Content Options

View Options

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

CIS 7.5 The ICVC, its directors and the depositary

Dealings in scheme property

CIS 7.5.1R
  1. (1)

    The ACD may give instructions as to the acquisition or disposal of property for the account of the ICVC. The authority of the depositary to give those instructions is not required, except in the case of the acquisition or disposal of immovable property.

  2. (2)

    Where the depositary is of the opinion that a particular acquisition or disposal of property for the account of the ICVC exceeds the powers conferred on the ICVC by the rules in this sourcebook (and in particular CIS 5 or CIS 5A (Investment and borrowing powers)), the depositary may require the ACD to cancel the transaction or make a corresponding disposal or acquisition to secure restoration of the previous situation and to meet any resulting loss or expense.1

  3. (3)

    Where the depositary is of the opinion that:

    1. (a)

      an acquisition of property for the account of the ICVC necessarily involves documents evidencing title being kept in the custody of a person other than the depositary; and

    2. (b)

      the depositary cannot reasonably be expected to accept the responsibility which would otherwise be placed upon it if it were to permit custody by that other person;

    the ACD must (for the account of the ICVC), if the depositary so requests, either cancel the transaction or make a corresponding disposal.

ICVC without a Director

CIS 7.5.2R
  1. (1)

    If the ICVC ceases to have any directors, the depositary has the power:

    1. (a)

      to retain the services of an authorised person to carry out the functions referred to in CIS 7.3.1 R (3)(a)and(b) (The ACD); or

    2. (b)

      provided it is not prohibited from doing so by any law or any rule, to manage the scheme property itself on behalf of the ICVC;

    until in either case; a director is appointed; or a winding up of the ICVC is commenced.

Duties of the ACD and depositary: investment and borrowing powers

CIS 7.5.3R
  1. (1)

    The ACD must take all reasonable steps and exercise due diligence to avoid the scheme property being used or invested contrary to any provision in CIS 5 or CIS 5A (Investment and borrowing powers), except to the extent permitted by (6)(c).1

  2. (2)

    The depositary must take all reasonable steps and exercise due diligence to monitor the management of the scheme property sufficiently to ensure that the ACD complies with (1).

  3. (3)

    The ACD must, immediately upon becoming aware of any breach of any provision in CIS 5 or CIS 5A , take action, at its own expense, to rectify that breach, unless the breach occurred as the result of a circumstance of one of the types described in (5) and (6).1

  4. (4)

    When this paragraph (4) applies as a result of (5) or (6), the ACD must take the steps necessary to ensure a restoration of compliance with CIS 5 or CIS 5A as soon as is reasonably practicable having regard to the interests of the shareholders and, in any event, within the period specified in (8) or, when applicable, (9).1

  5. (5)

    Paragraph (4) applies:

    1. (a)

      where the scheme property is used or invested at any time contrary to any provision of CIS 5 or CIS 5A (other than a provision excusing a failure to comply on a temporary basis); and 1

    2. (b)

      the reason for the contravention is beyond the control of both the ACD and the depositary.

  6. (6)
    1. (a)

      Paragraph (4) applies to a transaction ("subsequent transaction") deriving from a right (such as the right to convert stock or subscribe to a rights issue) attributable to an investment ("original investment") of the ICVC if:

      1. (i)

        the subsequent transaction, but for this rule (CIS 7.5.3 R) would constitute a breach of CIS 5 or CIS 5A; and1

      2. (ii)

        at the time of the acquisition of the original investment, it was reasonable for the ACD, on the assumption that any right attached to the original investment when it was acquired would be exercised, to expect that a breach would not be caused by the subsequent transaction.

    2. (b)

      In this paragraph (6) reference to the exercise of a right includes the taking effect of a right without any action by or on behalf of the depositary or the ICVC.

    3. (c)

      Nothing in CIS 5 or CIS 5A prevents the ICVC from entering into a transaction of the type described in (a) provided that the ACD obtains the prior written consent of the depositary.1

  7. (7)

    Immediately upon the depositary becoming aware of any circumstance described in (5) or any breach resulting from the exercise of, or receipt of a benefit from, a right in the circumstance described in (6), it must take the steps necessary to ensure that the ACD complies with (4).

  8. (8)

    The maximum period for restoration of compliance under (4) starts at the date of discovery of the relevant circumstance and lasts, subject to any extension under (9):

    1. (a)

      except where (b), (c) or (d) applies, for six months;

    2. (b)

      where the transaction in question was a transaction in derivatives or a forward transaction under CIS 5.2.22 R (Permitted transactions (derivatives and forwards)) or CIS 5A.6 (Futures and options schemes) or CIS 5.7A (Geared futures and options schemes), until the close of business five business days later;1

    3. (c)

      where the transaction in question was entered into for hedging purposes under CIS 5.2.22 R (Permitted transactions (derivatives and forwards)) or under CIS 5A.13 (Efficient portfolio management), until the close of business five business days later; and1

    4. (d)

      where the ICVC is a property scheme and the property in question is an immovable, for two years.

  9. (9)

    The period specified at (8)(b) and (c) (five business days) is extended:

    1. (a)

      if the transaction involved a delivery of a commodity, from five to twenty business days;

    2. (b)

      if the reason for the contravention in (5) is the inability of the ACD to close out a transaction because of a limit in the number or value of transactions imposed by an eligiblederivatives market, until five business days after:

      1. (i)

        the inability resulting for any such limit is removed; or

      2. (ii)

        it becomes, to the knowledge of the ACD, reasonably practicable and reasonably prudent for the transaction to be closed out in some other way.