CIS Handbook

Businesses licensed POST-1.8.08 to provide services to collective investment schemes

PLEASE NOTE THAT (UNTIL 1ST JANUARY 2009) THIS PAGE DOES NOT APPLY TO ANY BUSINESS WHICH WAS A LICENCEHOLDER ON 31ST JULY 2008 Class

3 – Collective Investment Schemes Handbook

Content

1. Introduction

The Collective Investment Scheme handbook is produced to provide licenceholders (those who are licensed by the Financial Supervision Commission to provide services to 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 Collective Investment Schemes Act 2008 (“the CIS Act”), the Financial Services Act 2008 (“the Act”), secondary legislation (regulations and regulatory codes) and relevant pieces of guidance.

Important Notes:

The Collective Investment Schemes Act 2008 came into operation on 1st August 2008. It should be noted that subordinate legislation made under the Financial Supervision Act 1988 continues to have effect as if it was made under the relevant provisions of the CIS Act
Throughout the existing subordinate legislation and guidance the term “trustee” should be read as “Trustee” if the scheme is a unit trust and “fiduciary custodian” for other types of scheme structure.

Guidance (and where applicable other legislation) relating to other Classes of Regulated Activities may be found in handbooks relating to other licensable activities: Deposit taking, Investment Businesses, Corporate Service Providers, Trust Service Providers, Money transmission, and Management and Administration services.

In case of any query, please contact the Funds & Investment Services team at the Commission, on +44 (0)1624 689329.

2. Brief synopsis of schemes under the Collective Investment Schemes Act 2008

2.1 Statutory Basis

The CIS Act 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 1 of the CIS Act (and arrangements that are not to be treated as schemes are set out in the Collective Investment Schemes (Definitions) Order 2008.

2.2 Promotion of Schemes

Section 3 of the CIS Act 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 CIS Act. 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 (or the UK by virtue of the Island's designated territory status), must be specifically authorised by the FSC under Schedule 1 to the CIS Act 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 under Schedule 2 to the CIS Act is a scheme established in the Isle of Man which is not an Authorised Scheme or an Exempt Scheme. International Schemes may not be promoted to the general public in the Isle of Man.

The Commission's approach to the regulation of 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.

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 Exempt Schemes

Exempt 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.

2.6 Recognised Schemes

A Collective Investment Scheme established in another jurisdictions which has been recognised under Schedule 4 of the CIS Act 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 (UK, Ireland, Jersey or Guernsey) or on the basis of the terms of the particular scheme. You may also like to refer to the guidance notes for Recognised Schemes, the Financial Supervision (Recognised Schemes) (Facilities in the Island) Regulations 1988. and the Financial Supervision (Recognised Schemes) (Notification) Regulations 1988.

2.7 Overseas Schemes

Schemes that are established outside the Isle of Man and administered or managed in the Island are not subject to detailed Isle of Man regulations or approvals in the Isle of Man, (but will be subject to the regulatory regime in their home jurisdiction), and investors in such funds are not protected by any Isle of Man statutory compensation arrangements in the event of the fund’s failure. The Commission does not vouch for the financial soundness of such funds or for the correctness of any statements made or opinions expressed with regard to it. Schemes which were full international schemes, specialist funds, qualifying funds, professional investor funds, experienced investor funds or exempt schemes when the CIS Act came into operation can continue to be such schemes.

2.8 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/or Banking Handbook (as relevant).

3. Legislation

3.1 Primary legislation

The Primary legislation governing Collective Investment Scheme activities in or from the Isle of Man is the Collective Investment Schemes Act 2008 (CIS Act) and the Financial Services Act 2008 (the Act).

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

3.2 Other legislation which may affect collective investment schemes but which is not made under the Financial Services Act 2008 or the Collective Investment Schemes Act 2008:

Legislation applicable to Authorised Schemes

Legislation applicable to Full International Collective Investment Schemes

Legislation applicable to Other International Collective Investment Schemes

Legislation applicable to Recognised Schemes

Legislation applicable to Promotion of Schemes

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

Legislation applicable to Custody of Experienced Investor Funds

General legislation

Financial Services Review Regulations 2001

4. Guidance applicable to collective investment schemes

Important Notes:

The Collective Investment Schemes Act 2008 came into operation on 1st August 2008. It should be noted that subordinate legislation made under the Financial Supervision Act 1988 continues to have effect as if it was made under the relevant provisions of the CIS Act
Throughout the existing subordinate legislation and guidance the term “trustee” should be read as “Trustee” if the scheme is a unit trust and “fiduciary custodian” for other types of scheme structure.

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	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
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
Q&A Regulated Promoter and Regulated Financial Adviser	Qualifying Funds & Experienced Investor Funds
Regulated Financial Adviser - Standard Modifications for Qualifying Type EIFs	Experienced Investor Funds
Regulated Financial Adviser - Standard Modifications for Qualifying Funds	Qualifying Funds
Professional Investor Fund - High Level Key Features	Professional Investor Funds
Notification of Recognised Schemes	Recognised Overseas Schemes
Recognition of Collective Investment Schemes under Schedule 4 Para 1, CIS Act - Guidance Note on Scheme Particulars	Recognised Schemes
Recognition of Collective Investment Schemes under Schedule 4 Para 2, CIS Act - 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:

6. Sundry web links and other matters

The Isle of Man Fund Management Association www.fma.org.im

The Alternative Investment Management Association www.aima.org

The International Organisation of Securities Commissions www.iosco.org/

DisabledGo Information

Terms & Conditions

F.S.C

Businesses licensed POST-1.8.08 to provide services to collective investment schemes

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