURS’ most up to date prospectus.

[Note: article 6(2) of the PRIIPs Regulation]

Translation of a key investor information document

.....................................................................................................

While the original key investor information document or NURS-KII document

is required by ■ COLL 4.7.2 R to be drawn up in English, an authorised fund

manager may prepare an accurate translation of it into any language for the

purpose of marketing the units of the UCITS scheme or KII-compliant NURS

in the United Kingdom. Any such translation should be prepared without

alterations or supplements.

Pre-contractual information

.....................................................................................................

The key investor information document and the NURS-KII document must:

(1) constitute pre-contractual information (see ■ COBS 14.2.1A R (Provision

of key investor information document or NURS-KII document));

(2) be fair, clear and not misleading; and

(3) be consistent with the relevant parts of the prospectus.

[Note: article 79(1) of the UCITS Directive]

(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 document. It states that an

authorised fund manager may be held liable solely on the basis of

any statement contained in the document that is misleading,

inaccurate or inconsistent with the relevant parts of the prospectus

for the UCITS scheme.

(3) A NURS-KII document should not include the wording of warning to

investors in (2) as the limitation of liability in (1) does not apply to

KII-compliant NURS.

Revision and filing of key investor information or key

information document or NURS-KII document

.....................................................................................................

(1) An authorised fund manager must keep up to date the essential

elements of:

COLL 4 : Investor Relations Section 4.7 : Key investor information and

marketing communications

G4.7.8

G4.7.9

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/57

(a) the key investor information document for each UCITS scheme

which it manages; or

(b) the NURS-KII document for each KII-compliant NURS which it

manages.

(2) An authorised fund manager must file the key investor information

document for each UCITS scheme or the NURS-KII document for each

KII-compliant NURS which it manages, and any amendments thereto,

with the FCA.

(3) An authorised fund manager of a feeder UCITS or feeder NURS must,

in addition to (1) and (2), file the key investor information of its

master UCITS or the NURS-KII document of its qualifying master

scheme, and any amendments thereto, with the FCA.

[Note: articles 63(3) and 82 of the UCITS Directive]

Synthetic risk and reward indicators and ongoing charges

disclosures in the KII

.....................................................................................................

(1) Authorised fund managers are advised that CESR issued two separate

guidelines regarding the methodology that should be used in

calculating the synthetic risk and reward indicator and the ongoing

charges figure, both of which must be disclosed in the key investor

information document for each UCITS scheme which they manage.

(2) In line with the KII Regulation and ■ COLL Appendix 2R, firms in

producing their key investor information documents or NURS-KII

documents should take account of CESR's methodologies in

calculating the figures for the synthetic risk and reward indicators

and for ongoing charges to be disclosed in those documents. For ease

of reference links to these guidelines are shown below, as follows:

Methodology for the calculation of the synthetic risk and reward

indicator in the KII (CESR/10-673)

https://www.esma.europa.eu/sites/default/files/library/2015/11/10_

673.pdf

Methodology for the calculation of the ongoing charges figure in the

KII (CESR/10-674)

https://www.esma.europa.eu/sites/default/files/library/2015/11/10_

674.pdf

(3) [deleted]

Authorised fund managers of a UCITS scheme and KII-compliant NURS are

further advised that ESMA has issued the following guidelines, which refer

to matters that should be included in the key investor information for

certain types of UCITS (ESMA 2012/832).

Guidelines for competent authorities and UCITS management companies:

Guidelines on ETFs and other UCITS issues

COLL 4 : Investor Relations Section 4.7 : Key investor information and

marketing communications

G4.7.10

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/58

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_

guidelines_on_etfs_and_other_ucits_issues.pdf

Marketing communications

.....................................................................................................

COBS 4.13.2R(1)(b) and (c) (Marketing communications relating to UCITS

schemes or EEA UCITS schemes) require an authorised fund manager to

ensure that its marketing communications that contain an invitation to

purchase units in a UCITS scheme or EEA UCITS scheme, indicate that a

prospectus and key investor information exist, specifying where they may be

obtained by the public or how the public may have access to them.

COLL 4 : Investor Relations Section 4.8 : Notifications for UCITS

master-feeder arrangements

R4.8.1

G4.8.2

R4.8.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4/59

4.8 Notifications for UCITS master-

feeder arrangements

Application

.....................................................................................................

This section applies to an ICVC, an authorised fund manager of an AUT, ACS

or ICVC and any other director of an ICVC where, in each case, the AUT, ACS

or ICVC is a UCITS scheme.

Purpose

.....................................................................................................

The purpose of this section is to explain the type, form and timing of the

notifications that are required before an existing UCITS scheme can begin to

operate as a feeder UCITS for the first time, or an existing feeder UCITS can

change to a different master UCITS. The process for making those changes is

set out in ■ COLL 11.2 (Approval of a feeder UCITS).

Information to be provided to Unitholders

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme that has been

approved by the FCA to operate as a feeder UCITS, including as a

feeder UCITS of a different master UCITS, must provide the following

information to its unitholders at least 30 calendar days before the

date when the feeder UCITS is to start to invest in units of the master

UCITS or, if it has already invested in them, the date when its

investment will exceed the limit applicable under ■ COLL 5.2.11R (9)

(Spread: general):

(a) a statement that the FCA has approved the investment of the

feeder UCITS in units of that master UCITS;

(b) the key investor information of the feeder UCITS and the master

UCITS;

the master UCITS or, if it has already invested in them, the date

when its investment will exceed the limit applicable under

■ COLL 5.2.11R (9);

(d) a statement that the unitholders have the right, for 30 calendar

days from the moment this information is provided, to request

the repurchase or redemption of their units without any charges

other than those retained by the UCITS scheme to cover

disinvestment costs.

(2) Where a UCITS marketing notification was made in relation to a

feeder UCITS before IP completion day, the authorised fund manager

COLL 4 : Investor Relations Section 4.8 : Notifications for UCITS

master-feeder arrangements

R4.8.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4/60

of the feeder UCITS must ensure that an accurate translation of the

information in (1) is provided to unitholders in:

(a) the official language, or one of the official languages, of the EEA

state where the UCITS marketing notification was made; or

(b) a language approved by the overseas regulator in the EEA state

where the UCITS marketing notification was made.

[Note: article 64 first and second paragraphs of the UCITS Directive]

Method of providing information

.....................................................................................................

The authorised fund manager of the feeder UCITS must provide to

unitholders the information required under ■ COLL 4.8.3 R in a durable

medium.

[Note: article 29 of the UCITS implementing Directive No 2]

COLL 4 : Investor Relations Annex 1

Total expense ratio calculation [deleted]

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4 Annex 1/1

COLL 4 : Investor Relations Annex 1

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4 Annex 1/2

COLL 4 : Investor Relations Annex 2

Portfolio turnover calculation [deleted]

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 4 Annex 2/1

COLL 4 : Investor Relations Annex 2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 4 Annex 2/2

Collective Investment Schemes

Chapter 5

Investment and borrowing

powers

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/1

COLL 5 : Investment and Section 5.1 : Introduction

borrowing powers

R5.1.1

G5.1.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/2

5.1 Introduction

Application

.....................................................................................................

(1) Subject to 1(A), ■ COLL 5.1 to ■ COLL 5.5 apply to the authorised fund

manager and the depositary of an authorised fund, and to an ICVC,

which is or ever has been a UCITS scheme.

(1A) The only sections of ■ COLL 5 that apply to the authorised fund

manager and the depositary of a feeder UCITS, and to an ICVC which

is a feeder UCITS, are ■ COLL 5.3 and ■ COLL 5.8, although particular

rules in ■ COLL 5.1, ■ COLL 5.2 and ■ COLL 5.5 are incorporated by

reference.

(2) Subject to 2(A), ■ COLL 5.1, ■ COLL 5.4 and ■ COLL 5.6 apply to the

authorised fund manager and depositary of an authorised fund, and

to an ICVC, which is a non-UCITS retail scheme.

(2A) ■ COLL 5.1, ■ COLL 5.4 and ■ COLL 5.7 apply to the authorised fund

manager and the depositary of an authorised fund and to an ICVC

which is a non-UCITS retail scheme operating as a fund of alternative

investment funds.

(3) Paragraphs (2) and (2A) cease to apply if a non-UCITS retail scheme

converts to be authorised as a UCITS scheme.

(4) [deleted]

Purpose

.....................................................................................................

(1) This chapter helps in achieving the statutory objective of protecting

consumers by laying down minimum standards for the investments

that may be held by an authorised fund. In particular:

(a) the proportion of transferable securities and derivatives that may

be held by an authorised fund is restricted if those transferable

securities and derivatives are not listed on an eligible market; the

intention of this is to restrict investment in transferable securities

or derivatives that cannot be accurately valued and readily

disposed of; and

(b) authorised funds are required to comply with a number of

investment rules that require the spreading of risk.

COLL 5 : Investment and Section 5.1 : Introduction

borrowing powers

R5.1.3

G5.1.4

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/3

(2) Table 5.1.4G gives an overview of the permissible investments and

maximum investment limits for UCITS schemes and non-UCITS retail

schemes.

Treatment of obligations

.....................................................................................................

(1) Where a rule in this chapter allows a transaction to be entered into

or an investment to be retained only if possible obligations arising

out of the transaction or out of the retention would not cause the

breach of any limits in this chapter, it must be assumed that the

maximum possible liability of the authorised fund under any other of

those rules has also to be provided for.

(2) Where a rule in this chapter permits a transaction to be entered into

or an investment to be retained only if that transaction, or the

retention, or other similar transactions, are covered:

(a) it must be assumed that in applying any of those rules, the

authorised fund must also simultaneously satisfy any other

obligation relating to cover; and

(b) no element of cover must be used more than once.

Indicative overview of investment and borrowing powers

.....................................................................................................

This table belongs to ■ COLL 5.1.2G (2).

Scheme investments and invest- Limits for UCITS Limits for non-UC-

ment techniques schemes ITS retail schemes

Permiss- Max- Permiss- Max-

ible in- imum ible in- imum

vestment limit vestment limit

Approved securities Yes None Yes None

Transferable securities that are Yes 10% Yes 20%

not approved securities

Government and public se- Yes None Yes None

curities

Regulated schemes other than Yes None Yes None

qualified investor schemes and

long-term asset funds

Unregulated schemes, qualified No N/A Yes 20%(C)

investor schemes, and long-term (D)

asset funds

Warrants Yes None Yes None

Investment trusts Yes None Yes None

Deposits Yes None Yes None

Derivatives Yes None Yes None

Immovables (i.e real property) No N/A Yes None

Gold No N/A Yes 10%

Hedging Yes None Yes None

Stock lending Yes None Yes None

Underwriting Yes None Yes None

Borrowing Yes 10% (T) Yes 10%

COLL 5 : Investment and Section 5.1 : Introduction

borrowing powers

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/4

Scheme investments and invest- Limits for UCITS Limits for non-UC-

ment techniques schemes ITS retail schemes

Cash and near cash Yes None Yes None

Note: Meaning of terms used:

A percentage an upper limit (though there may be

limits of other kinds).

"(T)" temporary only- see COLL 5.5.4R(4)

"N/A" Not applicable

“(C)” In the case of a non-UCITS retail

scheme operating as a FAIF there is no

maximum limit - see COLL 5.7.7 R.

“(D)” The second scheme would also need to

meet the applicable requirements speci-

fied in the rules.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.1

R5.2.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/5

5.2 General investment powers and

limits for UCITS schemes

Application

.....................................................................................................

(1) This section applies to an ICVC, an ACD, an authorised fund manager

of an AUT or ACS and a depositary of an ICVC, AUT or ACS where

such ICVC, AUT or ACS is a UCITS scheme, in accordance with

■ COLL 5.2.2 R (Table of application).

(2) [deleted]

Table of application

.....................................................................................................

This table belongs to ■ COLL 5.2.1 R.

Au-

thorised

fund

manager

of an AUT

or ACS, or

Au- ACD of an

thorised ICVC, that

fund Deposit- is a regu-

man- ary of lated

ager of an ICVC, money

an AUT AUT or market

Rule ICVC ACD or ACS ACS fund

5.2.3R x x x

5.2.4R x x

5.2.4AG x

5.2.5R to x x

5.2.9R

5.2.9AR x x

5.2.10R(1) x x

5.2.10R(2)(a)& x x

(b)

5.2.10R(2)(c) x

5.2.10R(3) x x

5.2.10AR to x x

5.2.10EG

5.2.11R to x x

5.2.20R

(excluding

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/6

Au-

thorised

fund

manager

of an AUT

or ACS, or

Au- ACD of an

thorised ICVC, that

fund Deposit- is a regu-

man- ary of lated

ager of an ICVC, money

an AUT AUT or market

Rule ICVC ACD or ACS ACS fund

5.2.17AR

and

5.2.17BG)

5.2.17AR x x x

and

5.2.17BG

5.2.20AR x x x

5.2.20BG x x

5.2.21R x x x

5.2.22R x x x

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.2A

R5.2.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/7

Au-

thorised

fund

manager

of an AUT

or ACS, or

Au- ACD of an

thorised ICVC, that

fund Deposit- is a regu-

man- ary of lated

ager of an ICVC, money

an AUT AUT or market

Rule ICVC ACD or ACS ACS fund

5.2.22AG x x x x x

5.2.23R(1) x x x x

5.2.23R(2) x x x x

to (4)

COLL 5.2.23- x x x x

5.2.23CR x x

5.2.26R x x

5.2.27R x

5.2.28R x

5.2.29R x x x

5.2.30R x x x x

5.2.31R to x x x

5.2.33R

5.2.34G x x

Note: x me-

ans

"applies"

In addition to the parts of CESR's UCITS eligible assets guidelines specifically

referred to in this section, the authorised fund manager of a UCITS scheme

should have regard to the other parts of those guidelines when applying the

rules in this section. CESR's UCITS eligible assets guidelines are available at

https://www.esma.europa.eu/sites/default/files/library/2015/11/07_044.pdf..

Prudent spread of risk

.....................................................................................................

(1) An authorised fund manager must ensure that, taking account of the

investment objectives and policy of the UCITS scheme as stated in the

most recently published prospectus, the scheme property of the UCITS

scheme aims to provide a prudent spread of risk.

(2) The rules in this section relating to spread of investments do not

apply until the expiry of a period of six months after the date of

which the authorisation order, in respect of the UCITS scheme, takes

effect or on which the initial offer commenced, if later, provided that

(1) is complied with during such period.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.4

G5.2.4A

R5.2.5

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/8

Investment powers: general

.....................................................................................................

The scheme property of each UCITS scheme must be invested only in

accordance with the relevant provisions in sections ■ COLL 5.2 to

■ COLL 5.5 that are applicable to that UCITS scheme and up to any maximum

limit so stated, but, the instrument constituting the fund may further restrict:

(1) the kind of property in which the scheme property may be invested;

(2) the proportion of the capital property of the UCITS scheme that may

be invested in assets of any description;

(3) the descriptions of transactions permitted; and

(4) the borrowing powers of the UCITS scheme.

Investment powers and limits for UCITS schemes that are regulated money

market funds are set out in the Money Market Funds Regulation. Subject to

complying with that Regulation, the instrument constituting the fund may

further restrict:

the kind of money market instruments in which the scheme property

may be invested;

the proportion of the capital property of the UCITS scheme to be

invested in money market instruments of any description;

the descriptions of transactions permitted; and

the borrowing powers of the UCITS scheme.

Valuation

.....................................................................................................

(1) In this chapter, the value of the scheme property of a UCITS scheme

means 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 not count as a valuation or a

valuation point for the purposes of ■ COLL 6.3 (Valuation and

pricing);

(b) initial outlay is to be regarded as remaining part of the scheme

property; and

determines that the UCITS scheme will become entitled to any

unrealised profit which has been made on account of a

transaction in derivatives, that prospective entitlement is to be

regarded as part of the scheme property.

(3) When valuing the scheme property of a dual-priced authorised fund,

the cancellation basis of valuation referred to in ■ COLL 6.3.3 R (2)

(Valuation) is to be applied.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.6

R5.2.6A

R5.2.7

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/9

Valuation guidance

.....................................................................................................

It should be noted that for the purpose of ■ COLL 5.2.5 R, ■ COLL 6.3 may be

affected by specific provisions in this chapter such as, for example,

■ COLL 5.4.6 R (Treatment of collateral).

UCITS schemes: permitted types of scheme property

.....................................................................................................

The scheme property of a UCITS scheme must, except where otherwise

provided in the rules in this chapter, consist solely of any or all of:

(1) transferable securities;

(2) approved money-market instruments;

(3) units in collective investment schemes;

(4) derivatives and forward transactions;

(5) deposits; and

(6) (for an ICVC) movable and immovable property that is essential for

the direct pursuit of the ICVC's business;

in accordance with the rules in this section.

[Note: articles 50(1) (in conjunction with other rules in this section) and 50(3)

of the UCITS Directive]

Transferable securities

.....................................................................................................

(1) A transferable security is an investment which is any of the following:

(a) a share;

(b) a debenture;

(ba) an alternative debenture;

(d) a warrant; or

(e) a certificate representing certain securities.

(2) An investment is not a transferable security if the title to it cannot be

transferred, or can be transferred only with the consent of a third

party.

(3) In applying (2) to an investment which is issued by a body corporate,

and which is a share or a debenture, the need for any consent on the

part of the body corporate or any members or debenture holders of

it may be ignored.

(4) An investment is not a transferable security unless the liability of the

holder of it to contribute to the debts of the issuer is limited to any

amount for the time being unpaid by the holder of it in respect of

the investment.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.7A

G5.2.7B

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/10

Investment in transferable securities

.....................................................................................................

(1) A UCITS scheme may invest in a transferable security only to the

extent that the transferable security fulfils the following criteria:

(a) the potential loss which the UCITS scheme may incur with respect

to holding the transferable security is limited to the amount paid

for it;

(b) its liquidity does not compromise the ability of the authorised

fund manager to comply with its obligation to redeem units at

the request of any qualifying unitholder (see ■ COLL 6.2.16 R (3) );

(i) in the case of a transferable security admitted to or dealt in

on an eligible market, where there are accurate, reliable and

regular prices which are either market prices or prices made

available by valuation systems independent from issuers;

(ii) in the case of a transferable security not admitted to or dealt

in on an eligible market, where there is a valuation on a

periodic basis which is derived from information from the

issuer of the transferable security or from competent

investment research;

(d) appropriate information is available for it as follows:

(i) in the case of a transferable security admitted to or dealt in

on an eligible market, where there is regular, accurate and

comprehensive information available to the market on the

transferable security or, where relevant, on the portfolio of

the transferable security;

(ii) in the case of a transferable security not admitted to or dealt

in on an eligible market, where there is regular and accurate

information available to the authorised fund manager on the

transferable security or, where relevant, on the portfolio of

the transferable security;

(e) it is negotiable; and

(f) its risks are adequately captured by the risk management process

of the authorised fund manager.

(2) Unless there is information available to the authorised fund manager

that would lead to a different determination, a transferable security

which is admitted to or dealt in on an eligible market shall be

presumed:

(a) not to compromise the ability of the authorised fund manager to

comply with its obligation to redeem units at the request of any

qualifying unitholder; and

(b) to be negotiable.

[Note: article 2(1) of the UCITS eligible assets Directive]

Where the authorised fund manager considers that the liquidity or

negotiability of a transferable security might compromise the ability of the

authorised fund manager to comply with its obligation to redeem units at

the request of any qualifying unitholder, it should assess the liquidity risk in

accordance with CESR's UCITS eligible assets guidelines with respect to article

2(1) of the UCITS eligible assets Directive.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.7C

G5.2.7D

R5.2.7E

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/11

Closed end funds constituting transferable securities

.....................................................................................................

A 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 to national regulation for the

purpose of investor protection; or

(2) where the closed end fund is constituted under the law of contract:

(a) it is subject to corporate governance mechanisms equivalent to

those applied to companies; and

(b) it is managed by a person who is subject to national regulation

for the purpose of investor protection.

[Note: articles 2(2)(a) and (b) of the UCITS eligible assets Directive]

(1) An 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 with rights to:

(a) vote on the essential decisions of the closed end fund (including

appointment and removal of asset management company,

amendment to the contract which set up the closed end fund,

modification of investment policy, merger, liquidation); and

(b) control the investment policy of the closed end fund through

appropriate mechanisms.

(3) The assets of the closed end fund in contractual form should be

separate and distinct from those of the asset manager and the closed

end fund should be subject to liquidation rules that adequately

protect its investors.

[Note: CESR's UCITS eligible assets guidelines with respect to articles 2(2) and

2(2)(b)(ii) of the UCITS eligible assets Directive ]

Transferable securities linked to other assets

.....................................................................................................

(1) A UCITS scheme may invest in any other investment which shall be

taken to be a transferable security for the purposes of investment by

a UCITS scheme provided the investment:

(a) fulfils the criteria for transferable securities set out in

■ COLL 5.2.7A R; and

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.7F

R5.2.7G

R5.2.7H

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/12

(b) is backed by or linked to the performance of other assets, which

may differ from those in which a UCITS scheme can invest.

(2) Where an investment in (1) contains an embedded derivative

component (see ■ COLL 5.2.19R (3A)), the requirements of this section

with respect to derivatives and forwards will apply to that

component.

[Note: articles 2(2)(c) and 2(3) of the UCITS eligible assets Directive]

Approved money-market instruments

.....................................................................................................

An approved money-market instrument is a money-market instrument which

is normally dealt in on the money market, is liquid and has a value which can

be accurately determined at any time.

[Note: article 2(1)(o) of the UCITS Directive]

A money-market instrument shall be regarded as normally dealt in on the

money market if it:

(1) has a maturity at issuance of up to and including 397 days;

(2) has a residual maturity of up to and including 397 days;

(3) undergoes regular yield adjustments in line with money market

conditions at least every 397 days; or

(4) has a risk profile, including credit and interest rate risks,

corresponding to that of an instrument which has a maturity as set

out in (1) or (2) or is subject to yield adjustments as set out in (3).

[Note: article 3(2) of the UCITS eligible assets Directive]

(1) A money-market instrument shall be regarded as liquid if it can be

sold at limited cost in an adequately short time frame, taking into

account the obligation of the authorised fund manager to redeem

units at the request of any qualifying unitholder (see

■ COLL 6.2.16 R (3) ).

(2) A money-market instrument shall be regarded as having a value

which can be accurately determined at any time if accurate and

reliable valuations systems, which fulfil the following criteria, are

available:

(a) enabling the authorised fund manager to calculate a net asset

value in accordance with the value at which the instrument held

in the portfolio could be exchanged between knowledgeable

willing parties in an arm's length transaction; and

(b) based either on market data or on valuation models including

systems based on amortised costs.

(3) A money-market instrument that is normally dealt in on the money

market and is admitted to or dealt in on an eligible market shall be

presumed to be liquid and have a value which can be accurately

determined at any time unless there is information available to the

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.7I

R5.2.8

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/13

authorised fund manager that would lead to a different

determination.

[Note: article 4 of the UCITS eligible assets Directive]

Guidance on assessing liquidity and quality of money-market

instruments

.....................................................................................................

(1) The 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, the authorised

fund manager should adequately monitor that the instrument

continues to be of high quality, taking into account both its credit risk

and its final maturity.

[Note: CESR's UCITS eligible assets guidelines with respect to article 4(2) of

theUCITS eligible assets Directive.]

Transferable securities and money-market instruments

generally to be admitted to or dealt in on an eligible market

.....................................................................................................

(1) [deleted]

(2) [deleted]

(3) Transferable securities and approved money-market instruments held

within a UCITS scheme must be:

(a) admitted to or dealt in on an eligible market within

■ COLL 5.2.10 R (1)(a) (Eligible markets: requirements); or

(b) dealt in on an eligible market within ■ COLL 5.2.10 R (1)(b); or

■ COLL 5.2.10 R (2); or

(d) for an approved money-market instrument not admitted to or

dealt in on an eligible market, within ■ COLL 5.2.10AR (1); or

(e) recently issued transferable securities, provided that:

(i) the terms of issue include an undertaking that application

will be made to be admitted to an eligible market; and

(ii) such admission is secured within a year of issue.

(4) However, a UCITS scheme may invest no more than 10% of the

scheme property in transferable securities and approved money-

market instruments other than those referred to in (3).

[Note: article 50(1)(a)-(d) and (h) and (2)(a) of the UCITS Directive and article

3(1) of the UCITS eligible assets Directive]

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.9

R5.2.9A

R5.2.10

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/14

Eligible markets regime: purpose

.....................................................................................................

(1) This section specifies criteria based on those in article 50 of the UCITS

Directive, as to the nature of the markets in which the property of a

UCITS scheme may be invested.

(2) Where a market ceases to be eligible, investments on that market

cease to be approved securities. The 10% restriction in

■ COLL 5.2.8 R (4) applies, and exceeding this limit because a market

ceases to be eligible will generally be regarded as a breach beyond

the control of the authorised fund manager.

The 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) [deleted]

Eligible markets: requirements

.....................................................................................................

(1) A market is eligible for the purposes of the rules in this sourcebook if

it is:

(a) a regulated market;

(b) a market in the United Kingdom or an EEA State which is

regulated, operates regularly and is open to the public; or

(2) A market not falling within (1)(a) and (b) is eligible for the purposes

of the rules in this sourcebook if:

(a) the authorised fund manager, after consultation with and

notification to the depositary (and in the case of an ICVC, any

other directors), decides that market is appropriate for

investment of, or dealing in, the scheme property;

(b) the market is included in a list in the prospectus; and

(i) adequate custody arrangements can be provided for the

investment dealt in on that market; and

(ii) all reasonable steps have been taken by the authorised fund

manager in deciding whether that market is eligible.

(3) In (2)(a), a market must not be considered appropriate unless it:

(a) is regulated;

(b) operates regularly;

organisation by an overseas regulator;

(d) is open to the public;

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.10A

R5.2.10B

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/15

(e) is adequately liquid; and

(f) has adequate arrangements for unimpeded transmission of

income and capital to or to the order of investors.

Money-market instruments with a regulated issuer

.....................................................................................................

(1) (In addition to instruments admitted to or dealt in on an eligible

market) a UCITS scheme may invest in an approved money-market

instrument provided it fulfils the following requirements:

(a) the issue or the issuer is regulated for the purpose of protecting

investors and savings; and

(b) the instrument is issued or guaranteed in accordance with

■ COLL 5.2.10B R.

[Note: article 50(1)(h)(i) to (iii) of the UCITS Directive]

(2) The issue or the issuer of a money-market instrument, other than one

dealt in on an eligible market, shall be regarded as regulated for the

purpose of protecting investors and savings if:

(a) the instrument is an approved money-market instrument;

(b) appropriate information is available for the instrument (including

information which allows an appropriate assessment of the credit

risks related to investment in it), in accordance with

■ COLL 5.2.10C R; and

[Note: article 5(1) of the UCITS eligible assets Directive]

Issuers and guarantors of money-market instruments

.....................................................................................................

(1) A UCITS scheme may invest in an approved money-market instrument

if it is:

(a) issued or guaranteed by any one of the following:

(i) a central authority of the United Kingdom or an EEA State

or, if the EEA State is a federal state, one of the members

making up the federation;

(ii) a regional or local authority of the United Kingdom or an

EEA State;

(iii) the Bank of England, the European Central Bank or a central

bank of an EEA State;

(iv) the European Union or the European Investment Bank;

(v) a non-EEA State or, in the case of a federal state, one of the

members making up the federation;

(vi) a public international body to which the United Kingdom or

one or more EEA States belong; or

(b) issued by a body, any securities of which are dealt in on an

eligible market; or

(i) subject to prudential supervision in accordance with criteria

defined by UK or EU law; or

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.10C

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/16

(ii) subject to and complies with prudential rules considered by

the FCA to be at least as stringent as those laid down by UK

or EU law.

(2) An establishment shall be considered to satisfy the requirement in

(1)(c)(ii) if it is subject to and complies with prudential rules, and

fulfils one or more of the following criteria:

(a) it is located in the European Economic Area;

(b) it is located in an OECD country belonging to the Group of Ten;

(d) on the basis of an in-depth analysis of the issuer, it can be

demonstrated that the prudential rules applicable to that issuer

are at least as stringent as those laid down by UK or EU law.

[Note: article 6 of the UCITS eligible assets Directive]

Appropriate information for money-market instruments

.....................................................................................................

(1) In the case of an approved money-market instrument within

■ COLL 5.2.10BR (1)(b) or issued by a body of the type referred to in

■ COLL 5.2.10E G; or which is issued by an authority within

■ COLL 5.2.10BR (1)(a)(ii) or a public international body within

■ COLL 5.2.10BR (1)(a)(vi) but is not guaranteed by a central authority

within ■ COLL 5.2.10BR (1)(a)(i), the following information must be

available:

(a) information on both the issue or the issuance programme, and

the legal and financial situation of the issuer prior to the issue of

the instrument, verified by appropriately qualified third parties

not subject to instructions from the issuer;

(b) updates of that information on a regular basis and whenever a

significant event occurs; and

programme.

(2) In the case of an approved money-market instrument issued or

guaranteed by an establishment within ■ COLL 5.2.10BR (1)(c), the

following information must be available:

(a) information on the issue or the issuance programme or on the

legal and financial situation of the issuer prior to the issue of the

instrument;

(b) updates of that information on a regular basis and whenever a

significant event occurs; and

programme, or other data enabling an appropriate assessment of

the credit risks related to investment in those instruments.

(3) In the case of an approved money-market instrument:

(a) within ■ COLL 5.2.10BR (1)(a)(i), ■ (iv) or ■ (v); or

(b) which is issued by an authority within ■ COLL 5.2.10BR (1)(a)(ii) or a

public international body within ■ COLL 5.2.10BR (1)(a)(vi) and is

guaranteed by a central authority within ■ COLL 5.2.10BR (1)(a)(i);

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.10D

G5.2.10E

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/17

information must be available on the issue or the issuance

programme, or on the legal and financial situation of the issuer prior

to the issue of the instrument.

[Note: articles 5(2), (3) and (4) of the UCITS eligible assets Directive]

(1) The appropriately qualified third parties referred to in

■ COLL 5.2.10CR (1)(a) should specialise in the verification of legal or

financial documentation and be composed of persons meeting

professional standards of integrity.

(2) The regular updates of information referred to in ■ COLL 5.2.10CR (1)(b)

and ■ (2)(b) should normally occur on at least an annual basis.

[Note: CESR's UCITS eligible assets guidelines with respect to articles 5(2)(b)

and (c) of the UCITS eligible assets Directive]

Other money-market instruments with a regulated issuer

.....................................................................................................

(1) In addition to instruments admitted to or dealt in on an eligible

market, a UCITS scheme may also with the express consent of the FCA

(which takes the form of a waiver under sections 138A and 138B of

the Act as applied by section 250 of the Act or regulation 7 of the

OEIC Regulations) invest in an approved money-market instrument

provided:

(a) the issue or issuer is itself regulated for the purpose of protecting

investors and savings in accordance with ■ COLL 5.2.10AR (2);

(b) investment in that instrument is subject to investor protection

equivalent to that provided by instruments which satisfy the

requirements of ■ COLL 5.2.10BR (1)(a),■ (b) or ■ COLL 5.2.10BR (1)(c);

and

least EUR 10 million and which presents and publishes its annual

accounts in accordance with the requirements of the Companies

Act 2006 applicable to public companies limited by shares or by

guarantee, or private companies limited by shares or by

guarantee, or, for companies incorporated in the EEA, Directive

2013/34/EU, is an entity which, within a group of companies

which includes one or several listed companies, is dedicated to

the financing of the group or is an entity which is dedicated to

the financing of securitisation vehicles which benefit from a

banking liquidity line.

(2) A securitisation vehicle is a structure, whether in corporate, trust or

contractual form, set up for the purpose of securitisation operations.

(3) A banking liquidity line is a banking facility secured by a financial

institution which is an establishment subject to prudential supervision

in accordance with criteria defined by UK or EU law or an

establishment which is subject to and complies with prudential rules

considered by the FCA (in accordance with ■ COLL 5.2.10BR (2)) to be at

least as stringent as those laid down by UK or EU law.

[Note: article 50(1)(h)(iv) of the UCITS Directive and article 7 of the UCITS

eligible assets Directive]

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.11

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/18

Spread: general

.....................................................................................................

(1) This rule does not apply in respect of a transferable security or an

approved money-market instrument to which ■ COLL 5.2.12R (Spread:

government and public securities) applies.

(2) For the purposes of this rule companies included in the same group

for the purposes of consolidated accounts as defined in accordance

with section 399 of Companies Act 2006, Directive 2013/34/EU or, in

the same group in accordance with international accounting

standards, are regarded as a single body.

(3) Not more than 20% in value of the scheme property is to consist of

deposits with a single body.

(4) Not more than 5% in value of the scheme property is to consist of

transferable securities or approved money-market instrumentsissued

by any single body.

(5) The limit of 5% in (4) is raised to 10% in respect of up to 40% in

value of the scheme property. Covered bonds need not be taken into

account for the purpose of applying the limit of 40%.

(5A) The limit of 5% in (4) is raised to 25% in value of the scheme

property in respect of covered bonds, provided that when a UCITS

scheme invests more than 5% in covered bonds issued by a single

body, the total value of covered bonds held must not exceed 80% in

value of the scheme property.

(6) In applying (4) and (5), certificates representing certain securities are

to be treated as equivalent to the underlying security.

(7) The exposure to any one counterparty in an OTC derivative

transaction must not exceed 5% in value of the scheme property; this

limit being raised to 10% where the counterparty is an approved

bank.

(8) Not more than 20% in value of the scheme property is to consist of

transferable securities and approved money-market instrumentsissued

by the same group (as referred to in (2)).

(9) Not more than 20% in value of the scheme is to consist of the units

of any one collective investment scheme.

(10) In applying the limits in (3),(4),(5), (6) and (7) in relation to a single

body, and subject to (5A), not more than 20% in value of the scheme

property is to consist of any combination of two or more of the

following:

(a) transferable securities (including covered bonds) or approved

money-market instrumentsissued by that body; or

(b) deposits made with that body; or

body.

(11) [deleted]

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.11A

R5.2.11B

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/19

(12) [deleted]

(13) [deleted]

(14) [deleted]

[Note: article 52 of the UCITS Directive]

Guidance on spread: general

.....................................................................................................

(1) [deleted]

(2) [deleted]

(3) In applying the spread limit of 20% in value of scheme property

which may consist of deposits with a single body, all uninvested cash

comprising capital property that the depositary holds should be

included in calculating the total sum of the deposits held by it and

other companies in its group on behalf of the scheme.

Counterparty risk and issuer concentration

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must ensure that

counterparty risk arising from an OTC derivative transaction is subject

to the limits set out in ■ COLL 5.2.11R (7) and ■ COLL 5.2.11R (10).

(2) When calculating the exposure of a UCITS scheme to a counterparty

in accordance with the limits in ■ COLL 5.2.11R (7), the authorised fund

manager must use the positive mark-to-market value of the OTC

derivative contract with that counterparty.

(3) An authorised fund manager may net the OTC derivative positions of

a UCITS scheme with the same counterparty, provided:

(a) it is able legally to enforce netting agreements with the

counterparty on behalf of the UCITS scheme; and

(b) the netting agreements in (a) do not apply to any other

exposures the UCITS scheme may have with that same

counterparty.

(4) An authorised fund manager of a UCITS scheme may reduce the

exposure of the scheme property to a counterparty to an OTC

derivative transaction through the receipt of collateral. Collateral

received must be sufficiently liquid so that it can be sold quickly at a

price that is close to its pre-sale valuation.

(5) An authorised fund manager of a UCITS scheme must take collateral

into account in calculating exposure to counterparty risk in

accordance with the limits in ■ COLL 5.2.11BR (7) when it passes

collateral to the counterparty to an OTC derivative transaction on

behalf of the UCITS scheme.

(6) Collateral passed in accordance with (5) may be taken into account on

a net basis only if the authorised fund manager is able legally to

enforce netting arrangements with this counterparty on behalf of the

UCITS scheme.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.12

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/20

(7) An authorised fund manager of a UCITS scheme must calculate the

issuer concentration limits referred to in ■ COLL 5.2.11 R on the basis of

the underlying exposure created through the use of OTC derivatives

in accordance with the commitment approach.

(8) In relation to exposures arising from OTC derivative transactions, as

referred to in ■ COLL 5.2.11R (10), the authorised fund manager must

include in the calculation any counterparty risk relating to the OTC

derivative transactions.

[Note: article 43 of the UCITS implementing Directive]

Spread: government and public securities

.....................................................................................................

(1) This rule applies in respect of a transferable security or an approved

money-market instrument (“such securities”) that is issued by:

(a) the United Kingdom or an EEA State;

(b) a local authority of the United Kingdom or an EEA State;

(d) a public international body to which the UK or 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 or in any one issue.

(3) An authorised fund may invest more than 35% in value of the

scheme property in such securities issued by any one body provided

that:

(a) the authorised fund manager has before any such investment is

made consulted with the depositary and as a result considers that

the issuer of such securities is one which is appropriate in

accordance with the investment objectives of the authorised

fund;

(b) no more than 30% in value of the scheme property consists of

such securities of any one issue;

another issuer, of at least six different issues; and

(d) the disclosures in ■ COLL 3.2.6R(8) (Table: contents of the

instrument constituting the fund) and ■ COLL 4.2.5R(3)(i) (Table:

contents of the prospectus) have been made.

(4) [deleted]

(5) In this rule in relation to such securities:

(a) issue, issued and issuer include guarantee, guaranteed and

guarantor; and

(b) an issue differs from another if there is a difference as to

repayment date, rate of interest, guarantor or other material

terms of the issue.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.13

R5.2.13A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/21

(6) Notwithstanding ■ COLL 5.2.11R (1) and subject to ■ (2) and ■ (3), in

applying the 20% limit in ■ COLL 5.2.11R (10) with respect to a single

body, such securities issued by that body shall be taken into account.

Investment in collective investment schemes

.....................................................................................................

A UCITS scheme must not invest in units in a collective investment scheme

("second scheme") unless the second scheme satisfies all of the following

conditions, and provided that no more than 30% of the value of the UCITS

scheme is invested in second schemes within (1)(b) to (e):

(1) the second scheme must:

(a) be a UCITS scheme or satisfy the conditions necessary for it to

enjoy the rights conferred by the UCITS Directive as implemented

in the EEA; or

(b) be a recognised scheme that is authorised by the supervisory

authorities of Guernsey, Jersey or the Isle of Man (provided the

requirements of ■ COLL 5.2.13AR are met); or

requirements of ■ COLL 5.2.13AR(1), (3) and (4) are met); or

(d) be authorised in an EEA State (provided the requirements of

■ COLL 5.2.13AR are met); or

(e) be authorised by the competent authority of an OECD member

country (other than an EEA State) which has:

(i) signed the IOSCO Multilateral Memorandum of

Understanding; and

(ii) approved the scheme's management company, rules and

depositary/custody arrangements;

(provided the requirements of ■ COLL 5.2.13AR are met);

(2) the second scheme must comply, where relevant, with ■ COLL 5.2.15 R

(Investment in associated collective investment schemes) and

■ COLL 5.2.16 R (Investment in other group schemes);

(3) the second scheme must have terms which prohibit more than 10% in

value of the scheme property consisting of units in collective

investment schemes; and

(4) where the second scheme is an umbrella, the provisions in (2) and (3)

and ■ COLL 5.2.11 R (Spread: general) apply to each sub-fund as if it

were a separate scheme.

The requirements referred to in ■ COLL 5.2.13R(1) are that:

(1) the second scheme is an undertaking:

(a) with the sole object of collective investment in transferable

securities or in other liquid financial assets, as referred to in this

chapter, of capital raised from the public and which operate on

the principle of risk-spreading; and

(b) with units which are, at the request of holders, repurchased or

redeemed, directly or indirectly, out of those undertakings’ assets

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.14

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/22

(action taken by a scheme to ensure that the price of its units on

an investment exchange does not significantly vary from their net

asset value shall be regarded as equivalent to such repurchase or

redemption);

(2) the second scheme is authorised under laws which provide that they

are subject to supervision considered by the FCA to be equivalent to

that laid down in the law of the United Kingdom, and that

cooperation between the FCA and the supervisory authorities of the

second scheme is sufficiently ensured;

(3) the level of protection for unitholders in the second scheme is

equivalent to that provided for unitholders in a UCITS scheme, and in

particular that the rules on asset segregation, borrowing, lending,

and uncovered sales of transferable securities and approved money

market instruments are equivalent to the requirements of this

chapter; and

(4) the business of the second scheme is reported in half-yearly and

annual reports to enable an assessment to be made of the assets and

liabilities, income and operations over the reporting period.

Qualifying non-UCITS collective investment schemes

.....................................................................................................

(1) ■ COLL 9.3 gives further detail as to the recognition of a scheme under

section 272of the Act.

(2) A scheme which has the power to invest in gold or immovables would

not meet the criteria set out in ■ COLL 5.2.13R (1).

(3) In determining whether a scheme (other than a UCITS) meets the

requirements of ■ COLL 5.2.13AR for the purposes of■ COLL 5.2.13R (1),

the authorised fund manager should consider the following factors

before deciding that the scheme provides a level of protection for

unitholders which is equivalent to that provided to unitholders in a

UCITS scheme:

(a) the rules guaranteeing the autonomy of the scheme and

management in the exclusive interest of the unitholders;

(b) the existence of an independent depositary/custodian with similar

duties and responsibilities in relation to both safekeeping and

supervision; where an independent depositary/custodian is not a

requirement of local law as regards collective investment

schemes, robust governance structures may provide a suitable

alternative;

requirements;

(d) redemption facilities and frequency;

(e) restrictions in relation to dealings by related parties;

(f) the extent of asset segregation; and

(g) the local requirements for borrowing, lending and uncovered

sales of transferable securities and money market instruments

regarding the portfolio of the scheme.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.15

R5.2.16

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/23

[Note: article 26 of CESR's UCITS eligible assets guidelines with

respect to article 50(1)(e) of the UCITS Directive]

(4) The requirement for supervisory equivalence, as described in

■ COLL 5.2.13AR(2), also applies to schemes (that are not EEA UCITS

schemes) established in EEA States. In considering whether the second

scheme satisfies this requirement, the authorised fund manager

should have regard to the first section of article 26 of CESR's UCITS

eligible assets guidelines.

Investment in associated collective investment schemes

.....................................................................................................

(1) A UCITS scheme must not invest in or dispose of units in another

collective investment scheme (the second scheme) if the second

scheme is managed or operated by (or, for an ICVC, whose ACD is)

the authorised fund manager of the investing UCITS scheme or an

associate of that authorised fund manager, unless:

(a) the prospectus of the investing UCITS scheme clearly states that

the property of that investing scheme may include such units; and

(b) ■ COLL 5.2.16 R (Investment in other group schemes) is complied

with.

(2) Where a sub-fund of a UCITS scheme which is an umbrella invests in

or disposes of units in another sub-fund of the same umbrella (the

second sub-fund), the requirement in:

(a) ■ COLL 5.2.15R (1)(a) is modified as follows - the prospectus of the

umbrella must clearly state that the scheme property attributable

to the investing or disposing sub-fund may include units in

another sub-fund of the same umbrella; and

(b) ■ COLL 5.2.15R (1)(b) is modified as follows - ■ COLL 5.2.16 R

(Investment in other group schemes) must be complied with,

modified such that references to the "UCITS scheme" are taken

to be references to the investing or disposing sub-fund and

references to the "second scheme" are taken to be references to

the second sub-fund.

Investment in other group schemes

.....................................................................................................

(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:

(a) any amount by which the consideration paid by the UCITS scheme

for the units in the second scheme exceeds the price that would

have been paid for the benefit of the second scheme had the

units been newly issued or sold by it; or

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.17

R5.2.17A

G5.2.17B

R5.2.18

R5.2.19

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/24

(b) if such price cannot be ascertained by the authorised fund

manager of the authorised fund, the maximum amount of any

charge permitted to be made by the seller of units in the second

scheme.

(3) When a disposal is made, the amount referred to in (1) is any charge

made for the account of the authorised fund manager or operator of

the second scheme or an associate of any of them in respect of the

disposal.

(4) In this rule:

(a) any addition to or deduction from the consideration paid on the

acquisition or disposal of units in the second scheme, which is

applied for the benefit of the second scheme and is, or is like, a

dilution levy made in accordance with ■ COLL 6.3.8 R (Dilution) is

to be treated as part of the price of the units and not as part of

any charge; and

(b) any charge made in respect of an exchange of units in one sub-

fund or separate part of the second scheme for units in another

sub-fund or separate part of that scheme is to be included as part

of the consideration paid for the units.

Investment in nil and partly paid securities

.....................................................................................................

(1) [deleted]

(2) A transferable security or an approved money-market instrumenton

which any sum is unpaid falls within a power of investment only if it

is reasonably foreseeable that the amount of any existing and

potential call for any sum unpaid could be paid by the UCITS scheme,

at the time when payment is required, without contravening the rules

in this chapter.

Investment in securitisation positions

.....................................................................................................

Where an authorised fund manager is exposed to a securitisation that does

not meet the requirements provided for in the Securitisation Regulation, it

must, in the best interests of the investors in the relevant UCITS scheme, act

and take corrective action, if appropriate.

[Note: article 50a of the UCITS Directive]

Article 5 (Due diligence requirements for institutional investors) of the

Securitisation Regulation applies to authorised fund managers in

combination with ■ COLL 5.2.17AR.

[deleted]

Derivatives: general

.....................................................................................................

(1) A transaction in derivatives or a forward transaction must not be

effected for a UCITS scheme unless:

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.19A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/25

(a) the transaction is of a kind specified in ■ COLL 5.2.20 R (Permitted

transactions (derivatives and forwards)); and

(b) the transaction is covered, as required by ■ COLL 5.3.3A R (Cover

for investment in derivatives and forward transactions).

(2) Where a UCITS scheme invests in derivatives, the exposure to the

underlying assets must not exceed the limits in ■ COLL 5.2.11 R (Spread:

general) and ■ COLL 5.2.12 R (Spread: government and public

securities) save as provided in (4).

(3) Where a transferable security or approved money-market

instrumentembeds a derivative, this must be taken into account for

the purposes of complying with this section.

(3A) (a) A transferable security or an approved money-market instrument

will embed a derivative if it contains a component which fulfils

the following criteria:

(i) by virtue of that component some or all of the cash flows

that otherwise would be required by the transferable security

or approved money-market instrument which functions as

host contract can be modified according to a specified

interest rate, financial instrument price, foreign exchange

rate, index of prices or rates, credit rating or credit index or

other variable, and therefore vary in a way similar to a stand-

alone derivative;

(ii) its economic characteristics and risks are not closely related to

the economic characteristics and risks of the host contract;

and

(iii) it has a significant impact on the risk profile and pricing of

the transferable security or approved money-market

instrument.

(b) A transferable security or an approved money-market instrument

does not embed a derivative where it contains a component

which is contractually transferable independently of the

transferable security or the approved money-market instrument.

That component shall be deemed to be a separate instrument.

[Note: article 10 of the UCITS eligible assets Directive]

(4) Where a scheme invests in an index based derivative, provided the

relevant index falls within ■ COLL 5.2.20AR (Financial indices underlying

derivatives) the underlying constituents of the index do not have to

be taken into account for the purposes of ■ COLL 5.2.11 R and

■ COLL 5.2.12 R.

(5) The relaxation in (4) is subject to the authorised fund manager taking

account of ■ COLL 5.2.3 R (Prudent spread of risk).

Guidance on transferable securities and money-market

instruments embedding derivatives

.....................................................................................................

(1) Collateralised debt obligations (CDOs) or asset-backed securities using

derivatives, with or without an active management, will generally not

be considered as embedding a derivative except if:

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.20

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/26

(a) they are leveraged, i.e. the CDOs or asset-backed securities are

not limited recourse vehicles and the investors' loss can be higher

than their initial investment; or

(b) they are not sufficiently diversified.

(2) Where a transferable security or approved money-market instrument

embedding a derivative is structured as an alternative to an OTC

derivative, the requirements set out in ■ COLL 5.2.23 R with respect to

transactions in OTC derivatives will apply. This will be the case for

tailor-made hybrid instruments, such as a single tranche CDO

structured to meet the specific need of a scheme, which should be

considered as embedding a derivative. Such a product offers an

alternative to the use of an OTC derivative, for the same purpose of

achieving a diversified exposure with a pre-set credit risk level to a

portfolio of entities.

(3) The following list of transferable securities and approved money-

market instruments, which is illustrative and non-exhaustive, could be

assumed to embed a derivative:

(a) credit linked notes;

(b) transferable securities or approved money-market instruments

whose performance is linked to the performance of a bond index;

whose performance is linked to the performance of a basket of

shares, with or without active management;

(d) transferable securities or approved money-market instruments

with a fully guaranteed nominal value whose performance is

linked to the performance of a basket of shares, with or without

active management;

(e) convertible bonds; and

(f) exchangeable bonds.

(4) Schemes cannot use transferable securities or approved money-

market instruments which embed a derivative to circumvent the rules

in this section.

(5) Transferable securities and approved money-market instruments

which embed a derivative are subject to the rules applicable to

derivatives as required by this section. It is the authorised fund

manager's responsibility to check that these requirements are

complied with. The nature, frequency and scope of checks performed

will depend on the characteristics of the embedded derivatives and

on their impact on the scheme, taking into account its stated

investment objective and risk profile.

[Note: CESR's UCITS eligible assets guidelines with respect to article 10 of the

UCITS eligible assets Directive]

Permitted transactions (derivatives and forwards)

.....................................................................................................

(1) A transaction in a derivative must:

(a) be in an approved derivative; or

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/27

(b) be one which complies with ■ COLL 5.2.23 R (OTC transactions in

derivatives).

(2) The underlying of a transaction in a derivative must consist of any

one or more of the following to which the scheme is dedicated:

(a) transferable securities permitted under ■ COLL 5.2.8 R (3)(a) to ■ (c)

and ■ COLL 5.2.8 R (3)(e);

(b) approved money-market instruments permitted

under■ COLL 5.2.8 R (3)(a) to ■ COLL 5.2.8 R (3)(d);

(d) derivatives permitted under this rule;

(e) collective investment scheme units permitted under ■ COLL 5.2.13 R

(Investment in collective investment schemes);

(f) financial indices which satisfy the criteria set out in

■ COLL 5.2.20A R;

(g) interest rates;

(h) foreign exchange rates; and

(i) currencies.

[Note: article 8(1)(a) of the UCITS eligible assets Directive]

(3) A transaction in an approved derivative must be effected on or under

the rules of an eligible derivatives market.

(4) A transaction in a derivative must not cause a scheme to diverge from

its investment objectives as stated in the instrument constituting the

fund and the most recently published prospectus.

(5) A transaction in a derivative must not be entered into if the intended

effect is to create the potential for an uncovered sale of one or more

transferable securities, approved money-market instruments, units in

collective investment schemes or derivatives provided that a sale is

not to be considered as uncovered if the conditions in

■ COLL 5.2.22R (1) (Requirement to cover sales), as read in accordance

with the guidance at ■ COLL 5.2.22A G, are satisfied.

(6) Any forward transaction must be made with an eligible institution or

an approved bank.

(7) A derivative includes an instrument which fulfils the following

criteria:

(a) it allows the transfer of the credit risk of the underlying

independently from the other risks associated with that

underlying;

(b) it does not result in the delivery or the transfer of assets other

than those referred to in ■ COLL 5.2.6A R (UCITS schemes:

permitted types of scheme property) including cash;

requirements in ■ COLL 5.2.23 R (OTC transactions in derivatives);

(d) its risks are adequately captured by the risk management process

of the authorised fund manager, and by its internal control

mechanisms in the case of risks of asymmetry of information

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.20A

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/28

between the authorised fund manager and the counterparty to

the derivative, resulting from potential access of the counterparty

to non-public information on persons whose assets are used as

the underlying by that derivative.

[Note: article 8(2) of the UCITS eligible assets Directive]

(8) A UCITS scheme may not undertake transactions in derivatives on

commodities.

[Note: article 8(5) of the UCITS eligible assets Directive]

Financial indices underlying derivatives

.....................................................................................................

(1) The financial indices referred to in ■ COLL 5.2.20R (2)(f) are those which

satisfy the following criteria:

(a) the index is sufficiently diversified;

(b) the index represents an adequate benchmark for the market to

which it refers; and

(2) A financial index is sufficiently diversified if:

(a) it is composed in such a way that price movements or trading

activities regarding one component do not unduly influence the

performance of the whole index;

(b) where it is composed of assets in which a UCITS scheme is

permitted to invest, its composition is at least diversified in

accordance with the requirements with respect to spread and

concentration set out in this section; and

invest, it is diversified in a way which is equivalent to the

diversification achieved by the requirements with respect to

spread and concentration set out in this section.

(3) A financial index represents an adequate benchmark for the market

to which it refers if:

(a) it measures the performance of a representative group of

underlyings in a relevant and appropriate way;

(b) it is revised or rebalanced periodically to ensure that it continues

to reflect the markets to which it refers, following criteria which

are publicly available; and

it if necessary.

(4) A financial index is published in an appropriate manner if:

(a) its publication process relies on sound procedures to collect

prices, and calculate and subsequently publish the index value,

including pricing procedures for components where a market

price is not available; and

(b) material information on matters such as index calculation,

rebalancing methodologies, index changes or any operational

difficulties in providing timely or accurate information is provided

on a wide and timely basis.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.20B

R5.2.21

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/29

(5) Where the composition of underlyings of a transaction in a derivative

does not satisfy the requirements for a financial index, the

underlyings for that transaction shall where they satisfy the

requirements with respect to other underlyings pursuant to

■ COLL 5.2.20R (2), be regarded as a combination of those underlyings.

[Note: article 9 of the UCITS eligible assets Directive]

Guidance on financial indices underlying derivatives

.....................................................................................................

(1) An 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 cover for transactions in derivatives and

forward transactions set out in ■ COLL 5.3.3A R and spread set out in

■ COLL 5.2.11 R.

(3) (a) In order to avoid undue concentration, where derivatives on an

index composed of assets in which a UCITS scheme cannot invest

are used to track or gain high exposure to the index, the index

should be at least diversified in a way which is equivalent to the

diversification achieved by the requirements with respect to

spread and concentration set out in this section.

(b) If derivatives on that index are used for risk-diversification

purposes, provided that the exposure of the UCITS scheme to that

index complies with the 5%, 10% and 40% ratios required by

■ COLL 5.2.11R (4) and ■ (5), there is no need to look at the

underlying components of that index to ensure that it is

sufficiently diversified.

[Note: UCITS eligible assets guidelines with respect to article 9 of the

UCITS eligible assets Directive]

(3A) Authorised fund managers of UCITS schemes are advised that UCITS

schemes should not be invested in commodity indices that do not

consist of different commodities, as provided by paragraph 50 of

ESMA's guidelines on ETFs and other UCITS issues (ESMA 2012/832)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-

832en_guidelines_on_etfs_and_other_ucits_issues.pdf.

(4) [deleted]

Transactions for the purchase of property

.....................................................................................................

A derivative or forward transaction which will or could lead to the delivery

of property for the account of the UCITS scheme may be entered into only if:

(1) that property can be held for the account of the UCITS scheme; and

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.22

G5.2.22A

R5.2.23

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/30

(2) the authorised fund manager having taken reasonable care

determines that delivery of the property under the transaction will

not occur or will not lead to a breach of the rules in this sourcebook.

Requirement to cover sales

.....................................................................................................

(1) No agreement by or on behalf of a UCITS scheme to dispose of

property or rights may be made unless:

(a) the obligation to make the disposal and any other similar

obligation could immediately be honoured by the UCITS scheme

by delivery of property or the assignment (or, in Scotland,

assignation) of rights; and

(b) the property and rights at (a) are owned by the UCITS scheme at

the time of the agreement.

(2) Paragraph (1) does not apply to a deposit.

(3) [deleted]

(4) [deleted]

Guidance on requirement to cover sales

.....................................................................................................

[deleted]

(1) In the FCA's view the requirement in ■ COLL 5.2.22R (1)(a) can be met

where:

(a) the risks of the underlying financial instrument of a derivative

can be appropriately represented by another financial instrument

and the underlying financial instrument is highly liquid; or

(b) the authorised fund manager or the depositary has the right to

settle the derivative in cash, and cover exists within the scheme

property which falls within one of the following asset classes:

(i) cash;

(ii) liquid debt instruments (e.g. government bonds of first credit

rating) with appropriate safeguards (in particular, haircuts);

(iii) other highly liquid assets having regard to their correlation

with the underlying of the financial derivative instruments,

subject to appropriate safeguards (e.g. haircuts where

relevant).

(2) In the asset classes referred to in (1), an asset may be considered as

liquid where the instrument can be converted into cash in no more

than seven business days at a price closely corresponding to the

current valuation of the financial instrument on its own market.

OTC transactions in derivatives

.....................................................................................................

A transaction in an OTC derivative under ■ COLL 5.2.20 R (1) (b) or, for the

purposes of (1) only, executed by or on behalf of a regulated money market

fund, must be:

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/31

(1) with an approved counterparty; a counterparty to a transaction in

derivatives is approved only if the counterparty is:

(a) an eligible institution or an approved bank;

(b) a person whose permission (including any requirements or

limitations), as published in the Financial Services Register,

permits it to enter into the transaction as principal off-exchange;

(d) a CCP that is recognised in that capacity in accordance with the

process set out in article 25 of EMIR; or

(e) to the extent not already covered above, a CCP supervised in a

jurisdiction that:

(i) has implemented the relevant G20 reforms on over-the-

counter derivatives to at least the same extent as the United

Kingdom; and

(ii) is identified as having done so by the Financial Stability

Board in its summary report on progress in implementation

of G20 financial regulatory reforms dated 25 June 2019;

(2) on approved terms; the terms of the transaction in derivatives are

approved only if the authorised fund manager:

(a) carries out, at least daily , a reliable and verifiable valuation in

respect of that transaction corresponding to its fair value and

which does not rely only on market quotations by the

counterparty; and

(b) can enter into one or more further transactions to sell, liquidate

or close out that transactions at any time, at its fair value ;

(3) capable of reliable valuation; a transaction in derivatives is capable of

reliable valuation only if the authorised fund manager having taken

reasonable care determines that, throughout the life of the derivative

(if the transaction is entered into), it will be able to value the

investment concerned with reasonable accuracy:

(a) on the basis of an up-to-date market value which the authorised

fund manager and the depositary have agreed is reliable; or

(b) if the value referred to in (a) is not available, on the basis of a

pricing model which the authorised fund manager and the

depositary have agreed uses an adequate recognised

methodology; and

(4) subject to verifiable valuation; a transaction in derivatives is subject to

verifiable valuation only if, throughout the life of the derivative (if

the transaction is entered into) verification of the valuation is carried

out by:

(a) an appropriate third party which is independent from the

counterparty of the derivative, at an adequate frequency and in

such a way that the authorised fund manager is able to check it;

(b) a department within the authorised fund manager which is

independent from the department in charge of managing the

scheme property and which is adequately equipped for such a

purpose.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.23-A

R5.2.23A

R5.2.23B

R5.2.23C

R5.2.24

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/32

[Note: articles 8(1)(b), 8(3) and 8(4) of the UCITS eligible assets Directive.

In relation to ■ COLL 5.2.23R(1)(e), see the table on page 3 of the Financial

Stability Board’s report of 25 June 2019 which is available here: https://

www.fsb.org/wp-content/uploads/P250619-2.pdf]

The jurisdictions that fall within ■ COLL 5.2.23R(1)(e) are Australia, France,

Germany, Hong Kong, Italy, Japan, the Netherlands, Singapore, Spain,

Switzerland, and the United States of America.

For the purposes of ■ COLL 5.2.23 R (2), “fair value” is the amount for which

an asset could be exchanged, or a liability settled, between knowledgeable,

willing parties in an arm’s length transaction.

In respect of its obligations under ■ COLL 6.6.4 R (1) (a) , the depositary must

take reasonable care to ensure that the authorised fund manager has

systems and controls that are adequate to ensure compliance with

■ COLL 5.2.23 R (1) to ■ (4).

Valuation of OTC derivatives

.....................................................................................................

(1) For the purposes of ■ COLL 5.2.23 R (2), an authorised fund manager of

a UCITS scheme must:

(a) establish, implement and maintain arrangements and procedures

which ensure appropriate, transparent and fair valuation of the

exposures of a UCITS scheme to OTC derivatives; and

(b) ensure that the fair value of OTC derivatives is subject to

adequate, accurate and independent assessment.

(2) Where the arrangements and procedures referred to in (1) involve the

performance of certain activities by third parties, the authorised fund

manager must comply with the requirements in ■ SYSC 8.1.13 R

(Additional requirements for a management company) and

■ COLL 6.6A.4 R (5) and ■ (6) (Due diligence requirements of AFMs of

UCITS schemes).

(3) The arrangements and procedures referred to in this rule must be:

(a) adequate and proportionate to the nature and complexity of the

OTC derivative concerned; and

(b) adequately documented.

[Note: article 51(1) second paragraph of the UCITS Directive and articles 44(2)

and 44(4) of the UCITS implementing Directive]

(1) [deleted]

(2) [deleted]

(3) [deleted]

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.25

R5.2.26

R5.2.27

R5.2.28

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/33

(1) [deleted]

(2) [deleted]

(3) [deleted]

(4) [deleted]

(5) [deleted]

(6) [deleted]

(7) [deleted]

(8) [deleted]

Investment in deposits

.....................................................................................................

A UCITS scheme may invest in deposits only if it:

(1) is with an approved bank;

(2) is:

(a) repayable on demand; or

(b) has the right to be withdrawn; and

(3) matures in no more than 12 months.

Significant influence for ICVCs

.....................................................................................................

(1) An ICVC must not acquire transferable securities issued by a body

corporate and carrying rights to vote (whether or not on substantially

all matters) at a general meeting of that body corporate if:

(a) immediately before the acquisition, the aggregate of any such

securities held by the ICVC gives the ICVC power to influence

significantly the conduct of business of that body corporate; or

(b) the acquisition gives the ICVC that power.

(2) For the purpose of (1), an ICVC is to be taken to have power

significantly to influence the conduct of business of a body corporate

if it can, because of the transferable securities held by it, exercise or

control the exercise of 20% or more of the voting rights in that body

corporate (disregarding for this purpose any temporary suspension of

voting rights in respect of the transferable securities of that body

corporate).

Significant influence for authorised fund managers of AUTs or

ACSs

.....................................................................................................

(1) An authorised fund manager must not acquire, or cause to be

acquired for an AUT or ACS of which it is the authorised fund

manager, transferable securities issued by a body corporate and

carrying rights to vote (whether or not on substantially all matters) at

a general meeting of the body corporate if:

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.29

R5.2.30

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/34

(a) immediately before the acquisition, the aggregate of any such

securities held for that AUT or ACS, taken together with any such

securities already held for other AUTs or ACSs of which it is also

the authorised fund manager, gives the authorised fund manager

power significantly to influence the conduct of business of that

body corporate; or

(b) the acquisition gives the authorised fund manager that power.

(2) For the purpose of (1), an authorised fund manager is to be taken to

have power significantly to influence the conduct of business of a

body corporate if it can, because of the transferable securities held

for all the AUTs or ACSs, of which it is the authorised fund manager,

exercise or control the exercise of 20% or more of the voting rights in

that body corporate (disregarding for this purpose any temporary

suspension of voting rights in respect of the transferable securities of

that body corporate).

Concentration

.....................................................................................................

A UCITS scheme:

(1) must not acquire transferable securities (other than debt securities)

which:

(a) do not carry a right to vote on any matter at a general meeting

of the body corporate that issued them; and

(b) represent more than 10% of those securities issued by that body

corporate;

(2) must not acquire more than 10% of the debt securities issued by any

single body;

(3) must not acquire more than 25% of the units in a collective

investment scheme;

(4) must not acquire more than 10% of the approved money-market

instruments issued by any single body; and

(5) need not comply with the limits in (2), (3) and (4) if, at the time of

acquisition, the net amount in issue of the relevant investment

cannot be calculated.

UCITS schemes that are umbrellas

.....................................................................................................

(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 ACSs); and

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

R5.2.31

G5.2.32

R5.2.33

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/35

(2) A sub-fund may invest in or dispose of units of another sub-fund of

the same umbrella (the second sub-fund) only if the following

conditions are satisfied:

(a) the second sub-fund does not hold units in any other sub-fund of

the same umbrella;

(b) the conditions in ■ COLL 5.2.15 R (Investment in associated

collective investment schemes) and ■ COLL 5.2.16 R (Investment in

other group schemes) are complied with (for the purposes of this

rule, ■ COLL 5.2.15 R and ■ COLL 5.2.16 R are to be read as modified

by ■ COLL 5.2.15 R (2)); and

the second sub-fund.

Schemes replicating an index

.....................................................................................................

(1) Notwithstanding ■ COLL 5.2.11 R (Spread: general), a UCITS scheme

may invest up to 20% in value of the scheme property in shares and

debentures which are issued by the same body where the investment

policy of that scheme as stated in the most recently published

prospectus is to replicate the composition of a relevant index which

satisfies the criteria specified in ■ COLL 5.2.33 R (Relevant indices).

(1A) Replication of the composition of a relevant index shall be

understood to be a reference to replication of the composition of the

underlying assets of that index, including the use of techniques and

instruments permitted for the purpose of efficient portfolio

management.

[Note: article 12(1) of the UCITS eligible assets Directive]

(2) The limit in (1) can be raised for a particular UCITS scheme up to 35%

in value of the scheme property, but only in respect of one body and

where justified by exceptional market conditions.

Index replication

.....................................................................................................

(1) [deleted]

(2) In the case of a UCITS scheme replicating an index under

■ COLL 5.2.31 R (Schemes replicating an index) the scheme property

need not consist of the exact composition and weighting of the

underlying in the relevant index in cases where the scheme's

investment objective is to achieve a result consistent with the

replication of an index rather than an exact replication.

Relevant indices

.....................................................................................................

(1) The indices referred to in ■ COLL 5.2.31 R are those which satisfy the

following criteria:

(a) the composition is sufficiently diversified;

(b) the index represents an adequate benchmark for the market to

which it refers; and

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.34

G5.2.35

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/36

(2) The composition of an index is sufficiently diversified if its

components adhere to the spread and concentration requirements in

this section.

(3) An index represents an adequate benchmark if its provider uses a

recognised methodology which generally does not result in the

exclusion of a major issuer of the market to which it refers.

(4) An index is published in an appropriate manner if:

(a) it is accessible to the public;

(b) the index provider is independent from the index-replicating

UCITS scheme; this does not preclude index providers and the

UCITS scheme from forming part of the same group, provided

that effective arrangements for the management of conflicts of

interest are in place.

[Note: articles 12(2),(3) and (4) of the UCITS eligible assets Directive]

Disclosure requirements in relation to UCITS schemes that

employ particular investment strategies

.....................................................................................................

(1) Authorised fund managers of UCITS schemes should bear in mind that

where a UCITS scheme employs particular investment strategies such

as those in (2), ■ COBS 4.13.2R (Marketing communications relating to

UCITS schemes) and ■ COBS 4.13.3R (Marketing communications

relating to a feeder UCITS) contain additional disclosure requirements

in relation to marketing communications that concern those

investment strategies.

(2) Examples of investment strategies that require these additional

disclosures include a scheme:

(a) investing more than 35% in value of its scheme property in

transferable securities or approved money-market instruments

specified in ■ COLL 5.2.12R (Spread: government and public

securities); or

(b) investing principally in units in collective investment schemes,

deposits or derivatives; or

Guidance on syndicated loans

.....................................................................................................

(1) A syndicated loan for the purposes of this guidance means a form of

loan where a group or syndicate of parties lend money to a third

party and, in return, receive interest payments during the life of the

debt and a return of principal either at the end of the loan period or

amortised over the life of the loan. Such loans are usually arranged

through agent banks which may, among other things, maintain a

record of the lenders’ interest in the loan and arrange or act as a

conduit for the interest payments. Whether an interest in a

syndicated loan constitutes a transferable security or otherwise will

depend on the terms of the relevant instrument. Where an

authorised fund manager plans to invest scheme property in interests

in such syndicated loans, it may wish to consider seeking professional

advice as to their eligibility.

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/37

(2) To determine whether an interest in a syndicated loan would be an

eligible investment for a UCITS scheme in accordance with ■ COLL 5.2,

an authorised fund manager should first consider whether it

constitutes a transferable security within the meaning of ■ COLL 5.2.7 R

(Transferable securities) and ■ COLL 5.2.7AR (which implemented the

additional eligibility criteria arising out of the UCITS eligible assets

Directive that relate to liquidity, valuations and negotiability).

(3) A UCITS scheme cannot lend money from its scheme property.

Accordingly, it is unable to partake in the initial funding of a

syndicated loan either as an original lender or as a person who

becomes a lender as part of the primary syndication of the loan.

However, we recognise that a UCITS scheme may be acknowledged as

the lender of record as a consequence of the legal form of transfer

used to purchase a loan in the secondary market, such as novation.

(4) An instrument will not be a transferable security if it falls within one

or more of the exclusions set out in article 77(2) of the Regulated

Activities Order. An instrument acknowledging or creating

indebtedness for, or for money borrowed to defray, the consideration

payable under a contract for the supply of goods or services would be

an example of an exclusion.

(5) In the FCA's opinion, for an instrument to be classed as a debenture

for the purposes of constituting a transferable security (see

■ COLL 5.2.7 R (1)(b)), there must be an instrument creating or

evidencing indebtedness. A facilities agreement and a drawdown

request which does not create or evidence indebtedness will not be a

debenture for these purposes.

(6) In the FCA's view, the simple fact that a debt obligation is legally

transferable (whether by way of creation, assignment or otherwise)

does not necessarily make it negotiable for the purposes of

■ COLL 5.2.7AR (1)(e) (Investment in transferable securities), so as to

make it a permissible investment for a UCITS scheme. When securities

are capable of being traded on a capital market, whether on-

exchange or off-exchange, as a class and are fungible within their

class, this would tend to indicate (unless the AFM was aware of

specific evidence to the contrary) that they are negotiable.

(7) The FCA's understanding is that leveraged loans are a non-investment

grade sub-set of syndicated loans and, where this is the case, AFMs

should use similar analysis to determine whether or not interests in

such loans are eligible investments for UCITS schemes.

(8) Where a loan falls within the Glossary definition of a transferable

security, investment in such a loan in the case of a UCITS scheme is

subject to the spread requirements in ■ COLL 5.2.11 R (Spread: general).

AFMs also need to bear in mind that where such a transferable

security does not meet the requirements of ■ COLL 5.2.8 R (3)

(Transferable securities and money-market instruments generally to

be admitted to or dealt in on an eligible market), the scheme's

overall exposure to such loans will count towards the limit in

■ COLL 5.2.8 R (4).

COLL 5 : Investment and Section 5.2 : General investment powers and

borrowing powers limits for UCITS schemes

G5.2.36

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/38

ESMA guidelines

.....................................................................................................

Authorised 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)

https://www.esma.europa.eu/sites/default/files/library/2015/11/07_434.pdf

Guidelines to competent authorities and UCITS management companies on

ETFs and other UCITS issues (ESMA 2012/832)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_

guidelines_on_etfs_and_other_ucits_issues.pdf

Revision of the provisions on diversification of collateral in ESMA’s Guidelines

on ETFs and other UCITS issues (ESMA 2014/294).

https://www.esma.europa.eu/sites/default/files/library/2015/11/2014-294_final_

report_revision_of_guidelines_etfs_and_other_ucits_issues.pdf

COLL 5 : Investment and Section 5.3 : Derivative exposure

borrowing powers

R5.3.1

G5.3.2

R5.3.3

R5.3.3A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/39

5.3 Derivative exposure

Application

.....................................................................................................

This section applies to an authorised fund manager of a UCITS scheme and to

an ICVC which is a UCITS scheme.

Introduction

.....................................................................................................

(1) A scheme may invest in derivatives and forward transactions as long

as the exposure to which the scheme is committed by that transaction

itself is suitably covered from within its scheme property. Exposure

will include any initial outlay in respect of that transaction.

(2) Cover ensures that a scheme is not exposed to the risk of loss of

property, including money, to an extent greater than the net value of

the scheme property. Therefore, a scheme is required to hold scheme

property sufficient in value or amount to match the exposure arising

from a derivative obligation to which the scheme is committed. This

section sets out detailed requirements for cover of a scheme.

(3) In accordance with ■ COLL 5.1.3 R (2)(b) (Treatment of obligations),

cover used in respect of one transaction in derivatives or forward

transaction should not be used for cover in respect of another

transaction in derivatives or a forward transaction.

(1) [deleted]

(2) [deleted]

(3) [deleted]

(4) [deleted]

(5) [deleted]

Cover for investment in derivatives and forward transactions

.....................................................................................................

The authorised fund manager of a UCITS scheme must ensure that its global

exposure relating to derivatives and forward transactions held in the UCITS

scheme does not exceed the net value of the scheme property.

[Note: article 51(3) first paragraph of the UCITS Directive]

COLL 5 : Investment and Section 5.3 : Derivative exposure

borrowing powers

R5.3.3B

R5.3.3C

G5.3.4

R5.3.5

R5.3.6

R5.3.7

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/40

Daily calculation of global exposure

.....................................................................................................

An authorised fund manager of a UCITS scheme must calculate its global

exposure on at least a daily basis.

[Note: article 41(2) of the UCITS implementing Directive]

For the purposes of this section, exposure must be calculated taking into

account the current value of the underlying assets, the counterparty risk,

future market movements and the time available to liquidate the positions.

[Note: article 51(3) second paragraph of the UCITS Directive]

Guidance on cover

.....................................................................................................

(1) An authorised fund manager should note that the scope of

■ COLL 5.3.3C R is extended in relation to underwriting commitments

by ■ COLL 5.5.8 R (4) (General power to accept or underwrite placings).

(2) Property the subject of a transaction under ■ COLL 5.4 (Stock lending)

should not be considered as available for cover unless the authorised

fund manager has taken reasonable care to determine that it is

obtainable (by return or re-acquisition) in time to meet the obligation

for which cover is required.

Borrowing

.....................................................................................................

(1) Cash obtained from borrowing, and borrowing which the authorised

fund manager reasonably regards an eligible institution or an

approved bank to be committed to provide, is not available for cover

under ■ COLL 5.3.3A R (Cover for investment in derivatives and forward

transactions), except if (2) applies.

(2) Where, for the purposes of this section, the ICVC or the depositary for

the account of the AUT or ACS on the instructions of the authorised

fund manager:

(a) borrows an amount of currency from an eligible institution or an

approved bank; and

(b) keeps an amount in another currency, at least equal to the

borrowing for the time being in (a), on deposit with the lender

(or his agent or nominee);

then this section applies as if the borrowed currency, and not the

deposited currency, were part of the scheme property.

(1) [deleted]

(2) [deleted]

Calculation of global exposure

.....................................................................................................

An authorised fund manager must calculate the global exposure of any

UCITS scheme it manages either as:

COLL 5 : Investment and Section 5.3 : Derivative exposure

borrowing powers

R5.3.8

R5.3.9

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/41

(1) the incremental exposure and leverage generated through the use of

derivatives and forward transactions (including embedded derivatives

as referred to in ■ COLL 5.2.19R (3A) (Derivatives: general)), which may

not exceed 100% of the net value of the scheme property; or

(2) the market risk of the scheme property.

[Note: article 41(1) of the UCITS implementing Directive]

(1) An authorised fund manager must calculate the global exposure of a

UCITS scheme by using:

(a) the commitment approach; or

(b) the value at risk approach.

(2) An authorised fund manager must ensure that the method selected in

(1) is appropriate, taking into account:

(a) the investment strategy pursued by the UCITS scheme;

(b) the types and complexities of the derivatives and forward

transactions used; and

forward transactions.

(3) Where a UCITS scheme employs techniques and instruments including

repo contracts or stock lending transactions in accordance with

■ COLL 5.4 (Stock lending) in order to generate additional leverage or

exposure to market risk, the authorised fund manager must take

those transactions into consideration when calculating global

exposure.

(4) For the purposes of (1), value at risk means a measure of the

maximum expected loss at a given confidence level over the specific

time period.

[Note: articles 41(3) and 41(4) of the UCITS implementing Directive]

Commitment approach

.....................................................................................................

Where an authorised fund manager of a UCITS scheme uses the commitment

approach for the calculation of global exposure, it must:

(1) ensure that it applies this approach to all derivative and forward

transactions (including embedded derivatives as referred to in

■ COLL 5.2.19R (3A) (Derivatives: general)), whether used as part of the

scheme's general investment policy, for the purposes of risk reduction

or for the purposes of efficient portfolio management in accordance

with the rules of this chapter; and

(2) convert each derivative or forward transaction into the market value

of an equivalent position in the underlying asset of that derivative or

forward (standard commitment approach).

[Note: articles 42(1) and 42(2) first paragraph of the UCITS implementing

Directive]

COLL 5 : Investment and Section 5.3 : Derivative exposure

borrowing powers

R5.3.10

G5.3.11

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/42

(1) An authorised fund manager of a UCITS scheme may apply other

calculation methods which are equivalent to the standard

commitment approach.

(2) An authorised fund manager may take account of netting and

hedging arrangements when calculating global exposure of a UCITS

scheme, where those arrangements do not disregard obvious and

material risks and result in a clear reduction in risk exposure.

(3) Where the use of derivatives or forward transactions does not

generate incremental exposure for the UCITS scheme, the underlying

exposure need not be included in the commitment calculation.

(4) Where the commitment approach is used, temporary borrowing

arrangements entered into on behalf of the UCITS scheme in

accordance with ■ COLL 5.5.4 R (General power to borrow) need not

form part of the global exposure calculation.

[Note: articles 42(2) final paragraph, 42(3), 42(4) and 42(5) of the UCITS

implementing Directive]

ESMA guidelines

.....................................................................................................

Authorised 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: Risk Measurement and the Calculation of Global Exposure and

Counterparty Risk for UCITS (CESR/10-788)

https://www.esma.europa.eu/sites/default/files/library/2015/11/10_788.pdf

Guidelines to competent authorities and UCITS management companies on

risk measurement and the calculation of global exposure for certain types of

structured UCITS (ESMA 2012/197)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-197.pdf

Guidelines to competent authorities and UCITS management companies on

ETFs and other UCITS issues (ESMA 2012/832)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_

guidelines_on_etfs_and_other_ucits_issues.pdf

COLL 5 : Investment and Section 5.4

borrowing powers

R5.4.1

G5.4.1A

G5.4.2

R5.4.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/43

5.4 Stock lending

Application

.....................................................................................................

(1) Subject to (2), this section applies to an ICVC, the depositary of an

authorised fund and an authorised fund manager in any case where

the authorised fund is a UCITS scheme or a non-UCITS retail scheme.

(2) This section does not apply in any case where a UCITS scheme or a

non-UCITS retail scheme is a regulated money market fund. The

Money Market Funds Regulation sets out restrictions in relation to

stock lending and repo contracts that apply in relation to regulated

money market funds.

■ COLL 6.6B sets out additional FCA rules applicable to a depositary of a UCITS

scheme in relation to the re-use of UCITS custodial assets.

Permitted stock lending

.....................................................................................................

(1) This section covers techniques relating to transferable securities and

approved money-market instruments which are used for the purpose

of efficient portfolio management. It 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 in the normal sense. Rather it is

an arrangement of the kind described in section 263B of the Taxation

of Chargeable Gains Act 1992, under which the lender transfers

securities to the borrower otherwise than by way of sale and the

borrower is to transfer those securities, or securities of the same type

and amount, back to the lender at a later date. In accordance with

good market practice, a separate transaction by way of transfer of

assets is also involved for the purpose of providing collateral to the

"lender" to cover him against the risk that the future transfer back of

the securities may not be satisfactorily completed.

Stock lending: general

.....................................................................................................

(1) An 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

COLL 5 : Investment and Section 5.4

borrowing powers

R5.4.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/44

(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 additional income for the authorised fund with an

acceptable degree of risk.

Stock lending: requirements

.....................................................................................................

(1) An ICVC, or the depositary of an authorised fund acting in accordance

with the instructions of the authorised fund manager, may enter into

a repo contract, or a stock 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:

(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

ACS are in a form which is acceptable to the depositary and are

in accordance with good market practice;

(b) the counterparty is:

(i) an authorised person; or

(ii) a person authorised by a Home State regulator; or

(iii) a person registered as a broker-dealer with the Securities and

Exchange Commission of the United States of America; or

(iv) a bank, or a branch of a bank, supervised and authorised to

deal in investments as principal, with respect to OTC

derivatives by at least one of the following federal banking

supervisory authorities of the United States of America:

(A) the Office of the Comptroller of the Currency;

(B) the Federal Deposit Insurance Corporation; and

and

(D) [deleted]

obligation of the counterparty under the terms referred to in (a)

and the collateral is:

(i) acceptable to the depositary;

(ii) adequate; and

(iii) sufficiently immediate.

(2) The counterparty for the purpose of (1) is the person who is obliged

under the agreement referred to in (1)(a) to transfer to the

depositary the securities transferred by the depositary under the stock

lending arrangement or securities of the same kind.

(3) (1)(c) does not apply to a stock lending transaction made through

Euroclear Bank SA/NV's Securities Lending and Borrowing Programme.

COLL 5 : Investment and Section 5.4

borrowing powers

G5.4.5

R5.4.6

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/45

Stock lending: treatment of collateral

.....................................................................................................

Where a stock lending arrangement is entered into, the scheme property

remains unchanged in terms of value. The securities transferred cease to be

part of the scheme property, but there is obtained in return an obligation on

the part of the counterparty to transfer back equivalent securities. The

depositary will also receive collateral to set against the risk of default in

transfer, and that collateral is equally irrelevant to the valuation of the

scheme property (because it is transferred against an obligation of

equivalent value by way of re-transfer). ■ COLL 5.4.6 R accordingly makes

provision for the treatment of the collateral in that context.

Treatment of collateral

.....................................................................................................

(1) Collateral is adequate for the purposes of this section only if it is:

(a) transferred to the depositary or its agent;

(aa) for a UCITS scheme, received under a title transfer arrangement;

(ab) for 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 at least equal in value

to the value of the securities transferred by the depositary; and

(i) cash; or

(ii) [deleted]

(iii) a certificate of deposit; or

(iv) a letter of credit; or

(v) a readily realisable security; or

(vi) commercial paper with no embedded derivative content; or

(vii) a qualifying money market fund.

(1A) Where the collateral is invested in units in a qualifying money market

fund managed or operated by (or, for an ICVC, whose ACD is) the

authorised fund manager of the investing scheme or an associate of

that authorised fund manager, the conditions in ■ COLL 5.2.16 R

(Investment in other group schemes) must be complied with whether

or not the investing scheme is a UCITS scheme or a non-UCITS retail

scheme.

(2) Collateral is sufficiently immediate for the purposes of this section if:

(a) it is transferred before or at the time of the transfer of the

securities by the depositary; or

(b) the depositary takes reasonable care to determine at the time

referred to in (a) that it will be transferred at the latest by the

close of business on the day of the transfer.

(3) The depositary must ensure that the value of the collateral at all

times meets the requirement of either (1)(ab) or (1)(b), as

appropriate.

COLL 5 : Investment and Section 5.4

borrowing powers

G5.4.6A

R5.4.7

G5.4.8

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/46

(4) The duty in (3) may be regarded as satisfied in respect of collateral

the validity of which is about to expire or has expired where the

depositary takes reasonable care to determine that sufficient

collateral will again be transferred at the latest by the close of

business on the day of expiry.

(5) Any agreement for transfer at a future date of securities or of

collateral (or of the equivalent of either) under this section may be

regarded, for the purposes of valuation under ■ COLL 6.3 (Valuation

and pricing) or this chapter, as an unconditional agreement for the

sale or transfer of property, whether or not the property is part of

the property of the authorised fund.

(6) Collateral transferred to the depositary is part of the scheme property

for the purposes of the rules in this sourcebook, except in the

following respects:

(a) it does not fall to be included in any valuation for the purposes

of ■ COLL 6.3 or this chapter, because it is offset under (5) by an

obligation to transfer; and

(b) it does not count as scheme property for any purpose of this

chapter other than this section.

(7) Paragraph (5) and (6)(a) do not apply to any valuation of collateral

itself for the purposes of this section.

As 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)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_

guidelines_on_etfs_and_other_ucits_issues.pdf

Revision of the provisions on diversification of collateral in ESMA’s Guidelines

on ETFs and other UCITS issues (ESMA 2014/294)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2014-294_final_

report_revision_of_guidelines_etfs_and_other_ucits_issues.pdf

Limitation by value

.....................................................................................................

There is no limit on the value of the scheme property which may be the

subject of repo contracts or stock lending transactions within this section.

Guidance relating to the use of cash collateral

.....................................................................................................

(1) The use of stock lending or the reinvestment of cash collateral should

not result in a change of the scheme's declared investment objectives

or add substantial supplementary risks to the scheme's risk profile.

(2) Collateral taking the form of cash may only be invested in:

(a) one of the investments coming within ■ COLL 5.4.6 R (1) (c) (iii) to

■ (vii) (Treatment of collateral); or

(b) deposits, provided they:

COLL 5 : Investment and Section 5.4

borrowing powers

G5.4.9

G5.4.10

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/47

(i) are capable of being withdrawn within five business days, or

such shorter time as may be dictated by the stock lending

agreement; and

(ii) satisfy the requirements of ■ COLL 5.2.26 R (1) (Investment in

deposits).

Where a scheme generates leverage through the reinvestment of collateral,

this should be taken into account in the calculation of the scheme's global

exposure.

[Note: CESR's UCITS eligible assets guidelines with respect to article 11 of the

UCITS eligible assets Directive (part)]

Authorised 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)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2012-832en_

guidelines_on_etfs_and_other_ucits_issues.pdf

Revision of the provisions on diversification of collateral in ESMA’s Guidelines

on ETFs and other UCITS issues (ESMA 2014/294)

https://www.esma.europa.eu/sites/default/files/library/2015/11/2014-294_final_

report_revision_of_guidelines_etfs_and_other_ucits_issues.pdf

COLL 5 : Investment and Section 5.5

borrowing powers

R5.5.1

R5.5.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/48

5.5 Cash, borrowing, lending and other

provisions

Application

.....................................................................................................

(1) Subject to (2), this section applies to an ICVC, an ACD, an authorised

fund manager of an AUT or ACS, and a depositary of an ICVC, AUT or

ACS, where such ICVC, AUT or ACS is a UCITS scheme as set out in

■ COLL 5.5.2R (Table of application).

(2) Other than ■ COLL 5.5.3R and ■ COLL 5.5.9R, this section does not apply

to an ICVC, an ACD, an authorised fund manager of an AUT or ACS,

or a depositary of an ICVC, AUT or ACS, where such ICVC, AUT or ACS

is a regulated money market fund.

Table of application

.....................................................................................................

This table belongs to ■ COLL 5.5.1 R.

Au-

thorised

fund Deposit-

manager ary of an

of an AUT Depositary AUT or

Rule ICVC ACD or ACS of an ICVC ACS

5.5.3R x x

5.5.4R(1) to x x

(3)

5.5.4R(4)&(5) x x

5.5.4R(6) x x

5.5.4R(7) x x x x x

5.5.4R(8) x

5.5.5R(1) to x x

(3)

5.5.6R(1)&(2) x x x

5.5.6R(3) x

5.5.7R(1)-(3) x x x

5.5.7R(4) x x x

5.5.8R x x x

5.5.9R x x x

5.5.10G x x x x x

Note: x means "applies"

COLL 5 : Investment and Section 5.5

borrowing powers

R5.5.3

R5.5.4

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/49

Cash and near cash

.....................................................................................................

(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

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 initial offer the scheme property may consist

of cash and near cash without limitation.

General power to borrow

.....................................................................................................

(1) The ICVC or depositary of an AUT or ACS (on the instructions of the

authorised fund manager) 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.

(2) Paragraph (1) is subject to the obligation of the authorised fund to

comply with any restriction in the instrument constituting the fund.

(3) The ICVC or depositary of an AUT or ACS may borrow under (1) only

from an eligible institution or an approved bank.

(4) The authorised fund manager must ensure that any borrowing is on a

temporary basis and that borrowings are not persistent, and for this

purpose the authorised fund manager must have regard in particular

to:

(a) the duration of any period of borrowing; and

(b) the number of occasions on which resort is had to borrowing in

any period.

(5) In addition to complying with (4), the authorised fund manager must

ensure that no period of borrowing exceeds three months, whether

in respect of any specific sum or at all, without the prior consent of

the depositary.

(6) The depositary may only give its consent as required under (5) on

such conditions as appear to the depositary appropriate to ensure

that the borrowing does not cease to be on a temporary basis only.

(7) This rule does not apply to "back to back" borrowing under

■ COLL 5.3.5 R (2) (Borrowing).

(8) An ICVC must not issue any debenture unless it acknowledges or

creates a borrowing that complies with (1) to (6)

COLL 5 : Investment and Section 5.5

borrowing powers

R5.5.5

G5.5.5A

R5.5.6

R5.5.7

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/50

Borrowing limits

.....................................................................................................

(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 that the sum

will be repaid.

(4) [deleted]

An 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.

Restrictions on lending of money

.....................................................................................................

(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 to meet expenditure to be incurred by him for

the purposes of the ICVC (or for the purposes of enabling him

properly to perform his duties as an officer of the ICVC) or from

doing anything to enable an officer to avoid incurring such

expenditure.

Restrictions on lending of property other than money

.....................................................................................................

(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

COLL 5 : Investment and Section 5.5

borrowing powers

G5.5.7A

R5.5.8

R5.5.9

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/51

depositary at the request of the ICVC, or the depositary of an AUT or

ACS at the request of the authorised fund manager, from:

(a) lending, depositing, pledging or charging scheme property for

margin requirements; or

(b) transferring scheme property under the terms of an agreement in

relation to margin requirements, provided that the authorised

fund manager reasonably considers that both the agreement and

the margin arrangements made under it (including in relation to

the level of margin) provide appropriate protection to

unitholders.

An agreement providing appropriate protection to unitholders for the

purposes of ■ COLL 5.5.7 R (4)(b) includes one made in accordance with the

1995 International Swaps and Derivatives Association Credit Support Annex

(English Law) to the International Swaps and Derivatives Association Master

Agreement.

General power to accept or underwrite placings

.....................................................................................................

(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.

(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) Paragraph (2) does not apply to:

(a) an option; or

(b) a purchase of a transferable security which confers a right to:

(i) subscribe for or acquire a transferable security; or

(ii) convert one transferable security into another.

(4) The exposure of an authorised fund to agreements and

understandings within (2) must, on any day, be:

(a) covered under ■ COLL 5.3.3A R (Cover for investment in derivatives

and forward transactions); and

(b) such that, if all possible obligations arising under them had

immediately to be met in full, there would be no breach of any

limit in this chapter.

Guarantees and indemnities

.....................................................................................................

(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.

COLL 5 : Investment and Section 5.5

borrowing powers

G5.5.10

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/52

(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 are being used in

accordance with the rules in this chapter; and

(b) for an ICVC:

(i) an indemnity falling within the provisions of regulation 62(3)

of the OEIC Regulations (Exemptions from liability to be

void);

(ii) an indemnity (other than any provision in it which is void

under regulation 62 of the OEIC Regulations) given to the

depositary against any liability incurred by it as a

consequence of the safekeeping of any of the scheme

property by it or by anyone retained by it to assist it to

perform its function of the safekeeping of the scheme

property; and

(iii) an indemnity given to a person winding up a scheme if the

indemnity is given for the purposes of arrangements by

which the whole or part of the property of that scheme

becomes the first property of the ICVC and the holders of

units in that scheme become the first unitholders in the ICVC;

and

body corporate or other scheme in circumstances where those

assets are becoming part of the scheme property by way of a

unitisation.

Guidance on restricting payments

.....................................................................................................

■ COLL 6.7.15 R (Payment of liabilities on transfer of assets) and ■ COLL 6.7.4 R

(Payments out of scheme property) contain provisions restricting payments

out of scheme property.

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.1

G5.6.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/53

5.6 Investment powers and borrowing

limits for non-UCITS retail schemes

Application

.....................................................................................................

(1) Subject to (3), this section applies to the authorised fund manager

and the depositary of a non-UCITS retail scheme and to an ICVC

which is a non-UCITS retail scheme.

(2) Where this section contains a reference to a rule in any of ■ COLL 5.1

to ■ COLL 5.5 , these rules and any rules to which they refer or any

relevant guidance should be read as if any reference to a UCITS

scheme is to a non-UCITS retail scheme.

(3) Other than ■ COLL 5.6.3R(1), ■ 5.6.4AG, ■ 5.6.14R, ■ 5.6.15R, ■ 5.6.22R(2),

■ 5.6.22R(3), ■ 5.6.22R(9) and ■ 5.6.24R, this section does not apply

where the non-UCITS retail scheme in question is a regulated money

market fund.

Explanation of ■ COLL 5.6

.....................................................................................................

(1) This section contains rules on the types of permitted investments and

any relevant limits with which non-UCITS retail schemes must comply.

These rules allow for the relaxation of certain investment and

borrowing powers from the requirements applicable to UCITS

schemes.

(2) Some examples of the different investment and borrowing powers

under the rules in this section for non-UCITS retail schemes are the

power to:

(a) invest not more than 10% of the value of scheme property in

transferable securities or money-market instruments issued by any

single body;

(b) invest in up to 20% in aggregate of the value of the scheme

property in transferable securities which are not approved

securities and unregulated schemes;

(d) include gold in the scheme property (up to a limit of 10% of the

value of the scheme property);

(e) include immovables in the scheme property; and

(f) borrow on a non-temporary basis without any specific time limit

as to repayment of the borrowing.

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.3

R5.6.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/54

Prudent spread of risk

.....................................................................................................

(1) An authorised fund manager must ensure that, taking account of the

investment objectives and policy of the non-UCITS retail scheme as

stated in its most recently published prospectus, the scheme property

of the non-UCITS retail scheme aims to provide a prudent spread of

risk

(1A) For a feeder NURS, (1) applies only to the extent that the feeder

NURS invests in assets other than units of its qualifying master

scheme.

(2) Subject to (3) and (4), the rules in this section relating to spread of

investments, including immovables, do not apply until 12 months

after the later of:

(a) the date when the authorisation order in respect of the non-

UCITS retail scheme takes effect; and

(b) the date the initial offer commenced;

provided that (1) is complied with during such period.

(3) Subject to (4), the limits in ■ COLL 5.6.19 R do not apply until 24

months after the later of:

(a) the date when the authorisation order in respect of the non-

UCITS retail scheme takes effect; and

(b) the date the initial offer commenced;

provided that (1) is complied with during such period.

(4) The limit in ■ COLL 5.6.19 R (7) relating to immovables which are

unoccupied and non-income producing or are in the course of

substantial development, redevelopment or refurbishment applies

from the later of the date when the authorisation order in respect of

the non-UCITS retail scheme takes effect and the date the initial offer

period commenced.

Investment powers: general

.....................................................................................................

(1) The scheme property of a non-UCITS retail scheme may, subject to the

rules in this section, comprise any assets or investments to which it is

dedicated.

(2) For an ICVC, the scheme property may also include movable or

immovable property that is necessary for the direct pursuit of the

ICVC's business of investing in those assets or investments.

(3) The scheme property must be invested only in accordance with the

relevant provisions in this section that are applicable to that non-

UCITS retail scheme and within any upper limit specified in this

section.

COLL 5 : Investment and Section 5.6

borrowing powers

G5.6.4A

R5.6.5

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/55

(4) The instrument constituting the fund may restrict the investment

powers of a scheme further than the relevant restrictions in this

section.

(5) The scheme property may only, except where otherwise provided in

the rules in this section, consist of any one or more of:

(a) transferable securities;

(b) money-market instruments;

■ COLL 5.6.10 R (Investment in collective investment schemes);

(d) derivatives and forward transactions permitted under

■ COLL 5.6.13 R (Permitted transactions (derivatives and forwards));

(e) deposits permitted under ■ COLL 5.2.26 R (Investment in deposits);

(f) immovables permitted under ■ COLL 5.6.18 R (Investment in

property) to ■ COLL 5.6.19 R (Investment limits for immovables);

and

(g) gold up to a limit of 10% in value of the scheme property.

Investment powers and limits for non-UCITS retail schemes that are regulated

money market funds are set out in the Money Market Funds Regulation.

Subject to complying with that Regulation, the instrument constituting the

fund may further restrict:

(1) the kind of money market instruments in which the scheme property

may be invested;

(2) the proportion of the capital property of the non-UCITS retail scheme

to be invested in money market instruments of any description;

(3) the descriptions of transactions permitted; and

(4) the borrowing powers of the non-UCITS retail scheme.

Eligibility of transferable securities and money-market

instruments for investment by a non-UCITS retail scheme

.....................................................................................................

Transferable securities and money-market instruments held within a non-

UCITS retail scheme must:

(1) (a) be admitted to or dealt in on an eligible market within

■ COLL 5.2.10 R (Eligible markets: requirements); or

(b) be recently issued transferable securities which satisfy the

requirements for investment by a UCITS scheme set out in

■ COLL 5.2.8 R (3)(e); or

in on an eligible market which satisfy the requirements for

investment by a UCITS scheme set out in ■ COLL 5.2.10A R to

■ COLL 5.2.10C R; or

(2) subject to a limit of 20% in value of the scheme property be:

(a) transferable securities which are not within (1); or

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.5A

G5.6.5B

R5.6.5C

R5.6.5D

G5.6.5E

R5.6.6

R5.6.7

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/56

(b) money-market instruments which are liquid and have a value

which can be determined accurately at any time.

Transferable securities held within a non-UCITS retail scheme must also

satisfy the criteria in ■ COLL 5.2.7A R, ■ COLL 5.2.7C R and ■ COLL 5.2.7E R for the

purposes of investment by a UCITS scheme.

■ COLL 5.2.7A R to ■ COLL 5.2.7E R contain rules and guidance relating to the

criteria that need to be satisfied for the purposes of investment in

transferable securities.

[deleted]

Funds investing in inherently illiquid assets (FIIA)

.....................................................................................................

(1) The Glossary definition of a fund investing in inherently illiquid assets

(or FIIA) includes conditions relating to, amongst other things, the

investment objectives of such non-UCITS retail schemes and the

proportion of scheme property which is invested in inherently illiquid

assets.

(2) Examples of such assets include:

(a) property and real estate;

(b) shares in a special purpose vehicle investing in infrastructure

projects;

trading; and

(d) units in a property authorised investment fund.

Valuation

.....................................................................................................

In this section the value of the scheme property means the value of the

scheme property determined in accordance with ■ COLL 5.2.5 R (Valuation).

Spread: general

.....................................................................................................

(1) This rule does not apply in respect of a transferable security or an

approved money-market instrument to which ■ COLL 5.6.8R (Spread:

government and public securities) applies.

(2) Not more than 20% in value of the scheme property is to consist of

deposits with a single body.

(3) Not more than 10% in value of the scheme property is to consist of

transferable securities or money-market instruments issued by any

single body subject to ■ COLL 5.6.23 R (Schemes replicating an index).

COLL 5 : Investment and Section 5.6

borrowing powers

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/57

(3A) The limit of 10% in (3) is raised to 25% in value of the scheme

property in respect of covered bonds.

(4) In applying (3) certificates representing certain securities are to be

treated as equivalent to the underlying security.

(5) The exposure to any one counterparty in an OTC derivative

transaction must not exceed 10% in value of the scheme.

(6) Except for a feeder NURS or a scheme dedicated to units in a single

property authorised investment fund, not more than 35% in value of

the scheme is to consist of the units of any one scheme.

(6A) Schemes which (in respect of investment in units in collective

investment schemes) are dedicated to units in a single property

authorised investment fund or qualifying master scheme must, in

addition to the investment in the property authorised investment

fund or qualifying master scheme, only hold cash or near cash to

maintain sufficient liquidity to enable the scheme to meet its

commitments, such as redemptions. Schemes may also use techniques

and instruments for the purpose of efficient portfolio management,

where appropriate, such as forward foreign exchange transactions

entered into for the purpose of reducing the effect of fluctuations in

the rate of exchange between relevant currencies.

(7) For the purpose of calculating the limit in (5), the exposure in respect

of an OTC derivative may be reduced to the extent that collateral is

held in respect of it if the collateral meets each of the conditions

specified in (8).

(8) The conditions referred to in (7) are that the collateral:

(a) is marked-to-market on a daily basis and exceeds the value of the

amount at risk;

(b) is exposed only to negligible risks (e.g. government bonds of first

credit rating or cash) and is liquid;

legally secured from the consequences of a failure of a related

party; and

(d) can be fully enforced by the non-UCITS retail scheme at any time.

(9) For the purpose of calculating the limit in (5), OTC derivative

positions with the same counterparty may be netted provided that

the netting procedures:

(a) comply with the conditions set out in Part Three, Title II, Chapter

6, Section 7(Contractual netting (Contracts for novation and other

netting agreements)) of the UK CRR and

(b) are based on legally binding agreements.

(10) In applying this rule, all derivatives transactions are deemed to be

free of counterparty risk if they are performed on an exchange where

the clearing house meets each of the following conditions:

(a) it is backed by an appropriate performance guarantee; and

(b) it is characterised by a daily mark-to-market valuation of the

derivative positions and an at least daily margining.

COLL 5 : Investment and Section 5.6

borrowing powers

G5.6.7A

R5.6.8

R5.6.9

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/58

(11) For the purposes of this rule a single body is:

(a) in relation to transferable securities and money market

instruments, the person by whom they are issued; and

(b) in relation to deposits, the person with whom they are placed.

Guidance on spread: general

.....................................................................................................

(1) ■ COLL 5.6.7 R (7) to ■ (10) replicate the provisions of Article 5 of the

Commission Recommendation 2004/383/EC of 27 April 2004 on the

use of financial derivative instruments for undertakings for collective

investment in transferable securities, so as to enable non-UCITS retail

schemes to benefit from the same flexibility.

(2) The attention of authorised fund managers is specifically drawn to

condition (d) in ■ COLL 5.6.7 R (8) under which the collateral has to be

legally enforceable at any time. It is the FCA's view that it is advisable

for an authorised fund manager to undertake a legal due diligence

exercise before entering into any financial collateral arrangement.

This is particularly important where the collateral arrangements in

question have a cross-border dimension. The depositary will also need

to exercise reasonable care to review the collateral arrangements in

accordance with its duties under ■ COLL 6.6.4 R (General duties of the

depositary).

(3) In applying the spread limit of 20% in value of scheme property

which may consist of deposits with a single body, all uninvested cash

comprising capital property that the depositary holds should be

included in calculating the total sum of the deposits held by it on

behalf of the scheme.

Spread: government and public securities

.....................................................................................................

(1) This rule applies in respect of a transferable security or an approved

money-market instrument (“such securities”) that is issued or

guaranteed by:

(a) the UK or an EEA State; or

(b) a local authority of the UK or an EEA State; or

(d) a public international body to which the UK or one or more EEA

States belong.

(2) The requirements in ■ COLL 5.2.12 R (Spread: government and public

securities) apply to investment in such securities by a non-UCITS retail

scheme, except for ■ COLL 5.2.12R(3)(d), which applies to such a scheme

only to the extent that it concerns the most recently published

prospectus of the scheme.

Investment in nil and partly paid securities

.....................................................................................................

A non-UCITS retail scheme must not invest in nil and partly paid securities

unless the investment complies with the conditions in ■ COLL 5.2.17 R

(Investment in nil and partly paid securities).

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.10

R5.6.10A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/59

Investment in collective investment schemes

.....................................................................................................

A non-UCITS retail scheme, except for a feeder NURS (which must instead

comply with ■ COLL 5.6.26 R), must not invest in units in a collective

investment scheme (second scheme) unless the second scheme meets each of

the requirements at (1) to (5):

(1) the second scheme:

(a) is a UCITS scheme or satisfies the conditions necessary for it to

enjoy the rights conferred by the UCITS Directive as implemented

in the EEA; or

(b) is a non-UCITS retail scheme; or

(d) is constituted outside the United Kingdom and the investment

and borrowing powers of which are the same or more restrictive

than those of a non-UCITS retail scheme; or

(e) is a scheme not falling within (a) to (d) and in respect of which

no more than 20% in value of the scheme property (including

any transferable securities which are not approved securities) is

invested;

(2) the second scheme operates on the principle of the prudent spread of

risk;

(3) the second scheme is prohibited from having more than 15% in value

of the property of that scheme consisting of units in collective

investment schemes (unless ■ COLL 5.6.10AR applies);

(4) the participants in the second scheme must be entitled to have their

units redeemed in accordance with the scheme at a price:

(a) related to the net value of the property to which the units relate;

and

(b) determined in accordance with the scheme; and

(5) where the second scheme is an umbrella, the provisions in (2) to (4)

and ■ COLL 5.6.7 R (Spread: general) apply to each sub-fund as if it

were a separate scheme.

Investment in feeder schemes

.....................................................................................................

(1) A 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

investment fund; or

(d) a scheme dedicated 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.

COLL 5 : Investment and Section 5.6

borrowing powers

G5.6.10B

G5.6.10C

R5.6.11

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/60

(b) The relevant qualifying master scheme, property authorised

investment fund or recognised scheme must comply with

■ COLL 5.6.10R(2) to (5) as if it were the second scheme for the

purpose of that rule.

(3) Not more than 35% in value of the scheme property of the non-UCITS

retail scheme may consist of units of one or more schemes permitted

under (1)(a) to (d).

(4) The non-UCITS retail scheme must not invest directly in units of the

relevant master UCITS, qualifying master scheme, property authorised

investment fund or recognised scheme.

(5) The authorised fund manager of the non-UCITS retail scheme must be

able to show on reasonable grounds that an investment in one or

more schemes permitted under (1)(a) to (d) is:

(a) in the interests of investors; and

(b) no less advantageous than if the non-UCITS retail scheme had

held units directly in the relevant:

(i) master UCITS; or

(ii) qualifying master scheme; or

(iii) property authorised investment fund; or

(iv) recognised scheme.

When 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).

A non-UCITS retail scheme that is a feeder NURS is required to comply with

■ COLL 5.6.26R instead of ■ COLL 5.6.10AR.

Investment in associated collective investment schemes

.....................................................................................................

(1) Units in a scheme do not fall within ■ COLL 5.6.10 R if that scheme is

managed or operated by (or, if it is an ICVC, has as its ACD) the

authorised fund manager of the investing non-UCITS retail scheme or

by an associate of that authorised fund manager, unless:

(a) the prospectus of the investing authorised fund clearly states that

the property of that investing fund may include such units; and

(b) the conditions in ■ COLL 5.2.16 R (Investment in other group

schemes) are complied with.

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.12

R5.6.13

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/61

(2) Where a sub-fund of a non-UCITS retail scheme which is an umbrella

invests in or disposes of units in another sub-fund of the same

umbrella (the second sub-fund), the requirement in:

(a) ■ COLL 5.6.11 R (1)(a) is modified as follows - the prospectus of the

umbrella must clearly state that the scheme property attributable

to the investing or disposing sub-fund may include units in

another sub-fund of the same umbrella; and

(b) ■ COLL 5.6.11 R (1)(b) is modified as follows - ■ COLL 5.2.16 R

(Investment in other group schemes) must be complied with,

modified such that references to the "UCITS scheme" are taken

to be references to the investing or disposing sub-fund and

references to the "second scheme" are taken to be references to

the second sub-fund.

Derivatives: general

.....................................................................................................

(1) A transaction in derivatives or a forward transaction must not be

effected for a non-UCITS retail scheme unless the transaction is:

(a) of a kind specified in ■ COLL 5.6.13 R (Permitted transactions

(derivatives and forwards)); and

(b) covered, as required by ■ COLL 5.3.3A R (Cover for investment in

derivatives and forward transactions).

(2) Where a scheme invests in derivatives, the exposure to the underlying

assets must not exceed the limits in ■ COLL 5.6.7 R (Spread: general)

and ■ COLL 5.6.8 R (Spread: government and public securities) except as

provided in (4).

(3) Where a transferable security or money-market instrument embeds a

derivative, this must be taken into account for the purposes of

calculating any limit in this section.

(4) Where a scheme invests in an index-based derivative, provided the

relevant index falls within ■ COLL 5.6.23 R (Schemes replicating an

index) the underlying constituents of the index do not have to be

taken into account for the purposes of ■ COLL 5.6.7 R and

■ COLL 5.6.8 R.

(5) The relaxation in (4) is subject to the authorised fund manager taking

account of ■ COLL 5.6.3 R (Prudent spread of risk).

Permitted transactions (derivatives and forwards)

.....................................................................................................

(1) A transaction in a derivative must be within ■ COLL 5.2.20 R (1)

(Permitted transactions (derivatives and forwards)) and:

(a) the underlying must be within ■ COLL 5.6.4 R (5) (Investment

powers: general) or ■ COLL 5.2.20R (2)(f) to ■ (i); and

(b) the exposure to the underlying must not exceed the limits in

■ COLL 5.6.7 R (Spread: general), ■ COLL 5.6.8 R (Spread: government

and public securities) and ■ COLL 5.6.5 R (2).

(2) A transaction in an approved derivative must be effected on or under

the rules of an eligible derivatives market.

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.14

R5.6.15

R5.6.16

G5.6.17

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/62

(3) A transaction in a derivative must not cause a scheme to diverge from

its investment objectives as stated in the instrument constituting the

fund and the most recently published prospectus.

(4) transaction in a derivative must not be effected if the intended effect

is to create the potential for an uncovered sale of:

(a) transferable securities;

(b) money-market instruments;

(d) derivatives.

(5) Any forward transaction must be made with an eligible institution or

an approved bank.

(6) The authorised fund manager must ensure compliance with

■ COLL 5.3.3A R (Cover for investment in derivatives and forward

transactions), ■ COLL 5.3.3B R and ■ COLL 5.3.3C R (Daily calculation of

global exposure).

Transactions for the purchase or disposal of property

.....................................................................................................

The requirements of ■ COLL 5.2.21 R (Transactions for the purchase of

property) and ■ COLL 5.2.22 R (Requirement to cover sales) apply to non-UCITS

retail schemes in the same manner as to UCITS schemes.

OTC transactions in derivatives

.....................................................................................................

Any transaction in an OTC derivative under ■ COLL 5.6.13 R (Permitted

transactions (derivatives and forwards)) must comply with the requirements

of ■ COLL 5.2.23 R (OTC transactions in derivatives).

Risk management

.....................................................................................................

An authorised fund manager must use a risk management process enabling

it to monitor and measure as frequently as appropriate the risk associated

with a non-UCITS retail scheme's positions and their contribution to the

overall risk profile of the scheme.

Risk management process

.....................................................................................................

(1) The risk management process should take account of the investment

objectives and policy of the non-UCITS retail scheme as stated in its

most recent prospectus.

(2) The depositary should take reasonable care to review the

appropriateness of the risk management process in line with its duties

under ■ COLL 6.6.4 R (General duties of the depositary) and

■ COLL 6.6.14 R (Duties of the depositary and authorised fund

manager: investment and borrowing powers), as appropriate.

(3) An authorised fund manager is expected to demonstrate more

sophistication in its risk management process for a non-UCITS retail

scheme with a complex risk profile than for one with a simple risk

profile. In particular, the risk management process should take

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.18

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/63

account of any characteristic of non-linear dependence in the value of

a position to its underlying.

(4) An authorised fund manager should take reasonable care to establish

and maintain such systems and controls as are appropriate to its

business as required by ■ SYSC 4.1 (General requirements).

(5) The risk management process should enable the analysis required by

■ COLL 5.6.16 R (Risk management) to be undertaken at least daily or

at each valuation point whichever is the more frequent.

Investment in property

.....................................................................................................

(1) Any investment in land or a building held within the scheme property

of a non-UCITS retail scheme must be an immovable within (2) to (5).

(2) An immovable must:

(a) be situated in a country or territory identified in the prospectus

for the purpose of this rule; and

(b) if situated in:

(i) England and Wales or Northern Ireland, be a freehold or

leasehold interest; or

(ii) Scotland, be any interest or estate in or over land or

heritable right including a long lease; or

equivalent to any of the interests in (b)(i) or (ii) or, if no such

equivalent interest is available in the jurisdiction, be an interest

that grants beneficial ownership of the immovable to the scheme

and provides as good a title as any of the interests in (b)(i) or (ii).

(3) The authorised fund manager must have taken reasonable care to

determine that the title to the immovable is a good marketable title.

(4) The authorised fund manager of an AUT or ACS or the ICVC must:

(a) have received a report from an appropriate valuer which:

(i) contains a valuation of the immovable (with and without any

relevant subsisting mortgage); and

(ii) states that in the appropriate valuer's opinion the immovable

would, if acquired by the scheme, be capable of being

disposed of reasonably quickly at that valuation; or

(b) have received a report from an appropriate valuer as required by

(4)(a)(i) and stating that:

(i) the immovable is adjacent to or in the vicinity of another

immovable included in the scheme property or is another

legal interest as defined in (2)(b) or (c) in an immovable

which is already included in the scheme property; and

(ii) in the opinion of the appropriate valuer, the total value of

both immovables would at least equal the sum of the price

payable for the immovable and the existing value of the

other immovable.

(5) An immovable must:

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.18A

G5.6.18B

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/64

(a) be bought or be agreed by enforceable contract to be bought

within six months after receipt of the report of the appropriate

valuer under (4);

(b) not be bought, if it is apparent to the authorised fund manager

that the report in (a) could no longer reasonably be relied upon;

and

relevant immovable in the report in (4).

(6) Any furniture, fittings or other contents of any building may be

regarded as part of the relevant immovable.

(7) An appropriate valuer must be a person who:

(a) has knowledge of and experience in the valuation of immovables

of the relevant kind in the relevant area;

(b) is qualified to be a standing independent valuer of a non-UCITS

retail scheme or is considered by the scheme's standing

independent valuer to hold an equivalent qualification;

directors of the ICVC or of the authorised fund manager and

depositary of the AUT or ACS; and

(d) has not engaged himself or any of his associates in relation to the

finding of the immovable for the scheme or the finding of the

scheme for the immovable.

Investment in overseas property through an intermediate

holding vehicle

.....................................................................................................

(1) An overseas immovable may be held by a scheme through an

intermediate holding vehicle whose purpose is to enable the holding

of immovables by the scheme or a series of such intermediate holding

vehicles, provided that the interests of unitholders are adequately

protected. Any investment in an intermediate holding vehicle for the

purpose of holding an overseas immovable shall be treated for the

purposes of this chapter as if it were a direct investment in that

immovable.

(2) An intermediate holding vehicle must be wholly owned by the

scheme or another intermediate holding vehicle or series of

intermediate holding vehicles wholly owned by the scheme, unless

and to the extent that local legislation or regulation relating to the

intermediate holding vehicle holding the immovable requires a

proportion of local ownership.

(1) The authorised fund manager may transfer capital and income

between an intermediate holding vehicle and the scheme by the use

of inter-company debt if the purpose of this is for investment in

immovables and repatriation of income generated by such

investment. In using inter-company debt, the authorised fund

manager should ensure the following:

(a) a record of inter-company debt is kept in order to provide an

accurate audit trail; and

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.19

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/65

(b) interest paid out on the debt instruments is equivalent to the net

rental income earned from the immovables after deduction of

the intermediate holding vehicle's reasonable running costs

(including tax).

(2) An intermediate holding vehicle should undertake the purchase, sale

and management of immovables on behalf the scheme in accordance

with the scheme's investment objectives and policy.

(3) Wherever reasonably practicable, an intermediate holding vehicle

should have the same auditor and accounting reference date as the

scheme.

(4) The accounts of any intermediate holding vehicle should be

consolidated into the annual and interim reports of the scheme.

(5) The authorised fund manager should provide sufficient information

to enable the depositary to fulfil its duties under COLL in relation to

the immovables held through an intermediate holding vehicle.

Investment limits for immovables

.....................................................................................................

The following limits apply in respect of immovables held as part of scheme

property of a scheme:

(1) not more than 15% in value of the scheme property is to consist of

any one immovable;

(2) in (1), immovables within ■ COLL 5.6.18 R (4) (b) (Investment in property)

must be regarded as one immovable;

(3) the figure of 15% in (1) may be increased to 25% once the

immovable has been included in the scheme property in compliance

with (1);

(4) the income receivable from any one group in any accounting period

must not be attributable to immovables comprising;

(a) more than 25%; or

(b) in the case of a government or public body more than 35%;

of the value of the scheme property;

(5) not more than 20% in value of the scheme property is to consist of

immovables that are subject to a mortgage and any mortgage must

not secure more than 100% of the value in ■ COLL 5.6.18 R (4) (on the

assumption the immovable is not mortgaged);

(6) the aggregate value of:

(a) mortgages secured on immovables under (5);

(b) borrowing of the scheme under ■ COLL 5.6.22 R (5); and

must not at any time exceed 20% of the value of the scheme

property;

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.20

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/66

(7) not more than 50% in value of the scheme property is to consist of

immovables which are unoccupied and non-income producing or in

the course of substantial development, redevelopment or

refurbishment; and

(8) no option may be granted to a third party to buy any immovable

comprised in the scheme property unless the value of the relevant

immovable does not exceed 20% of the value of the scheme property

together with, where appropriate, the value of investments in:

(a) unregulated collective investment schemes; and

(b) any transferable securities which are not approved securities.

Standing independent valuer and valuation

.....................................................................................................

(1) The following requirements apply in relation to the appointment of a

valuer:

(a) the authorised fund manager must ensure that any immovables

in the scheme property are valued by an appropriate valuer

(standing independent valuer) appointed by the authorised fund

manager; and

(b) the appointment must be made with the approval of the

depositary at the outset and upon any vacancy.

(2) The standing independent valuer in (1) must be:

(a) for an AUT or ACS, independent of the authorised fund manager

and depositary; and

(b) for an ICVC, independent of the ICVC, the directors and the

depositary.

(3) The following requirements apply in relation to the functions of the

standing independent valuer:

(a) the authorised fund manager must ensure that the standing

independent valuer values all the immovables held within the

scheme property, on the basis of a full valuation with physical

inspection (including, where the immovable is or includes a

building, internal inspection), at least once a year;

(b) for the purposes of (a) any inspection in relation to adjacent

properties of a similar nature may be limited to that of only one

such representative property;

independent valuer values the immovables, on the basis of a

review of the last full valuation, at least once a month;

(d) if either the authorised fund manager or the depositary becomes

aware of any matters that appear likely to:

(i) affect the outcome of a valuation of an immovable; or

(ii) cause the valuer to decide to value under (a) instead of

under (c);

it must immediately inform the standing independent valuer of

that matter;

COLL 5 : Investment and Section 5.6

borrowing powers

G5.6.20A

R5.6.21

R5.6.22

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/67

(e) the authorised fund manager must use its best endeavours to

ensure that any other affected person reports to the standing

independent valuer immediately upon that person becoming

aware of any matter within (d); and

(f) any valuation by the standing independent valuer must be

undertaken in accordance with UKVPS 3 and 2.3 of UKVPGA of

the RICS Valuation – Global Standards 2017, UK national

supplement 2018 (the RICS Red Book) or, in the case of overseas

immovables, on an appropriate basis but subject to

■ COLL 6.3 (Valuation and pricing).

(4) In relation to an immovable:

(a) any valuation under ■ COLL 6.3 (Valuation and pricing) has effect,

until the next valuation under that rule, for the purposes of the

value of immovables; and

(b) an agreement to transfer an immovable or an interest in an

immovable is to be disregarded for the purpose of the valuation

of the scheme property unless it reasonably appears to the

authorised fund manager to be legally enforceable.

In considering whether a valuation of overseas immovables by the standing

independent valuer is made on an appropriate basis for the purpose of

■ COLL 5.6.20 R (3) (f), the authorised fund manager should consider whether

that valuation was made in accordance with internationally accepted

valuation principles, procedures and definitions as set out in the

International Valuation Standards published by the International Valuation

Standards Committee.

Stock lending

.....................................................................................................

A non-UCITS retail scheme may undertake stock lending in accordance with

■ COLL 5.4 (Stock lending).

Cash, borrowing, lending and other provisions

.....................................................................................................

The following rules in Chapter 5 apply to a non-UCITS retail scheme:

(1) ■ COLL 5.2.7 R (Transferable securities);

(2) ■ COLL 5.5.1 R(Application) and ■ COLL 5.5.2 R (Table of application);

(3) ■ COLL 5.5.3 R (Cash and near cash);

(4) ■ COLL 5.5.4 R (1), ■ COLL 5.5.4 R (2), ■ COLL 5.5.4 R (3) and ■ COLL 5.5.4R (8)

(General power to borrow);

(5) ■ COLL 5.5.5 R (1) and ■ COLL 5.5.5 R (2) (Borrowing limits);

(6) ■ COLL 5.5.6 R (Restrictions on lending of money) ;

(7) ■ COLL 5.5.7 R (1), ■ (2) and ■ (4) (Restrictions on lending of property

other than money);

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.23

G5.6.23A

R5.6.24

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/68

(8) ■ COLL 5.5.8 R (General power to accept or underwrite placings); and

(9) ■ COLL 5.5.9 R (Guarantees and indemnities).

Schemes replicating an index

.....................................................................................................

(1) A non-UCITS retail scheme may invest up to 20% in value of the

scheme property in shares and debentures which are issued by the

same body where the aim of the investment policy of that scheme as

stated in its most recently published prospectus is to replicate the

performance or composition of an index within (2).

(2) The index must:

(a) have a sufficiently diversified composition;

(b) be a representative benchmark for the market to which it refers;

and

(3) The limit in (1) may be raised for a particular scheme up to 35% in

value of the scheme property, but only in respect of one body and

where justified by exceptional market conditions.

(1) Replication of the composition of an index shall be understood to be

a reference to replication of the composition of the underlying assets

of that index, including the use of techniques and instruments for the

purpose of efficient portfolio management.

(2) The composition of an index is sufficiently diversified if its

components adhere to the spread requirements in this section.

(3) An index is a representative benchmark if its provider uses a

recognised methodology which generally does not result in the

exclusion of a major issuer of the market to which it refers.

(4) An index is published in an appropriate manner if:

(a) it is accessible to the public;

(b) the index provider is independent from the index-replicating

scheme; this does not preclude index providers and the scheme

from forming part of the same group, provided that effective

arrangements for the management of conflicts of interest are in

place.

Non-UCITS retail schemes that are umbrellas

.....................................................................................................

(1) In relation to a scheme which is an umbrella, the provisions in this

section apply to each sub-fund as they would for a non-UCITS retail

scheme.

(2) A sub-fund may invest in or dispose of units of another sub-fund of

the same umbrella (the second sub-fund) only if the following

conditions are satisfied:

(a) the second sub-fund does not hold units in any other sub-fund of

the same umbrella;

COLL 5 : Investment and Section 5.6

borrowing powers

G5.6.25

R5.6.26

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/69

(b) the conditions in ■ COLL 5.2.16 R (Investment in other group

schemes) and ■ COLL 5.6.11 R (Investment in associated collective

investment schemes) are complied with (for the purposes of this

rule, ■ COLL 5.2.16 R and ■ COLL 5.6.11 R are to be read as modified

by ■ COLL 5.6.11 R (2));

fund is to consist of units of the second sub-fund; and

(d) the investing or disposing sub-fund must not be a feeder NURS to

the second sub-fund.

Guidance on syndicated loans

.....................................................................................................

(1) ■ COLL 5.2.35 G (Guidance on syndicated loans) is equally applicable to

investment by a non-UCITS retail scheme in a syndicated loan.

(2) Where a loan falls within the Glossary definition of a transferable

security, investment in such a loan in the case of a non-UCITS retail

scheme is subject to the spread requirements in ■ COLL 5.6.7 R (Spread:

general). AFMs also need to bear in mind that where such a

transferable security does not meet the requirements of

■ COLL 5.6.5 R (1) (Eligibility of transferable securities and money-

market instruments for investment by a non-UCITS retail scheme), the

scheme's overall exposure to such loans will count towards the limit

in ■ COLL 5.6.5 R (2).

Qualifying collective investment schemes for feeder NURS

.....................................................................................................

The authorised fund manager of a feeder NURS must ensure that the feeder

NURS does not invest in the qualifying master scheme, unless the qualifying

master scheme meets meets the requirements in (1) to (3):

(1) the qualifying master scheme:

(a) is a UCITS scheme or satisfies the conditions necessary for it to

enjoy the rights conferred by the UCITS Directive as implemented

in the EEA; or

(b) is a recognised scheme; or

(2) where the qualifying master scheme is an umbrella, the provisions in

■ COLL 5.6.7 R (Spread: general) apply to each sub-fund as if it were a

separate scheme; and

() the qualifying master scheme:

(a) is not:

(i) a feeder UCITS or an EEA UCITS scheme or a sub-fund of an

EEA UCITS scheme which has been approved by the overseas

regulator of the UCITS Home State to invest at least 85% of

its assets in the units of a single EEA master UCITS; or

(ii) a feeder NURS; or

(iii) otherwise dedicated to units in a single collective investment

scheme; and

(b) does not hold units in:

COLL 5 : Investment and Section 5.6

borrowing powers

R5.6.27

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/70

(i) a feeder UCITS or an EEA UCITS scheme or a sub-fund of an

EEA UCITS scheme which has been approved by the overseas

regulator of the UCITS Home State to invest at least 85% of

its assets in the units of a single EEA master UCITS; or

(ii) a feeder NURS; or

(iii) a scheme otherwise dedicated to units in a single collective

investment scheme.

An EEA UCITS scheme that is not a recognised scheme is not a qualifying

master scheme for ■ COLL 5.6.26R(3) for a pension feeder fund that is a feeder

NURS.

COLL 5 : Investment and Section 5.7 : Investment powers and

borrowing powers borrowing limits for NURS operating as FAIFs

R5.7.1

G5.7.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/71

5.7 Investment powers and borrowing

limits for NURS operating as FAIFs

Application

.....................................................................................................

(1) This section applies to the authorised fund manager and the

depositary of a non-UCITS retail scheme operating as a FAIF and to an

ICVC which is a non-UCITS retail scheme operating as a FAIF.

(2) Where this section refers to:

(a) a rule or guidance in ■ COLL 5.1 to ■ COLL 5.6, these rules and

guidance, and any rules and guidance to which they refer, must

be read as if a reference to a UCITS scheme or non-UCITS retail

scheme were a reference to a non-UCITS retail scheme operating

as a FAIF;

(b) a second scheme, and the second scheme is a feeder scheme

which (in respect of investment in units in collective investment

schemes) is dedicated to units in a single collective investment

scheme, the reference in this section to the second scheme must

be read as if it were a reference to any scheme into which the

feeder scheme's master scheme invests; and

which (in respect of investment in units in collective investment

schemes) the relevant non-UCITS retail scheme operating as a

FAIF is dedicated, the reference in this section to the second

scheme must be read as if it were a reference to any scheme into

which that master scheme invests.

Purpose

.....................................................................................................

(1) This section contains rules on the types of permitted investments and

any relevant limits with which non-UCITS retail schemes operating as

FAIFs must comply. These rules allow for the relaxation of certain

investment and borrowing powers from the requirements for non-

UCITS retail schemes under ■ COLL 5.6 .

(2) One example of the different investment and borrowing powers

under the rules in this section for non-UCITS retail schemes operating

as FAIFs is the power to invest up to 100% of the value of the scheme

property in schemes to which ■ COLL 5.7.7 R (Investment in collective

investment schemes) applies. A non-UCITS retail scheme operating as

a FAIF is not able to hold more than 50% of its scheme property in

units of long-term asset funds unless it operates limited redemption

arrangements in accordance with ■ COLL 5.7.7R(3)(c) (Investment in

COLL 5 : Investment and Section 5.7 : Investment powers and

borrowing powers borrowing limits for NURS operating as FAIFs

R5.7.3

R5.7.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/72

collective investment schemes) and ■ COLL 6.2.19R (Limited

redemption).

(3) In order to ensure adequate unitholder protection, the authorised

fund manager is required to implement certain due diligence

procedures in respect of investment in second schemes.

Applicable rules in COLL 5.6

.....................................................................................................

The following rules and guidance in ■ COLL 5.6 (Investment powers and

borrowing limits for non-UCITS retail schemes) apply to the authorised fund

manager and the depositary of a non-UCITS retail scheme operating as a

FAIF and to an ICVC which is a non-UCITS retail scheme operating as a FAIF:

(1) ■ COLL 5.6.3 R;

(2) ■ COLL 5.6.5 R to ■ 5.6.6 R;

(3) ■ COLL 5.6.8 R to ■ 5.6.9 R; and

(4) ■ COLL 5.6.11 R to ■ 5.6.24 R.

Investment powers: general

.....................................................................................................

(1) The scheme property of a non-UCITS retail scheme operating as a FAIF

may, subject to the rules in this section, comprise any assets or

investments to which it is dedicated.

(2) For an ICVC, the scheme property may also include movable or

immovable property that is necessary for the direct pursuit of the

ICVC's business of investing in those assets or investments.

(3) The scheme property must be invested only in accordance with the

relevant provisions in this section that are applicable to that non-

UCITS retail scheme operating as a FAIF and within any upper limit

specified in this section.

(4) The instrument constituting the fund may restrict the investment

powers of a scheme further than the relevant restrictions in this

section.

(5) The scheme property may only, except where otherwise provided in

the rules in this section, consist of any one or more of:

(a) transferable securities;

(b) money market instruments;

■ COLL 5.7.7 R (Investment in collective investment schemes);

(d) derivatives and forward transactions permitted under

■ COLL 5.6.13 R (Permitted transactions (derivatives and forwards));

(e) deposits permitted under ■ COLL 5.2.26 R (Investment in deposits);

COLL 5 : Investment and Section 5.7 : Investment powers and

borrowing powers borrowing limits for NURS operating as FAIFs

R5.7.5

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/73

(f) immovables permitted under ■ COLL 5.6.18 R (Investment in

property) to ■ COLL 5.6.19 R (Investment limits for immovables);

and

(g) gold up to a limit of 10% in value of the scheme property.

Spread: general

.....................................................................................................

(1) This rule does not apply in respect of a transferable security or an

approved money-market instrument to which ■ COLL 5.6.8R (Spread:

government and public securities) applies.

(2) Not more than 20% in value of the scheme property is to consist of

deposits with a single body.

(3) Not more than 10% in value of the scheme property is to consist of

transferable securities or approved money-market instruments issued

by any single body subject to ■ COLL 5.6.23 R (Schemes replicating an

index).

(4) The limit of 10% in (3) is raised to 25% in value of the scheme

property in respect of covered bonds.

(5) In applying (3) certificates representing certain securities are to be

treated as equivalent to the underlying security.

(6) The exposure to any one counterparty in an OTC derivative

transaction must not exceed 10% in value of the scheme.

(7) Except for a feeder scheme which (in respect of investment in units in

collective investment schemes) is dedicated to the units of a master

scheme, not more than 35% in value of the scheme is to consist of

the units of any one scheme.

(8) For the purpose of calculating the limit in (6), the exposure in respect

of an OTC derivative may be reduced to the extent that collateral is

held in respect of it if the collateral meets each of the conditions

specified in (9).

(9) The conditions referred to in (8) are that the collateral:

(a) is marked-to-market on a daily basis and exceeds the value of the

amount at risk;

(b) is exposed only to negligible risks (e.g. government bonds of first

credit rating or cash) and is liquid;

legally secured from the consequences of a failure of a related

party; and

(d) can be fully enforced by the non-UCITS retail scheme operating as

a FAIF at any time.

(10) For the purpose of calculating the limit in (6), OTC derivative

positions with the same counterparty may be netted provided that

the netting procedures:

COLL 5 : Investment and Section 5.7 : Investment powers and

borrowing powers borrowing limits for NURS operating as FAIFs

G5.7.6

R5.7.7

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/74

(a) comply with the conditions set out in Part Three, Title II, Chapter

6, Section 7(Contractual netting (Contracts for novation and other

netting agreements)) of the UK CRR and

(b) are based on legally binding agreements.

(11) In applying this rule, all derivatives transactions are deemed to be

free of counterparty risk if they are performed on an exchange where

the clearing house meets each of the following conditions:

(a) it is backed by an appropriate performance guarantee; and

(b) it is characterised by a daily mark-to-market valuation of the

derivative positions and an at least daily margining.

(12) For the purposes of this rule a single body is:

(a) in relation to transferable securities and money market

instruments, the person by whom they are issued; and

(b) in relation to deposits, the person with whom they are placed.

Guidance on spread: general

.....................................................................................................

(1) ■ COLL 5.7.5R (8) to ■ (11) replicate the provisions of Article 5 of the

Commission Recommendation 2004/383/EC of 27 April 2004 on the

use of financial derivative instruments for undertakings for collective

investment in transferable securities, so as to enable non-UCITS retail

schemes to benefit from the same flexibility.

(2) The attention of authorised fund managers is specifically drawn to

condition (d) in ■ COLL 5.7.5R (9) under which the collateral has to be

legally enforceable at any time. It is the FCA's view that it is advisable

for an authorised fund manager to undertake a legal due diligence

exercise before entering into any financial collateral arrangement.

This is particularly important where the collateral arrangements in

question have a cross-border dimension. The depositary will also need

to exercise reasonable care to review the collateral arrangements in

accordance with its duties under ■ COLL 6.6.4 R (General duties of the

depositary).

(3) In applying the spread limit of 20% in value of scheme property

which may consist of deposits with a single body, all uninvested cash

comprising capital property that the depositary holds should be

included in calculating the total sum of the deposits held by it on

behalf of the scheme.

Investment in collective investment schemes

.....................................................................................................

(1) A non-UCITS retail scheme operating as a FAIF must not invest in units

in a collective investment scheme (second scheme) unless the second

scheme:

(a) is a scheme which satisfies the criteria in ■ COLL 5.6.10R(1)(a) to

■ (d);

(b) meets each of the requirements in (2)(a) to (d); or

fund.

COLL 5 : Investment and Section 5.7 : Investment powers and

borrowing powers borrowing limits for NURS operating as FAIFs

G5.7.7A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/75

(2) A non-UCITS retail scheme operating as a FAIF may invest in a second

scheme under this paragraph if:

(a) the second scheme operates on the principle of the prudent

spread of risk;

(b) the second scheme is prohibited from investing more than 15% in

value of the property of that scheme in units in collective

investment schemes or, if there is no such prohibition, the non-

UCITS retail scheme’s authorised fund manager is satisfied, on

reasonable grounds and after making all reasonable enquiries,

that no such investment will be made;

their units redeemed in accordance with the scheme at a price:

(i) related to the net value of the property to which the units

relate; and

(ii) determined in accordance with the scheme; and

(d) where the second scheme is an umbrella, the provisions in (2)(a)

to (2)(c) above and ■ COLL 5.7.5R (Spread: general) apply to each

sub-fund as if it were a separate scheme.

A non-UCITS retail scheme operating as a FAIF may invest in units in

a second scheme which is a long-term asset fund provided:

(a) the long-term asset fund’s liquidity, redemption policy and

dealing arrangements are sufficient for the non-UCITS retail

scheme to be able to meet its obligations in respect of

redemptions;

(b) if relevant, the authorised fund manager ensures that the non-

UCITS retail scheme’s holdings of units of different long-term

asset funds are diversified enough so that it can meet its

obligations in respect of redemptions; and

value of the scheme property in units of second schemes that are

long-term asset funds, the non-UCITS retail scheme operates

limited redemption arrangements that:

(i) enable it to meet its obligations in respect of redemptions;

and

(ii) are consistent with (a) and (b).

Investment in long-term asset funds: guidance

.....................................................................................................

(1) Under ■ COLL 5.7.7R(3)(c), a non-UCITS retail scheme operating as a

FAIF will need to operate limited redemption arrangements where it

invests more than the 50% of the value of the scheme property in

second schemes that are long-term asset funds. The FCA expects this

to be where:

(a) the investment objective and investment policy set out in the

non-UCITS retail scheme’s prospectus aim to invest at least 50%

of the value of the scheme property in units of long-term asset

funds; or

(b) at least 50% of the value of the scheme property of the non-

UCITS retail scheme has been invested in long-term asset funds

for at least 3 continuous months in the last 12 months.

COLL 5 : Investment and Section 5.7 : Investment powers and

borrowing powers borrowing limits for NURS operating as FAIFs

R5.7.8

R5.7.9

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/76

(2) (a) In order to comply with ■ COLL 5.7.7R(3), the non-UCITS retail

scheme’s authorised fund manager must be satisfied that the

long-term asset fund’s liquidity, redemption policy and dealing

arrangements are sufficient for the non-UCITS retail scheme to be

able to meet its own redemption obligations.

(b) In determining whether (2)(a) is satisfied, the authorised fund

manager should have regard to the liquidity of the other assets

in which the scheme property is invested, particularly where such

assets are inherently illiquid assets. This includes having regard to

the redemption policies and dealing arrangements for other

second schemes in which the non-UCITS retail scheme holds units.

(3) In practice, and having regard to the liquidity of other assets,

compliance with this rule may require the non-UCITS retail scheme to

operate limited redemption arrangements even in circumstances

where less than 50% of the value of the scheme property is invested

in second schemes that are long-term asset funds.

Feeder scheme dedicated to units in a collective investment

scheme

.....................................................................................................

Feeder schemes which (in respect of investment in units in collective

investment schemes) are dedicated to units in a single collective investment

scheme must, in addition to the investment in the master scheme, only hold

cash or near cash to maintain sufficient liquidity to enable the scheme to

meet its commitments, such as redemptions. Feeder schemes may also use

techniques and instruments for the purpose of efficient portfolio

management, where appropriate, such as forward foreign exchange

transactions entered into for the purpose of reducing the effect of

fluctuations in the rate of exchange between relevant currencies.

Due diligence requirements

.....................................................................................................

(1) A non-UCITS retail scheme operating as a FAIF must not invest in units

in schemes in ■ COLL 5.7.7R(2)(a) to ■ (2)(c) (‘second schemes’) unless the

authorised fund manager has carried out appropriate due diligence

on each of the second schemes and:

(a) is satisfied, on reasonable grounds and after making all

reasonable enquiries, that each of the second schemes complies

with relevant legal and regulatory requirements;

(b) has taken reasonable care to determine that:

(i) the property of each of the second schemes is held in

safekeeping by a third party, which is subject to prudential

regulation and independent of the investment manager of

the second scheme;

(ii) the calculation of the net asset value of each of the second

schemes and the maintenance of their accounting records is

segregated from the investment management function; and

(iii) each of the second schemes is regularly audited by an

independent auditor in accordance with international

standards on auditing.

(2) The authorised fund manager of a non-UCITS retail scheme operating

as a FAIF invested in one or more second schemes must carry out

COLL 5 : Investment and Section 5.7 : Investment powers and

borrowing powers borrowing limits for NURS operating as FAIFs

R5.7.10

G5.7.11

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/77

appropriate due diligence as detailed in (1) on those schemes on an

ongoing basis.

The authorised fund manager of a non-UCITS retail scheme operating as a

FAIF which is a feeder scheme must ensure that:

(1) its master scheme; and

(2) where its master scheme is itself a feeder scheme, any scheme into

which that master scheme invests;

operates on a basis that is consistent with the rules in this section

notwithstanding any due diligence previously carried out which suggested

that those schemes would so operate.

An authorised fund manager carrying out due diligence for the purpose of

the rules in this section should make enquiries or otherwise obtain

information needed to enable him properly to consider:

(1) whether the experience, expertise, qualifications and professional

standing of the second scheme's investment manager is adequate for

the type and complexity of the second scheme;

(2) the adequacy of the regulatory, legal and accounting regimes

applicable to the second scheme and its investment manager;

(3) whether the second scheme, its investment manager and

administrator have complied with their legal and regulatory

obligations, including but not limited to an evaluation of the

investment manager’s written policies with respect to such

compliance;

(4) the extent to which the second scheme's investment manager adheres

to guidance and codes which amount to good practice in the

industry;

(5) the adequacy of the second scheme's systems, controls, governance,

accounting, administration, business continuity, disaster recovery,

safekeeping, custody and trading and execution arrangements;

(6) the extent to which the property of the second scheme may be

rehypothecated and the potential impact of such rehypothecation on

the non-UCITS retail scheme operating as a FAIF;

(7) the adequacy of the second scheme's risk management process, in

particular:

(a) the methodology by which risk is measured and its practical

adequacy in the light of the limitations inherent in risk measures

(such as value at risk), including where appropriate, reference to

market risk, credit risk (including counterparty credit risk),

liquidity risk, operational risk and outsourcing risk;

(b) the extent to which the second scheme's investment manager

carries out stress testing and backtesting, to determine how

potential changes in market conditions could impact on the value

of the second scheme's portfolio;

COLL 5 : Investment and Section 5.7 : Investment powers and

borrowing powers borrowing limits for NURS operating as FAIFs

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/78

scheme's governance structure;

(d) the manner in which risks arising from services provided by third

parties are managed, including where those third parties provide

prime brokerage, administration, auditing, valuation, risk

monitoring, business continuity and disaster recovery services; and

(e) the management of key person risk;

(8) the adequacy of the second scheme's investment strategy and trading

philosophy;

(9) the implications of currency convertibility (if any);

(10) whether the second scheme produces a valuation that is sufficiently

accurate for the authorised fund manager to be reasonably satisfied

that the price of the FAIF's units can be calculated in accordance with

■ COLL 6.3 (Valuation and pricing), including but not limited to an

assessment of:

(a) the roles and responsibilities of each of the parties involved in

the second scheme's valuation process and the extent to which

these are defined;

(b) the extent to which the valuation process is segregated or is

functionally separate from the second scheme's investment

manager where the second scheme is not subject to completely

independent valuation by a third party;

part of its property including those assets which are difficult to

value or which are not subject to independent market pricing;

(d) the extent to which the investment manager of the second

scheme does not rely on prices from external sources, and its

written policies relating to this;

(e) the manner in which the investment manager of the second

scheme selects and monitors the adequacy of its pricing sources;

(f) the extent to which the investment manager of the second

scheme operates a valuation policy that is consistent and fair to

both subscribing and redeeming investors from the second

scheme;

(11) the level of liquidity, redemption policy and dealing arrangements

offered by the second scheme and whether they are sufficient for the

investing scheme to be able to meet its obligations in respect of

redemptions; wherever appropriate the authorised fund manager

may need to consider how many second schemes the investing

scheme should invest in to ensure that that scheme can meet its

redemption obligations; and

(12) any relevant conflicts of interest that may arise out of the

relationships of the second scheme's investment manager with other

relevant parties and in particular detract from the integrity of the

second scheme's decision-making process, including:

(a) relationships with brokers or service providers;

(b) conflicts that may be generated by fee structures;

COLL 5 : Investment and Section 5.7 : Investment powers and

borrowing powers borrowing limits for NURS operating as FAIFs

R5.7.12

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/79

(d) conflicts that may arise from the second scheme's investment

manager managing that scheme alongside other business; and

(e) the conflicts of interest that may arise (if any) between the

second scheme's investment manager and any person instructed

to carry out due diligence on the authorised fund manager's

behalf.

Non-UCITS retail schemes that are umbrellas with FAIF sub-

funds

.....................................................................................................

In relation to a non-UCITS retail scheme which is an umbrella comprised of

sub-funds which are:

(1) FAIFs; or

(2) a mixture of FAIFs and standard non-UCITS retail schemes;

the provisions in this section apply to each sub-fund operating as a FAIF as

they would to a separate scheme.

COLL 5 : Investment and Section 5.8 : Investment powers and

borrowing powers borrowing limits for feeder UCITS

R5.8.1

R5.8.2

R5.8.2A

R5.8.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/80

5.8 Investment powers and borrowing

limits for feeder UCITS

Application

.....................................................................................................

(1) This section applies to:

(a) the authorised fund manager of a feeder UCITS;

(b) the depositary of a feeder UCITS; and

where the scheme is a UCITS scheme.

(2) Where this section refers to a rule or guidance in ■ COLL 5.1 to

■ COLL 5.5 , those rules and guidance, and any rules and guidance to

which they refer, must be read as if a reference to a UCITS scheme

were a reference to a feeder UCITS.

(3) Where the sub-fund of a UCITS scheme is a feeder UCITS, the

provisions in this section apply to each sub-fund as they would for an

authorised fund.

Permitted types of scheme property

.....................................................................................................

A feeder UCITS must invest at least 85% in value of the scheme property in

units of a single master UCITS.

[Note: article 58(1) of the UCITS Directive]

The authorised fund manager of a pension feeder fund that is a feeder

UCITS must ensure that the single master UCITS is:

(1) a UCITS scheme; or

(2) an EEA UCITS scheme that is a recognised scheme.

Balance of scheme property: investment restrictions on a

feeder UCITS

.....................................................................................................

A feeder UCITS may hold up to 15% in value of the scheme property in one

or more of the following:

(1) cash or near cash in accordance with ■ COLL 5.5.3 R (Cash and near

cash);

COLL 5 : Investment and Section 5.8 : Investment powers and

borrowing powers borrowing limits for feeder UCITS

R5.8.4

R5.8.5

R5.8.6

R5.8.7

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 5/81

(2) derivatives and forward transactions which may be used only for the

purposes of hedging and in accordance with the rules set out at

■ COLL 5.8.7 R (Other provisions applicable to a feeder UCITS); and

(3) (for an ICVC) movable and immovable property which is essential for

the direct pursuit of the business.

[Note: article 58(2) first subparagraph of the UCITS Directive]

Exposure to derivatives

.....................................................................................................

In calculating the global exposure of a feeder UCITS to derivatives and

forward transactions in accordance with ■ COLL 5.3.3A R (Cover for investment

in derivatives and forward transactions), the feeder UCITS must combine its

own direct exposure under ■ COLL 5.8.3R (2) with either:

(1) the master UCITS' actual exposure to derivatives and forward

transactions in proportion to the feeder UCITS' investment into the

master UCITS; or

(2) the master UCITS' potential maximum global exposure to derivatives

and forward transactions provided for in the master UCITS'

instrument constituting the fund or its prospectus in proportion to

the feeder UCITS investment into the master UCITS.

[Note: article 58(2) second subparagraph of the UCITS Directive]

Prudent spread of risk

.....................................................................................................

An authorised fund manager must ensure that, to the extent that the feeder

UCITS invests in assets other than units of a master UCITS, the feeder UCITS

complies with ■ COLL 5.2.3 R (1) (Prudent spread of risk).

Investment powers: general

.....................................................................................................

The scheme property of a feeder UCITS must be invested only in accordance

with the relevant provisions in this section and up to any maximum limit so

stated, but the instrument constituting the fund may restrict the investment

and borrowing powers of a scheme further than the relevant restrictions in

this section.

Other provisions applicable to a feeder UCITS

.....................................................................................................

The following rules and guidance in ■ COLL 5.1 (Introduction), ■ COLL 5.2

(General investment powers and limits for UCITS schemes) and

■ COLL 5.5 (Cash, borrowing, lending and other provisions) apply to the

authorised fund manager of a UCITS scheme which is a feeder UCITS and to

an ICVC which is a feeder UCITS:

(1) ■ COLL 5.1.1 R (Application), ■ COLL 5.1.2G (1) (Purpose) and

■ COLL 5.1.3 R (Treatment of obligations);

(2) ■ COLL 5.2.1 R (Application), ■ COLL 5.2.2 R (Table of application) and

■ COLL 5.2.2A G;

(3) ■ COLL 5.2.5 R (Valuation) and ■ COLL 5.2.6 G (Valuation guidance);

COLL 5 : Investment and Section 5.8 : Investment powers and

borrowing powers borrowing limits for feeder UCITS

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 5/82

(4) ■ COLL 5.2.10 R (Eligible markets: requirements);

(5) ■ COLL 5.2.11R (7) (Spread: general);

(6) ■ COLL 5.2.11B R (Counterparty risk and issuer concentration);

(7) ■ COLL 5.2.15R (1) (Investment in associated collective investment

schemes);

(8) ■ COLL 5.2.19 R (1), ■ COLL 5.2.19 R (2) and ■ COLL 5.2.19R (4) (Derivatives:

general);

(9) ■ COLL 5.2.20 R (Permitted transactions (derivatives and forwards));

(10) ■ COLL 5.2.20A R (Financial indices underlying derivatives),

■ COLL 5.2.20BG (1) and ■ COLL 5.2.20BG (4) (Guidance on financial

indices underlying derivatives);

(11) ■ COLL 5.2.21 R (Transactions for the purchase of property);

(12) ■ COLL 5.2.22 R (Requirement to cover sales) and ■ COLL 5.2.22A G

(Guidance on requirement to cover sales);

(13) ■ COLL 5.2.23 R (OTC Transactions in derivatives), ■ COLL 5.2.23A R and

■ COLL 5.2.23B R);

(14) ■ COLL 5.2.23C R (Valuation of OTC derivatives);

(15) ■ COLL 5.2.26 R (Investment in deposits);

(16) ■ COLL 5.5.1 R to ■ COLL 5.5.7A G (Cash, borrowing, lending and other

provisions); and

(17) ■ COLL 5.5.9 R (Guarantees and indemnities) and ■ COLL 5.5.10 G

(Guidance on restricting payments).

Collective Investment Schemes

Chapter 6

Operating duties and

responsibilities

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/1

COLL 6 : Operating duties and Section 6.1

responsibilities

R6.1.1

G6.1.2

G6.1.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/2

6.1 Introduction and Application

Application

.....................................................................................................

This chapter applies to:

(1) an authorised fund manager of an AUT, ACS or an ICVC;

(2) any other director of an ICVC;

(3) a depositary of an AUT, ACS or an ICVC; and

(4) an ICVC,

where such AUT, ACS or ICVC is a UCITS scheme or a non-UCITS retail scheme.

Purpose

.....................................................................................................

This chapter helps in achieving the statutory objective of protecting

consumers. It provides the operating framework within which the authorised

fund must be operated on a day-to-day basis to ensure that clients are

treated fairly when they become, remain or as they cease to be unitholders.

Explanation of this chapter

.....................................................................................................

(1) The authorised fund manager operates the scheme on a day-to-day

basis. Its operation is determined by the rules in this chapter, which

require appropriate powers in the instrument constituting the fund or

refer to the need to state the relevant operating procedures in the

prospectus of the scheme.

(2) (a) The authorised fund manager does not necessarily have to carry

out all the activities it is responsible for and may delegate

functions to other persons.

(b) The rules in this chapter set out the parameters of such

delegation, except in relation to a non-UCITS retail scheme

managed by a full-scope UK AIFM, where this chapter

supplements ■ FUND 3.10 (Delegation).

(3) The depositary's duty is, generally speaking, to ensure the safe

custody of scheme property and to oversee certain functions of the

authorised fund manager (most notably the pricing and dealing

function and investment powers). The oversight responsibilities for a

trustee of an AUT are similar to, but not the same as, the oversight

responsibilities of the depositary of an ICVC or ACS. These differences

result from the different legal structure of the authorised funds and

the trustee's obligations under trust law.

COLL 6 : Operating duties and Section 6.2

responsibilities

R6.2.1

G6.2.2

R6.2.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/3

6.2 Dealing

Application

.....................................................................................................

() This section applies to an authorised fund manager, a depositary, an

ICVC and any other director of an ICVC.

Purpose

.....................................................................................................

(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 ICVC is responsible

for arranging for the issue and the cancellation of units for the

authorised fund. An authorised fund manager of an AUT, ICVC or co-

ownership scheme is permitted to sell and redeem units for its own

account. An authorised fund manager of a limited partnership

scheme is only permitted to sell and redeem units as agent for the

scheme. The rules in this section are intended to ensure that the

authorised fund manager treats the authorised fund fairly when

arranging for the issue or cancellation of units, and treats clients

fairly when they purchase or sell units.

(3) This section also sets out common standards for how the amounts in

relation to unit transactions are to be paid. These arrangements

include the initial offer of units, the exchange of units for scheme

property and issues and cancellations of units by an ICVC, or by the

depositary of an AUT or ACS, carried out directly with the unitholder.

(4) This section also sets out rules and guidance relating to the

authorised fund manager's controls over the issue and cancellation of

units including any box holdings.

(5) The requirements in this section are to be applied separately to each

sub-fund of a scheme which is an umbrella, and, if appropriate, the

currency of a sub-fund may be used instead of the base currency of

the umbrella.

Initial offers

.....................................................................................................

(1) During the initial offer period, units may only be issued at the initial

price.

COLL 6 : Operating duties and Section 6.2

responsibilities

G6.2.4

R6.2.5

R6.2.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/4

(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 respect of any unit it has agreed to sell during the

period of the initial offer:

(a) in the case of a single-priced authorised fund, the initial price of

that unit; or

(b) in the case of a dual-priced authorised fund, the initial price of

that unit less, where relevant, an amount not exceeding the

amount of any preliminary charge stated in the prospectus.

(4) The period of the initial offer comes to an end if the authorised fund

manager reasonably believes the price that would reflect the current

value of the scheme property would vary by more than 2% from the

initial price.

Initial offer: guidance

.....................................................................................................

(1) Details of any initial offer period must be provided in the relevant

prospectus as described in ■ COLL 4.2.5R (17)(h) (Table: contents of the

prospectus).

(2) It may be appropriate that the initial offer for a scheme operating

limited issue or limited redemption arrangements, or intending to

invest in illiquid assets, is longer than one for a scheme which does

not have these features.

Issue and cancellation of units by an ICVC

.....................................................................................................

(1) Units in an ICVC are issued or cancelled by the ACD making a record

of the issue or cancellation and of the number of the units of each

class concerned, and cannot be issued or cancelled in any other

manner, unless ■ COLL 3.2.6R (11) (Table: contents of the instrument

constituting the fund) applies.

(2) The time of the issue or cancellation under (1) is the time when the

record is made.

Issue and cancellation of units in an AUT or ACS

.....................................................................................................

(1) The depositary must issue or cancel units in an AUT or ACS when

instructed by the authorised fund manager.

(2) Any instructions given by the authorised fund managermust state, for

each class of unit to be issued or cancelled, the number to be issued

or cancelled, expressed either as a number of units or as an amount

in value (or as a combination of the two).

(3) If the depositary is of the opinion that it is not in the interests of

unitholders that any units should be issued or cancelled or that to do

so would not be in accordance with the trust deed, contractual

scheme deed or prospectus, it must notify the authorised fund

COLL 6 : Operating duties and Section 6.2

responsibilities

R6.2.6A

R6.2.7

R6.2.8

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/5

manager of that fact and it is then relieved of the obligation to issue

or cancel those units.

Issue and cancellation of units in multiple classes

.....................................................................................................

If 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 scheme property; or

(b) differ only as to whether income is distributed or accumulated by

periodic credit to capital, provided the price of the units in each

class is calculated by reference to undivided shares in the scheme

property.

Issue and cancellation of units through an authorised fund

manager

.....................................................................................................

(1) The authorised fund manager may require, on agreement with the

depositary, or may permit, on the request of the investor, direct issues

and cancellations of units by an ICVC or by the depositary of an AUT

or ACS.

(2) If (1) applies:

(a) the instrument constituting the fund must provide for this; and

(b) the prospectus must provide details of the procedure to be

followed which must be consistent with the rules in this section.

Controls over the issue and cancellation of units

.....................................................................................................

(1) An authorised fund manager must ensure that at each valuation

point there are at least as many units in issue of any class as there are

units registered to unitholders for that class.

(2) An authorised fund manager must not:

(a) for an AUT or ACS, when giving instructions to the depositary for

the issue or cancellation of units; or

(b) for an ICVC, when arranging for the issue or cancellation of units;

do, or omit to do, anything that would, or might, confer on itself or

an associate a benefit or advantage at the expense of a unitholder or

a potential unitholder.

(3) For the purpose of (1), the authorised fund manager may take into

account instructions to redeem units at the following valuation point

received before any time agreed with the depositary for such

purpose.

COLL 6 : Operating duties and Section 6.2

responsibilities

G6.2.9

R6.2.10

R6.2.11

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/6

Controls over the issue and cancellation of units - guidance

.....................................................................................................

(1) As the authorised fund manager normally controls the issue,

cancellation, sale and redemption of an authorised fund's units, 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 of interest between itself and a customer fairly.

(3) To manage the conflict of interest that arises, when an authorised

fund manager gives an instruction to issue or cancel units, the price

of the units should be calculated at the valuation pointbefore or after

the instruction has been given, in accordance with (4).

(4) An authorised fund manager should agree a period of time with the

depositary during which it will give instructions to issue or cancel

units. Where the authorised fund manager operates a box with the

principal aim of making a profit, this period will be short (for

example, two hours); otherwise a longer period (for example, up to

the next valuation point but in all cases within 24 hours) may be

acceptable, provided the principles in (2) are followed.

(5) The last valuation point should be used for the pricing of units where

instructions are given before the expiry of the period of time agreed

in (4); otherwise the next valuation point should be used.

(6) Where an in specie issue or cancellation occurs it should be

undertaken using the next valuation point's price.

Modification to number of units issued or cancelled

.....................................................................................................

(1) Any instruction for the issue or cancellation of units under

■ COLL 6.2.5 R (Issue and cancellation of units by an ICVC) or

■ COLL 6.2.6 R (Issue and cancellation of units in an AUT or ACS) may

be modified but only if the depositary agrees and has taken

reasonable care to determine that:

(a) the modification corrects an error in the instruction; and

(b) the error is an isolated one.

(2) Any error in (1) must be corrected within the payment period

applicable under ■ COLL 6.2.13 R (Payment for units issued) or

■ COLL 6.2.14 R (Payment for cancelled units).

Compensation for box management errors

.....................................................................................................

(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:

COLL 6 : Operating duties and Section 6.2

responsibilities

G6.2.12

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/7

(a) the amount under (1) is not, in the depositary's opinion, material

to the authorised fund;

(b) the authorised fund manager can demonstrate that it has

effective controls in place over box management, including all of

the areas that affect the figures which are included in the box

management calculations; and

units issued or cancelled) are complied with.

Box management errors guidance

.....................................................................................................

Explanatory table: This table belongs to ■ COLL 6.2.2 G (4) (Purpose).

Correction of box management errors

1 Controls by authorised fund managers

An authorised fund manager needs to be able to demonstrate that it

has effective controls over:

(1) its calculations of what units are owned by it (its 'box'); and

(2) compliance with COLL 6.2.8 R which is intended to prevent a

negative box.

2 Controls by depositaries

(1) Under COLL 6.6.4 (General duties of the depositary), a deposit-

ary should take reasonable care to ensure that a scheme is

managed in accordance with COLL 6.2 (Dealing) and COLL 6.3

(Pricing and valuation).

(2) A depositary should therefore make a regular assessment of

the authorised fund manager's box management procedures

(including supporting systems) and controls. This should in-

clude reviewing the authorised fund manager's controls and

procedures when the depositary assumes office, on any signi-

ficant change and on a regular basis, to ensure that a series

of otherwise minor changes do not have a cumulative and a

significant effect on the accuracy of the controls and

procedures.

3 Recording and reporting of box management errors

(1) An authorised fund manager should record all errors which

result in a breach of COLL 6.2.8 R (Controls over the issue and

cancellation of units) and as soon as an error is discovered,

the authorised fund manager should report the fact to the

depositary, together with details of the action taken, or to

be taken, to avoid repetition of the error.

(2) A depositary should report material box management errors

to the FCA immediately. Materiality should be determined by

taking into account a number of factors including:

(a) the implications of the error for the sufficiency of con-

trols put into place by the authorised fund manager;

(b) the significance of any breakdown in the authorised

fund manager's management controls or other checking

procedures;

rangements;

(d) the duration of an error; and

(e) the level of compensation due to the scheme, and an

authorised fund manager's ability (or otherwise) to meet

claims for compensation in full.

COLL 6 : Operating duties and Section 6.2

responsibilities

R6.2.13

R6.2.14

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/8

(3) A depositary should also make a return to the FCA (in the

manner prescribed by SUP 16.6.8 R) on a quarterly basis.

Payment for units issued

.....................................................................................................

(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 ACS or the ICVC of:

(a) in the case of a single-priced authorised fund, the price of the

units and any payments required under ■ COLL 6.3.8 R (Dilution);

(b) in the case of a dual-priced authorised fund, the issue price of the

units; or

pursuant to article 33 of the Money Market Funds Regulation.

(2) The authorised fund manager must make the payment referred to in

(1) in cash or cleared funds unless ■ COLL 6.2.15 R (In specie issue and

cancellation) applies.

(3) Where the authorised fund manager has not complied with (1), it

must reimburse the authorised fund for any lost interest unless the

amount involved is not, in the depositary's opinion, material to the

authorised fund.

Payment for cancelled units

.....................................................................................................

(1) On cancelling units 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 ACS or the ICVC of such evidence of title to the units as

it may reasonably require, require the depositary to pay:

(a) in the case of a single-priced authorised fund, the price of the

units (less any deduction required under ■ COLL 6.3.8 R);

(b) in the case of a dual-priced authorised fund, the cancellation

price of the units; or

pursuant to article 33 of the Money Market Funds Regulation,

in accordance with (1A).

(1A) The depositary must pay the amount in (1):

(a) to the authorised fund manager;

(b) where relevant, to the unitholder;

provisions of the trust deed or contractual scheme deed; or

(d) where the amount relates to an eligible CIS amount that is a

dormant asset arising from the conversion of units (see section

9(3)(a) of the Dormant Assets Act 2022), either:

(i) to the authorised fund manager (for onward payment to a

dormant asset fund operator); or

(ii) where relevant, to the dormant asset fund operator.

COLL 6 : Operating duties and Section 6.2

responsibilities

R6.2.15

R6.2.16

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/9

(2) If the authorised fund manager has not ensured that the scheme

property includes or will include sufficient cash in the appropriate

currency (or a sufficient facility to borrow without infringing any

restriction in ■ COLL 5 (Investment and borrowing powers)) within the

period in (1), that period is extended, for any relevant currency, until

the shortage is rectified.

(3) If (2) applies, the authorised fund manager must take reasonable

steps to rectify the currency shortage as quickly as possible.

(4) This rule does not apply where ■ COLL 6.2.15 R is in operation.

(5) Nothing in this section requires an ICVC, a depositary or an

authorised fund manager to part with money or to transfer scheme

property for a cancellation or redemption of units where any money

due on the earlier issue or sale of those units has not been received.

In specie issue and cancellation

.....................................................................................................

The depositary may take into or pay out of scheme property assets other

than cash as payment for the issue or cancellation of units but only if:

(1) it has taken reasonable care to ensure that the property concerned

would not be likely to result in any material prejudice to the interests

of unitholders; and

(2) the instrument constituting the fund so provides.

Sale and redemption

.....................................................................................................

(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

fund and the prospectus unless:

(a) it has reasonable grounds to refuse such sale; or

(b) the issue of units is prevented under ■ COLL 6.2.18 R (Limited

issue).

(3) Subject to ■ COLL 6.2.19 R (Limited redemption) and ■ COLL 6.2.21 R

(Deferred redemption), the authorised fund manager must, at all

times during the dealing day, on request of any qualifying unitholder,

effect the redemption of units in accordance with the conditions in

the instrument constituting the fund and the prospectus unless it has

reasonable grounds to refuse such redemption.

(4) On agreeing to a redemption of units in (3), the authorised fund

manager must pay the unitholder the appropriate proceeds of

redemption within the period specified in (5) unless the authorised

fund manager has reasonable grounds for withholding all or any part

of the proceeds.

COLL 6 : Operating duties and Section 6.2

responsibilities

G6.2.17

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/10

(5) Except where (5A) applies the period in (4) expires at the close of

business on the fourth business day following the later of:

(a) the valuation point at which the price for the redemption was

determined; or

(b) the time when the authorised fund manager has all the duly

executed instruments and authorisations to effect (or enable the

authorised fund manager to effect) the transfer of title to the

units.

(5A) Where a non-UCITS retail scheme operating as a FAIF operates limited

redemption arrangements, the period in (4) expires no later than the

expiry of a period of 185 days from the date of receipt and

acceptance of the instruction to redeem.

(6) Except where (7) applies, and subject to ■ COLL 6.2.21 R (Deferred

redemption), the authorised fund manager must sell or redeem units

at a price determined no later than the end of the business day

immediately following the receipt and acceptance of an instruction to

do so, or at the next valuation point for the purposes of dealing in

units if later.

(7) Where the authorised fund operates limited redemption

arrangements, the authorised fund manager must sell or redeem

units at a price determined no later than the expiry of a period of

185 days from the date of the receipt and acceptance of the

instruction to sell or redeem.

(8) [deleted]

(9) [deleted]

(10) Paragraphs (4), (5) and ■ COLL 6.3.5AR (2) (Sale and redemption prices

for single-priced authorised funds) do not apply where the authorised

fund manager of an AUT or ICVC is buying units as principal on an

investment exchange (for an AUT in accordance with a power in the

trust deed) and settlement will be made in accordance with the rules

of that exchange.

(11) Paragraph (4) does not apply where ■ COLL 6.2.17AR (Transfers under

the Dormant Assets Act 2022) applies.

Sale and redemption: guidance

.....................................................................................................

(1) The prospectus of an authorised fund 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

redeem units 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 should

not be before any previous valuation point.

(2) Where the authorised fund operates limited redemption

arrangements, the cut-off point may reflect the expected length of

time required to undertake transactions in the underlying

COLL 6 : Operating duties and Section 6.2

responsibilities

R6.2.17A

R6.2.17B

G6.2.17C

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/11

investments provided the 185 day limit in ■ COLL 6.2.16 R (7) (Sale and

redemption) is complied with.

(3) Where (1) applies, different cut-off points may be used to

differentiate between the methods of submitting instructions to sell

or redeem to the authorised fund manager but not to differentiate

between unitholders or potential unitholders.

(4) [deleted]

Transfers under the Dormant Assets Act 2022

.....................................................................................................

(1) This rule applies where the authorised fund manager or the

depositary of an authorised fund transfers to a dormant asset fund

operator a dormant asset that is:

(a) an amount owing by virtue of the conversion of one or more

units into a right to payment (see section 9(3)(a) of the Dormant

Assets Act 2022); or

(b) eligible redemption proceeds.

(2) Before a transfer in (1) can be effected, the authorised fund manager

must:

(a) take reasonable steps to reunite the relevant eligible CIS amounts

to be transferred with their owners (see section 23 of the

Dormant Assets Act 2022); and

(b) be satisfied that the eligible CIS amount is a dormant asset.

(3) Upon effecting a transfer in (1), the authorised fund manager (or,

where relevant, the depositary) must ensure that such records as are

specified in ■ COLL 6.6.6R(6) (Maintenance of records) are retained.

Conversion of units into a right to payment under the Dormant

Assets Act 2022

.....................................................................................................

(1) This rule applies where the authorised fund manager or the

depositary converts one or more units into a right to payment for

transfer to a dormant asset fund operator in accordance with

■ COLL 6.2.17AR and sections 8 to 10 of the Dormant Assets Act 2022

(2) On conversion of units into a right to payment the authorised fund

manager or the depositary must:

(a) effect a redemption of units; and

(b) transfer the eligible CIS amount to a dormant asset fund

operator.

(1) Section 10 of the Dormant Assets Act 2022 specifies when an eligible

CIS amount is dormant and may be transferred to a dormant asset

fund operator in accordance with the applicable provisions of the

dormant assets scheme established by that Act.

COLL 6 : Operating duties and Section 6.2

responsibilities

R6.2.18

R6.2.19

G6.2.20

R6.2.21

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/12

(2) An eligible CIS amount that is a dormant asset should be transferred

to a dormant asset fund operator only as provided for in the

instrument constituting the fund and the prospectus.

(3) When taking reasonable steps to reunite owners with their eligible

CIS amounts under ■ COLL 6.2.17AR(2)(a), the authorised fund manager

should comply with any arrangements it has entered into with the

dormant asset fund operator (see section 23 of the Dormant Assets

Act 2021) and have regard to industry standards of good practice.

Limited issue

.....................................................................................................

(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 issue, itis satisfied

on reasonable grounds that the proceeds of that subsequent issue can

be invested without compromising the scheme's investment objective

or materially prejudicing existing unitholders.

(3) Within a scheme, unit classes may operate different arrangements for

the issue of units provided there is no prejudice to the interests of

any unitholder.

Limited redemption

.....................................................................................................

(1) The instrument constituting the fund and the prospectus of a non-

UCITS retail scheme operating as a FAIF, or that invests substantially in

immovables or whose investment objective is to provide a specified

level of return, may provide for limited redemption arrangements

appropriate to its aims and objectives.

(2) Where (1) applies, the scheme must provide for sales and redemptions

at least once in every six months.

(3) Within a scheme, unit classes may operate different arrangements for

sales and redemptions of units provided there is no prejudice to the

interests of any unitholder.

(4) The scheme may provide for sales of units of any class to be executed

at a greater frequency than redemptions of units of the same class.

Limited redemption: guidance

.....................................................................................................

The conditions for limited redemption arrangements in ■ COLL 6.2.19 R should

be considered, for AUTs and ACSs as well as for ICVCs, in conjunction with

PERG 9 (Meaning of an open-ended investment company) and PERG 9.8 (The

investment condition: the 'expectation test' (section 236(3)(a) of the Act)).

Deferred redemption

.....................................................................................................

(1) Subject to (1A), (3), and (4), the instrument constituting the fund 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

COLL 6 : Operating duties and Section 6.2

responsibilities

G6.2.22

R6.2.23

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/13

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.

(1A) Subject to (3) the instrument constituting the fund and the

prospectus of a non-UCITS retail scheme operating as a FAIF may

permit deferral of redemptions at a valuation point to a following

valuation point where the requested redemptions exceed 10%, or

some other reasonable proportion disclosed in the prospectus, of the

authorised fund's value.

(2) Any deferral of redemptions under (1) or (1A) must be undertaken in

accordance with the procedures explained in the prospectus which

must ensure:

(a) the consistent treatment of all unitholders who have sought to

redeem units at any valuation point at which redemptionsare

deferred; and

(b) that all deals relating to an earlier valuation point are completed

before those relating to a later valuation point are considered.

(3) Any deferral under (1A) is subject to the limitations on payments to

unitholders in ■ COLL 6.2.16 R (5A).

(4) Any deferral under (1) in relation to an authorised fund that is a

regulated money market fund must be consistent with the Money

Market Funds Regulation, where relevant.

Deferred redemption: guidance

.....................................................................................................

(1) In times of high levels of redemption, deferred redemption will

enable the authorised fund manager to protect the interests of

continuing unitholders by allowing it to match the sale of scheme

property to the level of redemptions. This should reduce the impact

of dilution on the scheme.

(2) Article 34 of the Money Market Funds Regulation provides for

deferred redemption in relation to certain kinds of regulated money

market funds in particular circumstances.

Property Authorised Investment Funds

.....................................................................................................

(1) The 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").

(1A) For the purposes of (1), a body corporate shall not be treated as

holding more than the maximum allowable to the extent that:

(a) the body corporate holds units in a unit trust scheme which holds

shares in the property authorised investment fund; and

(b) in their capacity as trustees of the unit trust scheme, the trustees

are chargeable in the United Kingdom either to income tax or to

corporation tax.

COLL 6 : Operating duties and Section 6.2

responsibilities

G6.2.24

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/14

(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; and

maximum allowable within a reasonable time-frame.

(3) For the purpose of (2)(c), a reasonable time-frame means the time-

frame which the authorised fund manager reasonably considers to be

appropriate having regard to the interests of the unitholders as a

whole.

Reasonable 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.

COLL 6 : Operating duties and Section 6.3

responsibilities

R6.3.1

G6.3.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/15

6.3 Valuation and pricing

Application

.....................................................................................................

(1) Subject to (3) and (4), this section applies to an authorised fund

manager, a depositary, an ICVC and any other director of an ICVC.

(2) [deleted]

(3) The following rules and guidance do not apply to an authorised fund

manager, a depositary, an ICVC, or any other director of an ICVC

where the authorised fund is a regulated money market fund:

(a) ■ COLL 6.3.3R;

(b) ■ COLL 6.3.3DR;

(d) ■ COLL 6.3.5R; and

(e) ■ COLL 6.3.5AR to ■ COLL 6.3.5CG.

(4) Where an authorised fund is a regulated money market fund,

■ COLL 6.3.6G applies to the authorised fund manager and depositary

of that authorised fund to the extent it is consistent with the

requirements of the Money Market Funds Regulation.

Purpose

.....................................................................................................

(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 guidance to ensure the prices of units in

both a single-priced authorised fund and a dual-priced authorised

fund are calculated fairly and regularly;

(b) allowing the authorised fund manager to mitigate the effects of

any dilution (reduction) in the value of the scheme property

caused by buying and selling underlying investments as a result

of the issue or cancellation of units; and

(d) ensuring that prices are made public in an appropriate manner.

COLL 6 : Operating duties and Section 6.3

responsibilities

R6.3.3

R6.3.3A

R6.3.3B

G6.3.3C

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/16

(3) The requirements in this section are to be applied separately to each

sub-fund of a scheme which is an umbrella, and, if appropriate, the

currency of a sub-fund may be used instead of the base currency of

the umbrella. Consequently different methods of pricing units may be

applied by an authorised fund manager to different sub-funds of an

umbrella.

(4) The authorised fund manager must follow the same method of

pricing for each class of units in an authorised fund, or in a sub-fund

of an umbrella.

(5) A full-scope UK AIFM that is the authorised fund manager of a non-

UCITS retail scheme should comply with the requirements of:

(a) ■ FUND 3.9 (Valuation); and

(b) this chapter.

Valuation

.....................................................................................................

(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 fund and the

prospectus.

(2) For 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.

Accounting procedures

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must ensure the

employment of the accounting policies and procedures referred to in

■ SYSC 4.1.9 R (Accounting policies), so as to ensure the protection of

unitholders.

(2) Accounting for the scheme shall be carried out in such a way that all

assets and liabilities of the scheme can be directly identified at all

times.

(3) If the scheme is an umbrella, separate accounts must be maintained

for each sub-fund.

[Note: article 8(1) of the UCITS implementing Directive]

An authorised fund manager of a UCITS scheme must have accounting

policies and procedures established, implemented and maintained, in

accordance with the accounting rules of the United Kingdom, so as to ensure

that the calculation of the net asset value of each scheme it manages is

accurately effected, on the basis of the accounting, and that subscription and

redemption orders can be properly executed at that net asset value.

[Note: article 8(2) of the UCITS implementing Directive]

(1) The accounting policies and procedures referred to in ■ COLL 6.3.3B R

should enable the authorised fund manager of a UCITS scheme to

COLL 6 : Operating duties and Section 6.3

responsibilities

R6.3.3D

R6.3.3E

R6.3.4

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/17

value the scheme property accurately at each valuation point and to

calculate dealing prices by reference to that valuation.

(2) Where different share or unit classes exist, it should be possible to

extract from the accounting records the net asset value of each

different class.

[Note: recital (9) of the UCITS implementing Directive]

An authorised fund manager of a UCITS scheme must establish appropriate

procedures to ensure the proper and accurate valuation of the assets and

liabilities of each scheme it manages.

[Note: article 8(3) of the UCITS implementing Directive]

Valuation of an immovable

.....................................................................................................

An authorised fund manager may only agree a fair and reasonable price for

an immovable to reflect a rapid sale if the prospectus states that it may do

so, in accordance with ■ COLL 4.2.5R(3)(pa)(ii).

Valuation points

.....................................................................................................

(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 apply and the valuation points must be stated in the prospectus

but must not be set more than six months apart.

(4) Where a scheme operates limited redemption arrangements, it must

be valued and prices published in the manner set out in

■ COLL 6.3.11 R (Publication of prices) at least once in every month.

(5) In (4), a valuation point for the purpose of publishing prices only,

does not make it a valuation point for the purpose of (2) unless it is

disclosed as such in the prospectus.

(6) Higher volatility funds must have at least one valuation point every

business day except where the scheme is a non-UCITS retail scheme

operating as a FAIF.

(6A) Qualifying money market funds must have at least one valuation

point every business day at which the valuation is carried out on an

amortised cost basis.

(6B) [deleted]

(6C) [deleted]

COLL 6 : Operating duties and Section 6.3

responsibilities

R6.3.5

R6.3.5A

R6.3.5B

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/18

(6D) [deleted]

(7) No valuation points are required during the period of any initial

offer.

(8) The authorised fund manager may determine to have an additional

valuation point for an authorised fund, in which case itmust inform

the depositary.

Price of a unit

.....................................................................................................

(1) An authorised fund manager must ensure that the price of a unit of

any class is calculated:

(a) by reference to the net value of the scheme property; and

(b) in accordance with the provisions of both the instrument

constituting the fund and the prospectus.

(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) For each class of units in a single-priced authorised fund, a single

price must be calculated at which units are to be issued and

cancelled.

Sale and redemption prices for single-priced authorised funds

.....................................................................................................

The 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 ■ COLL 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 ■ COLL 6.3.8 R.

Sale and redemption price parameters for dual-priced

authorised funds

.....................................................................................................

(1) The 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 point; 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 permitted.

(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) The sale price of units under (1)(a) must not be less than the relevant

redemption price under (1)(b).

COLL 6 : Operating duties and Section 6.3

responsibilities

G6.3.5C

R6.3.5D

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/19

(4) The redemption price under (1)(b) must not exceed the relevant issue

price of the relevant units.

(5) Subject to ■ COLL 6.7.9 R (Charges for the exchange of units in an

umbrella), in the case of an umbrella:

(a) the maximum price at which units in one sub-fund that is a dual-

priced authorised fund may be acquired in exchange for units in

another sub-fund must not exceed the relevant maximum sale

price (less any preliminary charge) of the new units; and

(b) the minimum price at which the old units in a sub-fund that is a

dual-priced authorised fund may be taken in exchange must not

be less than the equivalent cancellation price.

The prospectus may make provision for large deals to be carried out at a

higher sale price or a lower redemption price than those published, provided

they do not exceed the relevant maximum and minimum parameters.

Profits from dealing as principal

.....................................................................................................

(1) Where an authorised fund manager (AFM):

(a) accepts instructions to sell and redeem units as principal; and

(b) is able to execute a sale instruction by selling units it has

redeemed at the same valuation point, without placing its own

capital at risk,

subject to (2), the AFM must not retain for its own account, or the

account of any of its associates, the difference between the price at

which a unit was redeemed (before deduction of any redemption

charge) and the price at which the same unit was sold (after

deduction of any preliminary charge). Any such difference must be

allocated in a way that is fair to unitholders.

(2) In calculating the profit arising under (1), the AFM may offset any loss

it incurs at the same valuation point, calculated in accordance with (3)

below, when dealing as principal in relation to:

(a) a unit issued at that valuation point to fulfil a sale instruction

that cannot be matched against any redeemed unit or any other

unit of that class held by the manager as principal; and

(b) a unit redeemed and cancelled at that valuation point.

(3) The amount of the loss referred to in (2) is:

(a) for units issued in accordance with (2)(a), the difference between

the issue price of a unit and the sale price of that unit, less any

preliminary charge;

(b) for units cancelled in accordance with (2)(b), the difference

between the cancellation price of a unit and the redemption

price of that unit, before any redemption charge is applied.

(4) Where any loss arising under (2) is greater than any profit arising

under (1), that loss cannot be offset against any profit arising at a

subsequent valuation point.

COLL 6 : Operating duties and Section 6.3

responsibilities

G6.3.5E

G6.3.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/20

(5) This rule applies to the redemption and sale of units of different

classes at the same valuation point, if those classes are treated as one

for the purpose of ■ COLL 6.2.6AR.

(1) The authorised fund manager may commit its own capital to hold

units for the purpose of dealing as principal and may seek to profit

from gains in the value of the units it holds, when it issues or

redeems units at one valuation point then sells or cancels them at a

later valuation point. However, it should not profit from situations in

which it is not exposed to an equal risk of loss if the units fall in

value, or from the ability to match simultaneous sales and

redemptions at different prices at no risk to its own capital.

(2) The AFM may allocate any amount arising under ■ COLL 6.3.5DR(1) in

the interests of investors by paying it into scheme property for the

benefit of all unitholders. Alternatively, the AFM may redistribute it

individually among the transacting investors.

(3) Where the AFM intends to allocate a payment to scheme property, it

should determine if the amount (when added to any other amounts

of the same kind relating to that class of units) would, if taken into

account in the scheme’s valuation, affect the accuracy of the unit

prices to four significant figures. If so, and subject to (4) below, the

amount should be accrued in each subsequent valuation of the

scheme until the payment is transferred. Such payments into scheme

property should be made regularly and no less frequently than

payments for the AFM’s management charge are transferred out of

scheme property.

(4) The calculation to be performed under ■ COLL 6.3.5DR should be

carried out in relation to each valuation point of the scheme on a

timely basis. Where it is not practical to do this before unit prices are

calculated and published, the AFM should ensure that the accrual

represents a reasonable estimate of the total payment it intends to

make to scheme property.

Valuation and pricing guidance

.....................................................................................................

Table: This table belongs to ■ COLL 6.3.2 G (2) (a) and ■ COLL 6.3.3 R (Valuation).

Valuation and pricing

1 The valuation of scheme property

(1) Where possible, investments should be valued using a

reputable source. The reliability of the source of prices

should be kept under regular review.

(2) For some or all of the investments comprising the

scheme property, different prices may quoted accord-

ing to whether they are being bought (offer prices) or

sold (bid prices). The valuation of a single-priced au-

thorised fund should reflect the mid-market value of

such investments. In the case of a dual-priced au-

thorised fund, the issue basis of the valuation will be

carried out by reference to the offer prices of invest-

ments and the cancellation basis by reference to the

bid prices of those same investments. The prospectus

should explain how investments will be valued for

COLL 6 : Operating duties and Section 6.3

responsibilities

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/21

which a single price is quoted for both buying and

selling.

(2A) Schemes investing in approved money-market instru-

mentsshould value such instruments on an amortised

cost basis on condition that:

(a) the approved money-market instrument has a resid-

ual maturity of less than three months and has no spe-

cific sensitivity to market parameters, including credit

risk; or

(b) the scheme is a qualifying money market fund.

[Note: CESR's UCITS eligible assets guidelines with respect to article

4(2) of the UCITS eligible assets Directive]

(2B) [deleted]

(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).

(4) For the purposes of (2) and (3), any fiscal charges, com-

missions, 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,

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 appro-

priate. Alternatively, the prospectus of a dual-priced

authorised fund may prescribe any other method of

calculating unit prices that ensures an equivalent treat-

ment of the effect of these payments.

(5) Where the authorised fund manager has reasonable

grounds to believe that:

(a) no reliable price exists for a security at a valuation

point; or

(b) the most recent price available does not reflect the

authorised fund manager's best estimate of the value

of a security at the valuation point

it should value an investment at a price which, in its

opinion, reflects a fair and reasonable price for that in-

vestment (the fair value price);

(6) The circumstances which may give rise to a fair value

price being used include:

(a) no recent trade in the security concerned; or

(b) the occurrence of a significant event since the most

recent closure of the market where the price of the se-

curity is taken.

In (b), a significant event is one that means the most

recent price of a security or a basket of securities is ma-

terially different to the price that it is reasonably be-

lieved would exist at the valuation point had the relev-

ant market been open.

(7) In determining whether to use such a fair value price ,

the authorised fund manager should include in his con-

sideration:

(a) the type of authorised fund concerned;

(b) the securities involved;

COLL 6 : Operating duties and Section 6.3

responsibilities

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/22

used; and

(d) the authorised fund manager's policy on the valu-

ation of scheme property as disclosed in the

prospectus.

(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, then, unless COLL 6.3.6G(1)(7B) applies,

the authorised fund manager should consult and

agree with the standing independent valuer a fair and

reasonable value for the immovable.

(7B) Where the authorised fund manager decides that an

immovable must be sold quickly to meet redemption

requests as they fall due, it should consult and agree

with the standing independent valuer a fair and reas-

onable price for the immovable to reflect a rapid sale,

to extent that the prospectus states that it may do so.

(8) The authorised fund manager should document the ba-

sis of valuation (including any fair value pricing policy)

and, where appropriate, the basis of any methodology

and ensure that the procedures are applied consist-

ently and fairly.

(9) Where a unit price is determined using properly ap-

plied fair value prices in accordance with policies in (8),

subsequent information that indicates the price should

have been different from that calculated will not norm-

ally give rise to an instance of incorrect pricing.

2 The pricing controls of the authorised fund manager

(1) An authorised fund manager needs to be able to dem-

onstrate that it has effective controls over its calcula-

tions of unit prices.

(2) The controls referred to in (1) should ensure that:

(a) asset prices are accurate and up to date;

(b) investment transactions are accurately and

promptly reflected in valuations;

cash, and units in issue), are regularly reconciled to

their source or prime records and any reconciling items

resolved promptly and debtors reviewed for re-

coverability;

(d) the sources of prices not obtained from the main

pricing source are recorded and regularly reviewed;

(e) compliance with the investment and borrowing

powers is regularly reviewed;

(f) dividends are accounted for as soon as securities

are quoted ex-dividend (unless it is prudent to account

for them on receipt):

(g) fixed interest dividends, interest and expenses are

accrued at each valuation point;

(h) tax positions are regularly reviewed and adjusted, if

necessary;

(i) reasonable tolerances are set for movements in the

key elements of a valuation and movements outside

these tolerances are investigated;

(j) the fund manager regularly reviews the portfolio

valuation for accuracy; and

COLL 6 : Operating duties and Section 6.3

responsibilities

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/23

(k) the valuation of OTC derivatives is accurate and up

to date and in compliance with the methods agreed

with the depositary.

(3) In exercising its pricing controls, the authorised fund

manager may exercise reasonable discretion in deter-

mining the appropriate frequency of the operation of

the controls and may choose a longer interval, if appro-

priate, given the level of activity on the authorised

fundor the materiality of any effect on the price.

(4) Evidence of the exercise of the pricing controls should

be retained.

(5) Evidence of persistent or repetitive errors in relation to

these matters, and in particular any evidence of a pat-

tern of errors working in an authorised fund man-

ager's favour, will make demonstrating effective con-

trols more difficult.

(6) Where the pricingfunction is delegated to a third

party, COLL 6.6.15 R (1) (Committees and delegation) will

apply.

3 The depositary's review of the authorised fund manager's systems

and controls

(1) This section provides details of the types of checks a de-

positary should carry out to be satisfied that the au-

thorised 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 au-

thorised fund manager has delegated all or some of its

pricing functions to one or more third parties.

(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 in-

clude an analysis of the controls in place to determine

the extent to which reliance can be placed on them.

(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.

(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.

(5) Additionally, a depositary should from time to time re-

view other aspects of the valuation of the scheme

property of each authorised fund for which it is re-

sponsible, verifying, on a sample basis, if necessary, the

assets, liabilities, accruals, units in issue, securities

prices (and in particular the prices of OTC derivatives,u-

napproved securities and the basis for the valuation of

unquoted securities) and any other relevant matters,

for example an accumulation factor or a currency con-

version factor.

(6) A depositary should ensure that any issues, which are

identified in any such review, are properly followed up

and resolved.

4 The recording and reporting of instances of incorrect pricing

COLL 6 : Operating duties and Section 6.3

responsibilities

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/24

(1) An authorised fund manager should record each in-

stance where the price of a unit is incorrect as soon as

the error is discovered, and report the fact to the de-

positary together with details of the action taken, or

to be taken, to avoid repetition as soon as practicable.

(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, noti-

fication should relate to instances which the deposit-

ary considers material only.

(3) A depositary should also report to the FCA immedi-

ately any instance of incorrect pricingwhere the error

is 0.5% or more of the price of a unit, where a deposit-

ary believes that reimbursement or payment is inappro-

priate and should not be paid by an authorised fund

manager.

(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

pricing during a particular period.

5 The rectification of pricing breaches

(1) COLL 6.6.3R(3)(c) (Functions of the authorised fund man-

ager) places a duty on the authorised fund manager to

take action to reimburse affected unitholders, former

unitholders, and the scheme itself, for instances of in-

correct pricing, except if it appears to the depositary

that the breach is of minimal significance.

(2) A depositary may consider that the instance of incor-

rect pricingis of minimal significance if:

(a) the authorised fund manager and depositary meet

the standards of control set out in Section 2 and Sec-

tion 3 of this Table; and

(b) the error in pricing of a unit is less than 0.5% of

the correct price.

(3) In determining (2), if the instance of incorrect pricing

is due to one or more factors or exists over a period of

time, each price should be considered separately.

(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 au-

thorised fund to the unitholders, former unitholders,

the authorised fund or the authorised fund manager

(where appropriate).

(5) The depositary should satisfy itself that any payments

required following an instance of incorrect pricing are

accurately and promptly calculated and paid.

(6) If a depositary considers that reimbursement or pay-

ment is inappropriate, it should report the matter to

the FCA, together with its recommendation and justi-

fication. 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.

(7) It may not be practicable, or in some cases legally per-

missible, for the authorised fund manager to obtain re-

imbursement from unitholders, where the unitholders

have benefited from the incorrect price.

COLL 6 : Operating duties and Section 6.3

responsibilities

R6.3.7

R6.3.8

R6.3.9

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/25

(8) In all cases where reimbursement or payment is re-

quired, amounts due to be reimbursed to unitholders

for individual sums which are reasonably considered by

the authorised fund manager and depositary to be im-

material, need not normally be paid.

[deleted]

Dilution

.....................................................................................................

(1) Subject to (1A), when arranging to sell, redeem, issue or cancel units,

or when units are issued or cancelled under ■ COLL 6.2.7 R (1) (Issues

and cancellations through an authorised fund manager), an

authorised fund manager is permitted to:

(a) require the payment of a dilution levy; or

(b) make a dilution adjustment; or

in accordance with its statements in the prospectus required by

■ COLL 4.2.5R (18) (Table: contents of the prospectus).

(1A) When arranging to sell, redeem, issue or cancel units, or when units

are issued or cancelled under ■ COLL 6.2.7R(1) (Issues and cancellations

through an authorised fund manager), an authorised fund manager

of a regulated money market fund may only require payment of a

dilution levy or make a dilution adjustment to the extent it is

permissible under the Money Market Funds Regulation.

(2) An authorised fund manager operating either a dilution levy or a

dilution adjustment, must operate that measure in a fair manner to

reduce dilution and solely for that purpose.

(3) A dilution levy becomes due at the same time as payment or transfer

of property becomes due for the issue, sale, redemption or

cancellation and any such payment in respect of a dilution levy must

be paid to the depositary to become part of scheme property as soon

as practicable after receipt.

(4) A dilution adjustment may be made as part of the calculation of the

unit price for the purpose of reducing dilution in the scheme or to

recover any amount which it had already paid or reasonably expects

to pay in the future in relation to the issue or cancellation of units.

(5) Where the authorised fund manager decides to make or not to make

a dilution adjustment, it must not do so for the purpose of creating a

profit or avoiding a loss for the account of an affected person.

(6) As soon as practicable after a valuation point, the authorised fund

manager must provide the depositary with the amount or rate of any

dilution adjustment made to the price or any dilution levy applied.

Forward pricing

.....................................................................................................

(1) Subject to (7), for the sale and redemption of units, all deals must be

at a forward price.

COLL 6 : Operating duties and Section 6.3

responsibilities

G6.3.10

R6.3.11

G6.3.12

R6.3.13

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/26

(2) [deleted]

(3) [deleted]

(4) [deleted]

(5) [deleted]

(6) [deleted]

(7) Deals for the sale and redemption of units in a regulated money

market fund need not be at a forward price where the circumstances

in article 34(2) of the Money Market Funds Regulation apply.

[deleted]

Publication of prices

.....................................................................................................

Where the authorised fund manager is prepared to deal in units, or is willing

to issue or cancel units, under ■ COLL 6.2.7, it must make the dealingprices

public in an appropriate manner.

Manner of price publication

.....................................................................................................

(1) In determining the appropriate manner of making prices public, the

authorised fund manager should ensure that:

(a) a unitholder or potential unitholder can obtain the prices at a

reasonable cost;

(b) prices are available at reasonable times;

the units are dealt in;

(d) the manner of publication is disclosed in the prospectus; and

(e) prices are published in a consistent manner.

(2) Examples of what might be deemed appropriate include:

(a) publication in a national newspaper;

(b) supply through an advertised local rate or freephone telephone

number;

(d) inclusion in a database of prices which is publicly available; or

(e) communication to all existing unitholders.

(3) The authorised fund manager should make previous prices available

to any unitholder or potential unitholder.

Maintaining the value of a qualifying money market fund

.....................................................................................................

The authorised fund manager of a qualifying money market fund valuing

scheme property on an amortised cost basis must:

COLL 6 : Operating duties and Section 6.3

responsibilities

G6.3.14

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/27

(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 value of

the scheme property when valued on an amortised cost basis.

The authorised fund manager should advise the depositary when the mark

to market value of a qualifying money market fund valuing scheme property

on an amortised cost basis varies from its amortised cost value by 0.1%, 0.2%

and 0.3% respectively. The authorised fund manager of a qualifying money

market fund should agree procedures with the depositary designed to

stabilise the value of the scheme in these events.

COLL 6 : Operating duties and Section 6.4

responsibilities

R6.4.1

G6.4.2

G6.4.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/28

6.4 Title and registers

Application

.....................................................................................................

(1) This section applies to an authorised fund manager and a depositary

of an AUT or ACS.

(2) ■ COLL 6.4.9 (Plan registers) also applies to the ACD, any other director

and the depositary of an ICVC.

Purpose

.....................................................................................................

The aim of this section is to protect consumers, by setting out the

requirements for a register of unitholders for an AUT or ACS and for a plan

maintained, whether held directly or indirectly through a group plan.

Explanation of this section

.....................................................................................................

(1) (a) This section deals with matters relating to the register of

unitholders of units in an AUT or ACS including its establishment

and contents.

(b) The authorised fund manager or depositary may be responsible

for the register.

stated in the trust deed or contractual scheme deed and this

section details what his duties are.

(d) The provisions relating to documents evidencing title to units are

dependent on the provisions in the trust deed or contractual

scheme deed and their operation should be set out in the

prospectus.

(2) For an ICVC, requirements as to the register of holders and transfer of

units are contained in Schedule 3 of the OEIC Regulations (Register of

shareholders).

(3) ■ COLL 6.4.9 makes provision to ensure that if the cost of the plan

respect of notice and disclosure as unitholders on the main register.

COLL 6 : Operating duties and Section 6.4

responsibilities

R6.4.4

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/29

.....................................................................................................

(1) Either:

(a) the manager or the trustee (as nominated in the trust deed); or

(b) the authorised contractual scheme manager or the depositary of

the ACS (as nominated in the contractual scheme deed);

must establish and maintain a register of unitholders as a document

in accordance with this section.

(2) The manager or trustee or the authorised fund manager or

depositary in accordance with their duties under (1) must exercise all

due diligence and take all reasonable steps to ensure the information

contained on the register is at all times complete and up to date.

(3) The register must contain:

(a) the name and address of each unitholder (for joint unitholders,

no more than four need to be registered);

(b) the number of units of each class held by each unitholder;

standing in his name; and

(d) the number of units of each class currently in issue.

(4) No notice of any trust, express, implied or constructive which may be

entered in the register is binding on the manager or trustee or the

authorised fund manager or depositary, but this does not affect their

obligations under ■ COLL 6.4.9 R (1) (Plan registers).

(5) The register is conclusive evidence of the persons entitled to the units

entered in it.

(6) The person responsible for the register in (1) must:

(a) take reasonable steps to alter the register on receiving written

notice of a change of name or address of any unitholder;

(b) in relation to a change of name in (a) where a certificate has

been issued, either endorse the existing certificate or issue a new

one;

United Kingdom by or on behalf of any unitholder (including the

manager or authorised fund manager), during office hours;

(d) supply free of charge to any unitholder or his authorised

representative a copy of the entries on the register relating to

that unitholder on request;

(e) where a unitholder defaults on paying for the issue or sale of

units, make an alteration or deletion in the register to

compensate for the default after which the manager or

authorised fund manager becomes entitled to those units (until

those units are either cancelled or re-sold and paid for); and

(f) carry out any conversion of units allowed for by ■ COLL 6.4.8 R

(Conversion of units) after consultation with the manager or

trustee or the authorised fund manager or depositary, as

appropriate.

COLL 6 : Operating duties and Section 6.4

responsibilities

R6.4.5

R6.4.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/30

The authorised fund manager as unitholder

.....................................................................................................

(1) Subject to (3), if no person is entered in the register as the unitholder

of a unit, the authorised fund manager must be treated as the

unitholder of each such unit which is in issue.

(2) Where units are transferred to the authorised fund manager, they

need not be cancelled and the authorised fund manager need not be

entered on the register as the new unitholder.

(3) In the case of a limited partnership scheme, unregistered units may

be held by the authorised contractual scheme manager as the agent

for the scheme provided the authorised contractual scheme manager

is not entered in the register as the new unitholder.

Transfer of units by act of parties: AUTs and ACSs

.....................................................................................................

(1) Every unitholder of an AUT is entitled to transfer units held on the

responsible for the register may approve, but that person is under no

duty to accept a transfer unless it is permitted by the trust deed or

prospectus.

(1A) Provided:

(a) the requirements in ■ COLL 6.4.6A R (Transfer of units in an ACS)

are satisfied; and

(b) transfers of units are allowed by the contractual scheme deed

and prospectus in accordance with the conditions specified by

FCA rules;

every unitholder of an ACS is entitled to transfer units held on the

responsible for the register may approve, but that person is under no

duty to accept a transfer unless it is permitted by the contractual

scheme deed and prospectus.

(2) Every instrument of transfer of units of an AUT or ACS must be

signed by, or on behalf of, the unitholder transferring the units (or,

for a body corporate, sealed by that body corporate or signed by one

of its officers (or in Scotland, two of its officers)) authorised to sign it

and, unless the transferee is the authorised fund manager, the

transferor must be treated as the unitholder until the name of the

transferee has been entered in the register.

(3) In the case of an AUT or ACS, every instrument of transfer (stamped

as necessary) must be left for registration, with the person responsible

for the register, accompanied by:

(a) any necessary documents that may be required by legislation; and

(b) any other evidence reasonably required by the person responsible

for the register.

(4) In the case of an AUT or ACS, the details of instruments of transfer

must be kept for a period of six years from the date of its

registration.

COLL 6 : Operating duties and Section 6.4

responsibilities

R6.4.6A

G6.4.6B

R6.4.7

R6.4.8

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/31

(5) In the case of an AUT or ACS, on registration of an instrument of

transfer, a record of the transferor and the transferee and the date of

transfer must be made on the register.

Transfer of units in an ACS

.....................................................................................................

(1) Where transfer of units in an ACS is allowed by its contractual scheme

deed and prospectus in accordance with the conditions specified by

FCA rules, the authorised contractual scheme manager of the ACS

must take reasonable care to ensure that units are only transferred if

the conditions specified by the FCA under (2) are met.

(2) The FCA specifies that for the purposes of (1), and for the purposes of

■ COLL 3.2.6 R(27G) (ACSs: UCITS and NURS transfer of units) and

■ COLL 4.2.5 R(5B) (ACSs: UCITS and NURS transfer of units), units in an

ACS may only be transferred to a person that is a:

(a) professional ACS investor; or

(b) large ACS investor; or

The FCA recognises that some transfers of units arise by operation of law

(such as upon death or bankruptcy of the unitholder, or otherwise) and are

accordingly outside the control of the authorised contractual scheme

manager. The authorised contractual scheme manager is expected to comply

with its responsibilities under ■ COLL 6.6.3B R (Redemption of ACS units by an

authorised contractual scheme manager) in such cases by redeeming such

units.

Certificates

.....................................................................................................

(1) Following the sale of units or as a result of ■ COLL 6.4.6 R (Transfer of

units by act of parties: AUTs and ACSs) a document recording title to

those units may be issued in such a form as the trust deed or

contractual scheme deed permits.

(2) The person responsible for the register must issue any document in

(1) or provide relevant information in a timely manner where the

procedures for redeeming units require the unitholder to surrender

that document.

(3) [deleted]

(4) Bearer certificates may not be issued for AUTs or ACSs.

Conversion of units

.....................................................................................................

Where there is more than one class of units offered for issue or sale, the

unitholder has a right to convert from one to the other, provided that doing

so would not contravene any provision in the prospectus.

COLL 6 : Operating duties and Section 6.4

responsibilities

R6.4.9

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/32

Plan registers

.....................................................................................................

(1) The ACD and any other directors of an ICVC or the person responsible

for the register of an AUT or an ACS may arrange for a plan register

to be established and maintained.

(2) Where payments are made out of scheme property to establish and

maintain a plan register, plan investors must be treated as unitholders

for the purposes of ■ COLL 4.3 to ■ COLL 4.5 and ■ COLL 6.4.4 R (Register:

general requirements and contents).

COLL 6 : Operating duties and Section 6.5 : Appointment and replacement

responsibilities of the authorised fund manager and the

depositary

R6.5.1

R6.5.2

G6.5.2A

R6.5.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/33

6.5 Appointment and replacement of

the authorised fund manager and

the depositary

Application

.....................................................................................................

This section applies in accordance with ■ COLL 6.5.2 R (Table of application).

Table of application

This table belongs to ■ COLL 6.5.1 R.

Au-

thorised

Any fund

other manager Deposit-

director Deposit- of an ary of an

of an ary of an AUT or AUT or

Rule ICVC ACD ICVC ICVC ACS ACS

6.5.1R x x x x x x

6.5.3R x x x x

6.5.4R x x x

6.5.5R x x

6.5.6R x x

6.5.7R x x

6.5.8R x x

6.5.9R x x

6.5.10R x x x x

Note: "x" means "applies", but not every paragraph in every rule will

necessarily apply.

■ COLL 6.6A and ■ COLL 6.6B set out additional FCA rules and guidance

applicable to the authorised fund manager and depositary of a UCITS

scheme in relation to the appointment and duties of the depositary.

Appointment of an ACD

.....................................................................................................

(1) The directors (or director) of an ICVC must take all practicable steps

to ensure the ICVC has at all times as its ACD a person who is

qualified to act as ACD.

COLL 6 : Operating duties and Section 6.5 : Appointment and replacement

responsibilities of the authorised fund manager and the

depositary

R6.5.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/34

(2) If the ICVC ceases to have any director, the depositary must exercise

its powers, under the OEIC Regulations, to appoint a person to be an

ACD of the ICVC.

(3) For an ICVC that holds annual general meetings under the OEIC

Regulations, the appointment of an ACD (other than the first ACD),

under (1) or (2), must terminate at the close of the next annual

general meeting following the date of the appointment or (if later)

upon the expiration of 12 months from the date the appointment

takes effect, unless the appointment has been approved by a

resolution of the unitholders before the close of that annual general

meeting or expiration of that 12 month period (as the case may be).

(4) An ACD must not voluntarily terminate its appointment as ACD unless

the termination is effective at the same time as the commencement

of the appointment of a successor ACD.

(5) (a) In the event of:

(i) any person becoming or ceasing to be a director;

(ii) the appointment of an ACD being terminated;

(iii) a new ACD being appointed; or

(iv) a corporate director (including the ACD) becoming aware of

any change of its controller;

the FCA must immediately be notified in accordance with (b).

(b) In the case of:

(i) (a)(i), by the ACD;

(ii) (a)(ii), by the ACD whose appointment is being terminated;

(iii) (a)(iii), by the new ACD; and

(iv) (a)(iv), by the corporate director concerned.

Termination of appointment of an ACD

.....................................................................................................

(1) The appointment of an ACD terminates immediately upon it ceasing

to be a director.

(2) The appointment of an ACD terminates if a notice of termination of

that appointment, the terms of which have been approved by a

resolution of the board of directors of the ICVC, is given to the ACD.

(3) If there is no director other than the ACD, the appointment of the

ACD terminates if a notice of termination of that appointment is

given by the depositary to the ACD and to the ICVC, following any of

the following events:

(a) the calling of a meeting to consider a resolution for winding up

the ACD;

(b) an application being made to dissolve the ACD or to strike it off

the Register of Companies;

(d) the making of, or any proposals for the making of, a composition

or arrangement with any one or more of the ACD's creditors;

COLL 6 : Operating duties and Section 6.5 : Appointment and replacement

responsibilities of the authorised fund manager and the

depositary

R6.5.5

R6.5.6

R6.5.7

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/35

(e) the appointment of a receiver to the ACD (whether an

administrative receiver or a receiver appointed over particular

property);

(f) anything equivalent to (a) to (e) above occurring in respect of the

ACD in a jurisdiction outside the United Kingdom.

(4) Any termination under (2) or (3) takes effect when the notice is given,

or on any subsequent time for its effect stated in the notice, or, if

later, the time at which the termination is permitted to take effect

under regulation 21 of the OEIC Regulations (The Authority's

approval for certain changes in respect of a company).

(5) The depositary must (unless the termination takes effect at the same

time as the appointment of a successor ACD) ensure that the

unitholders are informed of the termination of the appointment of

an ACD.

(6) The depositary is entitled to be reimbursed out of the scheme

property for its out of pocket expenses in complying with (5).

Other directors

.....................................................................................................

(1) Any directors of an ICVC other than the ACD must exercise reasonable

care to ensure that the ACD undertakes the responsibilities allocated

under ■ COLL 6.6.3 R (1) (Functions of the authorised fund manager) in

a competent manner and the ACD must give those directors the

information and explanations they consider necessary for this

purpose.

(2) A director of an ICVC must not appoint an alternate director.

(3) When there is no person acting as ACD, the directors of an ICVC have

the functions of an ACD under ■ COLL 6.6.3 R (1) , but this does not

affect the powers of the directors under ■ COLL 6.6.15 R (Committees

and delegation).

(4) When (3) applies, the directors must retain the services of one or

more authorised persons to assist them in performing the functions

referred to in ■ COLL 6.6.3 R (1) and ■ COLL 6.6.3 R (2) .

ICVC without a director

.....................................................................................................

If the ICVC ceases to have any directors, the depositary may:

(1) retain the services of an authorised person to carry out the functions

referred to in ■ COLL 6.6.3 R (3)(a) and (b); or

(2) manage the scheme property itself on behalf of the ICVC until a

director is appointed or the winding up of the ICVC is commenced

provided it is not prohibited from doing so by any law or rule.

Replacement of an authorised fund manager of an AUT or ACS

.....................................................................................................

(1) The authorised fund manager of an AUT or ACS is subject to removal

by written notice by the depositary upon any of the following events:

COLL 6 : Operating duties and Section 6.5 : Appointment and replacement

responsibilities of the authorised fund manager and the

depositary

R6.5.8

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/36

(a) the calling of a meeting to consider a resolution for winding up

the authorised fund manager;

(b) an application being made to dissolve the authorised fund

manager or to strike it off the Register of Companies;

authorised fund manager;

(d) the making of, or any proposals for the making of, a composition

or arrangement with any one or more of the authorised fund

manager's creditors;

(e) the appointment of a receiver to the authorised fund manager

(whether an administrative receiver or a receiver appointed over

particular property);

(f) anything equivalent to (a) to (e) above occurring in respect of the

authorised fund manager in a jurisdiction outside the United

Kingdom;

(g) the depositary forming the reasonable opinion, and stating in

writing, that a change of authorised fund manager is desirable in

the interest of unitholders;

(h) a resolution of unitholders being passed to remove the

authorised fund manager; or

(i) the unitholders of three quarters in value of all of the units then

in issue (excluding units held or treated as held by the authorised

fund manager or by any associate of the authorised fund

manager) making a request in writing to the depositary that the

authorised fund manager should be removed.

(2) On receipt of a notice by the depositary under (1), the authorised

fund manager of the AUT or ACS ceases to be the authorised fund

manager; and the depositary must by deed appoint another person

eligible under the Act to be the authorised fund manager of the AUT

or ACS upon and subject to that other entering into such deed or

deeds as the depositary may require.

(3) If the name of the AUT or ACS contains a reference to the name of

the former authorised fund manager, the former authorised fund

manager is entitled to require the new authorised fund manager and

the depositary immediately on receipt of a notice under (1) to

propose a change in the name of the AUT or ACS.

Retirement of an authorised fund manager of an AUT or ACS

.....................................................................................................

(1) The authorised fund manager of an AUT or ACS has the right to

retire in favour of another person eligible under the Act and

approved in writing by the depositary upon:

(a) the retiring authorised fund manager appointing that person by

deed as authorised fund manager in its place and assigning to

that person all its rights and duties as such a authorised fund

manager; and

(b) the new authorised fund manager entering into such deeds as

the depositary reasonably considers necessary or desirable to be

entered into by that person in order to secure the due

COLL 6 : Operating duties and Section 6.5 : Appointment and replacement

responsibilities of the authorised fund manager and the

depositary

R6.5.9

R6.5.10

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/37

performance of its duties as the authorised fund manager of the

AUT or ACS.

(2) Upon retirement, the retiring authorised fund manager:

(a) subject to (3), is released from all further obligations under the

rules in this sourcebook and under the trust deed or contractual

scheme deed; and

(b) may retain any consideration paid to it in connection with the

change without having to account for it to any unitholder.

(3) Sub-paragraph (2)(a) does not affect the rights of the depositary or

any other person in respect of any act or omission on the part of the

retiring authorised fund manager before his retirement.

Consequences of removal or retirement of an authorised fund

manager of an AUT or ACS

.....................................................................................................

(1) Upon the removal or retirement of the authorised fund manager, the

removed or retiring authorised fund manager of an AUT or ACS:

(a) is entitled to be recorded in the register for those units continued

to be held or treated as held by it as principal; and

(b) may require the depositary to issue to it a certificate for those

units (if not previously issued).

(2) Paragraph (1) is subject to any restriction in the prospectus relating to

the permitted categories of unitholders.

Retirement of the depositary

.....................................................................................................

(1) The depositary of an authorised fund may not retire voluntarily

except upon the appointment of a new depositary.

(2) The depositary of an authorised fund must not retire voluntarily

unless, before its retirement, it has ensured that the new depositary

has been informed of any circumstance of which the retiring

depositary has informed the FCA.

(3) When the depositary of an authorised fund wishes to retire or ceases

to be an authorised person, the authorised fund manager may,

subject to section 251 of the Act (Alteration of schemes and changes

of manager or trustee), section 261Q of the Act (Alteration of

contractual schemes and changes of operator or depositary) or

regulation 21 of the OEIC Regulations (The Authority's approval for

certain changes in respect of a company) appoint another person

eligible to be the depositary in its place.

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.1

R6.6.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/38

6.6 Powers and duties of the scheme,

the authorised fund manager, and

the depositary

Application

.....................................................................................................

Subject to (2), this section applies in accordance with ■ COLL 6.6.2 R

(Table of application).

Where a scheme is a regulated money market fund, ■ COLL 6.6.3R and

■ COLL 6.6.14R apply to the authorised fund manager and depositary

of that scheme to the extent the provisions are consistent with the

requirements of the Money Market Funds Regulation.

Table of application

.....................................................................................................

This table belongs to ■ COLL 6.6.1 R.

Au-

thorised

Any fund

other manager Deposit-

directors Deposit- of an ary of an

of an ary of an AUT or AUT or

Rule ICVC ACD ICVC ICVC ACS ACS

6.6.1R x x x x x x

6.6.3R x x x x x

6.6.3AR* x

6.6.3BR* x

6.6.3CR* x x

6.6.3DG* x x

6.6.3ER* x x

6.6.3FR* x x

6.6.4R x x

6.6.4BR* x x

6.6.4CR* x x

6.6.4DG* x x

COLL 6 : Operating duties and Section 6.6

responsibilities

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/39

Au-

thorised

Any fund

other manager Deposit-

directors Deposit- of an ary of an

of an ary of an AUT or AUT or

Rule ICVC ACD ICVC ICVC ACS ACS

6.6.5R x x x x x

6.6.5AR* x x

6.6.5BG* x x

6.6.6R x x

6.6.7R x x

6.6.8R x x

6.6.9R x x

6.6.10R x x x x

6.6.11G x x

6.6.12R x x

6.6.13R x x x x x

6.6.14R x x x x

6.6.15R x x x x x

6.6.15AR* x x

6.6.16G x x x x

6.6.17R x x x x x

6.6.18G x x x x x

6.6.19R x x x

6.6.20R x x x

6.6.21R x x x

6.6.22G x x x

6.6.23E x x x

6.6.24G x x x

6.6.25R x x x

6.6.26G x x x

6.6.27R x x x

Notes: (1) “x” means “applies”, but not every paragraph in

every rule will necessarily apply.

(2) * COLL 6.6.3A Rand COLL 6.6.3B R only apply to au-

thorised contractual scheme managers of ACSs.

(3) * COLL 6.6.5A R and COLL 6.6.5B G only apply to ACDs

of ICVCs which are umbrellas and authorised contrac-

tual scheme managers of co-ownership schemes

which are umbrellas.

(4) * COLL 6.6.15A R has a special application as set out in

COLL 6.6.15AR (1).

(5) COLL 6.6.20R to COLL 6.6.27R have a special application

as set out in COLL 6.6.19R.

(6) *COLL 6.6.3CR, COLL 6.6.3DG, COLL 6.6.3ER and COLL

6.6.3FR apply only to the authorised fund manager of

a FIIA.

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/40

Au-

thorised

Any fund

other manager Deposit-

directors Deposit- of an ary of an

of an ary of an AUT or AUT or

Rule ICVC ACD ICVC ICVC ACS ACS

(7) *COLL 6.6.4BR, COLL 6.6.4CR, and COLL 6.6.4DG apply

only to the depositary of a FIIA.

Functions of the authorised fund manager

.....................................................................................................

(1) The authorised fund manager must manage the scheme in

accordance with:

(a) the instrument constituting the fund;

(b) the applicable rules;

(d) for an ICVC, the OEIC Regulations; and

(e) where applicable, the Money Market Funds Regulation.

(2) The authorised fund manager must take such steps as necessary to

ensure compliance with the rules that impose obligations upon the

ICVC.

(3) The authorised fund manager must:

(a) make decisions as to the constituents of the scheme property in

accordance with the investment objectives and policy of the

scheme;

(b) instruct the depositary in writing how rights attaching to the

ownership of the scheme property are to be exercised, but not

where ■ COLL 6.6.13 R (2) (Exercise of rights in respect of the

scheme property) applies; and

where the breach relates to the incorrect pricing of units or to

the late payment in respect of the issue of units, the rectification

must, (unless the depositary otherwise directs under (4)), extend

to the reimbursement or payment, or arranging the

reimbursement or payment, of money:

(i) by the authorised fund manager to unitholders and former

unitholders;

(ii) by the ACD to the ICVC;

(iii) by the ICVC to the ACD;

(iv) by the authorised fund manager to the depositary of the

AUT or ACS; or

(v) by the depositary (for the account of the AUT or ACS) to the

authorised fund manager.

(4) Rectification under (3)(c) need not, unless the depositary so directs,

extend to any such reimbursement or payment where it appears to

the depositary such breach, is of minimal significance.

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.3A

R6.6.3B

R6.6.3C

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/41

Functions of the authorised contractual scheme manager in

relation to ACS units

.....................................................................................................

(1) The authorised contractual scheme manager of an authorised

contractual scheme which is a UCITS scheme or a non-UCITS retail

scheme must take reasonable care to ensure that ownership of units

in the scheme is only recorded in the register for a:

(a) professional ACS investor; or

(b) large ACS investor; or

(2) The authorised contractual scheme manager of an authorised

contractual scheme must take reasonable care to ensure that rights or

interests in units in the scheme are not acquired by any person from

or through an intermediate unitholder, unless that person meets the

criteria within (1)(a) to (c).

(3) The authorised contractual scheme manager will be regarded as

complying with (1) and (2) to the extent that it can show that it was

reasonable for it to rely on relevant information provided by another

person.

Redemption of ACS units by an authorised contractual scheme

manager

.....................................................................................................

The authorised contractual scheme manager of an authorised contractual

scheme must redeem units in the scheme as soon as practicable after

becoming aware that those units are vested in anyone (whether as a result

of subscription or transfer of units) other than a person meeting the criteria

in ■ COLL 6.6.3AR (1)(a) to ■ (c).

Additional functions of an authorised fund manager of a FIIA

.....................................................................................................

The authorised fund manager of a FIIA must establish, implement and

maintain an adequate liquidity management contingency plan for

exceptional circumstances which sets out:

how the authorised fund manager will respond to a liquidity risk

crystallising;

the range of liquidity tools and arrangements which it may deploy in

such exceptional circumstances, any operational challenges associated

with the use of such tools and the likely consequences for investors;

the procedures for working with the depositary in the event the

authorised fund manager must deploy these tools and arrangements;

how the authorised fund manager will work with its delegates, such

as third-party administrators, and other relevant third parties

including intermediate unitholders, to:

(a) deploy the liquidity management tools and arrangements;

(b) communicate their use in a timely way to unitholders; and

COLL 6 : Operating duties and Section 6.6

responsibilities

G6.6.3D

R6.6.3E

R6.6.3F

R6.6.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/42

any operational challenges likely to arise from working with relevant

third parties identified at (4); and

communication arrangements for internal and external concerned

parties (including the FCA, investors and the media where necessary).

Compliance with ■ COLL 6.6.3CR may enable a full-scope UK AIFM that is an

authorised fund manager of a FIIA to meet some of its obligations under

article 47(1)(e) of the AIFMD level 2 regulation.

(1) The authorised fund manager of a FIIA must obtain written

confirmation from any relevant third party identified in the

contingency plan under ■ COLL 6.6.3CR(4) that the third party will be

able to undertake the matters specified in (2) as soon as is reasonably

practicable.

(2) The matters specified for the purpose of (1) are that the relevant

third party will, where necessary, be able to:

(a) deploy any liquidity management tools and arrangements on

which the authorised fund manager plans to rely as part of its

contingency plan;

(b) in a timely way, communicate the authorised fund manager’s use

of any such tools and arrangements to unitholders; and

authorised fund manager has identified as requiring action by

that third party.

The authorised fund manager of a FIIA must provide the depositary on an

ongoing basis with all relevant information it needs to comply with its

obligations under ■ COLL 6.6.4BR.

General duties of the depositary

.....................................................................................................

(1) The depositary of an authorised fund must take reasonable care to

ensure that the scheme is managed by the authorised fund manager

in accordance with:

(a) ■ COLL 5 (Investment and borrowing powers);

(b) ■ COLL 6.2 (Dealing);

(d) ■ COLL 6.8 (Income: accounting, allocation and distribution);

(e) any provision of the instrument constituting the fund or

prospectus that relates to the provisions referred to in (a) to (d);

and

(e) where applicable, the provisions of the Money Market Funds

Regulation relating to investment and borrowing powers,

dealing, valuation and pricing, and income.

(2) The depositary must, in so far as not required under (1)(c), take

reasonable care to ensure on a continuing basis that:

COLL 6 : Operating duties and Section 6.6

responsibilities

G6.6.4A

R6.6.4B

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/43

(a) the authorised fund manager is adopting appropriate procedures

to ensure that the price of a unit is calculated for each valuation

point in accordance with ■ COLL 6.3 or, where applicable, the

Money Market Funds Regulation; and

(b) the authorised fund manager has maintained sufficient records to

show compliance with ■ COLL 6.3 .

(3) The depositary, when acting in its capacity as depositary, must act

solely in the interests of the unitholders.

(4) The depositary:

(a) must also take reasonable care to ensure that;

(i) the authorised fund manager considers whether or not to

exercise the power provided by ■ COLL 6.3.8 R (Dilution) and,

if applicable, the rate or amount of any dilution levy or

dilution adjustment that is imposed;

(ii) the authorised fund manager has in relation to (i), taken

account of all factors that are material and relevant to the

authorised fund manager's decision; and

(iii) when the authorised fund manager considers whether or not

to exercise the power under ■ COLL 6.3.8 R, the authorised

fund manager has acted in accordance with the restrictions

imposed by that rule; and

(b) has no duty in respect of the authorised fund manager's exercise

of the discretion referred to in (a).

(5) [deleted]

(6) [deleted]

(7) [deleted]

[deleted]

Specific duties of a depositary: oversight of the liquidity

management of a FIIA

.....................................................................................................

The depositary of a FIIA must:

(1) regularly make its own assessment of the liquidity profile of the FIIA

and the liquidity risks presented by the scheme property of a FIIA;

(2) take reasonable care to oversee the authorised fund manager’s

liquidity management systems and procedures on an ongoing basis,

using the assessment it has made under (1), to ensure the FIIA is

managed in accordance with the following COLL rules and, in the

case of a FIIA managed by a full-scope UK AIFM, the following FUND

rules and provisions in the AIFMD level 2 regulation:

(a) ■ COLL 4.2.5R(3)(pa);

(b) ■ COLL 6.6.3CR and ■ COLL 6.6.3ER;

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.4C

G6.6.4D

R6.6.5

R6.6.5A

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/44

(d) ■ FUND 3.2.5R;

(e) ■ FUND 3.6.3R;

(f) article 44(1) and (2)(c) of the AIFMD level 2 regulation;

(g) articles 46 to 49 of the AIFMD level 2 regulation; and

(h) article 108 of the AIFMD level 2 regulation; and

(3) establish an escalation procedure when instances of potential non-

compliance with the rules and provisions set out in paragraph (2) are

identified, the details of which must be made available to the FCA

upon request.

The depositary of a FIIA managed by a small authorised UK AIFM must not

delegate its functions under ■ COLL 6.6.4BR to one or more third parties,

except in relation to supporting administrative or technical tasks that are

linked to these functions.

Subject to certain specified exceptions, the depositary of a FIIA managed by

a full-scope UK AIFM is generally prohibited from delegating its functions

(see in particular, ■ FUND 3.11.26R (Delegation: general prohibition) and

■ FUND 3.11.28R (Delegation: safekeeping)).

Duties of the authorised fund manager and the depositary

under the general law

.....................................................................................................

(1) The duties and powers of the authorised fund manager, the directors

of an ICVC and the depositary under the rules in this sourcebook and

under the instrument constituting the fund are in addition to the

powers and duties under the general law.

(2) Paragraph (1) applies only in so far as the relevant general law is not

qualified by the rules in this sourcebook, the instrument constituting

the fund, the OEIC Regulations, or the Money Market Funds

Regulation.

Duties of the ACD of an ICVC or the authorised contractual

scheme manager of a co-ownership scheme: umbrella schemes

.....................................................................................................

Where reasonable grounds exist for an ACD of an ICVC or an authorised

contractual scheme manager of a co-ownership scheme which is an umbrella

to consider that a foreign law contract entered into by the ICVC or

authorised contractual scheme manager on behalf of the co-ownership

scheme may have become inconsistent with the principle of limited recourse

stated in the instrument constituting the fund of the ICVC or co-ownership

scheme (see ■ COLL 3.2.6 R (22A) (ICVCs: Umbrella schemes - principle of limited

recourse) and ■ COLL 3.2.6 R(22B) (Co-ownership schemes: Umbrella schemes -

principle of limited recourse)) the ACD or authorised contractual scheme

manager of the co-ownership scheme must:

(1) promptly investigate whether there is an inconsistency; and

(2) if the inconsistency still appears to exist, take appropriate steps to

remedy that inconsistency.

COLL 6 : Operating duties and Section 6.6

responsibilities

G6.6.5B

R6.6.6

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/45

In deciding what steps are appropriate to remedy the inconsistency, the ACD

of an ICVC or the authorised contractual scheme manager of a co-ownership

scheme should have regard to the best interests of the unitholders.

Appropriate steps to remedy the inconsistency may include:

(1) where possible, renegotiating the foreign law contract in a way that

remedies the inconsistency; or

(2) causing the ICVC or the authorised contractual scheme manager on

behalf of the co-ownership scheme to exit the foreign law contract.

Maintenance of records

.....................................................................................................

(1) Subject to (5) and (6), the authorised fund manager must make and

retain for six years such records as enable:

(a) the scheme and the authorised fund manager to comply with the

rules in this sourcebook and the OEIC Regulations; and

(b) it to demonstrate at any time that such compliance has been

achieved.

(2) Subject to (5) and (6), the authorised fund manager must make and

retain for six years a daily record of the units in the scheme held,

acquired or disposed of by the authorised fund manager, including

the classes of such units, and of the balance of any acquisitions and

disposals.

(3) Where relevant, an authorised fund manager must make and retain

for a period of six years a daily record of:

(a) how it calculates and estimates dilution; and

(b) its policy and method for determining the amount of any dilution

levy or dilution adjustment.

(4) The authorised fund manager must on the request of the depositary

immediately supply it with such information concerning the

management and administration of the authorised fund as the

depositary may reasonably require.

(5) Where the authorised fund manager or the depositary transfers an

eligible CIS amount which is a dormant asset or unwanted asset

money to a dormant asset fund operator, the authorised fund

manager must retain the relevant records specified in (6) for a period

of six years from the date on which:

(a) (in relation to the transfer of a dormant asset) the person to

whom those records relate made a repayment claim; or

(b) (in relation to unwanted asset money) the person confirmed their

wish for the unwanted asset money to be transferred.

(6) (a) Whenever an eligible CIS amount is transferred to a dormant

asset fund operator, the records to be retained under (5) include:

(i) the full names of each relevant unitholder; and

(ii) the name of the scheme to which the converted units relate,

including, where the scheme is a sub-fund, the name of its

umbrella.

COLL 6 : Operating duties and Section 6.6

responsibilities

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/46

(b) Where the eligible CIS amount falls within section 9(3)(a) of the

Dormant Assets Act 2022 (an amount owing by virtue of the

conversion of one or more units into a right to payment), the

records must also include:

(i) the number and class of units converted;

(ii) the date on which the units were converted and the price per

unit;

(iii) a record of any interest due, fees and charges that would

have been paid and any other adjustments (such as a dilution

levy) in respect of the converted units that would affect the

amount of a repayment claim; and

(iv) for the period beginning with the date of the conversion of

units and ending with the date on which a person establishes

a repayment claim in respect of the units:

(A) in the case of a class of units which pays income, a record

of the distribution rate per unit for each distribution of

income paid;

(B) in the case of any sub-division or consolidation of units,

or any mandatory conversion of units from one class to

another class of the same authorised fund or sub-fund, a

record of the basis of calculation for the action; and

authorised fund or sub-fund under a scheme of

arrangement by which new units are issued in another

authorised fund or sub-fund in exchange, a record of the

basis of calculation for the exchange.

distribution of income or orphan monies, the records must

include:

(i) a note of whether the transfer relates to eligible redemption

proceeds, an eligible distribution of income or orphan

monies;

(ii) where the transfer is of eligible redemption proceeds, the

date on which the units were redeemed;

(iii) where the transfer is of an eligible distribution of income:

(A) the distribution date, and the number and class of units

to which the transfer relates; and

(B) the distribution rate per unit for each distribution paid;

(iv) the value of the relevant eligible CIS amount transferred; and

(v) a record of the interest due, fees and charges that would

have been paid and any other adjustments that would affect

the amount of the repayment claim in respect of the

transferred eligible CIS amount.

(d) Where the transfer is of unwanted asset money, the records must

include:

(i) a note that the transfer relates to unwanted asset money;

(ii) the value of the unwanted asset money transferred;

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.7

R6.6.8

R6.6.9

R6.6.10

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/47

(iii) details of the unitholder’s confirmation that they wish the

unwanted asset money to be transferred to a dormant asset

fund operator; and

(iv) details of the declaration required by section 21(2)(a)(ii) of

the Dormant Assets Act 2022.

Maintenance of capital: notification

.....................................................................................................

The ACD must immediately notify the FCA in writing if the ICVC's capital falls

below the minimum or exceeds the maximum stated in the instrument of

incorporation.

Auditor: AUTs or ACSs

.....................................................................................................

(1) The authorised fund manager of an AUT or ACS must, upon any

vacancy for the position of auditor for an AUT or ACS, with the

approval of the depositary, appoint as auditor for the AUT or ACS a

person qualified for appointment as auditor of an authorised person.

(2) The audit fees of the auditor are determined by the authorised fund

manager with the approval of the depositary.

(3) The authorised fund manager of an AUT or ACS may, with the

approval of the depositary, at any time, remove the auditor of an

AUT or ACS; this power exists notwithstanding anything in any

agreement between the persons concerned.

Returns: AUTs

.....................................................................................................

The manager of an AUT must prepare and supply to the trustee the returns

required to be submitted by the trustee to HM Revenue and Customs.

Dealings in scheme property

.....................................................................................................

(1) The authorised fund manager may give instructions to deal in the

property of the scheme.

(2) The authorised fund manager must obtain the consent of the

depositary for the acquisition or disposal of immovable property.

(3) Where the depositary is of the opinion that a deal in property is not

within the rules in this sourcebook and the instrument constituting

the fund, the depositary may require the authorised fund manager to

cancel the transaction or make a corresponding disposal or acquisition

to secure restoration of the previous situation and to meet any

resulting loss or expense.

(4) Where the depositary is of the opinion that:

(a) an acquisition of property necessarily involves documents

evidencing title being kept in the custody of a person other than

the depositary; and

(b) the depositary cannot reasonably be expected to accept the

responsibility which would otherwise be placed upon it if it were

to permit custody by that other person;

COLL 6 : Operating duties and Section 6.6

responsibilities

G6.6.11

R6.6.12

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/48

the authorised fund manager must, if the depositary so requests,

either cancel the transaction or make a corresponding disposal.

Duty to inform the FCA

.....................................................................................................

■ SUP 15.3 (General notification requirements) contains rules and guidance on

matters that should be notified to the FCA. Such matters include, but are not

limited to, any circumstance that the depositary becomes aware of whilst

undertaking its functions or duties in ■ COLL 6.6.4 R (1) (General duties of the

depositary) and (where applicable) ■ COLL 6.6.4BR (Specific duties of a

depositary: oversight of the liquidity management of a FIIA), that the FCA

would reasonably view as significant.

Control by the depositary over the scheme property

.....................................................................................................

(1) The depositary of an authorised fund is responsible for the

safekeeping of all of the scheme property (other than tangible

movable property) entrusted to it and must:

(a) take all steps and complete all documents needed to ensure

completion of transactions properly entered into for the account

of the scheme;

(b) ensure that scheme property in registered form is, as soon as

practicable, registered in the name of the depositary, its nominee,

or (in the case of a non-UCITS retail scheme managed by a small

authorised UK AIFM) a person retained by it under

■ COLL 6.6.15R(4) (Committees and delegation);

scheme property other than for transactions in derivatives or

forward transactions; and

(d) ensure that any transaction in derivatives or a forward

transaction is entered into so as to ensure that any resulting

benefit is received by the depositary.

(2) The depositary is responsible for the collection of income due to be

paid for the account of the authorised fund.

(3) The depositary must keep for six years such records as are necessary:

(a) to enable it to comply with the rules in this sourcebook; and

(b) to demonstrate that it has achieved such compliance.

(4) Where the authorised fund is a UCITS scheme, this rule applies to the

scheme’s depositary to the extent the provisions are consistent with

the requirements of the UCITS level 2 regulation.

(5) Where the authorised fund is a non-UCITS retail scheme managed by

a full-scope UK AIFM, this rule applies to the scheme’s depositary to

the extent the provisions are consistent with the requirements of the

AIFMD level 2 regulation.

[Note: Articles 12 to 14 of the UCITS level 2 regulation and articles 88 to 90

of the AIFMD level 2 regulation make provision relating to custody and

safekeeping of scheme property. The AIFMD level 2 regulation does not

apply to the depositary of a non-UCITS retail scheme managed by a small

authorised UK AIFM.]

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.13

R6.6.14

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/49

Exercise of rights in respect of the scheme property

.....................................................................................................

(1) The depositary must take all necessary steps to ensure that

instructions given to it by the authorised fund manager for the

exercise of rights attaching to the ownership of scheme property are

carried out.

(2) Where the scheme property of an authorised fund contains units in

any other scheme managed or otherwise operated by the authorised

fund manager of the AUT or ACS or, as the case may be, by any

director of the ICVC or by any associate of either, the depositary must

exercise any voting rights associated with those units in accordance

with what he reasonably believes to be the interests of the

unitholders in the authorised fund.

Duties of the depositary and the authorised fund manager:

investment and borrowing powers

.....................................................................................................

(1) The authorised fund manager must avoid the scheme property being

used or invested contrary to ■ COLL 5, or any provision in the

instrument constituting the fund or the prospectus as referred to in

■ COLL 5.2.4 R (Investment powers:general), ■ COLL 5.6.4 R (Investment

powers: general) and, where the scheme is a regulated money market

fund, the Money Market Funds Regulation, except to the extent

permitted by (3)(b).

(2) The authorised fund manager must, immediately upon becoming

aware of any breach of a provision listed in (1), take action, at its

own expense, to rectify that breach, unless the breach occurred as the

result of any of the circumstances within (3).

(3) The authorised fund manager must restore compliance with COLL 5 as

soon as reasonably practicable having regard to the interests of the

unitholders and, in any event, within the period specified in (5) or,

when applicable, (6) where:

(a) the scheme property is:

(i) used or invested contrary to ■ COLL 5 (other than a provision

excusing a failure to comply on a temporary basis); and

(ii) the contravention is beyond the control of both the

authorised fund manager and the depositary; or

(b) there is a transaction ("subsequent transaction") deriving from a

right (such as the right to convert stock or subscribe to a rights

issue) attributable to an investment ('original investment') of the

scheme if:

(i) the subsequent transaction, but for this rule would constitute

a breach of ■ COLL 5; and

(ii) at the time of the acquisition of the original investment, it

was reasonable for the authorised fund manager, to expect

that a breach would not be caused by the subsequent

transaction; and

in this rule the reference to the exercise of a right includes the

taking effect of a right without any action by or on behalf of the

depositary or the authorised fund manager.

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.15

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/50

(4) Immediately upon the depositary becoming aware of any breach of

any provision listed in (1), it must ensure that the authorised fund

manager complies with (2).

(5) The maximum period for restoration of compliance under (3) starts at

the date of discovery of the relevant circumstance and lasts, subject

to any extension under (6):

(a) for six months; or

(b) where the transaction in question was a transaction in derivatives

or a forward transaction under ■ COLL 5.2.20 R (Permitted

transactions (derivatives and forwards)) or COLL 5.6.13R

(Permitted transactions (derivatives and forwards)), until the close

of business five business days later; or

(6) The period specified at (5)(b) is extended where:

(a) the transaction involved a delivery of a commodity, from five to

twenty business days;

(b) the reason for the contravention in (3)(a) is the inability of the

authorised fund manager to close out a transaction because of a

limit in the number or value of transactions imposed by an

eligible derivatives market, until five business days after:

(i) the inability resulting from any such limit is removed; or

(ii) it becomes, to the knowledge of the authorised fund

manager, reasonably practicable and reasonably prudent for

the transaction to be closed out in some other way.

Committees and delegation

.....................................................................................................

(1) The directors of an ICVC may delegate to any one or more of their

number any of the directors' powers or duties but remain responsible

for the acts or omissions of any such directors.

(1A) The directors of an ICVC have the power to retain the services of

anyone to assist in the performance of their functions, subject to the

duty of the ACD to comply with ■ COLL 6.6.15A R.

(2) [deleted]

(3) [deleted]

(4) The depositary of a non-UCITS retail scheme managed by a small

authorised UK AIFM may delegate any function to any person save:

(a) the ICVC or any director of the ICVC or the authorised fund

manager of a scheme, to assist the depositary to perform:

(i) any function of oversight in respect of the scheme, its

directors or the authorised fund manager as the case may be;

(ii) any function of custody or control of the scheme property;

(b) an associate of the ICVC or of any of the directors of the ICVC or

of the authorised fund manager of the scheme (as the case may

be) to assist the depositary to perform any function in (a)(i); or

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.15A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/51

function of being a custodian of documents evidencing title to

scheme property of the scheme unless the arrangements with the

custodian prohibit the custodian from releasing the documents

into the possession of a third party without the consent of the

depositary.

(5) Where a depositary retains services under (4):

(a) if it retains the services of a director of the ICVC, or an associate

of such a director or its own associate, or the authorised fund

manager of a scheme or that authorised fund manager's

associate, then its liability for those services shall remain

unaffected; and

(b) in any other case, it will not be held responsible by virtue of the

rules in COLL for any act or omission of the person so retained if

it can show that:

(i) it was reasonable for it to obtain assistance to perform the

function in question;

(ii) the person retained was and remained competent to provide

assistance in the performance of the function in question;

and

(iii) it had taken reasonable care to ensure that the assistance in

question was provided by the person retained in a competent

manner.

(6) Where ■ COLL 6.5.5 R (4) (Other directors) applies, the directors have, in

respect of the functions of the ACD under ■ COLL 6.6.3 R (Functions of

the authorised fund manager), the same rights and responsibilities as

for an ACD under this rule and ■ COLL 6.6.15A R.

(1) This rule applies to:

(a) an authorised fund manager of an AUT, ACS or an ICVC where

such AUT, ACS or ICVC is a UCITS scheme; and

(aa) a small authorised UK AIFM that is the authorised fund manager

of an AUT, ACS or an ICVC that is a non-UCITS retail scheme.

(b) [deleted]

(2) The authorised fund manager has the power to retain the services of

any person to assist it in the performance of its functions, provided

that:

(a) a mandate in relation to managing investments of the scheme is

not given to:

(i) the depositary; or

(ii) any other person whose interests may conflict with those of

the authorised fund manager or unitholders; or

(iii) an authorised person operating from an establishment in the

United Kingdom unless such person has a Part 4A permission

to manage investments; or

(iv) any other person operating from an establishment in a

country other than the United Kingdom unless such person:

COLL 6 : Operating duties and Section 6.6

responsibilities

G6.6.16

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/52

(A) is authorised or registered in such country for the

purpose of asset management; and

(B) is subject to prudential supervision in such country;

and in addition if that person is not an a UK firm, co-

operation is ensured between the FCA and the overseas

regulator of that person;

(b) the authorised fund manager ensures that at all times it can

monitor effectively the relevant activities of any person so

retained;

(i) give further instructions to the person so retained; and

(ii) withdraw the mandate with immediate effect when this is in

the interests of the unitholders;

(d) the mandate does not prevent effective supervision of the

authorised fund manager and it must not prevent the authorised

fund manager from acting, or the scheme from being managed,

in the best interests of the unitholders; and

(e) having regard to the nature of the functions to be carried out

under the mandate, the person to whom the mandate is given

must be qualified and capable of undertaking those functions.

(3) Subject to the provisions of the OEIC Regulations and

■ COLL 6.6.15 R (1) and ■ (1A), where services are retained under (2), the

responsibility which the authorised fund manager had in respect of

such services prior to that retention of services will remain

unaffected.

[Note: article 13 of the UCITS Directive]

Delegation: guidance

.....................................................................................................

(1) Directors of an ICVC, authorised fund managers and depositaries

should also have regard to ■ SYSC 8 (Outsourcing). ■ SYSC 8.1.6 R states

that a firm remains fully responsible for discharging all of its

obligations under the regulatory system if it outsources crucial or

important operational functions or any relevant services and

activities.

(2) ■ SUP 15.8.6 R (Delegation by UCITS management companies) requires

the authorised fund manager of a UCITS scheme to inform the FCA

before it delegates one of its duties to another person.

(3) For the purpose of ■ COLL 6.6.15AR (2)(a)(iv), adequate co-operation will

be ensured where the FCA has entered into a co-operation

agreement providing for the exchange of information with the

relevant overseas regulator which is subject to guarantees of

professional secrecy that prevent recipients of any confidential

information divulging it to any person whatsoever, save in summary

or aggregate form such that UCITS schemes, management companies

and depositaries cannot be individually identified, without prejudice

to cases covered by criminal law.

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.17

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/53

(4) ■ COLL 6.6B sets out the FCA’s rules and guidance that apply to a

depositary of a UCITS scheme seeking to delegate any of its functions.

Conflicts of interest

.....................................................................................................

(1) The authorised fund manager, any other director of an ICVC and the

depositary must take reasonable care to ensure that a transaction

within (a) to (f) is not carried out on behalf of the scheme:

(a) putting cash on deposit with an affected person unless that

person is an eligible institution or an approved bank and the

arm's length requirement in (2) is satisfied;

(b) lending money by an affected person to, or for the account of,

the scheme, unless the affected person is an eligible institution or

an approved bank, and the arm's length requirement in (2) is

satisfied;

scheme (or the depositary for the account of the scheme), unless

(3) applies;

(d) the vesting of property (other than cash) by an affected person in

the scheme or the depositary for the account of the scheme

against the issue of units in the scheme, unless:

(i) (3) applies; or

(ii) the purpose of the vesting is that the whole or part of the

property of a body corporate or a collective investment

scheme becomes the first property of the scheme and the

unitholders of shares or units in the body corporate or

collective investment scheme become the first unitholders in

the scheme;

(e) the acquisition of scheme property by an affected person from

the scheme (or the depositary acting for the account of the

scheme), unless ■ COLL 6.2.15 R (In specie issue and cancellation)

applies, or unless (3) applies; and

(f) transactions within COLL 5.4 (Stock lending) by an affected

person with, or in relation to, the scheme unless the arm's length

requirement in (2) is satisfied.

(2) Any transaction in (1)(a),(b) or (f) must be at least as favourable to

the scheme as any comparable arrangement on normal commercial

terms negotiated at arm's length between the affected person and an

independent party.

(3) There is no breach of (1)(c), (d) or (e) if the transaction meets the

requirements of (4) (best execution on-exchange), (5) (independent

valuation) or (6) (arm's length transaction).

(4) There is best execution on-exchange for the purposes of (3) if:

(a) the property is an approved security or an approved derivative;

(b) the transaction is effected under the rules of the relevant

exchange with or through a person who is bound by those rules;

and of its terms; and

COLL 6 : Operating duties and Section 6.6

responsibilities

G6.6.18

R6.6.19

R6.6.20

G6.6.20A

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/54

(d) the authorised fund manager has taken all reasonable steps to

ensure that the transaction is effected on the terms which are the

best available for the scheme.

(5) There is independent valuation for the purposes of (3) if:

(a) the value of the property is certified in writing for the purpose of

the transaction by a person approved by the depositary as:

(i) independent of any affected person; and

(ii) qualified to value property of the relevant kind; and

(b) the depositary is of the opinion that the terms of the transaction

are not likely to result in any material prejudice to unitholders.

(6) There is an arm's length transaction for the purposes of (3) if:

(a) paragraph (4)(a) is not satisfied;

(b) it is not reasonably practicable to obtain an independent

valuation under (5); and

be on terms which satisfy the arm's length requirement in (2).

Conflicts of interest: guidance

.....................................................................................................

(1) [deleted]

(2) Regulation 44 of the OEIC Regulations (Invalidity of certain

transactions involving directors) is relevant to the application of

■ COLL 6.6.17 R.

Application of assessment of value and independent director

rules

.....................................................................................................

■ COLL 6.6.20R to ■ COLL 6.6.26G apply to:

(1) an authorised fund manager (other than one which is managing an

authorised fund under a temporary permission) of an AUT, ACS or

ICVC.

(2) [deleted]

Assessment of value

.....................................................................................................

(1) An authorised fund manager must conduct an assessment at least

annually for each scheme it manages of whether the payments out of

scheme property set out in the prospectus are justified in the context

of the overall value delivered to unitholders.

(2) In carrying out the assessment required by (1), the AFM must,

separately for each class of units in a scheme, consider at least the

matters set out in ■ COLL 6.6.21R (Table: minimum considerations –

assessment of value).

The authorised fund manager of a scheme with a side pocket class should

note the modified application of the assessment of value rules in

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.21

G6.6.22

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/55

■ COLL 7.8.34R (Modified application of the assessment of value rules) and the

related guidance in ■ COLL 7.8.35G.

Table: minimum considerations – assessment of value

.....................................................................................................

This table belongs to ■ COLL 6.6.20R (Assessment of value).

Quality of service

(1) The range and quality of services provided to unitholders.

Performance

(2) The performance of the scheme, after deduction of all payments out

of scheme property as set out in the prospectus (in this rule, COLL

6.6.23E and COLL 8.5.19E, “charges”). Performance should be consid-

ered over an appropriate timescale having regard to the scheme’s in-

vestment objectives, policy and strategy.

AFM costs - general

(3) In relation to each charge, the cost of providing the service to which

the charge relates, and when money is paid directly to associates or

external parties, the cost is the amount paid to that person.

Economies of scale

(4) Whether the AFM is able to achieve savings and benefits from eco-

nomies of scale, relating to the direct and indirect costs of managing

the scheme property and taking into account the value of the

scheme property and whether it has grown or contracted in size as a

result of the sale and redemption of units.

Comparable market rates

(5) In relation to each service, the market rate for any comparable ser-

vice provided:

(a) by the AFM; or

(b) to the AFM or on its behalf, including by a person to which

any aspect of the scheme’s management has been delegated.

Comparable services

(6) In relation to each separate charge, the AFM’s charges and those of

its associates for comparable services provided to clients, including

for institutional mandates of a comparable size and having similar in-

vestment objectives and policies;

Classes of units

(7) Whether it is appropriate for unitholders to hold units in classes sub-

ject to higher charges than those applying to other classes of the

same scheme with substantially similar rights.

When assessing the quality of service provided under ■ COLL 6.6.21R(1):

(1) the AFM should have regard to the quality of service it provides and

the quality of service provided by any person to which any aspect of

the scheme’s management has been delegated or which provides

services to the AFM or on its behalf; and

(2) the AFM’s assessment of quality of service is not confined to services

provided directly to unitholders but may include services undertaken

on their behalf by the AFM, such as consideration of the quality of

the investment process used to make decisions about managing the

scheme property.

COLL 6 : Operating duties and Section 6.6

responsibilities

E6.6.23

G6.6.24

R6.6.25

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/56

Failure by an AFM to take sufficient steps to address any instance where a

scheme’s charges are not justified in the context of the overall value

delivered to unitholders may be relied on as tending to establish

contravention of ■ COLL 6.6A.2R, ■ COBS 2.1.1R or ■ COBS 2.1.4R as applicable.

(1) ■ COLL 6.6A.2R applies to AFMs of UCITS schemes and in broad terms

requires AFMs to act in the best interests of unitholders. In particular,

■ COLL 6.6A.2R(1) requires AFMs to ensure unitholders are treated

fairly, ■ COLL 6.6A.2R(5) requires AFMs to act in such a way as to

prevent undue costs being charged to any scheme it manages and its

unitholders and ■ COLL 6.6A.2R(6)(b) requires an AFM to act solely in

the interests of the scheme and its unitholders.

(2) ■ COBS 2.1.1R is the clients best interests rule, ■ COBS 2.1.4R(2) requires

a full-scope UK AIFM to act in the best interests of the AIF it manages

or the investors of the AIF it manages and the integrity of the market

and ■ COBS 2.1.4R(3) requires the AFM to treat all investors fairly.

Independent directors

.....................................................................................................

(1) An authorised fund manager must ensure that at least one quarter of

the members of its governing body are independent natural persons.

If the AFM’s governing body comprises fewer than eight members,

the AFM must instead ensure that at least two of its members are

independent natural persons.

(2) The authorised fund manager, in appointing an independent member

of its governing body, must determine whether such a member is

independent in character and judgement and whether there are

relationships or circumstances which are likely to affect, or could

appear to affect, that member’s judgement.

(3) The authorised fund manager must take reasonable steps to ensure

that independent members appointed to its governing body have

sufficient expertise and experience to be able to make judgements on

whether the AFM is managing each scheme in the best interests of

unitholders.

(4) (a) Independent members of an AFM’s governing body must be

appointed for terms of no longer than five years, with a

cumulative maximum duration of ten years.

(b) If an independent member is appointed to more than one

governing body within an AFM’s group, the cumulative maximum

duration of ten years referred to in (a) is calculated by adding the

durations of each separate appointment and discounting periods

during which appointments overlapped to avoid double counting.

an AFM’s governing body before 1 October 2019, the five year

term(s) and cumulative maximum duration of ten years run from

that date.

(5) Independent members are not eligible for reappointment to an AFM’s

governing body until five years have elapsed from the end of the ten

year period referred to in (4).

COLL 6 : Operating duties and Section 6.6

responsibilities

G6.6.26

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/57

(6) The terms of employment on which independent members are

appointed must be such as to secure their independence.

(1) The role of the independent members should include providing input

and challenge as part of the AFM’s assessment of value in accordance

with ■ COLL 6.6.20R. Independent members may be tasked with

additional responsibilities, taking into consideration remuneration

and conflict of interest rules.

(2) A member of an AFM’s governing body is unlikely to be considered

independent if any of the following circumstances exist:

(a) the person is an employee of the AFM or of an affiliated

company or paid by them for any role (other than as an

independent member of the governing body of an affiliated

company or of a body exercising an independent governance

function within the AFM’s group) including participating in the

AFM’s share option or performance-related pay scheme; or

(b) the person has been an employee of the AFM or of an affiliated

company within the AFM's group (other than having been an

independent member of the governing body of an affiliated

company or of a body exercising an independent governance

function within the AFM’s group) or of any person to which

collective portfolio management of the scheme has been

delegated, within the five years preceding their appointment to

the governing body; or

appointment, a material business relationship of any description

with the AFM or with an affiliated company or with any person

to which collective portfolio management of the scheme has

been delegated, either directly or indirectly; or

(d) the person has received any sort of remuneration from the AFM’s

group (other than as an independent member of the governing

body of an affiliated company of the AFM or of a body exercising

an independent governance function within the AFM’s group)

within the five years preceding their appointment; or

(e) the person has a close relative who is an officer or other senior

employee of the AFM or a company within the AFM’s group.

(3) The expertise and experience required under ■ COLL 6.6.25R(3) may

have been gained through professional experience, public service,

academia or otherwise, and does not need to relate to the financial

services industry.

(4) The effect of ■ COLL 6.6.25R(6) is that a person who serves on the

governing body should be subject to appropriate contractual terms so

that, when acting in the capacity of an independent member of the

governing body, they are free to act in the interests of unitholders

and should be able to do so without breaching their terms of

employment.

(5) An AFM should fill any vacancies that arise within the required

number of independent members on its governing body as soon as

possible and, in any event, within six months.

COLL 6 : Operating duties and Section 6.6

responsibilities

R6.6.27

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/58

(6) An AFM should consider indemnifying the independent members of

its governing body against liabilities incurred while fulfilling their

duties as such members.

Allocation of responsibility for compliance to an approved

person

.....................................................................................................

(1) An AFM must allocate responsibility for ensuring its compliance with

■ COLL 6.6.20R, ■ COLL 6.6.25R, and, as applicable, ■ COLL 6.6A.2R or

■ COBS 2.1.4R to an approved person.

(2) Where the chair of the AFM’s governing body is an approved person,

the AFM must allocate the responsibility set out in (1) to that person.

COLL 6 : Operating duties and Section 6.6A : Duties of AFMs in relation to

responsibilities UCITS schemes

6R6.6A.1

R6.6A.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/59

6.6A Duties of AFMs in relation to

UCITS schemes

Application

.....................................................................................................

(1) This section applies to:

(a) an authorised fund manager of a UCITS scheme, a depositary, an

ICVC and any other director of an ICVC which is a UCITS scheme.

(b) [deleted]

(2) [deleted]

(3) [deleted]

Duties of AFMs of UCITS schemes to act in the best interests

of the scheme and its unitholder

.....................................................................................................

An authorised fund manager of a UCITS scheme must:

(1) ensure that the unitholders of any such scheme it manages are

treated fairly;

(2) refrain from placing the interests of any group of unitholders above

the interests of any other group of unitholders;

(3) apply appropriate policies and procedures for preventing malpractices

that might reasonably be expected to affect the stability and integrity

of the market;

(4) (a) ensure that fair, correct and transparent pricing models and

valuation systems are used for each scheme it manages, in order

to comply with the duty to act in the best interests of the

unitholders; and

(b) be able to demonstrate that the investment portfolio of each

such scheme it manages is accurately valued;

(5) act in such a way as to prevent undue costs being charged to any

such scheme it manages and its unitholders; and

(6) in carrying out its functions act:

(a) honestly, fairly, professionally and independently; and

(b) solely in the interests of the UCITS scheme and its unitholders.

COLL 6 : Operating duties and Section 6.6A : Duties of AFMs in relation to

responsibilities UCITS schemes

G6.6A.3

R6.6A.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/60

[Note: article 22 of the UCITS Implementing Directive and article 25(2) first

paragraph of the UCITS Directive]

(1) Examples of malpractices for the purposes of ■ COLL 6.6A.2R (3) would

include market timing and late trading, which may have detrimental

effects on unitholders and may undermine the functioning of the

market.

(2) Examples of undue costs for the purposes of ■ COLL 6.6A.2R (5) would

include unreasonable charges and excessive trading, taking into

account the scheme's investment objectives and policy.

[Note: recital (18) of the UCITS implementing Directive]

Due diligence requirements of AFMs of UCITS schemes

.....................................................................................................

An authorised fund manager of a UCITS scheme must:

(1) ensure a high level of diligence in the selection and ongoing

monitoring of scheme property, in the best interests of the scheme

and the integrity of the market;

(2) ensure it has adequate knowledge and understanding of the assets in

which any scheme it manages is invested;

(3) establish written policies and procedures on due diligence and

implement effective arrangements for ensuring that investment

decisions on behalf of any UCITS scheme it manages are carried out in

compliance with the objectives and the investment strategy and risk

limit system of the scheme;

(4) when implementing its risk management policy, and where it is

appropriate after taking into account the nature of a proposed

investment:

(a) formulate forecasts and analyse the investment’s impact on the

portfolio composition, liquidity and risk and reward profile of the

scheme before carrying out the investment; and

(b) carry out the analysis in (a) only on the basis of reliable and up-

to-date information, both in quantitative and qualitative terms;

(5) exercise due skill, care and diligence when entering into, managing or

terminating any arrangement with third parties in relation to the

performance of risk management activities; and

(6) before entering into any arrangements of the type referred to in (5):

(a) take the necessary steps in order to verify that the third party has

the ability and capacity to perform the risk management activities

reliably, professionally and effectively; and

(b) establish methods for the on-going assessment of the standard of

performance of the third party.

[Note: article 23 of the UCITS implementing Directive]

COLL 6 : Operating duties and Section 6.6A : Duties of AFMs in relation to

responsibilities UCITS schemes

R6.6A.5

R6.6A.6

R6.6A.7

R6.6A.8

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/61

Compliance with the regulatory requirements applicable to the

conduct of business activities of a UCITS management

company

.....................................................................................................

The authorised fund manager of a UCITS scheme must comply with all

regulatory requirements applicable to the conduct of its business activities so

as to promote the best interests of its investors and the integrity of the

market.

[Note: article 14(1)(e) of the UCITS Directive]

Strategies for the exercise of voting rights

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must develop

adequate and effective strategies for determining when and how

voting rights attached to ownership of scheme property, are to be

exercised, to the exclusive benefit of the scheme concerned.

(2) The strategy referred to in (1) must determine measures and

procedures for:

(a) monitoring relevant corporate events;

(b) ensuring that the exercise of voting rights is in accordance with

the investment objectives and policy of the relevant scheme; and

exercise of voting rights.

(3) An authorised fund manager of a UCITS scheme must make available

to unitholders:

(a) a summary description of the strategies referred to in (1); and

(b) free of charge and on their request, details of the actions taken

on the basis of the strategies referred to in (1).

[Note: article 21 of the UCITS implementing Directive]

Appointment of a single depositary

.....................................................................................................

An authorised fund manager of a UCITS scheme must (for each scheme it

manages) ensure that:

(1) a single depositary is appointed; and

(2) the assets of the UCITS scheme are entrusted to the depositary for

safekeeping in accordance with ■ COLL 6.6B.18R and ■ COLL 6.6B.19R.

[Note: article 22(1) and (5) of the UCITS Directive]

Eligible depositaries for UCITS schemes

.....................................................................................................

An authorised fund manager must ensure that the depositary it appoints

under ■ COLL 6.6A.7R is a firm established in the United Kingdom that has the

Part 4A permission of acting as trustee or depositary of a UK UCITS and is

one of the following:

(1) a national central bank; or

COLL 6 : Operating duties and Section 6.6A : Duties of AFMs in relation to

responsibilities UCITS schemes

G6.6A.9

R6.6A.10

R6.6A.11

G6.6A.12

G6.6A.13

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/62

(2) a credit institution; or

(3) a firm which:

(a) [deleted]

(b) either:

(i) is a MiFID investment firm; or

(ii) is an investment management firm to which IPRU(INV) 5

applies; and

■ COLL 6.6B.11R.

[Note: article 23(2)(a), (b) and (c) (first sentence) of the UCITS Directive]

For a depositary to be established in the United Kingdom, it must have its

registered office in the United Kingdom.

[deleted]

Written contract

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must ensure that the

appointment of the depositary is evidenced by a written contract.

(2) The contract must regulate the flow of information deemed necessary

to allow the depositary to perform its functions for the scheme.

[Note: article 22(2) of the UCITS Directive]

The written contract referred to in ■ COLL 6.6A.11R may cover more than one

scheme.

Article 2 of the UCITS level 2 regulation sets out the minimum information

that must be included in the written contract between:

(1) (a) the authorised fund manager of a UCITS scheme; and

(b) [deleted]

(2) the depositary.

COLL 6 : Operating duties and Section 6.6B : UCITS depositaries

responsibilities

R6.6B.1

R6.6B.2

R6.6B.3

G6.6B.4

G6.6B.5

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/63

6.6B UCITS depositaries

Application

.....................................................................................................

This section applies to the depositary of a UCITS scheme managed by an

authorised fund manager.

General obligations

.....................................................................................................

A depositary in carrying out its functions must act:

(1) honestly, fairly, professionally and independently; and

(2) solely in the interests of the UCITS scheme and its unitholders.

[Note: article 25(2) first paragraph of the UCITS Directive]

Conflicts of interest: depositaries

.....................................................................................................

A depositary must not carry out activities with regard to the UCITS scheme,

or the authorised fund manager, acting on behalf of the scheme, that may

create conflicts of interest between the scheme, the unitholders in the

scheme or the authorised fund manager and itself, unless:

(1) the depositary has properly identified any such potential conflicts of

interest;

(2) the depositary has functionally and hierarchically separated the

performance of its depositary tasks from its other potentially

conflicting tasks; and

(3) the potential conflicts of interest are properly managed, monitored

and disclosed to the unitholders of the scheme.

[Note: article 25(2) second paragraph of the UCITS Directive]

Eligible depositaries for UCITS schemes

.....................................................................................................

A depositary of a UCITS scheme must be a firm established in the United

Kingdom that has the Part 4A permission of acting as trustee or depositary

of a UK UCITS.

■ COLL 6.6A.8R sets out the categories of firms that may be appointed by an

authorised fund manager as the depositary of a UCITS scheme.

COLL 6 : Operating duties and Section 6.6B : UCITS depositaries

responsibilities

G6.6B.6

G6.6B.7

R6.6B.8

G6.6B.9

G6.6B.10

R6.6B.11

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/64

For a depositary to be established in the United Kingdom, it must have its

registered office in the United Kingdom.

Depositaries appointed under COLL 6.6A.8R(3) (non-bank

depositaries): Capital requirements

.....................................................................................................

A depositary appointed in accordance with ■ COLL 6.6A.8R(3) needs to satisfy

the capital requirements in either:

(1) ■ IPRU(INV) 5; or

(2) MIFIDPRU

[deleted]

[Editor’s note: this requirement has been moved to ■ MIFIDPRU 4.4.6R.]

(1) [deleted]

(2) [deleted]

[deleted]

Depositaries appointed under COLL 6.6A.8R(3) (non-bank

depositaries): organisational requirements

.....................................................................................................

A depositary appointed under ■ COLL 6.6A.8R(3) must:

(1) ensure that it has the infrastructure necessary to keep in custody

UCITS custodial assets that can be registered in a financial instruments

account opened in the depositary’s books;

(2) establish adequate policies and procedures sufficient to ensure the

compliance of the depositary, including its managers and employees,

with its obligations under the regulatory system;

(3) have:

(a) sound administrative and accounting procedures and internal

control mechanisms;

(b) effective procedures for risk assessment; and

processing systems;

(4) maintain and operate effective organisational and administrative

arrangements with a view to taking all reasonable steps designed to

prevent conflicts of interest;

(5) arrange for records to be kept of all services, activities and

transactions that it undertakes, which must be sufficient to enable

the competent authority to monitor the firm’s compliance with the

requirements under the regulatory system;

COLL 6 : Operating duties and Section 6.6B : UCITS depositaries

responsibilities

G6.6B.12

R6.6B.13

G6.6B.14

G6.6B.15

R6.6B.16

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/65

(6) take reasonable steps to ensure continuity and regularity in the

performance of its depositary functions by employing appropriate

and proportionate systems, resources and procedures to perform its

depositary activities;

(7) ensure that all members of its management body and senior

management at all times:

(a) are of sufficiently good repute; and

(b) possess sufficient knowledge, skills and experience;

(8) ensure that its management body possesses adequate collective

knowledge, skills and experience to be able to understand the

depositary’s activities, including the main risks; and

(9) require each member of its management body and senior

management to act with honesty and integrity.

[Note: article 23(2)(c) (second sentence) of the UCITS Directive]

A firm’s attention is also drawn to the organisational requirements in SYSC.

The rules and guidance in SYSC apply to a depositary appointed under

■ COLL 6.6A.8R(3), in accordance with the application provisions summarised in

■ SYSC 1.1A (Application) and provided in detail in ■ SYSC 1 Annex 1.

Written contract

.....................................................................................................

(1) A depositary must ensure that its appointment as depositary of a

UCITS scheme is evidenced by a written contract.

(2) The contract must regulate the flow of information deemed necessary

to allow the depositary to perform its functions for the scheme.

[Note: article 22(2) of the UCITS Directive]

The written contract referred to in ■ COLL 6.6B.13R may cover more than one

UCITS scheme.

Article 2 of the UCITS level 2 regulation sets out the minimum information

that must be included in the written contract between the authorised fund

manager and the depositary.

Depositary functions: oversight

.....................................................................................................

The depositary must, for each UCITS scheme for which it is appointed:

(1) ensure that the sale, issue, repurchase, redemption and cancellation

of units of the scheme are carried out in accordance with:

(a) the applicable national law;

(b) the instrument constituting the fund;

(d) ■ COLL 6.2 (Dealing);

COLL 6 : Operating duties and Section 6.6B : UCITS depositaries

responsibilities

R6.6B.17

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/66

(2) ensure that the price of the units of the UCITS is calculated in

accordance with:

(a) the applicable national law;

(b) the instrument constituting the fund;

(d) ■ COLL 6.3 (Valuation and pricing);

(3) carry out the instructions of the authorised fund manager, unless they

conflict with:

(a) the applicable national law; or

(b) the instrument constituting the fund; or

(d) ■ COLL 5 (Investment and borrowing powers);

(4) ensure that, in transactions involving the assets of the UCITS scheme,

any consideration is remitted to the scheme within the usual time

limits; and

(5) ensure that the income of the UCITS scheme is applied in accordance

with:

(a) the applicable national law;

(b) the instrument constituting the fund;

(d) ■ COLL 6.8 (Income: accounting, allocation and distribution).

[Note: article 22(3) of the UCITS Directive]

Depositary functions: cash monitoring

.....................................................................................................

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; or

(ii) a CRD credit institution; or

(iii) a bank authorised in a country other than an EEA State; and

COLL 6 : Operating duties and Section 6.6B : UCITS depositaries

responsibilities

R6.6B.18

R6.6B.19

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/67

(safeguarding of client financial instruments and funds) of the

MiFID Delegated Directive; and

(3) where cash accounts are opened in the name of the depositary acting

on behalf of the scheme in accordance with (2)(a)(iii), the depositary

must ensure that no cash of the entity referred to in (2)(b), and none

of the depositary’s own cash, is booked on such accounts.

[Note: article 22(4) of the UCITS Directive]

Depositary functions: safekeeping of financial instruments

.....................................................................................................

(1) The depositary of a UCITS scheme must hold in custody all UCITS

custodial assets of the scheme.

(2) The depositary must ensure that all UCITS custodial assets that can be

registered in a financial instruments account:

(a) are registered in the depositary’s books within segregated

accounts opened in the name of:

(i) the UCITS scheme; or

(ii) the authorised fund manager, acting on behalf of the

scheme; and

(b) can be clearly identified as belonging to the UCITS scheme at all

times in accordance with:

(i) the applicable law; and

(ii) the applicable provisions in ■ CASS 6.

[Note: article 22(5)(a) of the UCITS Directive]

Depositary functions: safekeeping of other assets

.....................................................................................................

The depositary must, for UCITS scheme property other than UCITS custodial

assets:

(1) verify that the UCITS scheme or the authorised fund manager, acting

on behalf of the scheme, is the owner of the assets based:

(a) on information or documents provided by the authorised fund

manager; and

(b) where available, on external evidence; and

(2) maintain, and keep up to date, a record of those assets for which it is

satisfied that the UCITS scheme or the authorised fund manager,

acting on behalf of the scheme, is the owner.

[Note: article 22(5)(b) of the UCITS Directive]

COLL 6 : Operating duties and Section 6.6B : UCITS depositaries

responsibilities

R6.6B.20

R6.6B.21

R6.6B.22

G6.6B.23

G6.6B.24

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/68

Inventory of assets

.....................................................................................................

The depositary must provide a comprehensive inventory of all the assets

comprising the scheme property of the UCITS scheme to the authorised fund

manager on a regular basis.

[Note: article 22(6) of the UCITS Directive]

Re-use of assets

.....................................................................................................

(1) The depositary must not re-use UCITS custodial assets except:

(a) where permitted under ■ COLL 5.4 (stock lending); and

(b) when carrying out the instructions of the authorised fund

manager on behalf of the scheme.

(2) Re-use of the UCITS custodial assets comprises any transaction in

relevant scheme property including, but not limited to, transferring,

pledging, selling and lending.

[Note: article 22(7) first paragraph of the UCITS Directive]

Limitation on delegation

.....................................................................................................

A depositary must not delegate its oversight function in ■ COLL 6.6B.16R or its

cash monitoring function in ■ COLL 6.6B.17R to a third party.

[Note: article 22a(1) of the UCITS Directive]

The use of services provided by securities settlement systems, as specified in

the Financial Markets and Insolvency (Settlement Finality) Regulations 1999,

or similar services provided by securities settlement systems in other

countries, does not constitute a delegation by the depositary of its functions

for the purposes of ■ COLL 6.6B.22R.

[Note: article 22a(4) of the UCITS Directive]

(1) (a) If a depositary performs part of its functions through a branch in

an EEA State, this is not a delegation by the depositary of its

functions to a third party.

(b) This is because ‘third party’ in ■ COLL 6.6B.22R means any party

that is not part of the same legal entity as the depositary.

(2) [deleted]

(3) (a) A depositary that performs part of its functions through a branch

in an EEA State should ensure that those arrangements do not

impede the depositary’s ability to meet the threshold conditions.

(b) (i) In particular, the arrangements should not impede the FCA’s

ability to supervise the depositary effectively.

(ii) For example, the FCA’s ability to supervise the depositary

might be impeded if the depositary performed tasks other

than administrative and supporting tasks from its branch in

an EEA State.

COLL 6 : Operating duties and Section 6.6B : UCITS depositaries

responsibilities

R6.6B.25

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/69

Delegation: safekeeping

.....................................................................................................

A depositary may delegate the functions in ■ COLL 6.6B.18R and

■ COLL 6.6B.19R to one or more third parties if:

(1) the tasks are not delegated with the intention of avoiding the

requirements of the UCITS Directive, as implemented in this chapter;

(2) the depositary can demonstrate that there is an objective reason for

the delegation;

(3) the depositary:

(a) has exercised all due skill, care and diligence in the selection and

appointment of any third party to whom it intends to delegate

parts of its tasks; and

(b) continues to exercise all due skill, care and diligence in the

periodic review and ongoing monitoring:

(i) of any third party to whom it has delegated parts of its tasks;

and

(ii) of the arrangements of that third party in respect of the

matters delegated to it; and

(4) the depositary ensures that the third party delegate meets the

following conditions at all times:

(a) the third party has structures and expertise that are adequate

and proportionate to the nature and complexity of the assets of

the UCITS scheme that have been entrusted to it;

(b) (subject to ■ COLL 6.6B.26R) for custody tasks in relation to UCITS

custodial assets, the third party is subject to:

(i) effective prudential regulation, including minimum capital

requirements, and supervision in the jurisdiction concerned;

and

(ii) an external periodic audit to ensure that the financial

instruments remain in its custody;

from its own assets and from the assets of the depositary in such

a way that they can, at any time, be clearly identified as

belonging to clients of a particular depositary;

(d) the third party takes all necessary steps to ensure that in the

event of insolvency of the third party, UCITS custodial assets held

in custody by the third party are unavailable for distribution

among, or realisation for the benefit of, creditors of the third

party; and

(e) the third party complies with the general obligations and

prohibitions relating to the depositary in:

(i) ■ COLL 6.6B.2R (General obligations);

(ii) ■ COLL 6.6B.3R (Conflicts of interests: depositaries);

(iii) ■ COLL 6.6B.13R (Written contract);

(iv) ■ COLL 6.6B.18R (Depositary functions: safekeeping of financial

instruments);

COLL 6 : Operating duties and Section 6.6B : UCITS depositaries

responsibilities

R6.6B.26

R6.6B.27

G6.6B.28

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/70

(v) ■ COLL 6.6B.19R (Depositary functions: safekeeping of other

assets); and

(vi) ■ COLL 6.6B.21R (Reuse of assets).

[Note: article 22a(2) and (3) of the UCITS Directive]

Delegation: third countries

.....................................................................................................

A depositary may delegate custody tasks in relation to UCITS custodial assets

to an entity in another country even though that entity does not satisfy the

conditions in ■ COLL 6.6B.25R(4)(b)(i) if:

(1) the law of that 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 law of that country; and

(b) for as long as there is no local entity that satisfies the delegation

conditions in ■ COLL 6.6B.25R(4)(b)(i);

(4) the investors of the relevant UCITS scheme are informed before their

investment:

(a) that such delegation is required due to legal constraints in the

other country;

(b) of the reasons as to why the delegation is necessary; and

(5) the authorised fund manager, acting on behalf of the UCITS scheme,

has consented to the delegation arrangements before they become

effective.

[Note: article 22a(3) of the UCITS Directive]

Delegation: sub-delegation

.....................................................................................................

A depositary must ensure that a third party to whom the depositary has

delegated functions under ■ COLL 6.6B.25R does not, in turn, sub-delegate

those functions unless the delegate complies with the same requirements

that apply to the depositary, with any necessary changes, in relation to the

delegation by the depositary of its functions in ■ COLL 6.6B.25R and

■ COLL 6.6B.26R.

[Note: article 22a(3) third paragraph of the UCITS Directive]

Delegation: omnibus account

.....................................................................................................

A depositary may delegate the safekeeping of assets to a third party that

maintains an omnibus account for multiple UCITS schemes, provided it is a

segregated common account that is segregated from the third party’s own

assets.

[Note: recital 22 of the UCITS Directive]

COLL 6 : Operating duties and Section 6.6B : UCITS depositaries

responsibilities

G6.6B.29

R6.6B.30

G6.6B.31

G6.6B.32

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/71

Provision of information

.....................................................................................................

The requirements of ■ SUP 2 (Information gathering by the FCA or PRA on its

own initiative) apply to the depositary, under which it must enable the FCA

to obtain, on request, all information that the depositary has obtained while

discharging its duties and that the FCA considers necessary.

[Note: article 26a first paragraph of the UCITS Directive]

Reporting of breaches

.....................................................................................................

A depositary must have appropriate procedures for its employees to report

internally, through a specific, independent and autonomous channel,

potential or actual breaches of those national provisions which implemented

the UCITS Directive before IP completion day.

[Note: article 99d(5) of the UCITS Directive]

■ SYSC 18 (Guidance on Public Interest Disclosure Act: Whistleblowing)

contains further guidance on the effect of the Public Interest Disclosure Act

1998 in the context of the relationship between firms and the FCA.

Subordinate measures

.....................................................................................................

Articles 3 to 17 of the UCITS level 2 regulation provide detailed rules

supplementing this section.

COLL 6 : Operating duties and Section 6.7

responsibilities

R6.7.1

R6.7.2

G6.7.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/72

6.7 Payments

Application

.....................................................................................................

This section applies in accordance with ■ COLL 6.7.2 R (Table of application).

Table of application

.....................................................................................................

Table of Application. This table belongs to ■ COLL 6.7.1 R.

Authorised

Depositary fund man-

of an ICVC, ager of an

AUT or AUT or

Rule ICVC ACD ACS ACS

6.7.1R to x x x x

6.7.5G

6.7.6G x x x

6.7.7R x x

6.7.8G x x

6.7.9R x x

6.7.10R x x x

6.7.11G x x x

6.7.12R x x x

6.7.13G x x x

6.7.14R x

6.7.15R x x x x

6.7.16G x x x

6.7.17R x x x

Note: "x" means "applies", but not every paragraph in every rule will

necessarily apply.

Purpose

.....................................................................................................

(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.

COLL 6 : Operating duties and Section 6.7

responsibilities

R6.7.4

G6.7.5

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/73

(3) The prospectus should make adequate provision for payments from

an authorised fund. This section:

(a) prohibits, or stipulates the conditions on which, the payments out

of the scheme property can be made;

(b) requires certain payments to be conditional on disclosure in the

prospectus; and

Payments out of scheme property

.....................................................................................................

(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;

(d) subject to (1A), donations to one or more registered charities for

Sharia compliance purposes (in this rule, ‘purification’), as set out

in and authorised by the prospectus of the scheme.

(1A) Payments relating to (1)(d) may only be made from the income

property of the scheme where they represent the required

percentage of the income property recognised for purification as

advised by a person with appropriate knowledge of finance and

Islamic law.

(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 (2) do not apply to any payments in relation to

any taxation payable by the authorised fund.

(4) Paragraphs (1) and (2) do not permit payments to third parties for the

safekeeping or administration of units on behalf of unitholders rather

than on behalf of the authorised fund.

Payments out of scheme property: guidance

.....................................................................................................

(1) Details of permissible types of payments out of scheme property are

to be set out in full in the prospectus in accordance with

■ COLL 4.2.5R (13) and ■ COLL 4.2.5R (14) (Table: contents of the

prospectus).

(2) An authorised fund manager should consider whether a payment to

an affected person is unfair because of its amount or because it

confers a disproportionate benefit on the affected person.

(3) ■ COLL 6.7.4 R (2) (Payments out of scheme property) does not

invalidate a payment that gives rise to a difference between the

rights of separate classes of unit that relates solely to the payments

that may be taken out of scheme property.

COLL 6 : Operating duties and Section 6.7

responsibilities

G6.7.6

R6.7.6A

R6.7.7

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/74

(4) Payments to third parties as referred to in ■ COLL 6.7.4 R (4) include

payments to platform service providers and other similar platform

services.

(5) The person referred to in ■ COLL 6.7.4R(1A) should be independent of

the authorised fund manager and any registered charity to which

payments may be made.

Performance fees

.....................................................................................................

(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 should be consistent with ■ COLL 6.7.4 R. In

determining whether the performance fee is consistent the

authorised fund manager should have regard to factors such as:

(a) [deleted]

(b) where it is made on the basis of performance of the authorised

fund against any index or any other factor, that benchmark must

be reasonable given the investment objectives of the authorised

fund and must be consistently applied;

return (the "hurdle rate"), which may be fixed or variable;

(d) where (b) or (c) applies, the benchmark or hurdle rate may be

carried forward to future accrual periods;

(e) the period over which it accrues and the frequency with which it

crystallises should be reasonable; and

(f) except where allowed by ■ COLL 6.7.4 R (1), there are to be no

arrangements to adjust the price or value of sale or repurchase

transactions in respect of performance fees accrued or paid if the

transactions occur within the accrual period of the charge.

(3) In accordance with ■ COLL 4.2.5R (13) (Table: contents of prospectus)

the prospectus should contain the maximum amount or percentage of

scheme property that the performance fee might represent in an

annual accounting period. This disclosure should be given in plain

language together with examples of the operation of the

performance fee.

Any performance fee specified in the prospectus must be calculated on the

basis of the scheme’s performance after deduction of all other payments out

of scheme property.

Charges on buying and selling units

.....................................................................................................

(1) No person other than the authorised fund manager may impose

charges on unitholders or potential unitholders when they buy or sell

units.

COLL 6 : Operating duties and Section 6.7

responsibilities

G6.7.8

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/75

(2) An authorised fund manager must not make any charge or levy in

connection with:

(a) the issue or sale of units except where a preliminary charge is

made in accordance with the prospectus of the scheme which

must be:

(i) a fixed amount; or

(ii) calculated as a percentage of the price of a unit; or

(iii) calculated as a percentage of the amount being subscribed;

(b) the redemption or cancellation of units, except a redemption

charge made in accordance with the prospectus current at the

time the relevant units were purchased by the unitholder.

(3) This rule is subject to ■ COLL 6.3.8 R (Dilution) and ■ COLL 11.3.11 R

(Obligations of the master UCITS).

Charges on buying and selling units: guidance

.....................................................................................................

(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 or be calculated on

the basis of the unit price performance of the units. However any

redemption charge should not be such that it could be reasonably

regarded as restricting any right of redemption.

(3) The prospectus should contain a statement as to the determination of

the order in which units which have been acquired at different times

by a unitholder are to be taken to be redeemed or cancelled for the

purpose of the imposition of the redemption charge.

(4) (a) For a UCITS scheme, article 10(2)(a) of the KII Regulation requires

the key investor information document to disclose the maximum

percentage that might be deducted as an entry charge from the

investor’s capital commitment.

(b) Where a preliminary charge is charged as a fixed amount or is

calculated as a percentage of the price of a unit, the AFM should

ensure that the actual amount charged, if it were expressed as a

percentage of the amount being subscribed, does not exceed the

maximum percentage stated as the entry charge in the key

investor information document.

(5) When a preliminary charge is calculated as a percentage of the price

of a unit, the percentage amount should be added to:

(a) the price of a unit (for a single-priced authorised fund); or

(b) the issue price (for a dual-priced authorised fund).

COLL 6 : Operating duties and Section 6.7

responsibilities

R6.7.9

R6.7.10

G6.7.11

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/76

(6) In relation to a regulated money market fund, any charges for the

sale or redemption of units, and any change to such charges, should

reflect the restrictions of the Money Market Funds Regulation.

Charges for the exchange of units in an umbrella

.....................................................................................................

For a scheme which is an umbrella, an authorised fund manager must not

make a charge on an exchange of units in one sub-fund for units in another

sub-fund unless the amount of the charge is not more than the amount

stated in the current prospectus.

Allocation of payments to income or capital

.....................................................................................................

(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.

(1A) Where there is at least one class of units that distributes income and

one class of units that accumulates income in the same authorised

fund, the authorised fund manager can determine that a payment be

made from:

(a) the capital property of the authorised fund for the classes of

units that distribute income; and

(b) the income property of the authorised fund for classes of units

that accumulate income,

if this is set out in and authorised by the prospectus of the

scheme.

(2) Where, for any class of units for any annual accounting period, the

amount of the income property is less than the income distributed,

the shortfall must, as from the end of that period, be charged to the

capital account and must not subsequently be transferred to the

income account.

Allocation of payments to income or capital: guidance

.....................................................................................................

(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 should disclose the matters in

■ COLL 4.2.5R (14).

(4) If the authorised fund manager wishes to make a change in relation

to the allocation of payments, the procedures in ■ COLL 4.3 (Approvals

and notifications) will be relevant.

COLL 6 : Operating duties and Section 6.7

responsibilities

R6.7.12

G6.7.13

R6.7.14

R6.7.15

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/77

Prohibition on promotional payments

.....................................................................................................

(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) Paragraph (1) does not apply to the costs an authorised fund incurs

preparing and printing the key investor information document, NURS-

KII document or key information document, provided the prospectus

states, in accordance with ■ COLL 4.2.5 R (13) and (14) (Table: contents

of the prospectus), that these costs are properly payable to the

authorised fund manager from scheme property.

Prohibition on promotional payments: guidance

.....................................................................................................

Examples of payments which are not permitted by ■ COLL 6.7.12 R include:

(1) commission payable to intermediaries (such payments should normally

be borne by the authorised fund manager);

(2) payments or costs in relation to the preparation or dissemination of

financial promotions (other than costs allowed under

■ COLL 6.7.12 R (2)).

(3) [deleted]

Movable or immovable property

.....................................................................................................

An ICVC must not incur any expense for the use by it of any movable or

immovable property except to the extent that such property is necessary for

the direct pursuit of its business or held in accordance with its investment

objectives.

Payment of liabilities on transfer of assets

.....................................................................................................

(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 or AUT 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 the transfer, could properly have been paid out of the

property transferred, but only if:

(a) there is nothing in the instrument constituting the fund of the

authorised fund expressly forbidding the payment; and

(b) the authorised fund manager is of the opinion that proper

provision was made for meeting such liabilities as were known or

could reasonably have been anticipated at the time of the

transfer.

COLL 6 : Operating duties and Section 6.7

responsibilities

G6.7.16

R6.7.17

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/78

Exemptions from liability to account for profits

.....................................................................................................

Except as provided in ■ COLL 6.3.5DR, an affected person is not liable to

account to another affected person or to the unitholders of any scheme for

any profits or benefits it makes or receives that are made or derived from or

in connection with:

(1) dealings in the units of a scheme; or

(2) any transaction in scheme property; or

(3) the supply of services to the scheme;

where disclosure of the non-accountability has been made in the prospectus

of the scheme.

Allocation of scheme property

.....................................................................................................

For a scheme which is an umbrella, any assets to be received into, or any

payments out of, the scheme property which are not attributable to one sub-

fund only, must be allocated by the authorised fund manager between the

sub-funds in a manner which is fair to the unitholders of the umbrella

generally.

COLL 6 : Operating duties and Section 6.8

responsibilities

6R6.8.1

R6.8.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/79

6.8 Income: accounting, allocation and

distribution

Application

.....................................................................................................

(1) This section applies to an authorised fund manager.

(2) ■ COLL 6.8.4 R (1) (Unclaimed, de minimis and joint unitholder

distributions) also applies to the depositary of an authorised fund.

(3) Except in the case of ■ COLL 6.8.2 R (1) (Accounting periods) and

■ COLL 6.8.3 R (1) (Income allocation and distribution), ■ COLL 6.8 applies

as if each sub-fund were a separate authorised fund.

Accounting periods

.....................................................................................................

(1) An authorised fund must have:

(a) an annual accounting period;

(b) a half-yearly accounting period; and

(2) A half-yearly accounting period begins when an annual accounting

period begins and ends on:

(a) the day which is six months before the last day of that annual

accounting period; or

(b) some other reasonable date as set out in the prospectus of the

scheme.

(3) The first annual accounting period of a scheme must begin:

(a) on the first day of any period of initial offer; or

(b) in any other case, on the date of the relevant authorisation

order;

and in either case must end on the next accounting reference date,

except where (4) applies.

(4) When the accounting reference date of a scheme falls less than six

months after the beginning of the first annual accounting period,

that period may be extended until the subsequent accounting

reference date.

(5) Each annual accounting period of a scheme subsequent to the first

period must begin immediately after the end of the previous period

COLL 6 : Operating duties and Section 6.8

responsibilities

G6.8.2A

R6.8.2B

R6.8.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/80

and must end on the next accounting reference date, except where

(6) or (6A) applies.

(5A) Each annual accounting period or half-yearly accounting period must

end either at the end of the day determined under this rule or, if the

authorised fund manager so decides, at the last valuation point on

that day.

(6) Following a revision to the prospectus of the scheme that includes a

change to the accounting reference date, the annual accounting

period may be shortened, or extended by up to six months, so as to

end on the new accounting reference date.

(6A) If the authorised fund manager notifies the depositary that a

particular annual accounting period or half-yearly accounting period

is to end on a specified day, which is not more than seven days after,

and not more than seven days before, the day on which the period

would otherwise end under this rule, that notice is to have effect

provided it is given before the day on which the period would

otherwise end.

(7) The authorised fund manager must consult the depositary and the

scheme's auditor before shortening or extending an accounting

period in accordance with (4) or (6).

(1) The effect of ■ COLL 6.8.1R(3) and ■ COLL 6.8.2R(4) is that when the

accounting reference date of a sub-fund falls less than 6 months after

the beginning of the first annual accounting period of that sub-fund,

that period may be extended until the subsequent accounting

reference date.

(2) When the annual accounting period of a scheme is extended under

■ COLL 6.8.2R(4) or ■ COLL 6.8.2R(6), resulting in a longer than usual

period before the publication of reports to unitholders, the

authorised fund manager should make summary information about

the investment activities of the scheme available to unitholders

during that period, in accordance with either (as applicable) Principle

12 (Consumer Duty) and ■ PRIN 2A, or Principles 6 (Customers’

interests) and 7 (Communications with clients) (see ■ PRIN 3.2.10R

(Interaction between Principle 12 and Principles 6 and 7)).

Income allocation and distribution

.....................................................................................................

The allocation or distribution of the income of a UCITS scheme must be

determined in accordance with its instrument constituting the fund, its

prospectus and the general law of the United Kingdom.

[Note: article 86 of the UCITS Directive]

(1) An authorised fund must have an annual income allocation date,

which must be within four months of the end of the relevant annual

accounting period.

(2) An authorised fund may have interim income allocation dates and

one or more interim accounting periods for each of those dates and,

COLL 6 : Operating duties and Section 6.8

responsibilities

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/81

if it does, the interim income allocation date must be within four

months of the end of the relevant interim accounting period(s).

(3) An authorised fund must have a distribution account to which the

amount of income allocated to classes of units that distribute income

is transferred as at the end of the relevant accounting period.

(3A) The amount available for income allocations must be calculated by:

(a) taking the net revenue after taxation determined in accordance

with the SORP;

(b) making any transfers, to the extent permitted by the prospectus,

between the income account and the capital account in order

that the amount available for income allocations is calculated as

if the revenue from debt securities had been determined

disregarding the effect of:

(i) the change in the Retail Prices Index during the period,

provided that the policy is to invest predominantly in index-

linked securities and the transfer relates only to amounts in

respect of index-linked gilt-edged securities; or

(ii) amortisation, provided that the amount available for income

allocations is not less than if such transfers had not been

made;

capital account that are required in relation to:

(i) stock dividends;

(ii) income equalisation included in income allocations from

other collective investment schemes;

(iii) the allocation of payments in accordance with ■ COLL 6.7.10 R

(Allocation of payments to income or capital);

(iv) taxation;

(v) the aggregate amount of income property included in units

issued, cancelled and converted during the period; and

(vi) amounts determined by the authorised fund manager to be

the reportable income of other collective investment

schemes.

(4) If income is allocated during an accounting period:

(a) with effect from the end of the relevant annual or interim

accounting period, the amount of income allocated to classes of

units that accumulate income becomes part of the capital

property and requires an adjustment to the proportion of the

value of the scheme property to which they relate if other classes

of units are in issue during the period;

(b) the adjustment in (a) must ensure the price of units remains

unchanged despite the transfer of income; and

amount which, in the opinion of the authorised fund manager,

would be available for allocation if the interim accounting period

and all previous interim accounting periods in the same annual

accounting period, taken together, were an annual accounting

period.

COLL 6 : Operating duties and Section 6.8

responsibilities

G6.8.3A

R6.8.4

R6.8.4A

G6.8.5

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/82

Allocation of income to different classes of unit

.....................................................................................................

In the case of sub-funds with more than one class of units in issue, the

proportionate interests of each class of units in the amount available for

income allocations should be determined in accordance with the instrument

constituting the fund.

Unclaimed, de minimis and joint unitholder distributions

.....................................................................................................

(1) Unless (4) or ■ COLL 6.8.4AR apply, any distribution remaining

unclaimed after a period of six years, or such longer time specified by

the prospectus, must become part of the capital property.

(2) The authorised fund manager and the depositary may agree a de

minimis amount in respect of which a distribution of income is not

required, and how any such amounts are to be treated.

(3) Distributions made to the first named joint unitholder on the register

will be as effective a discharge to the trustee and manager, as if the

first named joint unitholder had been a sole unitholder.

(a) This paragraph applies where:

(i) an eligible distribution of income remaining unclaimed is a

dormant asset; and

(ii) the instrument constituting the fund and the prospectus

permit the transfer of such money to a dormant asset fund

operator.

(b) Where this paragraph applies:

(i) the authorised fund manager or (where relevant) the

depositary may seek to transfer the unclaimed distribution to

a dormant asset fund operator in accordance with the

instrument constituting the fund and the prospectus; and

(ii) if the depositary makes such a transfer, the requirement in

(1) (that the unclaimed distribution becomes part of the

capital property) does not apply.

Unwanted asset money

.....................................................................................................

(1) This rule applies where:

(a) an eligible distribution of income is unwanted asset money; and

(b) the instrument constituting the fund and the prospectus permit

the transfer of such money to a dormant asset fund operator.

(2) Where (1) applies, the authorised fund manager or (where relevant)

the depositary may transfer the unwanted asset money to a dormant

asset fund operator in accordance with the instrument constituting

the fund, the prospectus and section 21 of the Dormant Assets Act

2022.

Guidance: contents of the prospectus

.....................................................................................................

■ COLL 4.2.5 R (Table: contents of prospectus) requires the details of

■ COLL 6.8.2 R, ■ COLL 6.8.3 R (1) and ■ COLL 6.8.3 R (2) and ■ COLL 6.8.4 R (1) and

COLL 6 : Operating duties and Section 6.8

responsibilities

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/83

■ COLL 6.8.4 R (2) to be contained in the prospectus as well as when, and how,

the distribution will be paid (e.g. by cheque or BACS) and also how any

unclaimed distributions are to be processed.

COLL 6 : Operating duties and Section 6.9

responsibilities

6 R6.9.1

G6.9.1A

G6.9.2

G6.9.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/84

6.9 Independence, names and UCITS

business restrictions

Application

.....................................................................................................

This section applies to an authorised fund manager, a depositary, an ICVC

and any other directors of an ICVC.

Articles 20 to 24 of the UCITS level 2 regulation set out detailed provisions

that must be read by the authorised fund manager and the depositary of a

UCITS scheme alongside ■ COLL 6.9.2G to ■ COLL 6.9.5G.

Independence of depositaries and scheme operators

.....................................................................................................

(1) Regulation 15(8)(f) of the OEIC Regulations (Requirements for

authorisation) requires independence between the depositary, the

ICVC and the ICVC's directors, as does section 243(4) of the Act

(Authorisation orders) for the trustee and manager of an AUT, and

section 261D(4) of the Act (Authorisation orders) for the depositary

and authorised fund manager of an ACS. ■ COLL 6.9.3 G to

■ COLL 6.9.5 G give the FCA's view of the meaning of independence of

these relationships. An ICVC, its directors and depositary or a

manager and a trustee of an AUT or an authorised fund manager and

depositary of an ACS are referred to as "relevant parties" in this

guidance.

(2) There are at least three possible kinds of links between the relevant

parties:

(a) directors in common;

(b) cross-shareholdings; and

(3) If any of these links exist between the relevant parties, the FCA will

have regard to ■ COLL 6.9.3 G to ■ COLL 6.9.5 G in determining whether

there is independence.

Independence: influence by directors

.....................................................................................................

(1) Independence is likely to be lost if, by means of executive power,

either relevant party could control the action of the other.

(2) The board of one relevant party should not be able to exercise

effective control of the board of another relevant party.

Arrangements which might indicate this situation include quorum

COLL 6 : Operating duties and Section 6.9

responsibilities

G6.9.4

G6.9.5

G6.9.6

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/85

provisions and reservations of decision-making capacity of certain

directors.

(3) For an AUT or ACS, the FCA would interpret the concept of directors

in common to include any directors of associates of one relevant

party who are simultaneously directors of the other relevant party.

(4) For an ICVC, independence would not be met if:

(a) a director of the ICVC or any associate of the director is a

director, an employee, or both of the depositary; or

(b) a director of an ICVC:

(i) has a direct or indirect shareholding for investment purposes

of more than 0.5% of the votes at a general meeting or a

meeting of holders of the class of share concerned of the

depositary of that ICVC; or

(ii) has any other relationship with the depositary which might

reasonably be expected to give rise to a potential conflict of

interest.

Independence: influence by shareholding

.....................................................................................................

Independence is likely to be lost if either of the relevant parties could

control the actions of the other by means of shareholders' votes. The FCA

considers this would happen if any shareholding by one relevant party and

their respective associates in the other exceeds 15% of the voting share

capital, either in a single share class or several share classes. The FCA would

be willing, however, to look at cross-shareholdings exceeding 15% on a case-

by-case basis to consider if there were exceptional grounds for concluding

that independence was safeguarded by other means.

Independence: contractual commitments

.....................................................................................................

The FCA would encourage relevant parties to consult it in advance about its

view on the consequences of any intended contractual commitment or

relationship which could affect independence, whether directly or indirectly.

Undesirable or misleading names

.....................................................................................................

(1) Regulation 15(9) of the OEIC Regulations, and sections 243(8) and

261D(10) of the Act require that an authorised fund's name must not

be undesirable or misleading. This section contains guidance on some

specific matters the FCA will consider in determining whether the

name of an authorised fund is undesirable or misleading. It is in

addition to the requirements of regulation 19 of the OEIC

Regulations (Prohibition on certain names).

(2) The FCA will take into account whether the name of the scheme:

(a) is substantially similar to the name of another authorised fund;

(b) implies that the authorised fund has merits which are not, or

might not be, justified;

which may not be justified;

COLL 6 : Operating duties and Section 6.9

responsibilities

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/86

(d) is inconsistent with the authorised fund's investment objectives or

policy;

(e) implies that the authorised fund is not an authorised fund (for

example, describing the authorised fund as a "plan" or "account"

are unlikely to be acceptable); and

(f) might mislead investors into thinking that persons other than the

authorised fund manager are responsible for the authorised fund.

(3) The FCA is unlikely to approve a name of an authorised fund that

includes the word "guaranteed" unless:

(a) the guarantee is given by:

(i) an authorised person;

(ii) a person which is established in an EEA State and equivalent

to an authorised person; or

(iii) a person subject to prudential supervision in accordance with

criteria defined by UK law or prudential rules at least as

stringent as those laid down by UK law;

other than the authorised fund manager or the depositary.

(b) the authorised fund manager can demonstrate that the

guarantor has the authority and resources to honour the terms of

the guarantee;

and is legally enforceable by each Unitholder who is intended to

benefit from it or by a person acting on that unitholder's behalf;

(d) the guarantee relates to the total amount paid for a unit which

includes any charge or other costs of buying or selling units in the

authorised fund;

(e) the guarantee provides for payment at a specified date or dates

and is unconditional although reasonable commercial exclusions

such as force majeure may be included; and

(f) where the guarantee applies to different classes of unit, it is

identical in its application to all classes except for the differences

attributable to income already received or charges already

suffered by the different classes of unit.

(4) The name of an authorised fund may indicate a guaranteed capital

return or income return or both but only if the total amount paid for

a unit is guaranteed in accordance with (3).

(5) The FCA is unlikely to approve a name of an authorised fund that

includes words implying a degree of capital security (such as "capital

protected" or anything with a similar meaning) unless the degree of

capital security is apparent from the name and clearly stated in the

prospectus, and:

(a) the principles in (3) are satisfied except that, for the purposes of

(3)(d), the guarantee may relate to an amount not materially less

than the total amount paid for a unit; or

(b) the investment objective and investment policy for the authorised

fund are such as to show a clear intention to provide a material

degree of security in respect of the total amount paid for a unit.

COLL 6 : Operating duties and Section 6.9

responsibilities

R6.9.7

G6.9.8

R6.9.8A

G6.9.8B

R6.9.8C

G6.9.8D

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/87

(6) When determining whether (5) is complied with, the FCA will take

into account whether the degree of capital security implied by the

name fairly reflects the nature of the arrangements for providing that

security. This assessment will take place on a case-by-case basis.

Undesirable or misleading names: umbrellas

.....................................................................................................

The authorised fund manager must ensure that the name of a sub-fund or of

a class of unit is not undesirable or misleading.

Undesirable or misleading names: umbrellas - guidance

.....................................................................................................

When deciding whether ■ COLL 6.9.7R is complied with, the FCA will take into

account ■ COLL 6.9.6G. ■ COLL 6.9.7R applies generally and not just to the

names that include the words "guaranteed" or "capital protected".

[deleted]

Use of the term 'UCITS ETF'

.....................................................................................................

(1) ESMA has issued guidelines on the use of the term ‘UCITS ETF’. A

‘UCITS ETF’ is a UCITS with at least one unit or share class which is

traded throughout the day, on at least one regulated market or

multilateral trading facility, with at least one market maker that takes

action to ensure that the stock exchange value of its units or shares

does not significantly vary from its net asset value and, where

applicable, its indicative net asset value.

(2) A ‘UCITS ETF’ should use the identifier ‘UCITS ETF’ which identifies it

as an exchange traded fund. This identifier should be used in its

name, fund rules, instrument of incorporation, prospectus, key

investor information document or marketing communications.

(3) A UCITS which is not a ‘UCITS ETF’ should not use the ‘UCITS ETF’

identifier, ‘ETF’ or ‘exchange traded fund’ in its name or in any of the

documents or communications referred to in (2).

[Note: ESMA's Guidelines to competent authorities and UCITS management

companies on ETFs and other UCITS issues (ESMA/2012/832)]

Use of the term ‘long-term asset fund’ or ‘LTAF’

.....................................................................................................

(1) Paragraph (2) applies to the authorised fund manager of a UCITS

scheme or a non-UCITS retail scheme, an ICVC which is such a scheme,

and any other directors of such an ICVC.

(2) The scheme or sub-fund:

(a) must not use ‘Long-Term Asset Fund’ or ‘LTAF’ in its name; and

(b) must not otherwise suggest through its name that it is a fund

which invests in long-term assets or describe itself as such.

(1) The term ‘Long-Term Asset Fund’ or ‘LTAF’ is reserved for long-term

asset funds (see ■ COLL 15).

COLL 6 : Operating duties and Section 6.9

responsibilities

G6.9.8E

R6.9.9

G6.9.10

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/88

(2) Only AIFs that are authorised in accordance with the LTIF Regulation

may use the designation ‘LTIF’ or ‘long-term investment fund’.

ESG naming restrictions

.....................................................................................................

Further requirements related to the naming and marketing of authorised

funds are found in ■ ESG 4.3.

Restrictions of business for UCITS management companies

.....................................................................................................

A UCITS management company must not engage in any activities other than:

(1) [deleted]

(1A) managing a UK UCITS;

(1B) managing an AIF;

(1C) acting as a residual CIS operator;

(2) activities for the purposes of or in connection with those in (1A), (1B)

or (1C);

(3) collective portfolio management, including without limitation:

(a) investment management;

(b) administration:

(i) legal and fund management accounting services;

(ii) customer enquiries;

(iii) valuation and pricing (including tax returns);

(iv) regulatory compliance monitoring;

(v) maintenance of unitholder register;

(vi) distribution of income;

(vii) unit issues and redemptions;

(viii) contract settlements (including certificate dispatch); and

(ix) record keeping; and

(4) managing investments where the relevant portfolio includes one or

more financial instruments;

(5) investment advice concerning financial instruments where the firm

has permission for the activity in (4); and

(6) safeguarding and administration of collective investment scheme

units where the firm has a permission for the activity in (4).

Connected activities: guidance

.....................................................................................................

(1) Examples of the connected activities referred to in

■ COLL 6.9.9 R (2) include management of group plans, as long as they

COLL 6 : Operating duties and Section 6.9

responsibilities

R6.9.11

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/89

are dedicated to investments in unit trust schemes, co-ownership

schemes, limited partnership schemes and OEICs for which the firm

acts as an authorised fund manager.

(2) [deleted]

Notification to the FCA in its role as registrar of ICVCs

.....................................................................................................

An ICVC must notify the FCA within 14 days of the occurrence of any of the

following:

(1) any amendment to the instrument of incorporation;

(2) any change in the address of the head office of the ICVC;

(3) any change of director;

(4) any change of depositary;

(5) in respect of any director or depositary, any change in the

information mentioned in regulation 12(1)(b) or (c) of the OEIC

Regulations (Applications for authorisation);

(6) any change of the auditor of the ICVC;

(7) any order in respect of the ICVC made by virtue of regulation 70 of

the OEIC Regulations (Mergers and divisions).

COLL 6 : Operating duties and Section 6.10 : Senior personnel

responsibilities responsibilities

R6.10.1

R6.10.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/90

6.10 Senior personnel responsibilities

Application

.....................................................................................................

(1) This section applies to an authorised fund manager of a UCITS

scheme.

(2) [deleted]

Senior personnel responsibilities

.....................................................................................................

In complying with ■ SYSC 4.3.1 R (Responsibility of senior personnel), an

authorised fund manager of a UCITS scheme must ensure that its senior

personnel:

(1) are responsible for the implementation of the general investment

policy for each scheme it manages, as defined, where relevant, in the

prospectus or the instrument constituting the fund;

(2) oversee the approval of investment strategies for each scheme it

manages;

(3) are responsible for ensuring that the authorised fund manager has a

permanent and effective compliance function as referred to in

■ SYSC 6.1 (Compliance), even if this function is performed by a third

party;

(4) ensure and verify on a periodic basis that the general investment

policy, the investment strategies and the risk limit system of each

scheme it manages are properly and effectively implemented and

complied with, even if the risk management function is performed by

a third party;

(5) approve and review on a periodic basis the adequacy of the internal

procedures for undertaking investment decisions for each scheme it

manages, so as to ensure that those decisions are consistent with the

approved investment strategies; and

(6) approve and review on a periodic basis the risk management policy

and arrangements, processes and techniques for implementing that

policy, as referred to in ■ COLL 6.12.5 R (Risk management policy),

including the risk limit system for each scheme it manages.

[Note: article 9(2) of the UCITS implementing Directive]

COLL 6 : Operating duties and Section 6.10 : Senior personnel

responsibilities responsibilities

R6.10.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/91

An authorised fund manager of a UCITS scheme must ensure that its senior

personnel receive, on a regular basis, reports on the implementation of

investment strategies and of the internal procedures for taking the

investment decisions referred to in ■ COLL 6.10.2R (2) to ■ COLL 6.10.2R (5).

[Note: article 9(5) of the UCITS implementing Directive]

COLL 6 : Operating duties and Section 6.11 : Risk control and internal

responsibilities reporting

R6.11.1

R6.11.2

G6.11.3

R6.11.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/92

6.11 Risk control and internal reporting

Application

.....................................................................................................

(1) This section applies to an authorised fund manager of a UCITS

scheme.

(2) [deleted]

Permanent risk management function

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must establish and

maintain a permanent risk management function.

(2) The function referred to in (1) must be hierarchically and functionally

independent from operating units, except where such independence

would not be appropriate and proportionate in view of the nature,

scale and complexity of the authorised fund manager’s business and

of each scheme it manages.

(3) The authorised fund manager must be able to demonstrate that:

(a) appropriate safeguards against conflicts of interest have been

adopted so as to allow an independent performance of risk

management activities; and

(b) its risk management process satisfies the requirements of

■ COLL 6.12.3 R (Risk management process).

[Note: articles 12(1) and 12(2) of the UCITS implementing Directive]

Where the risk management function required under ■ COLL 6.11.2 R (1) is not

hierarchically and functionally independent, the authorised fund manager

should nevertheless be able to demonstrate that its risk management process

satisfies the requirements of ■ COLL 6.12.3 R (Risk management process) and

that, in particular, the appropriate safeguards have been adopted.

[Note: article 12(2) third paragraph and recital (12) of the UCITS

implementing Directive]

Duties of the permanent risk management function

.....................................................................................................

(1) The permanent risk management function must:

(a) implement the risk management policy and procedures;

(b) ensure compliance with the risk limit system, including statutory

limits concerning global exposure and counterparty risk, as

COLL 6 : Operating duties and Section 6.11 : Risk control and internal

responsibilities reporting

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/93

required by ■ COLL 5.2 (General investment powers and limits for

UCITS schemes) and ■ COLL 5.3 (Derivative exposure);

identification of the risk profile of each scheme it manages;

(d) provide regular reports to the governing body and, where it

exists, the supervisory function on:

(i) the consistency between the current level of risk incurred by

each scheme it manages and the risk profile agreed for that

scheme;

(ii) the compliance of each scheme it manages with the risk limit

system referred to in (b); and

(iii) the adequacy and effectiveness of the risk management

process, indicating in particular whether appropriate

remedial measures have been taken in the event of any

deficiencies;

(e) provide regular reports to the senior personnel outlining the

current level of risk incurred by the relevant scheme and any

actual or foreseeable breaches to their limits, so as to ensure that

prompt and appropriate remedial action can be taken; and

(f) review and support, where appropriate, the arrangements for the

valuation of OTC derivatives, as referred to in ■ COLL 5.2.23 R (OTC

transactions in derivatives), ■ COLL 5.2.23C R (Valuation of OTC

derivatives) and in this rule.

(2) The permanent risk management function must have the authority

and access to all relevant information necessary to fulfil the duties set

out in (1).

[Note: articles 12(3), 12(4) and 44(3) of the UCITS implementing Directive]

COLL 6 : Operating duties and Section 6.12 : Risk management policy and

responsibilities risk measurement

6 R6.12.1

G6.12.2

R6.12.3

R6.12.3A

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/94

6.12 Risk management policy and risk

measurement

Application

.....................................................................................................

This section applies to an authorised fund manager and a depositary of a

UCITS scheme.

[deleted]

Risk management process

.....................................................................................................

(1) (a) An authorised fund manager of a UCITS scheme must use a risk

management process enabling it to monitor and measure at any

time the risk of the scheme's positions and their contribution to

the overall risk profile of the scheme.

(b) In particular, an authorised fund manager of a UCITS scheme

must not solely or mechanistically rely on credit ratings issued by

credit rating agencies, as defined in article 3(1)(b) of Regulation

(EC) No 1060/2009 of the European Parliament and of the Council

of 16 September 2009 on credit rating agencies, or credit rating

agencies as defined in the CRA Regulation, for assessing the

creditworthiness of the scheme's assets.

(2) An authorised fund manager must regularly notify the following

information to the FCA and at least on an annual basis:

(a) a true and fair view of the types of derivatives and forward

transactions to be used within the scheme together with their

underlying risks and any relevant quantitative limits; and

(b) the methods for estimating risks in derivative and forward

transactions.

[Note: article 51(1), first and third paragraphs, of the UCITS Directive and

article 45(1) of the UCITS implementing Directive]

An authorised fund manager subject to ■ COLL 6.12.3R(2) must notify the FCA

of the information specified in points (a) and (b) of that rule:

(1) annually, within 30 business days of 31 October, with information that

is accurate as of 31 October of that year;

(2) using the form in ■ COLL 6 Annex 2R; and

COLL 6 : Operating duties and Section 6.12 : Risk management policy and

responsibilities risk measurement

G6.12.3B

G6.12.4

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/95

(3) by submitting it:

(a) online through the appropriate systems accessible from the FCA’s

website; or

(b) if the appropriate systems are unavailable, via email to

[email protected].

(1) In addition, an authorised fund manager subject to ■ COLL 6.12.3R(2)

should submit a notification to the FCA if there has been a significant

change to the fund’s risk profile since its last report, by sending the

form in ■ COLL 6 Annex 2R, completed as applicable, to

[email protected].

(2) A significant change to the fund’s risk profile could include, but is not

limited to:

(a) the first use of derivatives for investment purposes, if derivatives

have previously been used only for efficient portfolio

management;

(b) investment in non-standard derivatives, if only standard

derivatives have been used previously;

exposure (commitment method, relative VaR or absolute VaR);

and

(d) where a VaR measure is used, a change in the parameters of the

calculation.

(3) Reports of significant changes only need to contain new information

for the period since the previous report.

(1) The risk management process in ■ COLL 6.12.3 R should take account of

the investment objectives and policy of the scheme as stated in the

most recent prospectus.

(2) The depositary of a UCITS scheme should take reasonable care to

review the appropriateness of the risk management process in line

with its duties under ■ COLL 6.6.4 R (General duties of the depositary)

and ■ COLL 6.6.14 R (Duties of the depositary and authorised fund

manager: investment and borrowing powers), as appropriate.

(3) An authorised fund manager is expected to demonstrate more

sophistication in its risk management process for a scheme with a

complex risk profile than for one with a simple risk profile. In

particular, the risk management process should take account of any

characteristic of non-linear dependence in the value of a position to

its underlying.

(4) An authorised fund manager should take reasonable care to establish

and maintain such systems and controls as are appropriate to its

business as required by ■ SYSC 4.1 (General requirements).

(5) The risk management process should enable the analysis required by

■ COLL 6.12.3 R to be undertaken at least daily or at each valuation

point, whichever is more frequent.

COLL 6 : Operating duties and Section 6.12 : Risk management policy and

responsibilities risk measurement

R6.12.5

G6.12.6

R6.12.7

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/96

(6) An authorised fund manager should undertake the risk assessment

required by ■ COLL 5.2.20R (7)(d) (Permitted transactions (derivatives

and forwards)) with the highest care when the counterparty to the

derivative transaction is an associate of the authorised fund manager

the UK UCITS management company or the credit issuer.

[Note: CESR's UCITS eligible assets guidelines with respect to article 8(2)(d) of

the UCITS eligible assets Directive]

Risk management policy

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must establish,

implement and maintain an adequate and documented risk

management policy for identifying the risks to which that scheme is

or might be exposed.

(2) The risk management policy must comprise such procedures as are

necessary to enable the authorised fund manager to assess the

exposure of each UCITS it manages to market risk, liquidity risk and

counterparty risk, and to all other risks, including operational risk,

that might be material for that scheme.

(3) The risk management policy must address at least the following

elements:

(a) the techniques, tools and arrangements that enable the

authorised fund manager to comply with the obligations set out

in this section and ■ COLL 5.3 (Derivative exposure);

(b) the allocation of responsibilities within the authorised fund

manager pertaining to risk management; and

management function referred to in ■ COLL 6.11.2 R (Permanent

risk management function) to the governing body, senior

personnel and, where appropriate, to the supervisory function.

(4) To meet its obligations in (1), (2) and (3) an authorised fund manager

must take into account the nature, scale and complexity of its

business and of the UCITS it manages.

[Note: article 38 of the UCITS implementing Directive]

[deleted]

Monitoring of risk management policy

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must assess, monitor

and periodically review:

(a) the adequacy and effectiveness of the risk management policy

and of the arrangements, processes and techniques referred to in

■ COLL 6.12.5 R;

(b) the level of compliance by the authorised fund manager with the

risk management policy and with those arrangements, processes

and techniques referred to in ■ COLL 6.12.5 R; and

COLL 6 : Operating duties and Section 6.12 : Risk management policy and

responsibilities risk measurement

G6.12.8

R6.12.9

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/97

deficiencies in the performance of the risk management process.

(2) The authorised fund manager must notify the FCA of any material

changes to the risk management process.

[Note: article 39(1) and 39(2) of the UCITS implementing Directive]

Authorised fund managers are advised that when they applied for

authorisation from the FCA under the Act, their ability to comply with the

requirements in ■ COLL 6.12.7 R would have been assessed by the FCA as an

aspect of their fitness and properness in determining whether the threshold

conditions set out in Schedule 6 (Threshold conditions) of the Act were met.

Firms are further advised that their compliance with these requirements is

subject to review by the FCA on an ongoing basis in determining whether

they continue to meet the threshold conditions.

[Note: article 39(3) of the UCITS implementing Directive]

Measurement and management of risk

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must adopt adequate

and effective arrangements, processes and techniques in order to:

(a) measure and manage at any time the risks to which that UCITS is

or might be exposed; and

(b) ensure compliance with limits concerning global exposure and

counterparty risk, in accordance with ■ COLL 5.2.11B R

(Counterparty risk and issuer concentration) and ■ COLL 5.3

(Derivative exposure).

(2) For the purposes of (1), the authorised fund manager must take the

following actions for each UCITS it manages:

(a) put in place such risk measurement arrangements, processes and

techniques as are necessary to ensure that the risks of positions

taken and their contribution to the overall risk profile are

accurately measured on the basis of sound and reliable data and

that the risk measurement arrangements, processes and

techniques are adequately documented;

(b) conduct, where appropriate, periodic back-tests in order to

review the validity of risk measurement arrangements which

include model-based forecasts and estimates;

analyses to address risks arising from potential changes in market

conditions that might adversely impact the UCITS;

(d) establish, implement and maintain a risk limit system for each

UCITS;

(e) ensure that the current level of risk complies with that risk limit

system; and

(f) establish, implement and maintain adequate procedures that, in

the event of actual or anticipated breaches to that risk limit

system, result in timely remedial actions in the best interests of

unitholders.

COLL 6 : Operating duties and Section 6.12 : Risk management policy and

responsibilities risk measurement

G6.12.10

R6.12.11

R6.12.12

G6.12.13

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/98

(3) The arrangements, processes and techniques referred to in (1) should

be proportionate in view of the nature, scale and complexity of the

business of the authorised fund manager and the UCITS it manages

and be consistent with the UCITS' risk profile.

[Note: articles 40(1) and 40(2) of the UCITS implementing Directive]

[deleted]

(1) An authorised fund manager must employ an appropriate liquidity

risk management process in order to ensure that each UCITS it

manages is able to comply at any time with ■ COLL 6.2.16 R (Sale and

redemption).

(2) Where appropriate, the authorised fund manager must conduct stress

tests to enable it to assess the liquidity risk of the UCITS under

exceptional circumstances.

[Note: article 40(3) of the UCITS implementing Directive]

An authorised fund manager must ensure that, for each UCITS it manages,

the liquidity profile of the investments of the scheme is appropriate to the

redemption policy laid down in the instrument constituting the fund or the

prospectus.

[Note: article 40(4) of the UCITS implementing Directive]

CESR guidelines: Risk management principles for UCITS

.....................................................................................................

Authorised fund managers are advised that CESR issued guidelines prior to

the revision of the UCITS Directive in 2009 which, to the extent they remain

compatible with the rules and other guidance in COLL, should be complied

with in applying the rules in this section. These guidelines are available at:

Guidelines - Risk management principles for UCITS (CESR/09-178)

https://www.esma.europa.eu/sites/default/files/library/2015/11/09_178.pdf

COLL 6 : Operating duties and Section 6.13 : Record keeping

responsibilities

R6.13.1

R6.13.2

R6.13.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/99

6.13 Record keeping

Application

.....................................................................................................

(1) This section applies to an authorised fund manager of a UCITS

scheme.

(2) [deleted]

Recording of portfolio transactions

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must ensure, for each

portfolio transaction relating to a scheme it manages, that a record

of information which is sufficient to reconstruct the details of the

order and the executed transaction is produced without delay.

(2) The record referred to in (1) must include:

(a) the name or other designation of the scheme and of the person

acting on behalf of the scheme;

(b) the details necessary to identify the instrument in question;

(d) the type of the order or transaction;

(e) the price;

(f) for orders, the date and exact time of the transmission of the

order and the name or other designation of the person to whom

the order was transmitted, or for transactions, the date and exact

time of the decision to deal and execution of the transaction;

(g) the name of the person transmitting the order or executing the

transaction;

(h) where applicable, the reasons for the revocation of an order; and

(i) for executed transactions, the counterparty and execution venue

identification.

[Note: article 14 of the UCITS implementing Directive]

Recording of subscription and redemption orders

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must take all

reasonable steps to ensure that every subscription and redemption

order it receives relating to units in any such scheme it manages are

centralised and recorded immediately after receipt of that order.

COLL 6 : Operating duties and Section 6.13 : Record keeping

responsibilities

R6.13.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/100

(2) The record referred to in (1) must include information on the

following:

(a) the relevant scheme;

(b) the person giving or transmitting the order;

(d) the date and time of the order;

(e) the terms and means of payment;

(f) the type of the order;

(g) the date of execution of the order;

(h) the number of units subscribed or redeemed;

(i) the subscription or redemption price for each unit;

(j) the total subscription or redemption value of the units; and

(k) the gross value of the order including charges for subscription or

net amount after charges for redemption.

[Note: article 15 of the UCITS implementing Directive]

Recordkeeping requirements

.....................................................................................................

(1) An authorised fund manager of a UCITS scheme must ensure the

retention of the records referred to in ■ COLL 6.13.2 R and

■ COLL 6.13.3 R for a period of at least five years or, in exceptional

circumstances and where directed by the FCA, for a longer period,

determined by the nature of the instrument or portfolio transaction,

where it is necessary to enable the FCA to exercise its supervisory

functions in respect of UCITS schemes.

(2) Following the termination of its authorisation, an authorised fund

manager of a UCITS scheme must retain its records referred to in (1)

for the outstanding term of the five year period or, if it transfers its

responsibilities in relation to the UCITS to another authorised fund

manager, arrange for those records for the past five years to be

accessible to that other manager.

(3) The authorised fund manager must retain the records referred to in

■ COLL 6.13.2 R and ■ COLL 6.13.3 R in a medium that allows the storage

of information in a way accessible for future reference by the FCA,

and in such a form and manner that the following conditions are

met:

(a) the FCA must be able to access them readily and to reconstitute

each key stage of the processing of each portfolio transaction;

(b) it must be possible for any corrections or other amendments, and

the contents of the records prior to such corrections or

amendments, to be easily ascertained; and

manipulated or altered.

[Note: article 16 of the UCITS implementing Directive]

COLL 6 : Operating duties and Section 6.13 : Record keeping

responsibilities

R6.13.5

R6.13.6

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6/101

Electronic data processing

.....................................................................................................

An authorised fund manager of a UCITS scheme must make appropriate

arrangements for suitable electronic systems so as to permit a timely and

proper recording of each portfolio transaction or subscription or redemption

order, in order to be able to comply with ■ COLL 6.13.2 R (Recording of

portfolio transactions) and ■ COLL 6.13.3 R (Recording of subscription and

redemption orders).

[Note: article 7(1) of the UCITS implementing Directive]

An authorised fund manager of a UCITS scheme must ensure a high level of

security during the electronic data processing referred to in ■ COLL 6.13.5 R as

well as the integrity and confidentiality of the recorded information, as

appropriate.

[Note: article 7(2) of the UCITS implementing Directive]

COLL 6 : Operating duties and Section 6.13 : Record keeping

responsibilities

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6/102

COLL 6 : Operating duties and Annex 2

responsibilities

UK UCITS management company of UCITS schemes: Derivative Use

Report (FSA042: UCITS)

COLL 6 Annex 2RCOLL 6 Annex 2R

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6 Annex 2/1

COLL 6 : Operating duties and Annex 2

responsibilities

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6 Annex 2/2

COLL 6 : Operating duties and Annex 3

responsibilities

Guidance notes on UK UCITS management company of UCITS schemes:

Derivative Use Report (FSA042: UCITS)

Description Guidance

Fund name This is the name of the scheme or, where applicable, of the

sub-fund as it appears on the FS Register.

PRN or LEI For a UCITS scheme, this is the product reference number of

the scheme or, where applicable, of the sub-fund which ap-

pears on the FS Register.

Derivative A forward, a future, an option, a swap, a warrant or an-

other type of derivative instrument.

Derivatives used for investment This means that derivatives are not being used solely in pur-

purposes suit of efficient portfolio management.

Global exposure Global exposure is calculated as either the incremental expo-

sure and leverage generated through the use of derivatives,

or the market risk of the scheme property, as set out in COLL

5.3.7R. Market risk is calculated using one of the stated risk

measures.

Risk measures For each scheme or, where applicable, sub-fund, information

should be provided for only one of the risk measures (com-

mitment approach, relative VaR or absolute VaR) indicated

in the table.

Average leverage In line with the CESR Guidelines (CESR/10-788), this is the

mean of all leverage calculations over the past twelve

months, leverage being calculated as the sum of the no-

tionals of the derivatives used.

Leverage limit In line with Box 24 of the CESR guidelines (CESR/10-788), the

usually expected or maximum expected level of leverage

should be provided. Where these are not applicable, please

provide the maximum leverage limit approved internally by

the authorised fund manager (or leave blank if appropriate

and provide an explanation in the comments box).

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 6 Annex 3/1

COLL 6 : Operating duties and Annex 3

responsibilities

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 6 Annex 3/2

Collective Investment Schemes

Chapter 7

Suspension of dealings,

termination of authorised

funds and side pockets

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/1

COLL 7 : Suspension of dealings, Section 7.1 : Introduction

termination of authorised funds

and side pockets

R7.1.1

R7.1.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/2

7.1 Introduction

Application

.....................................................................................................

(1) This chapter applies to an ICVC, an ACD, any other director of an

ICVC, a depositary of an ICVC, an authorised fund manager of an AUT

or ACS and a depositary of an AUT or ACS, where such AUT, ACS or

ICVC is a UCITS scheme or a non-UCITS retail scheme in accordance

with ■ COLL 7.1.2 R (Table of application).

(2) ■ COLL 7.7 (UCITS mergers) applies only to a domestic UCITS merger.

Table of application

.....................................................................................................

This table belongs to ■ COLL 7.1.1 R.

Au-

thorised

Any fund

other manager Deposit-

directors Deposit- of an ary of an

of an ary of an AUT or AUT or

Rule ICVC ACD ICVC ICVC ACS ACS

7.1.1 x x x x x x

7.1.3 x x x x x x

7.2.-3* x x x x

7.2.-2* x x x x

7.2.-1* x x x x

COLL 7 : Suspension of dealings, Section 7.1 : Introduction

termination of authorised funds

and side pockets

G7.1.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/3

Au-

thorised

Any fund

other manager Deposit-

directors Deposit- of an ary of an

of an ary of an AUT or AUT or

Rule ICVC ACD ICVC ICVC ACS ACS

7.2.1 x x x x x

7.3.1 x x x x

7.3.2 x x x x

7.3.3 x x x

7.3.4 x x x

7.3.5 x x

7.3.6 x x x

7.3.7 x x x x

7.3.8 x x

7.3.9 x

7.3.10 x x x x

7.3.11 x

7.3.12 x x

7.3.13 (1) x x

7.3.13 (2) x x

7.4* x x

7.4A* x x

7.5 x x x x x

7.6 x x x x x

7.7 x x x x x x

7.8 x x x x x x

Notes: (1) "x" means "applies", but not every paragraph in

every rule will necessarily apply.

(2) *COLL 7.4 does not apply to the authorised contrac-

tual scheme manager or depositary of an ACS.

(3) *COLL 7.4A does not apply to the manager or deposit-

ary of an AUT.

(4) COLL 7.2.-3R to 7.2.-1R apply only to the authorised

fund manager and depositary of a non-UCITS retail

scheme.

(5) COLL 7.8 (Side pockets) applies only to UCITS schemes

and non-UCITS retail schemes in which the au-

thorised fund manager intends to establish (or has es-

tablished) a side pocket class. The rules in COLL 7.8 do

not apply to a regulated money market fund.

Purpose

.....................................................................................................

(1) This chapter helps to achieve the statutory objective of protecting

investors by ensuring the authorised fund manager does not sell or

redeem units at a price that cannot be calculated accurately. For

instance, due to unforeseen circumstances, it may be impossible to

COLL 7 : Suspension of dealings, Section 7.1 : Introduction

termination of authorised funds

and side pockets

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/4

value, or to dispose of and obtain payment for, all or some of the

scheme property of an authorised fund or sub-fund. ■ COLL 7.2.-3R,

■ COLL 7.2.-2R, ■ COLL 7.2.-1R, and ■ COLL 7.2.1 R set out the

circumstances in which an authorised fund manager must or may

suspend dealings in units and the manner in which a suspension takes

effect.

(2) This chapter also helps with the statutory objective of protecting

consumers, by providing a cost effective and fair means of winding up

authorised funds and terminating sub-funds of ICVCs, AUTs and co-

ownership schemes. ■ EG 14(Collective investment schemes) deals with

the FCA's powers to revoke the authorisation of authorised funds

otherwise than by consent.

(3) This chapter also helps to achieve the statutory objectives of

protecting consumers and protecting and enhancing the integrity of

the UK financial system, by enabling unitholders or potential

unitholders in a UCITS scheme or non-UCITS retail scheme with

affected investments to continue to deal in units representing assets

held in the scheme property that are not affected investments.

COLL 7 : Suspension of dealings, Section 7.2 : Suspension and restart of

termination of authorised funds dealings

and side pockets

R7.2.-3

R7.2.-2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/5

7.2 Suspension and restart of dealings

Requirement

.....................................................................................................

(1) This rule applies to the authorised fund manager of a non-UCITS

retail scheme if at any time:

(a) a standing independent valuer has expressed material uncertainty

in accordance with VPS 3 paragraph 2.2(o) and the guidance at

VPGA10, RICS Valuation Global Standards 2017 (The Red Book)

(effective from 1 July 2017), about the value of one or more

immovables under management and that material uncertainty

applies to at least 20% of the value of the scheme property; or

(b) the authorised fund invests at least 20% of the value of the

scheme property in units of one or more other authorised funds

for which dealings in units have been temporarily suspended

under (2).

(2) As soon as possible and in any event by the end of the second

business day after the day on which this rule starts to apply under (1),

the authorised fund manager must temporarily suspend dealings in

units in the authorised fund unless (3) applies.

(3) Dealings in units in the authorised fund may continue provided that:

(a) as soon as possible and in any event by the end of the second

business day after the day on which this rule starts to apply under

(1), the authorised fund manager and the depositary agree that

dealings in units in the authorised fund should continue;

(b) the authorised fund manager and the depositary have a

reasonable basis for determining that a temporary suspension of

dealings in units would not be in the best interests of unitholders

in the authorised fund; and

solely on a fair value price adjustment when making their

determination under (b).

(1) This rule applies where the authorised fund manager of a non-UCITS

retail scheme is required to temporarily suspend dealings in units in

the authorised fund under ■ COLL 7.2.-3R(2) or ■ COLL 7.2.-1R(3).

(2) The authorised fund manager must notify the depositary before

suspending dealings in units in the authorised fund.

(3) During the suspension, the authorised fund manager must follow the

requirements set out in the following provisions, where applicable:

COLL 7 : Suspension of dealings, Section 7.2 : Suspension and restart of

termination of authorised funds dealings

and side pockets

R7.2.-1

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/6

(a) ■ COLL 7.2.1R(2);

(b) ■ COLL 7.2.1R(2A);

(d) ■ COLL 7.2.1R(2C);

(e) ■ COLL 7.2.1R(3);

(f) ■ COLL 7.2.1R(4A);

(g) ■ COLL 7.2.1R(5); and

(h) ■ COLL 7.2.1R(6).

(4) Dealings in units must restart as soon as reasonably practicable after:

(a) the standing independent valuer’s material uncertainty

assessment applies to less than 20% of the value of the scheme

property; and

(b) the scheme’s depositary gives its approval for the temporary

suspension to be removed.

(5) If a non-UCITS retail scheme operates limited redemption

arrangements and a suspension has prevented dealings in units at a

valuation point, the authorised fund manager must declare an

additional valuation point as soon as possible after the restart of

dealings in units.

(6) This rule applies to a sub-fund as it applies to an authorised fund,

and:

(a) references to the units of the class or classes relate to that sub-

fund and to the scheme property attributable to the sub-fund;

and

(b) this rule can only apply to one or more classes of units without

being applied to other classes if the authorised fund manager

considers that a suspension of dealings in units of some but not

all classes of units is in the best interest of all the unitholders of

that authorised fund or sub-fund.

(1) This rule applies where the authorised fund manager and the

depositary agree that dealings in units in the authorised fund should

continue under ■ COLL 7.2.-3R(3) and, if relevant, following a review

under this rule.

(2) During the period of material uncertainty (see (8) below), the

authorised fund manager and the depositary must review their

agreement not to suspend dealings in units in the authorised fund at

least every 14 days.

(3) Following such a review the authorised fund manager must

temporarily suspend dealings in units in the authorised fund unless

(4) applies.

(4) Dealings in units in the authorised fund may continue provided that:

(a) the authorised fund manager and the depositary agree that

dealings in units in the authorised fund should continue;

COLL 7 : Suspension of dealings, Section 7.2 : Suspension and restart of

termination of authorised funds dealings

and side pockets

R7.2.1

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/7

(b) the authorised fund manager and the depositary have a

reasonable basis for determining that a temporary suspension of

dealings in units would not be in the best interests of unitholders

in the authorised fund; and

solely on a fair value price adjustment when making their

determination under (b).

(6) The authorised fund manager must inform the FCA of the results of

each review.

(7) This rule applies to a sub-fund as it applies to an authorised fund,

and:

(a) references to the units of the class or classes relate to that sub-

fund and to the scheme property attributable to the sub-fund;

and

(b) this rule can only apply to one or more classes of units without

being applied to other classes if the authorised fund manager

considers a suspension of dealings in units of some but not all

classes of units is in the best interest of all the unitholders of that

authorised fund or sub-fund.

(8) In this rule, a “period of material uncertainty” is any period during

which one or both of ■ COLL 7.2.-3R(1)(a) and (b) applies.

(1) The authorised fund manager may, with the prior agreement of the

depositary, and must without delay, if the depositary so requires,

temporarily suspend the issue, cancellation, sale and redemption of

units in an authorised fund (referred to in this chapter as "dealings in

units"), where due to exceptional circumstances it is in the interest of

all the unitholders in the authorised fund. Where an authorised fund

is a regulated money market fund, the authorised fund manager

must ensure that any such suspensions are consistent with the Money

Market Funds Regulation.

(1A) The authorised fund manager and the depositary must ensure that

the suspension is only allowed to continue for as long as it is justified

having regard to the interests of the unitholders.

(2) On suspension, the authorised fund manager, or the depositary if it

has required the authorised fund manager to suspend dealings in

units, must:

(a) immediately inform the FCA, stating the reason for its action; and

(b) as soon as practicable give written confirmation of the suspension

and the reasons for it to the FCA.

(2A) The authorised fund manager must ensure that a notification of the

suspension is made to unitholders of the authorised fund as soon as

practicable after suspension commences.

(2B) In making the notification set out in (2A), the authorised fund

manager must ensure that it:

(a) draws unitholders' particular attention to the exceptional

circumstance which resulted in the suspension;

COLL 7 : Suspension of dealings, Section 7.2 : Suspension and restart of

termination of authorised funds dealings

and side pockets

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/8

(b) is clear, fair and not misleading; and

(2C).

(2C) The authorised fund manager must ensure that it publishes (on its

website or by other general means) sufficient details to keep

unitholders appropriately informed about the suspension including, if

known, its likely duration.

(3) During a suspension:

(a) none of the obligations in ■ COLL 6.2 (Dealing) apply; and

(b) the authorised fund manager must comply with as much of

■ COLL 6.3 (Valuation and pricing) as is practicable in the light of

the suspension.

(4) The suspension of dealings in units must cease as soon as practicable

after the exceptional circumstances referred to in (1) have ceased.

(4A) The authorised fund manager and the depositary must formally

review the suspension at least every 28 days and inform the FCA of

the results of this review and any change to the information provided

in (2).

(5) The authorised fund manager must inform the FCA of the proposed

restart of dealings in units and immediately after the restart must

confirm this by giving notice to the FCA.

(6) The authorised fund manager may agree, during the suspension, to

deal in units in which case all deals accepted during, and outstanding

prior to, the suspension will be undertaken at a price calculated at

the first valuation point after restart of dealing in units, subject to

(8).

(7) This rule applies to a sub-fund as it applies to an authorised fund,

and:

(a) references to the units of the class or classes relate to that sub-

fund and to the scheme property attributable to the sub-fund;

and

(b) this rule can only apply to one or more classes of units without

being applied to other classes, if it is in the interest of all the

unitholders.

(8) If an authorised fund operates limited redemption arrangements, and

the event in (1) has affected a valuation point, the authorised fund

manager must declare an additional valuation point as soon as

possible after the restart of dealings in units.

[Note: article 45(2) of the UCITS Directive]

COLL 7 : Suspension of dealings, Section 7.2 : Suspension and restart of

termination of authorised funds dealings

and side pockets

R7.2.1A

G7.2.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/9

Temporary suspension of units of a master UCITS or qualifying

master scheme

.....................................................................................................

Where:

(1) an authorised fund manager of a UCITS scheme which is a master

UCITS or a qualifying master scheme temporarily suspends the issue,

cancellation, sale and redemption of its units, whether at its own

initiative or at the request of the FCA; or

(2) an operator of an EEA UCITS scheme which is a master UCITS or a

qualifying master scheme temporarily suspends the issue, cancellation,

sale or redemption of its units, whether at its own initiative or at the

request of its Home State regulator; or

(3) an authorised fund manager of a non-UCITS retail scheme which is a

qualifying master scheme temporarily suspends the issue, cancellation,

sale or redemption of its units, whether at its own initiative or at the

request of the FCA; or

(4) the operator of a recognised scheme which is a qualifying master

scheme temporarily suspends the issue, cancellation, sale or

redemption of its units whether at its own initiative or at the request

of its regulator;

the authorised fund manager of each of its feeder UCITS (which is a UCITS

scheme) or feeder NURS is entitled to suspend the issue, cancellation, sale or

redemption of its units for the same period of time as the master UCITS or

qualifying master scheme.

[Note: article 60(3) of the UCITS Directive]

Guidance

.....................................................................................................

(-1) The guidance in (1), (1A) and (1B) does not apply in circumstances

where an authorised fund manager is required to temporarily

suspend dealings in units in an authorised fund under ■ COLL 7.2.-3R

or ■ COLL 7.2.-1R.

(1) Suspension should be allowed only in exceptional cases where

circumstances so require and suspension is justified having regard to

the interests of the unitholders.

(1A) Except in the case of FIIAs (for which see (1B) below), difficulties in

realising scheme assets or temporary shortfalls in liquidity may not on

their own be sufficient justification for suspension. In such

circumstances the authorised fund manager and depositary would

need to be confident that suspension could be demonstrated

genuinely to be in the best interests of the unitholders. Before an

authorised fund manager and depositary determine that it is in the

best interests of unitholders to suspend dealing, they should ensure

that any alternative courses of action have been discounted.

(1B) In the case of FIIAs, there may be circumstances where suspension is

genuinely in the best interests of unitholders; for example, where

orders received for redemptions of units at the next valuation period

cannot be executed without significantly depleting the scheme’s

COLL 7 : Suspension of dealings, Section 7.2 : Suspension and restart of

termination of authorised funds dealings

and side pockets

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/10

liquidity, and/or without selling scheme property at a substantial

discount to its open market value.

(2) The authorised fund manager will need to ensure that any

suspension, while maintaining unitholders' interests, is temporary, of

minimal duration and is consistent with the provisions of the

prospectus and the instrument constituting the fund.

(3) During a suspension, the authorised fund manager should inform any

person who requests a sale or redemption of units that all dealings in

units have been suspended and that that person has the option to

withdraw the request during the period of suspension or have the

request executed at the first opportunity after the suspension ends.

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

G7.3.1

R7.3.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/11

7.3 Winding up a solvent ICVC and

terminating or winding up a sub-

fund of an ICVC

Explanation of COLL 7.3

.....................................................................................................

(1) The winding up of an ICVC may be carried out under this section

instead of by the court provided the ICVC is solvent and the steps

required under regulation 21 the OEIC Regulations (The Authority's

approval for certain changes in respect of a company) are fulfilled.

This section lays down the procedures to be followed and the

obligations of the ACD and any other directors of the ICVC.

(2) The termination of a sub-fund may be carried out under this section,

instead of by the court, provided the sub-fund is solvent and the

steps required under regulation 21 of the OEIC Regulations are

complied with. Termination can only commence once the proposed

alterations to the ICVC's instrument of incorporation and prospectus

have been notified to the FCA and permitted to take effect. On

termination, the assets of the sub-fund will normally be realised, and

the unitholders in the sub-fund will receive their respective share of

the proceeds net of liabilities and the expenses of the termination.

(3) A sub-fund or ICVC may also be terminated or wound up in

connection with a scheme of arrangement. unitholders will become

entitled to receive units in another regulated collective investment

scheme in exchange for their units.

(4) ■ COLL 7.3.3 G gives an overview of the main steps in winding up a

solvent ICVC or terminating a sub-fund under FCA rules, assuming

FCA approval.

Special meanings for termination of a sub-fund of an ICVC

.....................................................................................................

In this section, where a sub-fund of an ICVC is being terminated, references

to:

(1) units, are references to units of the class or classes related to the sub-

fund to be terminated;

(2) a resolution, or extraordinary resolution, are references to such a

resolution passed at a meeting of unitholders of units of the class or

classes referred to in (1);

(3) scheme property, are references to the scheme property allocated or

attributable to the sub-fund to be terminated; and

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

G7.3.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/12

(4) liabilities, are references to liabilities of the ICVC allocated or

attributable to the sub-fund to be terminated.

Guidance on winding up or termination

.....................................................................................................

This table belongs to ■ COLL 7.3.1 G (4) (Explanation of COLL 7.3)

Summary of the main steps in winding up a solvent ICVC or terminating a

sub-fund under FCA rules, assuming FCA approval.

Notes: N = Notice to be given to the FCA under regulation 21 of OEIC Re-

gulations

E = commencement of winding up or termination

W/U = winding up

FAP = final accounting period (COLL 7.3.8 R(4))

Step number Explanation When COLL rule (unless

stated

otherwise)

1 Commence pre- N-28 days 7.3.5 (2)

paration of solv-

ency statement

2 Send audited By N + 21 days 7.3.5 (4) and (5)

solvency state-

ment to the FCA

with copy to de-

positary

3 Receive the FCA N + one month Regulation 21 of

approval OEIC Regulations

4 Normal business E 7.3.6

ceases; notify un-

itholders

5 Realise proceeds, ASAP after E 7.3.7

wind up, instruct

depositary ac-

cordingly

6 Prepare final ac- On completion 7.3.8

count or ter- of W/U or ter-

mination ac- mination

count & have ac-

count audited

7 Send final ac- Within 4 months 7.3.8(6)

count or ter- of FAP

mination ac-

count and aud-

itor's report to

the FCA & un-

itholders

8 Request FCA to On completion 7.3.7(9)

revoke relevant of W/U or ter-

authorisation mination

order or update

its records

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

R7.3.4

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/13

When an ICVC is to be wound up or a sub-fund terminated or

wound up

.....................................................................................................

(1) An ICVC must not be wound up except:

(a) under this section; or

(b) as an unregistered company under Part V of the Insolvency Act

1986.

(1A) A sub-fund must not:

(a) be terminated except under this section; or

(b) wound up except under Part V of the Insolvency Act 1986 (as

modified by regulation 33C of the OEIC Regulations) as an

unregistered company.

(2) An ICVC must not be wound up or a sub-fund terminated under this

section if there is a vacancy in the position of ACD.

(3) An ICVC must not be wound up or a sub-fund terminated under this

section:

(a) unless and until effect may be given, under regulation 21 of the

OEIC Regulations, to proposals to wind up the affairs of the ICVC

or to proposals to make the alterations to the ICVC's instrument

of incorporation and prospectus that will be required if a sub-

fund is terminated;

(b) unless a statement has been prepared and sent or delivered to

the FCA under ■ COLL 7.3.5 R (Solvency statement) and received by

the FCA prior to satisfaction of the condition in (a); and

under sections 9 to 11 of the Dormant Assets Act 2022 in respect

of an eligible CIS amount relating to the authorised fund or sub-

fund, the ACD and the depositary have ensured that any records

required under ■ COLL 6.6.6R(5) and ■ COLL 6.6.6R(6) (Maintenance

of records) are:

(i) accessible by the ACD or the depositary and will be

preserved; or

(ii) transferred to a dormant asset fund operator or to another

authorised person that has undertaken to preserve them.

(4) Subject to (3) and the subsequent provisions of this section, the

appropriate steps to wind up an ICVC or terminate a sub-fund under

this section must be taken:

(a) if an extraordinary resolution to that effect is passed; or

(b) when the period (if any) fixed for the duration of the ICVC or the

sub-fund by the instrument of incorporation expires or any event

occurs, for which the instrument of incorporation provides that

the ICVC or the sub-fund is to be wound up or terminated; or

request from the directors for the winding up of the ICVC or a

request for the termination of the sub-fund; or

(d) on the effective date of a duly approved scheme of arrangement

which is to result in the ICVC ceasing to hold any scheme

property; or

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

R7.3.5

R7.3.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/14

(e) in the case of a sub-fund, on the effective date of a duly

approved scheme of arrangement which is to result in the sub-

fund ceasing to hold any scheme property; or

(f) in the case of an ICVC that is an umbrella, on the date on which

all of its sub-funds fall within (e) or have otherwise ceased to

hold any scheme property, notwithstanding that the ICVC may

have assets and liabilities that are not attributable to any

particular sub-fund.

Solvency statement

.....................................................................................................

(1) Before notice is given to the FCA under regulation 21 of the OEIC

Regulations of the proposals referred to in ■ COLL 7.3.4 R (3), the

directors must make a full enquiry into the ICVC's or, in the case of

termination of a sub-fund, the sub-fund's affairs, business and

property to determine whether the ICVC or the sub-fund will be able

to meet all its liabilities.

(2) The ACD must then, based on the results of this enquiry, prepare a

statement either:

(a) confirming that the ICVC or the sub-fund will be able to meet all

its liabilities within twelve months of the date of the statement;

(b) stating that such confirmation cannot be given.

(3) This solvency statement must:

(a) relate to the ICVC's or the sub-fund's affairs, business and

property at a date no more than 28 days before the date on

which notice is given to the FCA;

(b) if there is more than one director, be approved by the board of

directors and signed on their behalf by the ACD; and

one other director or, if there is no director other than the ACD,

be signed by the ACD.

(4) A statement which contains the confirmation under (2)(a) must annex

a statement signed by the auditor appointed under Schedule 5 to the

OEIC Regulations (Auditors) to the effect that, in his opinion, the

enquiry required by (1) has been properly made and is fairly reflected

by the confirmation.

(5) The solvency statement must be sent or delivered to the FCA and the

depositary no later than 21 days after notice is given to the FCA in

accordance with regulation 21 of the OEIC Regulations.

Consequences of commencement of winding up or termination

.....................................................................................................

(1) Winding up or termination must commence once the conditions

referred to in ■ COLL 7.3.4 R (3) are both satisfied or, if later, once the

events in ■ COLL 7.3.4 R (4) have occurred.

(2) Once winding up or termination has commenced:

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

R7.3.7

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/15

(a) ■ COLL 6.2 (Dealing), ■ COLL 6.3 (Valuation and pricing),

■ COLL 6.6.20R to ■ COLL 6.6.24G (Assessment of value) and ■ COLL 5

(Investment and borrowing powers) cease to apply to the ICVC or

to the units and scheme property in the case of a sub-fund;

(b) the ICVC must cease to issue and cancel units, except in respect of

the final cancellation under ■ COLL 7.3.7 R (5);

issue or cancellation of units, except in respect of the final

cancellation under ■ COLL 7.3.7 R (5);

(d) no transfer of a unit may be registered and no other change to

the register of unitholders may be made without the sanction of

the directors;

(e) where winding up an ICVC, the ICVC must cease to carry on its

business, except for its beneficial winding up; and

(f) the corporate status and corporate powers of the ICVC and

(subject to the preceding provisions of this rule) the powers of

the directors continue until the ICVC is dissolved.

(3) If the ACD has not previously notified unitholders of the proposal to

wind up the ICVC or terminate the sub-fund, the ACD must, as soon

as practicable after winding up or termination has commenced, give

written notice of the commencement of the winding up or

termination to the unitholders.

Manner of winding up or termination

.....................................................................................................

(1) [deleted]

(2) The ACD must, as soon as practicable after winding up or termination

has commenced, cause the scheme property to be realised and the

liabilities of the ICVC or the sub-fund to be met out of the proceeds.

(3) The ACD must instruct the depositary how such proceeds (until

utilised to meet liabilities or make distributions to unitholders) must

be held and those instructions must be prepared with a view to the

prudent protection of creditors and unitholders against loss.

(4) Where sufficient liquid funds are available after making adequate

provision for the expenses of the winding up or termination and the

discharge of the ICVC's or the sub-fund's remaining liabilities, the

ACD may arrange for the depositary to make one or more interim

distributions to the unitholders proportionately to the right of their

respective units to participate in scheme property at the

commencement of the winding up or termination.

(5) On or before the date on which the final account is sent to

unitholders in accordance with ■ COLL 7.3.8 R (Final account and

termination account), the ACD must arrange for all units in issue to

be cancelled and for the depositary to make a final distribution to

the unitholders, in the same proportions as provided by (4), of the

balance remaining (net of a provision for any further expenses of the

ICVC or sub-fund).

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

G7.3.7A

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/16

(6) Paragraphs (2) to (5) are subject to the terms of any scheme of

arrangement sanctioned by an extraordinary resolution passed on or

before the commencement of the winding up or termination.

(7) Where the ICVC and one or more unitholders (other than the ACD)

agree, the requirement in (2) to realise the scheme property does not

apply to that part of the scheme property which is proportionate to

the right to participate in scheme property of that or those

unitholders

(8) In the case of (7), the ACD must cause the ICVC to distribute that part

of the scheme property in specie to that or those unitholders in

proportion to their respective rights to participate, this distribution

being effected after making adjustments and retaining such provision

as appears to the ACD appropriate to ensure that those unitholders

bear the proportion of the liabilities and the expenses of the

distribution attributable to their units.

(9) The depositary must notify the FCA once the winding up of the ICVC

or the termination of a sub-fund (including compliance with

■ COLL 7.3.8 R is complete and at the same time the ACD or the

depositary must request the FCA to revoke the relevant authorisation

order (on the winding up of an ICVC) or to update its records (on the

termination of a sub-fund of an ICVC).

(10) Where any sum of money stands to the account of the ICVC at the

date of its dissolution or a sub-fund at the date of its termination, the

ACD must arrange for the depositary to pay or lodge that sum within

one month after that date in accordance with regulation 33(4), (5) or

(6) of the OEIC Regulations (Dissolution in other circumstances),

where relevant, as applied by regulation 33C of the OEIC Regulations

(Winding up of sub-funds).

(11) [deleted]

(12) [deleted]

(13) [deleted]

(14) [deleted]

(15) [deleted]

For the purposes of this section an ICVC may be treated as having been

wound up or a sub-fund terminated upon completion, where relevant, of all

of the steps in (1) to (3):

(1) payment or adequate provision being made (by the ACD) to cover the

expenses relating to the winding up or termination and all liabilities

of the scheme;

(2) the scheme property being realised or distributed in accordance with

■ COLL 7.3.7 R (8); and

(3) the net proceeds being distributed to the unitholders named in the

or provision being made in respect of the final distribution.

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

G7.3.7B

R7.3.8

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/17

Transfers of orphan monies to a dormant asset fund operator

.....................................................................................................

(1) Under regulation 33 of the OEIC Regulations, where an ICVC is

dissolved otherwise than by the court, any sum of money (including

unclaimed distributions) standing to the account of the ICVC at the

date of the dissolution must be paid into court. This duty does not

apply if (or to the extent that) it is transferred to a dormant asset

fund operator as orphan monies.

(2) Under the Dormant Assets Act 2022, orphan monies may be

transferred to a dormant asset fund operator where they are a

dormant asset. This means that only the proportion of outstanding

money that is attributable pro rata to a ‘gone-away’ person (see

section 10 of the Dormant Assets Act 2022) can be transferred as a

dormant asset. However, a person with whom the ACD or the

depositary is still in contact could be invited to donate de minimis

amounts as unwanted asset money for transfer to the dormant asset

fund operator (see ■ COLL 6.8.4AR (Unwanted asset money)).

(3) Where a transfer of orphan monies to a dormant asset fund operator

is possible in accordance with the instrument constituting the fund,

the prospectus and sections 8 and 9 of the Dormant Assets Act 2022,

the FCA would expect this to be the preferred option for the ICVC.

Final account and termination account

.....................................................................................................

(1) Once the ICVC's affairs are wound up or termination of the sub-fund

has been completed (including distribution or provision for

distribution in accordance with ■ COLL 7.3.7 R (5)), the ACD must

prepare an account of the winding up or termination showing:

(a) how it has been conducted; and

(b) how the scheme property has been disposed of.

(2) The account in (1) must be, if there is:

(a) more than one director, approved by the board of directors and

be signed on their behalf by the ACD and at least one other

director; or

(b) no director other than the ACD, signed by the ACD.

(3) Once signed, this account is the "final account" for the purposes of

the winding up of an ICVC and the "termination account" for the

purposes of the termination of a sub-fund.

(4) The final account must state the date on which the ICVC's affairs

were wound up and the date stated must be regarded as the final

day of the accounting period of the ICVC then running ('final

accounting period') for the purpose of ■ COLL 4.5.

(4A) The termination account must state the date on which the sub-fund's

affairs were terminated.

(5) The ACD must ensure that the ICVC's auditor makes a report in

respect of the final account or termination account, which states the

auditor's opinion whether the final account or termination account

has been properly prepared for the purpose of (1).

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

R7.3.9

R7.3.10

G7.3.10A

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/18

(6) Within four months of the date of the completion of the winding up

of the ICVC or termination of the sub-fund, the ACD must send a

copy of the final account or termination account and the auditor's

report on it to the FCA and to each person who was a unitholder (or

the first named of joint unitholders) immediately before the winding

up or termination commenced.

Duty to ascertain liabilities

.....................................................................................................

(1) The ACD must use all reasonable endeavours to ensure that all the

liabilities of the ICVC or the sub-fund are discharged before the

completion of the winding up or termination.

(2) The duty in (1) relates to all liabilities of which the ACD:

(a) is, or becomes, aware before the completion of the winding up

or termination; or

(b) would have become aware before the completion of the winding

up or termination had it used all reasonable endeavours to

ascertain the liabilities.

(3) If the ACD rejects any claim against the ICVC or the sub-fund in whole

or part or against the ICVC or the sub-fund in respect of a liability in

whole or part, the ACD must immediately send to the claimant

written notice of its reasons for doing so.

Reports and accounts

.....................................................................................................

(1) [deleted]

(1A) [deleted]

(2) For any annual accounting period or half-yearly accounting period

which begins after commencement of the winding up or termination,

a copy of the long report must be supplied free of charge to any

unitholder upon request.

(3) The ACD must ensure that it keeps unitholders appropriately

informed about the winding up or termination including, if known,

its likely duration.

(4) The ACD must send a copy of the information required by (3) to each

person who was a unitholder or the first named of joint unitholders

immediately before the winding up or termination commenced,

unless a final distribution has been made in accordance with

■ COLL 7.3.7 R (5).

(1) The effect of ■ COLL 7.3.10R is that the ACD must continue to prepare

annual and half-yearly long reports and to make them available to

unitholders in accordance with ■ COLL 4.5.14 R.

(2) Where there are outstanding unrealised assets, keeping unitholders

appropriately informed may, for example, be carried out by providing

updates at six-monthly or more frequent intervals.

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

R7.3.11

R7.3.12

R7.3.13

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/19

Liabilities of the ACD

.....................................................................................................

(1) Except to the extent that the ACD can show that it has complied with

■ COLL 7.3.9 R (Duty to ascertain liabilities), the ACD is personally liable

to meet any liability of an ICVC or a sub-fund, of which it is the ACD,

wound up or terminated under this section (whether or not the ICVC

has been dissolved or, in the case of the sub-fund, termination has

been completed) that was not discharged before the completion of

the winding up or termination.

(2) Where winding up an ICVC, if the proceeds of the realisation of the

assets attributable, or allocated to a particular sub-fund of an

umbrella ICVC are insufficient to meet the liabilities attributable or

allocated to that sub-fund, the ACD must pay to the ICVC, for the

account of that sub-fund the amount of the deficit, unless and to the

extent that the ACD can show that the deficit did not arise as a result

of any failure by the ACD to comply with the rules in COLL.

(3) The liabilities of the ACD under this rule create a debt (in England

and Wales in the nature of a specialty) accruing due from it on the

completion of the winding up or termination and payable upon the

demand of the creditor in question (including the ICVC in the

circumstances described in (2)).

(4) The obligations of the ACD under this rule do not affect any other

obligation of the ACD under these rules or the general law.

[deleted]

Miscellaneous

.....................................................................................................

(1) If:

(a) during the course, or as a result, of the enquiry referred to in

■ COLL 7.3.5 R (1) (Solvency statement), the directors become of the

opinion that it will not be possible to provide the confirmation

referred to in (2)(a) of that rule; or

(b) after winding up or termination has commenced, the ACD

becomes of the opinion that the ICVC or the sub-fund will be

unable to meet all its liabilities within twelve months of the date

of the statement provided under (a) of ■ COLL 7.3.5 R (2);

the directors must immediately present a petition or cause the ICVC

or sub-fund to present a petition for the winding up of the ICVC or

sub-fund as an unregistered company under Part V of the Insolvency

Act 1986.

(2) If, after the commencement of a winding up or termination under

this chapter and before notice of completion of the winding up or

termination has been sent to the FCA, there is a vacancy in the

position of ACD:

(a) the directors of the ICVC must immediately present or cause the

ICVC or sub-fund to present; or

(b) if there are no directors, the depositary must immediately

present;

COLL 7 : Suspension of dealings, Section 7.3 : Winding up a solvent ICVC and

termination of authorised funds terminating or winding up a sub-fund of an

and side pockets ICVC

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/20

a petition for the winding up of the ICVC or sub-fund as an

unregistered company under Part V of the Insolvency Act 1986.

COLL 7 : Suspension of dealings, Section 7.4 : Winding up an AUT and

termination of authorised funds terminating a sub-fund of an AUT

and side pockets

G7.4.1

R7.4.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/21

7.4 Winding up an AUT and terminating

a sub-fund of an AUT

Explanation of COLL 7.4

.....................................................................................................

(1) This section deals with the circumstances and manner in which an

AUT is to be wound up or a sub-fund of an AUT is to be terminated.

Under section 256 of the Act (Requests for revocation of

authorisation order), the manager or trustee of an AUT may request

the FCA to revoke the authorisation order in respect of that AUT.

Section 257 of the Act (Directions) gives the FCA the power to make

certain directions.

(2) The termination of a sub-fund under this section will be subject to

section 251 of the Act (Alteration of schemes and changes of

manager or trustee). Termination can only commence once the

proposed alterations to the trust deed and prospectus have been

notified to the FCA in writing and permitted to take effect. On

termination, the assets of the sub-fund will normally be realised, and

the unitholders in the sub-fund will receive their respective share of

the proceeds net of liabilities and the expenses of the termination.

(3) An AUT or a sub-fund of an AUT may also be wound up or

terminated in connection with a scheme of arrangement. unitholders

will become entitled to receive units in another regulated collective

investment scheme in exchange for their units.

(4) ■ COLL 7.4.2A G gives an overview of the main steps in winding up an

AUT or terminating a sub-fund under FCA rules, assuming FCA

approval.

Special meanings for termination of a sub-fund of an AUT

.....................................................................................................

In this section, where a sub-fund of an AUT is being terminated, references

to:

(1) units, are references to units of the class or classes related to the sub-

fund to be terminated;

(2) a resolution or extraordinary resolution, are references to such a

resolution passed at a meeting of unitholders of units of the class or

classes referred to in (1);

(3) scheme property, are references to the scheme property allocated or

attributable to the sub-fund to be terminated; and

COLL 7 : Suspension of dealings, Section 7.4 : Winding up an AUT and

termination of authorised funds terminating a sub-fund of an AUT

and side pockets

G7.4.2A

R7.4.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/22

(4) liabilities, are references to liabilities of the AUT allocated or

attributable to the sub-fund to be terminated.

Guidance on winding up or termination

.....................................................................................................

This table belongs to ■ COLL 7.4.1 G (4) (Explanation of COLL 7.4)

Summary of the main steps in winding up an AUT or terminating a sub-

fund under FCA rules

Notes: N = Notice to be given to the FCA under section 251 of the Act.

E = commencement of winding up or termination

W/U = winding up

FAP = final accounting period (COLL 7.4.5 R (4))

Step COLL rule (unless

number Explanation When stated otherwise)

1 Receive FCA N + one month Section 251 of the

approval Act

On receipt of no-

tice from the FCA

2 Normal business E 7.4.3R

ceases; notify un-

itholders

3 Trustee to realise ASAP after E 7.4.4R(1) to (5)

and distribute

proceeds

4 Send annual long Within 4 months 7.4.5R(5)

report of manager of FAP

and trustee to the

FCA

5 Request FCA to re- On completion of 7.4.4R(6)

voke relevant au- W/U

thorisation order

When an AUT is to be wound up or a sub-fund terminated

.....................................................................................................

(1) Upon the happening of any of the events or dates referred to in (2)

and not otherwise:

(a) ■ COLL 6.2 (Dealing), ■ COLL 6.3 (Valuation and pricing),

■ COLL 6.6.20R to ■ COLL 6.6.24G (Assessment of value) and ■ COLL 5

(Investment and borrowing powers) cease to apply to the AUT or

to the units and scheme property in the case of a sub-fund;

(b) the trustee must cease to issue and cancel units, except in respect

of the final cancellation under ■ COLL 7.4.4 R (1) or ■ (2);

(d) the manager must cease to arrange the issue or cancellation of

units under ■ COLL 6.2.7 R (Issue and cancellation of units through

an authorised fund manager), except in respect of the final

cancellation under ■ COLL 7.4.4 R (1) or ■ (2);

(dA) no transfer of a unit may be registered and no other change to

the register of unitholders may be made without the approval of

the person responsible for the register in accordance with

■ COLL 6.4.4 R (1); and

COLL 7 : Suspension of dealings, Section 7.4 : Winding up an AUT and

termination of authorised funds terminating a sub-fund of an AUT

and side pockets

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/23

(e) the trustee must proceed to wind up the AUT or terminate the

sub-fund in accordance with ■ COLL 7.4.4 R.

(1A) If the manager has not previously notified unitholders of the proposal

to wind up the AUT or terminate the sub-fund, it must as soon as

practicable after winding up or termination has commenced give

written notice of the commencement of the winding up or

termination to the unitholders.

(1B) (a) This paragraph applies where a person may have a right to make

a repayment claim under sections 9 to 11 of the Dormant Assets

Act 2022, in respect of an eligible CIS amount relating to the

authorised fund or sub-fund.

(b) The AUT must not be wound up nor the sub-fund terminated

under this section unless and until the manager and trustee have

ensured that any records required under ■ COLL 6.6.6R(5) and

■ COLL 6.6.6R(6) (Maintenance of records) are:

(i) accessible by the manager or the trustee and will be

preserved; or

(ii) transferred to a dormant asset fund operator or to another

authorised person that has undertaken to preserve them.

(2) The events referred to in (1) are:

(a) the authorisation order of the AUT is revoked;

(b) alterations to the AUT's trust deed and prospectus that will be

required if the sub-fund is terminated taking effect in accordance

with section 251 of the Act;

terminating the sub-fund, provided FCA's prior consent to the

resolution has been obtained by the manager or trustee;

(d) in response to a request to the FCA by the manager or the

trustee for the revocation of the authorisation order, the FCA has

agreed, subject to there being no material change in any relevant

factor, that, on the conclusion of the winding up of the AUT, the

FCA will agree to that request;

(e) the expiration of any period specified in the trust deed as the

period at the end of which the AUT is to be wound up or the

sub-fund is to terminate;

(f) the effective date of a duly approved scheme of arrangement,

which is to result in the AUT or sub-fund that is subject to the

scheme of arrangement being left with no property; or

(g) the date on which a relevant pension scheme is notified in

writing by The Pensions Regulator that the scheme is no longer

registered under the Welfare and Pensions Reform Act 1999 as a

stakeholder pension scheme.

(3) This rule is without prejudice to ■ COLL 7.2.1 R(Requirement) and to

any order or direction made under section 257 or 258 of the Act.

COLL 7 : Suspension of dealings, Section 7.4 : Winding up an AUT and

termination of authorised funds terminating a sub-fund of an AUT

and side pockets

R7.4.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/24

Manner of winding up or termination

.....................................................................................................

(1) Where ■ COLL 7.4.3 R (2) (f) applies, the trustee must cancel all units in

issue and wind up the AUT or terminate the sub-fund in accordance

with the approved scheme of arrangement.

(2) In any other case falling within ■ COLL 7.4.3 R:

(a) once the AUT falls to be wound up or sub-fund terminated, the

trustee must realise the scheme property;

(b) after paying out or retaining adequate provision for all liabilities

payable and for the costs of the winding up or termination, the

trustee must cancel all units in issue and distribute the proceeds

of that realisation to the unitholders and the manager

proportionately to their respective interests in the AUT or sub-

fund as at the date, or the date of the relevant event referred to

in ■ COLL 7.4.3 R; and

distribution payments) held by the trustee after one year from

the date on which they became payable must be paid by the

trustee in accordance with (2A) or (2B), in either case subject to

the trustee having a right to retain any expenses properly

incurred by them relating to that payment.

(2A) The manager must arrange for the trustee to transfer the unclaimed

net proceeds or cash referred to in (2)(c) to a dormant asset fund

operator in accordance with sections 8 and 9 of the Dormant Assets

Act 2022 where:

(a) the instrument constituting the fund and the prospectus permit

the transfer of unclaimed net proceeds or cash as referred to in

(2)(c) to a dormant asset fund operator as orphan monies; and

(b) the manager is satisfied that the orphan monies are a dormant

asset.

(2B) Where, and to the extent that, (2A) does not apply, the unclaimed

net proceeds or cash (see (2)(c) above) must be paid by the trustee

into court (or, in Scotland, as the court may direct).

(3) For an AUT which is a relevant pension scheme, payments must not

be made to unitholders in the AUT, the realisation proceeds having to

be paid by the trustee in accordance with the trust deed.

(4) Where the trustee and one or more unitholders agree, the

requirement in (2) to realise the scheme property does not apply to

that part of the property proportionate to the entitlement of that or

those unitholders.

(5) The trustee must distribute the part of the scheme property referred

to in (4) in the form of property, after making adjustments or

retaining provisions as appears appropriate to the trustee for

ensuring that, that or those unitholders bear a proportional share of

the liabilities and costs.

(6) On completion of the winding up in respect of the events referred to

in ■ COLL 7.4.3 R (2)(c), ■ COLL 7.4.3 R (2)(d), ■ COLL 7.4.3 R (2)(e) or

■ COLL 7.4.3 R (2) (f), the trustee must notify the FCA in writing and at

COLL 7 : Suspension of dealings, Section 7.4 : Winding up an AUT and

termination of authorised funds terminating a sub-fund of an AUT

and side pockets

G7.4.4A

G7.4.4B

R7.4.5

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/25

the same time the manager or trustee must request the FCA to

revoke the relevant authorisation order.

For the purposes of this section, an AUT may be treated as having been

wound up or a sub-fund terminated upon completion, where relevant, of all

of the steps in (1) to (3):

(1) payment or adequate provision being made (by the trustee after

consulting the manager) to cover the expenses relating to the

winding up or termination and all liabilities of the scheme;

(2) the scheme property being realised or distributed in accordance with

■ COLL 7.4.4 R (5); and

(3) the net proceeds being distributed to the unitholders named in the

or provision being made in respect of the final distribution.

Transfers of orphan monies to a dormant asset fund operator

.....................................................................................................

(1) Under the Dormant Assets Act 2022, orphan monies may be

transferred to a dormant asset fund operator where they are a

dormant asset. This means that only the proportion of outstanding

money that is attributable pro rata to a ‘gone-away’ person (see

section 10 of the Dormant Assets Act 2022) can be transferred in this

way.

(2) However, a person with whom the manager or the trustee is still in

contact could be invited to donate de minimis amounts as unwanted

asset money for transfer to the dormant asset fund operator (see

■ COLL 6.8.4AR (Unwanted asset money)).

Accounting and reports during winding up or termination

.....................................................................................................

(1) [deleted]

(1A) [deleted]

(2) For any annual accounting period or half-yearly accounting period

which begins after commencement of the winding up or termination,

a copy of the long report must be supplied free of charge to any

unitholder upon request.

(2A) The manager must ensure that it keeps unitholders appropriately

informed about the winding up or termination, including its likely

duration.

(2B) The manager must send a copy of the information required by

■ COLL 7.4.5 R (2A) to each person who was a unitholder or the first

named of joint unitholders immediately before the winding up or

termination commenced, unless a final distribution has been made in

accordance with ■ COLL 7.4.4 R (2)(b).

(3) [deleted]

COLL 7 : Suspension of dealings, Section 7.4 : Winding up an AUT and

termination of authorised funds terminating a sub-fund of an AUT

and side pockets

G7.4.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/26

(4) At the conclusion of the winding up or termination, the accounting

period then running is regarded as the final annual accounting

period.

(5) Within four months after the end of the final annual accounting

period or the termination of the sub-fund, the annual reports of the

manager and trustee must be published and sent to the FCA.

(6) The manager must, on publication of the annual long report in (5),

write to each person who was a unitholder or the first named of joint

unitholders immediately before the commencement of winding up or

termination to inform them that the annual long report is available

free-of-charge on request.

(1) The effect of ■ COLL 7.4.5R is that the manager must continue to

prepare annual and half-yearly long reports and to make them

available to unitholders in accordance with ■ COLL 4.5.14 R.

(2) Where there are outstanding unrealised assets, keeping unitholders

appropriately informed may, for example, be carried out by providing

updates to unitholders at six-monthly or more frequent intervals.

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

G7.4A.1

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/27

7.4A Winding up a solvent ACS and

terminating a sub-fund of a co-

ownership scheme

Explanation of COLL 7.4A

.....................................................................................................

(1) This section deals with the circumstances and manner in which an ACS

is to be wound up or a sub-fund of a co-ownership scheme is to be

terminated otherwise than by the court as an unregistered company

under the Insolvency Act 1986 or the Insolvency (Northern Ireland)

Order 1989 (further rules regarding schemes of arrangement are

found in ■ COLL 7.6 (Schemes of arrangement)).

(2) An ACS may be wound up under this section only if it is solvent.

Under section 261W of the Act (Requests for revocation of

authorisation order), the authorised contractual scheme manager or

depositary of an ACS may request the FCA to revoke the

authorisation order in respect of that ACS. The FCA may then indicate

that, subject to there being no change in any relevant factor, on the

conclusion of the winding up of the ACS, the FCA will agree to that

request. Section 261X of the Act (Directions) gives the FCA the power

to make certain directions.

(3) A sub-fund of a co-ownership scheme may be terminated under this

section only if it is solvent. The termination of a sub-fund under this

section will be subject to section 261Q of the Act (Alteration of

contractual schemes and changes of operator or depositary).

Termination can only commence once the proposed alterations to the

contractual scheme deed and prospectus have been notified to the

FCA in writing and permitted to take effect. On termination, the

assets of a sub-fund will normally be realised, and the unitholders in

the sub-fund will receive their respective share of the proceeds net of

liabilities and the expenses of the termination.

(4) An ACS or a sub-fund of a co-ownership scheme may also be wound

up or terminated in connection with a scheme of arrangement. The

requirements of section 261Q also apply in relation to a proposal that

an ACS or a sub-fund of a co-ownership scheme be involved in a

scheme of arrangement. unitholders will become entitled to receive

units in another regulated collective investment scheme in exchange

for their units.

(5) ■ COLL 7.4A.3 G gives an overview of the main steps in winding up a

solvent ACS or terminating a sub-fund of a co-ownership scheme

under FCA rules, assuming FCA approval.

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

R7.4A.2

G7.4A.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/28

Special meanings in this section

.....................................................................................................

(1) In this section, where a sub-fund of a co-ownership scheme is being

terminated, references to:

(a) units, are references to units of the class or classes related to the

sub-fund to be terminated;

(b) a resolution, or extraordinary resolution, are references to such a

resolution passed at a meeting of unitholders of units of the class

or classes referred to in (1);

or attributable to the sub-fund to be terminated; and

(d) liabilities, are references to liabilities of the co-ownership scheme

allocated or attributable to the sub-fund to be terminated.

(2) In this section:

(a) a "section 261Q case" refers to:

(i) a case where a sub-fund of a co-ownership scheme is to be

terminated otherwise than in connection with a scheme of

arrangement; or

(ii) a case where an ACS or a sub-fund of a co-ownership scheme

is to be wound up or terminated in connection with a

scheme of arrangement; and

(b) a "section 261W case" refers to a case where an ACS is to be

wound up otherwise than in connection with a scheme of

arrangement.

Guidance on winding up or termination

.....................................................................................................

This table belongs to ■ COLL 7.4A.1G (5) (Explanation of ■ COLL 7.4A)

Summary of the main steps in winding up an ACS or terminating a sub-

fund of a co-ownership scheme under FCA rules

Notes: N = Notice to be given to the FCA under section 261Q of the Act in

a section 261Q case.

R = Request to wind up the scheme under section 261W of the Act in a sec-

tion 261W case.

E = commencement of winding up or termination

W/U = winding up

FAP = final accounting period

Step number Explanation When COLL rule, (un-

less stated

otherwise)

1 Commence pre- N-28 days or R- 7.4A.5R(2)

paration of solv- 28 days

ency statement

2 Send audited By N + 21 days 7.4A.5R(4) and

solvency state- or by R + 21 (5)

ment to the FCA days

with copy to de-

positary.

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/29

3 In a section N + one month Section 261Q of

261Q case: or R + one the Act (in a sec-

month tion 261Q case)

- the authorised

contractual 7.4A.4R(3)(c) to

scheme manager (e) (in a section

receiving FCA 261W case)

approval;

- or one month

having passed

after submitting

the requisite no-

tice under sec-

tion 261Q of the

Act without the

authorised con-

tractual scheme

manager or de-

positary having

received from

the FCA a warn-

ing notice under

section 261R in

respect of the

proposal.

In a section

261W case, the

authorised con-

tractual scheme

manager or de-

positary receives

an indication

from the FCA

that, subject to

there being no

change in any

relevant factor,

on the conclu-

sion of the wind-

ing up of the

ACS, the FCA

will agree to the

request to wind

up the ACS.

4 Normal business E 7.4A.4R

ceases; notify un-

itholders

5 Depositary to re- ASAP after E 7.4A.6R(1)-(5)

alise and distrib-

ute proceeds

6 Send annual Within 4 months 7.4A.9R(7)

long report of of FAP

authorised con-

tractual scheme

manager, de-

positary and

auditor to the

FCA

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

R7.4A.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/30

7 Request FCA to On completion 7.4A.6R(6)

revoke relevant of W/U

authorisation

order

When an ACS is to be wound up or a sub-fund of a co-

ownership scheme terminated

.....................................................................................................

(1) Upon the happening of any of the matters or dates referred to in (3),

and subject to the requirement of (4) being satisfied, and not

otherwise:

(a) ■ COLL 6.2 (Dealing), ■ COLL 6.3(Valuation and pricing),

■ COLL 6.6.20R to ■ COLL 6.6.24G (Assessment of value) and ■ COLL 5

(Investment and borrowing powers) cease to apply to the ACS or

to the units and scheme property in the case of a sub-fund of a

co-ownership scheme;

(b) the depositary must cease to issue and cancel units, except in

respect of the final cancellation under ■ COLL 7.4A.6R (1) or

■ COLL 7.4A.6R (2) (Manner of winding up or termination);

and redeem units;

(d) the authorised contractual scheme manager must cease to

arrange the issue or cancellation of units under ■ COLL 6.2.7 R

(Issue and cancellation of units through an authorised fund

manager), except in respect of the final cancellation under

■ COLL 7.4A.6R (1) or ■ (2);

(e) no transfer of a unit may be registered and no other change to

the register of unitholders may be made without the approval of

the person responsible for the register in accordance with

■ COLL 6.4.4 R (1) (Register: general requirements and contents);

and

(f) the depositary must proceed to wind up the ACS or terminate the

sub-fund in accordance with ■ COLL 7.4A.6 R.

(2) If the authorised contractual scheme manager has not previously

notified unitholders of the proposal to wind up the ACS or terminate

the sub-fund of the co-ownership scheme, it must as soon as

practicable after winding up or termination has commenced give

written notice of the commencement of the winding up or

termination to the unitholders.

(3) The matters referred to in (1) are:

(a) the authorisation order of the ACS is revoked;

(b) alterations to the co-ownership scheme's contractual scheme

deed and prospectus that will be required if the sub-fund is

terminated taking effect in accordance with section 261Q

(Alteration of contractual schemes and changes of operator or

depositary) of the Act;

terminating the sub-fund, provided the FCA's prior consent to the

resolution has been obtained by the authorised contractual

scheme manager or depositary;

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/31

(d) in response to a request to the FCA by the authorised contractual

scheme manager or the depositary for the revocation of the

authorisation order, the FCA has agreed, subject to there being

no material change in any relevant factor, that, on the conclusion

of the winding up of the ACS, the FCA will agree to that request;

(e) the expiration of any period specified in the contractual scheme

deed as the period at the end of which the ACS is to be wound

up or the sub-fund is to terminate;

(f) the effective date of a duly approved scheme of arrangement,

which is to result in the ACS or sub-fund that is subject to the

scheme of arrangement being left with no property;

(g) in the case of a co-ownership scheme that is an umbrella, the

date on which all or the last of its sub-funds fall within (f) or

have otherwise ceased to hold any scheme property,

notwithstanding that the co-ownership scheme may have assets

and liabilities that are not attributable exclusively to any

particular sub-fund.

(4) An ACS must not be wound up nor a sub-fund terminated under this

section unless the requirements of (a), (b) and (where relevant) (c) are

satisfied:

(a) An ACS must not be wound up nor a sub-fund terminated under

this section unless and until:

(i) in a section 261Q case either:

(A) the FCA has given written approval to the proposal; or

(B) one month has passed since the authorised contractual

scheme manager gave notice under section 261Q without

the authorised contractual scheme manager or

depositary having received from the FCA a warning

notice under section 261R in respect of the proposal; or

(ii) in a section 261W case, the FCA indicates that, subject to

there being no change in any relevant factor, on the

conclusion of the winding up of the ACS, the FCA will agree

to the request to wind up the ACS.

(b) In addition an ACS must not be wound up nor a sub-fund

terminated under this section unless a statement has been

prepared and sent or delivered to the FCA under ■ COLL 7.4A.5 R

(Solvency statement) and received by the FCA prior to the

satisfaction of the condition in (a).

to make a repayment claim under sections 9 to 11 of the

Dormant Assets Act 2022, in respect of an eligible CIS amount

relating to the authorised fund or sub-fund.

(ii) The ACS must not be wound up nor the sub-fund terminated

under this section unless and until the authorised contractual

scheme manager and the depositary have ensured that any

records required under ■ COLL 6.6.6R(5) and ■ COLL 6.6.6R(6)

(Maintenance of records) are:

(A) accessible by the authorised fund manager or the

depositary and will be preserved; or

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

R7.4A.5

R7.4A.6

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/32

(B) transferred to a dormant asset fund operator or to

another authorised person that has undertaken to

preserve them.

(5) This rule is without prejudice to:

(a) ■ COLL 7.2.1 R (Requirement); or

(b) any order or direction made under section 261X (Directions) or

261Y (Applications to the court) of the Act; or

winding up a limited partnership scheme provided for by the law.

Solvency statement

.....................................................................................................

(1) Either before notice is given under section 261Q of the Act or before

a request is made under section 261W of the Act in relation to the

proposals referred to in ■ COLL 7.4A.4R (4), the authorised contractual

scheme manager must make a full inquiry into the ACS's (or, in the

case of the termination of a sub-fund of a co-ownership scheme, the

sub-fund's) affairs, business and property to establish whether the

ACS or the sub-fund will be able to meet all its liabilities.

(2) The authorised contractual scheme manager must then, based on the

results of this enquiry, prepare and sign a statement either:

(a) confirming that the ACS or the sub-fund of the co-ownership

scheme will be able to meet all its liabilities within twelve months

of the date of the statement; or

(b) stating that such confirmation cannot be given.

(3) This solvency statement must relate to the ACS's or the sub-fund's

affairs, business and property at a date no more than 28 days before

the date on which notice is given to the FCA under section 261Q or a

request is made under section 261W.

(4) A statement which contains the confirmation under (2) must annex a

statement signed by the auditor of the ACS to the effect that, in his

opinion, the enquiry required by (1) has been properly made and is

fairly reflected by the confirmation.

(5) The solvency statement must be sent or delivered to the FCA and the

depositary no later than 21 days after notice is given to the FCA in

accordance with section 261Q of the Act or the request made in

accordance with section 261W of the Act.

Manner of winding up or termination

.....................................................................................................

(1) Where ■ COLL 7.4A.4R (3)(f) applies, the depositary must cancel all units

in issue and wind up the ACS or terminate the sub-fund of the co-

ownership scheme in accordance with the approved scheme of

arrangement.

(2) In any other case falling within ■ COLL 7.4A.4 R:

(a) once the ACS falls to be wound up or sub-fund terminated, the

depositary must realise the scheme property;

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

G7.4A.7

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/33

(b) after paying out or retaining adequate provision for all liabilities

payable and for the costs of the winding up or termination, the

depositary must cancel all units in issue and distribute the

proceeds of that realisation to the unitholders and the authorised

contractual scheme manager proportionately to their respective

interests in the ACS or sub-fund as at the date, or the date of the

relevant event referred to in ■ COLL 7.4A.4 R; and

distribution payments) held by the depositary after one year from

the date on which they became payable must be paid by the

depositary in accordance with (2A) or (2B), in either case subject

to the depositary having a right to retain any expenses properly

incurred by them relating to that payment.

(2A) The authorised contractual scheme manager must arrange for the

depositary to transfer the unclaimed net proceeds or cash referred to

in (2)(c) to a dormant asset fund operator in accordance with sections

8 and 9 of the Dormant Assets Act 2022 where:

(a) the instrument constituting the fund and the prospectus permit

the transfer of unclaimed net proceeds or cash as referred to in

(2)(c) to a dormant asset fund operator as orphan monies; and

(b) the authorised contractual scheme manager is satisfied that the

orphan monies are a dormant asset.

(2B) Where, and to the extent that, (2A) does not apply, the unclaimed

net proceeds or cash referred to in (2)(c) must be paid by the

depositary into court (or, in Scotland, as the court may direct).

(3) For an ACS which is a relevant pension scheme, payments must not be

made to unitholders in the ACS. The realisation proceeds must be

paid by the depositary in accordance with the contractual scheme

deed.

(4) Where the depositary and one or more unitholders agree, the

requirement in (2) to realise the scheme property does not apply to

that part of the property proportionate to the entitlement of that or

those unitholders.

(5) The depositary must distribute the part of the scheme property

referred to in (4) in the form of property, after making adjustments

or retaining provisions as appears appropriate to the depositary for

ensuring that that or those unitholders bear a proportional share of

the liabilities and costs.

(6) On completion of the winding up in respect of the matters referred

to in ■ COLL 7.4A.4R (3)(c) to ■ (g), the depositary must notify the FCA

in writing and at the same time the authorised contractual scheme

manager or depositary must request the FCA to revoke the relevant

authorisation order.

For the purposes of this section, an ACS may be treated as having been

wound up or a sub-fund of a co-ownership scheme terminated upon

completion, where relevant, of all of the steps in (1) to (3):

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

G7.4A.7A

R7.4A.8

R7.4A.9

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/34

(1) payment or adequate provision being made (by the depositary after

consulting the authorised contractual scheme manager) to cover the

expenses relating to the winding up or termination and all liabilities

of the scheme;

(2) the scheme property being realised or distributed in accordance with

■ COLL 7.4A.6R (5); and

(3) the net proceeds being distributed to the unitholders named in the

or provision being made in respect of the final distribution.

Transfers of orphan monies to a dormant asset fund operator

.....................................................................................................

(1) Under the Dormant Assets Act 2022, orphan monies may be

transferred to a dormant asset fund operator where they are a

dormant asset. This means that only the proportion of outstanding

money that is attributable pro rata to a ‘gone-away’ person (see

section 10 of the Dormant Assets Act 2022) can be transferred in this

way.

(2) However, a person with whom the authorised contractual scheme

manager or the depositary is still in contact could be invited to

donate de minimis amounts as unwanted asset money for transfer to

the dormant asset fund operator (see ■ COLL 6.8.4AR (Unwanted asset

money)).

Duty to ascertain liabilities

.....................................................................................................

(1) The authorised contractual scheme manager must use all reasonable

endeavours to ensure that all the liabilities of the ACS or the sub-

fund of a co-ownership scheme are discharged before the completion

of the winding up or termination.

(2) The duty in (1) relates to all liabilities of which the authorised

contractual scheme manager:

(a) is, or becomes, aware before the completion of the winding up

or termination; or

(b) would have become aware before the completion of the winding

up or termination had it used all reasonable endeavours to

ascertain the liabilities.

(3) If the authorised contractual scheme manager rejects any claim or

liability against the ACS or the sub-fund in whole or part, the

authorised contractual scheme manager must immediately send to

the claimant written notice of its reasons for doing so.

Accounting and reports during winding up or termination

.....................................................................................................

(1) [deleted]

(2) [deleted]

(3) For any annual accounting period or half-yearly accounting period

which begins after commencement of the winding up or termination,

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

G7.4A.10

R7.4A.11

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/35

a copy of the long report must be supplied free of charge to any

unitholder upon request.

(4) The authorised contractual scheme manager must ensure that it keeps

unitholders appropriately informed about the winding up or

termination, including its likely duration.

(5) The authorised contractual scheme manager must send a copy of the

information required by (4) to each person who was a unitholder or

the first named of joint unitholders immediately before the winding

up or termination commenced, unless a final distribution has been

made in accordance with ■ COLL 7.4A.6R (2)(b).

(6) At the conclusion of the winding up or termination, the accounting

period then running is regarded as the final annual accounting

period.

(7) Within four months after the end of the final annual accounting

period or the termination of the sub-fund of the co-ownership

scheme, the annual reports of the authorised contractual scheme

manager and depositary must be published and sent to the FCA.

(8) The authorised contractual scheme manager must, on publication of

the annual long report in (7), write to each person who was a

unitholder or the first named of joint unitholders immediately before

the commencement of winding up or termination to inform them

that the annual long report is available free of charge on request.

(1) The effect of ■ COLL 7.4A.9R is that the authorised contractual scheme

manager must continue to prepare annual and half-yearly long

reports and to make them available to unitholders in accordance with

■ COLL 4.5.14R (Publication and availability of annual and half-yearly

long report).

(2) Where there are outstanding unrealised assets, keeping unitholders

appropriately informed may, for example, be carried out by providing

updates to unitholders at six-monthly or more frequent intervals.

Liabilities of the authorised contractual scheme manager

.....................................................................................................

(1) Except to the extent that the authorised contractual scheme manager

can show that it has complied with ■ COLL 7.4A.8 R (Duty to ascertain

liabilities), the authorised contractual scheme manager is personally

liable to meet any liability of an ACS or a sub-fund of a co-ownership

scheme, of which it is the authorised contractual scheme manager,

wound up or terminated under this section (whether or not the

winding up of the ACS or the termination of the sub-fund has been

completed) that was not discharged before the completion of the

winding up or termination.

(2) Where winding up an ACS, if the proceeds of the realisation of the

assets attributable or allocated to a particular sub-fund of an

umbrella co-ownership scheme are insufficient to meet the liabilities

attributable or allocated to that sub-fund, the authorised contractual

scheme manager must pay to the ACS, for the account of that sub-

fund, the amount of the deficit, unless and to the extent that the

COLL 7 : Suspension of dealings, Section 7.4A : Winding up a solvent ACS and

termination of authorised funds terminating a sub-fund of a co-ownership

and side pockets scheme

R7.4A.12

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/36

authorised contractual scheme manager can show that the deficit did

not arise as a result of any failure by the authorised contractual

scheme manager to comply with the rules in COLL.

(3) The liabilities of the authorised contractual scheme manager under

this rule create an accruing debt (in England and Wales in the nature

of a specialty) due from it on the completion of the winding up or

termination and payable upon the demand of the creditor in

question (including the ACS in the circumstances described in (2)).

(4) The obligations of the authorised contractual scheme manager under

this rule do not affect any other obligation of the authorised

contractual scheme manager under these rules or the law.

Miscellaneous

.....................................................................................................

If:

(1) during the course, or as a result, of the enquiry referred to in

■ COLL 7.4A.5R (1) (Solvency statement), the authorised contractual

scheme manager becomes of the opinion that it will not be possible

to provide the confirmation referred to in (2)(a) of that rule; or

(2) after winding up or termination has commenced, the authorised

contractual scheme manager becomes of the opinion that the ACS or

the sub-fund of a co-ownership scheme will be unable to meet all its

liabilities within twelve months of the date of the statement provided

under ■ COLL 7.4A.5R (2)(a);

the authorised contractual scheme manager must immediately present a

petition or cause the ACS or sub-fund to present a petition for the winding

up of the ACS or sub-fund as an unregistered company under the Insolvency

Act 1986 or the Insolvency (Northern Ireland) Order 1989, as modified by the

Contractual Scheme Regulations.

COLL 7 : Suspension of dealings, Section 7.5 : Schemes or sub-funds that are

termination of authorised funds not commercially viable

and side pockets

G7.5.1

G7.5.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/37

7.5 Schemes or sub-funds that are not

commercially viable

Explanation of this section

.....................................................................................................

(1) The FCA expects that the majority of requests it will receive for the

winding up of an authorised fund (under regulation 21(1) of the OEIC

Regulations or under sections 256 or 261W of the Act) or termination

of a sub-fund will be from authorised fund managers and

depositaries who consider that the AUT, ACS, ICVC or sub-fund in

question is no longer commercially viable.

(2) It is in consumers' interests to minimise, as far as possible, the period

between which the FCA receives such requests and responds to them.

To assist the FCA in arriving at a quick decision, based on all the

relevant factors, it would be helpful for the FCA to receive the

information listed at ■ COLL 7.5.2 G. Further information, however,

may be requested by the FCA after receipt of the information,

depending on the individual circumstances of the case.

Information to be provided to the FCA

.....................................................................................................

The information referred to in ■ COLL 7.5.1 G is listed below:

(1) the name of the authorised fund or sub-fund;

(2) the size of the authorised fund or sub-fund;

(3) the number of unitholders;

(4) whether dealing in units has been suspended;

(5) why the request is being made;

(6) what consideration has been given to the authorised fund or sub-

fund entering into a scheme of arrangement with another regulated

collective investment scheme and the reasons why a scheme of

arrangement is not feasible;

(7) (a) whether unitholders have been informed of the intention to seek

termination, winding up or revocation; and

(b) if not, when they will be informed;

(8) details of any proposed preferential switching rights offered or to be

offered to unitholders;

COLL 7 : Suspension of dealings, Section 7.5 : Schemes or sub-funds that are

termination of authorised funds not commercially viable

and side pockets

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/38

(9) details of any proposed rebate of charges to be made to unitholders

who recently purchased units;

(9A) where a person who is or was a unitholder in the authorised fund or

sub-fund may have a right to make a repayment claim under sections

9 to 11 of the Dormant Assets Act 2022, in respect of an eligible CIS

amount relating to that authorised fund or sub-fund, details as to the

steps taken by the authorised fund manager to ensure that the

relevant records (see ■ COLL 6.6.6R(5) and ■ COLL 6.6.6R(6) (Maintenance

of records)) are preserved;

(10) where the costs of winding up or termination will fall;

(11) the depositary's:

(a) statement whether having taken reasonable care it is certain that

a scheme of arrangement is not feasible and explaining what

steps have been considered that would result in the authorised

fund or sub-fund not needing to wind up or terminate (for

example, appointing a replacement authorised fund manager);

and

(b) confirmation that it will not or does not expect to qualify a

report made in accordance with ■ COLL 4.5.11 R (Report of the

depositary);

(12) the preferred date for the FCA's determination to revoke

authorisation or the date for the commencement of the winding up

or termination; and

(13) any additional information or material considered to be relevant to

the FCA's decision under sections 251, 256, 261Q and 261W of the Act

or regulation 21 of the OEIC Regulations (as appropriate).

COLL 7 : Suspension of dealings, Section 7.6 : Schemes of arrangement

termination of authorised funds

and side pockets

G7.6.1

R7.6.2

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/39

7.6 Schemes of arrangement

Schemes of arrangement: explanation

.....................................................................................................

(1) A proposal that an authorised fund should be involved in a scheme of

arrangement is subject to written notice to and approval by the FCA

under section 251 of the Act (Alteration of schemes and changes of

manager or trustee), section 261Q of the Act (Alteration of

contractual schemes and changes of operator or depositary) or

regulation 21 of the OEIC Regulations (The Authority's approval for

certain changes in respect of a company). Effect cannot be given to

such a change except in accordance with that section or regulation.

(2) The issue of units in exchange for assets as part of an approved

scheme of arrangement is subject to:

() ■ COLL 6.2.5 R and ■ COLL 6.2.6 R (Issue and cancellation of units);

() ■ COLL 6.2.15 R (In specie issue and redemption); and

() ■ COLL 7.6.2 R(Scheme of arrangement: requirements).

(3) ■ COLL 7.6.2 R (3) to ■ (6) apply to a domestic UCITS merger.

Arrangements constituting any such merger are in addition subject to

the requirements of ■ COLL 7.7 (UCITS mergers).

Schemes of arrangement: requirements

.....................................................................................................

(1) If a scheme of arrangement is entered into in relation to an

authorised fund ("transferor fund") or a sub-fund of a scheme which

is an umbrella ("transferor sub-fund"), an authorised fund manager

must ensure that the unitholders of the transferor fund or sub-fund

do not become unitholders of units in a collective investment scheme

other than a regulated collective investment scheme.

(2) For a UCITS scheme or a sub-fund of a UCITS scheme, (1) applies as if

the reference to a regulated collective investment scheme excludes

any recognised scheme which is not authorised under the UCITS

Directive in an EEA State.

(3) Where, for the purpose of a scheme of arrangement, it is proposed

that scheme property of an authorised fund should become the

property of another regulated collective investment scheme or sub-

fund of a regulated collective investment scheme, the proposal must

not be implemented without the sanction of an extraordinary

resolution of the unitholders in the authorised fund, unless (4)

applies.

COLL 7 : Suspension of dealings, Section 7.6 : Schemes of arrangement

termination of authorised funds

and side pockets

R7.6.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/40

(4) Where, for the purposes of a scheme of arrangement, it is proposed

that scheme property attributable to a sub-fund of an umbrella

should become the property of another regulated collective

investment scheme or of another sub-fund of a regulated collective

investment scheme (whether or not of that umbrella), the proposal

must not be implemented without the sanction of:

(a) an extraordinary resolution of the unitholders in the sub-fund of

that umbrella; and

(b) (unless implementation of the scheme of arrangement is not

likely to result in any material prejudice to the interests of the

unitholders in any other sub-fund of that umbrella) an

extraordinary resolution of the unitholders of units in that

umbrella.

(5) If it is proposed that an authorised fund or sub-fund of an umbrella

should receive property (other than its first property) as a result of a

scheme of arrangement (or an arrangement equivalent to a scheme

of arrangement) which is entered into by some other collective

investment scheme or sub-fund, or by a body corporate, the proposal

must not be implemented without the sanction of an extraordinary

resolution of the unitholders in the authorised fund or (as the case

may be) of the class or classes of units related to the sub-fund unless

(6) applies.

(6) This paragraph (6) applies if the directors of the ICVC or the

authorised fund manager and depositary of the AUT or ACS agree

that the receipt of the property concerned for the account of the

ICVC, AUT or ACS:

(a) is not likely to result in any material prejudice to the interests of

the unitholders of the authorised fund;

(b) is consistent with the objectives of the authorised fund or sub-

fund; and

■ COLL 5(Investment and borrowing powers).

(7) If it is proposed that the scheme property of an authorised fund or a

sub-fund of an umbrella should become the property of a recognised

scheme, the authorised fund manager of the authorised fund or sub-

fund must ensure that the document it provides to unitholders

setting out the proposal contains a prominent statement of the

matters required to be disclosed by ■ COLL 9.5.5R and ■ COLL 9.5.6R

(Preparation and maintenance of a prospectus relating to an OFR

recognised scheme).

Prior transfers under the Dormant Assets Act 2022

.....................................................................................................

(1) This rule applies where:

(a) a scheme of arrangement is entered into in relation to a

transferor fund or a transferor sub-fund;

(b) a person who is or was at any time the authorised fund manager

or (where relevant) the depositary of the transferor fund or

transferor sub-fund transferred eligible CIS amounts as dormant

assets to a dormant asset fund operator; and

COLL 7 : Suspension of dealings, Section 7.6 : Schemes of arrangement

termination of authorised funds

and side pockets

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/41

fund or transferor sub-fund.

(2) The authorised fund manager of the transferor fund or transferor

sub-fund must ensure that under the terms of the scheme of

arrangement the records required under ■ COLL 6.6.6R(5) and

■ COLL 6.6.6R(6):

(a) will be properly maintained;

(b) will be updated, where appropriate; and

so that the amount of any repayment claim can be readily calculated

and verified by the appropriate person.

(3) In this rule, ‘transferor fund’ and ‘transferor sub-fund’ have the same

meanings as in ■ COLL 7.6.2R.

COLL 7 : Suspension of dealings, Section 7.7 : UCITS mergers

termination of authorised funds

and side pockets

R7.7.1

G7.7.2

R7.7.3

R7.7.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/42

7.7 UCITS mergers

Application

.....................................................................................................

This section applies to an ICVC, an authorised fund manager of an AUT, ACS

or ICVC, any other director of an ICVC and the depositary of any such scheme

where, in each case, the AUT, ACS or ICVC is a UCITS scheme that is a party

to:

(1) a domestic UCITS merger.

(2) [deleted]

(1) The effect of ■ COLL 7.7.1 R, and in particular the narrow Glossary

definition of domestic UCITS merger, is that this section will not apply

to a merger in the United Kingdom between two or more UCITS

schemes unless one of them was the subject of a UCITS marketing

notification before IP completion day.

(2) [deleted]

References to a UCITS scheme

.....................................................................................................

In this section references to:

(1) a UCITS scheme, a merging UCITS or to a receiving UCITS include the

sub-fund of any such scheme.

(2) [deleted]

[Note: article 37 of the UCITS Directive]

UCITS mergers

.....................................................................................................

A domestic UCITS merger between two or more UCITS schemes is permissible

provided:

(1) it is effected in accordance with the requirements of:

(a) the UCITS Regulations 2011, which include the need for the FCA

to have made a prior order approving the proposed merger

(which may be made subject to (2)); and

(b) this chapter; and

(2) in the case of a UCITS scheme that is:

COLL 7 : Suspension of dealings, Section 7.7 : UCITS mergers

termination of authorised funds

and side pockets

G7.7.5

G7.7.6

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/43

(a) a merging UCITS, an extraordinary resolution is approved by

unitholders in accordance with ■ COLL 7.6.2 R (3) and ■ (4) (Schemes

of arrangement: requirements); and

(b) a receiving UCITS, the authorised fund manager and depositary

of the AUT or ACS and the directors of the ICVC comply with

■ COLL 7.6.2 R (5) and ■ (6).

[Note: articles 39(1), 39(4) and 44 first paragraph of the UCITS Directive]

Meetings of unitholders

.....................................................................................................

(1) The effect of ■ COLL 7.7.4 R (2)(a) is that the 75% majority that is

needed in support for an extraordinary resolution of unitholders to

be passed is without prejudice to the presence quorum that is

required by ■ COLL 4.4.6 R (Quorum).

(2) Any meeting of unitholders that is needed to give effect to a

proposed UCITS merger is subject to the requirements of ■ COLL 4.4

(Meeting of unitholders and service of notices).

UCITS Regulations 2011

.....................................................................................................

(1) The requirements and the process which must be followed to give

effect to a proposal for a domestic UCITS merger are in Part 4 of the

UCITS Regulations 2011. The main features of the regime as set out in

those provisions include:

(a) the merger must be a domestic UCITS merger which takes the

form of a scheme of arrangement;

(b) the need for the FCA to give prior approval to the proposed

merger under regulation 9 (Application for authorisation) of the

UCITS Regulations 2011;

obtain the approval under (b);

(d) the need for draft terms of merger to be prepared;

(e) the role of the relevant depositaries and auditors;

(f) the need for appropriate and accurate information to be

prepared for the benefit of unitholders;

(g) rights of redemption and suspension of dealing in units in the

relevant UCITS; and

(h) the consequences of the proposed merger.

(2) Firms are advised that they do not need to seek approval from the

FCA under section 251 (Alteration of schemes and changes of

manager or trustee) or 261Q (Alteration of contractual schemes and

changes of operator or depositary) of the Act or, as the case may be,

regulation 21 (The Authority's approval for certain changes in respect

of a company) of the OEIC Regulations where they are required to

obtain the prior approval of the FCA to a proposed merger under

regulation 9 of the UCITS Regulations 2011.

(3) [deleted]

COLL 7 : Suspension of dealings, Section 7.7 : UCITS mergers

termination of authorised funds

and side pockets

R7.7.7

G7.7.8

R7.7.8A

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/44

Common draft terms of merger

.....................................................................................................

(1) The authorised fund manager of a UCITS scheme that is a merging

UCITS or a receiving UCITS in a proposed UCITS merger, must in

conjunction with any other authorised fund manager draw up

common draft terms of the proposed UCITS merger.

(2) The common draft terms in (1) must set out the following particulars:

(a) the UCITS involved;

(b) the background to and the rationale for the proposed UCITS

merger;

unitholders of both the merging UCITS and the receiving UCITS;

(d) the criteria adopted for valuation of the assets and, where

applicable, the liabilities of the UCITS on the date for calculating

the exchange ratio as referred to in regulation 13 (Consequences

of a merger) of the UCITS Regulations 2011;

(e) the calculation method of the exchange ratio;

(f) the planned effective date of the UCITS merger;

(g) the rules applicable respectively to the transfer of assets and the

exchange of units; and

(h) in the case of a UCITS merger where the receiving UCITS or the

sub-fund is being specially formed for the purpose, the

instrument constituting the fund of the newly constituted

receiving UCITS.

[Note: article 40(1) of the UCITS Directive]

The management companies of the merging UCITS and the receiving UCITS

may decide to include further items in the common draft terms of the UCITS

merger.

[Note: article 40(2) of the UCITS Directive]

Prior transfers under Dormant Assets Act 2022

.....................................................................................................

(1) This rule applies where:

(a) a person who is or was at any time the authorised fund manager

or (where relevant) the depositary of a merging UCITS transferred

eligible CIS amounts as dormant assets to the dormant asset fund

operator; and

(b) such dormant assets are or were attributable to the merging

UCITS.

(2) The authorised fund manager of the merging UCITS must ensure that

under the terms of the proposed UCITS merger the records required

under ■ COLL 6.6.6R(5) and ■ COLL 6.6.6R(6):

(a) will be properly maintained;

(b) will be updated, where appropriate; and

COLL 7 : Suspension of dealings, Section 7.7 : UCITS mergers

termination of authorised funds

and side pockets

R7.7.9

R7.7.10

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/45

so that the amount of any repayment claim can be readily calculated

and verified by the appropriate person.

Verification by the depositary

.....................................................................................................

The depositary of a UCITS scheme that is either a merging UCITS or a

receiving UCITS in a proposed UCITS merger must verify that the statements

in the common draft terms of merger required under ■ COLL 7.7.7 R (2)(a), ■ (f)

and ■ (g), to the extent they relate to the scheme for which it is the

depositary, conform with the provisions of the regulatory system and the

instrument constituting the fund.

[Note: article 41 of the UCITS Directive]

Information to be given to unitholders

.....................................................................................................

(1) The authorised fund manager of a UCITS scheme that is a merging

UCITS or a receiving UCITS in a proposed UCITS merger must ensure

that a document containing appropriate and accurate information on

the merger is provided to the unitholders of that scheme so as to

enable them to:

(a) make an informed judgment about the impact of the proposal on

their investment;

(b) exercise their rights under regulation 12 (Right of redemption) of

the UCITS Regulations 2011; and

to approve the merger in accordance with ■ COLL 7.7.4 R (2)(a)

(UCITS mergers).

(2) Where a UCITS scheme is the merging UCITS in a domestic UCITS

merger its authorised fund manager must provide the information

document in (1):

(a) to the unitholders of the merging UCITS and (in the case of a

domestic UCITS merger) the receiving UCITS only after the FCA

has given its approval to the UCITS merger proposal under

regulation 9 of the UCITS Regulations 2011,

(b) [deleted]

at least 30 days before the last date by which unitholders may

request repurchase or redemption of their units or, where applicable,

conversion without additional charge.

(3) The information document to be provided to the unitholders of the

merging UCITS and the receiving UCITS under (1) must include the

following:

(a) the background to and the rationale for the proposed UCITS

merger;

(b) the possible impact of the proposed UCITS merger on unitholders,

including but not limited to any material differences in respect of

investment policy and strategy, costs, expected outcome, periodic

reporting, possible dilution in performance, and, where relevant,

a prominent warning to investors that their tax treatment may be

changed following the UCITS merger;

COLL 7 : Suspension of dealings, Section 7.7 : UCITS mergers

termination of authorised funds

and side pockets

R7.7.11

G7.7.12

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/46

UCITS merger, including but not limited to:

(i) the right to obtain additional information;

(ii) the right to obtain a copy of the report of the independent

auditor or the depositary on request prepared for the

purposes of regulation 11 of the UCITS Regulations 2011;

(iii) the right to request the repurchase or redemption or, where

applicable, the conversion of their units without charge

under regulation 12 of the UCITS Regulations 2011; and

(iv) the last date for exercising that right;

(d) the relevant procedural aspects and the planned effective date of

the merger; and

(e) a copy of the key investor information of the receiving UCITS.

(4) If a UCITS marketing notification in respect of the merging UCITS or

receiving UCITS has been made, the information document referred

to in (3) must be provided in the official language, or one of the

official languages, of the relevant EEA State in which units of the

UCITS scheme have been marketed, or in a language approved by the

overseas regulator in that EEA State. The authorised fund manager of

the relevant UCITS scheme must provide an accurate translation of

the information document.

[Note: article 43(1), 43(2), 43(3) and 43(4) of the UCITS Directive]

General rules regarding the content of merger information to

be provided to unitholders

.....................................................................................................

(1) The information document that must be provided to unitholders

under ■ COLL 7.7.10 R (Information to be given to unitholders) by the

authorised fund manager of a UCITS scheme must be written in a

concise manner and in non-technical language.

(2) [deleted]

(3) The information to be provided to the unitholders of the merging

UCITS must meet the needs of investors who have no prior

knowledge of the features of the receiving UCITS or of the manner of

its operation, drawing their attention to the key investor information

of the receiving UCITS and emphasising the desirability of reading it.

(4) The information to be provided to the unitholders of the receiving

UCITS must focus on the operation of the merger and its potential

impact on the receiving UCITS.

[Note: article 3 of the UCITS implementing Directive No 2]

(1) The information provided to unitholders under ■ COLL 7.7.10 R and

■ COLL 7.7.13 R on any proposed merger should reflect the different

needs of the unitholders of the merging UCITS and the receiving

UCITS and assist their understanding of what is being proposed.

COLL 7 : Suspension of dealings, Section 7.7 : UCITS mergers

termination of authorised funds

and side pockets

R7.7.13

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/47

(2) The reference to "conversion" in ■ COLL 7.7.10 R (2) means an exchange

of units in the merging UCITS or receiving UCITS for units in another

UCITS scheme that has similar investment policies and that is

managed by the same authorised fund manager or one of its

affiliated companies.

[Note: recital (1) of the UCITS implementing Directive No 2]

Specific rules regarding the content of merger information to

be provided to unitholders of the merging UCITS

.....................................................................................................

(1) The information document that the authorised fund manager of a

merging UCITS must provide to its unitholders under

■ COLL 7.7.10 R (3)(b) must also include:

(a) details of any differences in the rights of unitholders of the

merging UCITS before and after the proposed UCITS merger takes

effect;

(b) if the key investor information of the merging UCITS and the

receiving UCITS show synthetic risk and reward indicators in

different categories, or identify different material risks in the

accompanying narrative, a comparison of those differences;

based on the amounts disclosed in their respective key investor

information;

(d) if the merging UCITS applies a performance-related fee, an

explanation of how it will be applied up to the point at which

the merger becomes effective;

(e) if the receiving UCITS applies a performance-related fee, how it

will subsequently be applied to ensure fair treatment of those

unitholders who previously held units in the merging UCITS;

(f) in cases where costs associated with the preparation and the

completion of the merger may be charged to either the merging

or the receiving UCITS or any of their unitholders, details of how

those costs are to be allocated; and

(g) an explanation of whether the authorised fund manager of the

merging UCITS itself intends to undertake any rebalancing of the

portfolio before the merger takes effect.

(2) The information to be provided under ■ COLL 7.7.10 R (3)(c) must also

include:

(a) details of how any accrued income in each scheme is to be

treated; and

(b) an indication of how the report of the independent auditor or

the depositary may be obtained.

(3) The information to be provided in accordance with

■ COLL 7.7.10 R (3)(d) must include:

(a) where required by ■ COLL 7.6.2 R (Schemes of arrangement:

requirements), the procedure by which unitholders will be asked

to approve the merger proposal, and what arrangements will be

made to inform them of the outcome;

COLL 7 : Suspension of dealings, Section 7.7 : UCITS mergers

termination of authorised funds

and side pockets

R7.7.14

G7.7.15

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/48

(b) the details of any intended suspension of dealing in units to

enable the merger to be carried out efficiently; and

13 of the UCITS Regulations 2011.

(4) The information to be provided to the unitholders of the merging

UCITS must include:

(a) the period during which those unitholders will be able to

continue making subscriptions and requesting redemptions of

units in the scheme;

(b) the time when those unitholders not making use of their rights

granted under regulation 12 of the UCITS Regulations 2011,

within the relevant time limit, will be able to exercise their rights

as unitholders of the receiving UCITS; and

resolution of a general meeting of the unitholders of the

merging UCITS, those unitholders who vote against the proposal

or who do not vote at all, and who do not make use of their

rights granted under regulation 12 of the UCITS Regulations 2011

within the relevant time limit, will become unitholders of the

receiving UCITS.

(5) If a summary of the key points of the merger proposal is provided at

the beginning of the document providing information on the merger

proposal, it must cross-refer to the parts of the document where

further information is provided.

[Note: article 4 of the UCITS implementing Directive No 2]

Specific rules regarding the content of merger information to

be provided to unitholders of the receiving UCITS

.....................................................................................................

(1) The information that the authorised fund manager of a receiving

UCITS must provide to its unitholders under ■ COLL 7.7.10 R (3)(b) must

also include an explanation of whether the authorised fund manager

expects the merger to have any material effect on the portfolio of

the receiving UCITS, and whether it intends to undertake any

rebalancing of the portfolio either before or after the merger takes

effect.

(2) In addition to (1), the authorised fund manager of the receiving

UCITS must provide to its unitholders the information referred to in

■ COLL 7.7.13 R (2), ■ (3), and ■ (5).

[Note: article 4 of the UCITS implementing Directive No 2]

(1) An authorised fund manager may add other information to that

which is required by ■ COLL 7.7.10 R to ■ COLL 7.7.14 R if it considers

that it is relevant in the context of the proposed UCITS merger. For

example, it may be appropriate for the information provided in

accordance with ■ COLL 7.7.13 R (3)(a) to contain a recommendation by

the respective authorised fund manager of an AUT or ACS or the

directors of an ICVC as to the course of action the unitholders should

take.

COLL 7 : Suspension of dealings, Section 7.7 : UCITS mergers

termination of authorised funds

and side pockets

R7.7.16

R7.7.17

R7.7.18

R7.7.19

R7.7.20

G7.7.21

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/49

(2) Where an authorised fund manager chooses to include a summary of

the key points as allowed by ■ COLL 7.7.13 R (5), its inclusion does not

relieve the authorised fund manager of its obligation to avoid the use

of long or technical explanations in the rest of the document.

[Note: recitals (2) and (3) and article 4(6) of the UCITS implementing Directive

No 2]

Key investor information

.....................................................................................................

The authorised fund manager of a merging UCITS must provide an up-to-

date version of the key investor information of the receiving UCITS to its

existing unitholders.

[Note: article 5(1) of the UCITS implementing Directive No 2]

[deleted]

New unitholders

.....................................................................................................

Between the date when the information required under ■ COLL 7.7.10 R is

provided to unitholders and the date when the merger takes effect, the

information document and the up-to-date key investor information of the

receiving UCITS must be provided to each person who purchases or

subscribes for units in either the merging UCITS or the receiving UCITS or

who asks to receive copies of the instrument constituting the fund,

prospectus or key investor information of either scheme.

[Note: article 6 of the UCITS implementing Directive No 2]

Method of providing merger information to unitholders

.....................................................................................................

The authorised fund manager of the merging UCITS and the receiving UCITS

must provide the information required by ■ COLL 7.7.10 R to ■ COLL 7.7.14 R to

unitholders in a durable medium.

[Note: article 7 of the UCITS implementing Directive No 2]

Merger costs

.....................................................................................................

The authorised fund manager of a UCITS scheme that is either a merging

UCITS or a receiving UCITS must ensure that any legal, advisory,

administrative or any other costs associated with the preparation and

completion of the UCITS merger are not charged to either scheme or to any

of its unitholders.

[Note: article 46 of the UCITS Directive]

Effective merger date, exchange ratio calculation date and

publication of merger

.....................................................................................................

(1) In a domestic UCITS merger, the effective date of the merger will be

the date specified by the FCA in its order authorising the proposed

merger in accordance with regulation 9 of the UCITS Regulations

2011.

COLL 7 : Suspension of dealings, Section 7.7 : UCITS mergers

termination of authorised funds

and side pockets

R7.7.22

G7.7.23

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/50

(2) [deleted]

(3) For the receiving UCITS in a domestic UCITS merger:

(a) the date for calculating the exchange ratio of units of the

merging UCITS into units of the receiving UCITS and, where

applicable, for determining the relevant net asset value for cash

will be the date specified in the common terms of merger for

that purpose; and

(b) the FCA will publish the entry into effect of the merger in the

record it keeps under section 347 (The record of authorised

persons etc) of the Act in accordance with regulation 14 of the

UCITS Regulations 2011.

(4) [deleted]

[Note: article 47 of the UCITS Directive]

Confirmation obligation on completion of a UCITS merger

.....................................................................................................

The authorised fund manager of the receiving UCITS in a domestic UCITS

merger must confirm in writing to the depositary of the UCITS scheme and

the FCA that the merger transfer is complete.

[Note: article 48(4) of the UCITS Directive]

Regulation 13 of the UCITS Regulations 2011 sets out the conditions that

must be fulfilled for a merger transfer to be considered complete.

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.1

G7.8.2

G7.8.3

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/51

7.8 Side pockets

Application

.....................................................................................................

(1) Subject to (2), this section applies to:

(a) the authorised fund manager of an AUT, ACS or an ICVC;

(b) any other director of an ICVC;

(d) an ICVC,

which is a UCITS scheme or a non-UCITS retail scheme.

(2) This section does not apply to a scheme which is a regulated money

market fund.

(1) This section sets out the terms on which the authorised fund manager

of a scheme holding affected investments can segregate those

affected investments from the other assets held in the scheme

property by establishing a side pocket class.

(2) The purpose of the rules in this section is to advance the FCA’s

consumer protection and integrity objectives (see s1B(3) of the Act) by

helping authorised fund managers deal with the consequences of the

Russian invasion of Ukraine.

(3) The rules in this section apply other rules in COLL, where necessary,

with appropriate modifications, as well as imposing certain additional

requirements.

Financial sanctions regimes relating to Russia

.....................................................................................................

(1) The definition for a ‘sanctioned investment’ in the Glossary (which is

incorporated in the definition for ‘affected investment’) relates to the

financial sanctions regimes of the Group of 7 (G7) countries

comprising Canada, France, Germany, Italy, Japan, the United

Kingdom and the United States of America, plus the EU, as those

sanctions regimes relate to Russia.

(2) Before deciding whether to create a side pocket class and

determining the arrangements under which the class is to operate,

the authorised fund manager will need to understand the legal

requirements and obligations that apply under the relevant financial

sanctions regimes. The authorised fund manager will need to be

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/52

satisfied that creation of the side pocket class and the operational

arrangements for the class will comply with those regimes.

(3) The UK’s financial sanctions regime is set out in the Russia (Sanctions)

(EU Exit) Regulations 2019. The Regulations are available at https://

www.legislation.gov.uk/uksi/2019/855/contents. The UK regime

prohibits certain types of activity and conduct, including dealing with

funds and economic resources, and dealing with transferable

securities and money-market instruments, subject to certain

exceptions. Contravention of these prohibitions constitutes a criminal

offence.

(4) The Office of Financial Sanctions Implementation (OFSI) (part of HM

Treasury) helps to ensure that the UK financial sanctions regime is

properly understood, implemented and enforced in the United

Kingdom.

Conditions for creating a side pocket class

.....................................................................................................

(1) If all the conditions in (2) are satisfied, the authorised fund manager

of a scheme holding affected investments in the scheme property

may, after consulting with the depositary, create a side pocket class.

(2) The conditions are:

(a) The authorised fund manager has determined that the affected

investment in (1) is:

(i) a sanctioned investment;

(ii) a unit in a collective investment scheme or a share in an AIF

within the meaning of paragraph (2)(b)(vii) of the definition

of ‘affected investment’; or

(iii) to the extent not in (i) or (ii), an affected investment for

which there are no accurate, reliable and regular prices.

(b) The authorised fund manager has determined that:

(i) creating the side pocket class will protect the interests of

unitholders;

(ii) the rights of any unit in a side pocket class will not be

unfairly prejudicial to the interests of unitholders generally

or to the unitholders of any other class of units in the

scheme;

(iii) the issue of units in the side pocket class will be in the best

interests of unitholders, the authorised fund and the

integrity of the market; and

(iv) all the unitholders in the authorised fund will be treated

fairly.

(i) provide for the issue of units in a side pocket class; and

(ii) set out the terms on which that class will operate,

in accordance with the rules in, and applied by, this section (see

in particular ■ COLL 7.8.13R (Modified application of COLL 4.2

(Pre-sale notifications)).

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.5

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/53

(3) Before making the determination in (2)(b), the authorised fund

manager must consider:

(a) at least each of the matters specified in ■ COLL 7 Annex 1 (Matters

to be considered by the authorised fund manager before creating

a side pocket class); and

(b) whether it would be in the interest of all the unitholders in the

authorised fund to suspend dealings in units in accordance with

■ COLL 7.2.1R (Requirement) instead of creating a side pocket class.

(4) (a) The decision to create a side pocket class pursuant to (1) must be

taken by the authorised fund manager’s governing body.

(b) The authorised fund manager must make a record of the

governing body’s decision and the reasons for it.

Side pocket classes

.....................................................................................................

(1) The authorised fund manager may:

(a) issue units in a new class to unitholders in the authorised fund; or

(b) convert a unit in an existing class into units in one or more new

classes.

(2) Where the authorised fund manager has taken an action pursuant to

(1)(a) or (1)(b), it must determine the price of units of each existing

and new class by reference to a valuation of the portions of capital

property and income property represented by either:

(a) one or more affected investments held in the scheme property; or

(b) the scheme property excluding some or any such affected

investments,

as provided for in the instrument constituting the fund and the

prospectus.

(3) A new class within (2)(a) is referred to as a ‘side pocket class’.

(4) The authorised fund manager must determine the date and time on

which the units in the new class are to be issued.

(5) On the date and time specified in (4):

(a) the combined net asset value of all units of the new class and all

units of the existing class; or

(b) the combined net asset value of any new classes of unit issued by

conversion from an existing class of unit,

must equal the net asset value of all units of the class or classes that

existed immediately before the specified date and time.

(6) On the date and time specified in (4), the number of units held by a

unitholder in a new class must be proportionate to the number of

units held by them in an existing class immediately before such date

and time.

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.6

G7.8.7

G7.8.8

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/54

The prospectus of the authorised fund must limit the issue of units in a side

pocket class after the date and time specified in ■ COLL 7.8.5R(4) (see

■ COLL 7.8.30R(5) (Modified application of COLL 6.2 (Dealing)).

(1) An authorised fund manager intending to issue units in a new class

will need to consider the effect of section 235(4) of the Act. In broad

terms, this provides that if the contributions of the participants and

the profits or income out of which payments are to be made to them

are pooled in relation to separate parts of the scheme property, the

arrangements are not to be regarded as constituting a single

collective investment scheme unless the participants are entitled to

exchange rights in one part for rights in another (see section 235(4)

of the Act (Collective investment schemes)).

(2) The authorised fund manager of an ICVC will also need to consider

the effect of section 236(3) (Open-ended investment companies) of

the Act. ■ PERG 9.6 (The investment condition (section 236(3) of the

Act): general) sets out the FCA’s view of this provision. In particular,

■ PERG 9.6.3G and ■ PERG 9.6.4G provide guidance on situations where

an ICVC issues shares or securities that may not satisfy the investment

condition.

Allocation of scheme property to a side pocket class

.....................................................................................................

(1) The authorised fund manager will need to consider carefully how to

apply a fair accounting treatment when a side pocket class is created.

(2) Where the unit price is determined only by reference to affected

investments that are themselves valued at or close to zero, then a

unit in the side pocket class will have minimal value. Where a portion

of the income property of the scheme is attributable to affected

investments, the unit price of the side pocket class should include that

element of income.

(3) The authorised fund manager may determine that a proportion of

uninvested cash held in the capital property of the scheme should be

attributed to the side pocket class, as a provision against costs and

charges attributable to the class in the future. This will depend on the

authorised fund manager’s policy for the treatment of costs and

charges (see also ■ COLL 7.8.36R (Modified application of COLL 6.7

(Payments))). If the side pocket class has an overdrawn cash position,

it should not be netted off against a positive cash position

attributable to other classes.

(4) Some authorised fund managers may wish to use derivatives and

forward transactions within the side pocket class to hedge exposure

to currency fluctuations affecting asset valuations, especially if the

affected investments acquire value at a later point. Authorised fund

managers may also wish to replicate currency class hedging

arrangements where these already exist. Such activities will require an

allocation of capital property to cover transaction costs and margin

requirements.

(5) Decisions whether to undertake the activities in (4) should be taken

by the authorised fund manager based on its judgment of

unitholders’ reasonable expectations and future best interests. The

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

G7.8.9

R7.8.10

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/55

authorised fund manager should take particular care to ensure its risk

management process is properly applied to analyse the possible harm

that could arise from such transactions. See also ■ COLL 7.8.26R (Side

pockets: modified application of COLL 5 (Investment and borrowing

powers)) and the related guidance in ■ COLL 7.8.27G.

Costs and charges for a side pocket class

.....................................................................................................

(1) The FCA accepts that a side pocket class should bear a proportionate

share of the costs and charges which arise and are incurred for the

benefit of all unitholders, such as depositary expenses and fees, audit

fees, and regulatory charges. The authorised fund manager, in

managing and administering the authorised fund, will also incur

necessary expenses which it may recover from the scheme property.

The FCA would not expect unitholders in classes without any interest

in the affected investments to cross-subsidise the costs and charges of

managing the side pocket class. Such costs and charges may be

recovered in the first instance out of available income or capital

attributable to the side pocket class, depending on the normal

charging policy set out in the prospectus.

(2) Since it is not possible to know whether any income from affected

investments will be receivable on an ongoing basis in future, the

authorised fund manager will have to determine how to account for

such income and for expenses attributable to the side pocket class.

The authorised fund manager may decide to accrue such costs and

charges indefinitely until sufficient cash is available to cover them, or

to waive some charges or pay them from its own resources. The

governing body of the authorised fund manager should consider this

when evaluating whether to proceed with creating a side pocket

class.

(3) The governing body should also consider whether the authorised

fund manager should be remunerated for managing a class that is

valued largely or solely by reference to affected investments. To

ensure fair treatment of all unitholders in the fund, it may be more

appropriate for the authorised fund manager to forego some or all

remuneration from the side pocket class.

(4) An authorised fund manager may be able to charge a fee for

managing the side pocket class, but the fee should fairly reflect the

services provided and activities carried on by the authorised fund

manager for unitholders in that class. The fee should not exceed what

is reasonable to cover the necessary costs and charges of the

authorised fund manager (including any firm which has been given

the mandate to manage investments for the scheme under

■ COLL 6.6.15AR (Committees and delegation)) and to reward the

amount of work entailed in seeking opportunities over time to

dispose of the affected investments in an orderly way. The FCA would

expect such a fee to be less than the authorised fund manager’s

charges for managing the rest of the scheme property.

Application of COLL 3 (Constitution)

.....................................................................................................

The rules and guidance in ■ COLL 3 (Constitution) apply to an authorised fund

with a side pocket class subject to the modifications specified in

■ COLL 7.8.11R.

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.11

R7.8.12

R7.8.13

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/56

In ■ COLL 3.3.5R (Rights of unit classes), paragraphs (2) and (3) do not prohibit

the issue of units in a side pocket class.

Application of COLL 4 (Investor relations): General

.....................................................................................................

The rules and guidance in ■ COLL 4 (Investor relations) apply to an authorised

fund with a side pocket class, subject to:

(1) the modifications in ■ COLL 7.8.13R to ■ COLL 7.8.21R; and

(2) the additional requirements in ■ COLL 7.8.22R and ■ COLL 7.8.24R.

Modified application of COLL 4.2 (Pre-sale notifications)

.....................................................................................................

In relation to a side pocket class, the information required to be included in

the prospectus under ■ COLL 4.2.5R (Table: contents of prospectus) must cover

at least the additional matters set out in (1) to (4).

(1) In ■ COLL 4.2.5R(5) (Characteristics of units):

(a) a general description of the affected investments to be allocated

to the side pocket class (or side pocket classes);

(b) an explanation of how the scheme property (both capital

property and income property) will be allocated between the side

pocket class (or side pocket classes) and other classes at the outset

and on an ongoing basis; and

(i) that the authorised fund manager will seek to dispose of all

the affected investments over time, on terms that it judges to

be in the best interests of unitholders; and

(ii) that the units in the side pocket class (or side pocket classes)

will be cancelled when this has been done, indicating where

possible what options may be offered to unitholders for

exiting the side pocket class (or side pocket classes) under the

process.

(2) In ■ COLL 4.2.5R(16) (Valuation and pricing of scheme property), the

frequency at which:

(a) affected investments allocated to the side pocket class will be

valued; and

(b) the prices of units in the side pocket class will be calculated,

where these differ from other classes of the scheme.

(3) In ■ COLL 4.2.5R(17) (Dealing):

(a) that the issue of units in the side pocket class is limited, and the

circumstances and conditions for issuing them;

(b) a statement of when the dealing days for the side pocket class

will be;

prior to the valuation point for the relevant dealing day; and

(d) if applicable, details of:

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.14

G7.8.15

R7.8.16

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/57

(i) any special arrangements put in place for redemptions of

units in the side pocket class, including any extended time

period for settlement and any facility to pay the proceeds of

redemption to a person other than the unitholder;

(ii) whether redemption proceeds can be reinvested in units of

other classes of the scheme or in units of other schemes; and

(iii) any facility for a unitholder to dispose of an interest in units

by transferring title to them to another person (other than

by operation of law), as a donation or for financial

consideration.

(4) In ■ COLL 4.2.5R(27)(b) (Additional information):

(a) an explanation that there is no certainty that any affected

investment will ever recover its value to a significant extent, or at

all, and that the authorised fund manager may be unable to

realise any material value for unitholders in respect of units held

in the side pocket class;

(b) if applicable, that the costs and charges for operating the side

pocket class may significantly erode the returns from any

realisable value from the affected investments over time; and

the costs and charges associated with operating the side pocket

class from its own resources and, if not, a statement explaining:

(i) the risk that costs and charges might cause the cash position

of the side pocket class to become overdrawn;

(ii) that a liability arising as a result of (i) would be accounted

for against the scheme property allocated to the other classes

in the scheme; and

(iii) the steps the authorised fund manager would take to ensure

unitholders in other classes do not bear such a liability.

Modified application of COLL 4.3 (Approvals and notifications)

.....................................................................................................

The authorised fund manager need not treat the creation of a side pocket

class as a fundamental change for the purposes of ■ COLL 4.3.4R

(Fundamental change requiring prior approval by meeting) provided the

authorised fund manager is satisfied on reasonable grounds that the

foreseeable costs of this course of action are not disproportionate to the

benefits.

The guidance in ■ COLL 4.3.5G (Guidance on fundamental change) should be

read in accordance with the modification in ■ COLL 7.8.14R.

If the authorised fund manager considers that the creation of a side pocket

class constitutes a significant change, the authorised fund manager:

(1) may, but need not, give prior written notice to unitholders under

■ COLL 4.3.6R(1) (Significant change requiring pre-event notification);

and

(2) is not required to comply with ■ COLL 4.3.6R(3).

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

G7.8.17

G7.8.18

R7.8.19

G7.8.20

R7.8.21

R7.8.22

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/58

The guidance in ■ COLL 4.3.7G (Guidance on significant changes) should be

read in accordance with the modification in ■ COLL 7.8.16R.

Before announcing its intention to create a side pocket class, the authorised

fund manager should have regard to the reasonable operational needs of

intermediate unitholders and any reasonable periods of time they will need

to establish processes and procedures and communicate information to those

clients for whom the intermediate unitholder acts as a nominee in relation

to units in the scheme.

Modified application of COLL 4.4 (Meetings of unitholders and

service of notices)

.....................................................................................................

(1) ■ COLL 4.4.8R (Voting rights) applies to an authorised fund with a side

pocket class with the modifications set out in (2) and (3) below.

(2) Before a resolution is put to a vote at a unitholder meeting, it must

be made clear whether the resolution relates to or affects:

(a) all the classes of unit in the authorised fund;

(b) those classes of unit in the authorised fund excluding the side

pocket class; or

(3) On a poll, the votes of a unitholder may only be counted to the

extent that the unitholder’s voting rights are attached to units in the

class or classes to which the resolution relates or which the resolution

affects in accordance with (2).

(1) The authorised fund manager will need to ensure that the instrument

constituting the fund and the prospectus reflect the modified

application of ■ COLL 4.4.8R as set out in ■ COLL 7.8.19R.

(2) ■ COLL 7.8.19R modifies the application of ■ COLL 4.4.8R but does not

affect the other matters dealt with in ■ COLL 4.4, such as ■ COLL 4.4.6R

(Quorum).

Modified application of COLL 4.7 (Key investor information

and marketing communications)

.....................................................................................................

The rules in ■ COLL 4.7.2R (Key investor information) do not require an

authorised fund manager to draw up a key investor information document

or a NURS-KII document in relation to a side pocket class.

Additional information for unitholders on the creation of a side

pocket class

.....................................................................................................

The authorised fund manager must provide a written notification to

unitholders which meets the requirements of (1) to (3).

(1) The notification must be provided to unitholders in a timely way,

either shortly before the side pocket class is created or as soon as

practicable afterwards.

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

G7.8.23

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/59

(2) If the unitholder has a financial adviser, the requirement to provide

the notification in (1) may be satisfied by sending it to the financial

adviser.

(3) The notification must explain in a comprehensive manner:

the reasons for the authorised fund manager’s decision to create

a side pocket class, including the expected benefits and the costs

and charges;

the effect on unitholders’ ability to exercise their rights;

if applicable, the basis on which the authorised fund manager

has satisfied itself as to the cost impact of its decision under

■ COLL 7.8.14R;

a description of the main features of the side pocket class;

practical information that unitholders will need to understand

about the changes to their investment in the authorised fund;

and

each of the matters specified in ■ COLL 7.8.13R(4) (Modified

application of COLL 4.2 (Pre-sale notifications)).

(4) The notification must:

(a) be written in clear and plain language;

(b) be provided in a durable medium; and

publishing a copy in a prominent location on the authorised fund

manager’s website).

(1) In relation to ■ COLL 7.8.22R(3)(a), the information in the notification

should include:

(a) a description of the scheme’s exposure to affected investments

and the authorised fund manager’s approach to valuing them;

(b) an explanation of the risks such affected investments pose to the

scheme and its unitholders, and the authorised fund manager’s

policies for mitigating those risks;

taking as a result of those risks, and in relation to which affected

investments;

(d) either a detailed list of the affected investments or a link to a

place where they are (or will be) set out, making clear (if

applicable) which affected investments are not subject to any of

the measures referred to in (c); and

(e) an explanation of the costs and charges to be borne by

unitholders in the new classes, and of any resulting change in the

costs and charges borne by existing classes.

(2) In relation to ■ COLL 7.8.22R(3)(d), the information in the notification

should include:

(a) the name of each side pocket class and a description of how the

rights of a unitholder differ from the rights attached to existing

classes and any other new classes;

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.24

G7.8.25

R7.8.26

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/60

(b) any alteration in the rights attached to an existing class (e.g. that

it will be valued without reference to affected investments);

i.e. whether units in a new class are issued in addition to units in

an existing class, or by way of conversion into units in one or

more new classes;

(d) the terms on which units are issued to both existing and new

unitholders; and

(e) the date on which the changes take effect.

(3) In relation to ■ COLL 7.8.22R(3)(e), the information in the notification

should include:

(a) an explanation of the dealing arrangements for redemptions,

including the dealing days;

(b) if applicable, that dealing in units in the side pocket class has

been suspended (see also ■ COLL 7.2.1R(2A), ■ (2B) and ■ (2C)

(Requirement));

alternative arrangements for payment;

(d) the circumstances in which unitholders may convert their units in

a side pocket class to units of another class of the scheme; and

(e) the circumstances in which unitholders may transfer title to their

units in the class to another person.

The authorised fund manager must, as soon as reasonably practicable after

the date on which the side pocket class is created, send a written statement

to each unitholder confirming the number and type of units of each class the

unitholder holds in the authorised fund as a result of the creation of the side

pocket class.

The notification required by ■ COLL 7.8.22R and the written statement of

holdings required by ■ COLL 7.8.24R may be issued to existing unitholders in a

single combined communication. However, it will not be possible to use a

single combined communication where the notification required by

■ COLL 7.8.22R is provided to a unitholder’s financial adviser instead of the

unitholder (see ■ COLL 7.8.22R(2)).

Side pockets: modified application of COLL 5 (Investment and

borrowing powers)

.....................................................................................................

(1) ■ COLL 5 (Investment and borrowing powers) applies to the side

pocket property, subject to the modifications in this rule.

(2) Subject to (4) to (6), in the case of a UCITS scheme, the authorised

fund manager must comply with as much of ■ COLL 5.1 (Introduction),

■ COLL 5.2 (General investment powers and limits for UCITS schemes)

and ■ COLL 5.3 (Derivative exposure) as is practicable having regard to

the limited purpose for which the side pocket class was created.

(3) Subject to (4) to (6), in the case of a non-UCITS retail scheme, the

authorised fund manager must comply with as much of ■ COLL 5.1

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

G7.8.27

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/61

(Introduction) and ■ COLL 5.6 (Investment powers and borrowing limits

for non-UCITS retail schemes) as is practicable having regard to the

limited purpose for which the side pocket class was created.

(4) The authorised fund manager may only enter into a derivative or a

forward transaction which:

(a) is a ‘class hedging transaction’ within the meaning of

■ COLL 3.3.5R(4)(d); and

(b) falls within ■ COLL 3.3.5AR (Hedging of unit classes) (see also

■ COLL 3.3.5BG (Guidance on hedging of unit classes)),

and all provisions of ■ COLL 5 relevant to such transactions apply.

(5) ■ COLL 5.5.3R (Cash and near cash) applies, except that references to

the ‘investment objectives’ of the scheme should be read as

references to the objective in ■ COLL 7.8.33R(2)(b) (Modified application

of COLL 6.6 (Operating duties and responsibilities)).

(6) The following rules apply:

(a) ■ COLL 5.5.4R (General power to borrow);

(b) ■ COLL 5.5.5R (Borrowing limits);

(d) ■ COLL 5.5.7R (Restrictions on lending of property other than

money);

(e) ■ COLL 5.5.8R (General power to accept or underwrite placings);

and

(f) ■ COLL 5.5.9R (Guarantees and indemnities).

Side pockets: guidance on modified application of COLL 5

.....................................................................................................

(1) The nature of a side pocket class means that the authorised fund

manager cannot apply the same risk controls to affected investments

that would apply to the rest of the scheme property. In the FCA’s

view, it would not be practicable for the authorised fund manager to

apply a prudent spread of risk to the affected investments or to

comply in full with the specific eligibility and risk-spreading limits set

out in ■ COLL 5 for transferable securities, money-market instruments

and units in collective investment schemes.

(2) However, the modification of the rules provided in ■ COLL 7.8.26R(2)

and ■ (3) is to be interpreted narrowly and only to the extent

necessary to allow the authorised fund manager to manage the risks

of the affected investments allocated to the side pocket class and to

deal efficiently with them. In particular, the modifications in those

rules do not permit an authorised fund manager to take any action

that increases the risk profile of the scheme as a whole, such as

acquiring property or entering into transactions that would not be

permitted by the unmodified rules of ■ COLL 5.

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.28

R7.8.29

R7.8.30

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/62

COLL 5 references to ‘scheme property’ in relation to other

parts of the scheme

.....................................................................................................

(1) This rule applies to the authorised fund manager and depositary of

an authorised fund with a side pocket class.

(2) For the purpose of interpreting references to the ‘scheme property’ in

■ COLL 5 in relation to the part of the scheme which is not a ‘side

pocket’, the authorised fund manager and depositary may disregard

the side pocket property.

(3) The reference to a ‘side pocket’ in (2) is a reference to a part of the

scheme which is represented by units in a side pocket class.

Application of COLL 6 (Operating duties and responsibilities):

General

.....................................................................................................

The rules and guidance in ■ COLL 6 (Operating duties and responsibilities)

apply in relation to an authorised fund with a side pocket class subject to the

modifications specified in ■ COLL 7.8.30R (Modified application of COLL 6.2

(Dealing)) to ■ COLL 7.8.36R (Modified application of COLL 6.7 (Payments)).

Modified application of COLL 6.2 (Dealing)

.....................................................................................................

(1) ■ COLL 6.2 (Dealing) applies to a side pocket class subject to the

modifications specified in this rule.

(2) For the purposes of ■ COLL 6.2.8R (Issue and cancellation of units

through an authorised fund manager), if the authorised fund

manager redeems a unit in a side pocket class from a unitholder, the

authorised fund manager must immediately cancel the unit or, in

relation to an AUT or ACS, instruct the depositary to do so.

(3) (a) Subject to (b) and (c), the requirement in ■ COLL 6.2.13R (Payment

for units issued) may be satisfied by the authorised fund manager

allocating such proportion of the scheme property to that class as

the authorised fund manager may determine.

(b) Before making the allocation of scheme property in (a), the

authorised fund manager must consult the depositary and take

its views into account.

proposed allocation of the scheme property and inform the

authorised fund manager if it considers that the allocation is not

appropriate, having regard to the purpose of the side pocket

class.

(4) In ■ COLL 6.2.16R (Sale and redemption), in relation to the redemption

of units in a side pocket class:

(a) paragraphs (4) and (5) apply unless the prospectus makes

alternative provision for how unitholders may be paid; and

(b) paragraphs (5A), (6) and (7) do not apply.

(5) The authorised fund manager must apply ■ COLL 6.2.18R (Limited

issue) as follows:

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.31

G7.8.32

R7.8.33

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/63

(a) ■ COLL 6.2.18R(1) applies to the issue of units in a side pocket class;

(b) ■ COLL 6.2.18R(2) does not apply to a side pocket class, and the

authorised fund manager must not provide for the further issue

of units in the same class; and

Modified application of COLL 6.3 (Valuation and pricing)

.....................................................................................................

(1) ■ COLL 6.3 (Valuation and pricing) applies in relation to a side pocket

class subject to the modifications specified in this rule (see also

■ COLL 7.8.32G).

(2) For the purpose of ■ COLL 6.3.5R (Price of a unit), the authorised fund

manager must ensure that the price of a unit in a side pocket class is

calculated:

(a) by reference to the net value of the side pocket property; and

(b) in accordance with the provisions of both the instrument

constituting the fund and the prospectus.

(3) Notwithstanding ■ COLL 6.3.11R (Publication of prices), the authorised

fund manager must make public in an appropriate manner the price

of a unit in the side pocket class after every valuation point (see

■ COLL 6.3.4R (Valuation points)), even if the authorised fund manager

is not holding itself out to deal in such units at that valuation point.

The guidance in ■ COLL 6.3.12G(1)(a) to ■ (c) is unlikely to be relevant to an

authorised fund manager when publishing the price of a unit in a side

pocket class in accordance with the rules in this section.

Modified application of COLL 6.6 (Operating duties and

responsibilities)

.....................................................................................................

(1) ■ COLL 6.6 (Operating duties and responsibilities) applies to the

authorised fund manager and depositary of an authorised fund with

a side pocket class, subject to the modifications specified in this rule

and ■ COLL 7.8.34R (Modified application of the assessment of value

rules).

(2) For the purposes of ■ COLL 6.6.3R(3)(a) (Functions of the authorised

fund manager), the authorised fund manager must make decisions as

to the constituents of the scheme property:

(a) in accordance with the investment objectives and policy of the

scheme, but may disregard any affected investment in the side

pocket property; and

(b) with a view to disposing of those affected investments over time

as and when the authorised fund manager considers this can be

done in the best interests of unitholders.

(3) For the purposes of ■ COLL 6.6.4R(1) (General duties of the depositary),

the depositary must take reasonable care to ensure that the scheme is

managed by the authorised fund manager in accordance with the

matters specified in ■ COLL 6.6.4R(1)(a) to ■ (e) as modified by the rules

in this section, and ■ COLL 6.6.4R(2) is to be read accordingly.

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.34

G7.8.35

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/64

(4) (a) The duty in ■ COLL 6.6.14R(2) (Duties of the depositary and the

authorised fund manager: investment and borrowing powers)

requiring the authorised fund manager to rectify at its own

expense a breach of ■ COLL 5 (Investment and borrowing powers),

or any provision of the instrument constituting the fund or the

prospectus, does not apply to the extent that:

(i) the breach relates to affected investments in the side pocket

property; and

(ii) the depositary is satisfied that it is not practicable for the

authorised fund manager to comply with the relevant rule in

■ COLL 5, the provision of the instrument constituting the

fund or the prospectus.

(b) ■ COLL 6.6.14R(4), ■ (5) and ■ (6) do not apply to the extent that

the breach falls within (a) above.

Modified application of the assessment of value rules

.....................................................................................................

When conducting an assessment of value for the purposes of ■ COLL 6.6.20R

(Assessment of value) in relation to a scheme that has a side pocket class, the

authorised fund manager:

(1) must consider each of the matters included in ■ COLL 6.6.21R (Table:

minimum considerations – assessment of value) in relation to the

scheme as a whole, including the side pocket class, but may adopt a

proportionate approach to the assessment as it applies specifically to

the side pocket class;

(2) in relation to the side pocket class, need not consider a matter

included in ■ COLL 6.6.21R if, in all the circumstances, it is not relevant

to that class;

(3) must consider whether, to the extent that payments are being made

out of the scheme property attributable to the side pocket class or

are being accrued for that purpose, those payments:

(a) are justified in terms of the value delivered to unitholders in the

side pocket class; and

(b) are not prejudicial to the interests of unitholders of other classes;

and

(4) must consider whether it remains in unitholders’ best interests for the

side pocket class to continue in operation.

(1) In relation to ■ COLL 7.8.34R(1), the authorised fund manager should

consider the side pocket class when carrying out an assessment of

value for a scheme. A side pocket class, because of its special purpose,

might in isolation represent poor value according to the standard

criteria for assessment, so the authorised fund manager should take

account of that purpose in order to reach a proportionate assessment.

However, where payments are being taken out of the side pocket

property, the assessment of overall value delivered to unitholders in

the scheme should give due weight to the impact of those payments.

(2) In relation to ■ COLL 7.8.34R(3)(a), the authorised fund manager should

consider whether the payments out of scheme property can be

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

R7.8.36

R7.8.37

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7/65

justified when compared with the value it reasonably expects that

unitholders might receive from any eventual disposal of the affected

investments, taking into account current market conditions and

relevant political and economic developments.

(3) In relation to ■ COLL 7.8.34R(3)(b), it is likely to be unfair or prejudicial

to unitholders’ best interests for costs and charges borne by the side

pocket class to be attributable to unitholders in other classes.

Modified application of COLL 6.7 (Payments)

.....................................................................................................

(1) ■ COLL 6.7 (Payments) applies in relation to an authorised fund with a

side pocket class subject to the modifications and additional

requirements specified in this rule.

(2) The authorised fund manager must not impose any of the following

charges or levies on unitholders of the side pocket class:

(a) a preliminary charge or levy when the units in the side pocket

class are issued;

(b) a charge or levy on the redemption or cancellation of units;

(3) The authorised fund manager must prevent undue costs being

charged to the scheme and its unitholders.

[Note: In relation to (3), see also ■ COLL 6.6A.2R(5) (Duties of AFMs of UCITS

schemes to act in the best interests of the scheme and its unitholders) and

article 17 of the AIFMD level 2 regulation (Duty to act in the best interests of

the AIF or the investors in the AIF and the integrity of the market).]

Application of COLL 7.2 (Suspension and restart of dealings)

.....................................................................................................

(1) ■ COLL 7.2 (Suspension and restart of dealings) applies in relation to a

side pocket class subject to the modifications specified in this rule.

(2) The authorised fund manager may suspend dealings in units of a side

pocket class, while continuing to deal in other classes of the scheme.

(3) If the authorised fund manager suspends dealings in accordance with

(1), it is not required to carry out any request by a unitholder to

convert units in the suspended side pocket class into units of another

class in which dealing continues.

(4) ■ COLL 7.2.1R applies to the suspension of dealings in units of a side

pocket class under (2).

COLL 7 : Suspension of dealings, Section 7.8 : Side pockets

termination of authorised funds

and side pockets

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7/66

COLL 7 : Suspension of dealings, Annex 1

termination of authorised funds

and side pockets

Matters to be considered by the authorised fund manager before

creating a side pocket class

This Annex belongs to COLL 7.8.4R(3)(a) (Conditions for creating side pocket

classes).

1. Investment risk considerations

(1) Whether there is agreement on which affected in-

vestments should be allocated to a side pocket

class.

(2) The possible impact of relevant sanctions

regimes.

(3) The authorised fund manager’s estimate of the

likelihood of the affected investments achieving

a realisable value within a range of timeframes.

(4) Whether the authorised fund manager intends to

invest in affected countries if the economic situ-

ation stabilises and relevant sanctions regimes al-

low it and, if so, how that might affect unithold-

ers in the side pocket class.

(5) Whether the authorised fund manager’s risk man-

agement function (see COLL 6.11 (Risk control and

internal reporting)) has assessed the likely con-

sequences for the authorised fund manager, the

authorised fund and its unitholders if the au-

thorised fund manager were to take no action to

set up a side pocket class.

(6) That there is a risk management plan which con-

siders different scenarios for what might happen

to the affected investments allocated to the side

pocket class and how such scenarios would be

dealt with.

2. Costs

(1) The authorised fund manager’s estimated one-off

costs of establishing the side pocket class and

whether these costs will be met by the au-

thorised fund manager, or paid from the scheme

property of the authorised fund, or apportioned

between both.

(2) The authorised fund manager’s estimated ongo-

ing annual costs of operating the side pocket

class, and the provision being made to pay these

costs:

(a) over various scenarios

as to the duration of

the class; and

(b) (to the extent they dif-

fer) in relation to the

scenarios considered by

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7 Annex 1/1

COLL 7 : Suspension of dealings, Annex 1

termination of authorised funds

and side pockets

This Annex belongs to COLL 7.8.4R(3)(a) (Conditions for creating side pocket

classes).

the risk management

plan in paragraph 1(6)

above.

(3) Whether the authorised fund manager will take

a fee for managing the side pocket class and, if

so, what factors have been considered to deter-

mine whether it is set at a fair level and to pre-

vent unitholders from being charged undue costs.

(4) How the total costs, borne by a unitholder hold-

ing units in both the side pocket class and a class

relating to unaffected investments, will compare

to the total cost that the unitholder currently

bears.

(5) If the future total cost for unitholders is expected

to be higher than the current cost, how this will

be justified to unitholders against the uncertain

benefit of a future realisation of value in the side

pocket class.

3. Legal and operational considerations

(1) The authorised fund manager’s legal advice on

the implications of setting up a side pocket class,

having regard to s235(4) and, in the case of an

ICVC, s236(3) of the Act (see the guidance in COLL

7.8.7G).

(2) Whether the authorised fund’s auditor has been

consulted and its view taken into account.

(3) Whether the authorised fund manager is satisfied

that all operational functions for which it is re-

sponsible, including fund accounting and transfer

agency functions, are able to fully support the

side pocket class.

(4) The authorised fund manager’s assessment of the

readiness of firms to implement and maintain ar-

rangements for the side pocket class to operate

effectively, such as those that arrange or deal in

units in the authorised fund, providers of SIPPs

and providers of linked funds.

4. Longer-term investor considerations

(1) The authorised fund manager’s policy for al-

lowing unitholders to exit the class during its

lifetime.

(2) The authorised fund manager’s view of the likely

future options for enabling the side pocket class

to be terminated.

5. Overall assessment

Whether the governing body of the authorised fund manager is satisfied

that:

(1) the potential benefits to unitholders of units in

any side pocket class are proportionate to the es-

timated costs of establishing and running the

class, including over the long term;

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7 Annex 1/2

COLL 7 : Suspension of dealings, Annex 1

termination of authorised funds

and side pockets

This Annex belongs to COLL 7.8.4R(3)(a) (Conditions for creating side pocket

classes).

(2) proceeding to set up the side pocket class will be

in the best interests of the authorised fund and

its unitholders; and

(3) the depositary has been properly consulted and

its view taken into account.

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 7 Annex 1/3

COLL 7 : Suspension of dealings, Annex 1

termination of authorised funds

and side pockets

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 7 Annex 1/4

Collective Investment Schemes

Chapter 8

Qualified investor schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/1

COLL 8 : Qualified investor Section 8.1 : Introduction

schemes

R8.1.1

G8.1.2

R8.1.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/2

8.1 Introduction

Application

.....................................................................................................

(1) This chapter applies to:

(a) an authorised fund manager of an AUT, ACS or an ICVC;

(b) any other director of an ICVC;

(d) an ICVC,

which is a qualified investor scheme.

(2) Where this chapter refers to rules in any other chapter of this

sourcebook, those rules and any relevant guidance should be applied

as if they referred to qualified investor schemes.

Purpose

.....................................................................................................

(1) This chapter assists in achieving the statutory objective of protecting

consumers by providing an appropriate degree of protection in

respect of authorised funds that are only intended for investors that

are, in general, prepared to accept a higher degree of risk in their

investments or have a higher degree of experience and expertise than

investors in retail schemes.

(2) This section ceases to apply where a qualified investor scheme has

converted to be authorised as a UCITS scheme or a non-UCITS retail

scheme.

Qualified investor schemes: eligible investors

.....................................................................................................

(1) Subject to (3), the authorised fund manager of a qualified investor

scheme must take reasonable care to ensure that ownership of units

in that scheme is recorded in the register only for a person to whom

such units may be promoted under ■ COBS 4.12B.7R.

(2) The authorised fund manager will be regarded as complying with (1)

and (3) to the extent that it can show that it was reasonable for it to

rely on relevant information provided by another person.

(3) In addition to (1), the authorised contractual scheme manager of a

qualified investor scheme which is an ACS must take reasonable care

to ensure that ownership of units in that scheme is only recorded in

the register for a person that meets the criteria set out in

■ COLL 8 Annex 2 R (ACS Qualified Investor Schemes: eligible investors).

COLL 8 : Qualified investor Section 8.1 : Introduction

schemes

G8.1.4

G8.1.5

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/3

Qualified investor schemes - explanation

.....................................................................................................

(1) Qualified investor schemes are authorised funds which are intended

only for professional clients and for retail clients who are

sophisticated investors. For this reason, qualified investor schemes are

subject to a restriction on promotion under ■ COBS 4.12B.6R. See also

■ COBS 4.12B.47G.

(1A) The authorised contractual scheme manager of a qualified investor

scheme which is an ACS must take reasonable care to ensure that

subscription in relation to the units of this type of scheme should only

be in relation to a person to whom such units may be promoted

under ■ COBS 4.12B.7R and who also meets the criteria in

■ COLL 8 Annex 2.

(2) Accordingly, qualified investor schemes have a more relaxed set of

rules governing their operation and in particular their investment

powers than for retail schemes. A qualified investor scheme is

essentially a mixed asset type of scheme where different types of

permitted asset may be included as part of the scheme property,

depending on the investment objectives and policy of that scheme

and within any restrictions in the rules.

Application and notification procedures

.....................................................................................................

Details of the application procedures in respect of qualified investor schemes

are contained in ■ COLL 2.1 (Authorised fund applications). COLLG provides

details on how notifications may be made to the FCA.

COLL 8 : Qualified investor Section 8.2 : Constitution

schemes

R8.2.1

R8.2.2

R8.2.3

G8.2.4

R8.2.5

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/4

8.2 Constitution

Application

.....................................................................................................

This section applies to an authorised fund manager in respect of a qualified

investor scheme.

Classes of unit

.....................................................................................................

A qualified investor scheme may issue such classes of unit as are set out in

the instrument constituting the fund, provided the rights of any class are not

unfairly prejudicial as against the interests of the unitholders of any other

class of units in that scheme.

Names of schemes, sub-funds, and classes of units

.....................................................................................................

(1) The authorised fund manager must ensure that the name of the

scheme, a sub-fund or a class of unit is not undesirable or misleading.

(2) Paragraph (3) applies to an authorised fund manager of a qualified

investor scheme, an ICVC which is such a scheme, and any other

directors of such an ICVC.

(3) The scheme or sub-fund:

(a) must not use ‘Long-Term Asset Fund’ or ‘LTAF’ in its name; and

(b) must not otherwise suggest through its name that it is a fund

which invests in long-term assets or describe itself as such.

Undesirable and misleading names

.....................................................................................................

(1) ■ COLL 6.9.6G (Undesirable and misleading names) contains guidance

as to names which may be undesirable or misleading.

(2) The term ‘Long-Term Asset Fund’ or ‘LTAF’ is reserved for long-term

asset funds (see ■ COLL 15).

(3) Only AIFs that are authorised in accordance with the LTIF Regulation

may use the designation ‘LTIF’ or ‘long-term investment fund’.

Instrument constituting the fund

.....................................................................................................

The statements and provisions required by ■ COLL 8.2.6 R must be included in

the instrument constituting the fund of a qualified investor scheme.

COLL 8 : Qualified investor Section 8.2 : Constitution

schemes

R8.2.6

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/5

Table: contents of the instrument constituting the fund

.....................................................................................................

This table belongs to ■ COLL 8.2.5 R

1 Description of the authorised fund

Information detailing:

(1) the name of the authorised fund;

(2) that the authorised fund is a qualified investor scheme;

and

(3) in the case of an ICVC, whether the head office of the com-

pany is situated in England and Wales or Wales or Scotland

or Northern Ireland.

Property Authorised Investment Funds

1A For a property authorised investment fund, a statement that:

(1) it is a property authorised investment fund;

(2) no body corporate may seek to obtain or intentionally

maintain a holding of more that 10% of the net asset

value of the fund; and

(3) in the event that the authorised fund manager reasonably

considers that a body corporate holds more than 10% of

the net asset value of the fund, the authorised fund man-

ager is entitled to delay any redemption or cancellation of

units in accordance with 6A if the authorised fund man-

ager reasonably considers such action to be:

(a) necessary in order to enable an orderly reduction of

the holding to below 10%; and

(b) in the interests of the unitholders as a whole.

2 Constitution

The following statements:

(1) the scheme property of the scheme is entrusted to a depos-

itary for safekeeping (subject to any exception permitted

by the rules);

(2) if relevant, the duration of the scheme is limited and, if so,

for how long;

(3) charges and expenses of the scheme may be taken out of

scheme property;

(4) for an ICVC:

(a) what the maximum and minimum sizes of the

scheme's capital are; and

(b) the unitholders are not liable for the debts of the

company;

(4A) for an ICVC which is an umbrella, a statement that the as-

sets of a sub-fund belong exclusively to that sub-fund and

shall not be used to discharge directly or indirectly the liab-

ilities of, or claims against, any other person or body, in-

cluding the umbrella, or any other sub-fund, and shall not

be available for any such purpose;

(4B) for a co-ownership scheme which is an umbrella, the prop-

erty subject to a sub-fund is beneficially owned by the parti-

cipants in that sub-fund as tenants in common (or, in Scot-

land, is the common property of the participants in that

sub-fund) and must not be used to discharge any liabilities

of, or meet any claims against, any person other than the

participants in that sub-fund;

COLL 8 : Qualified investor Section 8.2 : Constitution

schemes

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/6

(4C) for a limited partnership scheme, that the scheme prohibits

pooling as is mentioned in section 235(3)(a) of the Act in re-

lation to separate parts of the scheme property, with the ef-

fect that the scheme cannot be an umbrella;

(5) for an AUT:

(a) the trust deed:

(i) is made under and governed by the law of

England and Wales, or the law of Scotland

or the law of Northern Ireland;

(ii) is binding on each unitholder as if he had

been a party to it and that he is bound by

its provisions; and

(iii) authorises and requires the trustee and the

manager to do the things required or permit-

ted of them by its terms;

(b) subject to the provisions of the trust deed and all

the rules made under section 247 of the Act (Trust

scheme rules):

(i) the scheme (other than sums held to the

credit of the distribution account) is held by

the trustee on trust for the unitholders ac-

cording to the number of units held by each

unitholder or, where relevant, according to

the number of individual shares in the

scheme property represented by the units

held by each unitholder; and

(ii) the sums standing to the credit of any distri-

bution account are held by the trustee on

trust to distribute or apply in accordance

with COLL 8.5.15 R (Income);

ment after he has paid the price of his units and

that no further liability can be imposed on him in

respect of the units he holds; and

(d) payments to the trustee by way of remuneration

are authorised to be paid (in whole or in part) out

of the scheme property; and

(6) for an ACS:

(a) the contractual scheme deed:

(i) is made under and governed by the law of

England and Wales, or the law of Scotland

or the law of Northern Ireland;

(ii) is binding on each unitholder as if he had

been a party to it and that he is bound by

its provisions;

(iii) authorises and requires the depositary and

the authorised contractual scheme manager

to do the things required or permitted of

them by its terms; and

(iv) states that units may not be issued to a per-

son other than a person:

(A) who is a:

(i) professional ACS investor;

(ii) large ACS investor; or

COLL 8 : Qualified investor Section 8.2 : Constitution

schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/7

(iii) person who already holds un-

its in the scheme; and

(B) to whom units in a qualified investor

scheme may be promoted under COBS

4.12B.7R;

(v) states that the authorised contractual

scheme manager of an ACS must redeem un-

its as soon as practicable after becoming

aware that those units are vested in anyone

(whether as a result of subscription or trans-

fer of units) other than a person meeting

the criteria in (iv)(A) and (B);

(vi) states that for a co-ownership scheme:

(A) the scheme property is beneficially

owned by the participants as tenants

in common (or, in Scotland, is the

common property of the par-

ticipants);

(B) the arrangements constituting the

scheme are intended to constitute a

co-ownership scheme as defined in

section 235A(2) of the Act; and

quired to wind up the scheme if dir-

ected to do so by the FCA in exercise

of its power under section 261X (Dir-

ections) or section 261Z (Winding up

or merger of master UCITS) of the

Act;

(vii) states:

(A) whether the transfer of units in the

ACS scheme or, for a co-ownership

scheme which is an umbrella (sub-

funds of which pursue differing pol-

icies in relation to transfer of units),

in each particular sub-fund, is either:

(i) prohibited; or

(ii) allowed;

(B) where transfer of units is allowed by

the scheme or, where appropriate the

sub-fund, in accordance with (A)(ii),

units may only be transferred in ac-

cordance with the conditions speci-

fied by FCA rules, including that units

may not be transferred to a person

other than a person :

(i) who is a:

(1) professional ACS in-

vestor; or

(2) large ACS investor; or

(3) person who already

holds units in the

scheme; and

COLL 8 : Qualified investor Section 8.2 : Constitution

schemes

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/8

(ii) to whom units in a qualified

investor scheme may be pro-

moted under COBS 4.12B.7R;

and

(viii) states that for a limited partnership

scheme, the scheme is not dissolved

on any person ceasing to be a limited

partner or nominated partner pro-

vided that there remains at least one

limited partner;

(b) subject to the provisions of the contractual scheme

deed and all the rules made under section 261I of

the Act (Contractual scheme rules) and for the time

being in force:

(i) the scheme property (other than sums

standing to the credit of the distribution ac-

count) is held by, or to the order of, the de-

positary for and on behalf of the unitholders

according to the number of units held by

each unitholder or, where relevant, accord-

ing to the number of individual shares in the

scheme property represented by the units

held by each unitholder; and

(ii) the sums standing to the credit of any distri-

bution account are held by the depositary to

distribute or apply them in accordance with

COLL 8.5.15 R(Income); and

to make any further payment after he has paid the

price of his units and that no further liability can be

imposed on him in respect of the units he holds;

(d) a unitholder in a limited partnership scheme is not

liable for the debts or obligations of the limited

partnership scheme beyond the amount of the

scheme property which is available to the au-

thorised contractual scheme manager to meet such

debts or obligations, provided that the unitholder

does not take part in the management of the part-

nership business;

(e) the exercise of rights conferred on limited partners

by FCA rules does not constitute taking part in the

management of the partnership business;

(f) the limited partners, other than the nominated part-

ner, are to be the participants in the scheme; and

(g) the operator of a co-ownership scheme is au-

thorised to:

(i) acquire, manage and dispose of the scheme

property; and

(ii) enter into contracts which are binding on un-

itholders for the purposes of, or in connec-

tion with, the acquisition, management or

disposal of scheme property.

3 Investment objectives

A statement of the object of the scheme, in particular the types of

investments and assets in which it and each sub-fund (where applic-

able) may invest and that the object of the scheme is to invest in

property of that kind with the aim of spreading investment risk.

COLL 8 : Qualified investor Section 8.2 : Constitution

schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/9

4 Units in the scheme

A statement of:

(1) the classes of units which the scheme may issue, indicating,

for a scheme which is an umbrella, which class or classes

may be issued in respect of each sub-fund; and

(2) the rights attaching to units of each class (including any

provisions for the expression in two denominations of such

rights).

5 Limitation on issue of and redemption of units

Details as to:

(1) the provisions relating to any restrictions on the right to re-

deem units in any class; and

(2) the circumstances in which the issue of the units of any par-

ticular class may be limited.

6 Income and distribution

Details of the person responsible for the calculation, transfer,

allocation and distribution of income for any class of unit in issue

during the accounting period.

Redemption or cancellation of units on breach of law or rules

6A A statement that where any holding of units by a unitholder is (or

is reasonably considered by the authorised fund manager to be) an

infringement of any law, governmental regulation or rule, those

units must be redeemed or cancelled.

7 Base currency

A statement of the base currency of the scheme.

8 Meetings

Details of the procedures for the convening of meetings and the

procedures relating to resolutions, voting and the voting rights for

unitholders.

9 Powers and duties of the authorised fund manager and depositary

Where relevant, details of any function to be undertaken by the

authorised fund manager and depositary which the rules in COLL

require to be stated in the instrument constituting the fund.

10 Termination and suspension

Details of:

(1) the grounds under which the authorised fund manager

may initiate a suspension of the scheme and any associated

procedures; and

(2) the methodology for determining the rights of unitholders

to participate in the scheme property on winding up.

10A Investment in overseas property through an intermediate holding

vehicle

If investment in an overseas immovable is to be made through an

intermediate holding vehicle or a series of intermediate holding

vehicles, a statement that the purpose of that intermediate hold-

ing vehicle or series of intermediate holding vehicles will be to en-

able the holding of overseas immovables by the scheme.

11 Other relevant matters

Details of those matters which enable the scheme, authorised fund

manager or depositary to obtain any privilege or power conferred

COLL 8 : Qualified investor Section 8.2 : Constitution

schemes

R8.2.7

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/10

by the rules in COLL which is not otherwise provided for in the in-

strument constituting the fund.

Limited issue

.....................................................................................................

Units whose issue may be limited can only be issued if permitted by the

instrument constituting the fund, under the conditions set out in the

prospectus and provided that this will not materially prejudice any existing

unitholders in the scheme.

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

R8.3.1

R8.3.2

G8.3.2A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/11

8.3 Investor relations

Application

.....................................................................................................

This section applies to an ICVC which is a qualified investor scheme and the

authorised fund manager of a qualified investor scheme.

Drawing up and availability of a prospectus

.....................................................................................................

(1) An authorised fund manager must ensure that a prospectus of a

qualified investor scheme is drawn up which contains the

information, specified in ■ COLL 8.3.4 R (Table: contents of qualified

investor scheme prospectus), and the authorised fund manager must:

(a) revise the prospectus immediately upon the occurrence of any

materially significant change in the information required to be

stated within it;

(b) include the date of any revision in a prominent manner in the

revised prospectus;

and

(d) review the prospectus periodically and revise it to take account of

any significant change or new matter.

(1A) A full-scope UK AIFM that is the authorised fund manager of a

qualified investor scheme must also ensure that the prospectus

contains the information for investors required by:

(i) ■ FUND 3.2.2R and ■ FUND 3.2.3R (Prior disclosure of information to

investors); and

(ii) ■ FUND 3.2.5R and ■ FUND 3.2.6R (Periodic disclosure), unless the

up-to-date information has been published in the scheme’s most

recent annual report or half-yearly report.

(2) The prospectus must not contain any provision which is unfairly

prejudicial to the interests of unitholders generally or to the

unitholders of any class of units.

(3) An ICVC or the authorised fund manager of an AUT or ACS must

offer a copy of the scheme's most recent prospectus free of charge to

any person eligible to invest in a qualified investor scheme prior to

the purchase of any units.

(1) The PRIIPs Regulation requires the manufacturer of a PRIIP to draw

up a key information document in accordance with the PRIIPs

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

R8.3.3

R8.3.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/12

Regulation before that PRIIP is made available to retail investors (as

defined in the PRIIPs Regulation).

(2) The requirements of the PRIIPs Regulation form part of UK law.

(3) As a result, when a qualified investor scheme is made available to

retail clients the authorised fund manager will need to prepare a key

information document in accordance with the PRIIPs Regulation, in

addition to the prospectus.

False or misleading prospectus

.....................................................................................................

The authorised fund manager must ensure that the prospectus does not

contain any untrue or misleading statement or omit any matter required by

the rules in this sourcebook to be included in it.

Table: contents of qualified investor scheme prospectus

.....................................................................................................

This table belongs to ■ COLL 8.3.2 R.

1 Document status

A statement that this document is the prospectus of the au-

thorised fund valid as at a particular date which shall be the date

of the document.

2 Description of the authorised fund

Information detailing:

(1) the name of the authorised fund;

(1A) its FCA product reference number (PRN);

(2) that the authorised fund is either an ICVC, ACS or an

AUT;

(3) that the scheme is a qualified investor scheme;

(4) where relevant, that the unitholders in an ICVC are not li-

able for the debts of the authorised fund;

(5) where relevant, the address of the ICVC's head office

and the address in the United Kingdom for service on

the ICVC of documents required or authorised to be

served on it;

(6) the effective date of the authorisation order made by

the FCA and, if the duration of the authorised fund is

not unlimited, when it will or may terminate;

(7) the base currency for the authorised fund;

(8) where relevant, the maximum and minimum sizes of the

ICVC's capital;

(9) the circumstances in which the authorised fund may be

wound up under the rules in COLL and a summary of the

procedure for, and the rights of unitholders under, such

a winding up; and

(10) for an ACS that is a limited partnership scheme, the ad-

dress of the proposed principal place of business of the

limited partnership scheme.

3 Investment objectives and policy

(1) Sufficient information to enable a unitholder to

ascertain:

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/13

(a) the investment objectives of the authorised

fund;

(b) the authorised fund's investment policy for

achieving those investment objectives, including:

(i) the general nature of the portfolio and

any intended specialisation;

(ii) the policy for the spreading of risk in

the scheme property; and

(iii) the policy in relation to the exercise of

borrowing powers;

which investment may be made; and

(d) the extent (if any) to which that investment pol-

icy does not envisage remaining fully invested at

all times.

(2) For investment in immovables :

(a) the countries or territories of immovables in

which the authorised fund may invest;

(b) the policy of the authorised fund manager in re-

lation to insurance of immovables forming part

of the scheme property; and

lation to the granting of options over immov-

ables in the scheme property and the purchase

of options on immovables.

(3) If intended, whether the scheme property may consist of

units in collective investment schemes ("second

schemes") which are managed by or operated by the au-

thorised fund manager or by one of its associates and a

statement as:

(a) to the basis of the maximum amount of the

charges in respect of transactions in a second

scheme; and

(b) the extent to which any such charges will be re-

imbursed to the scheme.

(4) If intended, whether the scheme may enter into stock

lending transactions and, if so, what procedures will op-

erate and what collateral will be required.

(5) Where a scheme is a feeder scheme which (in respect of

investment in units in a single collective investment

scheme) is dedicated to units in a collective investment

scheme, details of the master scheme and the minimum

(and, if relevant, maximum) investment that the feeder

scheme may make in it;

4 Distributions and accounting dates

Relevant details of accounting and distribution dates and a de-

scription of the procedures:

(1) for determining and applying income (including how any

distributable income is paid); and

(2) relating to unclaimed distributions.

5 The characteristics of units in the authorised fund

Information as to:

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/14

(1) the names of the classes of units in issue or available for

issue and the rights attached to them in so far as they

vary from the rights attached to other classes;

(2) how unitholders may exercise their voting rights and

what these are; and

(3) the circumstances where a mandatory redemption, can-

cellation or conversion of units from one class to another

may be required.

5A Issue of units in ACSs: eligible investors

(1) A statement that units may not be issued to a person

other than to a person :

(a) who is a:

(i) professional ACS investor; or

(ii) large ACS investor; or

(iii) person who already holds units in the

scheme; and

(b) to whom units in a qualified investor scheme

may be promoted under COBS 4.12B.7R.

(2) A statement that the authorised contractual scheme man-

ager of an ACS must redeem units as soon as practicable

after becoming aware that those units are vested in any-

one (whether as a result of subscription or transfer of un-

its) other than a person meeting the criteria in (1).

5B Transfer of units in ACSs

(1) A statement whether the transfer of units in the ACS

scheme is either:

(a) prohibited; or

(b) allowed;

by the instrument constituting the fund and prospectus.

(2) A statement that where transfer of units is allowed by

the instrument constituting the fund and prospectus in

accordance with (1)(b), units may only be transferred in

accordance with the conditions specified by FCA rules, in-

cluding that units may not be transferred to a person

other than a person :

(a) who is a:

(i) professional ACS investor; or

(ii) large ACS investor; or

(iii) person who already holds units in the

scheme; and

(b) to whom units in a qualified investor scheme

may be promoted under COBS 4.12B.7R.

(3) For a co-ownership scheme which is an umbrella, a state-

ment in accordance with (1)(a) or (1)(b) and, where ap-

propriate, a statement in accordance with (2), must also

be made for the sub-funds. Where individual sub-funds

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/15

have differing policies in relation to transfer of units, sep-

arate statements are required.

6 The authorised fund manager

The following particulars of the authorised fund manager:

(1) its name and the nature of its corporate form;

(2) the country or territory of its incorporation;

(3) the date of its incorporation and if the duration of its

corporate status is limited, when that status will or may

cease;

(4) if it is a subsidiary, the name of its ultimate holding com-

pany and the country or territory in which that holding

company is incorporated;

(5) the address of its registered office, its head office, and, if

different, the address of its principal place of business in

the United Kingdom;

(6) the amount of its issued share capital and how much of

it is paid up;

(7) for an ICVC, a summary of the material provisions of the

contract between the ICVC and the authorised fund man-

ager which may be relevant to unitholders including pro-

visions (if any) relating to termination, compensation on

termination and indemnity; and

(8) for an AUT, the names of the directors of the authorised

fund manager.

7 Directors of an ICVC, other than the ACD

Other than for the ACD:

(1) the names and positions in the ICVC of the directors; and

(2) the manner, amount and calculation of the remuneration

of the directors.

8 The depositary

The following particulars of the depositary:

(1) its name and the nature of its corporate form;

(2) the country or territory of its incorporation;

(3) the address of its registered office and the address of its

head office if that is different from the address of its re-

gistered office; and

(4) if neither its registered office nor its head office is in the

United Kingdom, the address of its principal place of busi-

ness in the United Kingdom.

9 The investment adviser

If an investment adviser is retained in connection with the busi-

ness of the authorised fund, its name and whether or not it is au-

thorised by the FCA.

10 The auditor

The name of the auditor of the authorised fund.

11 The register of Unitholders

Details of the address in the United Kingdom where the register

of unitholders is kept and can be inspected by unitholders.

12 Payments out of the scheme property

The payments that may be made out of the scheme property to

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/16

any person whether by way of remuneration for services, or reim-

bursement of expense and for each category of remuneration or

expense, the following should be specified:

(1) the current rates or amounts of such remuneration;

(2) how the remuneration will be calculated and accrue and

when it will be paid;

(3) if notice has been given to unitholders of the authorised

fund manager's intention to:

(a) introduce a new category of remuneration for

its services; or

(b) increase the basis of any current charge; or

from the capital property set out in COLL 8.5.13 R

(2) (Payments);

particulars of that introduction or increase and when it

will take place;

(4) the types of any other charges and expenses that may be

taken out of the scheme property;

(5) if, in accordance with COLL 8.5.13 R (2), all or part of the re-

muneration or expense are to be treated as a capital

charge:

(a) that fact; and

(b) the basis of the charge which may be so treated;

and

(6) where donations are to be made to one or more regis-

tered charities for Sharia compliance purposes from the

income property of the scheme (in this rule, ‘purifica-

tion’), in addition to the details required above, the per-

son who advises the authorised fund manager on the re-

quired percentage of the income property recognised for

purification.

13 Dealing

Details of:

(1) the dealing days and times in the dealing day on which

the authorised fund manager will receive requests for

the sale and redemption of units;

(2) the procedures for effecting:

(a) the issue and cancellation of units;

(b) the sale and redemption of units; and

(3) the steps required to be taken by a unitholder in re-

deeming units before he can receive the proceeds includ-

ing any relevant notice periods and the circumstances

and periods where a deferral of payment as provided in

COLL 8.5.11 R (3) (Sale and redemption) may be applied;

(4) the circumstances in which the redemption of units may

be suspended;

(5) the days and times in the day on which recalculation of

the price will commence;

(6) details of the minimum number or value of each type of

unit in the authorised fund which:

(a) any one person may hold; and

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/17

(b) may be the subject of any one transaction of

sale or redemption;

(7) the circumstances in which the authorised fund manager

may arrange for, and the procedure for, a redemption of

units in specie;

(8) the circumstances in which the further issue of units in

any particular class may be limited and the procedures re-

lating to this:

(9) the circumstances in which direct issue or cancellation of

units by the ICVC or the depositary of an AUT or ACS (as

appropriate) may occur and the relevant procedures for

such issues and cancellations;

(10) whether a unitholder may effect transfer of title to units

on the authority of an electronic communication and if

so the conditions that must be satisfied in order to effect

a transfer; and

(11) if the authorised fund manager deals as principal in units

of the scheme and holds them for that purpose, a state-

ment of its policy for doing so and, where applicable:

(a) a description of when the authorised

fund manager may retain any profits it

earns and absorb any losses it incurs for

these activities; and

(b) a statement of non-accountability as re-

ferred to in COLL 8.5.14G.

14 Valuation of scheme property

Details as to:

(1) how frequently and at what times of the day the scheme

property will be regularly valued to determine the price

at which units in the scheme may be purchased from or

redeemed by the authorised fund manager and a descrip-

tion of any circumstance where the scheme property may

be specially valued;

(2) in relation to each purpose for which the scheme prop-

erty must be valued, the basis on which it will be valued;

and

(3) how the price of units of each class will be determined,

including a statement that a forward price basis is to be

applied.

15 Sale and redemption charges

If the authorised fund manager makes any charges on sale or re-

demption of units, details of the charging structure and how no-

tice will be provided to unitholders of any increase.

15A Property Authorised Investment Funds

For a property authorised investment fund, a statement that:

(1) it is a property authorised investment fund;

(2) no body corporate may seek to obtain or intentionally

maintain a holding of more than 10% of the net asset

value of the fund; and

(3) in the event that the authorised fund manager reason-

ably considers that a body corporate holds more than

10% of the net asset value of the fund, the authorised

fund manager is entitled to delay any redemption or can-

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/18

cellation of units if the authorised fund manager reason-

ably considers such action to be:

(a) necessary in order to enable an orderly reduc-

tion of the holding to below 10%; and

(b) in the interests of the unitholders as a whole.

16 General information

Details as to:

(1) when annual and half- yearly reports will be published;

and

(2) the address at which copies of the instrument constitut-

ing the fund, any amending instrument and the most re-

cent annual reports may be inspected and from which

copies may be obtained.

17 Information on the umbrella

In the case of a scheme which is an umbrella, the following in-

formation:

(1) that a unitholder may exchange units in one sub-fund

for units in another sub-fund and that such an exchange

is treated as a redemption and sale;

(2) what charges may be made on exchanging units in one

sub-fund for units in other sub-funds;

(3) the policy for allocating between sub-funds any assets of,

or costs, charges and expenses payable out of, the

scheme property which are not attributable to any par-

ticular sub-fund;

(4) in respect of each sub-fund, the currency in which the

scheme property allocated to it will be valued and the

price of units calculated and payments made, if this cur-

rency is not the base currency of the umbrella;

(5) for an ICVC or a co-ownership scheme, that:

(a) for an ICVC, its sub-funds are segregated portfo-

lios of assets and, accordingly, the assets of a

sub-fund belong exclusively to that sub-fund

and shall not be used to discharge directly or in-

directly the liabilities of, or claims against, any

other person or body, including the umbrella, or

any other sub-fund, and shall not be available

for any such purpose;

(aa) for a co-ownership scheme, the property subject

to a sub-fund is beneficially owned by the parti-

cipants in that sub-fund as tenants in common

(or, in Scotland, is the common property of the

participants in that sub-fund) and must not be

used to discharge any liabilities of, or meet any

claims against, any person other than the parti-

cipants in that sub-fund; and

(b) for an ICVC or a co-ownership scheme, while the

provisions of the OEIC Regulations, and section

261P (Segregated liability in relation to umbrella

co-ownership schemes) of the Act in the case of

co-ownership schemes, provide for segregated li-

ability between sub-funds, the concept of segreg-

ated liability is relatively new. Accordingly,

where claims are brought by local creditors in

foreign courts or under foreign law contracts, it

is not yet known how those foreign courts will

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/19

react to regulations 11A and 11B of the OEIC Re-

gulations or, as the case may be, section 261P of

the Act; and

(6) the FCA product reference number (PRN) of each sub-

fund.

18 Application of the prospectus contents to an umbrella

For a scheme which is an umbrella, information required must be

stated:

(1) in relation to each sub-fund where the information for

any sub-fund differs from that for any other; and

(2) for the umbrella as a whole, but only where the informa-

tion is relevant to the umbrella as a whole.

18A Investment in overseas property through an intermediate hold-

ing vehicle

If investment in an overseas immovable is to be made through an

intermediate holding vehicle or a series of intermediate holding

vehicles a statement disclosing the existence of that intermediate

holding vehicle or series of intermediate holding vehicles and con-

firming that the purpose of that intermediate holding vehicle or

series of intermediate holding vehicles is to enable the holding of

overseas immovables by the scheme.

18B Information on authorised contractual schemes

A statement that:

(1) a unitholder in a co-ownership scheme is not liable to

make any further payment after he has paid the price of

his units and that no further liability can be imposed on

him in respect of the units he holds;

(2) a unitholder in a limited partnership scheme is not liable

for the debts or obligations of the limited partnership

scheme beyond the amount of the scheme property

which is available to the authorised contractual scheme

manager to meet such debts or obligations, provided

that the unitholder does not take part in the manage-

ment of the partnership business;

(3) the exercise of rights conferred on limited partners by

FCA rules does not constitute taking part in the manage-

ment of the partnership business; and

(4) the scheme property of a co-ownership scheme is benefi-

cially owned by the participants as tenants in common

(or, in Scotland, is the common property of the par-

ticipants).

18C Sustainability information

The following information, as applicable:

(1) where a sustainability label is used in relation to a

scheme, the information set out at ESG 5.3.3R and ESG

5.3.6R, in accordance with ESG 5.3.2R(1); or

(2) where a sustainability label is not used in relation to a

scheme, but that scheme uses the terms in ESG 4.3.2R(2)

under ESG 4.3.2R(1) the information required under ESG

5.3.2R(2).

19 Additional information

Any other material information which is within the knowledge of

the directors of an ICVC or the authorised fund manager of an

AUT or ACS, or which the directors or authorised fund manager

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

G8.3.4A

R8.3.5

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/20

would have obtained by the making of reasonable enquiries

which investors and their professional advisers would reasonably

require, and reasonably expect to find in the prospectus, for the

purpose of making an informed judgement about the merits of

investing in the authorised fund and the extent and character-

istics of the risks accepted by so participating.

Pre-sale information to be made available on securities

financing transactions and total return swaps

.....................................................................................................

The Securities Financing Transactions Regulation sets out the

additional information which an authorised fund manager who is a

full-scope UK AIFM of a qualified investor scheme must make

available to investors before they invest.

■ COLL 4.2.5BEU and ■ COLL 4.2.5CEU copy out the relevant provisions

of that regulation.

An authorised fund manager who is a full-scope UK AIFM of a

qualified investor scheme should publish the information in the

scheme prospectus.

An authorised fund manager of a qualified investor scheme that

does not use securities financing transactions or total return swaps is

not required to include the information in ■ COLL 4.2.5CEU in the

prospectus or other pre-sale documents.

[Note: A transitional provision applies to ■ COLL 8.3.4AG: see ■ COLL TP 1.39G]

Report and accounts

.....................................................................................................

(1) The authorised fund manager must prepare a report in respect of

each annual accounting period and half-yearly accounting period.

(2) [deleted]

(2A) Where the first annual accounting period of a scheme is less than 12

months, a half-yearly report need not be prepared.

(3) The authorised fund manager must within a reasonable time after

the end of each relevant accounting period, publish the annual report

and half-yearly report and provide a copy free of charge on request

to any unitholder.

(3A) The timing of the publication of the annual report in (3) is subject to

■ FUND 3.3.3R if the authorised fund manager is a full-scope UK AIFM.

(4) [deleted]

(5) The authorised fund manager must provide free of charge on the

request of any person eligible to invest in the scheme a copy of the

latest annual or half-yearly report before the conclusion of any sale

to such person.

(6) The authorised fund manager must provide a copy of each annual

and half-yearly report to the FCA.

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

R8.3.5A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/21

(7) For a scheme which is an umbrella, any annual report provided under

(3) or (5) may be a report prepared under ■ COLL 8.3.5AR (3), but the

authorised fund manager must nevertheless provide free of charge

the report prepared under ■ COLL 8.3.5AR (2) if a unitholder or any

other person eligible to invest in the scheme requests it.

Contents of the annual report

.....................................................................................................

(1) An annual report, other than for a scheme which is an umbrella, must

contain:

(a) the accounts for the annual accounting period prepared in

accordance with the requirements of the SORP;

(b) the report of the authorised fund manager in accordance with

■ COLL 8.3.5C R (Authorised fund manager's report);

(bA) comparative information in accordance with ■ COLL 4.5.10R (1A)

and ■ (2A) (Comparative information);

(Report of the depositary);

(d) the report of the auditor in accordance with ■ COLL 4.5.12 R

(Report of the auditor);

(e) subject to ■ COLL 8.3.5AR(1)(d), its public TCFD product report or an

adequately contextualised and prominent cross-reference and

hyperlink to the report’s location on the firm’s website, in

accordance with ■ ESG 2.3.1R;

(f) where applicable, Part B of its public product-level sustainability

report or an adequately contextualised and prominent cross-

reference and hyperlink to the report’s location on the firm’s

website, in accordance with ■ ESG 5.5.5R; and

(g) if applicable, the amounts paid as donations for Sharia

compliance purposes and the registered charities which received

these payments.

(2) An annual report on a scheme which is an umbrella must be prepared

for the umbrella as a whole and must contain:

(a) for each sub-fund:

(i) the accounts required by (1)(a);

(ii) the report of the authorised fund manager in accordance

with ■ COLL 8.3.5C R;

(iii) comparative information in accordance with

■ COLL 4.5.10R (1A) and ■ (2A);

(iv) subject to ■ COLL 8.3.5AR(2)(v), its public TCFD product report

or an adequately contextualised and prominent cross-

reference and hyperlink to the report’s location on the firm’s

website, in accordance with ■ ESG 2.3.1R;

(v) where applicable, Part B of its public product-level

sustainability report or an adequately contextualised and

prominent cross-reference and hyperlink to the report’s

location on the firm’s website, in accordance with

■ ESG 5.5.5R; and

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/22

(vi) if applicable, the amounts paid as donations for Sharia

compliance purposes and the registered charities which

received these payments;

(b) [deleted]

and

(d) the report of the auditor in accordance with ■ COLL 4.5.12 R.

(3) The authorised fund manager of a scheme which is an umbrella may,

in addition to complying with (2), prepare a further annual report for

any one or more individual sub-funds of the umbrella, in which case

it must contain:

(a) for the sub-fund:

(i) the accounts required by (1)(a);

(ii) the report of the authorised fund manager in accordance

with ■ COLL 8.3.5C R; and

(iii) comparative information in accordance with

■ COLL 4.5.10R (1A) and ■ (2A);

(b) the report of the depositary in accordance with ■ COLL 8.3.5D R;

and

(4) The directors of an ICVC or the authorised fund manager of an AUT

or ACS must ensure that the accounts referred to in (1)(a), (2)(a) and

(3)(a) give a true and fair view of the net revenue and the net capital

gains or losses on the scheme property of the authorised fund or sub-

fund for the relevant annual accounting period, and of the financial

position of the authorised fund or sub-fund as at the end of that

period.

(5) An annual report of an authorised fund must also contain a

statement setting out a description of the assessment of value

required by ■ COLL 8.5.17R including:

(a) a separate discussion and conclusion for the matters covered in

each paragraph of ■ COLL 6.6.21R, and for each other matter that

formed part of the assessment, covering the considerations taken

into account in the assessment, a summary of its findings and the

steps undertaken as part of or as a consequence of the

assessment;

(b) an explanation for any case in which benefits from economies of

scale that were identified in the assessment have not been passed

on to unitholders;

class for which the payments out of scheme property in relation

to that class as set out in the prospectus (in this rule, “charges”)

are higher than those applying to other classes of the same

scheme with substantially similar rights;

(d) the conclusion of the authorised fund manager’s assessment of

whether the charges are justified in the context of the overall

value delivered to the unitholders in the scheme; and

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

G8.3.5AA

R8.3.5B

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/23

(e) if the assessment has identified that the charges are not justified

in the context of the overall value delivered to the unitholders, a

clear explanation of what action has been or will be taken to

address the situation.

(6) An AFM need not include the information required by (5) in its

annual report if it makes the information available to unitholders

annually in a composite report covering two or more of the schemes

it manages, published in the same manner as the annual report.

Information to be included in annual reports on securities

financing transactions and total return swaps

.....................................................................................................

(1) The Securities Financing Transactions Regulation sets out the

additional information which an authorised fund manager who is a

full-scope UK AIFM of a qualified investor scheme must include in the

scheme’s annual report.

(2) ■ COLL 4.5.8ABEU and ■ COLL 4.5.8ACEU copy out the relevant provisions

of that regulation.

(3) An authorised fund manager of a qualified investor scheme that has

not used securities financing transactions or total return swaps during

the relevant annual accounting period is not required to include the

information in ■ COLL 4.5.8ACEU in its reports.

Contents of the half-yearly report

.....................................................................................................

(1) A half-yearly report on an authorised fund or sub-fund must contain:

(a) the accounts for the half-yearly accounting period which must be

prepared in accordance with the requirements of the SORP;

(b) the report of the authorised fund manager in accordance with

■ COLL 8.3.5C R;

adequately contextualised and prominent cross-reference and

hyperlink to the report’s location on the firm’s website, in

accordance with ■ ESG 2.3.1R, where the half-yearly report most

closely follows the reporting deadline of 30 June, under

■ ESG 2.1.1R(1); and

(d) where applicable, Part B of its public product-level sustainability

report or an adequately contextualised and prominent cross-

reference and hyperlink to the report’s location on the firm’s

website, in accordance with ■ ESG 5.5.5R, where the half-yearly

report is the report that most closely follows the date on which

Part B of the public product-level sustainability report was

published.

(2) For a scheme which is an umbrella, the authorised fund manager may

choose whether the half-yearly report is prepared for the umbrella as

a whole, or for each individual sub-fund, or both.

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

R8.3.5C

R8.3.5D

R8.3.5E

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/24

Authorised fund manager's report

.....................................................................................................

The report of the authorised fund manager must include:

(1) a review of the investment activities during the period to which the

report relates;

(1A) a portfolio statement prepared in accordance with the requirements

of the SORP;

(1B) in the case of an umbrella which has more than one sub-fund,

particulars in the form of a table showing, as at the end of the period

to which the report relates:

(a) for each sub-fund, the number of units in that sub-fund that

were held by a second sub-fund of that umbrella; and

(b) the value of each such holding;

or, alternatively, a statement that there were no such holdings as at

the end of that period;

(2) particulars of any fundamental or significant change to the

authorised fund made since the date of the last report; and

(3) any other information which would enable unitholders to make an

informed judgement on the development of the activities of the

authorised fund during the period and the results of those activities

as at the end of the period.

Report of the depositary

.....................................................................................................

(1) The depositary must make an annual report to unitholders which

must be included in the annual report.

(2) The depositary's report must contain:

(a) a description, which may be in summary form, of the duties of

the depositary under ■ COLL 8.5.4 R (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 application of the

authorised fund's revenue, have not been carried out in

accordance with the rules in this sourcebook and, where

applicable, the OEIC Regulations and the instrument

constituting the fund; and

(ii) the investment and borrowing powers and restrictions

applicable to the authorised fund have been exceeded.

Signing of annual and half-yearly reports

.....................................................................................................

The annual reports in ■ COLL 8.3.5AR (1) and ■ (2) and the half-yearly reports

in ■ COLL 8.3.5BR (1) must:

(1) in the case of an ICVC, if there is:

COLL 8 : Qualified investor Section 8.3 : Investor relations

schemes

R8.3.6

G8.3.7

R8.3.8

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/25

(a) more than one director, be approved by the board of directors

and signed on their behalf by the ACD and at least one other

director; or

(b) no director other than the ACD, be signed by the ACD;

(2) in the case of an AUT or ACS, if the authorised fund manager has:

(a) more than one director, be signed by at least two directors of the

authorised fund manager; or

(b) only one director, be signed by the director of the authorised

fund manager.

Alterations to the scheme and notices to Unitholders

.....................................................................................................

(1) Any proposed change which would be reasonably considered to be a

fundamental change to the scheme requires the prior sanction of an

ordinary resolution of the unitholders.

(2) Any proposed change to the scheme which is not within (1) but which

would be reasonably considered to be significant, requires the giving

of reasonable notice to Unitholders to become effective.

(3) Alterations affecting only a particular sub-fund or class of units may

be approved in accordance with (1) or (2) for the particular sub-fund

or class of units, with the consent of, or, as the case may be, notice to,

the relevant unitholders.

(4) This rule and ■ COLL 8.3.8 R (Meetings) will apply (unless the context

requires otherwise) to alterations concerning unitholders of a

particular sub-fund or class of units rather than the scheme or sub-

fund as a whole.

Alterations to the scheme and notices to Unitholders: guidance

.....................................................................................................

Although account should be taken of the guidance on fundamental changes

(■ COLL 4.3.5 G (Guidance on fundamental changes)) and significant changes

(■ COLL 4.3.7 G (Guidance on significant changes)) the impact of any change

to the scheme should be assessed individually based on the nature of the

scheme and its investor profile.

Meetings

.....................................................................................................

(1) Details of the procedures for the convening and conducting of

meetings and resolutions must be set out in the instrument

constituting the fund and be reasonable and fair as between all

relevant parties.

(2) The authorised fund manager must record and keep minutes for six

years of all proceedings to which ■ COLL 8.3.6 R (Alterations to the

scheme and notices to Unitholders) and this rule are relevant.

(3) The provisions in ■ COLL 4.4.12 R (Notices to Unitholders),

■ COLL 4.4.13 R (Other notices) and ■ COLL 4.4.14 G (References to

writing and electronic documents) apply in relation to qualified

investor schemes.

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

R8.4.1

R8.4.1A

R8.4.2

R8.4.3

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/26

8.4 Investment and borrowing powers

Application

.....................................................................................................

(1) Subject to (1A), this section applies to an ICVC which is a qualified

investor scheme and an authorised fund manager and a depositary of

a qualified investor scheme.

(1A) Other than ■ COLL 8.4.2R, ■ COLL 8.4.4CG, ■ COLL 8.4.7R, ■ COLL 8.4.8R

and ■ COLL 8.4.9AG this section does not apply where the qualified

investor scheme in question is a regulated money market fund.

(1) Where this section refers to a second scheme, and the second scheme

is a feeder scheme, which (in respect of investment in units in

collective investment schemes) is dedicated to units in a single

collective investment scheme, the reference in this section to the

second scheme must be read as if it were a reference to any scheme

into which the feeder scheme's master scheme invests.

(2) Where this section refers to a second scheme, and the second scheme

is a master scheme to which (in respect of investment in units in

collective investment schemes) the relevant qualified investor scheme

is dedicated, the reference in this section to the second scheme must

be read as if it were a reference to any scheme into which that

master scheme invests.

Spread of risk

.....................................................................................................

An authorised fund manager must take reasonable steps to ensure that the

scheme property of a qualified investor scheme provides a spread of risk,

taking into account the investment objectives and policy of the scheme as

stated in the most recently published prospectus, and in particular, any

investment objective as regards return to the unitholders (whether through

capital appreciation or income or both).

Investment powers: general

.....................................................................................................

(1) The scheme property of a qualified investor scheme may, subject to

the rules in this chapter, comprise any assets or investments to which

it is dedicated.

(2) The instrument constituting the fund and the prospectus may further

restrict:

(a) the kinds of assets in which the scheme property may be

invested;

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

R8.4.4

R8.4.4A

R8.4.4B

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/27

(b) the types of transactions permitted and any relevant limits; and

Qualified investor schemes: general

.....................................................................................................

The scheme property of a qualified investor scheme must, except where

otherwise provided by the rules in this chapter, consist only of one or more

of the following to which it is dedicated:

(1) any specified investment:

(a) within articles 74 to 86 of the Regulated Activities Order; and

(b) within article 89 (Rights to or interests in investments) of the

Regulated Activities Order where the right or interest relates to a

specified investment within (a);

(1A) (to the extent not within (1)(a)) an interest in a loan, provided that

the loan was not originated to:

(a) a natural person;

(b) the authorised fund manager of the qualified investor scheme;

(d) an affiliated company of the person in (b) or (c); or

(e) a person who intends to use, or uses, the credit for the purpose

of investing in a derivative, cryptoasset derivative, an unregulated

transferable cryptoasset, precious metals or a commodity contract

within (4);

(2) an interest in an immovable under ■ COLL 8.4.11 R (Investment in

property);

(3) precious metals; or

(4) a commodity contract traded on an RIE or a recognised overseas

investment exchange.

[Note: Full-scope UK AIFMs are subject to specific requirements relating to

conflicts of interest (see articles 30 to 36 in the AIFMD level 2 regulation and

■ SYSC 10.1.23R to ■ SYSC 10.1.26R (Additional requirements for an AIFM)).]

[Note: In relation to (1A), a borrower who receives money by way of deposit

from a person who is not a bank may (if the borrower is acting by way of

business) be carrying on the regulated activity of accepting deposits, but an

exclusion in the Regulated Activities Order may be available. See also article

2 of the Business Order.]

Money market funds

.....................................................................................................

[deleted]

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

G8.4.4C

R8.4.5

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/28

Investment powers and limits for qualified investor schemes that are

regulated money market funds are set out in the Money Market Funds

Regulation. Subject to complying with that Regulation, the instrument

constituting the fund may further restrict:

(1) the kinds of assets in which the scheme property may be invested;

(2) the types of transactions permitted and any relevant limits; and

(3) the borrowing powers of the scheme.

Investment in collective investment schemes

.....................................................................................................

(1) Subject to (2) and (3) (where applicable), a qualified investor scheme

may invest in units in a scheme (a ‘second scheme’) only if the second

scheme is:

(a) a regulated collective investment scheme; or

(b) a scheme not within (a) where the authorised fund manager has

taken reasonable care to determine that:

(i) it is the subject of an independent annual audit conducted in

accordance with international standards on auditing;

(ii) the calculation of the net asset value of each of the second

schemes and the maintenance of their accounting records is

segregated from the investment management function;

(iii) it (and any master scheme to whose units it is dedicated) is

prohibited from investing in units of the qualified investor

scheme or, if there is no such prohibition, the qualified

investor scheme's authorised fund manager is satisfied, on

reasonable grounds and after making all reasonable

enquiries, that no such investment will be made by either the

second scheme or any fund in which the second scheme

invests; and

(iv) it operates in accordance with the principle of risk spreading

as described in ■ COLL 8.4.2 R.

(2) A qualified investor scheme must not invest more than 20% in value

of the scheme property in units in second schemes which are

unregulated schemes, qualified investor schemes or long-term asset

funds unless the authorised fund manager has carried out

appropriate due diligence on each of the second schemes and has

taken reasonable care to determine that, after making all reasonable

enquiries and on reasonable grounds, the second scheme complies

with relevant legal and regulatory requirements.

(3) The authorised fund manager of a qualified investor scheme with

more than 20% in value of the scheme property invested in one or

more second schemes which are unregulated schemes, qualified

investor schemes or long-term asset funds must carry out appropriate

due diligence on those schemes on an ongoing basis.

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

R8.4.5A

G8.4.5B

R8.4.6

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/29

Investment in a collective investment scheme that is an

umbrella

.....................................................................................................

Where the second scheme in ■ COLL 8.4.5 R is an umbrella, the provisions

apply to each sub-fund as if it were a separate scheme.

(1) The authorised fund manager of a qualified investor scheme carrying

out due diligence for the purpose of ■ COLL 8.4.5R should use

reasonable efforts to make enquiries and obtain the information

needed to be able to consider the matters specified in ■ COLL 5.7.11G,

as if that guidance related to ■ COLL 8.4.5R.

(2) Where ■ COLL 5.7.11G (10) refers to ■ COLL 6.3 (Valuation and pricing),

that reference should be read as if it were a reference to

■ COLL 8.5.9 R (Valuation, pricing and dealing).

(3) In addition to the guidance at ■ COLL 5.7.11 G the authorised fund

manager should, as part of its due diligence process, consider

whether the property of each of the second schemes is held in

safekeeping by a third party, which is subject to prudential regulation

and independent of the investment manager of the second scheme

and, if not, what controls over the property of the second scheme are

in place to protect investors.

[Note: See also articles 18 to 20 of the AIFMD level 2 regulation for

further requirements that apply to full-scope UK AIFMs in relation to

due diligence.]

Delivery of property under a transaction in derivatives or a

commodities contract

.....................................................................................................

(1) An authorised fund manager must take reasonable care to determine

the following when entering into any transaction in derivatives or

any commodity contract which may result in any asset becoming part

of the scheme property:

(a) if it is an asset in which the scheme property could be invested,

that the transaction:

(i) can be readily closed out; or

(ii) would at the expected time of delivery relate to an asset

which could be included in the scheme property under the

rules in this chapter; or

(b) in any other case that the transaction can be readily closed out.

(2) An authorised fund manager may acquire an asset within (1) if its

determination has proved incorrect and if it determines that

acquisition is in the interests of the unitholders, provided it has the

consent of the depositary.

(3) Any asset within (1) acquired in accordance with (2) may form part of

the scheme property despite any other rule in this chapter until the

position can be rectified.

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

R8.4.7

G8.4.7-A

R8.4.7A

R8.4.8

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/30

Cover for transactions in derivatives and forward transactions

.....................................................................................................

(1) A transaction in derivatives or a forward transaction may be entered

into only if the maximum exposure, in terms of the principal or

notional principal created by the transaction to which the scheme is

or may be committed by another person, is covered globally under

(2).

(2) Exposure is globally covered if adequate cover from within the

scheme property is available to meet the scheme's total exposure

taking into account any reasonably foreseeable market movement.

(3) The total exposure relating to derivatives held in a qualified investor

scheme may not exceed the net value of the scheme property.

(4) No element of cover may be used more than once.

(1) When calculating whether cover is adequate under ■ COLL 8.4.7R(2),

the authorised fund manager may calculate the global exposure of

the scheme by using the commitment approach or the value at risk

approach. For this purpose, value at risk means a measure of the

maximum expected loss at a given confidence level over the specific

time period.

(2) The method selected should be appropriate, taking into account:

(a) the investment strategy pursued by the qualified investor scheme;

(b) the types and complexities of the derivatives and forward

transactions used; and

forward transactions.

Valuation of an OTC derivative

.....................................................................................................

A transaction in an OTC derivative must be capable of valuation which it will

only be if the authorised fund manager having taken reasonable care

determines that, throughout the life of the derivative (if the transaction is

entered into), it will be able to value the investment concerned with

reasonable accuracy:

(1) on the basis of the pricing model; or

(2) on some other reliable basis reflecting an up-to-date market value;

which has been agreed between the authorised fund manager and the

depositary.

Continuing nature of limits and requirements

.....................................................................................................

(1) An authorised fund manager must, as frequently as necessary to

ensure compliance with ■ COLL 8.4.7 R (2) and ■ COLL 8.4.7 R (4), re-

calculate the amount of cover required in respect of derivatives and

forwards positions in existence under this chapter.

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

R8.4.9

G8.4.9A

R8.4.10

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/31

(2) Derivatives and forwards positions may be retained in the scheme

property only so long as they remain covered globally under

■ COLL 8.4.7 R.

(3) An authorised fund manager must use a risk management process

enabling it to monitor and measure as frequently as appropriate the

risk of a scheme's derivatives positions and their contribution to the

overall risk profile of the scheme.

Permitted stock lending

.....................................................................................................

(1) The ICVC, or the depositary at the request of the ICVC, or the

depositary of an AUT or ACS at the request of the authorised fund

manager, may enter into a repo contract or a stock lending

arrangement within section 263B of the Taxation of Chargeable Gains

Act 1992 (without extension by section 263C).

(2) The depositary must ensure that the value of any collateral, for the

stock lending arrangement is at all times at least equal to the value

of the securities transferred by the depositary.

(3) In the case of the expiry of validity of any collateral, the duty in (2) is

satisfied if the depositary or the authorised fund manager, as

appropriate, takes reasonable care to determine that sufficient

collateral will be transferred by close of business on the day of expiry.

The Money Market Funds Regulation sets out restrictions in relation to stock

lending and repo contracts that apply in respect of regulated money market

funds.

General power to borrow

.....................................................................................................

(1) The ICVC or depositary of an AUT or ACS (on the instructions of the

authorised fund manager) may borrow money for the use of the

authorised fund on terms that the borrowing is to be repayable out

of the scheme property.

(2) The authorised fund manager must ensure that the authorised fund's

borrowing does not, on any day, exceed 100 % of the net value of

the scheme property and must take reasonable care to ensure that

arrangements are in place that will enable borrowings to be closed

out to ensure such compliance.

(3) In this rule "borrowing" also includes any arrangement (including a

combination of derivatives) designed to achieve a temporary injection

of money into the scheme property in the expectation that the sum

will be repaid.

(4) Where the limit in (2) is breached, the authorised fund manager must

take action in accordance with the principles set out in

■ COLL 8.5.3 R (3) to ■ COLL 8.5.3 R (5) (Duties of the authorised fund

manager: investment and borrowing powers) to deal with that

breach.

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

R8.4.11

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/32

Investment in property

.....................................................................................................

(1) Any investment in land or a building held within the scheme property

of a qualified investor scheme must be in an immovable within (2).

(2) For an immovable :

(a) it must be situated in a country or territory identified in the

prospectus;

(b) the authorised fund manager must have taken reasonable care to

determine that the title to the interest in the immovable is a

good marketable title; and

have received a report from the appropriate valuer that:

(i) contains a valuation of the interest in the immovable (with

and without any relevant existing mortgage); and

(ii) states that in the appropriate valuer's opinion the interest in

the immovable would if acquired by the scheme, be capable

of being disposed of reasonably expeditiously at that

valuation;

(d) unless (c) is satisfied, the authorised fund manager of an AUT or

ACS or the ICVC must have received a report from an appropriate

valuer valuing the interest in the immovable and stating that:

(i) the immovable is adjacent to or in the vicinity of another

immovable included in the scheme property; and

(ii) in the opinion of the appropriate valuer, the total value of

the interests in both immovables would at least equal the

sum of the price payable for the interest in the immovable

and the existing value of the interest in the other

immovable; and

(e) it must not be bought:

(i) if it becomes apparent to the authorised fund manager that

the report in either (c) or (d) could no longer reasonably be

relied upon; or

(ii) at a price more than 105% of the valuation relevant to the

interest for that immovable in the report in either (c) or (d).

(3) Any contents of any building may be regarded as part of the relevant

immovable.

(4) An appropriate valuer must be a person who:

(a) has knowledge of and experience in the valuation of immovables

of the relevant kind in the relevant area;

(b) is qualified to be a standing independent valuer of an authorised

fund or is considered by the scheme'sstanding independent

valuer to hold an equivalent qualification;

directors of the ICVC or of the authorised fund manager and

depositary of the AUT or ACS; and

(d) has not engaged himself or any of his associates in relation to the

finding of the immovable for the scheme or the finding of the

scheme for the immovable.

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

R8.4.11A

G8.4.11B

R8.4.12

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/33

Investment in overseas property through an intermediate

holding vehicle

.....................................................................................................

(1) An overseas immovable may be held by a scheme through an

intermediate holding vehicle whose purpose is to enable the holding

of immovables by the scheme or a series of such intermediate holding

vehicles, provided that the interests of unitholders are adequately

protected. Any investment in an intermediate holding vehicle for the

purpose of holding an overseas immovable shall be treated for the

purposes of this section as if it were a direct investment in that

immovable.

(2) An intermediate holding vehicle must be wholly owned by the

scheme or another intermediate holding vehicle or series of

intermediate holding vehicles wholly owned by the scheme, unless

and to the extent that local legislation or regulation relating to the

intermediate holding vehicle holding the immovable requires a

proportion of local ownership.

(1) The authorised fund manager may transfer capital and income

between an intermediate holding vehicle and the scheme by the use

of inter-company debt if the purpose of this is for investment in

immovables and repatriation of income generated by such

investment. In using inter-company debt, the authorised fund

manager should ensure the following:

(a) a record of inter-company debt is kept in order to provide an

accurate audit trail; and

(b) interest paid out on the debt instruments is equivalent to the net

rental income earned from the immovables after deduction of

the intermediate holding vehicle's reasonable running costs

(including tax).

(2) An intermediate holding vehicle should undertake the purchase, sale

and management of immovables on behalf the scheme in accordance

with the scheme's investment objectives and policy.

(3) Wherever reasonably practicable, an intermediate holding vehicle

should have the same auditor and accounting reference date as the

scheme.

(4) The accounts of any intermediate holding vehicle should be

consolidated into the annual and interim reports of the scheme.

(5) The authorised fund manager should provide sufficient information

to enable the depositary to fulfil its duties under COLL in relation to

the immovables held through an intermediate holding vehicle.

Investment limits for immovables

.....................................................................................................

The following limits apply in respect of immovables held as part of the

scheme property:

(1) the amount secured by mortgages over any immovable must not

exceed 100% of the latest valuation by an appropriate valuer under

■ COLL 8.4.11 R (2)(c) or ■ COLL 8.4.11 R (2)(d) or ■ COLL 8.4.13 R, as

appropriate;

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

R8.4.13

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/34

(2) no option may be granted to a person to buy or obtain an interest in

any immovable comprised in the scheme property if this might unduly

prejudice the ability to provide redemption; and

(3) the total of all premiums paid for options to purchase immovables

must not exceed 10% of the scheme value in any 12 month period,

calculated at the date of the granting of the option.

Standing independent valuer and valuation

.....................................................................................................

(1) In relation to the appointment of a valuer the authorised fund

manager must:

(a) at the outset appoint the standing independent valuer with the

approval of the depositary and likewise upon any vacancy; and

(b) ensure that any immovables in the scheme property are valued by

an appropriate valuer (standing independent valuer) appointed

by the authorised fund manager.

(2) The following apply in relation to the functions of the standing

independent valuer:

(a) the authorised fund manager must ensure that the standing

independent valuer appointed under (1), procures the valuation

of all the immovables held within the scheme property, on the

basis of a full valuation with physical inspection (including, where

the immovable is or includes a building, internal inspection) at

least once a year;

(b) for the purposes of (a), any inspection in relation to adjacent

properties of a similar nature and value may be limited to that of

only one such representative property;

independent valuer values the immovables, on the basis of a

review of the last full valuation, at least once a month;

(d) if either the authorised fund manager or the depositary becomes

aware of any matter which appears likely to:

(i) affect the outcome of a valuation of an immovable; or

(ii) cause the valuer to decide to value under (a), instead of

under (c),

it must immediately inform the standing independent valuer of

that matter;

(e) the authorised fund manager must use its best endeavours to

ensure that any other affected person reports to the standing

independent valuer immediately upon that person becoming

aware of any matter within (d); and

(f) any valuation by the standing independent valuer must be

undertaken in accordance with UKVPS 3 and 2.3 of UKVPGA 2 of

the RICS Valuation – Global Standards 2017 UK national

supplement 2018 (the RICS Red Book) or, in the case of overseas

immovables, on an appropriate basis but subject to any provisions

of the instrument constituting the fund.

(3) In relation to immovables:

COLL 8 : Qualified investor Section 8.4 : Investment and borrowing

schemes powers

G8.4.14

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/35

(a) any valuation under this rule has effect, until the next valuation

under this rule, for the purposes of the value of immovables; and

(b) an agreement to transfer an immovable or an interest in an

immovable is to be disregarded for the purpose of the valuation

of the scheme property unless it reasonably appears to the

authorised fund manager to be legally enforceable.

In considering whether a valuation of overseas immovables by the standing

independent valuer is made on an appropriate basis for the purpose of

■ COLL 8.4.13R (2)(f), the authorised fund manager should consider whether

that valuation was made in accordance with internationally accepted

valuation principles, procedures and definitions as set out in the

International Valuation Standards published by the International Valuation

Standards Committee.

COLL 8 : Qualified investor Section 8.5 : Powers and responsibilities

schemes

R8.5.1

R8.5.2

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/36

8.5 Powers and responsibilities

Application

.....................................................................................................

(1) Subject to (2) and (3), this section applies to an ICVC which is a

qualified investor scheme and the authorised fund manager, any

other directors of an ICVC and the depositary of a qualified investor

scheme.

(2) ■ COLL 8.5.9R(1) to (8) and (10) do not apply where the qualified

investor scheme is a regulated money market fund.

(3) Where a qualified investor scheme is a regulated money market fund,

■ COLL 8.5.2R and ■ COLL 8.5.3R apply to the authorised fund manager

and depositary of that scheme to the extent the provisions are

consistent with the requirements of the Money Market Funds

Regulation.

Functions of the authorised fund manager

.....................................................................................................

(1) The authorised fund manager must manage the scheme in

accordance with:

(a) the instrument constituting the fund;

(b) the applicable rules;

(d) for an ICVC, the OEIC Regulations; and

(e) where applicable, the Money Market Funds Regulation.

(2) The authorised fund manager must carry out such functions as are

necessary to ensure compliance with the rules that impose obligations

on the authorised fund manager or ICVC, as appropriate.

(3) The authorised fund manager must:

(a) make decisions as to the constituents of the scheme property in

accordance with the investment objectives and policy of the

scheme;

(b) instruct the depositary how rights attaching to the ownership of

scheme property are to be exercised;

methodology set out in the prospectus, which must (unless the

authorised fund manager determines on reasonable grounds that

the breach is of minimal significance) extend to payment of

money:

COLL 8 : Qualified investor Section 8.5 : Powers and responsibilities

schemes

R8.5.3

R8.5.3A

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/37

(i) by the authorised fund manager to unitholders and former

unitholders;

(ii) by the ACD to the ICVC;

(iii) by the ICVC to the ACD;

(iv) by the authorised fund manager of the AUT or ACS to the

depositary; or

(v) by the depositary; (for the account of the AUT or ACS) to the

authorised fund manager;

(d) ensure where relevant that the ICVC complies with the relevant

obligations imposed by, and when appropriate, exercises the

relevant powers provided under, the OEIC Regulations;

(e) maintain such records as are necessary to enable the authorised

fund manager or the ICVC, as appropriate, to comply with and

demonstrate compliance with the rules in this sourcebook and

also in the case of an ICVC, the OEIC Regulations; and

(f) maintain for a period of six years a daily record of the units held,

acquired or disposed of by the authorised fund manager

including the classes of such units, and of the balance of any

acquisitions and disposals.

Duties of the authorised fund manager: investment and

borrowing powers

.....................................................................................................

(1) An authorised fund manager may give instructions to deal in the

scheme property.

(2) An authorised fund manager must avoid the scheme property being

used or invested contrary to any provision in ■ COLL 8.4 (Investment

and borrowing powers).

(3) An authorised fund manager must immediately on becoming aware

of any breach of ■ COLL 8.4 take action, at its own expense, to rectify

that breach.

(4) An authorised fund manager must take the action in (3) immediately,

except in circumstances where doing so would not be in the best

interests of unitholders, in which case the action must be taken as

soon as such circumstances cease to apply.

(5) An authorised fund manager must not postpone taking action in

accordance with (3) unless the depositary has given its consent.

Duties of the ACD or the authorised contractual scheme

manager of a co-ownership scheme: umbrella schemes

.....................................................................................................

Where reasonable grounds exist for an ACD of an ICVC, or an authorised

contractual scheme manager of a co-ownership scheme which is an umbrella,

to consider that a foreign law contract entered into by the ICVC or

authorised contractual scheme manager on behalf of the co-ownership

scheme may have become inconsistent with the principle of limited recourse

stated in the instrument constituting the fund of the ICVC or co-ownership

scheme (see ■ COLL 8.2.6 R(2)(4A) and ■ COLL 8.2.6 R(2)(4B)), the ACD or

authorised contractual scheme manager of the co-ownership scheme must:

COLL 8 : Qualified investor Section 8.5 : Powers and responsibilities

schemes

G8.5.3B

R8.5.4

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/38

(1) promptly investigate whether there is an inconsistency; and

(2) if the inconsistency still appears to exist, take appropriate steps to

remedy that inconsistency.

In deciding what steps are appropriate to remedy the inconsistency, the ACD

or authorised contractual scheme manager of the co-ownership scheme

should have regard to the best interests of the unitholders. Appropriate

steps to remedy the inconsistency may include:

(1) where possible, renegotiating the foreign law contract in a way that

remedies the inconsistency; or

(2) causing the ICVC or the authorised contractual scheme manager on

behalf of the co-ownership scheme to exit the foreign law contract.

Duties of the depositary

.....................................................................................................

(1) The depositary is responsible for the safekeeping of all the scheme

property.

(2) The depositary must:

(a) take all steps to ensure that transactions properly entered into

for the account of the scheme are completed;

(b) take all steps to ensure that instructions properly given by the

authorised fund manager in respect of the exercise of rights

related to scheme property are carried out;

reasonably practicable registered in its name or that of its

nominee or delegate, as appropriate;

(d) take into its custody or control all documents of title of the

scheme property other than in respect of derivatives or forward

transactions;

(e) ensure that any resulting benefit of a derivatives or forward

transaction is received by itself in respect of the scheme;

(f) hold and deal with any income received in respect of the scheme

property in accordance with ■ COLL 8.5.15 R (Income);

(g) take reasonable care to ensure that the scheme is managed by

the authorised fund manager in accordance with:

(i) ■ COLL 8.4 (Investment and borrowing powers);

(ii) ■ COLL 8.5.9 R (Valuation, pricing and dealing);

(iii) ■ COLL 8.5.15 R (Income); and

(iv) where applicable, the provisions of the Money Market Funds

Regulation relating to investment and borrowing powers,

valuation, pricing, and dealing, and income.

(h) keep records so as to comply with the rules in this sourcebook

and so as to demonstrate such compliance; and

(i) be responsible for any other duties as set out in the instrument

constituting the fund.

COLL 8 : Qualified investor Section 8.5 : Powers and responsibilities

schemes

R8.5.5

G8.5.6

R8.5.7

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/39

(3) If a relevant ICVC ceases to have any directors, the depositary may act

in accordance with ■ COLL 6.5.6 R(ICVC without a director).

(4) This rule applies to the depositary of a scheme managed by a full-

scope UK AIFM to the extent the provisions are consistent with the

requirements of the AIFMD level 2 regulation.

[Note: Articles 88 to 90 of the AIFMD level 2 regulation make provision

relating to custody and safekeeping of scheme property. The AIFMD level 2

regulation does not apply to the depositary of a qualified investor scheme

managed by a small authorised UK AIFM.]

Delegation

.....................................................................................................

(1) A small authorised UK AIFM (or in addition any other director in the

case of an ICVC managed by a small authorised UK AIFM) may

delegate any function to any person.

(2) (a) The depositary of a scheme managed by a small authorised UK

AIFM has the power to delegate any function to anyone,

including in the case of an ICVC a director, to assist the depositary

to perform its functions.

(b) However, it must not retain the services of the authorised fund

manager or, in the case of an ICVC, any other director to perform

any part of its functions of safe custody of the scheme property.

(3) Subject to any provisions of the OEIC Regulations, the delegator in (1)

and (2) will not be responsible under the rules in COLL for any act or

omission of the delegate provided that the delegator can show:

(a) that it was reasonable for the delegator to obtain assistance to

perform the function in question;

(b) that the delegate was and remained competent to provide that

assistance; and

assistance was provided in a competent manner.

Delegation and responsibility for regulatory obligations

.....................................................................................................

Directors of an ICVC, authorised fund managers and depositaries should also

have regard to ■ SYSC 8 (Outsourcing).■ SYSC 8.1.6 R states that a firm remains

fully responsible for discharging all of its obligations under the regulatory

system if it outsources crucial or important operational functions or any

relevant services and activities.

Conflicts of interest

.....................................................................................................

(1) The authorised fund manager and the depositary must ensure that

any transaction in respect of the scheme property undertaken with an

affected person is on terms at least as favourable to the scheme as

any comparable arrangement on normal commercial terms

negotiated at arm's length with an independent third party.

COLL 8 : Qualified investor Section 8.5 : Powers and responsibilities

schemes

R8.5.8

R8.5.9

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/40

(2) Paragraph (1) is subject to any provision in the instrument

constituting the fund and the prospectus imposing a prohibition in

relation to any type of transaction.

The register of Unitholders: AUTs or ACSs

.....................................................................................................

(1) The authorised fund manager or the depositary of an AUT or ACS (in

accordance with their responsibilities as set out in the instrument

constituting the fund) must maintain a register of unitholders as a

document in accordance with this rule.

(2) The register must contain:

(a) the name and address of each Unitholder (for joint Unitholders

no more than four need to be registered);

(b) the number of units (including fractions of a unit) of each class

held by each unitholder; and

for the units standing in his name.

(3) The authorised fund manager or the depositary of an AUT or ACS (as

appropriate) must take all reasonable steps and exercise all due

diligence to ensure the register is kept complete and up to date.

(4) Where relevant, the authorised fund manager must immediately

notify the depositary of an AUT or ACS of any information he

receives which may affect the accuracy of any entry in the register.

(5) In the case of a limited partnership scheme, unregistered units may

be held by the authorised contractual scheme manager as the agent

for the scheme provided the authorised contractual scheme manager

is not entered in the register as the new unitholder.

Valuation, pricing and dealing

.....................................................................................................

(1) The value of the scheme property is the net value of the scheme

property after deducting any outstanding borrowings (including any

capital outstanding on a mortgage of an immovable).

(2) Any part of the scheme property which is not an investment (save an

immovable) must be valued at fair value.

(3) For the purposes of (2), any charges that were paid, or would be

payable, on acquiring or disposing of the asset must be excluded

from the value of that asset.

(4) The value of the scheme property of an authorised fund must, save as

otherwise provided in this section, be determined in accordance with

the provisions of the instrument constituting the fund and the

prospectus, as appropriate.

(4A) [deleted]

(4B) [deleted]

(5) The scheme must have a valuation point on each dealing day.

COLL 8 : Qualified investor Section 8.5 : Powers and responsibilities

schemes

R8.5.9-B

■ Release 39 ● Aug 2024 www.handbook.fca.org.uk COLL 8/41

(5A) [deleted]

(6) The authorised fund manager must prepare a valuation in accordance

with (4) for each relevant type of unit at each relevant valuation

point.

(7) The price of a unit must be calculated on the basis of the valuation in

(6) in a manner that is fair and reasonable as between unitholders.

(8) [deleted]

(9) The authorised fund manager must publish in an appropriate manner

the priceof any type of unit based on the valuation carried out in

accordance with (6).

(10) The authorised fund manager must also provide on request to any

unitholder at any time an estimated price for any type of unit in the

scheme.

(11) The period of any initial offer and how it should end must be set out

in the prospectus and must not be of unreasonable length.

Profits from dealing as principal

.....................................................................................................

(1) Where an authorised fund manager:

(a) accepts instructions to sell and redeem units as principal; and

(b) is able to execute a sale instruction by selling units it has

redeemed at the same valuation point, without placing its own

capital at risk,

subject to (2), the AFM must not retain for its own account, or the

account of any of its associates, the difference between the price at

which a unit was redeemed (before deduction of any redemption

charge) and the price at which the same unit was sold (after

deduction of any preliminary charge). Any such difference must be

allocated in a way that is fair to unitholders.

(2) In calculating the profit arising under (1), the AFM may offset any loss

it incurs at the same valuation point, calculated in accordance with

(3), when dealing as principal in relation to:

a unit issued at that valuation point to fulfil a sale instruction

that cannot be matched against any redeemed unit or any other

unit of that class held by the manager as principal; and

a unit redeemed and cancelled at that valuation point.

(3) The amount of the loss referred to in (2) is:

(a) for units issued in accordance with (2)(a), the difference between

the issue price of a unit and the sale price of that unit, less any

preliminary charge;

(b) for units cancelled in accordance with (2)(b), the difference

between the cancellation price of a unit and the redemption

price of that unit, before any redemption charge is applied.

COLL 8 : Qualified investor Section 8.5 : Powers and responsibilities

schemes

G8.5.9-A

R8.5.9A

G8.5.9B

R8.5.10

■ Release 39 ● Aug 2024www.handbook.fca.org.ukCOLL 8/42

(4) Where any loss arising under (2) is greater than any profit arising

under (1), that loss cannot be offset against any profit arising at a

subsequent valuation point.

(5) This rule applies to the redemption and sale of units of different

classes at the same valuation point, if those classes are treated as one

for the purpose of ■ COLL 8.5.10AR.

(1) The authorised fund manager may commit its own capital to hold

units for dealing as principal and may seek to profit from gains in the

value of the units it holds, when it issues or redeems units at one

valuation point then sells or cancels them at a later valuation point.

However, it should not profit from situations in which it is not

exposed to an equal risk of loss if the units fall in value, or from the

ability to match simultaneous sales and redemptions at different

prices at no risk to its own capital.

(2) The AFM may allocate any amount arising under ■ COLL 8.5.9-BR(1) in