COLL 4.3 Approvals and notifications

Application

COLL 4.3.1R01/04/2004

This section applies to an authorised fund manager.

COLL 4.3.2G01/04/2004

(1)
The diagram in COLL 4.3.3 G explains how an authorised fund manager should treat changes it is proposing to a scheme and provides an overview of the rules and guidance in this section.
(2)
Regulation 21 of the OEIC Regulations (The Authority's approval for certain changes in respect of a company) and section 251 of the Act (Alteration of schemes and changes of manager or trustee) require the prior approval of the FSA for certain proposed changes to an authorised fund, including a change of the authorised fund manager or depositary or a change to the instrument constituting the scheme . This should be kept in mind when considering any proposed change.

COLL 4.3.3G01/04/2004

This diagram belongs to COLL 4.3.2 G.

COLL 4.3.4R01/04/2004

(1)
The authorised fund manager, must, by way of an extraordinary resolution, obtain prior approval from the unitholders for any proposed change to the scheme which, in accordance with (2), is a fundamental change.
(2)
A fundamental change is a change or event which:
1. (a)
  changes the purposes or nature of the scheme; or
2. (b)
  may materially prejudice a unitholder; or
3. (c)
  alters the risk profile of the scheme; or
4. (d)
  introduces any new type of payment out of scheme property.

COLL 4.3.5G01/04/2004

(1)
Any change may be fundamental depending on its degree of materiality and effect on the scheme and its unitholders. Consequently an authorised fund manager will need to determine whether in each case a particular change is fundamental in nature or not.
(2)
For the purpose of COLL 4.3.4R (2)(a) to COLL 4.3.4R (2)(c) a fundamental change to a scheme is likely to include:
1. (a)
  any proposal for a scheme of arrangement referred to in COLL 7.6.2 R (Schemes of arrangement: requirements);
2. (b)
  a change in the investment policy to achieve capital growth from investment in one country rather than another;
3. (c)
  a change in the investment objective or policy to achieve capital growth through investment in fixed interest rather than equity investments;
4. (d)
  a change in the investment policy to allow the authorised fund to invest in derivatives as an investment strategy which increases its volatility;
5. (e)
  a change to the characteristics of a scheme to distribute income annually rather than monthly; or
6. (f)
  the introduction of limited redemption arrangements.

COLL 4.3.6R01/04/2004

(1)
The authorised fund manager must give prior written notice to unitholders, in respect of any proposed change to the operation of a scheme that, in accordance with (2), constitutes a significant change.
(2)
A significant change is a change or event which is not fundamental in accordance with COLL 4.3.4 R but which:
1. (a)
  affects a unitholder's ability to exercise his rights in relation to his investment; or
2. (b)
  would reasonably be expected to cause the unitholder to reconsider his participation in the scheme; or
3. (c)
  results in any increased payments out of the scheme property to an authorised fund manager or any other director of an ICVC or an associate of either; or
4. (d)
  materially increases other types of payment out of scheme property.
(3)
The notice period in (1) must be of a reasonable length (and must not be less than 60 days).

COLL 4.3.7G06/10/2006

(1)
Changes may be significant depending in each case on their degree of materiality and effect on the scheme and its unitholders. Consequently the authorised fund manager will need to determine whether in each case a particular change is significant in nature or not.
(2)
For the purpose of COLL 4.3.6 R a significant change is likely to include:
1. (a)
  a change in the method of price publication;
2. (b)
  a change in any operational policy such as dilution policy or allocation of payments policy;
  1
3. (c)
  an increase in the preliminary charge where units are purchased through a group savings plan; or1
  1
4. (d)
  1a change in the pricing arrangements for units of the scheme so as to cause a single-priced authorised fund to become a dual-priced authorised fund, or vice versa.
(3)
Where the directors of an ICVC elect to discontinue holding annual general meetings under paragraph 37A of the OEIC Regulations, they are required to give 60 days' written notice to shareholders. For the purpose of COLL 4.3.6 R this should be treated as a significant change to the operation of the scheme.2

COLL 4.3.8R01/04/2004

(1)
The authorised fund manager must inform unitholders in an appropriate manner and timescale of any notifiable changes that are reasonably likely to affect, or have affected, the operation of the scheme.
(2)
A notifiable change is a change or event, other than a fundamental change under COLL 4.3.4 R or a significant change under COLL 4.3.6 R, which a unitholder must be made aware of unless the authorised fund manager concludes that the change is insignificant.

COLL 4.3.9G01/04/2004

(1)
The circumstances causing a notifiable change may or may not be within the control of the authorised fund manager.
(2)
For the purpose of COLL 4.3.8 R (Notifiable changes) a notifiable change might include:
1. (a)
  a change of named investment manager where the authorised fund has been marketed on the basis of that individual's involvement;
2. (b)
  a significant political event which impacts on the authorised fund or its operation;
3. (c)
  a change to the time of the valuation point;
4. (d)
  the introduction of limited issue arrangements; or
5. (e)
  a change of the depositary or a change in the name of the authorised fund.
(3)
The appropriate manner and timescale of notification would depend on the nature of the change or event. Consequently the authorised fund manager will need to assess each change or event individually.
(4)
An appropriate manner of notification could include:
1. (a)
  sending an immediate notification to the unitholder;
2. (b)
  publishing the information on a website; or
3. (c)
  the information being included in the next long report of the scheme.