Class 3 - Collective Investment Schemes
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
Services to Collective Investment Schemes
A licence to carry on the Class 3 regulated activity of Services to Collective Investment Schemes permits a business operating in or from the Isle of Man (within certain criteria and with specified exclusions) to provide the following services to collective investment schemes: act as a manager, administrator, trustee, fiduciary custodian, custodian, promoter, asset manager or investment adviser.
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 3 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; and
- Recognised Schemes under Schedule 4 to the CIS Act.
General 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.
Full details of regulated activities, exclusions and exemptions from licensing may be found in the Collective Investment Schemes handbook. A licenceholder is obliged to comply with any licence conditions that have been imposed by the Commission and which are shown on the licence.
The Collective Investment Schemes handbook also contains links to other legislation relating to licenceholders, including the Financial Services Rule Book 2008 which contains the detailed rules to be complied with by all licenceholders. Guidance on rules and on other regulatory matters may also be found in the handbook.
Notes about Schemes/funds
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: Authorised Collective Investment Schemes (Compensation) Regulations 2008 only applies to investors in Authorised Schemes.
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 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”. From 1st November 2007 no new Experienced Investor Funds can be established. 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.
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 International Schemes are regarded as private arrangements and are not subject to regulation.
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.
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) 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.
Other
The Commission’s General Licensing Policy provides guidance for licenceholders. A licenceholder and its key staff are required to be fit and proper persons. The Commission’s licensing policy is to apply a test of fitness and propriety in the key areas of integrity, competence and solvency.
Licenceholders should also note the requirements of anti money laundering legislation and handbook.
Please also see the list of licenceholders.
Unless otherwise agreed with the Commission, all businesses which held licences for collective investment schemes’ business until 31st July 2008, will be expected to hold licences to conduct Class 3 Services to Collective Investment Schemes with effect from 1st January 2009.
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