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The UK's FSA Lays Out More Flexible Rules For Collective Investment Schemes

by Robin Pilgrim, LawAndTax-News.com, London

25 March 2004

The UK's Financial Services Authority on Tuesday unveiled more flexible rules for UK authorised collective investment schemes.

These largely confirm the proposals put forward in a consultation paper last year, and will mean that retail investors will have access to a wider range of investment opportunities and product features, in addition to better information about the progress of their investments, whilst schemes available only to professional investors will benefit from a reduction in regulation.

Newly launched funds or existing authorised funds wishing to convert will be able to operate under the new rules from 1 April 2004, and the rules will apply to all authorised funds from 13 February 2007.

According to the FSA, the new regime is intended to:

  • provide a type of fund (now called Qualified Investor Schemes) for investment by institutional and expert investors;
  • remove the existing categorisation of non-UCITS authorised funds (separate categories of UCITS authorised funds were removed in November 2002) and to provide more flexible rules on authorised fund investments;
  • provide further flexibility for fund managers to manage their funds;
  • set out a framework to determine when investors should be consulted and to provide more useful information for investors in regular reports;
  • allow limited redemption of units in certain circumstances;
  • introduce unit classes for Authorised Unit Trusts, align rules on expenses and allow performance fees; and
  • retain the current governance structure, pending further review following discussion with the industry.

The FSA consultation did not propose the introduction of UK-authorised hedge funds. However, the widening of investment and borrowing powers and the ability to undertake short selling proposed for qualified investor schemes will allow funds to employ some investment approaches commonly adopted by hedge funds.

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