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CIS 4.4 Sale and redemption

Application

CIS 4.4.1R
  1. (1)

    This section (CIS 4.4) applies to authorised fund managers. CIS 4.4.5 R (4) (Payment on redemption) also applies to ICVCs and depositaries.

  2. (2)

    This section (CIS 4.4) applies to the sale and redemption of units after the close of any initial offer. However, the following rules also apply to the sale of a unit during an initial offer:

    1. (a)

      CIS 4.4.3 R (1), (2) and (3) (other than the provision in (2)(a) relating to a sale at a forward price); and

    2. (b)

      CIS 4.4.8 R (but as if CIS 4.4.8 R (2) related to the initial price).

Purpose

CIS 4.4.2G
  1. (1)

    This section (CIS 4.4) protects investors by means of rules intended to ensure the authorised fund manager deals fairly with investors when they purchase or redeem units. Accordingly, this section lays down the basic procedures for the sale and redemption of units in an authorised fund and sets out how the resulting payments should be calculated and by when they should be made.

  2. (2)

    Sales and redemptions of units in futures and options schemes or geared futures and options schemes are, in addition, subject to the special rules in CIS 12.2.1 R (Special rules for sales and redemptions).

Authorised fund manager's obligation to sell

CIS 4.4.3R
  1. (1)

    The authorised fund manager must, at all times during the dealing day, be willing to sellunits in the authorised fund 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 for each of its sub-funds.

  2. (2)

    The authorised fund 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 (4) or (if the sale was at a forward price of a stated number of shares) if it has not received payment of an amount it estimated 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 authorised fund manager, having taken reasonable care, determines 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 authorised fund 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; and3

    5. (e)

      for an AUT, 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 Unitholder), (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); or2

      2. (ii)

        would breach a restriction on sale applicable to a class of limited issue shares or limited issue units.2

  4. (4)

    The authorised fund manager must not sell a unit for more than the price of a unit of the relevant class notified, or to be notified, to the depositary for the last valuation point (or, for a sale at a forward price, to be notified for the next valuation point) to which may be added any preliminary charge permitted under CIS 8.2.2 R (Preliminary charge: ICVCs and single-priced AUTs) and any payment required under CIS 4.6.3 R (Dilution levy and SDRT provision).

  5. (5)

    Units must be sold in the base currency, or, for a currency class share, in the currency of designation of that class, unless the person concerned requests and the authorised fund manager agrees that the units should be sold in another currency.

Authorised fund manager's obligation to redeem

CIS 4.4.4R
  1. (1)

    The authorised fund manager must at all times during the dealing day be willing to redeem units in the authorised fund; and, accordingly, must at the request in writing of any holder agree to redeem units owned by that holder for the amount to be paid under CIS 4.4.6 R (Proceeds of 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 holder's 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 of units, or units of the class concerned, that may be redeemed;

    2. (b)

      if the number or value of the units sought to be redeemed would result in the holder 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;

    3. (c)

      if the ICVC or the manager ensures that the holder 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;

    4. (d)

      where units are redeemed in return for property transferred or sold under CIS 4.5.4 R (In specie redemption);

    5. (e)

      during the period of the initial offer; or

    6. (f)

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

Payment on redemption

CIS 4.4.5R
  1. (1)

    On agreeing to redeem units, the authorised fund manager must, within the period specified in (2):

    1. (a)

      (except where (b) applies) pay the holder the appropriate proceeds of redemption under CIS 4.4.6 R (less, 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 proceeds of redemption in compliance with the trust deed (including, where applicable, any time limit in it for payment which is shorter than the period specified in (2)).

  2. (2)

    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 authorised fund manager received the request to redeem; or

    2. (b)

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

  3. (3)

    Neither this rule nor CIS 4.4.6 R (Proceeds of redemption) applies where the authorised fund manager is not redeeming units in accordance with this chapter but is buying them as principal on an investment exchange (in the case of an AUT, in accordance with a power in the trust deed) and settlement will be in accordance with the rules of that exchange.

  4. (4)

    Nothing in this rule or CIS 4.3.10 R(5) and (6) (Cancellation and payment for cancelled units) requires an ICVC, a depositary or an authorised fund manager to part with money for a cancellation or redemption of units where any money due on the earlier issue or sale of those units has not been received by the person entitled to it under this chapter.

Proceeds of redemption

CIS 4.4.6R

The amount to be paid by the authorised fund manager as the proceeds of redemption of a unit must not be less than the price of a unit of the relevant class notified or to be notified to the depositary at the last valuation point (or, for a redemption at a forward price, to be notified in respect of the next valuation point) less any redemption charge permitted under CIS 8.2.7 R (Redemption charge: ICVCs) or CIS 8.5.2 R (Redemption charge: single-priced AUTs) and any deduction required under CIS 4.6.3 R (Dilution levy and SDRT provision).

Notification of price to the depositary

CIS 4.4.7R
  1. (1)

    Immediately after completing a valuation under CIS 4.8 (Valuation) (whether regular or otherwise) the authorised fund manager must notify the depositary of:

    1. (a)

      the price, in the base currency (or, in the case of a currency class share, the currency of designation) of a unit of each class in issue as determined for the relevant valuation point; and

    2. (b)
      1. (i)

        the amount or rate of any dilution levy which applies to any issue or cancellation of units made by reference to that valuation; or

      2. (ii)

        the amount or rate of any dilution adjustment taken into account in calculating that price and whether it was an addition or deduction.1

  2. (2)

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

  3. (3)

    As soon as practicable after each notification under (1), the authorised fund manager must notify the depositary 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 4.4.8R
  1. (1)

    Where the authorised fund 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 4.5.3 R (Issues and cancellations through the authorised fund manager);

    it must make public the prices of units of each of those classes in an appropriate manner.4

  2. (2)

    The prices made public under (1) are to be the price or prices last notified to the depositary under CIS 4.4.7 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]

    4
  4. (4)

    Where the authorised fund manager holds itself out as willing to sell and redeem units (or, as the case may be, to issue or cancel units under CIS 4.5.3 R) 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 authorised fund manager is excused from dealing with the public.

4Manner of price publication

CIS 4.4.9G
  1. (1)

    4In determining the appropriate manner of making prices public under CIS 4.4.8 R (1), the authorised fund 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)

    4Examples 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)

    4The authorised fund manager should make previous prices available to any Unitholder or potential Unitholder.