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

CIS 5.1 Introduction

Application

CIS 5.1.1R
  1. (1)

    12This chapter applies in relation to ICVCs and AUTs which are not within transitional provision 14 and which:

    1. (a)

      were UCITS schemes when their authorisation order was made; or

    2. (b)

      were UCITS schemes immediately after any alteration to the scheme approved under section 251 of the Act or regulation 21 of the OEIC Regulations became effective.

  2. (2)

    This section (CIS 5.1) applies to authorised fund managers and depositaries of schemes within (1).

Application guidance

CIS 5.1.2G
  1. (1)

    A scheme may convert to, or be authorised to operate as, a UCITS scheme under the rules in CIS 5 at any time but may not convert back to operate under the rules in CIS 5A. Transitional provision 14 allows certain schemes to continue to operate under the rules in CIS 5A for a specific duration after which they must have converted to operate under CIS 5.

  2. (2)

    A UCITS scheme authorised on or before 13 February 2002 may operate within the rules in CIS 5A under transitional provision 14(1) It may at any time switch to operate under CIS 5. However, by 13 February 2007 it must have switched to operate under the rules in CIS 5.

  3. (3)

    A UCITS scheme authorised after 13 February 2002 may operate within the rules in CIS 5A under transitional provision 14(2). However, by 13 February 2004 it must have switched to operate under the rules in CIS 5.

Purpose

CIS 5.1.3G

This chapter helps in achieving the regulatory objective of protecting consumers by laying down minimum standards for the investments that may be held by an authorised fund. In particular:

  1. (1)

    the proportion of transferable securities and derivatives that may be held by an authorised fund is restricted if those 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

  2. (2)

    authorised funds are required to comply with a number of investment rules that require the spreading of risk.

Explanation of this chapter

CIS 5.1.4G
  1. (1)

    The rules in this chapter set out the investment powers for UCITS schemes operating under the provision of the widened investment powers in UCITS Amending Directive 2001/108/EC. Therefore, this chapter does not apply to UCITS schemes operating under the narrower range of investment powers in the unamended UCITS Directive (85/611/EEC) and which are within transitional provision 14 and authorised under the investment powers contained in CIS 5A (see CIS 5A.1.4 G explanation). This chapter also does not apply to non-UCITS types of schemes (geared futures and option schemes, futures and options schemes, fund of fund schemes, feeder funds and non-UCITS umbrella schemes), which are authorised under the investment powers contained in CIS 5A.

Distinct meaning of certain terms

CIS 5.1.5G

Terms used in this sourcebook should be interpreted and applied as they are defined. However, because of the distinct nature of investments in which an authorised fund is permitted to invest, some of these terms are not always used in a way that corresponds with their usage in certain markets. For example, the term warrants. In this sourcebook warrants has a slightly wider meaning than is usually attributed to it in warrant markets. The definition of warrants reflects this distinction.

CIS 5.1.6G

Indicative overview of investment and borrowing powers

This table belongs to CIS 5.1.4 G.

UCITS Scheme Investments and investment techniques

Limits

Approved securities

Yes

Transferable but not approved securities

10%

Government and public securities

Yes

Units

Yes

Warrants

Yes

Investment trusts

Yes

Deposits

Yes

Derivatives

Yes

Immovables

No

Gold

No

Hedging

Yes

Stocklending

Yes

Underwriting

Yes

Borrowing

10%

Cash and near cash

Yes

Note

Meaning of terms used

"Yes"

Can be invested in without specific upper limit (though there may be limits of other kinds).

"No"

Not available for investment.

A percentage

An upper limit (though there may be limits of other kinds).