Collective Investment Schemes On-line Handbook

Content

1. Introduction

The Collective Investment Scheme handbook is produced to provide licenceholders (those who are licensed by the Financial Supervision Commission to conduct Collective Investment Scheme business in or from the Isle of Man), potential licenceholders and other interested parties with easy access to the legislation and guidance relating to Collective Investment Scheme activities in or from the Isle of Man.

The handbook is only produced in an on-line format. However, copies of all statutory documents (original, un-amended legislation) may be obtained from the Tynwald Library, by quoting the legislative number at the top of each document (e.g. SD01/01).

Please find links below to the Financial Supervision Act 1988, the Investment Business Act 1991, secondary legislation (regulations and regulatory codes) and relevant pieces of guidance.

Other legislation may be found in handbooks relating to other licensable activities: Banks, Building Societies, Fiduciaries (Corporate Service Providers and Trust Service Providers), Investment Businesses (including Stockbrokers).

In case of any query, please contact the Funds and Investment Services team at the Commission, on +44 (0)1624 689328.

2. Brief synopsis of schemes under the Financial Supervision Act 1988

2.1 Statutory Basis

Part 1 of the Financial Supervision Act 1988 ("the FSA") sets out the statutory framework in the Isle of Man for the promotion and regulation of collective investment schemes.

The Definition of Collective Investment Scheme is set out at section 30 of the FSA.

2.2 Promotion of Schemes

Section 1 of the FSA prohibits advertising, or advising or procuring investment in a collective investment scheme unless it is an authorised collective investment scheme or a foreign collective investment scheme recognised under the FSA. For Guidance on promotion of schemes please refer to Guidance Note – Promotion of Authorised Schemes and Guidance Note - Promotion of Full International Schemes, Specialist Funds, Qualifying Funds, Experienced Investor Fund and Professional Investor Funds.

Types of Scheme

2.3 Authorised Schemes

Authorised Schemes can be sold to the general public on the Isle of Man, must be specifically authorised by the FSC under section 3 of the FSA and are subject to prescriptive regulations. The Financial Supervision (Authorised Collective Investment Schemes) Regulations 2005 set out the detailed regulatory framework which is appropriate to this type of scheme. You may also like to refer to the Authorised Schemes Key Features document.

2.4 International Schemes

An international collective investment scheme is defined in section 11 of the FSA as "every collective investment scheme, not being an authorised scheme or a recognised scheme (see para 1.6) which is established in the Island". Please refer to the Guidance Note on International Schemes – Meaning of Established in the Island for further details.

The Commission's approach to the regulation of full international schemes differs significantly from the regulation of authorised schemes. The Commission has sought to avoid comprehensive, prescriptive regulation, leaving managers free to innovate and develop new products, whilst at the same time upholding investor protection by requiring strict disclosure of all material matters to potential investors.

Full International Schemes are not authorised or approved by the Commission. The Financial Supervision (International Collective Investment Schemes) Regulations 1990 set out the regulatory framework which is appropriate to this type of scheme. You may also like to refer to the Full International Schemes Key Features document.
Specialist Funds are not authorised or approved by the FSC. Specialist funds, which have a minimum investment level of $100,000, are aimed at institutional and specialist investors who accept the higher levels of risk which can attach to investment in this type of fund. The Financial Supervision (Specialist Fund) (Exemption) Order 2007 exempts the scheme from certain provisions of S11 of the FSA and sets out the regulatory framework which is appropriate to this type of scheme including the disclosure of material information, risk warnings and investor certifications. You may also like to refer to the Specialist Funds Key Features document.
Qualifying Funds are not authorised or approved by the FSC. Qualifying funds, are aimed at non retail qualifying investors who accept the higher levels of risk which can attach to investment in this type of fund. The Financial Supervision (Qualifying Fund) (Exemption) Order 2007 exempts the scheme from certain provisions of S11 of the FSA and sets out the regulatory framework which is appropriate to this type of scheme including the disclosure of material information, risk warnings and investor certifications. You may also like to refer to the Qualifying Funds Key Features document.
Experienced Investor Funds are not authorised or approved by the FSC. Experience Investor funds, are aimed at non retail investors who accept the higher levels of risk which can attach to investment in this type of fund. The Financial Supervision (Experienced Investor Fund) (Exemption) Order 1999 exempts the scheme from certain provisions of S11 of the FSA and sets out the regulatory framework which is appropriate to this type of scheme including the disclosure of material information, risk warnings and investor certifications. It should be noted that with effect from 1st November 2007 no new Experienced Investor Funds may be established, although existing funds can continue as legacy EIFs, qualifying type EIFs or closed EIFs or may transition to become a specialist fund or a qualifying fund. You may also like to refer to the Experienced Investor Funds Key Features document.
Professional Investor Funds are not authorised or approved by the FSC. They are only available to investors who fall within the definition of a "professional investor" contained in the Financial Supervision (Professional Investor Fund) (Exemption) Order 1999; generally, market professionals and those who have net assets in excess of $1 million. Investors must invest at least US$100,000 and who accept the higher levels of risk which can attach to investment in this type of fund. The Order exempts the scheme from certain provisions of S11 of the FSA and sets out the regulatory framework which is appropriate to this type of scheme including the disclosure of material information, risk warnings and investor certifications. You may also like to refer to the Professional Investor Funds Key Features document.
Overseas Funds are funds established outside the Isle of Man but which are managed or administered on the Island. They are not subject to specific schemes regulations on the Island. The Financial Supervision (Overseas Funds) (Exemption) Order 2003 sets out the basis for the schemes exemption from the requirements of S11 of the FSA.
Exempt International Schemes are funds which have less than 50 participants and whose constitutional document prohibits the making of an invitation in any part of the world to the public or any section of it to subscribe for or purchase units in the scheme. They are not subject to specific schemes regulations on the Island. S11(7) of the FSA sets out the basis for their exemption.

International Schemes – other matters

The Commission permits a certain level of "inward outsourcing" of fund administration activities to Isle of Man licensed fund managers or fund administrators so that such entities can administer certain activities for non-Isle of Man collective investment schemes, without such schemes becoming an International Scheme. Please refer to the Commission's Guidance Note on "Undertaking outsourced functions on behalf of administrators or managers of foreign collective investment schemes - "Inward Outsourcing" for further details.

In accordance with the Limited Partnerships (Collective Investment Schemes) Regulations 2004 an international collective investment scheme, structured as an Isle of Man limited partnership may have more than 20 partners. The Limited Partnerships (Collective Investment Schemes) (Exemption) Regulations 2005 exempt a limited partnership that is an international scheme (other than an exempt international schemes) from the requirement to disclose details of the limited partners on the public file held at the Companies Registry.

International Schemes (with the exception of exempt international schemes) do not have to file returns of allotments and redemptions of shares with the registrar of companies by virtue of the exemption contained in the Collective Investment Schemes (Returns of Allotment and Redemption) (Exemption) Order 1999.

2.5 Recognised Schemes

A Collective Investment Scheme established in another jurisdictions which has been recognised under s12 or s13 of the FSA as being subject to equivalent regulatory requirements to an Authorised Scheme. Recognised schemes, must apply to the Commission for recognition (either on the basis that they are established as such a scheme in a prescribed territory (s12 recognition – UK, Ireland, Jersey or Guernsey) or on the basis of the terms of the particular scheme (S13 recognition). You may also like to refer to the Guidance Note – Recognised Schemes, the Financial Supervision (Recognised Schemes) (Facilities in the Island) Regulations 1988 and the Financial Supervision (Recognised Schemes) (Notification) Regulations 1988

2.6 Scheme functionaries

Whilst this handbook contains some information about licensing requirements for scheme functionaries, full details of the licensing and supervision regime is contained in the Investment Business and Banking Handbook (as relevant).

3. Legislation

3.1 The Primary legislation governing Collective Investment Scheme activities in or from the Isle of Man is the Financial Supervision Act 1988 and the Investment Business Act 1991.

The following secondary legislation is made under powers contained in the Financial Supervision Act 1988. Where regulations, orders and regulatory codes have been amended after they were made, the “as amended” version is shown:

Authorised Schemes

Full International Collective Investment Schemes

Other International Collective Investment Schemes

Recognised Schemes

Promotion of Schemes

Financial Supervision (Promotion of Unregulated Schemes) (Exemption) Regulations 1992

Custody of Experienced Investor Funds

General

3.2 The following secondary legislation is made under powers contained in the Investment Business Act. Where these regulations and regulatory codes have been amended after they were made, the “as amended” version is shown:

Regulatory Codes and Clients' Money Regulations

3.3 Other legislation which may affect schemes but which is not made under the Financial Supervision Act or the Investment Business Act:

4. Guidance applicable to Collective Investment Scheme activities

4.1 The Commission has issued guidance notes relating to Collective Investment Scheme activities covering the following matters:

Name of Guidance	Applies to
Permitted structures for scheme types	All Schemes
Trustees and Custodians – what is required and who can act?	All Schemes
Annual Report and Audited Financial Statements (“the Accounts”)	All Schemes
Fees Summary	All Schmes
Authorised Schemes - High Level Key Features	Authorised Schemes
Promotion of Authorised Schemes	Authorised Schemes
Eligible Markets	Authorised Schemes
Authorised Schemes Compensation Fund	Authorised Schemes
Applying to be an Authorised Fund	Authorised Schemes
Promotion of Full International Schemes, Specialist Funds, Qualifying Funds, Experienced Investor Fund and Professional Investor Funds	All International Schemes
International Schemes – Meaning of Established in the Island	All International Schemes
Domicile of International Schemes	All International Schemes
Protected Cell Companies	All International Schemes
Inward Outsourcing	All International Schemes
Pricing Errors	All International Schemes
Hedge Fund Valuation Policy AIMA’s Offshore Alternative Fund Directors’ Guide	All International Schemes
Companies incorporated under the Companies Act 2006 (“2006 Company”) and their use as International Collective Investment Schemes	All International Schemes
Fund Management Association – Sound Practice Guidelines	All International Schemes
Full International Schemes - High Level Key Features	Full International Schemes
Approval process to act as Manager to a Full International Schemes	Full International Schemes
Interpretation of the Financial Supervision (International Collective Investment Schemes) (Advertising and Scheme Particulars) Regulations 1995	Full International Schemes
Guidance Notes for Managers and Trustees	Full International Schemes
Licensing policy: Asset Managers Managed managers Promoters	Specialist Funds, Qualifying Funds, Experienced Investor Funds
Acceptable Jurisdictions Criteria	Specialist Funds, Qualifying Funds, Experienced Investor Funds
Specialist Fund - High Level Key Features	Specialist Funds
Qualifying Fund - High Level Key Features	Qualifying Funds
Experienced Investor Fund - High Level Key Features	Experienced Investor Funds
Guidance Notes for Managers, Fund Administrators, Custodians & Fiduciary Trustees of Experienced Investor Funds	Experienced Investor Funds
Professional Investor Fund - High Level Key Features	Professional Investor Funds
Notification of Recognised Schemes	Recognised Overseas Schemes
Recognition of Collective Investment Schemes under S12 of the FSA - Guidance Note on Scheme Particulars	Recognised Schemes
Recognition of Collective Investment Schemes under S13 of the FSA - Guidance Note on Scheme Particulars	Recognised Schemes

4.2 The Commission has issued the following forms for use with` Collective Investment Scheme:

Name of Form	Applies to
Statistical information to be supplied to the Commission within 15 working days of the end of each calendar quarter	All Schemes
Application Form for Authorisation of a Scheme – Open Ended Investment Company	Authorised Schemes
Application Form for Authorisation of a Scheme – Unit Trust	Authorised Schemes
Advance Scheme Notification Form	Full International Schemes
Notification Form for International Schemes	Full International Schemes (including Experienced Investor Funds and Professional Investor funds)
Responsibility Statement and Fund Notification/Alteration Form Annual Compliance Declaration	Specialist Fund
Responsibility Statement and Fund Notification/Alteration Form Annual Compliance Declaration	Qualifying Fund
Transitional declarations (to be resolved by 1st Nov 2008 and notified to FSC by 14th Nov 2008 Part A - qualifying type and legacy experienced investor funds Part B closed experienced investor funds Part C experienced investor funds that resolve to become a specialist fund or a qualifying fund General Forms Responsibility Statement and Fund Notification/Alteration Form – Continuing EIFs Annual Compliance Declaration – Continuing EIFs	Experienced Investor Fund
Notification Form for Overseas Funds	Overseas Funds
Application Form - Recognition of a Scheme under S13 of the FSA	Recognised Schemes
Notification Form - a Scheme Recognised by virtue of S12 of the FSA	Recognised Schemes

4.3 Other guidance and forms (not included above) which relate to Collective Investment Scheme activities:

5. Guidance applicable to all licensable sectors/activities

Guidance on matters generic to all FSC-licensable activities/ categories of business:

DisabledGo Information

Terms & Conditions

F.S.C. Handbooks

Collective Investment Schemes On-line Handbook

Content