1This section applies to:
The function referred to in (1) must be hierarchically and functionally independent from operating units, except where such independence would not be appropriate and proportionate in view of the nature, scale and complexity of the authorised fund manager’s or UK UCITS management company’s business and of each scheme it manages.
appropriate safeguards against conflicts of interest have been adopted so as to allow an independent performance of risk management activities; and
its risk management process satisfies the requirements of COLL 6.12.3 R (Risk management process) or, where appropriate, the relevant UCITS Home State measures implementing article 51 of the UCITS Directive.
[Note: articles 12(1) and 12(2) of the UCITS implementing Directive]
Where the risk management function required under COLL 6.11.2 R (1) is not hierarchically and functionally independent, the authorised fund manager or UK UCITS management company should nevertheless be able to demonstrate that its risk management process satisfies the requirements of COLL 6.12.3 R (Risk management process) and that, in particular, the appropriate safeguards have been adopted.
[Note: article 12(2) third paragraph and recital (12) of the UCITS implementing Directive]
The permanent risk management function must:
implement the risk management policy and procedures;
ensure compliance with the risk limit system, including statutory limits concerning global exposure and counterparty risk, as required by COLL 5.2 (General investment powers and limits for UCITS schemes) and COLL 5.3 (Derivative exposure) or, where appropriate, the relevant UCITS Home State measures implementing articles 41, 42 and 43 of the UCITS implementing Directive;
the adequacy and effectiveness of the risk management process, indicating in particular whether appropriate remedial measures have been taken in the event of any deficiencies;
provide regular reports to the senior personnel outlining the current level of risk incurred by the relevant scheme and any actual or foreseeable breaches to their limits, so as to ensure that prompt and appropriate remedial action can be taken; and
review and support, where appropriate, the arrangements for the valuation of OTC derivatives, as referred to in COLL 5.2.23 R (OTC transactions in derivatives), COLL 5.2.23C R (Valuation of OTC derivatives) and in this rule or, where appropriate, the relevant UCITS Home State measures implementing article 44 of the UCITS implementing Directive.
The permanent risk management function must have the authority and access to all relevant information necessary to fulfil the duties set out in (1).
[Note: articles 12(3), 12(4) and 44(3) of the UCITS implementing Directive]