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COLL 11.3 Co-ordination and information exchange for master and feeder UCITS

Authorised fund manager of a master UCITS: provision of documentation

COLL 11.3.1R

The authorised fund manager of a UCITS scheme that is a master UCITS must provide the management company of its feeder UCITS with all documents and information necessary for the latter to meet its regulatory obligations under the UCITS Directive.

[Note: article 60(1) first paragraph first sentence of the UCITS Directive]

Master-feeder agreement and internal conduct of business rules

COLL 11.3.2R
  1. (1)

    The authorised fund manager of a UCITS scheme that is a feeder UCITS must enter into a master-feeder agreement which, at a minimum, complies with COLL 11 Annex 1 R.

  2. (2)

    Where a master UCITS and a feeder UCITS are managed by the same management company, the master-feeder agreement may be replaced by internal conduct of business rules which, at a minimum, comply with COLL 11 Annex 2 R.

  3. (3)

    The authorised fund manager of a feeder UCITS must not invest in units of the master UCITS in excess of the limit applicable under COLL 5.2.11 R (9) (Spread: general) (20%) until the period of 30 calendar days referred to in COLL 4.8.3 R (1) (Information to be provided to Unitholders) has elapsed and the following have become effective:

    1. (a)

      the master-feeder agreement, or, if applicable under (2), the internal conduct of business rules;

    2. (b)

      the information-sharing agreement of the depositaries in accordance with COLL 11.4.1R (2) (Information-sharing agreement between depositaries); and

    3. (c)

      the information-sharing agreement of the auditors in accordance with COLL 11.5.1 R (Information-sharing agreement between auditors).

  4. (4)

    An authorised fund manager of a feeder UCITS must make a copy of the master-feeder agreement or, where applicable, the internal conduct of business rules, available to Unitholders free of charge on their request.

[Note: article 60(1) first paragraph last sentence, second and third paragraphs, article 61(1) second paragraph, article 62(1) second paragraph and article 64 third paragraph of the UCITS Directive]

COLL 11.3.3G

Where an authorised fund manager of a feeder UCITS enters into a master-feeder agreement or, if applicable, internal conduct of business rules, with the management company of an EEA UCITS scheme, references in COLL 11 Annex 1 R and COLL 11 Annex 2 R to COLL rules implementing provisions in the UCITS Directive which are the responsibility of the EEA UCITS scheme's Home State regulator should be read as referring to the corresponding provisions in the laws and regulations of that EEA State.

COLL 11.3.4G

In relation to the requirements in COLL 11 Annex 1 R(3) and Annex 2R(2), where the dealing arrangements between a master UCITS and a feeder UCITS do not differ from those applying to all non-feeder UCITS Unitholders of the master UCITS, the master-feeder agreement or the internal conduct of business rules do not have to replicate those standard dealing arrangements, but may cross-refer to the relevant parts of the prospectus of the master UCITS.

[Note: recital (8) to the UCITS implementing Directive No 2]

Law applicable to the master-feeder agreement

COLL 11.3.5R
  1. (1)

    Where the feeder UCITS and the master UCITS are UCITS schemes, the master-feeder agreement must provide that the law of a specified part of the United Kingdom applies to the agreement and that both parties agree to the exclusive jurisdiction of the courts of that part of the United Kingdom.

  2. (2)

    Where the feeder UCITS and the master UCITS are established in different EEA States, the master-feeder agreement must provide that the applicable law shall be either:

    1. (a)

      the law of the EEA State in which the feeder UCITS is established; or

    2. (b)

      the law of the EEA State in which the master UCITS is established;

      and that both parties agree to the exclusive jurisdiction of the courts of the EEA State whose law they have stipulated to be applicable to the agreement.

[Note: article 14 of the UCITS implementing Directive No 2]

Avoidance of opportunities for market timing

COLL 11.3.6R
  1. (1)

    The authorised fund managers of a master UCITS and its feeder UCITS must take appropriate measures to co-ordinate the timing of their net asset value calculation and publication, including the publication of dealing prices, in order to avoid market timing in their units, preventing arbitrage opportunities.

  2. (2)

    Where either the master UCITS or feeder UCITS is an EEA UCITS scheme managed by an EEA UCITS management company, the authorised fund manager must co-ordinate with that management company.

[Note: article 60(2) of the UCITS Directive]

Obligations of the feeder UCITS

COLL 11.3.7R
  1. (1)

    An authorised fund manager of a feeder UCITS must monitor effectively the activity of the master UCITS.

  2. (2)

    In performing this obligation, the authorised fund manager of the feeder UCITS may rely on information and documents received from the master UCITS, or where applicable, the master UCITS' management company, depositary or auditor, unless there is a reason for doubting their accuracy.

[Note: article 65(1) of the UCITS Directive]

Inducements

COLL 11.3.8R

Where, in connection with an investment in the units of the master UCITS, a distribution fee, commission or other monetary benefit is received by:

  1. (1)

    a feeder UCITS; or

  2. (2)

    an authorised fund manager of a feeder UCITS; or

  3. (3)

    any person acting on behalf of (1) or (2);

    that fee, commission or other monetary benefit must be paid into the scheme property of the feeder UCITS.

[Note: article 65(2) of the UCITS Directive]

Obligations of the master UCITS

COLL 11.3.9R

The authorised fund manager of a master UCITS must immediately inform the FCA of the identity of each feeder UCITS which invests in its units.

[Note: article 66(1) first sentence of the UCITS Directive]

COLL 11.3.10G

Where the FCA is informed in accordance with COLL 11.3.9 R that a feeder UCITS which is an EEA UCITS scheme has invested in units of the master UCITS, section 261A and section 261Z41 (Information for home state regulator) of the Act and regulation 29A (Information for home state regulator) of the OEIC Regulations require the FCA to inform the Home State regulator of the feeder UCITS immediately.

[Note: article 66(1) second sentence of the UCITS Directive]

COLL 11.3.11R
  1. (1)

    An authorised fund manager of a master UCITS must not impose any preliminary charge or redemption charge on the feeder UCITS for the issue, sale, redemption or cancellation of units in the master UCITS.

  2. (2)

    Where the authorised fund manager of a master UCITS requires any addition to or deduction from the consideration paid on the acquisition or disposal of units by a feeder UCITS which is, or is like, a dilution levy made in accordance with COLL 6.3.8 R (Dilution)3, it is to be treated as part of the price of the units and not as part of any charge.

[Note: article 66(2) of the UCITS Directive]

COLL 11.3.12R

An authorised fund manager of a master UCITS must ensure the timely availability of all information that is required in accordance with its obligations under the regulatory system, the general law and the instrument constituting the fund,2 to:

2
  1. (1)

    the feeder UCITS (or where applicable its management company);

  2. (2)

    the competent authority of the feeder UCITS;

  3. (3)

    the depositary of the feeder UCITS; and

  4. (4)

    the auditor of the feeder UCITS.

[Note: article 66(3) of the UCITS Directive]

Obligations to Unitholders of a master UCITS

COLL 11.3.13R

The authorised fund manager of a UCITS scheme that operates, or intends to operate, as a master UCITS must:

  1. (1)

    not enter into a master-feeder agreement or, where applicable, internal conduct of business rules in accordance with COLL 11.3.2R (2) unless it is satisfied on reasonable grounds that the arrangements with the feeder UCITS will not unfairly prejudice the interests of any other Unitholder or class of Unitholders in the master UCITS;

  2. (2)

    consider, in relation to:

    1. (a)

      each item of information it makes available to the feeder UCITS or its management company; and

    2. (b)

      each matter notified by the depositary of the master UCITS in accordance with COLL 11.4.3 R (Notification of irregularities);

      whether it would unfairly prejudice the interests of those Unitholders in the master UCITS other than the feeder UCITS by not making that information available to them, or by not informing them of that matter at the same time in an appropriate manner; and

  3. (3)

    in relation to any matter within (2)(b) where it does not notify other Unitholders at the same time:

    1. (a)

      record the grounds for determining that the interests of those Unitholders are not unfairly prejudiced by its decision; and

    2. (b)

      inform all Unitholders of that matter in an appropriate manner and timescale.

COLL 11.3.14G
  1. (1)

    The appropriate manner and timescale of notification referred to in COLL 11.3.13R (2) and (3)(b) will depend on the nature and significance of the matter. Consequently, the authorised fund manager will need to assess each matter individually.

  2. (2)

    An appropriate manner of notification could include sending an immediate notification to the Unitholders, or arranging for the information to be published on one or more websites where it is reasonable likely to be seen by investors.

  3. (3)

    Where COLL 11.3.13R (3)(b) applies, it might be appropriate to include the information in the next long report of the scheme.