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COLL 14.1 Introduction

Application

COLL 14.1.1 R

1This chapter applies to:

  1. (1)

    an authorised fund manager of a charity authorised investment fund;

  2. (2)

    an ICVC that is a charity authorised investment fund;

  3. (3)

    the depositary of a charity authorised investment fund; and

  4. (4)

    the authorised fund manager and the depositary of an authorised fund that was previously registered as a charity with the Charity Commission.

Purpose

COLL 14.1.2 G

This chapter sets out modifications to the rules and guidance in this sourcebook for authorised fund managers and depositaries of charity authorised investment funds.

Types of charity authorised investment fund

COLL 14.2 Registration with the Charity Commission

COLL 14.2.1 R

1The authorised fund manager of a charity authorised investment fund must notify the FCA without undue delay when it receives its registration as a charity from the Charity Commission.

COLL 14.2.2 R

The authorised fund manager and the depositary of an authorised fund that was previously registered as a charity with the Charity Commission must notify the FCA without undue delay when it ceases to be registered as a charity with the Charity Commission.

COLL 14.3 Advisory committee

COLL 14.3.1 G

1A charity authorised investment fund may have an advisory committee which is independent from the authorised fund manager and the depositary if the advisory committee has a consultative function only.

COLL 14.3.2 R

If the charity authorised investment fund has an advisory committee the authorised fund manager must ensure that:

  1. (1)

    the instrument constituting the fund sets out the role and responsibilities of the advisory committee; and

  2. (2)

    the prospectus contains at least the following information about the advisory committee:

    1. (a)

      a description of its role and responsibilities;

    2. (b)

      its membership;

    3. (c)

      how its members are nominated and how their membership is terminated; and

    4. (d)

      how meetings are called and operated, including the quorum.

COLL 14.3.3 R

If the charity authorised investment fund has an advisory committee, the authorised fund manager must ensure that on the request of the committee, the scheme’s annual long report includes a statement prepared and approved by the committee.

COLL 14.3.4 G

The statement may address matters such as:

  1. (1)

    how the advisory committee is discharging its role and responsibilities as set out in the instrument constituting the fund;

  2. (2)

    any observations the committee may have on how the authorised fund manager has carried out its functions during the annual accounting period; and

  3. (3)

    any other matters the committee considers of interest to the Unit holders of the charity authorised investment fund.

COLL 14.3.5 R
  1. (1)

    The authorised fund manager or depositary must convene a general meeting of Unit holders if it receives a notice from the advisory committee of a charity authorised investment fund which:

    1. (a)

      states the objects of the meeting;

    2. (b)

      is dated; and

    3. (c)

      is signed by or on behalf of the advisory committee.

  2. (2)

    The authorised fund manager or the depositary must ensure the general meeting of the authorised fund takes place no later than eight weeks after receipt of the notice in (1).

COLL 14.3.6 R

The authorised fund manager and depositary of a charity authorised investment fund must keep records of any dealings with an advisory committee for at least five calendar years.

COLL 14.4 Income allocation and distribution

Income reserve account

COLL 14.4.1 R

1As an exception to COLL 6.8.3R(3) (Income allocation and distribution), a charity authorised investment fund is not required to transfer income to a distribution account where this is allowed by COLL 14.4.2R.

COLL 14.4.2 R
  1. (1)

    The authorised fund manager and the depositary of a charity authorised investment fund may establish an income reserve account for the scheme if this is provided for in:

    1. (a)

      the instrument constituting the fund; and

    2. (b)

      the prospectus.

  2. (2)
    1. (a)

      The authorised fund manager may instruct the depositary to transfer up to 15% of the income available for allocation or distribution on an annual income allocation date to the income reserve account.

    2. (b)

      Any income transferred under (a) remains part of the income property of the scheme but is not available for allocation or distribution.

    3. (c)

      The transfer in (a) must be for the sole purpose of avoiding fluctuations in the income available for allocation or distribution for the annual accounting period.

  3. (3)

    The authorised fund manager may instruct the depositary to transfer income in the income reserve account to the income account.

  4. (4)

    The authorised fund manager and the depositary must treat:

    1. (a)

      any income transferred from the income reserve account to the income account as income available for allocation or distribution at the next annual income allocation date; and

    2. (b)

      any interest or other amounts earned on the income in the income reserve account as income due to the scheme.

COLL 14.4.3 R

The authorised fund manager of a charity authorised investment fund with an income reserve account must not allow a payment that has been allocated to income property in the first instance to be made from the capital account if that payment could be met, in whole or in part, by transferring income from the income reserve account to the income account.

COLL 14.4.4 R
  1. (1)

    COLL 14.4.1R ceases to apply if the scheme commences winding up or termination in accordance with:

    1. (a)

      COLL 7.3.6R (Consequences of commencement of winding up or termination) for an ICVC; or

    2. (b)

      COLL 7.4.3R (When an AUT is to be wound up or a sub-fund terminated) for an AUT; or

    3. (c)

      COLL 7.4A.4R (When an ACS is to be wound up or a sub-fund of a co-ownership scheme terminated) for an ACS.

  2. (2)

    Any income in the income reserve account must be transferred to the income account as soon as practicable after the winding up or termination commences.

Total return approach

COLL 14.4.5 R
  1. (1)

    The authorised fund manager and depositary of a charity authorised investment fund may adopt a total return approach to the allocation or distribution of income where this is provided for in:

    1. (a)

      the instrument constituting the fund; and

    2. (b)

      the prospectus.

  2. (2)

    Under a total return approach the authorised fund manager may make transfers between the capital account and the income account in addition to those in COLL 6.8.3R(3A)(c).

  3. (3)

    The authorised fund manager and depositary must ensure that any transfer under a total return approach:

    1. (a)

      is solely for the purpose of meeting the pre-determined target amount disclosed in the prospectus in accordance with COLL 14.4.6R(1); and

    2. (b)

      is consistent with the explanation given in the prospectus in accordance with COLL 14.4.6R(2).

COLL 14.4.6 R

If the charity authorised investment fund has adopted a total return approach to the allocation or distribution of income, the authorised fund manager must ensure that the prospectus contains:

  1. (1)

    the pre-determined target of the income available for allocation or distribution in any annual accounting period; and

  2. (2)

    an explanation of how the target amount is consistent with the investment objective and policy and the distribution policy of the scheme.