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  1. Point in time
    2024-05-22

COLL 15.2 Eligibility to act as the authorised fund manager

Application

COLL 15.2.1 R

1This section applies to:

  1. (1)

    the authorised fund manager of an AUT, ACS or an ICVC;

  2. (2)

    any other director of an ICVC;

  3. (3)

    the depositary of an AUT, ACS or an ICVC; and

  4. (4)

    an ICVC,

    which is a long-term asset fund.

Authorised fund manager to be a full-scope UK AIFM

COLL 15.2.2 R
COLL 15.2.3 G
  1. (1)

    1To ensure an appropriate degree of consumer protection, only a full-scope UK AIFM is able to act as the authorised fund manager for an LTAF.

  2. (2)

    Full-scope UK AIFMs that manage authorised AIFs are subject to the requirements of both COLL and FUND, and must also comply with any other applicable provisions of the UK AIFM regime, including the AIFMD level 2 regulation and the AIFMD UK regulation. Small authorised UK AIFMs are subject to a more limited set of rules and requirements.

Competence and resources of the authorised fund manager

COLL 15.2.4 R
  1. (1)

    1The authorised fund manager of a long-term asset fund must, having regard to the investment objectives, policy and strategy of the LTAF:

    1. (a)

      possess the knowledge, skills and experience necessary to understand the activities of the LTAF and, in particular, the risks involved in those activities and the assets which the LTAF holds (or is to hold) in the scheme property; and

    2. (b)

      employ sufficient personnel with the skills, knowledge and expertise necessary for discharging the responsibilities allocated to them.

  2. (2)

    The authorised fund manager may not rely on a delegation or outsourcing arrangement to satisfy (1).

COLL 15.2.5 R

1The authorised fund manager of a long-term asset fund must at all times be able to demonstrate to the FCA that it complies with COLL 15.2.4R.

[Note: Article 22 of the AIFMD level 2 regulation.]

Appointment of external valuer or authorised fund manager with knowledge, skills and experience of valuing long-term assets

COLL 15.2.6 R
  1. (1)

    1The authorised fund manager of a long-term asset fund must appoint an external valuer to perform the valuation function for the LTAF, but this is subject to (2) and (5).

  2. (2)

    The authorised fund manager need not appoint an external valuer under (1) if:

    1. (a)

      the authorised fund manager possesses the knowledge, skills and experience necessary to be able to carry out a proper and independent valuation of the assets and types of assets which the long-term asset fund holds or is to hold (see FUND 3.9.4R); and

    2. (b)

      the depositary of the long-term asset fund, having made an assessment of the matters in (a), has determined that the authorised fund manager has the resources and procedures for carrying out a valuation of those assets in accordance with the applicable law, the instrument constituting the fund and FUND 3.9 (Valuation).

  3. (3)

    1The depositary must:

    1. (a)

      review its determination under (2)(b):

      1. (i)

        regularly, and in any event at least annually; and

      2. (ii)

        whenever the depositary becomes aware of any circumstances which could affect the determination;

    2. (b)

      for a period of six years, keep a written record of its determination under (2)(b) and any review under (3)(a), and the reasons for the assessment; and

    3. (c)

      provide the FCA with a copy of the written record on request.

  4. (4)

    Where the authorised fund manager performs the valuation function itself in accordance with (2), the authorised fund manager may appoint, as applicable:

    1. (a)

      for the purpose of valuing immovables in accordance with COLL 15.6.18R (Investment in property), an appropriate valuer;

    2. (b)

      for the purpose of valuing immovables in accordance with COLL 15.6.22R (Standing independent valuer and valuation), a standing independent valuer;

    3. (c)

      for the purpose of valuing an asset other than an immovable or property, a delegate appointed in accordance with FUND 3.10 (Delegation) and the relevant provisions of section 8 (Delegation of AIFM functions) of Chapter III of the AIFMD level 2 regulation.

  5. (5)

    The authorised fund manager need not appoint an external valuer under (1) if:

    1. (a)

      the scheme property of the long-term asset fund is constituted solely of units or shares in other collective investment schemes or AIFs; and

    2. (b)

      an external valuer performs the valuation function of each such collective investment scheme or AIF.

[Note: FUND 3.9 (Valuation), FUND 3.10 (Delegation), FUND 3.11.25R (Depositary functions: oversight), article 19(5) of AIFMD, and articles 67 to 74 (Valuation) and article 94(4) (Duties regarding the valuation of shares/units) of the AIFMD level 2 regulation.]

COLL 15.2.7 G

1Where an authorised fund manager appoints an external valuer under COLL 15.2.6R(1) certain additional requirements apply. For example, FUND 3.9.7R(3) (Performance of the valuation function) sets certain conditions relating to the independence of the external valuer, and the authorised fund manager will also need to be able to demonstrate the matters set out in FUND 3.9.9R (Appointment of external valuer). The AIFMD level 2 regulation contains further requirements that apply to the authorised fund manager where an external valuer is used. Certain requirements also apply to the external valuer and the depositary of an LTAF with an external valuer.

[Note: Articles 67 to 74 and article 94(4) of the AIFMD level 2 regulation.]

COLL 15.2.8 R

1The governing body of the authorised fund manager of a long-term asset fund must:

  1. (1)

    possess the collective knowledge, skills and experience to be able to understand the authorised fund manager’s activities, in particular, the main risks involved in those activities and the assets in which the long-term asset fund is invested;

  2. (2)

    have members that commit sufficient time to properly perform their functions in the authorised fund manager; and

  3. (3)

    have members that act with honesty, integrity and independence of mind.

[Note: Article 21 of the AIFMD level 2 regulation.]

COLL 15.2.9 G
  1. (1)

    1In order to establish whether an authorised fund manager of a long-term asset fund conducts its activities honestly, fairly and with due skills, the FCA is required to assess various matters, including those set out in articles 21 and 22 of the AIFMD level 2 regulation. In addition, under COLL 15.2.4R, the authorised fund manager must possess the knowledge, skills and experience necessary to understand the activities of the LTAF and, in particular, the risks involved in those activities and the assets which the LTAF holds (or is to hold) in the scheme property without relying on delegation arrangements to satisfy the requirement.

  2. (2)

    The authorised fund manager of a long-term asset fund is subject to various other requirements relating to its governance arrangements; its organisational structure; the skills, knowledge, expertise and competence of those it employs; and its obligation to act honestly, fairly and with due skill, care and diligence. See for example the rules in SYSC 4 (General organisational requirements), SYSC 5 (Employees, agents and other relevant persons) and COBS 2.1 (Acting honestly, fairly and professionally).

  3. (3)

    The authorised fund manager of a long-term asset fund should also note the organisational requirements set out in the AIFMD level 2 regulation; for example, article 57 (General requirements).