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COLL 5.1 Introduction

Application

COLL 5.1.1R

  1. (1)

    Subject to 1(A),3 COLL 5.1 to COLL 5.5 apply to the authorised fund manager and the depositary of an authorised fund, and to an ICVC, which is or ever has been a UCITS scheme.

  2. (1A)

    The only sections of COLL 5 that apply to the authorised fund manager and the depositary of a feeder UCITS, and to an ICVC which is a feeder UCITS, are COLL 5.3 and COLL 5.8, although particular rules in COLL 5.1, COLL 5.2 and COLL 5.5 are incorporated by reference.3

  3. (2)

    Subject to 2(A),1 COLL 5.1, COLL 5.4 and COLL 5.6 apply to the authorised fund manager and depositary of an authorised fund, and to an ICVC, which is a non-UCITS retail scheme.

  4. (2A)

    COLL 5.1, COLL 5.4 and COLL 5.7 apply to the authorised fund manager and the depositary of an authorised fund and to an ICVC which is a non-UCITS retail scheme operating as a fund of alternative investment funds.

    1
  5. (3)

    Paragraphs1 (2) and (2A) cease1 to apply if a non-UCITS retail scheme converts to be authorised as a UCITS scheme.

    11
  6. (4)

    COLL 5.9 applies to the authorised fund manager and the depositary of an authorised fund which is a UCITS scheme or a non-UCITS retail scheme operating as a money market fund or a short-term money market fund.2

Purpose

COLL 5.1.2G

  1. (1)

    This chapter helps in achieving the statutory objective of protecting consumers by laying down minimum standards for the investments that may be held by an authorised fund. In particular:

    1. (a)

      the proportion of transferable securities and derivatives that may be held by an authorised fund is restricted if those transferable securities and derivatives are not listed on an eligible market; the intention of this is to restrict investment in transferable securities or derivatives that cannot be accurately valued and readily disposed of; and

    2. (b)

      authorised funds are required to comply with a number of investment rules that require the spreading of risk.

  2. (2)

    Table 5.1.4G gives an overview of the permissible investments and maximum investment limits for UCITS schemes and non-UCITS retail schemes.

Treatment of obligations

COLL 5.1.3R

  1. (1)

    Where a rule in this chapter allows a transaction to be entered into or an investment to be retained only if possible obligations arising out of the transaction or out of the retention would not cause the breach of any limits in this chapter, it must be assumed that the maximum possible liability of the authorised fund under any other of those rules has also to be provided for.

  2. (2)

    Where a rule in this chapter permits a transaction to be entered into or an investment to be retained only if that transaction, or the retention, or other similar transactions, are covered:

    1. (a)

      it must be assumed that in applying any of those rules, the authorised fund must also simultaneously satisfy any other obligation relating to cover; and

    2. (b)

      no element of cover must be used more than once.

Indicative overview of investment and borrowing powers

COLL 5.1.4G

This table belongs to COLL 5.1.2G (2).

Scheme investments and investment techniques

Limits for UCITS schemes

Limits for non-UCITS retail schemes

Permissible investment

Maximum limit

Permissible investment

Maximum limit

Approved securities

Yes

None

Yes

None

Transferable securities that are not approved securities

Yes

10%

Yes

20%

Government and public securities

Yes

None

Yes

None

Regulated schemes other than qualified investor schemes1

Yes

None

Yes

None

Unregulated schemes and qualified investor schemes1

No

N/A

Yes

20%(C)1

Warrants

Yes

None

Yes

None

Investment trusts

Yes

None

Yes

None

Deposits

Yes

None

Yes

None

Derivatives

Yes

None

Yes

None

Immovables (i.e real property)

No

N/A

Yes

None

Gold

No

N/A

Yes

10%

Hedging

Yes

None

Yes

None

Stock lending

Yes

None

Yes

None

Underwriting

Yes

None

Yes

None

Borrowing

Yes

10% (T)

Yes

10%

Cash and near cash

Yes

None

Yes

None

Note:

Meaning of terms used:

A percentage

an upper limit (though there may be limits of other kinds).

"(T)"

temporary only- see COLL 5.5.4R(4)

"N/A"

Not applicable1

1“(C)”

In the case of a non-UCITS retail scheme operating as a FAIF there is no maximum limit - see COLL 5.7.7 R.