Content Options

View Options

Status: You are viewing the version of the handbook as on 2005-06-30.

CIS 15.4 Sale and redemption

Application

CIS 15.4.1R
  1. (1)

    This section applies to managers. CIS 15.4.8 R (6) (Payment on redemption) and CIS 15.4.10 R (7)(c) (Redemption charge) also apply to trustees.

  2. (2)

    This section applies to the sale and redemption of units after the close of any initial offer. However, CIS 15.4.3 R (Manager's obligation to sell) also applies to initial offers.

Purpose

CIS 15.4.2G

This section protects investors by means of rules intended to ensure the manager deals fairly with investors when they purchase or redeem units. Accordingly, this section (CIS 15.4) lays down the basic procedures for the sale and redemption of units and sets out how the resulting payments should be calculated and paid.

Manager's obligation to sell

CIS 15.4.3R
  1. (1)

    The manager must at all times during the dealing day be willing to sell units and, subject to (2), must, at the request in writing of any person, agree to sell to that person units of at least one class or, in the case of an umbrella scheme, one class in respect of each of its sub-funds.

  2. (2)

    The manager's obligation to sell units under (1) does not apply:

    1. (a)

      if it has not received payment for the units of an amount complying with CIS 15.4.4 R (Sale price parameters) or, if the sale was at a forward price of a stated number of units, if it has not received payment of an amount estimated by it to be required; or

    2. (b)

      if the number or value of the units sought to be purchased is less than any number or value stated in the prospectus as the minimum number or value of units, or units of the class concerned, that may be purchased or held; or

    3. (c)

      (for a property scheme) if the manager believes, on reasonable grounds, that the number or value of units sought to be purchased would lead to any one person (or any one person and any other person who appears to the manager to be acting in concert with that person) holding more than any number or value stated in the prospectus as the maximum number or value to be purchased or held; or

    4. (d)

      if it has reasonable grounds for refusing to sell units to the person concerned; or1

    5. (e)

      if the sale would be in breach of a provision in the trust deed of any of the types described in paragraphs (j) (Limited categories of Unitholders), (m) (Relevant pension schemes) or (n) (Relevant charitable schemes) of CIS 2.2.7 G (Provisions that may be included in the trust deed).

  3. (3)

    Paragraph (1) does not apply to units of any class:

    1. (a)

      if no units of that class are in issue; or

    2. (b)

      if the sale of units of that class:

      1. (i)

        is prohibited by the rules in CIS 13 (Suspension and resumption of dealings); or

      2. (ii)

        would breach a restriction on sale applicable to a class of limited issue units.

  4. (4)

    Units must be sold in the base currency, unless the person concerned requests, and the manager agrees, that the units should be sold in another currency.

Sale price parameters

CIS 15.4.4R
  1. (1)

    Except in the case of a large deal, the manager's price for the sale of units must not exceed the maximum sale price of the relevant class; that is a price fixed by the manager and notified or to be notified to the trustee in respect of the last valuation point (or, for a sale at a forward price, to be notified in respect of the next valuation point) and that maximum sale price itself must not exceed the total (expressed to at least four significant figures) of:

    1. (a)

      the issue price; and

    2. (b)

      the current preliminary charge.

  2. (2)

    In the case of an initial offer, the manager's price for sale of units must not exceed the initial price.

  3. (3)

    In the case of a large deal, the manager's price for sale may exceed the maximum sale price, but must not exceed the limit above which the maximum sale price could not have been fixed.

  4. (4)

    The manager's price for sale must not be less than the minimum redemption price under CIS 15.4.9 R (Redemption price parameters).

Preliminary charge

CIS 15.4.5R
  1. (1)

    The sale price must not include a preliminary charge unless the trust deed so permits.

  2. (2)

    The preliminary charge must be expressed as a fixed amount or as a percentage of the issue price and must not exceed an amount or rate calculated in accordance with a statement in the prospectus as to the current charge.

  3. (3)

    The manager must not make any charge or levy in connection with the sale of units except a preliminary charge in accordance with (1) and (2), but this does not restrict any requirement for a payment under CIS 15.6.3 R (SDRT provision).

  4. (4)

    Paragraph (1) does not apply on an exchange of units within an umbrella scheme, but nothing in this rule prevents the manager from making a charge on such an exchange in accordance with CIS 15.4.12 R (Exchange of units in umbrella schemes)

Increase in preliminary charge

CIS 15.4.6R

The manager must not introduce a preliminary charge or increase (within the maximum stated in the trust deed) the current amount or rate of a preliminary charge payable under CIS 15.4.5 R unless:

  1. (1)

    the new preliminary charge is within the maximum stated in the trust deed;

  2. (2)

    the introduction or increase would not cause an infringement of CIS 15.4.11 R (Control over maximum charges on issue and redemption);

  3. (3)

    not less than 90 days before the introduction or increase:

    1. (a)

      the manager gave notice in writing of that introduction or increase and of the date of its commencement to the trustee and to all the persons who ought reasonably to be known to the manager to have made an arrangement for the purchase of units at regular intervals; and

    2. (b)

      the manager has revised the prospectus to reflect the introduction or new current amount or rate of preliminary charge and the date of its commencement and has made the revised prospectus available.

Manager's obligation to redeem

CIS 15.4.7R
  1. (1)

    The manager must at all times during the dealing day be willing to redeem units; and, accordingly, must at the request in writing of any Unitholder agree to redeem units owned by that Unitholder for the amount to be paid under CIS 15.4.8 R (Payment on redemption).

  2. (2)

    Paragraph (1) does not apply:

    1. (a)

      if the number or value of the units sought to be redeemed is:

      1. (i)

        less than the entirety of the Unitholders holding of units of the class concerned; and

      2. (ii)

        less than any number or value stated in the prospectus as the minimum number or value that may be redeemed of units, or units of the class concerned; or

    2. (b)

      if the number or value of the units sought to be redeemed would result in the Unitholder holding less than any number or value stated in the prospectus as the minimum number of units, or units of the class concerned, that may be held; or

    3. (c)

      if the manager ensures that the Unitholder is able to sell his units on an investment exchange at a price not significantly different from the price at which they would have been redeemed; or

    4. (d)

      where units are redeemed in return for property transferred or sold under CIS 15.5.4 R (In specie cancellation); or

    5. (e)

      during the period of the initial offer; or

    6. (f)

      if redemption of the units of the class concerned is prohibited by CIS 13 (Suspension and termination).

Payment on redemption

CIS 15.4.8R
  1. (1)

    On agreeing to redeem units, the manager must, within the period specified in (3):

    1. (a)

      (except where (b) applies) pay the Unitholder the proceeds of redemption under (3) (less any deduction under (4) and, where applicable, the cost of remitting the sum abroad); or

    2. (b)

      if a manager of a relevant pension scheme pay or arrange for the payment of the appropriate proceeds of redemption in compliance with the trust deed including, where applicable, any time limit therein for payment which is shorter than the period specified in (2).

  2. (2)

    The proceeds of redemption paid under (1) must not be less than the manager's price for redemption of units under CIS 15.4.9 R (Redemption price parameters).

  3. (3)

    The period expires at the close of business on the fourth business day following the later of:

    1. (a)

      the valuation point immediately after the manager receives the request to redeem; or

    2. (b)

      the time when the manager has all duly executed instruments and authorisations to effect (or enable the manager to effect) transfer of title to the units.

  4. (4)

    There may be deducted from the proceeds of redemption to be paid under (1) any redemption charge permitted under CIS 15.4.10 R (Redemption charge) and any payment required under CIS 15.6.3 R (SDRT provision).

  5. (5)

    Neither this ruleCIS 15.4.8 R nor CIS 15.4.9 R (Redemption price parameters) applies where the manager is not redeeming units in accordance with this chapter, but is buying them as principal on an investment exchange in accordance with a power in the trust deed, which envisages that settlement will be in accordance with the rules of that exchange.

  6. (6)

    Nothing in this rule require a manager or trustee to part with money for a cancellation or redemption of units where any money due on the earlier issue or sale of those has not been received by the person entitled to it under this chapter.

Redemption price parameters

CIS 15.4.9R
  1. (1)

    Except in the case of a large deal, the manager's price for any redemption of units must not be less than the relevant minimum redemption price of a unit of the relevant class notified, or to be notified to the trustee, in respect of the last valuation point (or, for a redemption at a forward price, next to be notified in respect of the next valuation point).

  2. (2)

    The minimum redemption price must not be less than the relevant cancellation price.

  3. (3)

    In the case of a large deal, the manager's price for redemption may be less than the minimum redemption price, but must not be less than the relevant cancellationprice.

  4. (4)

    Subject to CIS 15.4.12 R (Exchange of units in umbrella schemes), in the case of an umbrella scheme, the maximum price at which units in one sub-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 the minimum price at which the old units may be taken in exchange must not be less than the equivalent minimum redemption price.

  5. (5)

    The manager's price for redemption of units must not exceed the relevant issue price under CIS 15.3.6 R (Issue price).

Redemption charge

CIS 15.4.10R
  1. (1)

    If the trust deed so permits, the proceeds of redemption may in accordance with CIS 15.4.8 R (Payment on redemption) be arrived at after deduction of a redemption charge for the benefit of the manager.

  2. (2)
    1. (a)

      A redemption charge must not exceed the amount or rate of redemption charge stated in the prospectus current at the date when the relevant units were issued, other than to the manager, or sold; and

    2. (b)

      the amount or rate referred to in (a) may be expressed as diminishing over the time during which the Unitholder has held the units, but may not be expressed as liable to vary in any other respect.

  3. (3)

    In (2) and (7), "issued" or "sold" in the case of units in an AUT which has absorbed the whole or part of the property of another scheme, is (when relevant) a reference to the issue or sale of units in that other scheme so far as it is practicable for the manager to ascertain the timing of that issue or sale as opposed to the issue of other units held by that holder.

  4. (4)

    The manager must not introduce a redemption charge, or change the rate or method of calculation of a current redemption charge, in a manner which is adverse to Unitholders, unless at least 90 days before the introduction or change, the manager:

    1. (a)

      gave notice in writing of that introduction or change and of the date of its commencement, to the trustee and to all the persons who ought reasonably to be known to the manager to have made an arrangement for the purchase of units at regular intervals; and

    2. (b)

      has revised the prospectus to reflect the introduction or change and the date of its commencement and has made the revised prospectus available.

  5. (5)

    A modification of the rate or method which is adverse to redeeming Unitholders (or Unitholders cancelling units under CIS 15.5.3 R (Issues and cancellations through the manager)) must be limited so as to apply only to units which have been issued (whether at the request of the current Unitholder or otherwise) after the date on which the modification takes effect.

  6. (6)

    Where the trust deed, whenever executed, is modified so as to authorise a redemption charge, the modification must be expressed so as to apply only to units issued after the date on which the modification takes effect.

  7. (7)

    In deciding whether and to what extent a charge is deductible for the purposes of this rule, units held by a Unitholder are to be taken to be redeemed in the order in which they were issued (other than to the manager) or sold, unless:

    1. (a)

      the manager has the Unitholder's instructions to the contrary; or

    2. (b)

      the manager selects as the units first to be redeemed units which are not subject to the deduction; or

    3. (c)

      the manager and the trustee have agreed on another way of deciding the order in which units are redeemed which appears to them unlikely materially to prejudice the Unitholder concerned.

  8. (8)

    A manager must not make a redemption charge which might reasonably be regarded as restricting the right of redemption.

Control over maximum charges on issue and redemption

CIS 15.4.11R
  1. (1)

    In the circumstance envisaged by (2), an introduction of, or change to, either of the charges permitted by CIS 15.4.5 R (Preliminary charge) or CIS 15.4.9 R (Redemption charge) must not take effect unless:

    1. (a)

      the trust deed is modified under CIS 11.4.3 R (Amendment to trust deed: with meeting); or

    2. (b)

      as the case may be, the prospectus is amended following approval of the introduction or change by an extraordinary resolution at a meeting of the Unitholders called for the purpose.

  2. (2)

    The circumstance mentioned in (1) is that (for any individual unit notionally issued and redeemed on the same day) the maximum amount or percentage of any preliminary charge and of any redemption charge would in aggregate exceed the maximum amount or percentage for the preliminary charge alone which is stated in the trust deed.

Exchange of units in umbrella schemes

CIS 15.4.12R

For an umbrella scheme, the manager must not make any charge on an exchange of units:

  1. (1)

    if the exchange is the first to be made by the Unitholder during any annual accounting period; or

  2. (2)

    in the case of a second or subsequent exchange, unless:

    1. (a)

      such a charge is authorised by the trust deed; and

    2. (b)

      the amount of the charge is within the maximum for charging on such an exchange stated in the most recently published prospectus.

Notification of prices to the trustee

CIS 15.4.13R
  1. (1)

    Immediately after completing a valuation under CIS 15.8, (whether regular or otherwise) the manager must notify the trustee of:

    1. (a)

      the issue price;

    2. (b)

      the cancellation price;

    3. (c)

      the maximum sale price; and

    4. (d)

      the minimum redemption price; and

    5. (e)

      (in the case of an umbrella scheme) the maximum sale price for units in any sub-fund on an exchange of units.

  2. (2)

    The prices to be notified under (1) must:

    1. (a)

      relate to units of each class in issue;

    2. (b)

      be those relevant to deals based on prices determined at the valuation point; and

    3. (c)

      be in the base currency.

  3. (3)

    Each notification under (1) must include a statement of the number of units of each class owned by the manager at the valuation point (or notified point if there is one).

  4. (4)

    As soon as practicable after each notification under (1), the manager must notify the trustee of the transactions, or types of transaction, for which an SDRT provision is applied and the amounts or rates of those SDRT provisions.

Publication of prices

CIS 15.4.14R
  1. (1)

    Where the manager holds itself out as willing:

    1. (a)

      to sell or redeem units of any class; or

    2. (b)

      to issue or cancel units of any class under CIS 15.5.3 R (Issues and cancellations through the manager);

    it must make public the maximum sale and minimum redemption prices of those units and the current preliminary charge (if there is one) in an appropriate manner2.

  2. (2)

    The prices made public under (1) are to be the price or prices last notified to the trustee under CIS 15.4.13 R or, in the case of publication in a newspaper, last notified before the relevant newspaper ceased to accept material for publication in the relevant edition.

  3. (3)

    [deleted]2

    2
  4. (4)

    Where the manager holds itself out as willing to sell and redeem units (or, as the case may be, to issue or cancel units under CIS 15.5.3 R (Issues and cancellations through the manager) in any other EEA State, it must also comply with (1) in the manner provided for by the law of that EEA State.

  5. (5)

    Paragraphs (1) to (4) do not apply to units in relation to which the manager is excused from dealing with the public.

  6. (6)

    The manager must disclose the cancellation price, orally or in writing, to any person who requests it, whether in person at, or by any communication addressed to, the manager's principal place of business in the United Kingdom, and the manager must have arrangements to enable it accordingly to disclose, free of charge, at all times during the dealing day, the cancellation price last notified to the trustee.

2Manner of price publication

CIS 15.4.15G
  1. (1)

    2In determining the appropriate manner of making sale and redemption prices and the current preliminary charge (if there is one) (in this provision referred to together as "prices") public under CIS 15.4.14 R (1), the manager should ensure that:

    1. (a)

      a Unitholder or potential Unitholder can obtain the prices at a reasonable cost;

    2. (b)

      prices are available at reasonable times;

    3. (c)

      publication is consistent with the manner and frequency at which the units are sold;

    4. (d)

      the manner of publication is disclosed in the prospectus; and

    5. (e)

      prices are published in a consistent manner.

  2. (2)

    2Examples of what might be deemed appropriate include:

    1. (a)

      publication in a national newspaper;

    2. (b)

      supply through an advertised local rate or freephone telephone number;

    3. (c)

      publication on the internet;

    4. (d)

      inclusion in a database of prices which is publicly available; or

    5. (e)

      communication to all existing Unitholders.

  3. (3)

    2The manager should make previous prices available to any Unitholder or potential Unitholder.