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CIS 4.5 Issues and cancellations through the authorised fund manager and in specie cancellations

Application

CIS 4.5.1R

This section (CIS 4.5) applies to authorised fund managers. CIS 4.5.3 R (6) and CIS 4.5.4 R (4) also apply to ICVCs and depositaries.

Purpose

CIS 4.5.2G
  1. (1)

    CIS 4.5.3 R ensures investors are able, in certain circumstances, to require direct issues or cancellations of units by an ICVC, or by the trustee of an AUT, as an alternative to buyingunits from, or redeeming them with, the authorised fund manager.

  2. (2)

    CIS 4.5.4 R protects investors in the authorised fund by enabling an authorised fund manager, subject to the conditions in that rule, to require a holder who wishes to redeem or cancel his units to take, instead of the usual proceeds of redemption or cancellation, a transfer of assets of the authorised fund or, if the holder requires, to take the net proceeds of the sale of those assets.

Issues and cancellations through the authorised fund manager

CIS 4.5.3R
  1. (1)

    At the request of any person, the authorised fund manager is obliged to arrange for the ICVC, or instruct the trustee, to issue units to that person where the authorised fund manager would otherwise be obliged to sell them under CIS 4.4.3 R (Authorised fund manager's obligation to sell).

  2. (2)

    At the request of any holder, the authorised fund manager is obliged to arrange for the ICVC, or instruct the trustee, to cancel units held by that holder where the authorised fund manager would otherwise be obliged to redeem them under CIS 4.4.4 R (Authorised fund manager's obligation to redeem).

  3. (3)

    The price of a unit issued or cancelled under this rule (CIS 4.5.3 R) must be the price of a unit of the relevant class notified to the depositary at the next valuation point after the request referred to in (1) or (2), except for an issue to which CIS 4.2.4 R (Issue of units: initial offer) applies, when it must be the initial price.

  4. (4)
    1. (a)

      In the case of an issue, the authorised fund manager may require to be paid, in addition to the price under (3):

      1. (i)

        for the account of the authorised fund manager, any preliminary charge permitted under CIS 8.2.2 R (Preliminary charge: ICVCs and single-priced AUTs);

      2. (ii)

        for the account of the authorised fund, any payment required under CIS 4.6.3 R (Dilution levy and SDRT provision).

    2. (b)

      In the case of a cancellation, the authorised fund manager may require to be deducted from the proceeds:

      1. (i)

        for the account of the authorised fund manager, any redemption charge permitted under CIS 8.2.7 R (Redemption charge: ICVCs) or CIS 8.5.2 R (Redemption charge: single-priced AUTs);

      2. (ii)

        for the account of the authorised fund, any deduction required under CIS 4.6.3 R (Dilution levy and SDRT provision).

  5. (5)

    The authorised fund manager must pay the depositary in accordance with CIS 4.3.7 R (Payments for units issued) the price of any units issued under this rule (CIS 4.5.3 R) and any payment required under (4)(a)(ii) whether or not the authorised fund manager has received payment from the investor. However, the authorised fund manager may defer arranging for the ICVC, or instructing the trustee, to issue the units until full payment for them has been received.

  6. (6)

    Nothing in this rule (CIS 4.5.3 R) requires an ICVC, a depositary or an authorised fund manager to part with money for a cancellation of units in the circumstances described in CIS 4.4.5 R(4) (Payment on redemption).

  7. (7)

    Paragraph (1) does not apply if the issue would breach a restriction on issue applicable to a class of limited issue shares or limited issue units.1

In specie redemption

CIS 4.5.4R
  1. (1)

    Whenever a holder requests the redemption or cancellation of units, the authorised fund manager may arrange for the cancellation of those units and that, instead of payment in cash to the holder of the price for the units, schemeproperty selected in accordance with (c) and (d) is transferred to the holder, or, if required by the holder, the net proceeds of the sale of that property is paid to him, provided that:

    1. (a)

      the prospectus contains a statement describing the circumstances in which the authorised fund manager is permitted to arrange for, and describing the procedures for, a cancellation of units in the manner described above;

    2. (b)

      the authorised fund manager gives the holder written notice before the proceeds of the redemption or cancellation would otherwise become payable in cash, that instead of such payment the depositary will transfer scheme property (or the net proceeds of the sale of the relevant scheme property) to the holder;

    3. (c)

      the scheme property to be transferred (or sold) is selected by the authorised fund manager in consultation with the depositary and the selection is made with a view to achieving no more advantage or disadvantage to the holder requesting cancellation of his units than to the continuing holders; and

    4. (d)

      the scheme property to be transferred, or the proceeds of the sale of the relevant scheme property, is subject to the retention by the depositary of scheme property (including cash) of a value or amount equivalent to any deductions permitted by CIS 4.5.3 R (4)(b) (Issues and cancellations through the authorised fund manager) and the depositary accounts for any such deduction in the manner provided by that rule.

  2. (2)

    This rule (CIS 4.5.4 R) does not enable the authorised fund manager, when acting as a principal, to cancel units other than for payment in cash.

  3. (3)

    This rule does not enable units in a relevant pension scheme to be redeemed other than in accordance with that scheme.

  4. (4)

    Nothing in this rule requires an ICVC, a depositary or an authorised fund manager to transfer scheme property, or the proceeds of the sale of scheme property, in respect of the cancellation of units in the circumstances described in CIS 4.4.5 R (4) (Payment on redemption).