EG 14.1 1Exercise of the powers in respect of Authorised Unit Trust Schemes (AUT) and authorised contractual schemes (ACS): sections 254 (Revocation of authorisation order otherwise than by consent), 257 (Directions), 258 (Applications to the court), 261U (Revocation of authorisation order otherwise than by consent), 261X (Directions) and 261Y (Applications to the court) of the Act

EG 14.1.1

1The FCA will consider all the relevant circumstances of each case and may take a number of factors into account when it decides whether to use these powers. The following list is not exhaustive; not all these factors may be relevant in a particular case and there may be other factors that are relevant.

  1. (1)

    The seriousness of the breach or likely breach by an authorised fund manager or depositary of a requirement imposed by or under the Act. The following may be relevant:

    1. (a)

      the extent to which the breach was deliberate or reckless;

    2. (b)

      the extent of loss, or risk of loss, caused to existing, past or potential participants in the AUT or ACS as a result of the breach;

    3. (c)

      whether the breach highlights serious or systemic weaknesses in the management or control of either the AUT, ACS or scheme property;

    4. (d)

      whether there are grounds for believing a breach is likely to be continued or repeated;

    5. (e)

      the length of time over which the breach happened; and

    6. (f)

      whether existing and/or past participants in the AUT or ACS have been misled in a material way, for example about the investment objectives or policy of the scheme or the level of investment risk.

  2. (2)

    The consequences of a failure to satisfy a requirement for the making of an order authorising an AUT or ACS. The FCA will expect the non-compliance to be resolved as soon as possible. Important factors are likely to be whether existing and/or past participants have suffered loss due to the non-compliance and whether remedial steps will be taken to satisfy all the requirements of the order.

  3. (3)

    Whether it is necessary to suspend the issue and redemption of units to protect the interests of existing or potential participants in the AUT or ACS. For example, this may be necessary if:

    1. (a)

      information suggests the current price of units under the AUT or ACS may not accurately reflect the value of scheme property; or

    2. (b)

      the scheme property cannot be valued accurately.

  4. (4)

    The effect on the interests of participants within the scheme of the use of any of its powers under sections 254, 257, 261U and 261X. However, the FCA will also consider the interests of past and potential participants.

  5. (5)

    Whether the FCA's concerns can be resolved by taking enforcement action against the authorised fund manager and/or depositary of the AUT or ACS. In some instances, the FCA may consider it appropriate to deal with a breach by an authorised fund manager or depositary by taking direct enforcement action against the authorised fund manager and/or depositary without using its powers under sections 254, 257, 258, 261U, 261X or 261Y. In other instances, the FCA may combine direct enforcement action against a depositary and/or authorised fund manager with the use of one or more of the powers under sections 254, 257, 258, 261U, 261X or 261Y.

  6. (6)

    Whether there is information to suggest that a depositary or authorised fund manager has knowingly or recklessly given the FCA false information. Giving false information is likely to cause very serious concerns, particularly if it shows there is a risk of loss to the scheme property or that participants' interests have been or may be affected in some other way.

  7. (7)

    The conduct of the authorised fund manager or depositary in relation to, and following the identification of, the issue, for example:

    1. (a)

      whether the authorised fund manager or depositary discovered the issue or problem affecting the AUT or ACS and brought it to the FCA's attention promptly;

    2. (b)

      the degree to which the authorised fund manager or depositary is willing to cooperate with the FCA's investigation and to take protective steps, for example by suspending the issue and redemption of units in the AUT or ACS;

    3. (c)

      whether the authorised fund manager or depositary has compensated past and existing participants who have suffered loss.

  8. (8)

    The compliance history of the depositary or authorised fund manager, including whether the FCA has previously taken disciplinary action against the depositary or authorised fund manager in relation to the AUT, ACS or any other collective investment scheme.

  9. (9)

    Whether there is information to suggest that the AUT or ACS is being used for criminal purposes and/or that the authorised fund manager or depositary is itself involved in financial crime.