C1Part XVII Collective Investment Schemes

Annotations:
Modifications etc. (not altering text)

Chapter I Interpretation

235 Collective investment schemes.

1

In this Part “collective investment scheme” means any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.

2

The arrangements must be such that the persons who are to participate (“participants”) do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions.

3

The arrangements must also have either or both of the following characteristics—

a

the contributions of the participants and the profits or income out of which payments are to be made to them are pooled;

b

the property is managed as a whole by or on behalf of the operator of the scheme.

4

If arrangements provide for such pooling as is mentioned in subsection (3)(a) in relation to separate parts of the 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.

5

The Treasury may by order provide that arrangements do not amount to a collective investment scheme—

a

in specified circumstances; or

b

if the arrangements fall within a specified category of arrangement.

235AF6Contractual schemes

1

In this Part “contractual scheme” means—

a

a co-ownership scheme; or

b

a partnership scheme.

2

In this Part “co-ownership scheme” means a collective investment scheme which satisfies the conditions in subsection (3).

3

The conditions are—

a

that the arrangements constituting the scheme are contractual;

b

that they are set out in a deed that is entered into between the operator and a depositary and meets the requirements of subsection (4);

c

that the scheme does not constitute a body corporate, a partnership or a limited partnership;

d

that the property subject to the scheme is held by, or to the order of, a depositary; and

e

that either—

i

the property is beneficially owned by the participants as tenants in common (or, in Scotland, is the common property of the participants); or

ii

where the arrangements constituting the scheme provide for such pooling as is mentioned in section 235(3)(a) in relation to separate parts of the property, each part is beneficially owned by the participants in that part as tenants in common (or, in Scotland, is the common property of the participants in that part).

4

The deed—

a

must contain a statement that the arrangements are intended to constitute a co-ownership scheme as defined in section 235A of the Financial Services and Markets Act 2000;

b

must make provision for the issue and redemption of units;

c

must—

i

prohibit the transfer of units,

ii

allow units to be transferred only if specified conditions are met, or

iii

where the arrangements constituting the scheme provide for such pooling as is mentioned in section 235(3)(a) in relation to separate parts of the property, in relation to each separate part make provision falling within sub-paragraph (i) or (ii);

d

must authorise the operator—

i

to acquire, manage and dispose of property subject to the scheme; and

ii

to enter into contracts which are binding on participants for the purposes of, or in connection with, the acquisition, management or disposal of property subject to the scheme; and

e

must make provision requiring the operator and depositary to wind up the scheme in specified circumstances.

5

In this Part “partnership scheme” means a collective investment scheme which satisfies the conditions in subsection (6).

6

The conditions are—

a

that the scheme is a limited partnership;

F12aa

that the limited partnership is not designated under section 8(2) of the Limited Partnerships Act 1907 as a private fund limited partnership;

b

that the limited partnership—

i

at any time has only one general partner; and

ii

on formation has only one limited partner, who is a person nominated by the general partner (“the nominated partner”);

c

that the arrangements constituting the partnership are set out in a deed that is entered into between the general partner and the nominated partner;

d

that the deed prohibits such pooling as is mentioned in section 235(3)(a) in relation to separate parts of the property; and

e

that the deed provides that if an authorisation order is made in respect of the limited partnership under section 261D(1)—

i

the property subject to the scheme is to be held by, or to the order of, a person appointed to be a depositary;

ii

the limited partners, other than the nominated partner, are to be the participants in the scheme; and

iii

the partnership is not dissolved on any person ceasing to be a limited partner provided that there remains at least one limited partner.

7

In this section “general partner”, “limited partner” and “limited partnership” have the same meaning as in the Limited Partnerships Act 1907.

8

In this Part “contractual scheme deed” means—

a

in relation to a co-ownership scheme, the deed referred to in subsection (3)(b); and

b

in relation to a partnership scheme, the deed referred to in subsection (6)(c).

236 Open-ended investment companies.

1

In this Part “an open-ended investment company” means a collective investment scheme which satisfies both the property condition and the investment condition.

2

The property condition is that the property belongs beneficially to, and is managed by or on behalf of, a body corporate (“BC”) having as its purpose the investment of its funds with the aim of—

a

spreading investment risk; and

b

giving its members the benefit of the results of the management of those funds by or on behalf of that body.

3

The investment condition is that, in relation to BC, a reasonable investor would, if he were to participate in the scheme—

a

expect that he would be able to realize, within a period appearing to him to be reasonable, his investment in the scheme (represented, at any given time, by the value of shares in, or securities of, BC held by him as a participant in the scheme); and

b

be satisfied that his investment would be realized on a basis calculated wholly or mainly by reference to the value of property in respect of which the scheme makes arrangements.

4

In determining whether the investment condition is satisfied, no account is to be taken of any actual or potential redemption or repurchase of shares or securities under—

F1a

Chapters 3 to 7 of Part 18 of the Companies Act 2006;

c

F15... or

d

provisions in force in a country or territory F16... which the Treasury have, by order, designated as corresponding provisions.

5

The Treasury may by order amend the definition of “an open-ended investment company” for the purposes of this Part.

236AF14Meaning of “UCITS”

1

For the purposes of this Act, and subject to subsection (4), “UCITS” means an undertaking established in the United Kingdom or an EEA State—

a

with the sole object of collective investment, operating on the principle of risk-spreading, in transferable securities or other liquid financial assets mentioned in subsection (3), of capital raised from the public; and

b

with units which are, at the request of holders, repurchased or redeemed, directly or indirectly, out of the undertaking's assets.

2

A UCITS may consist of several sub-funds (see section 237(4)).

3

The transferable securities or other liquid financial assets referred to in subsection (1)(a) are—

a

in the case of an undertaking established in the United Kingdom, those permitted by section 2 of chapter 5 of the Collective Investment Schemes sourcebook; or

b

in the case of an undertaking established in an EEA State, those referred to in Article 50(1) of the UCITS directive.

4

For the purposes of subsection (1)(b), action taken by the undertaking to ensure that the price of its units on an investment exchange does not significantly vary from their net asset value is to be regarded as equivalent to the repurchase or redemption of units at the request of holders.

5

An undertaking is not a UCITS if it is any of the following—

a

a collective investment undertaking of the closed-ended type;

b

a collective investment undertaking which raises capital without promoting the sale of its units to the public within the relevant area or any part of it;

c

an open-ended investment company, or other collective investment undertaking, the units of which may, under its fund rules or instruments of incorporation, be sold only to the public in countries or territories outside the relevant area.

6

In subsection (5) “the relevant area” means—

a

in the case of an undertaking established in the United Kingdom, the United Kingdom;

b

in the case of an undertaking established in an EEA State, the EEA States.

237 Other definitions.

1

In this Part “unit trust scheme” means a collective investment scheme under which the property is held on trust for the participants F11, except that it does not include a contractual scheme.

2

In this Part—

  • “trustee”, in relation to a unit trust scheme, means the person holding the property in question on trust for the participants;

  • “depositary”, in relation to—

    1. a

      a collective investment scheme which is constituted by a body incorporated by virtue of regulations under section 262, or

    2. b

      any other collective investment scheme which is not a unit trust scheme,

    means any person to whom the property subject to the scheme is entrusted for safekeeping;

  • F17“management company” means an undertaking, as defined in section 1161 of the Companies Act 2006, whose regular business is the management of UK UCITS;

  • F2“the operator”—

    1. a

      in relation to a unit trust scheme with a separate trustee, means the manager;

    2. aa

      F8in relation to a co-ownership scheme, means the operator appointed under the terms of the contractual scheme deed;

    3. ab

      in relation to a partnership scheme, means the general partner;F24...

    4. b

      in relation to an open-ended investment company, means that company; F18... F25, and

    5. ba

      in relation to a recognised scheme, means the legal entity with overall responsibility for the management and performance of the functions of the scheme.

    6. c

      F19...

  • “units” means the rights or interests (however described) of the participants in a collective investment scheme.

  • F3“working day” has the meaning given in section 191G(2).

3

In this Part—

  • “an authorised unit trust scheme” means a unit trust scheme which is authorised for the purposes of this Act by an authorisation order in force under section 243;

  • F9“an authorised contractual scheme” means a contractual scheme which is authorised for the purposes of this Act by an authorisation order in force under section 261D(1);

  • “an authorised open-ended investment company” means a body incorporated by virtue of regulations under section 262 in respect of which an authorisation order is in force under any provision made in such regulations by virtue of subsection (2)(l) of that section;

  • F20“the Collective Investment Schemes sourcebook” means the Collective Investment Schemes sourcebook made under this Act by the FCA, as it has effect on IP completion day;

  • “EEA UCITS” means a UCITS which is authorised pursuant to Article 5 of the UCITS directive in an EEA State;

  • F13...

  • F21“feeder UCITS” means—

    1. (a)

      a UK UCITS which has been approved by the FCA to invest 85% or more of the total property which is subject to the collective investment scheme constituted by the UK UCITS in units of—

      1. (i)

        another UK UCITS,

      2. (ii)

        a sub-fund of another UK UCITS,

      3. (iii)

        an EEA UCITS, or

      4. (iv)

        a sub-fund of an EEA UCITS, or

    1. (b)

      a sub-fund of a UK UCITS which has been approved by the FCA to invest 85% or more of the sub-fund's separate pool of the property of the UK UCITS in units of—

      1. (i)

        another UK UCITS,

      2. (ii)

        another sub-fund of a UK UCITS,

      3. (iii)

        an EEA UCITS, or

      4. (iv)

        a sub-fund of an EEA UCITS;

  • “master UCITS”, in relation to a feeder UCITS, means (as the case may be)—

    1. (a)

      the other UK UCITS mentioned in paragraph (a)(i) or (b)(i) of the definition of “feeder UCITS”,

    2. (b)

      the EEA UCITS mentioned in paragraph (a)(iii) or (b)(iii) of that definition, or

    3. (c)

      the sub-fund mentioned in paragraph (a)(ii) or (iv) or (b)(ii) or (iv) of that definition;

  • “a recognised scheme” means F26a section 271A scheme or a scheme recognised under section F22... 272 F28(and see also section 282C).

  • F27“a section 271A scheme” means a scheme recognised under section 271A (and see also section 271S);

  • F13...

  • F23“UCITS-related direct EU legislation” means—

    1. (a)

      Commission Regulation (EU) 2010/583 of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than paper or by means of a website, or

    2. (b)

      Commission Delegated Regulation (EU) 2016/438 of 17 December 2015 supplementing Directive 2009/65/EC of the European Parliament and of the Council with regard to obligations of depositaries;

  • F4“UK UCITS” means a UCITS which is an authorised unit trust scheme F10, an authorised contractual scheme or an authorised open-ended investment company.

F54

In this Part, references to a sub-fund of a UCITS are references to a part of the property of the UCITS which forms a separate pool where—

a

the UCITS provides arrangements for separate pooling of the contributions of the participants and the profits and income out of which payments are made to them; and

b

the participants are entitled to exchange rights in one pool for rights in another.

F75

In this Part “umbrella co-ownership scheme” means an authorised contractual scheme which satisfies the conditions in subsection (6).

6

The conditions are—

a

that the scheme is a co-ownership scheme;

b

that the arrangements constituting the scheme provide for such pooling as is mentioned in section 235(3)(a) in relation to separate parts of the property; and

c

that the participants are entitled under the terms of the scheme to exchange rights in one part for rights in another.

7

In this Part “sub-scheme”, in relation to an umbrella co-ownership scheme, means the arrangements constituting the scheme so far as they relate to a separate part of the property.

8

In this Part “stand-alone co-ownership scheme” means an authorised contractual scheme which—

a

is a co-ownership scheme; and

b

is not an umbrella co-ownership scheme.