CIS 4
Single-pricing and dealing
CIS 4.1
Introduction
- 01/12/2004
Application
CIS 4.1.1
See Notes
(1)
This
chapter applies in relation to ICVCs and single-priced AUTs. Accordingly,
in this chapter:
(a) references to "authorised funds" and to "units" relate only to ICVCs and single-priced AUTs and to shares or units in them;
(b) references to "authorised fund manager" or to "depositary" relate only
to the ACD or depositary of an ICVC or to the manager or trustee of a single-priced AUT; and
(2) This section (CIS 4.1) applies to ICVCs,
their directors (including
the ACD) and depositaries, and to the managers and trustees of single-priced AUTs.
(3)
(a) If, and to the extent that, the authorised fund manager and
the depositary so
agree, income units and accumulation units are to
be treated, for the purposes in (b) as belonging to the same class of units.
(b) The purposes to which (a) can apply are:
(i) ascertaining the number of units to be issued or
cancelled for the authorised
fund manager to comply with CIS 4.3.9 R (2) (Issue
of units to meet authorised fund manager's obligation to sell) and CIS 4.3.10 R (2)(Cancellation and
payment for cancelled units); or
(ii) compliance with requirements of this
chapter relating to information to be given by the authorised fund manager to the depositary.
(c) Paragraphs (a) and (b) do not apply to
the income units and accumulation units of an ICVC unless the rights
attached to those classes provide
for their prices to
be calculated by reference to undivided shares (whatever
called) in a manner similar to that resulting from CIS
2.6.1 R (Units and classes of units in AUTS).
- 01/11/2002
Persons to whom the provisions apply
CIS 4.1.2
See Notes
- 01/12/2004
Purpose
CIS 4.1.3
See Notes
(1) This chapter helps in achieving the regulatory objective of protecting consumers (consumer's interests) as envisaged by sections 2 and 5 of the Act. In accordance with Principle 6, this chapter is intended to ensure the authorised fund manager pays due regard to its customers' interests and treats them fairly.
(2) An authorised fund manager is responsible for valuing the scheme property of the authorised fund it manages and for calculating the price of units in the authorised fund. As well as arranging for the issue and the cancellation of units for the account of the authorised fund, the authorised fund manager is permitted to sell and redeem units for its own account. The rules in this chapter are intended to ensure that the price of units is properly related to the net value of the authorised fund and, in accordance with Principle 6, that the authorised fund manager treats customers fairly with investors when they purchase or sell units. This chapter provides common standards for these purposes.
- 01/08/2002
Explanation of this chapter
CIS 4.1.4
See Notes
(1) The rules in this chapter make apparent the extent to which any of them, or any paragraph in any of them, applies only to a single-priced AUT or to an ICVC. In particular, CIS 4.3.3 R (Issue and cancellation of shares by an ICVC) applies only to an ICVC and the following rules apply only to a single-priced AUT: CIS 4.3.4 R (Issue and cancellation of units in an AUT); CIS 4.3.5 R (Trustee's refusal to issue or cancel units); CIS 4.3.6 R (Instructions or notifications between managers and trustees).
(2) Shares in an ICVC are issued or cancelled when the ACD records the issue or cancellation. Units of an AUT are issued or cancelled by the trustee on the manager's instructions. In the case of an issue, payment in cash of the price of the units or a transfer of assets of an equivalent value must be made to the depositary for the account of the authorised fund concerned. Payment by the depositary for cancelled shares is normally to be made by the close of the fourth business day after the cancellation.
(3) An authorised fund manager may hold units for its own account (in its 'box'): so a purchaser of units from the authorised fund manager may receive units which have been issued to the authorised fund manager or that have been redeemed (that is repurchased) by the authorised fund manager from a previous holder. In addition to selling and redeeming units for its own account, the authorised fund manager may arrange for the trustee or the ICVC to issue units direct to an investor or to cancel a holder's units.
(4) The authorised fund manager must be prepared to redeem units of a holder who wishes to realise the value of them. The authorised fund manager can then retain the units in its box or it can cancel them.
(5) The special provision about initial issues and sales at the start of an authorised fund's life are in CIS 4.2, separately from the rules about issues and sales in an ongoing authorised fund.
(6) Under this chapter, the price at which a unit is issued, sold, redeemed or cancelled will be a single price. Although certain additions to, or deductions from, the price are provided for and affect payments, they do not affect the single price. Except for the initial issues and sales, the single price will be determined in accordance with CIS 4.3.11 R (Price of a unit) and, in broad outline, will be calculated by valuing the scheme property attributable to the class of units in question and dividing that value by the number of those units in issue. The valuation of the scheme property must be in accordance with CIS 4.8 and with the relevant provisions of the instrument constituting the scheme.
(7) CIS 4.6 (Dilution and SDRT provision) enables the authorised fund manager to choose whether or not:
(a) to require for the benefit of the authorised fund, as an addition to, or deduction from, the single price (but not part of it), a provision (SDRT provision) against certain stamp duty reserve tax that is payable out of the scheme property; and
(b) for the purpose of reducing dilution (see CIS 4.6.2 G (1) (Purpose)) either:
(i) to require, for the benefit of the authorised fund, a dilution levy as an addition to, or deduction from, the single price (but not part of it); or
(ii) to make a dilution adjustment in the calculation of the single price.
(8) The requirements in this chapter are to be applied separately to each sub-fund of an umbrella scheme.
- 01/08/2002
CIS 4.2
Initial offers
- 01/12/2004
Application
CIS 4.2.1
See Notes
This section (CIS 4.2) applies to authorised
fund managers and CIS 4.2.4 R (1) (Issue
of units : initial offer) also applies to any directors of an ICVC additional to the ACD.
- 01/12/2004
Purpose
CIS 4.2.2
See Notes
This section (CIS 4.2) helps to protect investors by rules intended to ensure the authorised fund receives
subscriptions for units and
that neither the authorised
fund nor the investor will suffer any material loss, as a result
of fluctuations in the value of the scheme property,
for so long as units are
available at the fixed price.
- 01/12/2004
Period of initial offer
CIS 4.2.3
See Notes
(1) The period of the initial offer must not exceed 21 days and an initial offer must, subject
to CIS
4.2.5 R (Compulsory termination
of initial offer), be kept open for the period of the initial offer.
(2) Where an initial offer is of units in a sub-fund, CIS
4.2.4 R and CIS
4.2.5 R apply as if references
in those rules to
a unit were
to a unit in
that sub-fund.
- 01/12/2004
Issue of units: initial offer
CIS 4.2.4
See Notes
(1) The price to
be paid for a unit of
any class issued
during the period of the initial
offer must be the initial
price of a unit of
that class,
as determined by the directors of
the ICVC or
the manager of
the AUT. The price must be notified
in writing to the depositary before
the start of the period of the initial
offer.
(2) For the purpose of (1), a unit is treated as issued
during the period of the initial
offer if the authorised
fund manager had agreed to its sale or received an order for it to be sold
before the close of the period, and it was issued only afterwards.
(3) The authorised
fund manager must, by the close of business on the fourth business day after receiving
the price from
the purchaser, pay the depositary the price of any unit it agreed to sell during the period
of the initial offer,
unless payment by the authorised
fund manager is due earlier under CIS 4.3.7 R (Payments for units issued). The authorised fund manager may
retain for its own account any preliminary
charge it makes under CIS 8.2.2 R (Preliminary charge:
ICVCs and single-priced AUTs).
(4) During the period of the initial offer, the authorised fund manager must
not agree to cause units to
be issued under CIS 4.5 (Issues
and cancellations through the authorised fund manager and in specie cancellations)
at a price other
than the initial price.
(5) The initial
price of a unit must,
subject to CIS 12.5.2 R (Base currency),
be expressed in the base
currency of the authorised
fund (or, for a currency
class share, in the currency of designation of that class). However, during
the period of the initial offer, the authorised fund manager may
agree to sell units, or cause units to be issued under CIS 4.5.3 R (Issues and cancellations
through the authorised fund manager) in any other currency.
(6) Nothing in this rule affects the powers of the authorised fund manager to
require a payment of SDRT
provision under CIS
4.6.3 R (Dilution
levy and SDRT provision).
(7) Where the initial offer is made in a country outside
the United Kingdom,
an amount may be added to the initial
price of units offered
in that country which is sufficient to cover additional duty or taxation leviable
in that country and the cost of remitting money to the United Kingdom.
- 01/12/2004
Compulsory termination of initial offer
CIS 4.2.5
See Notes
(1) The period of the initial offer comes to an end immediately
if:
(a) the authorised
fund manager does not carry out a valuation immediately, but
after having taken reasonable care, it ascertains that, if the current price of a unit were to be calculated
by reference to an immediate valuation, it would be likely to vary from the unit's initial price by 2% or
more of the initial price;
or
(b) the authorised
fund manager carries out a valuation immediately after it has
ascertained the circumstances mentioned in (a) and the valuation shows there
is a variation of 2% or more.
(2) If the period of the initial offer comes to an end under (1),
the authorised fund manager must
immediately refrain from:
(a) agreeing to sell units at
the initial price;
and
(i) in the case of an ICVC, arranging for the ICVC to issue shares at the initial price, except
to fulfil an existing obligation of the ACD to sell shares at the initial price or to fulfil an order for shares at the initial price which the ACD received before the initial offer came to
an end; or
(ii) in the case of an AUT, instructing the trustee to issue units at the initial price, unless
to fulfil an existing obligation of the manager to sell units at the initial price or to fulfil an order for units at the initial price which the manager received before
the initial offer came
to an end.
(3) The current price of a unit for the purpose of (1):
(a) must be calculated on the basis that
the number of units of
each relevant class in
existence immediately before the valuation is the number for which the initial price has been
paid, or for which assets have been transferred to the depositary in exchange (or treated for the
purpose of the valuation as having been paid or exchanged), before the valuation;
and
(b) must not include any dilution adjustment.
- 01/08/2002
CIS 4.3
Issue and cancellation
- 01/12/2004
Application
CIS 4.3.1
See Notes
This section (CIS 4.3) applies in relation to the issue, cancellation and
pricing of units of
an authorised fund after
the close of any initial
offer of units at
a fixed price.
However, the rules in CIS 4.3.3 R to CIS 4.3.7 R and CIS 4.3.12 R also
apply to the initial issue of units under CIS
4.2.4 R.
- 01/12/2004
Purpose
CIS 4.3.2
See Notes
This section (CIS 4.3) protects investors by means of rules intended to ensure the authorised fund receives
or pays out the right amounts when units are
issued or cancelled. Accordingly, it lays down certain basic procedures for
the issue and cancellation of units and sets out how,
except for an initial offer,
the prices of
those units are
to be calculated, and paid.
- 01/12/2004
Issue and cancellation of shares by an ICVC
CIS 4.3.3
See Notes
(2) Shares in an ICVC are issued or cancelled by the ACD making a record for the ICVC of the issue or cancellation and of the number of the shares of each class concerned. Shares must not be issued or cancelled in any other manner.
(3) The time of the issue or cancellation under (2) is the time when the record is made.
(4) References in these rules to arrangements for the ICVC to issue or cancel shares means arrangements for making a record of the issue or cancellation.
(5) The ACD may arrange for the ICVC to issue shares in exchange for assets other than money if the depositary has taken reasonable care to determine that acquiring the assets in exchange for the issue of shares is not likely to result in any material prejudice to the interests of shareholders or potential shareholders. For this purpose the depositary must take account of any payment that would have been required under CIS 4.6.3 R (Dilution levy and SDRT provision) had the shares been issued for cash.
(6) An issue under (5) must not be made in breach of CIS 11.5.2 R (Schemes of arrangement: requirements).
- 01/12/2004
Issue and cancellation of units in an AUT
CIS 4.3.4
See Notes
(2) Where the manager wishes new units to be issued or wishes units to be cancelled
and, in either case, complies with CIS 4.3.11 R (4) and CIS 4.3.11 R (5) (Price of a unit),
it may instruct the trustee to issue or cancel units. Any instructions
given by the manager must
state, for each class of unit to be issued or
cancelled, the number to be issued or cancelled, expressed either as a number
of units or
as an amount in value (or as a combination of the two).
(3) The trustee must issue or cancel units on receipt of,
and in accordance with, instructions given by the manager under (2) and must not issue or cancel units otherwise, but
this is subject to (4) and CIS 4.3.5 R (2).
(4) The trustee may issue units in exchange for assets other than money, but its obligation
to comply with an instruction to issue units in such a case
arises only:
(a) if it has taken reasonable care to determine
that (taking account of any payment that would have been required under CIS
4.6.3 R (Dilution levy and SDRT
provision) if the units had
been issued for cash) the acquisition of the assets in exchange for the number
of units to
be issued is not likely to result in any material prejudice to the interests
of unitholders or
potential unitholders;
(b) in a case governed by CIS 11.5.2 R (5) (Schemes of arrangement: requirements) if the resolution concerned
in relation to the AUT of
which it is the trustee has
been duly carried or is not required.
(5) The manager may,
at any time during the period of an initial
offer, instruct the trustee to issue units. Furthermore, as soon as the period
of the initial offer has
come to an end, the manager must
instruct the trustee to issue any units which were sold,
or treated as sold, during that period and which it has not already instructed
the trustee to issue.
- 01/12/2004
Trustee's refusal to issue or cancel units
CIS 4.3.5
See Notes
(2) If, on receiving instructions to issue or cancel units, the trustee is of the opinion
that (in the case of an issue)
the issue would
be in breach of a restriction on issue relating
to a class of limited issue shares or limited issue units or
that it is not in the interests of unitholders that:
(a)
units should
be issued; or
(b)
units should
be cancelled; or
the trustee must give notice
to the manager that
it refuses to issue or,
as the case may be, cancel, all, or a specified number of, the units. - 01/11/2002
Instructions or notifications between the manager and trustee
CIS 4.3.6
See Notes
(2) Any instruction or notification given
(or report supplied) under this chapter by the manager to the trustee:
(a) must be in writing or in such other form
as enables the recipient to know or record the time of receipt and to preserve
a legible copy of it; and
(b) must be recorded by the manager at the time when
it is given or supplied.
- 01/12/2004
Payment for units issued
CIS 4.3.7
See Notes
(2) This rule applies to a unit issued during the period of the initial offer (and for
this purpose the time of issue is
not governed by CIS
4.2.4 R(2)
(Issue of units: initial offer)).
(3) The authorised
fund manager must, by the close of business on the fourth business day following
the issue of
any units:
(a) pay to the depositary, in cash or cleared funds, the price of the units and any payment
required under CIS
4.6.3 R (Dilution
levy and SDRT provision) to the extent that either remains unpaid; or
(b) for an exchange under CIS 4.3.3 R (5) or CIS 4.3.4 R (4),
ensure transfer to the depositary of
the assets to be taken in exchange.
(4) For an exchange under CIS 4.3.3 R (5) or CIS 4.3.4 R (4),
the authorised fund manager must
ensure the beneficial interest in the assets is transferred to the ICVC or to the trustee with effect from
the issue of
the units,
even if the legal ownership is not then transferred.
- 01/12/2004
Box management errors
CIS 4.3.8
See Notes
(2) An authorised
fund manager is not permitted to sell or cancel units that it does not own. To do so would
be in breach of CIS 4.3.9 R (2) (Issue
of units to meet authorised fund manager's obligation to sell) or CIS 4.3.10 R (2) (Cancellation and
payment for cancelled units). Errors relating to the number of units issued or cancelled
can be corrected to the extent permitted by CIS 4.3.12 R (Modification
to number of units issued or cancelled).
(3) An authorised
fund manager's holding of units for
its own account is commonly known as its 'box' of units. Appendix CIS G (Correction
of box management errors) contains further guidance on:
(b) recording and reporting errors in calculating
the number of units in
the box;
(c) correcting such errors; and
(d) the payment of compensation in relation
to particular categories of error.
- 01/12/2004
Issue of units to meet authorised fund manager's obligation to sell
CIS 4.3.9
See Notes
(2) If, at any valuation point, the authorised fund manager has any outstanding obligation to sell units of any class, it must arrange for the ICVC or instruct the trustee before the earlier of:
(a) the expiry of two hours since the valuation point; or
(b) the next valuation point;
to issue units of that class in such number (expressed either as a number of units or as an amount in value (or as a combination of the two)) as will at least enable the authorised fund manager to fulfil the obligation immediately whether from the units so issued or from other units of that class which it owned immediately before the valuation point (or notified point if there is one).(3) If the authorised fund manager wishes regularly to have a notified point, it may notify the depositary of its intention, indicating the period of time not exceeding two hours after the valuation point at which it wishes the notified point to occur. Any change in the period is ineffective unless agreed by the depositary.
- 01/12/2004
Cancellation and payment for cancelled units
CIS 4.3.10
See Notes
(1) Paragraphs (2) and (3) and (7) to (9)
apply to authorised fund
managers; (4) applies only to ICVCs and their depositaries and ACDs; (5) and (6) apply only to managers and trustees of AUTs.
(2) The authorised
fund manager must not arrange for the ICVC, or instruct the trustee, to cancel units of any class if, or to the extent that, by so doing
the authorised fund manager would
be prevented from immediately fulfilling any outstanding obligation to issue units which had been
assumed before the relevant valuation
point (or notified
point if there is one).
(3) For the purpose of (2), the authorised fund manager must
take account of all units sold
or redeemed by reference to the relevant valuation
point (or notified
point if there is one).
(4) On cancelling shares the ACD must, within the period specified in (7),
require the depositary to
pay the price of
the shares (less
any deduction required under CIS
4.6.3 R (Dilution
levy and SDRT provision)) to, or to the order of, the shareholder or the ACD (as the case may
be).
(5) Where instructions are given to cancel units in an AUT at a time which is
less than two hours after the last valuation
point and the trustee has
received but not yet executed instructions previously given, the later instructions
must enable the trustee to execute both or all sets
of instructions simultaneously.
(6) On cancelling units in an AUT, the trustee must
within the period specified in (7) pay the price of the units (less any deduction required under CIS
4.6.3 R (Dilution levy and SDRT
provision):
(a) (except where (b) applies) to, or to
the order of, the unitholder or
the manager (as
the case may be); or
(b) in the case of a relevant pension scheme, in accordance with
the relevant provisions of the trust
deed.
(7) The period for payment expires at the
close of business on the fourth business
day following the cancellation of
the units or,
if later, as soon as practicable after delivery to the trustee or the ICVC of such evidence of title to the units as it may reasonably
require.
(8) If the authorised fund manager has not ensured that
the scheme property includes
or will include sufficient cash in the appropriate currency (or a sufficient
facility to borrow without infringing any applicable restriction in CIS 5A.15.3 R (General power to borrow) or CIS 5A.15.4 R (Borrowing limits) or CIS 5.5 within
the period in (7)), that period is extended, for any relevant currency, until
the shortage is rectified.
(9) Paragraphs (4) and (6) do not apply where units are cancelled following
a cancellation for
property transferred or sold under CIS 4.5.4 R (In
specie redemption).
- 01/11/2002
Price of a unit
CIS 4.3.11
See Notes
(1) Paragraphs (2) to (3) apply to authorised fund managers; (4) and (5) apply only to ICVCs and their depositaries and ACDs; (6) and (7) apply only to managers and trustees.
(2) The price of a unit of any class must, subject to (3), be calculated as follows:
(a) take the proportion, attributable to the units of the class in question, of the value of the scheme property (excluding, in the case of an ICVC, the distribution account and the unclaimed payments account), by reference to the most recent valuation of the scheme property;
(b) compute the number of units of the relevant class in issue immediately before the valuation in (a);
(c) divide the total at (a) by the number of units at (b);
(d) if the authorised fund manager makes a determination under CIS 4.6.4 R (Dilution adjustment), increase or decrease the resulting amount by an adjustment (the "dilution adjustment") made for the purpose of reducing dilution; and
(e) Except for smaller denomination shares, express the price in a form that is accurate to at least four significant figures.
(3) If a method of calculation other than that at (2) is used, the authorised fund manager must be sure it is bound to produce the same result.
(4) Where an issue or cancellation of shares is made at a time which is less than two hours after the last valuation point and before the next valuation point, it must be made by reference to the price of the relevant class of shares calculated (or being calculated) for the last valuation point.
(5) Any issue or cancellation of shares to be made more than two hours after the last valuation point must be made by reference to the price of the relevant class of shares next to be calculated and made only after the next valuation point has been reached.
(6) Where the manager gives instructions to the trustee to create or cancel units and those instructions are given less than two hours after the last valuation point and before the next valuation point, the instructions must be given by reference to the price of the relevant class of units calculated (or being calculated) for the last valuation point.
(7) Where the manager gives instructions to the trustee to create or cancel units and those instructions are given more than two hours after the last valuation point:
(a) the instructions must be given by reference to the price of the relevant class of units next to be calculated, and
(b) the trustee must not issue or cancel the units before the next valuation point has been reached.
- 01/08/2002
Modification to number of units issued or cancelled
CIS 4.3.12
See Notes
(2) The number of units issued or cancelled may be modified
by the authorised fund manager (in
the case of shares)
making a record for the ICVC of
the modification or (in the case of units in
an AUT) changing
an instruction to issue or
cancel units which
has been complied with, provided that:
(a) the authorised
fund manager ensures that any appropriate consequential payment
between the authorised fund
manager and the depositary is
made; and
(b) the requirements of (3) are satisfied.
(3) The authorised
fund manager may only make a modification under (2) with the
agreement of the depositary and
the depositary may
not agree unless it has taken reasonable care to determine:
(a) that the purpose of the modification
is to rectify the consequences of an error relating to the number of units held by the authorised fund manager,
or issued or cancelled in connection with the sale or redemption of units by the authorised fund manager; and
(b) that in view of the quality of the authorised fund manager's control
systems the circumstance that resulted in the error in question is an isolated
one which is unlikely to recur.
(4) A modification under (2) is of no effect
unless the corrected number of units is
calculated by the end of the business
day next following the valuation
point for the issue or cancellation in question
or, if the depositary agrees,
within the payment period applicable to that issue or cancellation under CIS 4.3.7 R (3) (Payment for units issued) or CIS 4.3.10 R (7) (Cancellation and
payment for cancelled units).
- 01/12/2004
CIS 4.4
Sale and redemption
- 01/12/2004
Application
CIS 4.4.1
See Notes
(1) This section (CIS 4.4) applies to authorised
fund managers. CIS 4.4.5 R (4) (Payment
on redemption) also applies to ICVCs and depositaries.
(2) This section (CIS 4.4) applies to the sale and redemption of units after the close of any initial offer. However,
the following rules also
apply to the sale of
a unit during
an initial offer:
(a)
CIS 4.4.3 R (1),
(2) and (3) (other than the provision in (2)(a) relating to a sale at a forward price); and
- 01/12/2004
Purpose
CIS 4.4.2
See Notes
(1) This section (CIS 4.4) protects investors by means of rules intended to ensure the authorised fund manager deals
fairly with investors when they purchase or
redeem units.
Accordingly, this section lays down the basic procedures for the sale and redemption of units in an authorised fund and sets
out how the resulting payments should be calculated and by when they should
be made.
(2)
Sales and redemptions of units in futures and options schemes or geared
futures and options schemes are, in addition, subject to the
special rules in CIS
12.2.1 R (Special rules for sales and redemptions).
- 01/12/2004
Authorised fund manager's obligation to sell
CIS 4.4.3
See Notes
(1) The authorised fund manager must, at all times during the dealing day, be willing to sell units in the authorised fund and, subject to (2), must, at the request in writing of any person, agree to sell to that person units of at least one class or, in the case of an umbrella scheme, one class for each of its sub-funds.
(2) The authorised fund manager's obligation to sell units under (1) does not apply:
(a) if it has not received payment for the units of an amount complying with (4) or (if the sale was at a forward price of a stated number of shares) if it has not received payment of an amount it estimated to be required; or
(b) if the number or value of the units sought to be purchased is less than any number or value stated in the prospectus as the minimum number or value of units, or units of the class concerned, that may be purchased or held; or
(c) for a property scheme if the authorised fund manager, having taken reasonable care, determines that the number or value of units sought to be purchased would lead to any one person (or any one person and any other person who appears to the authorised fund to be acting in concert with that person) holding more than any number or value stated in the prospectus as the maximum number or value to be purchased or held; or
(e) for an AUT, if the sale would be in breach of a provision in the trust deed of any of the types described in paragraphs (j) (Limited categories of unitholder), (m) (Relevant pension schemes) or (n) (Relevant charitable schemes) of CIS 2.2.7 G (Provisions that may be included in the trust deed).
(3) Paragraph (1) does not apply to units of any class:
(b) if the sale of units of that class:
(ii) would breach a restriction on sale applicable to a class of limited issue shares or limited issue units.
(4) The authorised fund manager must not sell a unit for more than the price of a unit of the relevant class notified, or to be notified, to the depositary for the last valuation point (or, for a sale at a forward price, to be notified for the next valuation point) to which may be added any preliminary charge permitted under CIS 8.2.2 R (Preliminary charge: ICVCs and single-priced AUTs) and any payment required under CIS 4.6.3 R (Dilution levy and SDRT provision).
(5) Units must be sold in the base currency, or, for a currency class share, in the currency of designation of that class, unless the person concerned requests and the authorised fund manager agrees that the units should be sold in another currency.
- 01/04/2004
Authorised fund manager's obligation to redeem
CIS 4.4.4
See Notes
(1) The authorised
fund manager must at all times during the dealing day be willing to redeem units in the authorised fund; and, accordingly,
must at the request in writing of any holder agree
to redeem units owned
by that holder for
the amount to be paid under CIS 4.4.6 R (Proceeds
of redemption).
(2) Paragraph (1) does not apply:
(a) if the number or value of the units sought to be redeemed
is:
(ii) less than any number or value stated
in the prospectus as
the minimum number or value of units,
or units of
the class concerned,
that may be redeemed;
(b) if the number or value of the units sought to be redeemed
would result in the holder holding
less than any number or value stated in the prospectus as the minimum number of units, or units of the class concerned, that
may be held;
(c) if the ICVC or the manager ensures that the holder is able to sell his units on an investment exchange at a price not significantly different from the price at which they would
have been redeemed;
(d) where units are redeemed in return for property
transferred or sold under CIS 4.5.4 R (In
specie redemption);
(e) during the period of the initial offer; or
(f) if redemption of
the units of
the class concerned
is prohibited by the rules in CIS 13 (Suspension and termination).
- 01/12/2004
Payment on redemption
CIS 4.4.5
See Notes
(1) On agreeing to redeem units, the authorised fund manager must, within the period
specified in (2):
(a) (except where (b) applies) pay the holder the appropriate
proceeds of redemption under CIS 4.4.6 R (less, where applicable,
the cost of remitting the sum abroad); or
(b) if a manager of a relevant pension scheme, pay or arrange
for the payment of the proceeds of redemption in
compliance with the trust
deed (including, where applicable, any time limit in it for
payment which is shorter than the period specified in (2)).
(2) The period expires at the close of business
on the fourth business
day following the later of:
(a) the valuation
point immediately after the authorised fund manager received the request
to redeem; or
(b) the time when the authorised fund manager has all duly executed
instruments and authorisations to effect (or enable the authorised fund manager to effect) transfer
of title to the units.
(3) Neither this rule nor CIS 4.4.6 R (Proceeds
of redemption) applies where the authorised
fund manager is not redeeming units in accordance with this chapter but
is buying them
as principal on
an investment exchange
(in the case of an AUT,
in accordance with a power in the trust
deed) and settlement will be in accordance with the rules of
that exchange.
(4) Nothing in this rule or CIS 4.3.10 R(5)
and (6) (Cancellation and payment for cancelled units) requires an ICVC, a depositary or an authorised fund manager to part with money for a cancellation or redemption of units where any money due on the earlier issue or sale of those units has not been received
by the person entitled
to it under this chapter.
- 01/12/2004
Proceeds of redemption
CIS 4.4.6
See Notes
The amount to be paid by the authorised fund manager as the proceeds of redemption of a unit must not be less than the price of a unit of the relevant class notified or to be notified to the depositary at the last valuation point (or, for a redemption at a forward price, to be notified in respect of the next valuation point) less any redemption charge permitted under CIS 8.2.7 R (Redemption charge: ICVCs) or CIS 8.5.2 R (Redemption charge: single-priced AUTs) and any deduction required under CIS 4.6.3 R (Dilution levy and SDRT provision).
- 01/12/2004
Notification of price to the depositary
CIS 4.4.7
See Notes
(1) Immediately after completing a valuation
under CIS 4.8 (Valuation) (whether regular
or otherwise) the authorised
fund manager must notify the depositary of:
(a) the price,
in the base currency (or,
in the case of a currency
class share, the currency of designation) of a unit of each class in issue as determined for
the relevant valuation
point; and
(b)
(i) the amount or rate of any dilution levy which
applies to any issue or cancellation of units made by reference
to that valuation; or
(ii) the amount or rate of any dilution adjustment taken
into account in calculating that price and
whether it was an addition or deduction.
(2) Each notification under (1) must include
a statement of the number of units of
each class in issue owned by the authorised fund manager at
the valuation point (or notified point if there
is one).
(3) As soon as practicable after each notification
under (1), the authorised
fund manager must notify the depositary of the transactions, or types
of transaction, for which an SDRT
provision is applied and the amounts or rates of those SDRT
provisions.
- 01/08/2002
Publication of prices
CIS 4.4.8
See Notes
(1) Where the authorised fund manager holds itself out as
willing:
(b) to issue or
cancel units of
any class under CIS 4.5.3 R (Issues and cancellations
through the authorised fund manager);
it must make
public the prices of units of each of those classesin an appropriate manner.(2) The prices made
public under (1) are to be the price or prices last notified to
the depositary under CIS 4.4.7 R or, in the case of publication
in a newspaper, last notified before the relevant newspaper ceased to accept
material for publication in the relevant edition.
(3) [deleted]
(4) Where the authorised fund manager holds itself out as
willing to sell and
redeem units (or,
as the case may be, to issue or
cancel units under CIS 4.5.3 R) in any other EEA State, it must also
comply with (1) in the manner provided for by the law of that EEA State.
(5) Paragraphs (1) to (4) do not apply to units in relation to
which the authorised fund
manager is excused from dealing with the public.
- 01/04/2005
Manner of price publication
CIS 4.4.9
See Notes
(1)
In
determining the appropriate manner of making prices public under CIS
4.4.8 R (1), the authorised
fund manager should ensure that:
(b)
prices are
available at reasonable times;
(c) publication is consistent with the manner and frequency at which
the units are
sold;
(d) the manner of publication is disclosed in the prospectus; and
(e)
prices are
published in a consistent manner.
(2)
Examples
of what might be deemed appropriate include:
(a) publication in a national newspaper;
(b) supply through an advertised local rate or freephone telephone
number;
(c) publication on the internet;
(d) inclusion in a database of prices which
is publicly available; or
(e) communication to all existing unitholders.
(3)
The authorised fund manager should
make previous prices available
to any unitholder or
potential unitholder.
- 01/04/2005
CIS 4.5
Issues and cancellations through the authorised fund manager and in specie cancellations
- 01/12/2004
Application
CIS 4.5.1
See Notes
This section (CIS 4.5) applies to authorised
fund managers. CIS 4.5.3 R (6) and CIS 4.5.4 R (4) also apply to ICVCs and depositaries.
- 01/12/2004
Purpose
CIS 4.5.2
See Notes
(1) CIS 4.5.3 R ensures investors are able, in certain circumstances, to require direct issues or cancellations of units by an ICVC, or by the trustee of an AUT, as an alternative to buying units from, or redeeming them with, the authorised fund manager.
(2) CIS 4.5.4 R protects investors in the authorised fund by enabling an authorised fund manager, subject to the conditions in that rule, to require a holder who wishes to redeem or cancel his units to take, instead of the usual proceeds of redemption or cancellation, a transfer of assets of the authorised fund or, if the holder requires, to take the net proceeds of the sale of those assets.
- 01/12/2004
Issues and cancellations through the authorised fund manager
CIS 4.5.3
See Notes
(1) At the request of any person, the authorised fund manager is obliged to arrange
for the ICVC,
or instruct the trustee,
to issue units to that person where the authorised fund manager would
otherwise be obliged to sell them
under CIS 4.4.3 R (Authorised fund manager's
obligation to sell).
(2) At the request of any holder, the authorised fund manager is obliged to arrange
for the ICVC,
or instruct the trustee,
to cancel units held
by that holder where
the authorised fund manager would
otherwise be obliged to redeem them under CIS 4.4.4 R (Authorised
fund manager's obligation to redeem).
(3) The price of
a unit issued
or cancelled under this rule (CIS 4.5.3 R) must be the price of a unit of the relevant class notified to the depositary at the next valuation point after
the request referred to in (1) or (2), except for an issue to which CIS
4.2.4 R (Issue of units: initial offer) applies, when
it must be the initial
price.
(4)
(a) In the case of an issue, the authorised fund manager may require to be
paid, in addition to the price under
(3):
(i) for the account of the authorised fund manager, any preliminary charge permitted
under CIS 8.2.2 R (Preliminary charge: ICVCs and single-priced
AUTs);
(ii) for the account of the authorised fund, any payment required under CIS
4.6.3 R (Dilution levy and SDRT
provision).
(b) In the case of a cancellation, the authorised fund manager may require to be
deducted from the proceeds:
(i) for the account of the authorised fund manager, any redemption charge permitted
under CIS 8.2.7 R (Redemption charge: ICVCs) or CIS 8.5.2 R (Redemption charge: single-priced AUTs);
(ii) for the account of the authorised fund, any deduction required under CIS
4.6.3 R (Dilution levy and SDRT
provision).
(5) The authorised
fund manager must pay the depositary in
accordance with CIS 4.3.7 R (Payments
for units issued) the price of
any units issued
under this rule (CIS 4.5.3 R) and any payment required
under (4)(a)(ii) whether or not the authorised
fund manager has received payment from the investor. However,
the authorised fund manager may
defer arranging for the ICVC,
or instructing the trustee,
to issue the units until full payment
for them has been received.
(6) Nothing in this rule (CIS 4.5.3 R) requires an ICVC,
a depositary or
an authorised fund manager to
part with money for
a cancellation of units in the circumstances
described in CIS 4.4.5 R(4)
(Payment on redemption).
(7) Paragraph (1) does not apply if the issue would breach a restriction
on issue applicable
to a class of limited issue shares or limited issue units.
- 01/11/2002
In specie redemption
CIS 4.5.4
See Notes
(1) Whenever a holder requests the redemption or cancellation of units, the authorised fund manager may arrange for the cancellation of those units and that, instead of payment in cash to the holder of the price for the units, scheme property selected in accordance with (c) and (d) is transferred to the holder, or, if required by the holder, the net proceeds of the sale of that property is paid to him, provided that:
(a) the prospectus contains a statement describing the circumstances in which the authorised fund manager is permitted to arrange for, and describing the procedures for, a cancellation of units in the manner described above;
(b) the authorised fund manager gives the holder written notice before the proceeds of the redemption or cancellation would otherwise become payable in cash, that instead of such payment the depositary will transfer scheme property (or the net proceeds of the sale of the relevant scheme property) to the holder;
(c) the scheme property to be transferred (or sold) is selected by the authorised fund manager in consultation with the depositary and the selection is made with a view to achieving no more advantage or disadvantage to the holder requesting cancellation of his units than to the continuing holders; and
(d) the scheme property to be transferred, or the proceeds of the sale of the relevant scheme property, is subject to the retention by the depositary of scheme property (including cash) of a value or amount equivalent to any deductions permitted by CIS 4.5.3 R (4)(b) (Issues and cancellations through the authorised fund manager) and the depositary accounts for any such deduction in the manner provided by that rule.
(2) This rule (CIS 4.5.4 R) does not enable the authorised fund manager, when acting as a principal, to cancel units other than for payment in cash.
(3) This rule does not enable units in a relevant pension scheme to be redeemed other than in accordance with that scheme.
(4) Nothing in this rule requires an ICVC, a depositary or an authorised fund manager to transfer scheme property, or the proceeds of the sale of scheme property, in respect of the cancellation of units in the circumstances described in CIS 4.4.5 R (4) (Payment on redemption).
- 01/12/2004
CIS 4.6
Dilution and SDRT provision
- 01/12/2004
Application
CIS 4.6.1
See Notes
This section (CIS 4.6) applies to authorised
fund managers.
- 01/12/2004
Purpose
CIS 4.6.2
See Notes
(1)
(a) An ICVC or an AUT may suffer dilution (reduction) in the value of the scheme property as a result of the costs incurred in dealing in the underlying investments and of any spread between the buying and selling prices of those investments. In order to enable the authorised fund manager to decide what, if any, response to make to issues about dilution, an authorised fund manager is permitted to:
(i) require the payment of a dilution levy, as an addition to (but not part of) the price of units when they are issued by the ICVC or the trustee or sold by the authorised fund manager, and as a deduction when they are cancelled by the ICVC or the trustee or redeemed by the authorised fund manager; or
(ii) make a dilution adjustment in accordance with CIS 4.3.11 R (2)(d) (Price of a unit) so that the price of a unit is above or below that which would have resulted from a mid-market valuation; or
(iii) decide not to require the payment of a dilution levy or make a dilution adjustment.
(b) An authorised fund manager is not obliged by CIS to make any dilution levies or dilution adjustments.
(c) The choice between (1)(a)(i), (ii) or (iii) will be governed by a statement in the prospectus, but only one can apply at any time.
(2) Certain transactions in units can result in stamp duty reserve tax being paid out of the scheme property of an authorised fund. However, with a view to protecting investors from a resulting diminution in the value of their units, an authorised fund manager is permitted to require the payment of an SDRT provision as an addition to (but not as part of) the price of units when they are issued or sold, and as a deduction when they are cancelled (other than certain in specie cancellations) or redeemed.
(3) Any dilution levy or SDRT provision paid or received by deduction is for the account of the authorised fund. However, there are provisions to prevent a dilution levy or SDRT provision being imposed twice on both the issue and subsequent sale of a unit, or on the redemption and subsequent cancellation of a unit.
(4) For the purposes of (1) to (3) it does not matter whether the issue or cancellation is under CIS 4.3 (Issue and cancellations) or under CIS 4.5 (Issues and cancellations through the authorised fund manager and in specie redemptions).
(5) CIS 4.6.3 R (3) (Dilution levy and SDRT provision) requires a dilution levy or SDRT provision to be imposed only in a manner that, so far as practicable, is fair to all holders and potential holders. However there are exceptions to this in respect of large deals. In addition, certain transactions (such as transactions in units within an individual pension account) are specifically excluded from a charge to stamp duty reserve tax.
(6) Where there is more than one class of unit of an authorised fund, or in the case of an umbrella scheme, a sub-fund, the price of a unit of each class must be calculated separately under CIS 4.3.11 R (Price of a unit). Notwithstanding this, the FSA envisages that any dilution adjustment should in percentage terms affect the price of a unit of each class identically even if there were net issues of units of one class and net cancellations of the other.
(7) It should be noted that, in determining the rate of any dilution levy or dilution adjustment, an authorised fund manager may, in order to reduce volatility in the rate, take account of:
(a) the trend of the authorised fund or sub fund in question to expand or contract; and
(b) the transactions in units at a particular valuation point.
- 01/08/2002
Dilution levy and SDRT provision
CIS 4.6.3
See Notes
(1) The authorised
fund manager may, in accordance with the prospectus, have the power to require any
one or more of:
(b) the deduction of a dilution levy in respect of the redemption or the cancellation of units or any class of units;
(c) the payment of an SDRT provision in respect of the issue or sale of units or any class of units;
(d) the deduction of an SDRT provision in respect of the redemption or cancellation of units or of any class of units, other than a cancellation of units under CIS 4.5.4 R (In specie redemptions)
resulting in a transfer of such part of each description of asset in the scheme property as is
proportionate to, or as nearly as practicable proportionate to, the holder's share
in the scheme property of
the AUT or
(as the case may be) share in the ICVC.
(2) Any such payment or deduction becomes
due at the same time as payment or transfer of property becomes due in respect
of the issue, sale, redemption or cancellation.
(3) A dilution
levy or SDRT
provision may be imposed only in a manner that is, so far as
practicable, fair to all holders and potential holders.
However:
(a) the imposition of a dilution levy (or a higher dilution levy) or SDRT provision (or a higher SDRT provision) in respect
of large deals in
a manner described in the prospectus current
at the time of the deal;
or
(b) the exclusion from an SDRT provision of any transaction in units where the units are so held that their redemption or cancellation is specifically
excluded from a charge to stamp duty reserve tax;
is not unfair.(4) If the authorised fund manager receives a dilution levy or SDRT provision in respect
of any unit sold
or to be sold by it, it must, immediately upon receipt of that dilution levy or SDRT provision, pay it
to the depositary to
become part of the scheme
property, except to the extent that it has already been, or
will be, paid by the authorised
fund to the depositary on
the issue of
that unit.
(5) If the authorised fund manager deducts a dilution levy or SDRT provision from the
proceeds of a unit it
redeemed, it must immediately pay it to the depositary to become part of the scheme property, except
to the extent that it has already been, or will be, deducted from the depositary's payment to
the authorised fund manager on cancellation of that unit.
- 01/08/2002
Dilution adjustment
CIS 4.6.4
See Notes
(1)
The authorised fund manager may,
in accordance with the prospectus,
have the power to make a dilution
adjustment but may only exercise this power:
(a) for the purpose of reducing dilution in the fund;
or
(b) to recover any amount which it has already
paid or reasonably expects to pay in the future in relation to the issue or cancellation of units (see CIS 4.6.2 G (7) (Purpose)).
(2) Where the authorised fund manager decides not to make
an adjustment, this decision must not be made for the purpose of creating
a profit or avoiding a loss for the account of the authorised fund manager.
(3) When by reference to any valuation point:
(a) the aggregate value of the units of all classes of the authorised fund or sub-fund
issued exceeds the aggregate value of units of all classes cancelled:
(i) any adjustment must be upwards; and
(ii) the dilution
adjustment must not exceed the authorised fund manager's reasonable estimate
of the difference between what the price would
have been had the dilution
adjustment not been taken into account and what the price would have been
if the scheme property had
been valued on the best available market offer basis plus dealing costs; or
(b) the aggregate value of the units of all
classes of the authorised
fund or sub-fund cancelled exceeds
the aggregate value of units of
all classes issued:
(i) any adjustment must be downwards; and
(ii) the dilution
adjustment must not exceed the authorised fund manager's reasonable estimate
of the difference between what the price would
have been had the dilution
adjustment not been taken into account and what the price would have been
if the scheme property had
been valued on the best available market bid basis less dealing costs.
- 01/08/2002
Dilution adjustment guidance
CIS 4.6.5
See Notes
The
effect of CIS 4.6.4 R (1) (Dilution
adjustment) is to prohibit authorised
fund managers from making a dilution adjustment for reasons or purposes
other than set out in CIS 4.6.4 R (1)(a) or CIS 4.6.4 R
(1)(b), for example, in order to create a profit or
to avoid a loss for the account of the authorised
fund manager.
- 01/08/2002
CIS 4.7
Forward and historic pricing
- 01/12/2004
Application
CIS 4.7.1
See Notes
This section (CIS 4.7) applies to authorised
fund managers.
- 01/12/2004
Purpose
CIS 4.7.2
See Notes
This section (CIS 4.7) protects investors by means of rules intended to prevent the sale and redemption of units at an historic price where this
is liable to be unfair.
- 01/12/2004
Explanation
CIS 4.7.3
See Notes
(1) There are two ways in which an authorised fund manager may sell or redeem units; these are at forward and historic prices. A forward price is one which will be fixed at the next valuation point, while a historic price is one fixed on the basis of the last valuation.
(2) The two pricing systems have different characteristics. The investor knows that a forward deal will be priced at the next valuation point, but if he is investing a specified sum, he does not know until then how many units he will receive (or, if he is seeking to redeem, how much he will receive in cash). The investor knows, by contrast, that an historic deal may well represent a price which is outdated (though not by more than 2%), but is able to know, at the time of the deal, how much he must pay (or will receive) or the time of the valuation which will be relevant to that price.
(3) The rules generally express a preference for forward pricing in that there are numerous occasions when a price must be forward, whether or not the authorised fund manager chooses to deal in that way. Issues or cancellations by the authorised fund manager under CIS 4.5.3 R (Issues and cancellations through the authorised fund manager) are always at a forward price.
(4) The diagram in CIS 4.7.6 indicates the valuation point relevant for issues and cancellations and for sales and redemptions in the period between one valuation point and the next. In doing so, it takes account of CIS 4.7.5, and also of earlier provisions in this chapter, including CIS 4.3.11 R(4) to (7) (Price of a unit).
- 01/12/2004
Forward and historic pricing
CIS 4.7.4
See Notes
(1) For the sale and redemption of units, the authorised fund manager must, subject to this rule (CIS
4.7.4 R), operate on the basis of forward or historic prices, but its
power to choose, or its duty to operate on one basis only, is governed by CIS
4.7.5.
(2) If the prices for the sale and redemption of units in any sub-fund of an umbrella scheme are on a forward basis,
the prices for
the sale and redemption of units related to all sub-funds of that umbrella scheme must
be on a forward basis; but this paragraph (2) does not apply merely because
of a requirement to price on
a forward basis temporarily under Part 2 or Part 3 of CIS
4.7.5.
(3)
Prices are
to be on a forward basis only for the issue and redemption of units in an authorised fund which is
a geared futures and options
scheme, a property
scheme, a warrant
scheme or an umbrella
scheme that includes a sub-fund which,
if it were the subject of a separate authorisation
order, would be an authorised
fund of one of those categories.
(4)
CIS
4.7.5 does not apply during the period of initial offer at a fixed price. In CIS
4.7.5:
(b) "H" means that any price agreed on must be an historic price unless the authorised fund manager is required by the
table to deal at
a forward price;
and
(c) "General dealing" means in relation to
all sales and redemptions agreed on during
the remainder of the relevant dealing
period (except those that are agreed upon individual deviations);
and an "individual deviation" is a decision, in relation to a particular transaction,
covered by Part 3 of CIS
4.7.5.
- 01/12/2004
CIS 4.7.5
See Notes
Forward or historic pricing
This table belongs to CIS 4.7.4 R
| Forward or historic pricing | |
| Part 1: General Dealing | |
| 1. | Authorised fund manager's choice. The prospectus must state the authorised fund manager's choice for H or else for F Only. |
| 2. | If the authorised fund manager's current choice under 1. is F Only, all its deals must be at a forward price. |
| 3. | An authorised fund manager must not choose H if its normal arrangements for valuation envisage valuations more than one business day apart. |
| 4. | The remainder of this table applies to an authorised fund manager with a current choice of H. |
| 5. | It may at any time elect for F Only in respect of the rest of the then current dealing period. |
| 6. | If the authorised fund manager binds itself to switch from H to F only at a certain point in each dealing period this must be stated in the prospectus |
| 7. | An election for (or switch to) F Only will last until the end of the dealing period and will then lapse. |
| 8. | For general dealing purposes, redemptions must be on the same basis as sales. |
| Part 2: General Dealing - Duty to adopt forward pricing | |
| 9. | Market movement. F Only applies once the authorised fund manager knows or has reason to believe that there would be a difference of 2% or more between the current value of the scheme property, if immediately valued, and its last calculated value (taking that as 100% for this purpose), but decides not to carry out an additional valuation under CIS 4.8.6 R (Additional valuation points). |
| 10. | Valuation taking over 2 hours. F Only applies if a new price for units of each class has not been notified to the depositary after 2 hours (or such longer period as the depositary may agree with the authorised fund manager generally or in any specific case) from the valuation point. |
| 11. | F Only under 9 and 10 will start when the relevant moment arrives, will last until the end of the dealing period and will then lapse. |
| Part 3: Individual Deviations | |
| 12. | Paragraphs 13 to 16 apply to an individual transaction without affecting the general position arrived at under Parts 1 and 2. |
| 13. | Request. F only applies if the applicant for sale or redemption so requests. |
| 14. | Large deals: F only applies, if the authorised fund manager so decides, for a large deal. |
| 15. | Postal deals: F only applies if the order or offer reaches the authorised fund manager through the post or by any similar form of one-way communication. |
| 16. | Issue or cancellation through the authorised fund manager F Only applies in the case of an issue or cancellation under CIS 4.5.3 R (Issues and cancellations through the authorised fund manager). |
| Part 4: Notification to Depositary | |
| 17. | The authorised fund manager must notify the depositary of the fact and time of any adoption of F only under 5 or Part 2. |
- 01/12/2001
CIS 4.8
Valuation
- 01/12/2004
Application
CIS 4.8.1
See Notes
This section (CIS 4.8) applies to authorised
fund managers.
- 01/12/2004
Purpose
CIS 4.8.2
See Notes
This section (CIS 4.8) protects investors by stating some basic requirements
which apply to the valuation of the scheme
property of an AUT or
an ICVC for
the purposes of determining the price of
a unit in
it. CIS
4.8.5 R and CIS
4.8.6 R provide for the frequency of valuation and when
there are to be valuation
points. A valuation which refers to a time that is not a valuation point will
not cause that time to become a valuation
point.
- 01/12/2004
Valuation: requirements
CIS 4.8.3
See Notes
(1) An investment included
in the scheme property for
which different prices are quoted according to whether it is being bought
or sold must be valued at its mid-market price.
(2) Any part of the scheme property of an authorised fund that is not an investment must be valued
at a fair value, but, for property
schemes, this is subject to CIS 12.3.2 R (Functions
of the standing independent valuer) and CIS 12.3.3 R (Special
rules for pricing).
(3) For the purposes of (1) and (2), any
fiscal charges, commissions, professional fees or other charges that were
paid, or would be payable, on acquiring or disposing of the investment or
other part of the scheme
property, must be excluded from the value of an investment or
other part of the scheme
property.
(4) The value of the scheme property of an authorised fund must be determined in accordance
with the relevant provisions of the instrument
constituting the scheme, except to the extent that this rule (CIS
4.8.3 R) or CIS 5.2.5 R (Valuation)
or CIS 5A.2.5 RCIS 12.3 (Property
schemes) applies.
(5) To determine the price at which units of any class in an authorised fund may be issued, cancelled,
sold or redeemed, the authorised
fund manager must carry out a valuation of the scheme property or of
the scheme property attributable
to a sub-fund at
each valuation point for
the authorised fund or
the sub-fund (as
the case may be).
- 01/04/2004
Valuation: method
CIS 4.8.4
See Notes
(1)
CIS
4.8.3 R(4) requires that, subject to the exceptions in it, the value of
the scheme property of
an authorised fund must
be determined in accordance with the instrument
constituting the scheme. Accordingly, the method of valuing scheme property should
be set out in this instrument.
(2) In accordance with CIS
4.8.3 R(1), where different buying and selling prices are quoted for
an investment,
it should be valued at its mid-market price. The instrument constituting the scheme should
set out the valuation method that will apply where a single price for buying and selling a security is quoted and
where separate buying and
selling prices are quoted.
(3) In the context of SETS, The London Stock Exchange publishes
an "official mid-market price" for each security,
calculated as the average of the best bid and best offer price, unweighted
by deal size.
Either the official mid-market price or the last trade price should provide
an appropriate basis of valuation. The authorised
fund manager should, however, document the choice of methodology
and ensure the procedures are applied consistently and fairly. The basis on
which the scheme property is
to be valued must also be set out in an authorised
fund's prospectus as
required by CIS
3.5.2 R(17)(2).
(4) Where the authorised fund manager has reasonable grounds
to believe that:
(a) no reliable price exists for a security
at a valuation point;
or
(b) the most recent price available does
not reflect the authorised
fund manager's best estimate of the value of a security at the valuation point;
he should value
the investment at
a price which, in his opinion, reflects a fair and reasonable price for that investment (the fair value
price).(5) The circumstances which may give rise
to a fair value price being used include:
(a) no recent trade in the security concerned; or
(b) the occurrence of a significant event
since the most recent closure of the market where the price of the security is taken.
In (b), a significant
event is one that means the most recent price of a security or a basket of securities is
materially different to the price that it is reasonably believed would exist
at the valuation point had
the relevant market been open.(6) In determining whether to use such a
fair value price, the authorised
fund manager should include in his consideration:
(a) the type of authorised fund concerned;
(b) the securities involved;
(c) the basis and reliability of the alternative price used; and
(d) the authorised
fund manager's policy on the valuation of scheme property as disclosed in the prospectus.
(7) The authorised
fund manager should document the basis of valuation (including
any fair value pricing policy) and, where appropriate, the basis of any methodology
and ensure that the procedures are applied consistently and fairly.
(8) Where a unit price is
determined using properly applied fair value prices in accordance with policies
in (7), subsequent information that indicates the price should have been different from that
calculated will not normally give rise to an instance of incorrect pricing.
- 01/12/2004
Regular valuation points
CIS 4.8.5
See Notes
(1) There must be at least two valuation points in each
calendar month and if there are only two valuation
points in any calendar month they must be two weeks or more
apart.
(2) Paragraph (1) does not apply to geared
futures and options schemes or to warrant schemes or to a sub-fund which is permitted to invest entirely
in warrants and
there must be at least one valuation
point for them on each business
day.
- 01/12/2004
Additional valuation points
CIS 4.8.6
See Notes
The authorised
fund manager must inform the depositary if the authorised fund manager determines to have
an additional valuation
point for the authorised
fund or any sub-fund,
but this does not prevent the authorised
fund manager carrying out a valuation at a time that is not
a valuation point.
- 01/12/2004
Market movement
CIS 4.8.7
See Notes
(1) This rule (CIS
4.8.7 R) applies when an authorised
fund manager is operating on the basis of historic prices and decides to carry out
an additional valuation for the purpose of paragraph (9) (Market movement)
of CIS
4.7.5 (Forward or historic pricing).
(2) When the rule applies:
(a) the valuation must be at an additional valuation point and the authorised fund manager must
inform the depositary of
that valuation point;
(b) the valuation may be made by reference
to fluctuations in an index of property whose composition is reflected by
the scheme property,
if the authorised fund manager having
taken reasonable care determines, and the depositary agrees, that an adequate valuation
may be obtained in that way.
- 01/12/2004