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COLL 8.5 Powers and responsibilities

Application

COLL 8.5.1RRP
  1. (1)

    Subject to (2) and (3), this section applies to an ICVC which is a qualified investor scheme and the authorised fund manager, any other directors of an ICVC and the depositary of a qualified investor scheme.16

  2. (2)

    COLL 8.5.9R(1) to (8) and (10) do not apply where the qualified investor scheme is a regulated money market fund.16

  3. (3)

    Where a qualified investor scheme is a regulated money market fund, COLL 8.5.2R and COLL 8.5.3R apply to the authorised fund manager and depositary of that scheme to the extent the provisions are consistent with the requirements of the Money Market Funds Regulation.16

Functions of the authorised fund manager

COLL 8.5.2RRP
  1. (1)

    The authorised fund manager must manage the scheme in accordance with:

    1. (a)

      the instrument constituting the fund;12

      12
    2. (b)

      the16 applicable rules13;

    3. (c)

      the most recently published prospectus; 16

    4. (d)

      for an ICVC, the OEIC Regulations; and16

    5. (e)

      where applicable, the Money Market Funds Regulation.16

  2. (2)

    The authorised fund manager must carry out such functions as are necessary to ensure compliance with the rules 13that impose obligations on the authorised fund manager or ICVC, as appropriate.

  3. (3)

    The authorised fund manager must:

    1. (a)

      make decisions as to the constituents of the scheme property in accordance with the investment objectives and policy of the scheme;

    2. (b)

      instruct the depositary how rights attaching to the ownership of scheme property are to be exercised;

    3. (c)

      take action immediately to rectify any breach of the pricing methodology set out in the prospectus, which must (unless the authorised fund manager determines on reasonable grounds that the breach is of minimal significance) extend to payment of money:

      1. (i)

        by the authorised fund manager to unitholders and former unitholders;

      2. (ii)

        by the ACD to the ICVC;

      3. (iii)

        by the ICVC to the ACD;

      4. (iv)

        by the authorised fund manager of the AUT or ACS10 to the depositary;10 or

        1010
      5. (v)

        by the depositary;10 (for the account of the AUT or ACS10) to the authorised fund manager;10

        1010
    4. (d)

      ensure where relevant that the ICVC complies with the relevant obligations imposed by, and when appropriate, exercises the relevant powers provided under, the OEIC Regulations;

    5. (e)

      maintain such records as are necessary to enable the authorised fund manager or the ICVC, as appropriate, to comply with and demonstrate compliance with the rules in this sourcebook and also in the case of an ICVC, the OEIC Regulations; and

    6. (f)

      maintain for a period of six years a daily record of the units held, acquired or disposed of by the authorised fund manager including the classes of such units, and of the balance of any acquisitions and disposals.

Duties of the authorised fund manager: investment and borrowing powers

COLL 8.5.3RRP
  1. (1)

    An authorised fund manager may give instructions to deal in the scheme property.

  2. (2)

    An authorised fund manager must avoid the scheme property being used or invested contrary to any provision in COLL 8.4 (Investment and borrowing powers).

  3. (3)

    An authorised fund manager must immediately on becoming aware of any breach of COLL 8.4 take action, at its own expense, to rectify that breach.

  4. (4)

    An authorised fund manager must take the action in (3) immediately, except in circumstances where doing so would not be in the best interests of unitholders, in which case the action must be taken as soon as such circumstances cease to apply.

  5. (5)

    An authorised fund manager must not postpone taking action in accordance with (3) unless the depositary has given its consent.

Duties of the ACD or the authorised contractual scheme manager of a co-ownership scheme: umbrella schemes

COLL 8.5.3ARRP

9Where reasonable grounds exist for an ACD of an ICVC, or an authorised contractual scheme manager of a co-ownership scheme10 which is an umbrella,10 to consider that a foreign law contract entered into by the ICVC or authorised contractual scheme manager on behalf of the co-ownership scheme10 may have become inconsistent with the principle of limited recourse stated in the instrument constituting the fund12 of the ICVC or co-ownership scheme10 (see COLL 8.2.6 R(2)(4A) and COLL 8.2.6 R(2)(4B)10),10 the ACD or authorised contractual scheme manager of the co-ownership scheme10 must:

1012
  1. (1)

    promptly investigate whether there is an inconsistency; and

  2. (2)

    if the inconsistency still appears to exist, take appropriate steps to remedy that inconsistency.

COLL 8.5.3BGRP

9In deciding what steps are appropriate to remedy the inconsistency, the ACD or authorised contractual scheme manager of the co-ownership scheme10 should have regard to the best interests of the unitholders. Appropriate steps to remedy the inconsistency may include:

  1. (1)

    where possible, renegotiating the foreign law contract in a way that remedies the inconsistency; or

  2. (2)

    causing the ICVC or the authorised contractual scheme manager on behalf of the co-ownership scheme10 to exit the foreign law contract.

Duties of the depositary

COLL 8.5.4RRP
  1. (1)

    The depositary is responsible for the safekeeping of all the scheme property.

  2. (2)

    The depositary must:

    1. (a)

      take all steps to ensure that transactions properly entered into for the account of the scheme are completed;

    2. (b)

      take all steps to ensure that instructions properly given by the authorised fund manager in respect of the exercise of rights related to scheme property are carried out;

    3. (c)

      ensure that any scheme property in registered form is as soon as reasonably practicable registered in its name or that of its nominee or delegate, as appropriate;

    4. (d)

      take into its custody or control all documents of title of the scheme property other than in respect of derivatives or forward transactions;

    5. (e)

      ensure that any resulting benefit of a derivatives or forward transaction is received by itself in respect of the scheme;

    6. (f)

      hold and deal with any income received in respect of the scheme property in accordance with COLL 8.5.15 R (Income);

    7. (g)

      take reasonable care to ensure that the scheme is managed by the authorised fund manager in accordance with:

      1. (i)

        COLL 8.4 (Investment and borrowing powers);

      2. (ii)

        COLL 8.5.9 R (Valuation, pricing and dealing); 16

      3. (iii)

        COLL 8.5.15 R (Income); and16

      4. (iv)

        where applicable, the provisions of the Money Market Funds Regulation relating to investment and borrowing powers, valuation, pricing, and dealing, and income.16

    8. (h)

      keep records so as to comply with the rules in this sourcebook and so as to demonstrate such compliance; and

    9. (i)

      be responsible for any other duties as set out in the instrument constituting the fund.12

      12
  3. (3)

    If a relevant ICVC ceases to have any directors, the depositary may act in accordance with COLL 6.5.6 R(ICVC without a director).

  4. (4)

    17This rule applies to the depositary of a scheme managed by a full-scope UK AIFM to the extent the provisions are consistent with the requirements of the AIFMD level 2 regulation.

17[Note: Articles 88 to 90 of the AIFMD level 2 regulation make provision relating to custody and safekeeping of scheme property. The AIFMD level 2 regulation does not apply to the depositary of a qualified investor scheme managed by a small authorised UK AIFM.]

Delegation

COLL 8.5.5RRP
  1. (1)

    A small authorised UK AIFM 13(or in addition any other director in the case of an ICVC managed by a small authorised UK AIFM)13 may delegate any function to any person.

  2. (2)
    1. (a)

      13The depositary of a scheme managed by a small authorised UK AIFM has the power to delegate any function to anyone, including in the case of an ICVC a director, to assist the depositary to perform its functions.

    2. (b)

      13However, it must not retain the services of the authorised fund manager or, in the case of an ICVC, any other director to perform any part of its functions of safe custody of the scheme property.

  3. (3)

    Subject to any provisions of the OEIC Regulations, the delegator in (1) and (2) will not be responsible under the rules in COLL for any act or omission of the delegate provided that the delegator can show:

    1. (a)

      that it was reasonable for the delegator to obtain assistance to perform the function in question;

    2. (b)

      that the delegate was and remained competent to provide that assistance; and

    3. (c)

      that the delegator took reasonable care to ensure that the assistance was provided in a competent manner.

Delegation and responsibility for regulatory obligations

COLL 8.5.6GRP

Directors of an ICVC, authorised fund managers and depositaries should also have regard to 6SYSC 8 5 (Outsourcing).6SYSC 8.1.6 R 5states that a firm remains fully responsible for discharging all of its obligations under the regulatory system if it outsources crucial or important operational functions or any relevant services and activities. 5

555

Conflicts of interest

COLL 8.5.7RRP
  1. (1)

    The authorised fund manager and the depositary must ensure that any transaction in respect of the scheme property undertaken with an affected person is on terms at least as favourable to the scheme as any comparable arrangement on normal commercial terms negotiated at arm's length with an independent third party.

  2. (2)

    Paragraph (1) is subject to any provision in the instrument constituting the fund12 and the prospectus imposing a prohibition in relation to any type of transaction.

    12

The register of Unitholders: AUTs or ACSs

COLL 8.5.8RRP
  1. (1)

    The authorised fund manager10 or the depositary of an AUT or ACS10 (in accordance with their responsibilities as set out in the instrument constituting the fund12) must maintain a register of unitholders as a document in accordance with this rule.

    101012
  2. (2)

    The register must contain:

    1. (a)

      the name and address of each Unitholder (for joint Unitholders no more than four need to be registered);

    2. (b)

      the number of units (including fractions of a unit) of each class held by each unitholder; and

    3. (c)

      the date on which the Unitholder was registered in the register for the units standing in his name.

  3. (3)

    The authorised fund manager10 or the depositary of an AUT or ACS10 (as appropriate) must take all reasonable steps and exercise all due diligence to ensure the register is kept complete and up to date.

    1010
  4. (4)

    Where relevant, the authorised fund manager10 must immediately notify the depositary of an AUT or ACS10 of any information he receives which may affect the accuracy of any entry in the register.

    1010
  5. (5)

    10In the case of a limited partnership scheme, unregistered units may be held by the authorised contractual scheme manager as the agent for the scheme provided the authorised contractual scheme manager is not entered in the register as the new unitholder.

Valuation, pricing and dealing

COLL 8.5.9RRP
  1. (1)

    The value of the scheme property is the net value of the scheme property after deducting any outstanding borrowings (including any capital outstanding on a mortgage of an immovable).

  2. (2)

    Any part of the scheme property which is not an investment (save an immovable) must be valued at fair value.

  3. (3)

    For the purposes of (2), any charges that were paid, or would be payable, on acquiring or disposing of the asset must be excluded from the value of that asset.

  4. (4)

    The value of the scheme property of an authorised fund must, save as otherwise provided in this section, be determined in accordance with the provisions of the

    12

    instrument constituting the fund12 and the prospectus, as appropriate.

  5. (4A)

    [deleted]16

    8
  6. (4B)

    [deleted]16

    8
  7. (5)

    The16 scheme must have a valuation point on each dealing day.

    88
  8. (5A)

    [deleted]16

    8
  9. (6)

    The authorised fund manager must prepare a valuation in accordance with (4) for each relevant type of unit at each relevant valuation point.

  10. (7)

    The price of a unit must be calculated on the basis of the valuation in (6) in a manner that is fair and reasonable as between unitholders.

  11. (8)

    [deleted]2

  12. (9)

    The authorised fund manager must publish in an appropriate manner the price2of any type of unit based on the valuation carried out in accordance with (6)2.

  13. (10)

    The authorised fund manager must also provide on request to any unitholder at any time an estimated price for any type of unit in the scheme.

  14. (11)

    The period of any initial offer and how it should end must be set out in the prospectus and must not be of unreasonable length.

Profits from dealing as principal

COLL 8.5.9-BR
  1. (1)

    14Where an authorised fund manager:

    1. (a)

      accepts instructions to sell and redeem units as principal; and

    2. (b)

      is able to execute a sale instruction by selling units it has redeemed at the same valuation point, without placing its own capital at risk,

    subject to (2), the AFM must not retain for its own account, or the account of any of its associates, the difference between the price at which a unit was redeemed (before deduction of any redemption charge) and the price at which the same unit was sold (after deduction of any preliminary charge). Any such difference must be allocated in a way that is fair to unitholders.

  2. (2)

    In calculating the profit arising under (1), the AFM may offset any loss it incurs at the same valuation point, calculated in accordance with (3), when dealing as principal in relation to:

    1. (a)

      a unit issued at that valuation point to fulfil a sale instruction that cannot be matched against any redeemed unit or any other unit of that class held by the manager as principal; and

    2. (b)

      a unit redeemed and cancelled at that valuation point.

  3. (3)

    The amount of the loss referred to in (2) is:

    1. (a)

      for units issued in accordance with (2)(a), the difference between the issue price of a unit and the sale price of that unit, less any preliminary charge;

    2. (b)

      for units cancelled in accordance with (2)(b), the difference between the cancellation price of a unit and the redemption price of that unit, before any redemption charge is applied.

  4. (4)

    Where any loss arising under (2) is greater than any profit arising under (1), that loss cannot be offset against any profit arising at a subsequent valuation point.

  5. (5)

    This rule applies to the redemption and sale of units of different classes at the same valuation point, if those classes are treated as one for the purpose of COLL 8.5.10AR.

COLL 8.5.9-AG
  1. (1)

    14The authorised fund manager may commit its own capital to hold units for dealing as principal and may seek to profit from gains in the value of the units it holds, when it issues or redeems units at one valuation point then sells or cancels them at a later valuation point. However, it should not profit from situations in which it is not exposed to an equal risk of loss if the units fall in value, or from the ability to match simultaneous sales and redemptions at different prices at no risk to its own capital.

  2. (2)

    The AFM may allocate any amount arising under COLL 8.5.9-BR(1) in the interests of investors by paying it into scheme property for the benefit of all unitholders. Alternatively, the AFM may redistribute it individually among the transacting investors.

  3. (3)

    Where the AFM intends to allocate a payment to scheme property, it should determine if the amount (when added to any other amounts of the same kind relating to that class of units) would, if taken into account in the scheme’s valuation, affect the accuracy of the unit prices to four significant figures. If so, and subject to (4) below, the amount should be accrued in each subsequent valuation of the scheme until the payment is transferred. Such payments into scheme property should be made regularly and no less frequently than payments for the AFM’s management charge are transferred out of scheme property.

  4. (4)

    The calculation to be performed under COLL 8.5.9-BR should be carried out in relation to each valuation point of the scheme on a timely basis. Where it is not practical to do this before unit prices are calculated and published, the AFM should ensure that the accrual represents a reasonable estimate of the total payment it intends to make to scheme property.

COLL 8.5.9AR

[deleted]16

8
COLL 8.5.9BG

[deleted]16

8

Issues and cancellations of units

COLL 8.5.10RRP
  1. (1)

    The authorised fund manager must:

    1. (a)

      ensure that at each valuation point there are at least as many units in issue of any class as there are units registered to unitholders of that class; and

    2. (b)

      not do, or omit anything that would, or might confer on itself a benefit or advantage at the expense of a unitholder or potential unitholder.

  2. (2)

    For the purposes of (1) the authorised fund manager may take into account sales and redemptions after the valuation point, provided it has systems and controls to ensure compliance with (1).

  3. (3)

    The authorised fund manager must arrange for the issue and cancellation of units and pay money or assets to or from the depositary for the account of the scheme as required by the prospectus, and, where applicable, in accordance with the Money Market Funds Regulation.16

  4. (4)

    The authorised fund manager must keep a record of issues and cancellations made under this rule.

  5. (5)

    The authorised fund manager may arrange for the ICVC, or instruct the depositary of the AUT or ACS10 to issue or cancel units where the authorised fund manager would otherwise be obliged to sell or redeem the units in the manner set out in the prospectus.

    10
  6. (6)

    Where the authorised fund manager has not complied with (1), it must correct the error as soon as possible and must reimburse the scheme any costs it may have incurred in correcting the position, subject to any reasonable minimum level for such reimbursement as set out in the prospectus.

Issue and cancellation of units in multiple classes

COLL 8.5.10ARRP

3If a qualified investor scheme has two or more classes of unit in issue, the authorised fund manager may treat any or all of those classes as one for the purpose of determining the number of units to be issued or cancelled by reference to a particular valuation point, if:

  1. (1)

    the depositary gives its prior agreement; and

  2. (2)

    the relevant classes:

    1. (a)

      have the same entitlement to participate in, and the same liability for charges, expenses and other payments that may be recovered from, the scheme property; or

    2. (b)

      differ only as to whether income is distributed or accumulated by periodic credit to capital, provided the price of the units in each class is calculated by reference to undivided shares in the scheme property.

Transfer of units in an ACS

COLL 8.5.10BRRP
  1. (1)

    10Where transfer of units in an ACS is allowed by its contractual scheme deed and prospectus in accordance with the conditions specified by FCA rules, the authorised contractual scheme manager of the ACS must take reasonable care to ensure that units are only transferred if the conditions specified by the FCA under (2) are met.

  2. (2)

    The FCA specifies that for the purposes of (1), and for the purposes of COLL 8.2.6R(2)(6)(a)(vii)(B) (Table: contents of the instrument constituting the fund12) and COLL 8.3.4R(5B)(2) (Table: contents of qualified investor scheme prospectus), units in the ACS may only be transferred to a person :

    1211
    1. (a)

      who 11is a:

      1. (i)

        professional ACS investor; or

      2. (ii)

        large ACS investor; or

      3. (iii)

        person who already holds units in the scheme; and

    2. (b)

      to whom units in a qualified investor scheme may be promoted under COBS 4.12.4 R.11

      11
COLL 8.5.10CGRP

10The FCA recognises that some transfers of units arise by operation of law (such as upon death or bankruptcy of the unitholder, or otherwise) and are accordingly outside the control of the authorised contractual scheme manager. The authorised contractual scheme manager is expected to comply with its responsibilities under COLL 8.5.10E R (Redemption of ACS units in a QIS by an authorised contractual scheme manager) in those cases by redeeming those units.

Responsibilities of the authorised contractual scheme manager in relation to ACS units

COLL 8.5.10DRRP
  1. (1)

    10The authorised contractual scheme manager of an authorised contractual scheme which is a qualified investor scheme must take reasonable care to ensure that rights or interests in units in the scheme are not acquired by any person from or through an intermediate Unitholder in a qualified investor scheme, unless:

    11
    1. (a)

      that person 11is a:

      1. (i)

        professional ACS investor; or

      2. (ii)

        large ACS investor; or

      3. (iii)

        person who already holds units in the scheme; and

    2. (b)

      units in a qualified investor scheme may be promoted to that person under COBS 4.12.4 R.11

      11
  2. (2)

    The authorised contractual scheme manager will be regarded as complying with (1) to the extent that it can show that it was reasonable for it to rely on relevant information provided by another person.

Redemption of ACS units in a QIS by an authorised contractual scheme manager

COLL 8.5.10ERRP

10The authorised contractual scheme manager of a qualified investor scheme which is an ACS must redeem units in the scheme as soon as practicable after becoming aware that those units are vested in anyone (whether as a result of subscription or transfer of units) other than a person meeting the criteria in COLL 8 Annex 2(1) and (2) (ACS Qualified Investor Schemes: eligible investors).

Sale and redemption

COLL 8.5.11RRP
  1. (1)

    The authorised fund manager must, at all times during the dealing day, be willing to effect the sale of units to any eligible investor (within any conditions in the instrument constituting the fund12 and the prospectus which must be fair and reasonable as between all unitholders and potential unitholders) for whom the authorised fund manager does not have reasonable grounds to refuse such sale.

    12
  2. (2)

    The authorised fund manager must, at all times during the dealing day, effect a redemption on the request of any eligible unitholder (within any conditions in the instrument constituting the fund12 and the prospectus) of units owned by that unitholder, unless the authorised fund manager has reasonable grounds to refuse such redemption.

    12
  3. (3)

    On agreeing to a redemption of units within (2), the authorised fund manager must pay the full proceeds of the redemption to the unitholder within any reasonable period specified in the instrument constituting the fund12 or the prospectus, unless it has reasonable grounds for withholding payment.

    12
  4. (4)

    Payment of proceeds on redemption must be made by the authorised fund manager in any manner provided for in the prospectus which must be fair and reasonable as between redeeming unitholders and continuing unitholders.

Limited redemption periods

COLL 8.5.12GRP

The maximum period between dealing days for a qualified investor scheme will depend on the reasonable expectations of the target investor group and the particular investment objectives and policy of the scheme. For instance, for a scheme aiming to invest in large property developments, the expectation would be that it is reasonable to have a much longer period between dealing days for liquidity reasons than for a scheme investing predominantly in listed securities.

Property Authorised Investment Funds

COLL 8.5.12ARRP
  1. (1)

    4The authorised fund manager of a property authorised investment fund must take reasonable steps to ensure that no body corporate holds more than 10% of the net asset value of that fund (the "maximum allowable").

  2. (1A)

    17For the purposes of (1), a body corporate shall not be treated as holding more than the maximum allowable to the extent that:

    1. (a)

      the body corporate holds units in a unit trust scheme which holds shares in the property authorised investment fund; and

    2. (b)

      in their capacity as trustees of the unit trust scheme, the trustees are chargeable in the United Kingdom either to income tax or to corporation tax.

  3. (2)

    Where the authorised fund manager of a property authorised investment fund becomes aware that a body corporate holds more than the maximum allowable, he must:

    1. (a)

      notify the body corporate of that event;

    2. (b)

      not pay any income distribution to the body corporate; and

    3. (c)

      redeem or cancel the body corporate's holding down to the maximum allowable within a reasonable time-frame.

  4. (3)

    For the purpose of (2)(c), a reasonable time-frame means the time-frame which the authorised fund manager reasonably considers to be appropriate having regard to the interests of the unitholders as a whole.

COLL 8.5.12BGRP

4Reasonable steps to monitor the maximum allowable include:

  1. (1)

    regularly reviewing the register; and

  2. (2)

    taking reasonable steps to ensure that unitholders are kept informed of the requirement that no body corporate may hold more than 10% of the net asset value of a property authorised investment fund.

Payments

COLL 8.5.13RRP
  1. (1)

    An ICVC must not incur any expense in respect of the use of any movable or immovable property unless the scheme is dedicated to such investment or such property is necessary for the direct pursuit of its business.

  2. (2)

    Payments out of the scheme property may be made from capital property rather than from income, provided the basis for this is set out in the prospectus.

Exemption from liability to account for profits

COLL 8.5.14GRP

Except as provided in COLL 8.5.9-BR, an14 affected person is not liable to account to another affected person or to the unitholders of the scheme for any profits or benefits it makes or receives that are made or derived from or in connection with:

  1. (1)

    dealings in the units of a scheme; or

  2. (2)

    any transaction in scheme property; or

  3. (3)

    the supply of services to the scheme;

where disclosure of the non-accountability has been made in the prospectus of the scheme.

Income

COLL 8.5.15RRP
  1. (1)

    A qualified investor scheme must have:

    1. (a)

      an annual accounting period;

    2. (b)

      a half-yearly accounting period; and

    3. (c)

      an accounting reference date;

    the details of which must be set out in the prospectus.

  2. (1A)

    COLL 6.8.2 R (2) to COLL 6.8.2 R (7) (Accounting periods) also apply to the half-yearly accounting period and annual accounting period of a qualified investor scheme.1

  3. (2)

    A qualified investor scheme must have an annual income allocation date, which must be within four months of the accounting reference date.

  4. (3)

    A qualified investor scheme may have an interim income allocation date and interim accounting periods and if it does, the interim income allocation date must be within a reasonable period of the end of the relevant interim accounting period as set out in the prospectus.

  5. (3A)

    COLL 6.8.3 R (3) (Income allocation and distribution) to COLL 6.8.3A G (Allocation of income to difference classes of unit) also apply to a qualified investor scheme.

  6. (4)

    [deleted]7

    7
  7. (5)

    [deleted]7

    1. (a)

      [deleted]7

    2. (b)

      [deleted]7

    3. (c)

      [deleted]7

Application of assessment of value and independent director rules

COLL 8.5.16R

14COLL 8.5.17R to COLL 8.5.22R15 apply to an authorised fund manager (other than one which is managing an authorised fund under a temporary permission18) of an AUT, ACS or ICVC.

Assessment of value

COLL 8.5.17R
  1. (1)

    14An authorised fund manager must conduct an assessment at least annually for each scheme it manages of whether the payments out of scheme property set out in the prospectus are justified in the context of the overall value delivered to unitholders.

  2. (2)

    In carrying out the assessment required by (1), the AFM must, separately for each class of units in a scheme, consider at least the matters set out in COLL 6.6.21R (Table: minimum considerations – assessment of value).

COLL 8.5.18G

14The guidance in COLL 6.6.22G applies to interpreting the requirements of COLL 6.6.21R as applied by COLL 8.5.17R.

COLL 8.5.19E

14Failure by an AFM to take sufficient steps to address any instance where a scheme’s charges are not justified in the context of the overall value delivered to unitholders may be relied on as tending to establish contravention of COLL 6.6A.2R, COBS 2.1.1R or COBS 2.1.4R as applicable.

Independent directors

COLL 8.5.20R
  1. (1)

    14An authorised fund manager must ensure that at least one quarter of the members of its governing body are independent natural persons. If the AFM’s governing body comprises fewer than eight members, the AFM must instead ensure that at least two of its members are independent natural persons.

  2. (2)

    The authorised fund manager, in appointing an independent member of its governing body, must determine whether such a member is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, that member’s judgement.

  3. (3)

    The authorised fund manager must take reasonable steps to ensure that independent members appointed to its governing body have sufficient expertise and experience to be able to make judgements on whether the AFM is managing each scheme in the best interests of unitholders.

  4. (4)
    1. (a)

      Independent members of an AFM’s governing body must be appointed for terms of no longer than five years, with a cumulative maximum duration of ten years.

    2. (b)

      If an independent member is appointed to more than one governing body within an AFM’s group, the cumulative maximum duration of ten years referred to in (a) is calculated by adding the durations of each separate appointment and discounting periods during which appointments overlapped to avoid double counting.

    3. (c)

      In relation to a person who served as an independent director of an AFM’s governing body before 1 October 2019, the five year term(s) and cumulative maximum duration of ten years run from that date.

  5. (5)

    Independent members are not eligible for reappointment to an AFM’s governing body until five years have elapsed from the end of the ten year period referred to in (4).

  6. (6)

    The terms of employment on which independent members are appointed must be such as to secure their independence.

COLL 8.5.21G

14The guidance in COLL 6.6.26G applies to interpreting the requirement for independence in COLL 8.5.20R.

Allocation of responsibility for compliance to an approved person

COLL 8.5.22R
  1. (1)

    14An AFM must allocate responsibility for ensuring its compliance with COLL 8.5.17R, COLL 8.5.20R, and COBS 2.1.4R to an approved person.

  2. (2)

    Where the chair of the AFM’s governing body is an approved person, the AFM must allocate the responsibility set out in (1) to that person.