A firm may communicate an invitation or inducement to participate in an unregulated collective investment scheme without breaching the restriction on promotion in section 238 of the Act if the promotion falls within an exemption in the table in (5) below.
Where the middle column in the table in (5) refers to promotion to a category of person, this means that the invitation or inducement:
is directed at recipients in a way that may reasonably be regarded as designed to reduce, so far as possible, the risk of participation in, acquisition or underwriting of the non-mainstream pooled investment by persons who are not in that category.
A firm may rely on more than one exemption in relation to the same invitation or inducement.
Title of Exemption
Promotion of a non-mainstream pooled investment which is:
1. Replacement products and rights issues
A person who already participates in, owns, holds rights to or interests in, a non-mainstream pooled investment that is being liquidated or wound down or which is undergoing a rights issue. [See Note 1.]
1. A non-mainstream pooled investment which is intended by the operator or manager to absorb or take over the assets of that non-mainstream pooled investment, or which is being offered by the operator or manager of that non-mainstream pooled investment as an alternative to cash on its liquidation;
2. Certified high net worth investors
[See COBS 4.12.5G (2).]
3. Enterprise and charitable funds
A person who is eligible to participate or invest in an arrangement constituted under:
(1) the Church Funds Investment Measure 1958;
(3) section 25 of the Charities Act (Northern Ireland) 1964;
(4) the Regulation on European Venture Capital Funds (‘EuVECAs’); or
(5) the Regulation on European Social Entrepreneurship Funds (‘EuSEFs’).
Any non-mainstream pooled investment which is such an arrangement.
4. Eligible employees
(1) an officer;
(2) an employee;
(3) a former officer or employee; or
(4) a member of the immediate family of any of (1) - (3), of an employer which is (or is in the same group as) the firm, or which has accepted responsibility for the activities of the firm in carrying out the designated investment business in question.
1. A non-mainstream pooled investment, the instrument constituting which:
A. restricts the property of the non-mainstream pooled investment, apart from cash and near cash, to:
(2) (in any case), any property, provided that the non-mainstream pooled investment takes the form of:
(ii) a trust which the firm reasonably believes not to contain any risk that any eligible employee may be liable to make any further payments (other than charges) for investment transactions earlier entered into, which the eligible employee was not aware of at the time he entered into them; and
2. Any non-mainstream pooled investment, provided that the participation of eligible employees is to facilitate their co-investment:
5. Members of the Society of Lloyd’s
6. Exempt persons
An exempt person (other than a person exempted only by section 39 of the Act (Exemption of appointed representatives)) if the financial promotion relates to a regulated activity in respect of which the person is exempt from the general prohibition.
7. Non-retail clients
[See Note 4.]
8. Certified sophisticated investors
An individual6 who meets the requirements set out in COBS 4.12.7 R, including an individual who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm'sclient6.
9. Self-certified sophisticated investors
An individual6 who meets the requirements set out in COBS 4.12.8 R, including an individual who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm'sclient6.
[See COBS 4.12.5G (2)]
10. Solicited advice
Any non-mainstream pooled investment, provided the communication meets all of the following requirements:
(c) the client has not previously received a financial promotion or any other communication from the firm (or from a person connected to the firm) which is intended to influence the client in relation to that non-mainstream pooled investment. [See Note 3.]
11. Excluded communications
12. Non-recognised UCITS
[See COBS 4.12.5G (2).]
13. US persons
A person who is classified as a United States person for tax purposes under United States legislation or who owns a US qualified retirement plan.
Any investment company registered and operated in the United States under the Investment Company Act 1940.
The following Notes explain certain words and phrases used in the table above.
Promotion of non-mainstream pooled investments to a category of person includes any nominee company acting for such a person.
- they are both in the same group; or
- one company is entitled, either alone or with another company in the same group, to exercise or control the exercise of a majority of the voting rights attributable to the share capital, which are exercisable in all circumstances at any general meeting of the other company or of its holding company.
A person is connected with a firm if it acts as an introducer or appointed representative for that firm or if it is any other person, regardless of authorisation status, who has a relevant business relationship with the firm.
In deciding whether a promotion is permitted under the rules of this section or under section 238 of the Act, firms may use the client categorisation regime that applies to business other than MiFID or equivalent third country business. (This is the case even if the firm will be carrying on a MiFID activity at the same time as or following the promotion.)
Related provisions for COBS 4.12.7
1 - 2 of 2 items.
(1) 3A firm which is asked to or proposes to assess and certify a retail client as a certified sophisticated investor (see article 23 of the Promotion of Collective Investment Schemes Order, article 50 of the Financial Promotions Order and COBS 4.12.7 R) should have regard to its duties under the Principles and the client's best interests rule. In particular, the firm should carry out that assessment with due skill, care and diligence, having regard to the generally complex nature
(1) 3A firm which wishes to rely on any of the self-certified sophisticated investor exemptions (see Part II of the Schedule to the Promotion of Collective Investment Schemes Order, Part II of Schedule 5 to the Financial Promotions Order and COBS 4.12.8 R) should have regard to its duties under the Principles and the client's best interests rule. In particular, the firm should consider whether the promotion of the non-mainstream pooled investment is in the interests of the client
(1) 3A firm which wishes to rely on one of the one-off promotion exemptions provided by the Promotion of Collective Investment Schemes or the Financial Promotion Order to promote a non-mainstream pooled investment to a retail client should have regard to its duties under the Principles and the client's best interests rule. In particular, the firm should consider whether the promotion of the non-mainstream pooled investment is in the interests of the client and whether it is fair
5A certified high net worth investor, a certified sophisticated investor or a self-certified sophisticated investor is an individual who has signed, within the period of twelve months ending with the day on which the communication is made, a statement in the terms set out in the applicable rule listed below, substituting “non-readily realisable securities” for “non-mainstream pooled investments”:(1) certified high net worth investor: COBS 4.12.6 R;(2) certified sophisticated investor: