Section 5

Question 1

Definition of a Collective Investment Scheme (CIS)

Answer 1

• Unit trusts
• Open ended investment companies (OEICs): now referred to by the FCA as
investment companies with variable capital (ICVCs)

Question 2

UK regulation of CISs by the FCA

Answer 2

Regulated

• authorised - UK funds
• recognised - UCITS (Europe)

Question 3

Investment trust companies

Answer 3

An investment trust company is not considered a collective investment scheme by the FCA.

Question 4

UCITS status

Answer 4

• A regulated CIS may apply to FCA to seek UCITS (Undertaking for Collective Investments in Transferable Securities) status
• Such schemes can then be marketed throughout the EEA

Question 5

UCITS funds

Answer 5

• The Product Directive allows:
- Transferable securities
• Maximum of 10% of NAV of fund in any single issuer
- Money market instruments
- Other UCITS funds
• Fund of funds
- Bank deposits
- Financial derivatives
- Index tracker funds
- Borrowing restrictions
• UCITS funds cannot invest in commodity derivatives and property

Question 6

UCITS IV

Answer 6

UCITS IV was implemented on 1 July 2011 and introduced the following changes:
• Passporting for management companies
• Key Investor Information Documents (KIIDs)
• Improved cross-border marketing of authorised funds
• A single framework for mergers
• Master-feeder structures
• Improved supervisory co-operation

Question 7

Master-feeder structures

Answer 7

Where several funds (the feeder funds) can invest the majority of their
assets into another (the master fund). Investors buy units in the feeder
fund. The master fund makes all of the market transactions on behalf of the
feeders.