Content Options

Content Options

Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

FUND 1.1 Application and purpose

FUND 1.1.1 R
  1. (1)

    1The application of this sourcebook is summarised at a high level in the following table. The detailed application is provided in each chapter.

    Type of firm

    Applicable chapters

    full-scope UK AIFM of an unauthorised AIF

    Chapters 1, 3 and 10

    full-scope UK AIFM of an authorised AIF

    Chapters 1, 3 and 10

    full-scope UK AIFM of an LTIF3

    2

    Chapters 1, 3, 4.2 and 102

    3

    3

    full-scope UK AIFM of a non-UK AIF3

    Chapters 1, 3 and 10

    small authorised UK AIFM of anauthorised AIF

    Chapter 1

    small authorised UK AIFM of an unauthorised AIF

    Chapter 1

    3

    3

    depositary of an AIF managed by a full-scope UK AIFM

    Chapters 1 and 3

    depositary of an LTIF3 managed by a full-scope UK AIFM2

    Chapters 1, 3 and 4.22

    3

    2

    3

    2
  2. (2)

    A residual CIS operator is not subject to the requirements in FUND.

  3. (3)

    FUND 10 will apply to a UK AIFM3which intends to 3market on a cross-border basis.

Compatibility with AIFMD and the AIFMD level 2 regulation

FUND 1.1.2 R

Handbook rules which conflict with either a rule which transposed3AIFMD or a provision in the AIFMD level 2 regulation are modified to the extent necessary to be compatible with those rules and provisions3.

Interaction between FUND and COLL

FUND 1.1.3 G

A full-scope UK AIFM of an authorised AIF is subject to the requirements in FUND and COLL. The effect of FUND 1.1.2 R is that if a rule in COLL which applies to a UK AIFM, an ICVC that is an AIF, or a UK depositary of an AIF conflicts with either a rule in FUND transposing AIFMD or the AIFMD level 2 regulation, the COLL rule is modified to the extent necessary to be compatible with the FUNDrule or the AIFMD level 2 regulation.

FUND 1.2 Structure of the Investment Funds sourcebook1

Structure of the Investment Funds sourcebook1

FUND 1.2.1 G

FUND is structured as follows:

  1. (1)

    FUND 1 sets out the broad application of FUND and describes the types of fund manager to whom FUND applies.

  2. (2)

    [deleted]2

  3. (3)

    FUND 3 sets out the baseline requirements that apply to all full-scope UK AIFM.2

    1
  4. (4)

    1FUND 4 sets out some requirements in relation to specialist AIF regimes, including the LTIF3 regimes.

  5. (10)

    FUND 10 sets out the requirements that apply to an AIFM that operates on a cross-border basis.

FUND 1.3 Types of fund manager

Types of fund manager within the scope of the UK AIFM and UCITS regimes

FUND 1.3.1 G

The UK regulatory regime provides that an undertaking which manages an AIF or a UCITS scheme2 in the UK2must fall into one or both of the following categories:

  1. (1)

    an AIFM; or

  2. (2)

    a UCITS management company.

Types of fund manager outside the scope of the UK AIFM and UCITS regimes

FUND 1.3.2 G

An authorised person that operates a collective investment scheme in the UK and falls entirely outside the scope of the UK AIFM or UCITS regimes2 will be a residual CIS operator.

AIFMs

FUND 1.3.3 G

An AIFM with a Part 4A permission of managing an AIF will be a UK AIFM and must fall into at least one of the following categories:

  1. (1)

    a full-scope UK AIFM;

  2. (2)

    a small authorised UK AIFM of an authorised AIF; and

  3. (3)

    a small authorised UK AIFM of an unauthorised AIF.

Full-scope UK AIFM

FUND 1.3.4 G
  1. (1)

    A full-scope UK AIFM is a UK AIFM which is authorised in accordance with the UK AIFM regime2 and, therefore, subject to its full requirements.

    2
  2. (2)

    A full-scope UK AIFM must be either:

    1. (a)

      an external AIFM; or

    2. (b)

      an internally managed AIF.

  3. (3)

    PERG 16, question 3.6 provides guidance on where an AIFM is acting as an external AIFM or an internally managed AIF.

  4. (4)

    A full-scope UK AIFM is permitted under FUND 1.4.3 R (3) to FUND 1.4.3 R (6) to provide certain additional services. Where it carries on those services it is also an AIFM investment firm and subject to additional requirements for those services.

Small AIFM

FUND 1.3.5 G
  1. (1)

    [deleted]2

  2. (2)

    In the UK, the regulatory regime provides that an AIFM which has assets under management below certain thresholds (“a small AIFM”),2 with a registered office in the UK may be either:

    1. (a)

      a small authorised UK AIFM; or

    2. (b)

      a small registered UK AIFM.

Small authorised UK AIFM

FUND 1.3.6 G
  1. (1)

    A small authorised UK AIFM will be carrying on the regulated activity of managing an AIF and will be subject to FCArules in respect of that activity. The application of FCArules to a small authorised UK AIFM will depend on whether it manages an authorised AIF or an unauthorised AIF. A small authorised UK AIFM which manages an authorised AIF will be subject to the requirements in COLL, but a small authorised UK AIFM of an unauthorised AIF will not be subject to COLL.

  2. (2)

    A small authorised UK AIFM may also opt in to the full requirements of the UK AIFM regime2, in which case it will become a full-scope UK AIFM.

Small registered UK AIFM

FUND 1.3.7 G

A small registered UK AIFM will not be carrying on a regulated activity in respect of its activities as an AIFM for an AIF for which it is entitled to be registered. Regulation 10 of the AIFMD UK regulation provides for three categories of small registered UK AIFM:

  1. (1)

    to fall within the first category the AIFM must:

    1. (a)

      have a registered office in the UK;

    2. (b)

      be a small AIFM;

    3. (c)

      be an internally managed AIF of an AIF which is a body corporate and is not a collective investment scheme; and

    4. (d)

      not be an external AIFM.

  2. (2)

    to fall within the second category the AIFM must:

    1. (a)

      have a registered office in the UK;

    2. (b)

      be a small AIFM; and

    3. (c)

      only manage AIFs which:

      1. (i)

        are collective investment schemes;

      2. (ii)

        are not authorised AIFs;

      3. (iii)

        holds the majority of their assets as land, directly or indirectly, through an entity which also meets the conditions in (ii) to (iv) of this sub-paragraph (but this condition does not apply during the first 180 days and the last 180 days of the period during which the undertaking is an AIF);

        1
      4. (iv)

        do not hold any specified investments other than:

        1. (aa)

          contracts of insurance which relate to land held by the AIF; and

        2. (bb)

          shares through which the AIF holds land; and1

          1
      5. (v)

        are1operated, or will be established and operated, by a person with a Part 4A permission to carry on the regulated activity of establishing, operating or winding up a collective investment scheme.

        1
  3. (3)

    to fall within the third category the AIFM must:

    1. (a)

      have a registered office in the UK;

    2. (b)

      be a small AIFM; and

    3. (c)

      have applied for registration as a SEF manager or RVECA manager3 and meet the conditions for such registration.

FUND 1.3.8 G

Under regulation 16 of the AIFMD UK regulation a small registered UK AIFM may apply to the FCA for a Part 4A permission to manage an AIF. In its application a small registered UK AIFM may apply to become:

  1. (1)

    a small authorised UK AIFM; or

  2. (2)

    a full-scope UK AIFM2.

FUND 1.4 AIFM business restrictions

Single AIFM

FUND 1.4.1 R

A full-scope UK AIFM must ensure that for each AIF it is appointed to manage, it is the only AIFM of that AIF, and is responsible for ensuring compliance with FUND, other rules in the Handbook which, when made, implemented AIFMD, the AIFMD level 2 regulation, the AIFMD UK regulation, and the AIFMD BTS and any other binding technical standards made in connection with the UK AIFM regime.1

[Note: article 5(1) of AIFMD]

Internally managed AIFs

FUND 1.4.2 R

An internally managed AIF which is a full-scope UK AIFM must not engage in any activities other than AIFM management functions in respect of that AIF.

[Note: article 6(3) of AIFMD]

External AIFMs

FUND 1.4.3 R

An external AIFM that is a full-scope UK AIFM must not engage in any activities other than:

  1. (1)

    AIFM management functions;

  2. (2)

    the management of UCITS, for which it must have permission to carry on the regulated activity of managing a UK UCITS1;

  3. (3)

    the management of portfolios of investments in accordance with mandates given by investors on a discretionary client-by-client basis, including portfolios of investments for occupational pension schemes, within the meaning of section 1(1) of the Pension Schemes Act 19931;

  4. (4)

    investment advice;

  5. (5)

    safe-keeping and administration in relation to shares or units of collective investment undertakings; and

  6. (6)

    reception and transmission of orders in relation to financial instruments.

    [Note: article 6(2) and (4) of AIFMD]

FUND 1.4.4 R

An external AIFM that is a full-scope UK AIFM must not provide:

  1. (1)

    only the services in FUND 1.4.3 R (3) to FUND 1.4.3 R (6); or

  2. (2)

    only the services in FUND 1.4.3 R (4) to FUND 1.4.3 R (6) without also having been authorised to provide the services in FUND 1.4.3 R (3); or

  3. (3)

    only the AIFM management functions in point 2 of Annex I of AIFMD; or

  4. (4)

    the AIFM investment management function in point 1(a) (portfolio management) of Annex I of AIFMD without also providing the AIFM investment management functions in point 1(b) (risk management) of Annex I of AIFMD or vice versa.

FUND 1.4.5 G

Where a full-scope UK AIFM carries on the activities in FUND 1.4.3R (3) and (4) in relation to assets which are not financial instruments and it is not carrying on the activities of managing investments or advising on investments, the FCA will deem the firm as having been authorised to carry on such activities by virtue of its authorisation as an AIFM. However, for such an AIFM to be able to carry on the activity in FUND 1.4.3R (4) in relation to assets which are financial instruments or the activities in FUND 1.4.3R (5) and (6) it must have a Part 4A permission to manage investments.

FUND 1.4.6 G

In the FCA's view an AIFM is permitted under FUND 1.4.3 R to carry out AIFM management functions for a collective investment undertaking which is neither an AIF nor a UCITS1.

AIFM management functions

FUND 1.4.7 G

AIFM management functions are set out in Annex I of AIFMD as follows:

  1. (1)

    the AIFM investment management functions of:

    1. (a)

      portfolio management; and

    2. (b)

      risk management; and

  2. (2)

    other functions that an AIFM may additionally perform in the course of the collective management of an AIF:

    1. (a)

      administration:

      1. (i)

        legal and fund management accounting services;

      2. (ii)

        customer enquiries;

      3. (iii)

        valuation and pricing (including tax returns);

      4. (iv)

        regulatory compliance monitoring;

      5. (v)

        maintenance of unit/share holder register;

      6. (vi)

        distribution of income;

      7. (vii)

        unit issues and redemptions;

      8. (viii)

        contract settlements (including certificate dispatch); and

      9. (ix)

        record keeping;

    2. (b)

      marketing; and

    3. (c)

      activities related to the assets of AIFs, namely:

      1. (i)

        services necessary to meet the fiduciary duties of the AIFM;

      2. (ii)

        facilities management;

      3. (iii)

        real estate administration activities;

      4. (iv)

        advice to undertakings on capital structure, industrial strategy and related matters;

      5. (v)

        advice and services relating to mergers and the purchase of undertakings; and

      6. (vi)

        other services connected to the management of the AIF and the companies and other assets in which it has invested.

[Note: Annex I of AIFMD]