Class 3 - Collective Investment Schemes
Information about types of Collective Investment Schemes and Services to Collective Investment Schemes
Background to Collective Investment Schemes
The Collective Investment Schemes Act 2008 ("the CIS Act") sets out the statutory framework for the regulation of Collective Investment Schemes ("schemes" or "funds"), more commonly known as unit trusts, mutual funds or open-ended investment companies. The CIS Act sets out 4 classes of scheme:-
- Authorised Schemes under Schedule 1 to the CIS Act;
- International Schemes (including full international schemes and other prescribed classes of scheme) under Schedule 2 to the CIS Act;
- Exempt schemes under Schedule 3; and
- Recognised Schemes under Schedule 4 to the CIS Act.
In addition, functionaries in the Isle of Man who provide services to schemes established elsewhere are subject to regulation under the Financial Services Act 2008.
Schemes that may be promoted to the general public on the Isle of Man
Before deciding whether to invest in any scheme, prospective investors should consider matters including:
- the information and risks set out in the offering document of a scheme;
- whether the scheme is appropriate for their investment objectives; and
- whether they meet any entry criteria for the scheme.
Authorised Schemes
Any scheme established in the Island which is promoted to the general public in the Island (or the UK by virtue of the Island's designated territory status) must be authorised by the Commission under Schedule 1 to the CIS Act.. Authorised Schemes are subject to detailed regulation concerning their structure and operation.
The investors’ compensation scheme only applies to investors in Authorised Schemes:
Recognised Schemes
Collective investment schemes which are managed in or authorised under the law of another country or territory outside the Island may not be promoted to the general public in the Island unless they have been granted recognition by the Financial Supervision Commission under Schedule 4 to the CIS Act. Once granted recognition, a Recognised Scheme may be promoted to the general public in the Island.
A Recognised Scheme should be subject to equivalent regulatory requirements in its own jurisdiction 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.
The investors’ compensation scheme does not apply to Recognised Schemes. Potential investors may wish to check whether they are protected by compensation arrangements in the scheme’s home jurisdiction.
Isle of Man Schemes that cannot be promoted directly to the general public on the Isle of Man
International Schemes
Any scheme established in the Isle of Man which is not an Authorised Scheme or an Exempt Scheme, is an International Scheme under Schedule 2 to the CIS Act. International Schemes may not be promoted directly to the general public in the Isle of Man.
- Full International Schemes - The Commission does not prescribe the types of schemes which can be full international schemes. The Commission aims to provide a flexible regulatory framework in which new innovative products, which meet the needs of the market place operators, can be developed. Full international schemes are not subject to any direct approval or authorisation process, however the manager of such a scheme must have the Commission’s permission to act, and persons comprising the Governing Body of the scheme must be fit and proper persons.
The manager and trustee/fiduciary custodian of a full international scheme must be Authorised Persons. In granting permission for the manager to manage the scheme, the Commission reviews the constitutional documents of the scheme. The Commission does not, and is not required to, comment on the investment objectives or strategy of the scheme or its suitability for any investor or any class of investor. Investors in such funds are not protected by any statutory compensation arrangements in the event of the fund’s failure.
- Specialist Funds - The Specialist Fund (SF) is a sub-category of International scheme which is available only to specialist investors who are generally institutional investors and high net worth individuals. The minimum investment in a SF is US$100,000.
A SF is not subject to approval in the Isle of Man and investors in such funds are not protected by any statutory compensation arrangements in the event of the fund’s failure. The Commission does not vouch for the financial soundness of the fund or for the correctness of any statements made or opinions expressed with regard to it.
- Qualifying Funds - The Qualifying Fund (QF) is a sub-category of International scheme which is available only to qualifying investors who are non retail investors.
A QF is not subject to approval in the Isle of Man and investors in such funds are not protected by any statutory compensation arrangements in the event of the fund’s failure. The Commission does not vouch for the financial soundness of the fund or for the correctness of any statements made or opinions expressed with regard to it.
- Professional Investor Funds - The Professional Investor Fund (PIF) is a sub-category of International scheme which is available only to professional investors who are generally market professionals and who have net assets in excess of US$1 million. The minimum investment in a PIF is US$100,000.
A PIF is not subject to approval in the Isle of Man and investors in such funds are not protected by any statutory compensation arrangements in the event of the fund’s failure. The Commission does not vouch for the financial soundness of the fund or for the correctness of any statements made or opinions expressed with regard to it.
Experienced Investor Fund - The Experienced Investor Fund (EIF) is a sub-category of international scheme aimed at the "Experienced Investor". Since November 2007 it has not been permissible to establish new Experienced Investor Funds.
An EIF is not subject to approval in the Isle of Man and investors in such funds are not protected by any statutory compensation arrangements in the event of the fund’s failure. The Commission does not vouch for the financial soundness of the fund or for the correctness of any statements made or opinions expressed with regard to it.
Schemes that are not subject to regulation in the Isle of Man
- Exempt Schemes - Exempt schemes (as defined in Schedule 3 to the CIS Act) are Isle of Man schemes that must have less than 50 investors and their relevant constitutional documents must expressly prohibit the making of an invitation to the public to subscribe in any part of the world.
Exempt Schemes are regarded as private arrangements and are not subject to regulation. An Exempt Scheme is not subject to approval in the Isle of Man and investors in such funds are not protected by any statutory compensation arrangements in the event of the fund’s failure. The Commission does not vouch for the financial soundness of the fund or for the correctness of any statements made or opinions expressed with regard to it. Where Exempt Schemes have managers or administrators outside the Island, such overseas functionaries are not subject to regulation on the Island or regulatory consent to act for the scheme.
- Schemes established outside the Isle of Man but administered or managed in the Isle of Man – 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). 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 the fund or for the correctness of any statements made or opinions expressed with regard to it.
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