Section 262 (Open-ended investment companies) of the Act provides for HM Treasury to make regulations governing the establishment and regulation of ICVCs. Rather than merely adopting various parts of UK company law, HM Treasury chose a 'stand alone' approach for its OEIC Regulations. The main features and practical effects of those regulations are outlined below.
The application must contain details of the ACD and depositary, and any other person proposed as a director of the ICVC, of the scheme itself, and of other persons to whom functions are to be delegated (e.g. the registrar and the investment adviser).
Application forms are available free of charge from the forms page at https://www.handbook.fca.org.uk/form.
The following items must be provided with the application:
if applicable, documents evidencing any guarantee arrangement.
The name of the ICVC must not be undesirable or misleading and must not be the same as that of an existing company. Regulation 19 includes a list of words and expressions that are prohibited from inclusion within the name of an ICVC and further guidance can be found in COLL 6.9 (Independence, names and UCITS business restrictions). As with an AUT, the aim of the ICVC must be reasonably capable of being achieved.
to determine a completed application, but aims to process 75% of applications for UCITS schemes within six weeks. If the FCA is satisfied with the application, an authorisation order is issued. The ICVC becomes incorporated when the authorisation order is issued.
The FCA's approval is required before the following changes can take place:
any alteration to the instrument of incorporation;
any significant alteration to the prospectus;
any reconstruction or amalgamation involving the ICVC;
any proposal to replace the depositary.
Any notice proposing to change the instrument of incorporation must be accompanied by a solicitor's certificate confirming that the change will not affect compliance of the instrument with Schedule 2 to the OEIC Regulations and COLL as they relate to the contents of the instrument.
The FCA has one month following written notification under Regulation 21 (The Authority's approval for certain changes in respect of a company) to consider whether or not to refuse the proposal. In the case of a notice under Regulation 22A (The Authority's approval for conversion of a feeder UCITS) the period available to the FCA is 15 working days.
The FCA has a power of intervention if it appears there is a breach of the Act or a rule of COLL, or if it is desirable to give a direction to protect the interests of investors in the ICVC. Directions can be given to cease the issue or redemption of units or any class of unit in the ICVC or for the winding up of the ICVC.
Certain provisions of the Companies Acts will apply to ICVCs, as they are incorporated bodies (especially, but not exclusively, regarding the holding of meetings).
Regulations 34 to 70 lay down the corporate code for ICVCs. The code contains provisions dealing with the operation of ICVCs and includes a number of general company law provisions, for example personal liability for contracts and deeds and punishment for fraudulent trading. The operation of an ICVC is also governed by COLL.
Regulations 11A, 11B and 33C implement a protected cell regime for sub-funds of umbrella ICVCs. As a result a Unitholder in a solvent sub-fund of an umbrella ICVC receives protection in respect of liabilities of and claims against: (i) the umbrella company; and (ii) any other sub-fund. COLL provides for:
disclosure requirements in respect of the limited recourse to the assets and liabilities of a particular sub-fund in the instrument constituting the scheme (see COLL 3.2.6 R (Table: contents of the instrument constituting the scheme) paragraph 22A) and the prospectus (see COLL 4.2.5 R (Table: contents of the prospectus) paragraph 2A);
limitations on cross sub-fund investment (see COLL 5.2 (General investment powers and limits for UCITS schemes) for UCITS schemes and COLL 5.6 (Investment powers and borrowing limits for non-UCITS retail schemes) for non-UCITS retail schemes); and
duties on the ACD to take appropriate action in relation to foreign law contracts which after prompt investigation appear to be inconsistent with the principle of limited recourse (see COLL 6.6.5A R (Duties of the ACD of an ICVC: umbrella schemes)).