Thomson Reuters · Web viewContents. Page. Contents. Page. Glossary. Transitional. Chapter 12. Rule...

Collective Investment Schemes Rules 2010

(COLL)Version No. 4

Effective: 1 July 2013 – 31 December 2014

Includes amendments made byGovernance and Controlled Functions (Consequential and

Miscellaneous) Amendments Rules 2012(QFCRA Rules 2012-5)

Collective Investment Schemes Rules 2010made under the

Financial Services Regulations

ContentsPage

Chapter 1 General provisions 1

Part 1.1 Introductory 11.1.1 Name of rules 11.1.2 Commencement 11.1.3 Application of COLL 11.1.4 Glossary 1

V4 Collective Investment Schemes Rules 2010 contents 1

Effective: 1/Jul/13 – 31/Dec/14

Contents

Page

Part 1.2 Basic concepts and key terms—all schemes 3Division 1.2.A Collective investment schemes 31.2.1 What is a collective investment scheme? 3

Division 1.2.B Participants, scheme property, units and unitholders 41.2.2 Who is a participant? 41.2.3 What is the scheme property? 41.2.4 What is a unit? 41.2.5 Who is the unitholder? 5

Division 1.2.C QFC schemes and non-QFC schemes 51.2.6 What is a QFC scheme? 51.2.7 What is a non-QFC scheme? 5

Division 1.2.D Operator and independent entity 51.2.8 Who is the operator? 51.2.9 Who is the independent entity? 6

Division 1.2.E Open-ended and closed-ended schemes 71.2.10 What are open-ended and closed-ended schemes? 7

Division 1.2.F Umbrella schemes 71.2.11 What are umbrella schemes and subschemes? 7

Division 1.2.G Qualified investors and retail customers 81.2.12 Who is a qualified investor or retail customer? 8

Part 1.3 Basic concepts and key terms—QFC schemes 10

Division 1.3.A Types of QFC schemes generally 101.3.1 QFC schemes are qualified investor or retail schemes 101.3.2 What is a QFC qualified investor scheme? 101.3.3 What is a QFC retail scheme? 101.3.4 Types of QFC retail schemes 10

contents 2 Collective Investment Schemes Rules 2010 V4


Contents

Page1.3.5 What is a QFC UCITS type scheme? 10

Division 1.3.B Legal forms for QFC schemes 111.3.6 Permitted legal forms for QFC schemes 111.3.7 What is a QFC collective investment company (or CIC)? 111.3.8 What is a QFC collective investment partnership (or CIP)? 111.3.9 What is a QFC collective investment trust (or CIT)? 121.3.10 What is another permitted form of QFC scheme? 12

Division 1.3.C Particular types of QFC schemes 121.3.11 Islamic funds 121.3.12 Money-market funds 131.3.13 Other types of QFC schemes 14

Part 1.4 Basic concepts and key terms—non-QFC schemes 15

1.4.1 What is a non-QFC retail customer scheme? 151.4.2 What is a non-QFC qualified client scheme? 15

Chapter 2 Registration of schemes in QFC 162.1.1 Schemes established in QFC must be registered 162.1.2 Application for registration of scheme established in QFC 162.1.3 Decision on application for registration of scheme established in QFC 17

Chapter 3 Constitutional requirements—QFC schemes 21

Part 3.1 Constitutional document—QFC schemes 213.1.1 What is the constitutional document for a QFC scheme? 213.1.2 Matters to be included in constitutional document—all QFC schemes 213.1.3 Relationship between constitutional document and these rules—all

QFC schemes 21



Contents

Page3.1.4 Constitutional document and checklist to be filed with registration

application—all QFC schemes 223.1.5 Amendments of constitutional document—all QFC schemes 233.1.6 Prohibited amendments of constitutional document—QFC UCITS type

schemes 23

Part 3.2 Units—QFC schemes 24Division 3.2.A Units—all QFC schemes 243.2.1 Fractions of units—all QFC schemes 243.2.2 Smaller and larger denomination shares etc—CICs 243.2.3 Bearer certificates may not be issued—all QFC schemes 25

Division 3.2.B Units—QFC qualified investor schemes 253.2.4 Classes of units—QFC qualified investor schemes 253.2.5 Limited issue—QFC qualified investor schemes 26

Division 3.2.C Units—QFC retail schemes 263.2.6 Classes of units—QFC retail schemes 263.2.7 Currency class units—QFC retail schemes 273.2.8 Rights of unit classes—QFC retail schemes 273.2.9 Smaller and larger denomination shares—QFC retail schemes 293.2.10 Subdivision and consolidation of units—QFC retail schemes 293.2.11 Guarantees and capital protection—QFC retail schemes 303.2.12 Switching rights—QFC retail umbrella schemes 30

Chapter 4 The operator and independent entity—QFC schemes 32

Part 4.1 The operator—all QFC schemes 324.1.1 Requirements for operator—all QFC schemes 324.1.2 Operator must comply with legal and regulatory requirements—all

QFC schemes 33



Contents

Page4.1.3 Functions of operator generally—all QFC schemes 344.1.4 Duty of operator to report certain breaches of law—all QFC schemes 354.1.5 Particular duties of operator—all QFC schemes 364.1.6 Register of unitholders—all QFC schemes 374.1.7 Records of operator—all QFC schemes 374.1.8 Operator must give information etc to independent entity and auditor—

all QFC schemes 394.1.9 Maintenance of capital notification—CIC’s 39

Part 4.2 The independent entity—QFC schemes 40Division 4.2.A Independent entity generally—QFC schemes 404.2.1 Requirements for independent entity—all QFC schemes 404.2.2 Independent entity must comply with legal and regulatory

requirements—all QFC schemes 434.2.3 Oversight functions of independent entity—all QFC schemes 444.2.4 Duty of independent entity to report certain breaches of law etc—all

QFC schemes 464.2.5 Particular duties of independent entity—all QFC schemes 474.2.6 Property safeguarding functions of independent entity—all QFC

schemes 474.2.7 Records of independent entity—all QFC schemes 494.2.8 Independent entity must give information etc to operator and auditor—

all QFC schemes 50

Division 4.2.B Non-QFC independent entities—QFC schemes 514.2.9 Non-QFC independent entities—criteria for Regulatory Authority action 514.2.10 Non-QFC independent entities—annual compliance certificate 514.2.11 Non-QFC independent entities—oversight of property safeguarding

functions by operators 524.2.12 Non-QFC independent entities—removal by operators 534.2.13 Non-QFC independent entities—removal by Regulatory Authority 54



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Part 4.3 Operator and independent entity other provisions—QFC schemes 57

4.3.1 Duties of officers etc of operator and independent entity—all QFC schemes 57

4.3.2 Provisions of ch 4 do not limit other functions 57

Chapter 5 Investor relations—QFC schemes 59

Part 5.1 Transactions with affected persons—QFC schemes 59

5.1.1 Who is an affected person for a QFC scheme? 595.1.2 Transactions with affected persons—general rule for all QFC schemes 605.1.3 Transactions with affected persons—prior notice to unitholders of QFC

schemes 605.1.4 Transactions with affected persons—transactions involving 5% or

more of QFC scheme’s net asset value 615.1.5 Transactions with affected persons—details required for QFC

scheme’s annual reports 615.1.6 Transactions with affected persons—additional restrictions for QFC

retail schemes 62

Part 5.2 Prospectus requirements—QFC schemes 665.2.1 Prospectus to be drawn up—all QFC schemes 665.2.2 Prospectus etc to be made available—all QFC schemes 665.2.3 General information requirements for prospectus—all QFC schemes 675.2.4 Other general requirements for prospectus—all QFC schemes 675.2.5 Prospectus, checklist and any translations to be filed with registration

application—all QFC schemes 685.2.6 Revisions of prospectus etc—all QFC schemes 69



Contents

Page

Part 5.3 Prospectus responsibility—QFC schemes 725.3.1 Persons responsible for prospectus—all QFC schemes 725.3.2 Responsibility for expert statements in prospectus—all QFC schemes 735.3.3 Liability for prospectus—all QFC schemes 735.3.4 Exceptions from liability for prospectus—all QFC schemes 74

Part 5.4 Unitholder approvals and notice—QFC schemes 78

Division 5.4.A Unitholder approvals and notice—QFC qualified investor schemes 78

5.4.1 Changes requiring unitholder approval or notice—QFC qualified investor schemes 78

Division 5.4.B Unitholder approvals and notice—QFC retail schemes 795.4.2 Fundamental changes requiring prior approval by unitholder meeting—

QFC retail schemes 795.4.3 Significant changes requiring pre-event notification—QFC retail

schemes 805.4.4 Notifiable changes—QFC retail schemes 81

Part 5.5 Unitholder meetings—QFC schemes 82Division 5.5.A Unitholder meetings—QFC qualified investor schemes 825.5.1 Unitholder meetings—QFC qualified investor schemes 82

Division 5.5.B Unitholder meetings—QFC retail schemes 825.5.2 Special meaning of unitholder in div 5.5.B—QFC retail schemes 825.5.3 Application of div 5.5.B to class meetings—QFC retail schemes 835.5.4 General meetings of unitholders—QFC retail schemes 835.5.5 Notice of general meetings of unitholders—QFC retail schemes 845.5.6 Quorum for unitholder meetings—QFC retail schemes 865.5.7 Resolutions at unitholder meetings—QFC retail schemes 865.5.8 Voting rights at unitholder meetings—QFC retail schemes 87



Contents

Page5.5.9 Right to demand poll at unitholder meetings—QFC retail schemes 885.5.10 Proxies at unitholder meetings—QFC retail schemes 895.5.11 Chair, adjournment and minutes of unitholder meetings—QFC retail

schemes 89

Part 5.6 Reports, accounts and auditors—QFC schemes 91

Division 5.6.A Accounting standards and auditors—all QFC schemes 915.6.1 Accounting standards—all QFC schemes 915.6.2 Appointment and removal of auditors etc—all QFC schemes 92

Division 5.6.B Reports and accounts—QFC qualified investor schemes 93

5.6.3 Reports and accounts generally—QFC qualified investor schemes 935.6.4 Contents of annual reports—QFC qualified investor schemes 945.6.5 Contents of half-yearly reports—QFC qualified investor schemes 965.6.6 Operator’s reports—QFC qualified investor schemes 965.6.7 Independent entity’s reports—QFC qualified investor schemes 965.6.8 Auditor’s reports—QFC qualified investor schemes 97

Division 5.6.C Reports and accounts—QFC retail schemes 985.6.9 Preparation of long and short reports—QFC retail schemes 985.6.10 Contents of short reports—QFC retail schemes 995.6.11 Contents of annual long reports—QFC retail schemes 1015.6.12 Contents of half-yearly long reports—QFC retail schemes 1035.6.13 Operator’s reports—QFC retail schemes 1035.6.14 Comparative tables—QFC retail schemes 1065.6.15 Independent entity’s reports—QFC retail schemes 1075.6.16 Auditor’s reports—QFC retail schemes 1085.6.17 Provision of short reports—QFC retail schemes 1085.6.18 Publication and availability of annual and half-yearly long reports—

QFC retail schemes 109



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Chapter 6 Investment and borrowing—QFC qualified investor schemes 111

Part 6.1 Investment and borrowing generally—QFC qualified investor schemes 111

6.1.1 General duties of operator in relation to investment and borrowing—QFC qualified investor schemes 111

6.1.2 Investment powers generally—QFC qualified investor schemes 1126.1.3 Permissible investments generally—QFC qualified investor schemes 1126.1.4 Spread of risk—QFC qualified investor schemes 1136.1.5 Investments by money-market funds—QFC qualified investor schemes 1136.1.6 Application of ch 6 to umbrella schemes—QFC qualified investor

schemes 114

Part 6.2 Particular kinds of investments and transactions—QFC qualified investor schemes 115

Division 6.2.A Collective investments schemes—QFC qualified investor schemes 115

6.2.1 Investments in schemes—QFC qualified investor schemes 115

Division 6.2.B Derivatives, forward transactions and commodity contracts—QFC qualified investor schemes 116

6.2.2 Delivery of property under transactions in derivatives etc—QFC qualified investor schemes 116

6.2.3 Valuation of OTC derivatives—QFC qualified investor schemes 1176.2.4 Cover for transactions in derivatives and forward transactions—QFC

qualified investor schemes 1176.2.5 Continuing nature of limits and requirements for derivatives and

forward positions—QFC qualified investor schemes 118

Division 6.2.C Immovables—QFC qualified investor schemes 1186.2.6 Standing independent valuer—QFC qualified investor schemes 118



Contents

Page6.2.7 Requirements for making investments in immovables—QFC qualified

investor schemes 1196.2.8 Investments in non-Qatari immovables through intermediate holding

vehicles—QFC qualified investor schemes 1206.2.9 Additional requirements for immovables—QFC qualified investor

schemes 1216.2.10 Reports on valuation of immovables before acquisition or disposal—

QFC qualified investor schemes 1236.2.11 Valuation of immovables part of scheme property—QFC qualified

investor schemes 1246.2.12 Annual and other periodic valuation reports—QFC qualified investor

schemes 1266.2.13 Basis of valuation by standing independent valuer—QFC qualified

investor schemes 1276.2.14 Appointment of standing independent valuer—QFC qualified investor

schemes 1286.2.15 Standing independent valuer not to deal in immovables etc—QFC

qualified investor schemes 1296.2.16 Removal of standing independent valuer—QFC qualified investor

schemes 130

Part 6.3 Stock lending and repos—QFC qualified investor schemes 131

6.3.1 Permitted stock lending and repos—QFC qualified investor schemes 131

Part 6.4 Borrowing—QFC qualified investor schemes 1326.4.1 Borrowing—QFC qualified investor schemes 132



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Chapter 7 Investment and borrowing—QFC retail schemes 134

Part 7.1 Investment and borrowing introduction—QFC retail schemes 134

7.1.1 Objects of ch 7—QFC retail schemes 1347.1.2 General duties of operator in relation to investment and borrowing—

QFC retail schemes 1357.1.3 Treatment of obligations under ch 7—QFC retail schemes 1377.1.4 Valuation for ch 7—QFC retail schemes 1377.1.5 What is an approved money-market instrument? 1387.1.6 What is a transferable security? 1397.1.7 What is an eligible market? 1407.1.8 What is an approved derivative? 1417.1.9 What is an approved security? 1427.1.10 Application of ch 7 to umbrella schemes—QFC retail schemes 142

Part 7.2 Investments generally—QFC retail schemes 1437.2.1 Investment powers generally—QFC retail schemes 1437.2.2 Permissible investments generally—QFC retail schemes 1447.2.3 Significant influence through transferable securities—UCITS type

schemes 1447.2.4 Investments by money-market funds—QFC retail schemes 145

Part 7.3 Investment diversification—QFC retail schemes 147

7.3.1 Prudent spread of risk—QFC retail schemes 1477.3.2 Spread for certain transferable securities and money-market

instruments—QFC retail schemes 1477.3.3 Spread for transferable securities and money-market instruments

issued by single issuer or group—QFC retail schemes 148



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Page7.3.4 Spread exception for schemes replicating indices—QFC retail

schemes 1497.3.5 Spread for government or public securities issued by single issuer—

QFC retail schemes 1517.3.6 Spread for units in schemes etc—QFC retail schemes 1537.3.7 Spread for OTC derivatives—QFC retail schemes 1537.3.8 Spread for deposits—QFC retail schemes 1557.3.9 Spread for certain investments with single person—QFC retail

schemes 1557.3.10 Concentration—QFC retail schemes 1567.3.11 Application of pt 7.3—QFC retail schemes 157

Part 7.4 Particular kinds of investments—QFC retail schemes 158

Division 7.4.A Transferable securities—QFC retail schemes 1587.4.1 General investment requirements for non-approved transferable

securities—QFC retail schemes 1587.4.2 Investments in closed-ended schemes as transferable securities—

QFC retail schemes 1597.4.3 Investments linked etc to other assets as transferable securities—QFC

retail schemes 161

Division 7.4.B Money-market instruments—QFC retail schemes 1627.4.4 Investments in approved money-market instruments not admitted to

eligible markets etc—QFC retail schemes 162

Division 7.4.C Nil and partly paid securities—QFC retail schemes 1657.4.5 Investments in nil and partly paid securities—QFC retail schemes 165

Division 7.4.D Collective investment schemes—QFC retail schemes 1667.4.6 Investments in collective investment schemes generally —QFC retail

schemes 1667.4.7 Investments in associated schemes—QFC retail schemes 167



Contents

PageDivision 7.4.E Derivatives and forward transactions—QFC retail

schemes 1697.4.8 Derivatives and forward transactions generally—QFC retail schemes 1697.4.9 Permitted transactions in derivatives and forward transactions—QFC

retail schemes 1717.4.10 Permitted financial indices—QFC retail schemes 1727.4.11 Delivery of property under transactions in derivatives and forward

transactions—QFC retail schemes 1737.4.12 Requirement to cover sales—QFC retail schemes 1737.4.13 OTC transactions in derivatives—QFC retail schemes 1747.4.14 Risk management for transactions in derivatives and forward

transactions—QFC retail schemes 176

Division 7.4.F Deposits—QFC retail schemes 1777.4.15 Investments in deposits—QFC retail schemes 177

Part 7.5 Exposure for derivatives and forward transactions—QFC retail schemes 178

7.5.1 Cover for transactions in derivatives and forward transactions—QFC retail schemes 178

7.5.2 Borrowing not available for cover—QFC retail schemes 1797.5.3 Continuing nature of limits and requirements for derivatives and

forward positions—QFC retail schemes 180

Part 7.6 Stock lending and repos—QFC retail schemes 181

7.6.1 Stock lending and repos generally—QFC retail schemes 1817.6.2 Stock lending requirements—QFC retail schemes 1817.6.3 Treatment of collateral for stock lending—QFC retail schemes 1837.6.4 No limits on stock lending and repos—QFC retail schemes 185



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Part 7.7 Cash, borrowing, lending and other provisions—QFC retail schemes 186

7.7.1 Cash and near cash—QFC retail schemes 1867.7.2 General power to borrow—QFC retail schemes 1867.7.3 Borrowing limits—QFC retail schemes 1887.7.4 Restrictions on lending money—QFC retail schemes 1887.7.5 Restrictions on lending property other than money—QFC retail

schemes 1897.7.6 General power to accept or underwrite placings—QFC retail schemes 1907.7.7 Guarantees and indemnities—QFC retail schemes 191

Chapter 8 Operating duties and responsibilities—QFC schemes 193

Part 8.1 Dealing—QFC schemes 193Division 8.1.A Dealing—QFC qualified investor schemes 1938.1.1 Application of div 8.1.A to umbrella schemes—QFC qualified investor

schemes 1938.1.2 Initial offer—QFC qualified investor schemes 1948.1.3 How units are issued and redeemed etc—QFC qualified investor

schemes 1948.1.4 Controls over issue and redemption of units—QFC qualified investor

schemes 1958.1.5 Issue and redemption of units in multiple classes—QFC qualified

investor schemes 1968.1.6 Issue and redemption generally—QFC qualified investor schemes 1968.1.7 When instructions for issue and redemption must be given—QFC

qualified investor schemes 1988.1.8 Limited issue—QFC qualified investor schemes 1988.1.9 Issue only to qualified investors—QFC qualified investor schemes 199



Contents

PageDivision 8.1.B Dealing—QFC retail schemes 1998.1.10 Application of div 8.1.B to umbrella schemes—QFC retail schemes 1998.1.11 Initial offers—QFC retail schemes 2008.1.12 How units are issued and redeemed etc—QFC retail schemes 2008.1.13 Controls over issue and redemption of units—QFC retail schemes 2018.1.14 Issue and redemption of units in multiple classes—QFC retail

schemes 2028.1.15 Changes to number of units issued or redeemed—QFC retail schemes 2038.1.16 Payment for issued units—QFC retail schemes 2038.1.17 Issue and redemption generally—QFC retail schemes 2048.1.18 When instructions for issue or redemption must be given—QFC retail

schemes 2048.1.19 Payment for redeemed units—QFC retail schemes 2058.1.20 Issue or redemption otherwise than for cash—QFC retail schemes 2068.1.21 Deferred redemption—QFC retail schemes 207

Part 8.2 Valuation and pricing—QFC schemes 208Division 8.2.A Valuation and pricing—QFC qualified investor

schemes 2088.2.1 Application of div 8.2.A to umbrella schemes—QFC qualified investor

schemes 2088.2.2 Valuation—QFC qualified investor schemes 2088.2.3 Valuation points—QFC qualified investor schemes 2098.2.4 Prices of units—QFC qualified investor schemes 210

Division 8.2.B Valuation and pricing—QFC retail schemes 2108.2.5 Application of div 8.2.B to umbrella schemes—QFC retail schemes 2118.2.6 Duty of operator to rectify breaches of div 8.2.B—QFC retail schemes 2118.2.7 Valuation requirement——QFC retail schemes 2138.2.8 General rules for valuation of scheme property—QFC retail schemes 2138.2.9 Fair value pricing for securities—QFC retail schemes 2148.2.10 Valuation points—QFC retail schemes 216



Contents

Page8.2.11 Pricing controls of operator—QFC retail schemes 2168.2.12 Review by independent entity of operator’s pricing controls etc—QFC

retail schemes 2178.2.13 Recording and reporting incorrect pricing—QFC retail schemes 2198.2.14 Prices of units—QFC retail schemes 2198.2.15 Issue and redemption prices—QFC retail schemes 2208.2.16 Dilution—QFC retail schemes 2208.2.17 Particular duties of independent entity in relation to dilution—QFC

retail schemes 2218.2.18 Publication of prices—QFC retail schemes 222

Division 8.2.C Valuation—money-market funds 2238.2.19 Maintaining value—all money-market funds 223

Part 8.3 Title and register—QFC schemes 2258.3.1 Unitholder register requirements—all QFC schemes 2258.3.2 Transfer of units by act of parties—all QFC schemes 2268.3.3 Certificates for units—all QFC schemes 2278.3.4 Conversion of units—all QFC schemes 228

Part 8.4 Operator and independent entity appointment and removal—QFC schemes 229

8.4.1 Initial appointment of operator and independent entity—all QFC schemes 229

8.4.2 Removal of operator—QFC schemes 2298.4.3 Retirement of operator—all QFC schemes 2318.4.4 Consequences of removal or retirement of operator—all QFC

schemes 2328.4.5 Removal of independent entity by unitholders—all QFC schemes 2328.4.6 Removal of independent entity no longer eligible for appointment—all

QFC schemes 2338.4.7 Retirement of independent entity—all QFC schemes 234



Contents

Page8.4.8 Consequences of removal or retirement of independent entity—all

QFC schemes 235

Part 8.5 Outsourcing—QFC schemes 2368.5.1 What is outsourcing? 2368.5.2 Outsourcing by operator—all QFC schemes 2378.5.3 Outsourcing by independent entity—all QFC schemes 2378.5.4 Outsourcing notice and information—all QFC schemes 2388.5.5 Provisions applying to outsourcing by operator and independent entity

—all QFC schemes 2398.5.6 Outsourcing management—all QFC schemes 2428.5.7 Application of pt 8.5 to further outsourcing—all QFC schemes 2448.5.8 Systems and controls for outsourcings—all QFC schemes 244

Part 8.6 Payments—QFC schemes 245Division 8.6.A Payments—QFC qualified investor schemes 2458.6.1 Payments—QFC qualified investor schemes 245

Division 8.6.B Payments—QFC retail schemes 2458.6.2 Payments out of scheme property—QFC retail schemes 2458.6.3 Performance fees—QFC retail schemes 2468.6.4 Charges on buying and selling units—QFC retail schemes 2478.6.5 Redemption charges—QFC retail schemes 2488.6.6 Charges on exchange of units in umbrella schemes—QFC retail

schemes 2498.6.7 Allocation of payments to income or capital—QFC retail schemes 2498.6.8 Prohibition of promotional payments—QFC retail schemes 2508.6.9 Expenses in relation to property—QFC retail schemes 2508.6.10 Payment of liabilities on transfer of assets—QFC retail schemes 2508.6.11 Attribution of scheme property to subschemes—QFC retail schemes 251



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Part 8.7 Accounting periods—QFC schemes 2528.7.1 Accounting periods—all QFC schemes 252

Part 8.8 Income allocation and distribution—QFC schemes 254

8.8.1 Application of pt 8.8 to umbrella schemes—all QFC schemes 2548.8.2 Income allocation and distribution—all QFC schemes 2548.8.3 Unclaimed, minimal and joint unitholders distributions—all QFC

schemes 257

Part 8.9 Names—QFC schemes 2588.9.1 Name of scheme etc—all QFC schemes 2588.9.2 Use of certain names—all QFC schemes 261

Part 8.10 Shari’a Supervisory Board—all Islamic funds 2638.10.1 Islamic fund must have a supervisory board—all Islamic funds 263

Chapter 9 Suspension, winding up and transfer schemes—QFC schemes 264

Part 9.1 Suspension and restart of dealings—QFC schemes 264

9.1.1 Suspension and restart of dealings—all QFC schemes 264

Part 9.2 Winding up—QFC schemes 2689.2.1 Application of pt 9.2 to subschemes of QFC umbrella schemes—all

QFC schemes 2689.2.2 When scheme may be wound up—all QFC schemes 2689.2.3 Winding-up required by constitutional document—all QFC schemes 2699.2.4 Winding-up at direction of unitholders—all QFC schemes 269



Contents

Page9.2.5 Notification to Regulatory Authority that scheme not commercially

viable etc—all QFC schemes 2709.2.6 Winding-up by operator or independent entity—all QFC schemes 2719.2.7 Accounting and reports during winding-up—all QFC schemes 274

Part 9.3 Transfer schemes—QFC schemes 2759.3.1 Purpose—pt 9.3 2759.3.2 Transfer schemes—all QFC schemes 275

Chapter 10 Financial promotions and investment activities—all schemes 277

Part 10.1 Financial promotions generally—all schemes 27710.1.1 Declaration of non-QFC retail customer schemes 27710.1.2 Certain financial promotions only to qualified investors etc—QFC

qualified investor schemes 27810.1.3 Certain financial promotions only to qualified investors etc—non-QFC

qualified client schemes 27810.1.4 Pt 10.1 additional to COND 279

Part 10.2 Financial promotions—non-QFC schemes 28010.2.1 What is a complying disclaimer for a non-QFC scheme? 28010.2.2 Restrictions generally on financial promotions—all non-QFC schemes 28010.2.3 Prospectus and disclaimer must be provided etc—all non-QFC

schemes 28110.2.4 Complying disclaimer must be given with other documents under

COND—all non-QFC schemes 28210.2.5 Authorised firms must pass on documents etc—all non-QFC schemes 28210.2.6 Quarterly returns for financial promotions etc—all non-QFC schemes 28310.2.7 Recordkeeping by authorised firms—all non-QFC schemes 28410.2.8 Pt 10.2 additional to COND 285



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Part 10.3 Additional retail customer requirements—non-QFC retail customer schemes 286

10.3.1 Application—pt 10.3 28610.3.2 Facilities to be maintained in QFC—non-QFC retail customer schemes 28610.3.3 Retail customer to be informed about availability of facilities—non-

QFC retail customer schemes 28710.3.4 Documents to be available in QFC—non-QFC retail customer

schemes 28710.3.5 Pricing and redemption facilities to be available in QFC—non-QFC

retail customer schemes 28810.3.6 Other information facilities to be available in QFC—non-QFC retail

customer schemes 28910.3.7 Complaint facilities to be available in QFC—non-QFC retail customer

schemes 290

Chapter 11 Other provisions 291

Part 11.1 General 29111.1.1 Restitution orders for breach of relevant requirements—all schemes 29111.1.2 Service of notices and other documents on unitholders—all QFC

schemes 29111.1.3 Notices and other documents to be in legible form etc—all schemes 292

Part 11.2 Fees—QFC schemes 29411.2.1 Application fees—all QFC schemes 29411.2.2 Annual fees—all QFC schemes 29511.2.3 Waiver etc of fees—all QFC schemes 296

Part 11.3 Providing scheme administration—non-QFC schemes 297

11.3.1 Client money and assets—all non-QFC schemes 297



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Chapter 12 Transitional 29812.1.1 Existing applications for registration 29812.1.2 Existing registered QFC qualified investor funds 298

Schedule 1 Arrangements not collective investment schemes 300

S1.1 Individual investment management arrangements 300S1.2 Pure deposit-based arrangements 301S1.3 Arrangements not operated by way of business 301S1.4 Debt issues 301S1.5 Common accounts 304S1.6 Arrangements entered into for commercial purposes related to existing

businesses 304S1.7 Group arrangements 305S1.8 Franchise arrangements 305S1.9 Timeshare arrangements 306S1.10 Other arrangements relating to use or enjoyment of property 306S1.11 Arrangements involving issue of certificates representing investments 306S1.12 Clearing services 307S1.13 Contracts of insurance 307S1.14 Corporations 307S1.15 Partnerships 309S1.16 Profit sharing investment accounts 310

Schedule 2 Constitutional document content—QFC schemes 312

Part S2.1 Constitution requirements—all QFC schemes 312

S2.1 Name of scheme 312



Contents

PageS2.2 Scheme is established in QFC etc 312S2.3 Legal form of scheme etc 312S2.4 Islamic funds 312S2.5 Investment objectives and policy etc 313S2.6 Duration of limited schemes 313S2.7 Unitholder’s liability to pay 313S2.8 Fees, charges and other expenses of scheme 314S2.9 Classes of units 314S2.10 Income and capital distribution 315S2.11 Investment and borrowing restrictions 315S2.12 Management of borrowing risks 315S2.13 Valuation and pricing 315S2.14 Base currency 316S2.15 Functions of operator and independent entity 316S2.16 Responsibility statement 316S2.17 Meetings 316S2.18 Other statements and provisions for CIC 317S2.19 CIP partnership agreement binding etc 317S2.20 CIT trust deed binding etc 317S2.21 CIT declaration of trust 318S2.22 Assets other than cash for issue or redemption 318S2.23 Suspension and winding-up 319S2.24 Amendment of constitutional document 319S2.25 Redemption of units held in breach of QFC law 319S2.26 Documents evidencing title to units 319S2.27 Other relevant matters 319

Part S2.2 Extra constitution requirements—qualified investor schemes 320

S2.28 Qualified investor scheme statement—QFC qualified investor schemes 320



Contents

PageS2.29 Only qualified investors can be unitholders in qualified investor

schemes—QFC qualified investor schemes 320S2.30 Limits on unit issue and redemption—QFC qualified investor schemes 320

Part S2.3 Extra constitution requirement—UCITS type schemes 320

S2.31 UCITS type scheme statement—QFC UCITS type schemes 320

Part S2.4 Extra constitution requirements—money-market funds 321

S2.32 Money-market fund statement—QFC money-market funds 321S2.33 Primary investment objective etc—QFC money-market funds 321

Schedule 3 Prospectus content—QFC qualified investor schemes 322

S3.1 Document status 322S3.2 Description of scheme etc 322S3.3 Islamic funds 323S3.4 Investment objectives and policy etc 324S3.5 Distributions, accounting dates etc 326S3.6 Characteristics of units in the scheme 326S3.7 Operator 327S3.8 Independent entity 328S3.9 Investment adviser and standing independent valuer 330S3.10 Auditor 330S3.11 Register of unitholders 330S3.12 Payments out of scheme property 331S3.13 Dealing 332S3.14 Valuation and pricing 334S3.15 Issue and redemption charges 334S3.16 General information 334S3.17 Mandatory statement about prospectus 335



Contents

PageS3.18 Additional information for feeder funds 336S3.19 Additional information for fund of funds 336S3.20 Additional statements and information for property funds 336S3.21 Information on umbrella schemes 337S3.22 Application of prospectus contents to umbrella scheme 338

Schedule 4 Prospectus content—QFC retail schemes 339S4.1 Document status 339S4.2 Description of scheme etc 339S4.3 Islamic funds 340S4.4 Investment objectives and policy etc 341S4.5 Distributions, accounting and reporting dates etc 343S4.6 Characteristics of units in the scheme 344S4.7 Operator 344S4.8 Independent entity 345S4.9 Investment adviser 347S4.10 Auditor 347S4.11 Relationships with other parties 347S4.12 Register of unitholders 348S4.13 Payments out of scheme property 348S4.14 Allocation of payments 350S4.15 Valuation and pricing 350S4.16 Dealing 351S4.17 Dilution 352S4.18 Issue charges 353S4.19 Redemption charges 353S4.20 Meeting of unitholders 353S4.21 General information 354S4.22 Mandatory statement about prospectus 354S4.23 Additional information for feeder funds 355



Contents

PageS4.24 Additional information for fund of funds 355S4.25 Information on umbrella schemes 356S4.26 Application of prospectus contents to umbrella scheme 357S4.27 Additional information 357

Glossary 358

Endnotes 390



Transitional Chapter 12

Rule 12.1.1

Chapter 1 General provisions

Part 1.1 Introductory

1.1.1 Name of rulesThese rules are the Collective Investment Schemes Rules 2010 (or COLL).

1.1.2 CommencementThese rules commence on 1 January 2011.

1.1.3 Application of COLLThese rules do not apply to a collective investment scheme that is registered under the Private Placement Schemes Rules 2010 (PRIV).Note A collective investment scheme that is established in the QFC may be

registered under PRIV as a private placement scheme.

V4Collective Investment Schemes Rules 2010

page 1


Chapter 12 Transitional

Rule 12.1.2

1.1.4 GlossaryThe glossary at the end of these rules is part of these rules.Note 1 There are also relevant definitions in the INAP glossary. To assist the

reader, the application of a definition in that glossary would usually be indicated by the word(s) being in italics (other than bold italics).

Note 2 By contrast, the application of a definition in the glossary in these rules is not indicated by the word(s) being in italics.

Note 3 For the application of definitions, see INAP, r 2.1.8 (Application of definitions).

Note 4 A note in or to these rules is explanatory and is not part of the rules (see INAP, r 2.1.6 (1) and r 2.1.7).

Note 5 However, examples and guidance are part of these rules (see INAP, r 2.1.4 (1) (b) and (2)).

Note 6 An example is not exhaustive, and may extend, but does not limit the meaning of these rules or the particular provision of these rules to which it relates (see INAP, r 2.1.5).

Note 7 For the effect of guidance, see the Financial Services Regulations, art 17 (4).

page 2Collective Investment Schemes Rules 2010

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Rule 12.1.1

Part 1.2 Basic concepts and key terms—all schemes

Division 1.2.A Collective investment schemes

1.2.1 What is a collective investment scheme?A collective investment scheme (or scheme) is an arrangement that is a collective investment fund under the Financial Services Regulations (other than an arrangement that is not a scheme under schedule 1).Note on FSR definition of collective investment fund The Financial Services Regulations (FSR), schedule 3, part 3, paragraphs 6.2 to 6.6 provide as follows:

6.2 Subject to paragraphs 6.5 and 6.6, a collective investment fund is any arrangement:

(1) the purpose or effect of which is to enable persons taking part in the arrangements (the participants) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of property or sums paid out of such profits or income;


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Rule 12.1.2

(2) that meets the property condition in paragraph 6.3 and the investment condition in paragraph 6.4.

6.3 An arrangement will meet the property condition referred to in paragraph (2) if:

(1) the arrangement is made with respect to property of any description, including money, whether the participants become owners of the property or any part of it or otherwise; and

(2) any of the participants do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or give directions in respect of the property.

6.4 An arrangement will meet the investment condition referred to in paragraph 6.2 if:

(1) the contributions of the participants and the profits or income out of which payments to be made are pooled; or

(2) the property is managed as a whole by or on behalf of the operator of the scheme.

6.5 Arrangements for such pooling as is mentioned in paragraph 6.4 (1) in relation to separate parts of the property are not to be regarded as constituting a single collective investment fund unless the participants are entitled to exchange rights in one part for rights in another.

6.6 The Regulatory Authority may make Rules specifying the circumstances in which particular arrangements do not constitute a collective investment fund for the purposes of paragraph 6.1.


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Rule 12.1.1

Division 1.2.B Participants, scheme property, units and unitholders

1.2.2 Who is a participant?A participant in a collective investment scheme (or scheme) is a person who takes part (or is to take part) in the scheme by making a contribution to the scheme property.

1.2.3 What is the scheme property?The scheme property of a collective investment scheme (or scheme) is the property held for or in the scheme.Note Property is defined in the glossary.

1.2.4 What is a unit?A unit in a collective investment scheme (or scheme) is a unit representing the rights or interests (however described) of a participant in the scheme.Note The nature of the rights or interests will differ according to the form of

the scheme. If the scheme is a company, the units would be shares in the company.


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Rule 12.1.2

1.2.5 Who is the unitholder?The unitholder of a unit in a collective investment scheme (or scheme) is the person whose name is entered for the unit in the scheme’s records (however described).Note 1 For a QFC scheme, the name would be entered in the register of

unitholders (the unitholder register) kept under these rules for the scheme (see r 4.1.6).

Note 2 Unitholder has a special meaning in div 5.5.B (Unitholder meetings—QFC retail schemes) (see r 5.5.2).

Division 1.2.C QFC schemes and non-QFC schemes

1.2.6 What is a QFC scheme?A QFC scheme is a collective investment scheme (or scheme) that is established in the QFC and registered under these rules.Note Collective investment scheme (or scheme) is defined in r 1.2.1.

1.2.7 What is a non-QFC scheme?A non-QFC scheme is a collective investment scheme (or scheme) that is not established in the QFC.


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Rule 12.1.1

Division 1.2.D Operator and independent entity

1.2.8 Who is the operator?(1) The operator of a collective investment scheme (or scheme) is the

person (however described) responsible for managing the scheme, including all of the scheme property.Note 1 Scheme property is defined in r 1.2.3.

Note 2 For a QFC scheme, this person is described in these rules as the scheme’s ‘operator’ (see r 4.1.3 (Functions of operator generally—all QFC schemes)). For a non-QFC scheme, this person may, for example, be described as the scheme’s ‘manager’.

Note 3 The operator of a QFC scheme may outsource the management of all or a part of the scheme property (see pt 8.5).

(2) The law of the jurisdiction where the scheme is established is applied in deciding who is the person responsible for managing the scheme.Note 1 Jurisdiction is defined in the glossary.

Note 2 For a QFC scheme, see pt 8.4 (Operator and independent entity appointment and removal—QFC schemes).


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Rule 12.1.2

(3) The operator may also have other functions under the law of the jurisdiction where the scheme is established.Note For a QFC scheme, see eg r 4.1.3 (Functions of operator generally—all

QFC schemes).

1.2.9 Who is the independent entity?(1) The independent entity of a collective investment scheme (or

scheme) is the person (however described) responsible for safeguarding the scheme property.Note 1 Scheme property is defined in r 1.2.3.

Note 2 For a QFC scheme, this person is described in these rules as the scheme’s ‘independent entity’ (see r 4.2.6 (Property safeguarding functions of independent entity—all QFC schemes)). For a non-QFC scheme, this person may, for example, be described as the scheme’s ‘depository’ or ‘trustee’.

(2) The law of the jurisdiction where the scheme is established is applied in deciding who is the person responsible for safeguarding the scheme property.Note 1 Jurisdiction is defined in the glossary.

Note 2 For a QFC scheme, see pt 8.4 (Operator and independent entity appointment and removal—QFC schemes).


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Rule 12.1.1

(3) The independent entity may also have other functions under the law of the jurisdiction where the scheme is established.Note For a QFC scheme, see eg r 4.2.3 (Oversight functions of independent

entity—all QFC schemes).

Division 1.2.E Open-ended and closed-ended schemes

1.2.10 What are open-ended and closed-ended schemes?(1) An open-ended scheme is a collective investment scheme (or

scheme) that permits its units to be redeemed, whether continuously or periodically.Note Unit is defined in r 1.2.4. Redemption is defined in the glossary.

(2) A closed-ended scheme is a collective investment scheme (or scheme) that does not permit its units to be redeemed.

(3) A scheme registered under these rules must be an open-ended scheme.


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Rule 12.1.2

Division 1.2.F Umbrella schemes

1.2.11 What are umbrella schemes and subschemes?(1) An umbrella scheme is a collective investment scheme (or scheme)

under which the contributions of the unitholders, and the profit or income out of which payments are to be made to them, are pooled separately in relation to separate parts of the scheme property.Note Unitholder is defined in r 1.2.5 and scheme property is defined in

r 1.2.3.

(2) A subscheme of an umbrella scheme is a part of the scheme property that is pooled separately.

Division 1.2.G Qualified investors and retail customers

1.2.12 Who is a qualified investor or retail customer?(1) For these rules, a person can be a qualified investor or retail

customer for a QFC scheme or an authorised firm (or for both).

(2) A qualified investor for a QFC scheme is—

(a) a person who would be a business customer or market counterparty of the scheme in relation to dealings in


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Rule 12.1.1

investments that consist of (or include) units in the scheme if the scheme were an authorised firm and the person were a client of the scheme; or

(b) a person who is a business customer or market counterparty of any authorised firm in relation to dealings in investments that consist of (or include) units in the scheme.

Note 1 Client, business customer and market counterparty are defined in COND, r 1.2.1, r 1.2.5 and r 1.2.7 respectively.

Note 2 Authorised firm and dealing in investments are defined in the glossary.

(3) A qualified investor for an authorised firm in relation to units in a scheme is a person who is a business customer or market counterparty of the firm in relation to dealings in investments that consist of (or include) units in the scheme.

(4) A retail customer for a QFC scheme is—

(a) a person who would be a retail customer of the scheme in relation to dealings in investments that consist of (or include) units in the scheme if the scheme were an authorised firm and the person were a client of the scheme; or


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Rule 12.1.2

(b) a person who is a retail customer of any authorised firm in relation to dealings in investments that consist of (or include) units in the scheme.Note Retail customer is defined in COND, r 1.2.6 (2).

(5) For these rules, a retail customer for an authorised firm in relation to units in a scheme is a person who is a retail customer of the firm in relation to dealings in investments that consist of (or include) units in the scheme.


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Rule 12.1.1

Part 1.3 Basic concepts and key terms—QFC schemes

Division 1.3.A Types of QFC schemes generally

1.3.1 QFC schemes are qualified investor or retail schemesA QFC scheme registered under these rules is either—

(a) a qualified investor scheme; or

(b) a retail scheme.

1.3.2 What is a QFC qualified investor scheme?A QFC scheme is a qualified investor scheme if it is registered under these rules as a qualified investor scheme.

1.3.3 What is a QFC retail scheme?A QFC scheme is a retail scheme if it is registered under these rules as a retail scheme.

1.3.4 Types of QFC retail schemesQFC retail schemes are limited to UCITS type schemes.


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Rule 12.1.2

1.3.5 What is a QFC UCITS type scheme?A QFC retail scheme is a UCITS type scheme if—

(a) the scheme’s constitutional document contains the statement required by part S2.31 (Extra constitution requirement—UCITS type schemes); or

(b) the scheme is an umbrella scheme that is a UCITS type scheme and each subscheme would be a UCITS type scheme if it were a separate scheme.Note Umbrella scheme and subscheme are defined in

r 1.2.11.

Division 1.3.B Legal forms for QFC schemes

1.3.6 Permitted legal forms for QFC schemesA QFC scheme must take 1 of the following legal forms:

(a) a QFC collective investment company (or CIC);

(b) a QFC collective investment partnership (or CIP);

(c) a QFC collective investment trust (or CIT);


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Rule 12.1.1

(d) another permitted form of QFC scheme.Note The permitted legal forms of QFC schemes are defined in r 1.3.7 to

r 1.3.10.

1.3.7 What is a QFC collective investment company (or CIC)?A QFC collective investment company (or CIC) is an open-ended company with variable share capital incorporated under the Companies Regulations 2005 if its articles of association provide that the company is established for the sole purpose of constituting a collective investment scheme.Note Articles of association is defined in the glossary.

1.3.8 What is a QFC collective investment partnership (or CIP)?A QFC collective investment partnership (or CIP) is a limited partnership registered under the Partnership Regulations 2007 if its partnership agreement provides that the partnership is established for the sole purpose of constituting a collective investment scheme.Note Partnership agreement is defined in the glossary.


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Rule 12.1.2

1.3.9 What is a QFC collective investment trust (or CIT)?A QFC collective investment trust (or CIT) is an express trust created under the Trust Regulations 2007 if its trust instrument provides that the trust is established for the sole purpose of constituting a collective investment scheme.Note Trust instrument is defined in the glossary.

1.3.10 What is another permitted form of QFC scheme?Another permitted form of QFC scheme is an entity (other than a CIC, CIP or CIT) if—

(a) the legal form of the entity—

(i) is permitted under regulations made under the QFC Law or rules made by the Regulatory Authority or QFC Authority; or

(ii) otherwise permitted under an approval, authority, or licence, (however described) given by the QFC Authority under the QFC Law; and


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Rule 12.1.1

(b) an instrument creating the legal form of the entity provides that the entity is established for the sole purpose of constituting a collective investment scheme.

Note Entity, QFC Law and instrument are defined in the glossary.

Division 1.3.C Particular types of QFC schemes

1.3.11 Islamic fundsA QFC scheme, or a subscheme of a QFC umbrella scheme, is an Islamic fund if the constitutional document of the scheme states that the scheme or subscheme is an Islamic fund.Note 1 Umbrella scheme and subscheme are defined in r 1.2.11.

Constitutional document is defined in r 3.1.1.

Note 2 The following provisions must be complied with in relation to Islamic funds:

r 5.6.1 (2) and (3) (Accounting standards—all QFC schemes)

pt 8.10 (Shari’a Supervisory Board—all Islamic funds)

sch 2 (Constitutional document content—QFC schemes), r S2.4 (Islamic funds)

sch 3 (Prospectus content—QFC qualified investor schemes), r S3.2 (e) (Description of scheme etc) and r S3.3 (Islamic funds)


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Rule 12.1.2

sch 4 (Prospectus content—QFC retail schemes), r S4.2 (f) (Description of scheme etc) and r S4.3 (Islamic funds).

1.3.12 Money-market fundsA QFC scheme, or a subscheme of a QFC umbrella scheme, is a money-market fund if the constitutional document of the scheme states that the scheme or subscheme is a money-market fund.Note 1 Umbrella scheme and subscheme are defined in r 1.2.11.


Note 2 The following provisions must be complied with in relation to money-market funds:

r 6.1.5 (Investments by money-market funds—QFC qualified investor schemes)

r 7.2.4 (Investments by money-market funds—QFC retail schemes)

r 8.2.19 (Maintaining value—all money-market funds)

pt S2.4 (Extra constitution requirements—money-market funds)

sch 3 (Prospectus content—QFC qualified investor schemes), r S3.2 (f) (Description of scheme etc)

sch 4 (Prospectus content—QFC retail schemes), r S4.2 (g) (Description of scheme etc) (see also r S4.4 (r) (Investment objectives and policy etc)).


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Rule 12.1.1

1.3.13 Other types of QFC schemesThis division does not limit by implication the types of QFC schemes permitted under these rules.Note 1 See, for example, the definitions of feeder fund, fund of fund and

property fund in the glossary.

Note 2 For guaranteed funds and similar funds, see r 8.9.1 (5) to (11) (Name of scheme etc—all QFC schemes).


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Rule 12.1.2

Part 1.4 Basic concepts and key terms—non-QFC schemes

1.4.1 What is a non-QFC retail customer scheme?A non-QFC scheme is a retail customer scheme if it is a non-QFC scheme declared to be a retail customer scheme under rule 10.1.1 (Declaration of non-QFC retail customer schemes).Note Non-QFC scheme is defined in rule 1.2.7.

1.4.2 What is a non-QFC qualified client scheme?A non-QFC scheme is a qualified client scheme if is not a retail customer scheme.Note Non-QFC scheme is defined in rule 1.2.7.


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Rule 12.1.1

Chapter 2 Registration of schemes in QFC

2.1.1 Schemes established in QFC must be registered(1) A person must not operate a scheme that is established in the QFC

unless it is registered under these rules or PRIV.Note PRIV relates to private placement schemes.

(2) In this rule:

operate a scheme includes being responsible for managing the scheme or any of the scheme property.Note Scheme is defined in r 1.2.1. Scheme property is defined in r 1.2.3.

2.1.2 Application for registration of scheme established in QFC(1) The person who is to become the initial operator of a scheme

established in the QFC may apply to the Regulatory Authority for registration of the scheme under these rules as either—

(a) a qualified investor scheme; or


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Rule 12.1.2

(b) a retail scheme.Note 1 Operator is defined in r 1.2.8.

Note 2 See the following provisions:

r 3.1.4 (Constitutional document and checklist to be filed with registration application—all QFC schemes)

r 5.2.5 (Prospectus, checklist and any translations to be filed with registration application—all QFC schemes).

(2) The Regulatory Authority may, in writing, require the applicant to give the authority additional information or documents that the authority reasonably needs to decide the application.

(3) If the applicant does not comply with the requirement, the Regulatory Authority may refuse to consider the application.

(4) The applicant may withdraw the application by notice given to the Regulatory Authority at any time before the application is decided.


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Rule 12.1.1

(5) If, at any time between the making of the application and the application being withdrawn or decided, the applicant becomes aware of a material change that is reasonably likely to be relevant to the Regulatory Authority’s consideration of the application, the applicant must tell the authority about the change immediately, but by no later than the next business day.Note Business day is defined in the glossary.

2.1.3 Decision on application for registration of scheme established in QFC

(1) On an application under rule 2.1.2 for registration of a scheme, the Regulatory Authority must—

(a) register the scheme under these rules as either—

(i) a qualified investor scheme; or

(ii) a retail scheme; or

(b) refuse to register the scheme under these rules.

(2) The Regulatory Authority must register the scheme unless it considers that—

(a) the constitutional document does not comply with rule 3.1.2 (Matters to be included in constitutional document—all QFC


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Rule 12.1.2

schemes) or contains a provision that conflicts with any provision of these rules; or

(b) the name of the scheme, any subscheme of the scheme, or a class of units—

(i) is substantially similar to the name of—

(A) a scheme registered under PRIV or these rules; or

(B) a subscheme of an umbrella scheme registered under PRIV or these rules; or

(C) a class of units for a scheme registered under PRIV or these rules; or

(ii) is otherwise undesirable or misleading; orNote Umbrella scheme and subscheme are defined in

r 1.2.11. Class is defined in the glossary.Guidance on names of CICA CIC must not include in its name the following words, abbreviations of the following words or similar words or abbreviations:

(a) limited;

(b) unlimited;

(c) public limited company.


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Rule 12.1.1

(c) the person named in the application as the person who is to become the initial operator of the scheme is not eligible, on the scheme’s registration, to be the operator of the scheme under rule 4.1.1 (Requirements for operator—all QFC schemes); or Note Operator is defined in r 1.2.8.

(d) the person appointed by the operator, and named in the application, as the person who is to become the initial independent entity of the scheme is not—

(i) an authorised firm that is eligible, on the scheme’s registration, to be the independent entity of the scheme under rule 4.2.1 (Requirements for independent entity—all QFC schemes); or

(ii) otherwise an appropriate person to be the independent entity of the scheme; or

Note 1 Constitutional document is defined in r 3.1.1. Independent entity is defined in r 1.2.9.

Note 2 For para (d) (ii), see r 4.2.9 (Non-QFC independent entities—criteria for Regulatory Authority action).

(e) the person named in the application as the person who is to become the initial auditor of the scheme is not eligible to be the


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Rule 12.1.2

auditor of the scheme under GENE, section 9.7 (Auditors) as applied by rule 5.6.2 (7) (Appointment and removal of auditors etc—all QFC schemes); or

(f) the prospectus drawn up for the scheme does not comply with these rules; orNote Prospectus is defined in the glossary.

(g) the scheme does not otherwise comply with these rules; or

(h) it is otherwise inappropriate for the scheme to be registered under these rules.

Note The Regulatory Authority has power under the Financial Services Regulations, art 105 to give certain directions in relation to collective investment funds, including a direction to cease the issue or redemption of units in the fund and to wind up the fund.

(3) The Regulatory Authority may register the scheme either—

(a) without conditions, restrictions or requirements; or

(b) with the conditions, restrictions or requirements it considers appropriate.

(4) The Regulatory Authority must give the applicant written notice of its decision on the application.


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Rule 12.1.1

(5) If the Regulatory Authority refuses to register the scheme or registers the scheme with conditions, restrictions or requirements not agreed to by the applicant, the notice must—

(a) give reasons for the decision; and

(b) tell the applicant that the applicant may appeal to the Regulatory Tribunal against the decision.


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Rule 12.1.2

Chapter 3 Constitutional requirements—QFC schemes

Part 3.1 Constitutional document—QFC schemes

3.1.1 What is the constitutional document for a QFC scheme?The constitutional document, for a QFC scheme, is—

(a) for a CIC—the articles of association of the company; and

(b) for a CIP—the partnership agreement of the partnership; and

(c) for a CIT—the trust instrument of the trust; and

(d) for another permitted form of QFC scheme—any instrument creating the legal form of the entity.

Note CIC, CIP, CIT and another permitted form of QFC scheme are defined in div 1.3.B (Legal forms for QFC schemes). Articles of association, partnership agreement and trust instrument are defined in the glossary.


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Rule 12.1.1

3.1.2 Matters to be included in constitutional document—all QFC schemesThe constitutional document of a QFC scheme must include the statements and provisions required by schedule 2 (Constitutional document content—QFC schemes) for the scheme.

3.1.3 Relationship between constitutional document and these rules—all QFC schemes

(1) The constitutional document of a QFC scheme must not contain a provision—

(a) that conflicts with any provision of these rules; or

(b) that is unfairly prejudicial to the interest of unitholders generally or to the unitholders of any class of units.Note Class is defined in the glossary.

(2) A provision of the constitutional document of a QFC scheme has no effect to the extent—

(a) that it conflicts with any provision of these rules; or

(b) that it is unfairly prejudicial to the interest of unitholders generally or to the unitholders of any class of units.


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Rule 12.1.2

(3) However, a provision of the constitutional document of a QFC scheme must not be taken to conflict with a provision of these rules to the extent it can operate concurrently with the provision of these rules.

(4) Any power given by these rules to a QFC scheme, or to the operator or independent entity of a QFC scheme, is subject to any applicable condition, restriction or requirement in the scheme’s constitutional document.

3.1.4 Constitutional document and checklist to be filed with registration application—all QFC schemesThe person who is to become the operator of a scheme under these rules must file with the application for registration of the scheme—

(a) a copy of the scheme’s constitutional document; and

(b) a checklist prepared by the person listing all the statements and provisions required by these rules and indicating where they are in the constitutional document.


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Rule 12.1.1

3.1.5 Amendments of constitutional document—all QFC schemes

(1) This rule applies if the constitutional document of a QFC scheme is amended.

(2) Not later than 21 days after the day the amendment is made, the operator must file with the Regulatory Authority—

(a) a copy of the amendment and the constitutional document as amended; and

(b) a written certificate by the operator stating that—

(i) the amendment was made in accordance with these rules and the scheme’s constitutional document; and

(ii) the constitutional document as amended does not contain a provision that conflicts with any provision of these rules.

Note See pt 5.4 (Unitholder approvals and notice—QFC schemes) for the unitholder approval or notice required for amendments of the constitutional document.


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Rule 12.1.2

3.1.6 Prohibited amendments of constitutional document—QFC UCITS type schemesThe constitutional document of a QFC UCITS type scheme may not be amended in such a way that it ceases to be a UCITS type scheme. Note UCITS type scheme is defined in r 1.3.5.


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Rule 12.1.1

Part 3.2 Units—QFC schemes

Division 3.2.A Units—all QFC schemes

3.2.1 Fractions of units—all QFC schemesThe constitutional document of a QFC scheme may authorise the scheme to issue fractions of units.Note Constitutional document is defined in r 3.1.1.

3.2.2 Smaller and larger denomination shares etc—CICs(1) The constitutional document of a CIC may provide that the rights

attached to shares of any class are to be expressed in 2 denominations; one of which (the smaller denomination) is to be such proportion of the other (the larger denomination) as is fixed by the constitutional document. Note CIC is defined in r 1.3.7. Constitutional document is defined in r 3.1.1.

(2) For any class of shares of a CIC to which subrule (1) applies, any share with rights expressed in the smaller denomination is a smaller denomination share, and any share with rights expressed in the larger denomination is a larger denomination share.


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Rule 12.1.2

(3) For any class of shares of a CIC that is not expressed in 2 denominations, the rights that attach to a share of the class are equal to the rights that attach to every other share of that class.

(4) For any class of shares of a CIC that is expressed in 2 denominations—

(a) the rights that attach to a share of the class are equal to the rights that attach to every other share of that class of the same denomination; and

(b) the rights that attach to a smaller denomination share of the class are the relevant proportion of the rights that attach to a larger denomination share of that class.

(5) For subrule (4) (b):

relevant proportion means the proportion fixed by the constitutional document (as mentioned in subrule (1)).

3.2.3 Bearer certificates may not be issued—all QFC schemes(1) Bearer certificates may not be issued for units in a QFC scheme.


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Rule 12.1.1

(2) In this rule:

bearer certificate means a certificate or other document evidencing title that indicates that the bearer is entitled to the units in the QFC scheme stated in it.Note Document evidencing title is defined in the glossary.

Division 3.2.B Units—QFC qualified investor schemes

3.2.4 Classes of units—QFC qualified investor schemes(1) The operator of a QFC qualified investor scheme may issue the

classes of units that are set out in the constitutional document.Note Class is defined in the glossary. Constitutional document is defined in

r 3.1.1.

(2) However, the operator may issue a class of units only if the rights of unitholders of any class are not unfairly prejudiced as against the interests of the unitholders of any other class of units.


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Rule 12.1.2

3.2.5 Limited issue—QFC qualified investor schemes(1) This rule applies to units in a QFC qualified investor scheme if,

under the constitutional document, the issue of the units may be limited.

(2) The operator may only issue the units if the issue—

(a) is permitted by the constitutional document; and

(b) is in accordance with the conditions, restrictions and requirements (if any) stated in the latest filed prospectus; and

(c) will not materially prejudice any existing unitholders.Note Latest filed prospectus is defined in the glossary.

Division 3.2.C Units—QFC retail schemes

3.2.6 Classes of units—QFC retail schemes(1) The constitutional document of a QFC retail scheme may—

(a) provide for different classes of units to be issued; and

(b) if the scheme is an umbrella scheme—provide for different classes of units to be issued for a subscheme.

Note Constitutional document is defined in r 3.1.1. Umbrella scheme and subscheme are defined in r 1.2.11.


V4



Rule 12.1.1

(2) However, a new unit class must not be issued, or an existing unit class amended, if that would result in prejudice to unitholders of any other unit class.

(3) Also, the nature, operation and effect of a unit class must be reasonably capable of being explained clearly to prospective unitholders.

3.2.7 Currency class units—QFC retail schemes(1) This rule applies to a currency class unit in a QFC retail scheme.

Note 1 A currency class unit differs from other units mainly in that its price, having been calculated initially in the base currency will be quoted (and normally paid for) in the currency of the designation of the class. Income distributions will also be paid for in the currency of designation of the class.

Note 2 Currency class unit, base currency and class are defined in the glossary.

(2) The currency of the class must not be the base currency.


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Rule 12.1.2

(3) However, if the units in a subscheme are, in accordance with a statement in the latest filed prospectus, to be valued in a currency other than the base currency, the currency of the class may be in the base currency, but must not be in that other currency.Note Subscheme is defined in r 1.2.11.

(4) The price must be expressed in the currency of the class.Note Price is defined in the glossary.

(5) Any distribution must be paid in the currency of the class.

(6) Statements of amounts of money or values included in statements must be given in the currency of the class (whether or not also given in the base currency).

3.2.8 Rights of unit classes—QFC retail schemes(1) If any class of units in a QFC retail scheme has different rights from

another class of units in the scheme, the constitutional document must provide a method for calculating the proportion of the value of the scheme property, and the proportion of income available for allocation, attributable to each such class.Note Class is defined in the glossary.


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Rule 12.1.1

(2) For a QFC retail scheme that is not an umbrella scheme, the constitutional document must not provide for any class of units in relation to which—

(a) the extent of the rights to participate in the capital property, income property or distribution account would be decided differently from the extent of the corresponding rights for any other class of units; or

(b) payments or accumulation of income or capital would differ in source or form from those of any other class of units.

Note Capital property, income property and distribution account are defined in the glossary.

(3) For a QFC retail scheme that is an umbrella scheme, subrule (2) (a) applies to classes of units in relation to each subscheme as if each subscheme were a separate QFC retail scheme.

(4) Subrules (2) and (3) do not prohibit a difference between the rights attached to classes of units that relates solely to any of the following:

(a) the accumulation of income by way of periodical credit to capital rather than distribution;


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Rule 12.1.2

(b) charges and expenses that may be taken out of the scheme property or payable by the unitholders;

(c) the currency in which prices or values are expressed or payments made.Note Price is defined in the glossary.

3.2.9 Smaller and larger denomination shares—QFC retail schemes

(1) This rule applies if the constitutional document of a CIC that is a QFC retail scheme provides, in relation to any class of shares, for smaller denomination shares and larger denomination shares.Note CIC is defined in r 1.3.7. Smaller denomination share and larger

denomination share are defined in r 3.2.2 (2).

(2) If a registered holding of shares includes a number of smaller denomination shares that can be consolidated into a larger denomination share of the same class, the operator must consolidate the relevant number of the smaller denomination shares into a larger denomination share.

(3) To effect a transaction in shares, the operator may substitute the relevant number of smaller denomination shares for a larger denomination share.


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Rule 12.1.1

(4) If the operator acts under subrule (3), subrule (2) does not apply to the resulting smaller denomination share holding until the transaction is completed.

3.2.10 Subdivision and consolidation of units—QFC retail schemes

(1) Unless expressly forbidden by the constitutional document, the operator of a QFC retail scheme may decide—

(a) that each unit in any class is to be subdivided into 2 or more units; or

(b) that units in any class are to be consolidated.

(2) The operator must immediately give notice to each unitholder (or the first named of joint unitholders) of any subdivision or consolidation under subrule (1).

(3) Subrule (2) does not apply if the operator had given the notice before the subdivision or consolidation became effective.

3.2.11 Guarantees and capital protection—QFC retail schemes(1) This rule applies if there is—


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Rule 12.1.2

(a) any arrangement intended to result in a particular capital or income return from a holding of units in a QFC retail scheme; or

(b) any investment objective of giving protection to the capital value of, or income return from, a holding of units in a QFC retail scheme.

(2) The arrangement or protection must not create the possibility of a conflict of interest as between—

(a) unitholders and the operator or independent entity; or

(b) unitholders intended and not intended to benefit from the arrangement.

(3) If, in accordance with any information mentioned in schedule 4 (Prospectus content—QFC retail schemes), rule S4.27 (a) (iv) (Additional information), action is required by the unitholders to obtain the benefit of any guarantee, the operator must provide reasonable written notice to unitholders before the action is required.Note The Regulatory Authority may direct the operator of a QFC scheme to

change the name of the scheme if the name implies a degree of security


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Rule 12.1.1

in relation to the capital or income that is not justified (see r 8.9.1 (3) (h) and (5) to (11).

3.2.12 Switching rights—QFC retail umbrella schemesIn accordance with the Financial Services Regulations, schedule 3, part 3, paragraph 6.5, the participants in a QFC retail scheme that is an umbrella scheme are entitled to exchange rights in a subscheme for rights in another subscheme of the umbrella scheme.Note Umbrella scheme and subscheme are defined in r 1.2.11.


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Rule 12.1.2

Chapter 4 The operator and independent entity—QFC schemes

Part 4.1 The operator—all QFC schemes

4.1.1 Requirements for operator—all QFC schemes(1) The operator of a QFC scheme must be an authorised firm that—

(a) is a corporation; andNote Corporation is defined in the glossary.

(b) has an authorisation for each of the following regulated activities:

(i) operating collective investment schemes;

(ii) dealing in investments;

(iii) managing investments; andNote Authorisation, regulated activity and the

regulated activities mentioned in this paragraph are defined in the glossary.


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Rule 12.1.1

(c) is permitted under the scope of its authorisation to be the operator of the scheme, QFC schemes of that kind or any scheme registered in the QFC; and

(d) is a different person from the independent entity; and

(e) for a CIC or CIP—is a different person from the scheme; andNote CIC and CIP are defined in r 1.3.7 and r 1.3.8

respectively.(f) is independent of—

(i) the independent entity; and

(ii) if the scheme is a CIC or CIP—the scheme; and

(iii) a member (however described) of the governing body of the independent entity or, for a CIC or CIP, the scheme.

Note Governing body is defined in the glossary. (2) Without limiting subrule (1) (f), the operator is not independent of

another person if—

(a) the operator has at any time during the last 2 years been involved in material business dealings with the person (otherwise than in the exercise of their respective functions as the holders of positions in relation to any scheme); or


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Rule 12.1.2

(b) the person has a material interest in the operator or the operator has a material interest in the person.

Note Function is defined in the glossary.

4.1.2 Operator must comply with legal and regulatory requirements—all QFC schemes

(1) The operator of a QFC scheme must comply with every legal and regulatory requirement applying to the operator—

(a) in relation to the scheme; or

(b) as the operator of a QFC scheme; or

(c) as an authorised firm.

(2) Without limiting subrule (1), the operator must act in accordance with the following:

(a) these rules;

(b) any regulations under which the QFC scheme is established, including any law applied by, or that supplements, those regulations;


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Rule 12.1.1

(c) the other provisions of the law applying in the QFC in relation to—

(i) the scheme; or

(ii) the operator as the operator of a QFC scheme or as an authorised firm;

(d) the scope of the operator’s authorisation, including any conditions, restrictions or requirements;Note Authorisation is defined in the glossary.

(e) the scope of the scheme’s registration, including any conditions, restrictions or requirements;

(f) the constitutional document;Note Constitutional document is defined in r 3.1.1.

(g) the latest filed prospectus.Note Latest filed prospectus is defined the glossary.

4.1.3 Functions of operator generally—all QFC schemes(1) The operator of a QFC scheme is responsible for managing the

scheme, including all the scheme property.Note Scheme property is defined in r 1.2.3.


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Rule 12.1.2

(2) Without limiting subrule (1), the operator of a QFC scheme must—

(a) ensure that decisions about investments and borrowings by the scheme are made in accordance with the scheme’s investment objectives, strategies and policy as stated in the constitutional document and latest filed prospectus; andNote Borrowing and latest filed prospectus are

defined in the glossary. Constitutional document is defined in r 3.1.1

(b) value the scheme property in accordance with these rules; and

(c) calculate the scheme’s net asset value, net asset value per unit, and the price of units for issue and redemption, in accordance with these rules; andNote Net asset value and net asset value per unit

are defined in the glossary.(d) ensure the scheme property is—

(i) clearly identified as scheme property; and

(ii) held separately from the operator’s own property, and the property of any other scheme; and

(e) give the independent entity instructions about the exercise of rights in relation to the scheme property; and


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Rule 12.1.1

(f) for a qualified investor scheme—not acquire or dispose of any immovable property without the independent entity’s prior consent.

Note The operator also has functions in relation to the scheme under a number of other provisions of these rules eg see pt 8.2 (Valuation and pricing—QFC schemes).

4.1.4 Duty of operator to report certain breaches of law—all QFC schemes

(1) This rule applies if—

(a) the operator of a QFC scheme becomes aware that the operator, the independent entity or any other person has breached, or suspects on reasonable grounds that the operator, the independent entity or any other person may have breached or may be about to breach, in relation to the scheme any provision of these rules, any other Rules, any other law of the QFC or the law of any other jurisdiction; andNote Rules is defined INAP. Breach and jurisdiction are

defined in the glossary. (b) the breach has had, or is likely to have, a material adverse

effect on the scheme or the interests of unitholders.


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Rule 12.1.2

(2) The operator must tell the Regulatory Authority about the breach immediately, but within 1 business day.Examples—meaning of ‘within 1 business day’1 If, on a business day, the operator becomes aware of the breach, the operator

must tell the authority about it immediately, but on that day.

2 If, on a day that is not a business day, the operator becomes aware of the breach, the operator must tell the authority about it immediately, but by no later than the next business day.

Note Business day is defined in the glossary.

(3) The operator must give the Regulatory Authority any information about the breach that the authority reasonably requires.Note Under GENE, s 4.1.3 an authorised firm must also advise the authority

of certain significant events.

4.1.5 Particular duties of operator—all QFC schemesThe operator of a QFC scheme must—

(a) act honestly; and

(b) exercise the degree of care and diligence that a reasonable person would exercise in the operator’s position; and


V4



Rule 12.1.1

(c) act in the best interests of the unitholders and, if there is a conflict between the unitholders’ interests and its own interests, give priority to the unitholders’ interests; and

(d) treat unitholders who hold units in the same class equally and unitholders who hold units in different classes fairly; andNote Class is defined in the glossary.

(e) not make improper use of information acquired as a result of being the operator—

(i) to gain, directly or indirectly, a personal advantage or an advantage for another person; or

(ii) to cause detriment to the unitholders; and

(f) not make improper use of the position of operator—


(ii) to cause detriment to the unitholders.

4.1.6 Register of unitholders—all QFC schemes(1) The operator of a QFC scheme must ensure that a register of

unitholders is kept as part of the operator’s records under rule 4.1.7.


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Rule 12.1.2

(2) The operator must exercise all due diligence and take reasonable care to ensure that—

(a) the register is accurate, complete and up to date; and

(b) for a qualified investor scheme—only a person who is a qualified investor for the scheme is recorded in the register.

Note 1 Qualified investor scheme, and qualified investor for a QFC scheme, are defined in r 1.3.2 and r 1.2.12 (2) respectively.

Note 2 Rule 8.3.1 specifies the information that must be included in the register.

4.1.7 Records of operator—all QFC schemes(1) The operator of a QFC scheme must make the records necessary—

(a) to enable the operator to comply with—

(i) these rules; and

(ii) the other provisions of the law applying in the QFC in relation to—

(A) the scheme; or

(B) the operator as the operator of a QFC scheme or as an authorised firm; and


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Rule 12.1.1

(b) to demonstrate at all times whether it has complied with these rules.

(2) If the scheme is a QFC qualified investor scheme and the latest filed prospectus states that the operator’s policy is to require a dilution adjustment or dilution levy, the operator must make a record of—

(a) how it calculates and estimates dilution; and

(b) its policy and method for deciding the rate or amount of any dilution adjustment or dilution levy.

Note Latest filed prospectus, dilution adjustment, dilution levy and dilution are defined in the glossary.

(3) If the scheme is a QFC retail scheme, the operator must make a record of—

(a) how it calculates and estimates dilution; and

(b) its policy and method for deciding the rate or amount of any dilution adjustment or dilution levy.

(4) Subrules (2) and (3) do not limit subrule (1).

(5) The operator must keep records made for this rule for at least 6 years after the day they are made.


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Rule 12.1.2

(6) The operator must, at the request of the Regulatory Authority, the independent entity or the auditor—

(a) make records kept under this rule available for inspection within a reasonable period of not longer than 3 days; and

(b) provide a copy of any of the records, in the requested form (if any), within a reasonable period of not longer than 3 days.

(7) The operator must not charge for making records available, or providing a copy of any records, under subrule (6). Note GENE, ch 6 also contains provisions about record-keeping.

4.1.8 Operator must give information etc to independent entity and auditor—all QFC schemesThe operator of a QFC scheme must, on request, immediately give the independent entity or auditor of the scheme the information and explanations in relation to the scheme that the independent entity or auditor reasonably requires.


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Rule 12.1.1

4.1.9 Maintenance of capital notification—CIC’sIf the capital of a CIC changes so that it falls below the minimum, or exceeds the maximum, stated in the constitutional document, the operator must tell the Regulatory Authority about the change immediately, but within 1 business day after the day the change happens.ExamplesSee examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

Note CIC is defined in r 1.3.7.


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Rule 12.1.2

Part 4.2 The independent entity—QFC schemes

Division 4.2.A Independent entity generally—QFC schemes

4.2.1 Requirements for independent entity—all QFC schemes (1) The independent entity of a QFC scheme must be—

(a) appointed by the operator; and

(b) either—

(i) an authorised firm that—

(A) has an authorisation for providing custody services and operating collective investment schemes; and

(B) is permitted under the scope of its authorisation to be the independent entity of the scheme, QFC schemes of that kind or any QFC scheme; and


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Rule 12.1.1

(C) is a corporation; orNote Authorised firm, authorisation, corporation and the

regulated activities mentioned in para (i) (A) are defined in the glossary.

(ii) a corporation that is not an authorised firm or another QFC licensed firm if the operator has certified in writing that, after performing due diligence, it is satisfied that—

(A) the corporation is an appropriate person to be the independent entity of the scheme; and

(B) the corporation can effectively exercise the independent entity’s functions under these rules; and

(C) the appointment of the corporation as independent entity of the scheme is in the interest of participants and potential participants in the scheme; and

Note QFC licensed firm, exercise and function are defined in the glossary. Participant is defined in r 1.2.2.

(c) a different person from the operator and, if the scheme is a CIC or CIP, the scheme; andNote CIC and CIP are defined in r 1.3.7 and r 1.3.8

respectively.


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Rule 12.1.2

(d) independent of—

(i) the operator; and


(iii) a member (however described) of the governing body of the operator or, for a CIC or CIP, the scheme; and

Note 1 Governing body is defined in the glossary.Note 2 See r (4) on the meaning of ‘independent’.

(e) for a CIT—the trustee of the trust.Note CIT is defined in r 1.3.9.

(2) In deciding whether to give a certificate under subrule (1) (b) (ii) in relation to a corporation, the operator must consider each of the following matters:

(a) anything the Regulatory Authority could consider in assessing the corporation’s fitness and propriety if the corporation were an applicant for an authorisation, including the following:

(i) the corporation’s expertise and market reputation;

(ii) the corporation’s credit rating, capital and financial resources;

(iii) the corporation’s regulatory status and history;


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Rule 12.1.1

(iv) the other members of the corporation’s group and their activities;

Note Group is defined in the glossary. (b) the need to ensure that the corporation provides protection for

unitholders at least equivalent to the protection that would be provided by an independent entity that is an authorised firm;

(c) the regulatory regimes and legal systems (including insolvency laws) to which the corporation is subject;

(d) the regulatory authorisations (however described) held by the corporation;

(e) whether the corporation has entered into an agreement with the operator and, if so, the terms of the agreement;

(f) the corporation’s arrangements for safeguarding the scheme property and its use of agents and service providers;

(g) the obligations applying to the corporation, and the recourse available against the corporation by the operator, the Regulatory Authority and participants, under those regulatory regimes and legal systems in relation to anything done or not done by the corporation in relation to the scheme;


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Rule 12.1.2

(h) whether the corporation has submitted to the jurisdiction of the Regulatory Authority, the QFC Court or both.

(3) Subrule (2) does not limit the matters the operator may consider.

(4) Without limiting subrule (1) (d), the independent entity is not independent of another person if—

(a) the independent entity has at any time during the last 2 years been involved in material business dealings with the person (otherwise than in the exercise of their respective functions as holders of positions in relation to a scheme); or

(b) the person has a material interest in the independent entity or the independent entity has a material interest in the person.

4.2.2 Independent entity must comply with legal and regulatory requirements—all QFC schemes

(1) The independent entity of a QFC scheme must comply with every legal and regulatory requirement applying to the independent entity—

(a) in relation to the scheme; or

(b) as the independent entity of a QFC scheme; or


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Rule 12.1.1

(c) if the independent entity is an authorised firm—as an authorised firm.

(2) Without limiting subrule (1), the independent entity must act in accordance with the following:

(a) these rules;

(b) any regulations under which the QFC scheme is established, including any law applied by, or that supplements, those regulations;

(c) the other provisions of the law applying in the QFC in relation to—

(i) the scheme; or

(ii) the independent entity as the independent entity of a QFC scheme; or

(iii) if the independent entity is an authorised firm—the independent entity as an authorised firm;

(d) if the independent entity is an authorised firm—the scope of the independent entity’s authorisation, including any conditions, restrictions or requirements;Note Authorisation is defined in the glossary.


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Rule 12.1.2

(e) the scope of the scheme’s registration, including any conditions, restrictions or requirements;

(f) the constitutional document;

(g) the latest filed prospectus. Note Latest filed prospectus is defined in the glossary.

4.2.3 Oversight functions of independent entity—all QFC schemes

(1) The independent entity of a QFC scheme must take reasonable care to ensure that the scheme is managed by the operator in accordance with—

(a) the following provisions of these rules (as far as they apply to the scheme): part 5.1 (Transactions with affected persons—QFC

schemes) rule 5.6.6 (Operator’s reports—QFC qualified investor

schemes) rule 5.6.13 (Operator’s reports—QFC retail schemes) chapter 6 (Investment and borrowing—QFC qualified

investor schemes)


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Rule 12.1.1

chapter 7 (Investment and borrowing—QFC retail schemes)

part 8.1 (Dealing—QFC schemes) part 8.2 (Valuation and pricing—QFC schemes) part 8.7 (Accounting periods—QFC schemes) part 8.8 (Income allocation and distribution—QFC

schemes); and

(b) the provisions of the constitutional document, and the latest filed prospectus, that relate to any of the following matters:

(i) transactions with affected persons;

(ii) reports of the operator about the scheme;

(iii) investment and borrowing by the scheme;

(iv) dealing in units;

(v) valuation of the scheme property and pricing of units;

(vi) income and capital of the scheme, including their distribution.


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Rule 12.1.2

(2) Without limiting subrule (1), the independent entity must take reasonable care to ensure on a continuing basis that—

(a) the operator is adopting appropriate procedures to ensure that the scheme’s net asset value, and the price per unit in each class, are calculated for each valuation point in accordance with these rules; and

(b) the operator has made and kept sufficient records to show that the scheme’s net asset value, and the price per unit in each class, have been calculated for each valuation point in accordance with these rules.

Note Net asset value, class, price and valuation point are defined in the glossary.


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Rule 12.1.1

4.2.4 Duty of independent entity to report certain breaches of law etc—all QFC schemes

(1) This rule applies if the independent entity of a QFC scheme becomes aware that the operator or any other person has breached, or suspects on reasonable grounds that the operator or any other person may have breached or may be about to breach, in relation to the scheme any provision of these rules, any other law of the QFC or the law of any other jurisdiction.Note Breach and jurisdiction are defined in the glossary.

(2) The independent entity must immediately tell the operator in writing about the breach.

(3) Subrule (4) applies if—

(a) the independent entity is of the opinion that the operator has not taken, or does not propose to take, appropriate action in relation to the breach; and

(b) the breach—

(i) is of a provision mentioned in rule 4.2.3 (1) (Oversight functions of independent entity—all QFC schemes); or


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Rule 12.1.2

(ii) has had, or is likely to have, a material adverse effect on the scheme or the interests of unitholders.

(4) If this subrule applies, the independent entity must tell the Regulatory Authority about the breach immediately, but within 1 business day.ExamplesSee examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

(5) The independent entity must give the Regulatory Authority any information about the breach that the authority reasonably requires.

4.2.5 Particular duties of independent entity—all QFC schemesThe independent entity of a QFC scheme must—

(a) act honestly; and

(b) exercise the degree of care and diligence that a reasonable person would exercise in the independent entity’s position; and

(c) be independent of the operator; and

(d) act as independent entity solely in the interests of the unitholders; and


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Rule 12.1.1

(e) treat unitholders who hold units in the same class equally and unitholders who hold units in different classes fairly; andNote Class is defined in the glossary.

(f) not make improper use of information acquired as a result of being the independent entity—


(ii) to cause detriment to the unitholders; and

(g) not make improper use of the position of independent entity—


(ii) to cause detriment to the unitholders.

4.2.6 Property safeguarding functions of independent entity—all QFC schemes

(1) The independent entity of a QFC scheme is responsible for safeguarding all the scheme property.Note Scheme property is defined r 1.2.3.


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Rule 12.1.2

(2) Without limiting subrule (1), the independent entity must—

(a) ensure that all the scheme property is properly accounted for; and

(b) ensure that all the scheme property is—

(i) clearly identified as scheme property; and

(ii) held separately from the independent entity’s own property, the operator’s own property and the property of any other person; and

(c) take all steps and complete all documents needed to ensure completion of transactions properly entered into for the scheme; and

(d) ensure that instructions properly given by the operator about the exercise of rights in relation to the scheme property are carried out; and

(e) ensure that any scheme property in registrable form is registered as soon as practicable in its own name or in the name of its nominee or delegate, as appropriate; and


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Rule 12.1.1

(f) take into its custody or control all documents evidencing title to the scheme property, other than in relation to derivatives and forward positions; andNote Document evidencing title and derivative are

defined in the glossary.(g) ensure that any resulting benefit of a derivative or forward

transaction is received by it for the scheme property; and

(h) collect, hold and deal with income in relation to the scheme property.

(3) If the scheme property includes units in any other scheme operated by the operator or an associate of the operator, the independent entity must exercise any voting rights given by the units in accordance with what the independent entity reasonably believes to be in the interest of the unitholders of the QFC scheme. Note Associate is defined in the glossary.

(4) If the independent entity is of the opinion that a deal in property in relation to the scheme breaches these rules or the constitutional document, the independent entity may require the operator—

(a) to cancel the transaction or make a disposal or acquisition to restore the previous situation; and


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Rule 12.1.2

(b) to meet any resulting loss or expense.Note Deal and breach is defined in the glossary.

(5) If the independent entity is of the opinion that—

(a) an acquisition of property necessarily involves documents evidencing title being kept in the custody of a person other than the independent entity; and

(b) the independent entity cannot reasonably be expected to accept the responsibility that would otherwise be placed on it if it were to permit custody by the other person;

the operator must either cancel the transaction or make a corresponding disposal if the independent entity asks it to take action under this subrule.

4.2.7 Records of independent entity—all QFC schemes (1) The independent entity of a QFC scheme must make the records

necessary—

(a) to enable the independent entity to comply with—

(i) these rules; and


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Rule 12.1.1

(ii) the other provisions of the law applying in the QFC in relation to—

(A) the scheme; or

(B) the independent entity as the independent entity of a QFC scheme or, if the independent entity is an authorised firm, as an authorised firm; and

(b) to demonstrate at all times whether it has complied with these rules.

(2) The independent entity must keep records made for this rule for at least 6 years after the day they are made.

(3) The independent entity must, at the request of the Regulatory Authority, operator or auditor—

(a) make records kept under this rule available for inspection within a reasonable period of not longer than 3 days; and

(b) provide a copy of any of the records, in the requested form (if any), within a reasonable period of not longer than 3 days.


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Rule 12.1.2

(4) The independent entity must not charge for making records available, or providing a copy of any records, under subrule (3). Note GENE, ch 6 also contains provisions about record-keeping by

independent entities that are authorised firms.

4.2.8 Independent entity must give information etc to operator and auditor—all QFC schemes The independent entity of a QFC scheme must, on request, immediately give the operator or auditor of the scheme the information and explanations in relation to the scheme that the operator or auditor reasonably requires.


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Rule 12.1.1

Division 4.2.B Non-QFC independent entities—QFC schemes

4.2.9 Non-QFC independent entities—criteria for Regulatory Authority action

(1) This rule applies in relation to the making of a decision by the Regulatory Authority under these rules about whether a corporation that is not an authorised firm or another QFC licensed firm is an appropriate person to be the independent entity of a QFC scheme (or a scheme established in the QFC that is proposed to become a QFC scheme). Note This rule applies to decisions under the following provisions:

r 2.1.3 (2) (d) (ii) (Decision on application for registration of scheme established in QFC)

r 4.2.13 (2) (a) (Non-QFC independent entities—removal by Regulatory Authority).

(2) The Regulatory Authority may consider all or any of the matters mentioned in rule 4.2.1 (2) (a) to (h) (Requirements for independent entity—all QFC schemes).

(3) Subrule (2) does not limit the matters the Regulatory Authority may consider.


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Rule 12.1.2

4.2.10 Non-QFC independent entities—annual compliance certificate

(1) This rule applies to the independent entity of a QFC scheme if the independent entity is not an authorised firm.

(2) Not later than 1 February in each year, the independent entity must give the operator a written certificate about its compliance with the following provisions in relation to the QFC scheme during the previous year (the reporting year): rule 4.2.3 (Oversight functions of independent entity—all QFC

schemes) rule 4.2.6 (Property safeguarding functions of independent

entity—all QFC schemes).

(3) The certificate must—

(a) name the QFC scheme; and

(b) state whether the independent entity complied fully with all relevant provisions in relation to its functions under rule 4.2.3 and rule 4.2.6 and, if it did not fully comply with all relevant provisions, the details of any material non-compliance.Note Function is defined in the glossary.


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Rule 12.1.1

(4) In this rule:

relevant provisions means the provisions of—

(a) these rules; and

(b) any other law of the QFC applying in relation to the scheme; and

(c) the law of any other jurisdiction (if any) applying in relation to the scheme.

Note Jurisdiction is defined in the glossary.

4.2.11 Non-QFC independent entities—oversight of property safeguarding functions by operators

(1) This rule applies in relation to the independent entity of a QFC scheme if the independent entity is not an authorised firm.

(2) The operator must take reasonable care to ensure that the independent entity exercises its functions under rule 4.2.6 (Property safeguarding functions of independent entity—all QFC schemes) in accordance with the provisions of—


(b) any other law of the QFC applying in relation to the scheme; and


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Rule 12.1.2

(c) the law of any other jurisdiction (if any) applying in relation to the scheme.

4.2.12 Non-QFC independent entities—removal by operators(1) This rule applies in relation to the independent entity of a QFC

scheme if—

(a) the independent entity is not an authorised firm; and

(b) the operator considers that the independent entity is not, or is no longer, an appropriate person to be the independent entity of the scheme.

(2) In making a decision for subrule (1) (b), the operator must consider the matters mentioned in rule 4.2.1 (2) (a) to (h) (Requirements for independent entity—all QFC schemes).


(4) If this rule applies, the operator must—

(a) by written notice given to the independent entity, remove the independent entity; and

(b) appoint another person as the independent entity of the scheme.


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Rule 12.1.1

(5) The person appointed must be eligible to be the independent entity of the scheme under rule 4.2.1.

(6) If the independent entity is removed under this rule, the operator must tell the Regulatory Authority about the removal immediately, but within 1 business day after the day the independent entity is removed.

(7) If another person is appointed as the independent entity under this rule, the operator must tell the Regulatory Authority about the appointment immediately, but within 1 business day after the day the appointment is made.Examples for r (6) and r (7)See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

(8) This rule is additional to, and does not limit, part 8.4 (Operator and independent entity appointment and removal—QFC schemes).

4.2.13 Non-QFC independent entities—removal by Regulatory Authority

(1) The rule applies in relation to the independent entity of a QFC scheme if the independent entity is not an authorised firm.


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Rule 12.1.2

(2) The Regulatory Authority may, by written notice given to the operator, require the operator to remove the independent entity and appoint another person as the independent entity if satisfied that—

(a) the independent entity is not, or is no longer, an appropriate person to be the independent entity of the scheme; orNote See r 4.2.9 (Non-QFC independent entities—criteria

for Regulatory Authority action)).(b) it is desirable to remove the independent entity to protect

participants or potential participants in the scheme or the financial system operating in or from the QFC; or

(c) the independent entity is in breach of, or has been in breach of, these rules, any other law of the QFC or the law of any other jurisdiction; or

(d) a request has been received under the Financial Services Regulations, article 20 (International relations and co-operation) in relation to the independent entity.

(3) The Regulatory Authority may give a notice under subrule (2) only if it has—

(a) given the independent entity and the operator prior notice of its intention to give the notice; and


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Rule 12.1.1

(b) given the independent entity and the operator a reasonable opportunity to make representations; and

(c) considered any representations made.

(4) However, subrule (3) does not apply if—

(a) the Regulatory Authority considers that any delay likely to arise because of the application of the subrule would be prejudicial to participants or potential participants in the QFC scheme or the financial system operating in or from the QFC; or

(b) the power is to be exercised following a decision by the Regulatory Authority under the Financial Services Regulations, part 9 (Disciplinary and enforcement powers), or by the Regulatory Tribunal or the QFC Court, in relation to the independent entity.

(5) If subrule (4) (a) applies, the Regulatory Authority must—

(a) give the independent entity and the operator an opportunity to make representations promptly after the notice under subrule (2) has been given; and

(b) consider any representations made.


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Rule 12.1.2

(6) If the Regulatory Authority gives a notice under subrule (2), it must give the independent entity a written notice—

(a) stating that it has given the notice under subrule (2); and

(b) giving reasons for the notice; and

(c) tell the independent entity that the independent entity may appeal to the Regulatory Tribunal against the decision.

(7) The operator must give effect to a notice under subrule (2).

(8) The person appointed by the operator as the replacement independent entity must be eligible to be the independent entity of the scheme under rule 4.2.1 (Requirements for independent entity—all QFC schemes).

(9) This rule is additional to, and does not limit, any other powers of the Regulatory Authority to remove the independent entity of a QFC scheme.


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Rule 12.1.1

Part 4.3 Operator and independent entity other provisions—QFC schemes

4.3.1 Duties of officers etc of operator and independent entity—all QFC schemes

(1) This rule applies to a person who is an officer, employee or agent of the operator or independent entity of a QFC scheme.

(2) The person must not—

(a) make improper use of information acquired as a result of being a person to whom this rule applies—


(ii) to cause detriment to unitholders; or

(b) make improper use of the person’s position as a person to whom this rule applies—



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Rule 12.1.2

(ii) to cause detriment to unitholders.

4.3.2 Provisions of ch 4 do not limit other functions (1) This rule applies to a provision of this chapter that gives a function

(however expressed) to the Regulatory Authority, the operator or independent entity of a QFC scheme or another person.Note Function is defined in this glossary.

(2) To remove any doubt, the provision is additional to, and does not limit, any function given to the Regulatory Authority, operator, independent entity or other person under—

(a) any other provision of these rules; or

(b) any other law of the QFC; or

(c) for the operator—the constitutional document.


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Rule 12.1.1

Chapter 5 Investor relations—QFC schemes

Part 5.1 Transactions with affected persons—QFC schemes

5.1.1 Who is an affected person for a QFC scheme?An affected person for a QFC scheme is any of the following:

(a) the operator;

(b) the independent entity;

(c) a member (however described) of the governing body of the operator, the independent entity or, for a CIC or CIP, the scheme;

(d) for a qualified investor scheme—any standing independent valuer of the scheme;

(e) any investment adviser for the scheme;


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Rule 12.1.2

(f) a person to whom functions of the operator or independent entity in relation to the scheme are outsourced;

(g) the auditor of the scheme;

(h) any associated person for any person mentioned in paragraphs (a) to (g);

(i) a unitholder with 5% or more in value of all the units then in issue.

Note Governing body, standing independent valuer, investment adviser, function and associated person are defined in the glossary. CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively.

5.1.2 Transactions with affected persons—general rule for all QFC schemes

(1) This rule applies to a transaction by the operator of a QFC scheme in relation to the scheme property if the transaction is with an affected person.

(2) The operator must ensure that the transaction—

(a) is on terms at least as favourable to the scheme as any comparable transaction on normal commercial terms negotiated at arm’s length with an independent third party; and


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Rule 12.1.1

(b) does not breach any other provision of this part; and

(c) is not prohibited by the constitutional document or the latest filed prospectus.Note Constitutional document is defined in r 3.1.1.

Breach and latest filed prospectus are defined in the glossary.

5.1.3 Transactions with affected persons—prior notice to unitholders of QFC schemes

(1) This rule applies to a proposed transaction by the operator of a QFC scheme in relation to the scheme property if the transaction is with an affected person.

(2) The operator must not enter into the transaction unless the operator has given the unitholders prior written notice of the transaction (or transactions that include the transaction), including an explanation of how rule 5.1.2 has been complied with in relation to the transaction (or the transactions). Example of written noticenotice given in the scheme’s latest filed prospectus


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Rule 12.1.2

5.1.4 Transactions with affected persons—transactions involving 5% or more of QFC scheme’s net asset value

(1) This rule applies to a proposed transaction by the operator of a QFC scheme in relation to the scheme property if—

(a) the transaction is with an affected person; and

(b) the total consideration for, or value of, the transaction (or the transaction and all earlier such transactions within the last 12 months) is 5% or more of the latest net asset value of the scheme, as disclosed in the scheme’s latest audited accounts.Note Net asset value is defined in the glossary.

(2) The operator must not enter into the transaction unless the unitholders have given prior approval to the transaction at a general meeting in accordance with the constitutional document.


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Rule 12.1.1

5.1.5 Transactions with affected persons—details required for QFC scheme’s annual reports

(1) If the operator of a QFC scheme enters into any transaction with an affected person in relation to the scheme property during an annual accounting period, the scheme’s annual report, or the scheme’s annual long and short reports, for the period must include—

(a) a summary of the total value of transactions with affected persons in relation to the scheme property during the period; and

(b) a summary of the nature of the transactions; and

(c) a summary of the identities of the affected persons; and

(d) if the unitholders voted at a general meeting held during the period to approve a transaction with an affected person—details of the approval and the results of the voting in relation to the approval.

(2) If the operator of a QFC scheme does not enter into a transaction with an affected person in relation to the scheme property during an annual accounting period, the scheme’s annual report, or the scheme’s annual long and short reports, for the period must include a statement to that effect.


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Rule 12.1.2

5.1.6 Transactions with affected persons—additional restrictions for QFC retail schemes

(1) The operator of a QFC retail scheme must take reasonable care to ensure that the following transactions, arrangements or agreements are not entered into:

(a) the putting of cash on deposit by the scheme with an affected person, unless that person is an authorised firm or regulated financial institution and the transaction complies with the arm’s length requirement in subrule (2);Note Deposit, authorised firm and regulated

financial institution are defined in the glossary.(b) the lending of money by an affected person to or for the

scheme, unless the affected person is an authorised firm or regulated financial institution and the transaction complies with the arm’s length requirement in subrule (2);

(c) the dealing in property by an affected person with or in relation to the scheme (or the independent entity acting for the scheme), unless subrule (3) applies;Note Deal is defined in the glossary.


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Rule 12.1.1

(d) the vesting of property (other than cash) by an affected person in the scheme (or with the independent entity acting for the scheme) against the issue of units in the scheme, unless—

(i) subrule (3) applies; or

(ii) the purpose of the vesting is for—

(A) all or part of the property of a corporation or another collective investment scheme to become the first property of the QFC retail scheme; and

(B) holders of shares or units in the corporation or other collective investment scheme to become the first unitholders in the QFC retail scheme;

Note Corporation is defined in the glossary.(e) the acquisition of scheme property by an affected person from

the scheme (or the independent entity acting for the scheme), unless subrule (3) applies or the acquisition is otherwise permitted by the constitutional document or under these rules;Note See r 8.1.20 (Issue or redemption otherwise than for

cash—QFC retail schemes).


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Rule 12.1.2

(f) a stock lending arrangement or repo agreement with or in relation to the scheme, unless the transaction complies with the arm’s length requirement in subrule (2).Note Stock lending arrangement and repo

agreement are defined in the glossary.(2) A transaction mentioned in subrule (1) (a), (b) or (f) must be as

favourable to the scheme as any comparable arrangement on normal commercial terms negotiated at arm’s length between the affected person and an independent third party.

(3) A transaction does not breach subrule (1) (c), (d) or (e) if the transaction complies with—

(a) subrule (4) (the best execution on-exchange requirement); or

(b) subrule (5) (the independent valuation requirement); or

(c) subrule (6) (the arm’s length transaction requirement).

(4) For subrule (3), the transaction complies with this subrule (the best execution on-exchange requirement) if—

(a) the property is an approved derivative or approved security; andNote Approved derivative is defined in r 7.1.8.

Approved security is defined in r 7.1.9.


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Rule 12.1.1

(b) the transaction is effected under the rules of the relevant market with or through a person who is bound by those rules; and

(c) there is written evidence of the effecting of the transaction and its terms; and

(d) the operator has taken all reasonable steps to ensure that the transaction is effected on the terms that are the best available for the scheme.

(5) For subrule (3), the transaction complies with this subrule (the independent valuation requirement) if—

(a) the value of the property is certified in writing for the purpose of the transaction by a person approved by the independent entity as—

(i) independent of any affected person; and

(ii) qualified to value property of the relevant kind; and

(b) the independent entity is of the opinion that the terms of the transaction are not likely to result in any material prejudice to unitholders.


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Rule 12.1.2

(6) For subrule (3), the transaction complies with this subrule (the arm’s length transaction requirement) if—

(a) the property is not an approved derivative or approved security; and

(b) it is not reasonably practicable to comply with subrule (5) (the independent valuation requirement); and

(c) the independent entity has reliable evidence that the transaction is or will be on terms that comply with the arm’s length requirement in subrule (2).


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Rule 12.1.1

Part 5.2 Prospectus requirements—QFC schemes

5.2.1 Prospectus to be drawn up—all QFC schemesThe operator of a QFC scheme must ensure that a prospectus is drawn up for the scheme in accordance with these rules.Note Prospectus is defined in the glossary.

5.2.2 Prospectus etc to be made available—all QFC schemes(1) The operator of a QFC scheme must make available free of charge

the latest filed prospectus, and the latest filed translation of the prospectus in each language for which there is a translation prepared by or for the operator, to any person eligible to invest in the scheme before the person buys units (or additional units) in the scheme.Note Latest filed prospectus and latest filed translation are defined in the

glossary.


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Rule 12.1.2

(2) The operator of a UCITS type scheme must, on the request of a unitholder of the scheme, give the unitholder the following information supplementary to the information provided by the latest filed prospectus:

(a) the quantitative limits applying to the risk management of the scheme;

(b) the methods used in relation to risk management;

(c) any recent developments in relation to the risk and yield of the main categories of investment.

Note UCITS type scheme is defined in r 1.3.5.

5.2.3 General information requirements for prospectus—all QFC schemes

(1) The operator of a QFC scheme must ensure that the scheme’s prospectus at all times contains all the information that investors and their professional advisers would reasonably require, and reasonably expect to have drawn to their attention, in the prospectus for the purpose of making an informed judgment about—

(a) the merits and risks of participating in the scheme; and


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Rule 12.1.1

(b) the extent and characteristics of the risks accepted by participating in the scheme.

(2) The operator must ensure that at all times the prospectus contains a clear and easily understandable explanation of any risks that investment in the scheme may reasonably be regarded as presenting to investors in the scheme.

(3) Without limiting subrules (1) and (2), the operator must ensure that at all times the prospectus includes the information, statements and provisions required for the QFC scheme by—

(a) if the scheme is a qualified investor scheme—schedule 3 (Prospectus content—QFC qualified investor schemes); and

(b) if the scheme is a retail scheme—schedule 4 (Prospectus content—QFC retail schemes).

5.2.4 Other general requirements for prospectus—all QFC schemes

(1) The operator of a QFC scheme must ensure that any prospectus for the scheme—

(a) is in English; and

(b) presents information about the scheme clearly and fairly; and


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Rule 12.1.2

(c) does not contain any untrue or misleading statement; and

(d) otherwise complies with these rules.

(2) Subrule (1) (a) does not prevent the operator preparing, or arranging for the preparation of, a translation of the prospectus in any other language.

(3) However, the operator must ensure that any translation of a prospectus prepared by or for the operator—

(a) presents information about the scheme clearly and fairly; and

(b) does not contain any untrue or misleading statement; and

(c) is otherwise a correct translation; and

(d) prominently displays the date of the translation; and

(e) states that it is a translation authorised by the operator; and

(f) otherwise complies with these rules.


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Rule 12.1.1

5.2.5 Prospectus, checklist and any translations to be filed with registration application—all QFC schemes

(1) The person who is to become the operator of a collective investment scheme established in the QFC must file with the application for registration of the scheme under these rules—

(a) the original prospectus for the scheme; and

(b) a checklist prepared by the person listing all the statements and information required by these rules and indicating where they are in the original prospectus; and

(c) each translation of the original prospectus that has been prepared by or for the person; and

(d) for each translation mentioned in paragraph (c)—a certificate by the person who made the translation stating that the translation is a correct translation of the original prospectus.


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Rule 12.1.2

(2) If the person mentioned in subrule (1) (either before or after becoming the initial operator of the scheme), or a person who is a later operator of the scheme, prepares another translation of the original prospectus or has another translation prepared, the person must immediately, but within 1 business day after the day the translation is prepared, file with the Regulatory Authority—

(a) the translation; and

(b) a certificate by the person who made the translation stating that the translation is a correct translation of the original prospectus.

Examples See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

(3) The certificate of a person under subrule (1) (d) or (2) (b) must state, in English, the person’s—

(a) full name and address; and

(b) qualifications for making the translation.

5.2.6 Revisions of prospectus etc—all QFC schemes(1) The operator of a QFC scheme must keep the latest filed prospectus

under review.


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Rule 12.1.1

(2) If the operator becomes aware of the happening of any materially significant change affecting a statement or information required to be included in the prospectus, the operator must—

(a) immediately revise the prospectus and immediately file a revised or supplementary prospectus with the Regulatory Authority; and

(b) if a translation of the latest filed prospectus has been filed with the authority in a particular language—the operator must immediately prepare, or arrange for the preparation of, a translation of the revised or supplementary prospectus in that language and immediately file the translation with the authority.

Example of materially significant changea change in the scheme’s investment objectives, strategies or policy

(3) Without limiting subrules (1) and (2), the operator must, at least once every year—

(a) review the latest filed prospectus, make any revisions necessary and, whether or not revisions are necessary, immediately file a prospectus or revised prospectus with the Regulatory Authority; and


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Rule 12.1.2

(b) if a translation of the latest filed prospectus has been filed with the authority in a particular language—file with any revised or supplementary prospectus filed under paragraph (a) a translation of that prospectus in the same language.

(4) To remove any doubt, subrules (2) and (3) do not prevent the operator—

(a) revising the latest filed prospectus at any other time; or

(b) preparing, or arranging for the preparation of, a translation or revised translation of the latest filed prospectus in any language.

(5) If the operator revises the latest filed prospectus otherwise than under subrule (2) or (3), the operator must immediately file a revised or supplementary prospectus with the Regulatory Authority.

(6) If the operator prepares, or arranges for the preparation of, a translation or revised translation of the latest filed prospectus otherwise than under subrule (2) or (3), the operator must immediately file the translation with the Regulatory Authority.

(7) A prospectus filed under this rule must be accompanied by a checklist prepared by the operator listing all the statements and


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Rule 12.1.1

information required by these rules and indicating where they are in the prospectus.

(8) A translation of a prospectus filed under this rule must be accompanied by a certificate signed by the person who made the translation stating that the translation is a correct translation of the prospectus.

(9) The certificate of a person under subrule (8) must state, in English, the person’s—

(a) full name and address; and

(b) qualifications for making the translation.

(10) If, under this rule, the operator is required to do something immediately, the operator must do the thing immediately, but within 1 business day after the day the requirement to do the thing arises. Examples See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.


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Rule 12.1.2

Part 5.3 Prospectus responsibility—QFC schemes

5.3.1 Persons responsible for prospectus—all QFC schemes(1) Each of the following persons is responsible for a QFC scheme’s

prospectus:

(a) the operator;

(b) each member (however described) of the governing body of the operator;Note Governing body is defined in the glossary.

(c) subject to subrules (2) and (3), each person who has accepted, and is stated in the prospectus to have accepted, responsibility for the prospectus or any part of it;

(d) subject to subrules (2) and (3), each person who is taken under rule 5.3.2 (Responsibility for expert statements in prospectus—all QFC schemes) to have accepted responsibility for part of the prospectus;


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Rule 12.1.1

(e) subject to subrules (2) and (3), each person not mentioned in paragraphs (a) to (d) who has authorised, and is stated in the prospectus to have authorised, the prospectus or any part of it.

(2) If a person accepts (or is taken under rule 5.3.2 to have accepted) responsibility for, or authorises, only part of a prospectus, the person is responsible only for that part of the prospectus.

(3) However, the person is responsible for that part of the prospectus only if it is included in, or substantially in, the form and context in which the person accepted responsibility for it, consented to its inclusion or authorised it.

(4) This rule does not make a person responsible for a prospectus only because the person gave advice about its contents, in a professional capacity, to a person mentioned in subrule (1) (a) to (e).

5.3.2 Responsibility for expert statements in prospectus—all QFC schemes

(1) For this rule, an expert is a person whose profession or reputation gives authority to statements made by the person.


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Rule 12.1.2

(2) For rule 5.3.1 (1) (d), an expert is taken to have accepted responsibility for a part of a QFC scheme’s prospectus if—

(a) the part is a statement made by, or is based on a statement made by, the expert; and

(b) the expert gave the operator written consent for the statement to be included in the prospectus; and

(c) the prospectus states that the expert authorised the statement; and

(d) the expert does not withdraw the consent, by written notice given to the operator, before the prospectus is filed with the Regulatory Authority.

(3) The operator must keep the following for at least 6 years after the day the prospectus is last made available to a person eligible to invest in the scheme:

(a) the expert’s consent;

(b) any written notice given to the operator withdrawing the expert’s consent.


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Rule 12.1.1

5.3.3 Liability for prospectus—all QFC schemes(1) A person responsible under rule 5.3.1 (Persons responsible for

prospectus—all QFC schemes) for a prospectus is liable to pay compensation to another person who acquires (or contracts to acquire) units in the scheme for any loss or damage arising from—

(a) any untrue or misleading statement in the prospectus; or

(b) the omission from the prospectus of any matter required by these rules to have been included in it.

(2) However, if rule 5.3.1 (1) (c), (d) or (e) applies to the person, the person is only liable to pay compensation in relation to a part of the prospectus for which the person is responsible under rule 5.3.1 (2) and (3).

(3) Also, this rule is subject to rule 5.3.4.

(4) To remove any doubt, this rule does not limit any liability that exists apart from this rule.

(5) In this rule:

prospectus includes a translation of the prospectus prepared by or for the operator.


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Rule 12.1.2

5.3.4 Exceptions from liability for prospectus—all QFC schemes

(1) A person (other than the operator) is not liable under rule 5.3.3 to pay compensation, in relation to a statement in, or omission from, a QFC scheme’s prospectus, to another person who acquires units in the scheme if—

(a) at the time the prospectus was filed with the Regulatory Authority, the person believed on reasonable grounds, after having made all inquiries that were reasonable—

(i) that the statement was true and not misleading; or

(ii) that the omitted matter was properly omitted; andNote See defs acquire and prospectus in r (6).

(b) 1 or more of the following subparagraphs apply:

(i) the person continued in that belief until the units were acquired;

(ii) the units were acquired before it was reasonably practicable to bring a correction to the attention of potential purchasers of the units;


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Rule 12.1.1

(iii) before the units were acquired, the person had already taken all reasonable steps to ensure that a correction was brought to the attention of potential purchasers of the units;

(iv) the person who acquired the units was not materially influenced or affected by the statement or omission in making the decision to invest.

(2) A person (the first person) is not liable under rule 5.3.3 to pay compensation, in relation to a statement in a QFC scheme’s prospectus, to another person who acquired units in the scheme if—

(a) the statement is a part of the prospectus for which a third person (the expert) is taken, under rule 5.3.2 (Responsibility for expert statements in prospectus—all QFC schemes), to have accepted responsibility; and

(b) at the time the prospectus was filed with the Regulatory Authority, the first person believed on reasonable grounds, after having made all inquiries that were reasonable—

(i) that the expert was competent to make the statement; and

(ii) that the expert gave the operator written consent to include the statement in the prospectus; and


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Rule 12.1.2

(iii) that the expert had not withdrawn the consent; and

(iv) that the statement was included in, or substantially in, the form and context in which the expert consented to its inclusion; and

(c) 1 or more of the following subparagraphs apply:

(i) the first person continued in that belief until the units were acquired;

(ii) the units were acquired before it was reasonably practicable to bring a correction to the attention of potential purchasers of the units;

(iii) before the units were acquired, the first person had already taken all reasonable steps to ensure that a correction was brought to the attention of potential purchasers of the units;

(iv) the person who acquired the units was not materially influenced by the statement in making the decision to invest.


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Rule 12.1.1

(3) For the application of subrule (1) (b) (iii) or (2) (c) (iii) in relation to a person, it is sufficient if, before the units were acquired—

(a) the correction had been published in a way likely to bring it to the attention of potential purchasers of the units; or

(b) the person took all reasonable steps to ensure that such a correction was published and believed on reasonable grounds the correction had been published.

(4) A person is not liable under rule 5.3.3 to pay compensation, in relation to a statement in or omission from a QFC scheme’s prospectus, to another person who acquired units in the scheme if the other person knew, at the time of acquisition, that the statement was untrue or misleading or of the omission.

(5) For this rule—

(a) a revised or supplementary prospectus is taken to be a different prospectus from the original prospectus; and

(b) each revised or supplementary prospectus filed with the Regulatory Authority is taken to be a different prospectus from each other revised or supplementary prospectus filed with the authority.


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Rule 12.1.2

(6) In this rule:

acquire units includes contract to acquire them.

prospectus includes a translation of the prospectus prepared by or for the operator.


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Rule 12.1.1

Part 5.4 Unitholder approvals and notice—QFC schemes

Division 5.4.A Unitholder approvals and notice—QFC qualified investor schemes

5.4.1 Changes requiring unitholder approval or notice—QFC qualified investor schemes

(1) Any proposed change or event that would reasonably be considered a fundamental change in relation to a QFC qualified investor scheme requires the prior approval of an ordinary resolution of the unitholders.

(2) Any proposed change or event that would not reasonably be considered a fundamental change in relation to a QFC qualified investor scheme, but that would reasonably be considered a significant change, requires the giving of reasonable notice to unitholders to become effective.

(3) If a change mentioned in subrule (1) or (2) affects only a particular subscheme or class of units, it is sufficient to comply with the


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Rule 12.1.2

subrule only in relation to unitholders of the subscheme or class of units.

(4) For subrule (3), the provisions of these rules apply in relation to the change as if—

(a) a reference to unitholders of the scheme were a reference to the unitholders of the subscheme or class of units; and

(b) all other necessary changes were made.

(5) The operator of a QFC qualified investor scheme must ensure this rule is complied with in relation to the scheme.

(6) If a fundamental change in relation to a QFC qualified investor scheme happens, the operator must give the Regulatory Authority written notice of the change not later than 21 days after the day the change happens.


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Rule 12.1.1

Division 5.4.B Unitholder approvals and notice—QFC retail schemes

5.4.2 Fundamental changes requiring prior approval by unitholder meeting—QFC retail schemes

(1) The operator of a QFC retail scheme must, by way of a special resolution, obtain prior approval from the unitholders for any proposed change or event in relation to the scheme that is a fundamental change.Note Special resolution is defined in the glossary.

(2) For this rule, a fundamental change is a change or event—

(a) that changes the purpose or nature of the scheme; or

(b) that may materially prejudice a unitholder; or

(c) that changes the risk profile of the scheme; or

(d) that introduces any new type of payment out of scheme property.

Guidance on fundamental changes1 Any change or event may be fundamental depending on its degree of

materiality and effect on the scheme and its unitholders. Consequently, the


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Rule 12.1.2

operator will need to decide in each case whether a particular change is fundamental in nature.

2 For rule 5.4.2 (2) (a) to (c), a fundamental change is likely to include any of the following:

(a) any proposal for a scheme of arrangement;

(b) a change in the investment objectives, strategies or policy to achieve capital growth from investment in one jurisdiction rather than another jurisdiction;

(c) a change in the investment objectives, strategies or policy to achieve capital growth from investments in fixed interest rather than investments in equity;

(d) a change in the investment objectives, strategies or policy to allow the scheme to invest in derivatives as an investment strategy that increases its volatility;

(e) a change to the characteristics of the scheme to distribute income annually rather than monthly.


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Rule 12.1.1

5.4.3 Significant changes requiring pre-event notification—QFC retail schemes

(1) The operator of a QFC retail scheme must give prior written notice of not less than 60 days to unitholders of any proposed change or event in relation to the scheme that is a significant change.

(2) For this rule, a significant change is a change or event that is not a fundamental change under rule 5.4.2, but—

(a) affects a unitholder’s ability to exercise rights in relation to the unitholder’s investment; or

(b) would reasonably be expected to cause the unitholder to reconsider participation in the scheme; or

(c) results in any increased payments out of the scheme property to the operator or an associated person for the operator; orNote Associated person is defined in the glossary.

(d) materially increases other types of payments out of scheme property.

Guidance on significant changes1 Any change or event may be significant depending on its degree of

materiality and effect on the scheme and its unitholders. Consequently, the


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Rule 12.1.2

operator will need to decide in each case whether a particular change is significant in nature.

2 For rule 5.4.3, a significant change is likely to include any of the following:

(a) a change in how the scheme property is valued;

(b) a change in the method of price publication;

(c) a change in the operator’s operational policy (for example, allocation of payments policy).

5.4.4 Notifiable changes—QFC retail schemes(1) The operator of a QFC retail scheme must notify unitholders in an

appropriate way, and within a reasonable time, of any change or event in relation to the scheme that is a notifiable change.

(2) For this rule, a notifiable change is a change or event, other than a fundamental change under rule 5.4.2 or a significant change under rule 5.4.3, that is reasonably likely to affect, or has affected, the scheme or its operation unless the operator decides that the change or event is insignificant.Guidance on notifiable changes1 The circumstances causing a notifiable change may or may not be within the

control of the operator.


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Rule 12.1.1

2 For rule 5.4.4, a notifiable change is likely to include any of the following:

(a) a change of named investment manager if the scheme has been marketed on the basis of the manager’s involvement;

(b) a change of named investment adviser if the scheme has been marketed on the basis of the adviser’s involvement;

(c) a significant political event that affects the scheme or its operation;

(d) a change on the time of the valuation point;

(e) a change of independent entity;

(f) a change in the scheme’s name.

3 The appropriate way and reasonable time for notification would depend on the nature of the change or event. Consequently, the operator will need to assess each change or event individually.

4 An appropriate way for notification could include any or all the following:

(a) sending a notice to unitholders;

(b) publishing the information on a website;

(c) including the information in the next annual report of the scheme.


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Rule 12.1.2

Part 5.5 Unitholder meetings—QFC schemes

Division 5.5.A Unitholder meetings—QFC qualified investor schemes

5.5.1 Unitholder meetings—QFC qualified investor schemes(1) The constitutional document of a QFC qualified investor scheme

must set out details of the procedures for the calling and conducting of meetings, and for resolutions, of unitholders.

(2) The procedures must be reasonable and fair as between the parties.

(3) The operator must record minutes of all proceedings to which rule 5.4.1 (Changes requiring unitholder approval or notice—QFC qualified investor schemes) or this rule apply.

(4) The operator must keep the minutes for at least for 6 years after the day they are made.

Division 5.5.B Unitholder meetings—QFC retail schemes


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Rule 12.1.1

5.5.2 Special meaning of unitholder in div 5.5.B—QFC retail schemes

(1) A reference in this division to a unitholder of a QFC retail scheme in relation to a meeting is a reference to a unitholder of the scheme as at a cut-off date for the meeting selected by—

(a) if the independent entity calls the meeting—the independent entity; and

(b) in any other case—the operator.

(2) The date selected by the independent entity or operator must be a reasonable time before notices of the meeting are sent out.

5.5.3 Application of div 5.5.B to class meetings—QFC retail schemes

(1) This division applies to a class meeting for a class of units in a QFC retail scheme as if—

(a) a reference to a general meeting of the scheme were a reference to the class meeting; and

(b) a reference to units were a reference to units in the class; and

(c) a reference to unitholders were a reference to unitholders of units in the class; and


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Rule 12.1.2

(d) a reference to prices of units were a reference to prices of units in the class; and

(e) all other necessary changes were made.Note Class is defined in the glossary.

(2) In this rule:

class meeting, for a class of units in the scheme, means a separate meeting of unitholders of that class of units.

5.5.4 General meetings of unitholders—QFC retail schemes(1) The operator or independent entity of a QFC retail scheme may call

a general meeting of unitholders at any time.

(2) The unitholders may, at any time, request the calling of a general meeting of unitholders.

(3) The request must—

(a) state the object of the meeting; and

(b) be dated; and

(c) be signed by unitholders who, at that date, are registered as the unitholders of units representing not less than the required percentage in value of all the units then in issue; and


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Rule 12.1.1

(d) be given to the operator or independent entity.

(4) If the operator or independent entity is given a request for a general meeting of unitholders that complies with subrule (3), the operator or independent entity must immediately call a general meeting.

(5) The date fixed for the general meeting called under subrule (4) must not be later than 8 weeks after the day the request is given to the operator or independent entity.

(6) In this rule:

required percentage means—

(a) 10%; or

(b) if the constitutional document provides for a lower percentage—that percentage.

5.5.5 Notice of general meetings of unitholders—QFC retail schemes

(1) This rule applies if the operator or independent entity of a QFC retail scheme (the initiating entity) decides to call a general meeting to unitholders.

(2) The initiating entity must give unitholders notice of the meeting.


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Rule 12.1.2

(3) The notice must—

(a) be given to each unitholder at least 14 days before the date fixed for the meeting; and

(b) state the place, date and time of the meeting; and

(c) state the terms of the resolutions to be proposed.Note Rule 5.5.10 (3) also requires a notice to contain a reasonably prominent

statement that a unitholder may appoint a proxy if the unitholder is entitled to attend and vote.

(4) If the meeting is adjourned, the initiating entity must give unitholders notice of the adjourned (or further adjourned) meeting.

(5) Notice of an adjourned meeting (including a further adjourned meeting) must—

(a) be given to each unitholder at least 14 days before the date of the adjourned meeting; and

(b) state the place, date and time of the adjourned meeting; and


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Rule 12.1.1

(c) state that, although 2 unitholders present in person or by proxy are required for a quorum at the adjourned meeting, this may be reduced to 1 if a quorum is not present after a reasonable time from the time fixed for the start of the meeting.Note See r 5.5.6 (Quorum for unitholder meetings—QFC

retail schemes).(6) In working out the 14-day period for subrule (3) (a) or (5) (a), the

day the notice is given and the day of the meeting are included.

(7) If the operator is the initiating entity, the operator must give a copy of each notice under subrule (2) or (4) to the independent entity not later than the start of the 14-day period mentioned in subrule (3) (a) or (5) (a).

(8) If the independent entity is the initiating entity, the independent entity must give a copy of each notice under subrule (2) or (4) to the operator not later than the start of the 14-day period mentioned in subrule (3) (a) or (5) (a).

(9) The accidental failure to give notice to, or the non-receipt of notice by, any unitholder does not invalidate the proceedings at any meeting.


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Rule 12.1.2

5.5.6 Quorum for unitholder meetings—QFC retail schemes(1) The quorum required to conduct business at a meeting of

unitholders of a QFC retail scheme is 2 unitholders, present in person or by proxy.

(2) If a quorum is not present after a reasonable time from the time fixed for the start of the meeting, the meeting—

(a) if called at the request of unitholders—must be dissolved; and

(b) in any other case—must be adjourned to—

(i) a day and time that is at least 7 days after the day and time of the meeting; and

(ii) a place to be appointed by the chair of the meeting.

(3) If, at an adjourned meeting under subrule (2) (b), a quorum is not present after a reasonable time from the time fixed for the start of the meeting, a single person who is entitled to be counted in a quorum, and is present at the meeting, is taken to be a quorum.


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Rule 12.1.1

5.5.7 Resolutions at unitholder meetings—QFC retail schemes(1) Unless a special resolution is required or permitted by these rules,

any resolution of unitholders of a QFC retail scheme is passed by a simple majority of the votes validly cast at a general meeting of unitholders.Note Special resolution is defined in the glossary.

(2) But, if the votes are equal, the chair of the meeting is entitled to a casting vote.

(3) If a resolution (including a special resolution) is required to conduct business at a meeting of unitholders, and every unitholder is prohibited under rule 5.5.8 from voting—

(a) it is not necessary to call a meeting of unitholders; and

(b) a resolution may, with the prior written agreement of the independent entity, instead be passed with the written consent of the unitholders representing 50% or more (or, for a special resolution, 75% or more) of the units in issue.


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Rule 12.1.2

5.5.8 Voting rights at unitholder meetings—QFC retail schemes(1) On a show of hands at a general meeting of unitholders of a QFC

retail scheme, every unitholder of the scheme who is present in person has 1 vote.

(2) On a poll, the following provisions apply:

(a) votes may be given in person, by proxy or in another way permitted by the constitutional document;

(b) the voting rights for each unit are calculated in accordance with the following formula:

CBA

where:

A is the total number of the voting rights given by all the units in issue at the cut-off date selected by the operator under rule 5.5.2 (Special meaning of unitholder in div 5.5.B—QFC retail schemes).

B is the price of the unit.


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Rule 12.1.1

C is the total of the prices of all the units in issue at the cut-off date selected by the operator under rule 5.5.2;Note See r (6) for the treatment of the operator’s units.

(c) a unitholder need not use all the unitholder’s votes or cast all the unitholder’s votes in the same way.

Note Price and issue are defined in the glossary.

(3) For joint unitholders, the vote of the most senior unitholder who votes, whether in person or by proxy, must be accepted to the exclusion of the votes of the other joint unitholders. For this purpose seniority is decided by the order in which the names are recorded in the unitholder register.

(4) The operator cannot be counted in the quorum of any meeting of the scheme, and neither the operator nor any associate of the operator may vote at any meeting of the scheme.Note Associate is defined in the glossary.

(5) The prohibition in subrule (4) against voting at any meeting of the scheme does not apply in relation to units held on behalf of, or jointly, with a person if—

(a) the person would be entitled to vote if the person were the registered unitholder; and


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Rule 12.1.2

(b) the operator or associate of the operator has received voting instructions from the person.

(6) For this division, units held, or treated as held, by the operator must not be taken to be in issue unless subrule (5) applies to them.

5.5.9 Right to demand poll at unitholder meetings—QFC retail schemes

(1) A resolution put to the vote at a general meeting of unitholders of a QFC retail scheme must be decided on a show of hands unless a poll is demanded by—

(a) the chair of the meeting; or

(b) at least 2 unitholders; or

(c) the independent entity.

(2) The poll may be demanded only before or on the declaration of the result of the show of hands.

(3) Unless a poll is demanded in accordance with this rule, a declaration by the chair of the meeting about the result of a resolution is conclusive evidence of the result.


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Rule 12.1.1

5.5.10 Proxies at unitholder meetings—QFC retail schemes(1) A unitholder of a QFC retail scheme may appoint another person to

attend a general meeting of unitholders of the scheme and vote in the unitholder’s place.

(2) Unless the constitutional document provides otherwise, a unitholder of a QFC retail scheme may appoint more than 1 proxy to attend on the same occasion but a proxy may vote only on a poll.

(3) Every notice calling a meeting of unitholders of a QFC retail scheme must contain a reasonably prominent statement that a unitholder may appoint a proxy if the unitholder is entitled to attend and vote.

(4) Any document relating to the appointment of a proxy must not be required to be received more than 48 hours before the time fixed for the start of the meeting or adjourned meeting.

5.5.11 Chair, adjournment and minutes of unitholder meetings—QFC retail schemes

(1) A meeting of unitholders of a QFC retail scheme must have a chair for the meeting who is nominated by the independent entity.


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Rule 12.1.2

(2) If the chair is not present after a reasonable time from the time fixed for the start of the meeting, the unitholders present must choose a unitholder present to be the chair of the meeting.

(3) The chair of the meeting may adjourn the meeting from time to time, and from place to place, if a quorum is present at the meeting and the meeting agrees.

(4) The chair of the meeting must adjourn the meeting from time to time, and from place to place, if directed to do so by the meeting.

(5) Business must not be transacted at any adjourned meeting unless it could have been lawfully transacted at the original meeting.

(6) The operator must ensure that—

(a) minutes of all resolutions and proceedings at every meeting of unitholders are made and kept for at least 6 years after the day of the meeting; and

(b) any minute under paragraph (a) is signed by the chair of the meeting.

(7) Any minute mentioned in subrule (6) (b) is conclusive evidence of the matters stated in it.


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Rule 12.1.1

Part 5.6 Reports, accounts and auditors—QFC schemes

Division 5.6.A Accounting standards and auditors—all QFC schemes

5.6.1 Accounting standards—all QFC schemes(1) Unless subrule (2) or (3) applies, the operator of a QFC scheme

must prepare and keep all financial accounts and statements in accordance with—

(a) US GAAP; or

(b) UK GAAP or IFRS, as supplemented, if appropriate, by the Statement of Recommended Practice issued from time to time by the United Kingdom Investment Management Association.

Note US GAAP, UK GAAP and IFRS are defined in r (4).

(2) If the scheme is an Islamic fund, the operator must prepare and keep all financial accounts and statements in accordance with the accounting standards of AAOIFI FAS 14.Note Islamic fund is defined in r 1.3.11. AAOIFI is defined in the glossary.


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Rule 12.1.2

(3) If the operator of an umbrella scheme operates 1 or more subschemes that are Islamic funds, it must prepare and keep all financial accounts and statements in accordance with IFRS, as supplemented by AAOIFI FAS 14.Note 1 Umbrella scheme and subscheme are defined in r 1.2.11.

Note 2 AAOIFI FAS 14 sets out the accounting rules for conventional institutions that offer Islamic financial services.

(4) In this rule:

IFRS means International Financial Reporting Standards.

UK GAAP means generally accepted accounting principles in the United Kingdom of Great Britain and Northern Ireland.

US GAAP means generally accepted accounting principles in the United States of America.

5.6.2 Appointment and removal of auditors etc—all QFC schemes

(1) The operator of a QFC scheme must ensure that there is an auditor of the scheme at all times, and that the auditor is a QFC approved auditor.


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Rule 12.1.1

(2) The operator of a QFC scheme may, from time to time, appoint a QFC approved auditor as auditor of the scheme.

(3) The audit fees of the auditor are as decided by the operator.

(4) The operator may remove the auditor at any time.

(5) The operator may exercise a power under subrule (2), (3) or (4) only with the independent entity’s approval.

(6) The power under subrule (4) has effect despite anything in any agreement between the auditor and all or any of the following:

(a) the operator;


(c) the scheme.

(7) GENE, section 9.7 (Auditors) applies to the appointment and removal of the auditor of the QFC scheme as if the scheme were an authorised firm.Note Authorised firm is defined in the glossary.


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Rule 12.1.2

(8) In this rule:

QFC approved auditor means a person—

(a) who is approved by the QFC Authority to act as an auditor; and

(b) whose name is entered in the register of auditors maintained by the QFC Companies Registration Office.

Division 5.6.B Reports and accounts—QFC qualified investor schemes

5.6.3 Reports and accounts generally—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must prepare a report for each annual accounting period and half-yearly accounting period in accordance with this division.Note Annual accounting period and half-yearly accounting period are

defined in the glossary.

(2) However if the first annual accounting period is less than 12 months, a half-yearly report need not be prepared for that period.


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Rule 12.1.1

(3) A report for an annual accounting period must be prepared within 4 months after the day the period ends, and a report for a half-yearly accounting period must be prepared within 3 months after the day the period ends.

(4) The operator must give a copy of an annual or half-yearly report free of charge to any unitholder on request.

(5) If a person eligible to invest in the scheme asks for a copy of the latest annual or half-yearly report, the operator must give a copy free of charge to the person before any sale (or further sale) of units to the person is concluded.

(6) The operator must give a copy of each annual and half-yearly report to the Regulatory Authority within 21 days after the day the report is prepared.

(7) If the scheme is an umbrella scheme, any annual report given to a unitholder or other person under subrule (4) or (5) may be a report prepared under rule 5.6.4 (3) for the relevant subscheme.

(8) However, the operator must also give the unitholder or other person a copy of the annual report prepared under rule 5.6.4 (2) for the scheme as a whole if the unitholder or other person asks for it.


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Rule 12.1.2

5.6.4 Contents of annual reports—QFC qualified investor schemes

(1) An annual report for a QFC qualified investor scheme other than a QFC umbrella scheme must contain the following:

(a) the full audited accounts for the annual accounting period;

(b) the operator’s report for the period in accordance with rule 5.6.6 (Operator’s reports—QFC qualified investor schemes);

(c) the independent entity’s report for the period in accordance with rule 5.6.7 (Independent entity’s reports—QFC qualified investor schemes);

(d) the auditor’s report for the period in accordance with rule 5.6.8 (Auditor’s reports—QFC qualified investor schemes).

Note See also r 5.1.5 (Transactions with affected persons—details required for QFC scheme’s annual reports).

(2) An annual report for a QFC qualified investor scheme that is an umbrella scheme must be prepared for the scheme as a whole and must contain the following:

(a) for each subscheme—the full audited accounts for the subscheme for the annual accounting period and the operator’s


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Rule 12.1.1

report for the subscheme for the period in accordance with rule 5.6.6;

(b) an aggregation of all the accounts required by paragraph (a);

(c) the independent entity’s report for the scheme for the period in accordance with rule 5.6.7;

(d) the auditor’s report for the scheme for the period in accordance with rule 5.6.8.

(3) If the scheme is an umbrella scheme, the operator may, in addition to complying with subrule (2), prepare a further annual report for any 1 or more individual subschemes.

(4) A report under subrule (3) for a subscheme must contain the following:

(a) the full audited accounts for the subscheme for the annual accounting period;

(b) the operator’s report for the subscheme for the period in accordance with rule 5.6.6;



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Rule 12.1.2


(5) The operator of a QFC qualified investor scheme must ensure that the accounts mentioned in subrule (1) (a), (2) (a) and (4) (a) give a true and fair view of—

(a) the net income and the net gains and losses on the scheme property of the scheme (or subscheme) for the annual accounting period; and

(b) the financial position of the scheme (or subscheme) as at the end of the period.

5.6.5 Contents of half-yearly reports—QFC qualified investor schemes

(1) A half-yearly report for a QFC qualified investor scheme, or a subscheme of a QFC umbrella scheme, must contain—

(a) the full accounts for the half-yearly accounting period; and

(b) the operator’s report for the period in accordance with rule 5.6.6.


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Rule 12.1.1

(2) If the scheme is an umbrella scheme, the operator may choose whether the half-yearly report is prepared for the scheme as a whole, each individual subscheme, or both.

5.6.6 Operator’s reports—QFC qualified investor schemesA report of the operator of a QFC qualified investor scheme for a period must include the following:

(a) a review of the investment activities of the scheme (or subscheme) during the period against the prospectus applying to the period;

(b) particulars of any fundamental or significant change in relation to the scheme (or subscheme) since the date of the operator’s last report;

(c) any other information that would enable unitholders to make an informed judgment on the development of the activities of the scheme (or subscheme) during the period and the results of those activities as at the end of the period.


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Rule 12.1.2

5.6.7 Independent entity’s reports—QFC qualified investor schemes

(1) The independent entity of a QFC qualified investor scheme must make an annual report to the unitholders.

(2) The report for an annual accounting period must include the following:

(a) a description, which may be in summary form, of the functions of the independent entity under these rules;

(b) a statement whether, in any material respect, the provisions mentioned in rule 4.2.3 (1) (Oversight functions of independent entity—all QFC schemes) have not been complied with during the period;

(c) a statement whether, in any material respect, the investment and borrowing powers and restrictions applying to the scheme have been exceeded during the period.

(3) The independent entity must give the report to the operator for inclusion in the annual report prepared under rule 5.6.3 (Reports and accounts generally—QFC qualified investor schemes) for the annual accounting period.


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Rule 12.1.1

5.6.8 Auditor’s reports—QFC qualified investor schemesThe operator of a QFC qualified investor scheme must ensure that the report of the auditor to the unitholders for an annual accounting period includes the following statements:

(a) whether, in the auditor’s opinion, the accounts have been properly prepared in accordance with these rules and the constitutional document;

(b) whether, in the auditor’s opinion, the accounts give a true and fair view of—

(i) the net income and the net gains or losses of the scheme property for the period; and

(ii) the financial position of the scheme as at the end of the period;

(c) whether the auditor is of the opinion that proper accounting records for the scheme have been kept and whether the accounts are in agreement with the accounting records;

(d) whether the auditor has been given all the information and explanations that, to the best of the auditor’s knowledge and belief, are necessary for the purposes of the audit;


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Rule 12.1.2

(e) whether the auditor is of the opinion that the information given in the operator’s report for the period is consistent with the accounts.

Division 5.6.C Reports and accounts—QFC retail schemes

5.6.9 Preparation of long and short reports—QFC retail schemes

(1) The operator of a QFC retail scheme must prepare a short report and a long report for each annual accounting period and half-yearly accounting period in accordance with this division.Note Annual accounting period and half-yearly accounting period are


(2) However, if the first annual accounting period is less than 12 months, a half-yearly report need not be prepared for that period.

(3) For a QFC retail scheme that is an umbrella scheme, the operator must prepare a short report for each subscheme but need not prepare a short report for the QFC retail scheme as a whole.


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Rule 12.1.1

5.6.10 Contents of short reports—QFC retail schemes(1) The short report for a QFC retail scheme (or, for a QFC retail

scheme that is an umbrella scheme, a subscheme) for a period must contain the following for the period:

(a) the name of the scheme (or subscheme), its investment objectives, strategies and policy, a brief assessment of its risk profile, and the name and address of the operator;

(b) a review of the scheme’s (or subscheme’s) investment activities and investment performance during the period;

(c) a performance record consistent with rule 5.6.14 (Comparative tables—QFC retail schemes) that enables a unitholder to put into context the results of the investment activities of the scheme (or subscheme) during the period;

(d) sufficient information to enable unitholders to form a view of where the portfolio is invested at the end of the period and the extent to which that has changed over the period;

(e) any other significant information that would reasonably enable unitholders to make an informed judgment on the activities of the scheme (or subscheme) during the period and the results of those activities at the end of the period;


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Rule 12.1.2

(f) a statement that the latest long report is available on request.Note See also r 5.1.5 (Transactions with affected persons—details required

for QFC scheme’s annual reports).

(2) Without limiting subrule (1) (d) and (e), the short report must include the following for the relevant period:

(a) particulars of any change or event in relation to the scheme during the period that is a fundamental change under rule 5.4.2 (Fundamental changes requiring prior approval by unitholder meeting—QFC retail schemes);

(b) particulars of any change or event in relation to the scheme during the period that is a significant change under rule 5.4.3 (Significant changes requiring pre-event notification—QFC retail schemes), if the change or event affects the unitholders’ ability to make an informed judgment on the activities of the scheme (or subscheme);

(c) particulars of any other developments in relation to the investment objectives, strategies and policy of the scheme (or subscheme) or the instruments used by it during the period;

(d) the total expense ratio;


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Rule 12.1.1

(e) particulars of any qualification of the reports of the auditor and independent entity;

(f) particulars of any income or distribution relating to the period.

(3) The operator must take reasonable steps to ensure that the short report is structured and written in such a way that it can be easily understood by the average investor.

(4) The short report must be in the form of a separate stand-alone document and must not include any extraneous material.Note Document is defined in the glossary.

(5) The inclusion in a single document of the short reports of 2 or more QFC retail schemes with the same operator (or 2 or more subschemes of a QFC retail scheme that is an umbrella scheme) does not breach subrule (4) if each of the reports is discrete and easily identifiable.

(6) The operator must ensure that the information given in the short report is consistent with the long report for the relevant accounting period prepared under rule 5.6.11 (Contents of annual long reports—QFC retail schemes) or rule 5.6.12 (Contents of half-yearly long report—QFC retail schemes).


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Rule 12.1.2

5.6.11 Contents of annual long reports—QFC retail schemes(1) An annual long report for a QFC retail scheme other than an

umbrella scheme must contain the following:

(a) the full audited accounts for the annual accounting period;

(b) the operator’s report for the period in accordance with rule 5.6.13 (Operator’s reports—QFC retail schemes);

(c) the comparative table for the period in accordance with rule 5.6.14 (Comparative tables—QFC retail schemes);

(d) the independent entity’s report for the period in accordance with rule 5.6.15 (Independent entity’s reports—QFC retail schemes);

(e) the auditor’s report for the period in accordance with rule 5.6.16 (Auditor’s reports—QFC retail schemes).

Note See also r 5.1.5 (Transactions with affected persons—details required for QFC scheme’s annual reports).


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Rule 12.1.1

(2) An annual long report for a QFC retail scheme that is an umbrella scheme must be prepared for the scheme as a whole and must contain the following:

(a) for each subscheme—the following:

(i) the full audited accounts for the subscheme for the annual accounting period;

(ii) the operator’s report for the subscheme for the period in accordance with rule 5.6.13;

(iii) the comparative table for the subscheme for the period in accordance with rule 5.6.14;

(b) the aggregation of all the accounts required by paragraph (a) (i);



(3) If the scheme is an umbrella scheme, the operator may, in addition to complying with subrule (2), prepare a further annual long report for any 1 or more individual subschemes of the scheme.


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Rule 12.1.2

(4) A report under subrule (3) for a subscheme must contain the following:

(a) the full accounts for the subscheme for the annual accounting period;

(b) the operator’s report for the subscheme for the period in accordance with rule 5.6.13;

(c) the comparative table for the subscheme for the period in accordance with rule 5.6.14;

(d) the independent entity’s report for the scheme for the period in accordance with rule 5.6.15;

(e) the auditor’s report for the scheme for the period in accordance with rule 5.6.16.

(5) The operator of a QFC retail scheme must ensure that the accounts mentioned in subrule (1) (a), (2) (a) (i) and (4) (a) give a true and fair view of—

(a) the net income and the net gains and losses on the scheme property of the scheme (or subscheme) for the annual accounting period; and


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Rule 12.1.1

(b) the financial position of the scheme (or subscheme) as at the end of the period.

5.6.12 Contents of half-yearly long reports—QFC retail schemes(1) A half-yearly long report for a QFC retail scheme that is not an

umbrella scheme must contain—

(a) the full accounts for the half-yearly accounting period; and

(b) the operator’s report for the period in accordance with rule 5.6.13 (Operator’s reports—QFC retail schemes).

(2) A half-yearly long report for a QFC retail scheme that is an umbrella scheme must be prepared for the scheme as a whole and must contain the following:

(a) for each subscheme—the following:

(i) the full accounts for the subscheme for the half-yearly accounting period;

(ii) the operator’s report for the subscheme for the period in accordance with rule 5.6.13;

(b) the aggregation of all the accounts required by paragraph (a) (i).


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(3) The operator of a QFC retail scheme that is an umbrella scheme may, in addition to complying with subrule (2), prepare a further half-yearly long report for any 1 or more individual subschemes.

(4) A report under subrule (3) for a subscheme must contain the full accounts, and the operator’s report, that would be required by subrule (1) if the subscheme were a separate QFC retail scheme.

5.6.13 Operator’s reports—QFC retail schemesA report of the operator of a QFC retail scheme must include the following:

(a) the names and addresses of the following:

(i) the operator;

(ii) the independent entity;

(iii) any investment adviser;

(iv) the auditor;

(b) for a CIC—the names of the directors of the CIC;

(c) for a CIP—the name of the general partner of the CIP;

(d) a statement that the scheme is registered under these rules;


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Rule 12.1.1

(e) a statement that the unitholders are not liable for—

(i) the debts or other liabilities of the scheme; or

(ii) acts or omissions of the operator or independent entity;

(f) the scheme’s investment objectives, strategies and policy;

(g) a review of the investment activities during the period to which the report relates;

(h) particulars of any change or event in relation to the scheme during the period that is a fundamental change under rule 5.4.2 (Fundamental changes requiring prior approval by unitholder meeting—QFC retail schemes);

(i) particulars of any change or event in relation to the scheme during the period that is a significant change under rule 5.4.3 (Significant changes requiring pre-event notification—QFC retail schemes), if the change or event affects the unitholders’ ability to make an informed judgment on the activities of the scheme (or subscheme);

(j) for a scheme that invests a substantial part of the scheme property in other schemes—a statement of the maximum proportion of management fees charged to the scheme itself and to other schemes in which it invests;


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(k) any other information that would enable unitholders to make an informed judgment on the development of the scheme’s activities during the period and the results of the schemes activities as at the end of that period;

(l) for a report on an umbrella scheme prepared in accordance with rule 5.6.11 (2) (Contents of annual long reports—QFC retail schemes) or rule 5.6.12 (2) (Contents of half-yearly long reports—QFC retail schemes)—

(i) for a CIC—a statement to the effect that, as a subscheme is not a legal entity, if the assets attributable to any subscheme were insufficient to meet the liabilities attributable to it, the shortfall might have to be met out of the assets attributable to 1 or more other subschemes of the CIC; and

(ii) for each subscheme—the information mentioned in paragraphs (a) to (j) if it would differ from the information given for the umbrella scheme as a whole;


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Rule 12.1.1

(m) for a report on an individual subscheme of an umbrella scheme prepared in accordance with rule 5.6.11 (3) or rule 5.6.12 (3)—

(i) for a CIC—a statement corresponding to that required by paragraph (l) (i) making it clear that, if the liability relates to another subscheme of the umbrella scheme, the shortfall (or any part of it) might have to be met out of the assets of the subscheme to which the report relates; and

(ii) a statement that the latest long report prepared for the scheme as a whole is available on request.

5.6.14 Comparative tables—QFC retail schemes(1) The comparative table required by rule 5.6.11 (1) (c) or (4) (c)

(Contents of annual long reports—QFC retail schemes) must set out the following:

(a) a performance record over the last 5 years (or, if the scheme has not been in existence for 5 years, the years in which it has been in existence) showing—

(i) the highest and the lowest price of a unit in each class in issue during each of those years;


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Rule 12.1.2

(ii) the net income distributed (or, for accumulation units, allocated) for a unit in each class in issue during each of those years, taking into account any subdivision or consolidation of units that happened during those years;

Note Year and accumulation unit are defined in the glossary.

(b) as at the end of the last 3 annual accounting periods (or, if the scheme has had less than 3 annual accounting periods, all of the scheme’s annual accounting periods), the following:

(i) the net asset value;

(ii) the net asset value per unit;

(iii) the number of units in issue of each class;

(iv) the price per unit in each class.Note Net asset value, net asset value per unit and

price are defined in the glossary.(2) If, in the period covered by the table—


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Rule 12.1.1

(a) the scheme has been the subject of a change or event (for example, a scheme of arrangement) having a material effect on the size of the scheme, but excluding any issue or redemption of units for cash; orNote Scheme of arrangement is defined in the

glossary.(b) there have been changes in the scheme’s investment objectives,

strategies or policy;

the table must include an indication, related in the body of the table to the relevant year in the table, of the date of the change or event and a brief description of its nature.

5.6.15 Independent entity’s reports—QFC retail schemes(1) The independent entity of a QFC retail scheme must make an annual

report to the unitholders.

(2) The report for an annual accounting period must include the following:

(a) a description, which may be in summary form, of the functions of the independent entity under these rules;


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Rule 12.1.2

(b) a statement whether, in any material respect, any of the following matters have not been carried out during the period in accordance with these rules or, if applicable, the constitutional document:

(i) the sale, issue and redemption of units;

(ii) the calculation of the price of units;

(iii) the application of the scheme’s income;

(c) a statement whether, in any material respect, the investment and borrowing powers and restrictions applying to the scheme have been exceeded during the period.

5.6.16 Auditor’s reports—QFC retail schemesThe operator of a QFC retail scheme must ensure that the report of the auditor to the unitholders for an annual accounting period includes the following statements:

(a) whether, in the auditor’s opinion, the accounts have been properly prepared in accordance with these rules and the constitutional document;


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Rule 12.1.1

(b) whether, in the auditor’s opinion, the accounts give a true and fair view of—

(i) the net revenue, and the net capital gains or losses on the scheme property, for the period; and

(ii) the financial position of the scheme as at the end of the period;

(c) whether the auditor is of the opinion that proper accounting records for the scheme have been kept and whether the accounts are in agreement with those records;

(d) whether the auditor has been given all the information and explanations that, to the best of the auditor’s knowledge and belief, are necessary for the purpose of the audit;

(e) whether the auditor is of the opinion that the information given in the operator’s report for the period is consistent with the accounts.

5.6.17 Provision of short reports—QFC retail schemes(1) Within 4 months after the end of each annual accounting period and

within 3 months after the end of each half-yearly accounting period, the operator of a QFC retail scheme must send a copy of the short


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Rule 12.1.2

report for the period prepared in accordance with rule 5.6.10 (Contents of short reports—QFC retail schemes) to—

(a) each unitholder (or to the first named of joint unitholders) entered in or entitled to be entered in the unitholder register at the close of business on the last day of the accounting period; and

(b) any other person on request. Note Annual accounting period, half-yearly accounting period and month

are defined in the glossary.

(2) Unitholders of a QFC retail scheme that is an umbrella scheme must be sent a short report for the relevant period for the particular subscheme in which they hold units.

(3) However, a unitholder of a subscheme must also be provided with the long report for the period for the umbrella scheme on request.

(4) A report provided under this rule must be provided free of charge.


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Rule 12.1.1

5.6.18 Publication and availability of annual and half-yearly long reports—QFC retail schemes

(1) Within 4 months after the end of each annual accounting period and 3 months after the end of each half-yearly accounting period, the operator of a QFC retail scheme must publish and make available the long report for the period prepared in accordance with rule 5.6.11 (Contents of annual long reports—QFC retail schemes) or rule 5.6.12 (Contents of half-yearly long reports—QFC retail schemes).Note Annual accounting period, half-yearly accounting period and month

are defined in the glossary.

(2) The long report must—

(a) be given free of charge to any person on request; and

(b) be available in English, and any other language in which they have been published, for inspection by the public free of charge during ordinary office hours at a place in the QFC; and

(c) be given to the Regulatory Authority as soon as it is available, but within the relevant period mentioned in subrule (1).


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Rule 12.1.2

Chapter 6 Investment and borrowing—QFC qualified investor schemes

Part 6.1 Investment and borrowing generally—QFC qualified investor schemes

6.1.1 General duties of operator in relation to investment and borrowing—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must ensure that the scheme property is not invested or used in breach of this chapter.Note Breach is defined in the glossary.

(2) If the operator becomes aware of a breach of this chapter, the operator must take action to rectify the breach at its own expense.


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Rule 12.1.1

(3) The operator must take action under subrule (2) immediately unless subrule (4) applies.

(4) If the operator believes on reasonable grounds that taking action under subrule (2) immediately would not be in the best interests of the unitholders, the operator must take the action as soon as it is in the interests of unitholders to do so.

6.1.2 Investment powers generally—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must ensure that investments included in the scheme property are investments to which the scheme is dedicated.Note Investment and dedicated are defined in the glossary.

(2) Subrule (1) is subject to the other provisions of this chapter.

(3) The constitutional document and the latest filed prospectus may further restrict—

(a) the kinds of property in which the scheme property may be invested; and

(b) the kinds of transactions permitted by the scheme and any relevant limits.


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Rule 12.1.2

(4) Subrule (3) does not limit the further restrictions that the constitutional document and latest filed prospectus may impose on investment by the scheme or on the use of the scheme property.

(5) The operator must ensure that any further restrictions are complied with.

6.1.3 Permissible investments generally—QFC qualified investor schemes

(1) The scheme property of a QFC qualified investor scheme must be invested only in 1 or more of the following:

(a) specified products;

(b) immovables;

(c) gold, silver, platinum and palladium;

(d) commodity contracts traded on an eligible exchange.Note Specified product and commodity are defined in the glossary. Eligible

exchange is defined in INAP.

(2) This rule is subject to the other provisions of this chapter.


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Rule 12.1.1

6.1.4 Spread of risk—QFC qualified investor schemesThe operator of a QFC qualified investor scheme must take reasonable steps to ensure that the scheme property provides a spread of risk, taking into account the scheme’s investment objectives, strategies and policy as stated in the constitutional document and the latest filed prospectus, and, in particular, any investment objective about return to the unitholders (whether from capital appreciation, income or both).Note Constitutional document is defined in r 3.1.1 and latest filed

prospectus is defined in the glossary.

6.1.5 Investments by money-market funds—QFC qualified investor schemes

(1) A QFC qualified investor scheme that is a money-market fund must comply with its primary investment objective, and the investment restrictions, mentioned in schedule 2 (Constitutional document content—QFC schemes), rule S2.33 (Primary investment objective etc—QFC money-market funds).Note Money-market fund is defined in r 1.3.12.


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Rule 12.1.2

(2) For the investment restrictions, an approved money-market instrument is a high-quality approved money-market instrument if—

(a) it has been rated by at least 1 rating agency; and

(b) it has been awarded the highest available credit rating by each rating agency that has rated it.

Note Approved money-market instrument is defined in r 7.1.5. Rating agency is defined in INAP.

(3) If an approved money-market instrument forms part of the scheme property of a QFC qualified investor scheme that is a money-market fund, the operator must monitor the instrument to ensure that it continues to be of high quality, taking into account both its credit risk and its final maturity.

(4) A QFC qualified investor scheme that is a money-market fund must provide liquidity through same day or next day settlement.

(5) The weighted average maturity of its investments must not exceed 60 days.


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Rule 12.1.1

6.1.6 Application of ch 6 to umbrella schemes—QFC qualified investor schemes

(1) This chapter applies to each subscheme of a QFC qualified investor scheme that is an umbrella scheme as if it were a separate QFC qualified investor scheme.Note Subscheme and umbrella scheme are defined in r 1.2.11.

(2) However, a subscheme of an umbrella scheme must not invest in another subscheme of the same umbrella scheme.


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Rule 12.1.2

Part 6.2 Particular kinds of investments and transactions—QFC qualified investor schemes

Division 6.2.A Collective investments schemes—QFC qualified investor schemes

6.2.1 Investments in schemes—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must ensure that the scheme invests in units in a collective investment scheme (the second scheme) only if—

(a) the second scheme is a QFC scheme; or

(b) the second scheme is a non-QFC scheme, but the operator has taken reasonable care to decide that the second scheme meets all the following requirements:

(i) it is subject to an independent annual audit conducted in accordance with international accounting standards;


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Rule 12.1.1

(ii) it has its value verified by a person independent of the scheme’s operator in relation to each day on which dealing in the scheme’s units may take place;

(iii) there are mechanisms in place to enable unitholders of the scheme to redeem their units within a reasonable time;

(iv) it is prohibited from having more than 15% of its value in units in schemes;

(v) it operates in accordance with the principle of risk spreading.

(2) If the second scheme is an umbrella scheme, subrule (1) applies to each subscheme as if it were a separate scheme.


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Rule 12.1.2

Division 6.2.B Derivatives, forward transactions and commodity contracts—QFC qualified investor schemes

6.2.2 Delivery of property under transactions in derivatives etc—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must take reasonable care to decide the following when entering into any transaction in derivatives, or any commodity contract, that may result in any asset becoming part of the scheme property:

(a) if it is an asset in which the scheme property could be invested—that the transaction—

(i) can be readily closed out; or

(ii) would, at the expected time of delivery, relate to an asset that could be included in the scheme property under this chapter;

(b) in any other case—that the transaction can be readily closed out.

Note Derivative, commodity and close out are defined in the glossary.


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Rule 12.1.1

(2) If the operator makes a decision under subrule (1) in relation to an asset that proves to be incorrect, the operator may nevertheless acquire the asset for the scheme if the operator decides on reasonable grounds that the acquisition is in the interest of the unitholders.

(3) An asset acquired under subrule (2) may form part of the scheme property until the position can be rectified.

(4) Subrule (3) applies despite any other provision of this chapter.

6.2.3 Valuation of OTC derivatives—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must ensure that a transaction by the scheme in an OTC derivative can be valued.Note OTC derivative is defined in the glossary.

(2) For subrule (1), the transaction can be valued only if the operator having taken reasonable care decides that, if the transaction were to be entered into, the operator could value the investment throughout the life of the OTC derivative with reasonable accuracy—

(a) on the basis of an up-to-date market value that the operator and independent entity have agreed is reliable; or


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(b) if such a value is not available—on the basis of a pricing model that the operator and independent entity have agreed uses an adequate recognised methodology.

6.2.4 Cover for transactions in derivatives and forward transactions—QFC qualified investor schemes

(1) A transaction in derivatives or a forward transaction may be entered into by the operator of a QFC qualified investor scheme only if the maximum exposure, in terms of the principal or notional principal created by the transaction to which the scheme is or may be committed by another person, is covered globally under subrule (2).Note Derivative, principal and notional principal are defined in the glossary.

(2) Exposure is covered globally if adequate cover from within the scheme property is available to meet the scheme’s total exposure taking into account any reasonably foreseeable market movement.

(3) The total exposure relating to derivatives held in the scheme property must not at any time exceed the scheme’s net asset value.Note Net asset value is defined in the glossary.

(4) No element of cover may be used more than once.


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6.2.5 Continuing nature of limits and requirements for derivatives and forward positions—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must, as frequently as necessary to ensure compliance with rule 6.2.4 (Cover for transactions in derivatives and forward transactions—QFC qualified investor schemes), re-calculate the amount of cover required in relation to derivatives and forward positions.

(2) Derivatives and forward positions may be kept in the scheme property only so long as they remain covered globally under rule 6.2.4 (2).

(3) The operator must use a risk management process to monitor and measure as frequently as appropriate the risk of the scheme’s derivatives and forward positions and their contribution to the scheme’s overall risk profile.


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Division 6.2.C Immovables—QFC qualified investor schemes

6.2.6 Standing independent valuer—QFC qualified investor schemesA QFC qualified investor scheme that holds, or proposes to hold, immovables as part of the scheme property must at all times have a valuer of the scheme (the standing independent valuer).

6.2.7 Requirements for making investments in immovables—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must ensure that the scheme does not invest in an immovable to be held as part of the scheme property unless all the following requirements are met:

(a) the immovable must be located in a jurisdiction identified in the latest filed prospectus;

(b) the operator must have taken reasonable care to decide that the title to the interest to be acquired in the immovable is a good marketable title;


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Rule 12.1.1

(c) the standing independent valuer has valued the interest and the operator and independent entity have received a report on the valuation that states either—

(i) that, in the valuer’s opinion, the interest in the immovable could, if acquired by the scheme, be disposed of reasonably quickly at the valuation stated in the report; or

(ii) that—

(A) the immovable is adjacent to or in the vicinity of another immovable already included in the scheme property; and

(B) in the valuer’s opinion, the total value of the interests in the immovables would at least equal the total of the price payable for the interest in the immovable and the existing value of the interest in the other immovable.

Note See r 6.2.10 (Reports on valuation of immovables before acquisition or disposal—QFC qualified investor schemes).


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Rule 12.1.2

(2) However, a report of the standing independent valuer may not be relied on to acquire the interest in the immovable if—

(a) the interest is not acquired, or agreed by enforceable contract to be acquired, within 3 months after the date of the report; or

(b) it is (or should reasonably be) apparent to the operator that the standing independent valuer’s report cannot, or can no longer, reasonably be relied on; or

(c) the price of the interest is, or becomes, more than 105% of the valuation of the interest stated in the report.

6.2.8 Investments in non-Qatari immovables through intermediate holding vehicles—QFC qualified investor schemes

(1) An immovable located outside Qatar may be held by a QFC qualified investor scheme through an intermediate holding vehicle, or a series of intermediate holding vehicles, if—

(a) the purpose of the vehicle, or each of the vehicles, is to enable the scheme to hold immovables located outside Qatar; and

(b) the vehicle, or each of the vehicles, is wholly owned by the scheme, or by another intermediate holding vehicle or series of


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Rule 12.1.1

intermediate holding vehicles wholly owned by the scheme, unless and to the extent that the law of the jurisdiction where the immovable is located requires local ownership; and

(c) the vehicle, or each of the vehicles, undertakes the purchase, sale and management of immovables on behalf of the scheme in accordance with the scheme’s investment objectives, strategies and policy; and

(d) the interests of the unitholders are otherwise adequately protected.

Note Intermediate holding vehicle is defined in the glossary.

(2) Any investment in an intermediate holding vehicle for the purpose of holding an immovable located outside Qatar must be treated for this chapter as if it were a direct investment in the immovable.

(3) The operator of a QFC qualified investor scheme may, by the use of inter-company debt, transfer capital and income between the scheme and an intermediate holding vehicle of the scheme if—

(a) the purpose of the transfer is for investment in immovables located outside Qatar or repatriation of income generated by such an investment; and


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Rule 12.1.2

(b) a record of inter-company debt is kept to provide an accurate audit trail; and

(c) interest paid out on the debt instruments that gave rise to the inter-company debt is equivalent to the net rental income earned from the immovables less the intermediate holding vehicle’s reasonable running costs (including tax).

(4) If practicable, an intermediate holding vehicle of a QFC qualified investor scheme must have the same auditor and accounting reference date as the scheme.

(5) The accounts of any intermediate holding vehicle of a QFC qualified investor scheme must be consolidated into the annual and half-yearly reports of the scheme.

6.2.9 Additional requirements for immovables—QFC qualified investor schemes

(1) The operator must ensure that the following requirements are complied with in relation to interests in immovables held as part of the scheme property of a QFC qualified investor scheme:

(a) the amount secured by mortgages over any immovable must not exceed 100% of the latest valuation of the scheme’s


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Rule 12.1.1

interest in the immovable stated in a report by the scheme’s standing independent valuer;

(b) no option may be granted to a person to buy or obtain an interest in any immovable if this might unduly prejudice the ability to provide redemption;

(c) the total of all premiums paid for options to purchase interests in immovables must not exceed 10% of the value of the scheme property in any 12-month period, calculated at the date of the granting of the option;

(d) an interest in an immovable must not be disposed of unless—

(i) the standing independent valuer has valued the interest; and

(ii) the operator and independent entity have received a report on the valuation;

Note See r 6.2.10 (Reports on valuation of immovables before acquisition or disposal—QFC qualified investor schemes).

(e) each immovable must be adequately protected by appropriate insurance that is sufficient to cover its reinstatement.


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Rule 12.1.2

(2) However, a report of the standing independent valuer may not be relied on under subrule (1) (d) to dispose of an interest in an immovable if the interest is not disposed of, or agreed by enforceable contract to be disposed of, within 3 months after the date of the report.

6.2.10 Reports on valuation of immovables before acquisition or disposal—QFC qualified investor schemes

(1) This rule applies to a report by the standing independent valuer of a QFC qualified investor scheme in relation to the proposed acquisition or disposal for the scheme of an interest in an immovable. Note See the following provisions:

r 6.2.7 (2) (c) (Requirements for making investments in immovables—QFC qualified investor schemes)

r 6.2.9 (1) (d) (Additional requirements for immovables—QFC qualified investor schemes).

(2) The report must—

(a) include a brief description of the immovable, including—

(i) its location and existing use; and


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Rule 12.1.1

(ii) the nature of the interest the scheme is proposed to acquire, or dispose of, in the immovable; and

(iii) any encumbrances affecting the immovable; and

(iv) whether the immovable is leased and, if leased, the terms of the lease and its expiry; and

(v) the capital value of the immovable at the date of valuation; and

(vi) the net monthly income (if any) from the immovable; and

(vii) any other matters that may affect the immovable or the value of the interest; and

(b) include all material details about the basis of valuation and the assumptions used; and

(c) describe and explain the valuation methods used; and

(d) if more than 1 valuation method is available—explain the reasons for choosing a particular method; and

(e) outline the structure and condition of the relevant market, including an analysis of the supply and demand situation, the market trend, and investment activities; and


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Rule 12.1.2

(f) confirm the professional status of the standing independent valuer and that the report is prepared on a fair and unbiased basis; and

(g) be dated as at the date the valuation is made.

6.2.11 Valuation of immovables part of scheme property—QFC qualified investor schemes

(1) The following provisions apply in relation to the valuation of interests in immovables held as part of the scheme property of a QFC qualified investor scheme:

(a) the operator must ensure that the standing independent valuer—

(i) values, at least once a year, all the interests in immovables held as part of the scheme property, on the basis of a full valuation with physical inspection (including, if the immovable is or includes a building, internal inspection of the building); and

(ii) gives the operator and independent entity a report on the valuation;


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Rule 12.1.1

(b) for paragraph (a), any inspection in relation to adjacent properties of a similar nature and value may be limited to the inspection of only a single representative property;

(c) the operator must also ensure that the standing independent valuer—

(i) values, at least once a month, all the interests in immovables held as part of the scheme property, on the basis of a review of the last full valuation (unless the valuer decides that the valuation of an interest in an immovable should be conducted on the basis mentioned in paragraph (a)); and

(ii) gives the operator and independent entity a report on the valuation;

Note Month is defined in the glossary.(d) if the operator or independent entity becomes aware of any

matter that appears likely—

(i) to affect the valuation of an interest in an immovable; or

(ii) to cause the standing independent valuer to decide to value on the basis mentioned in paragraph (a) instead of on the basis mentioned in paragraph (c);


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Rule 12.1.2

it must immediately tell the standing independent valuer about the matter;

(e) the operator must use its best endeavours to ensure that any other affected person immediately tells the standing independent valuer if the affected person becomes aware of a matter mentioned in paragraph (d).Note Affected person is defined in r 5.1.1.

(2) The valuation of an interest in an immovable under this rule has effect for these rules until the next valuation of the interest under this rule.

6.2.12 Annual and other periodic valuation reports—QFC qualified investor schemes

(1) This rule applies to a report by the standing independent valuer of a QFC qualified investor scheme under rule 6.2.11 (Valuation of immovables part of scheme property—QFC qualified investor schemes).


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Rule 12.1.1

(2) The report must—

(a) include a brief description of each immovable in which the scheme holds an interest, including—

(i) its location and existing use; and

(ii) the nature of the interest the scheme holds in the immovable; and

(iii) any encumbrances affecting the immovable; and

(iv) whether the immovable is leased and, if leased, the terms of the lease and its expiry; and

(v) the capital value of the immovable at the date of valuation; and

(vi) the net monthly income (if any) from the immovable; and

(vii) any other matters that may affect the immovable or the value of the interest; and

(b) include all material details about the basis of valuation and the assumptions used; and

(c) describe and explain the valuation methods used; and

(d) if more than 1 valuation method is available—explain the reasons for choosing a particular method; and


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Rule 12.1.2

(e) outline the structure and condition of the relevant market, including an analysis of the supply and demand situation, the market trend, and investment activities; and

(f) confirm the professional status of the standing independent valuer and that the report is prepared on a fair and unbiased basis; and

(g) be dated as at the date the valuation is made.

6.2.13 Basis of valuation by standing independent valuer—QFC qualified investor schemes

(1) Any valuation of an interest in an immovable by the standing independent valuer of a QFC qualified investor scheme must be—

(a) on the basis of ‘open market value’ (as defined in the constitutional document and the latest filed prospectus); or

(b) on another appropriate basis.Guidance1 The constitutional document and latest filed prospectus would be expected to

define ‘open market value’ using an authoritative text such as the latest edition of the Royal Institute of Chartered Surveyors’ Appraisal and Valuation Standards (the ‘Red Book’).


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Rule 12.1.1

2 In considering whether valuation of an interest in an immovable by the standing independent valuer is made on another basis that is appropriate, the operator must consider whether the valuation was made in accordance with internationally accepted valuation principles, procedures and definitions as set out in the International Valuations Standards published by the International Valuation Standards Committee.

(2) The basis on which the standing independent valuer makes a valuation is subject to the constitutional document and the latest filed prospectus.

(3) In making a valuation, the standing independent valuer—

(a) may treat the contents of any building as part of the building; and

(b) must disregard any arrangement to dispose of an interest in an immovable forming part of the scheme property unless the valuer is satisfied on reasonable grounds that the arrangement is legally enforceable.

6.2.14 Appointment of standing independent valuer—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme that holds, or proposes to hold, immovables as part of the scheme property must,


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Rule 12.1.2

as required from time to time and with the independent entity’s approval, appoint a person as the standing independent valuer.

(2) A person must not be appointed as the standing independent valuer unless—

(a) the person conducts the business of valuing immovables; and

(b) the operator and the independent entity are satisfied that the person has the skills, experience, qualifications and attributes to be the standing independent valuer of the scheme, having regard in particular to the scheme’s investment objectives, strategies and policy; and

(c) the person is independent of—

(i) the operator and independent entity; and


(iii) a member (however described) of the governing body of the operator, the independent entity or, for a CIC or CIP, the scheme.

Note Governing body is defined in the glossary.


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Rule 12.1.1

Guidance for para (b)The operator and independent entity should be satisfied that the person meets all the following requirements:

(a) the person is a fellow or associate (however described), or has key personnel who are fellows or associates (however described), of a relevant recognised professional body of surveyors or property valuers;

(b) the person has, or has access to, expertise relevant to the scheme and, in particular, knowledge and experience in the valuation of immovables of the relevant kind in the relevant area;

(c) the person has robust internal controls and checks and balances to ensure—

(i) the integrity of valuation reports; and

(ii) that valuation reports are properly and professionally prepared in accordance with international best practice;

(d) the person has adequate professional indemnity insurance;

(e) the person does not have ownership or other commercial links with other persons providing services to the scheme (for example, investment advisers) that could impair the person’s ability to provide independent and objective valuation services to the scheme.


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Rule 12.1.2

(3) Without limiting (2) (c), a person (A) is not independent of another person (B) if—

(a) A has at any time during the last 2 years been involved in material business dealings with B (otherwise than in the exercise of their respective functions as the holders of positions in relation to any scheme); or

(b) B has a material interest in A or A has a material interest in B.

6.2.15 Standing independent valuer not to deal in immovables etc—QFC qualified investor schemesThe standing independent valuer of a QFC qualified investor scheme must not be personally engaged, and must not have an associated person who is engaged, in finding immovables for the scheme or finding the scheme for immovables. Note Associated person is defined in the glossary.

6.2.16 Removal of standing independent valuer—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme may, with the independent entity’s approval, remove the standing independent valuer at any time.


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Rule 12.1.1

(2) The operator of a QFC qualified investor scheme must remove a person as the standing independent valuer if—

(a) a special resolution of the unitholders is passed to remove the person as the standing independent valuer; orNote Special resolution is defined in the glossary.

(b) the person breaches rule 6.2.15 (Standing independent valuer not to deal in immovables etc—QFC qualified investor schemes); or

(c) the person ceases to be eligible to be appointed as the standing independent valuer. Note See r 6.2.14 (Appointment of standing independent

valuer—QFC qualified investor schemes). (3) The power to remove the standing independent valuer under this

rule has effect despite anything in any agreement between the valuer and all or any of the following:

(a) the operator;


(c) the scheme.


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Rule 12.1.2

Part 6.3 Stock lending and repos—QFC qualified investor schemes

6.3.1 Permitted stock lending and repos—QFC qualified investor schemes

(1) The independent entity of a QFC qualified investor scheme may, at the operator’s request, enter into a stock lending arrangement or repo agreement.Note Stock lending arrangement and repo agreement are defined in the

glossary.

(2) Subrule (1) is subject to the constitutional document and the latest filed prospectus.

(3) The independent entity must ensure that the value of any collateral for a stock lending arrangement is at all times at least equal to the value of the securities transferred by the independent entity.


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Rule 12.1.1

(4) If the validity of any collateral expires, the independent entity’s duty under subrule (3) is satisfied if the independent entity or the operator, as appropriate, takes reasonable care to ensure that sufficient collateral will be transferred by close of business on the day of the expiry.Note Collateral is defined in the glossary.


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Rule 12.1.2

Part 6.4 Borrowing—QFC qualified investor schemes

6.4.1 Borrowing—QFC qualified investor schemes(1) The operator of a QFC qualified investor scheme must—

(a) ensure that the scheme’s total borrowing does not, on any day, exceed the permitted percentage of the scheme’s net asset value; andNote Borrowing and net asset value are defined in the

glossary.(b) ensure that any further borrowing restrictions in the

constitutional document and latest filed prospectus are complied with; and

(c) take reasonable care to ensure that arrangements are in place that will enable borrowings to be closed out to ensure that paragraphs (a) and (b) are complied with.Note Close out is defined in the glossary.


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Rule 12.1.1

(2) For subrule (1) (a), the permitted percentage is—

(a) 100 %; or

(b) if the Regulatory Authority, by written notice, sets a different percentage (whether higher or lower) for the scheme (whether at the time of registration or later) or for QFC qualified investor schemes that include the scheme—the percentage set.

(3) If the Regulatory Authority sets a different percentage by notice under subrule (2) (b), the authority must—

(a) publish the notice on an approved website; and

(b) give a copy of the notice to the operator of each scheme to which the notice applies.

Note Approved website is defined in INAP.


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Rule 12.1.2

Chapter 7 Investment and borrowing—QFC retail schemes

Part 7.1 Investment and borrowing introduction—QFC retail schemes

7.1.1 Objects of ch 7—QFC retail schemes(1) The objects of this chapter include helping to protect investors in

QFC retail schemes by providing minimum standards for the investments that may be held by a QFC retail scheme.


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Rule 12.1.1

(2) In particular, this chapter—

(a) restricts the proportion of the scheme property of a QFC retail scheme that may be held in transferable securities that are not approved securities and derivatives that are not approved derivatives; andNote Approved security is defined in r 7.1.9 and

approved derivative is defined in r 7.1.8.(b) requires a QFC retail scheme to comply with a number of

investment rules that require the spreading of risk.

(3) The intention of the restriction mentioned in subrule (2) (a) is, in part, to limit investment in transferable securities and derivatives that cannot be accurately valued and readily disposed of.

7.1.2 General duties of operator in relation to investment and borrowing—QFC retail schemes

(1) The operator of a QFC retail scheme must ensure that, except to the extent permitted by subrule (3) (b), the scheme property is not invested or used in breach of this chapter.Note Breach is defined in the glossary.


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Rule 12.1.2

(2) If the operator becomes aware of a breach of this chapter in relation to the QFC retail scheme, the operator must immediately take action, at its own expense, to rectify the breach, unless the breach happened because of circumstances to which subrule (3) applies.

(3) The operator must ensure that this chapter is complied with as soon as practicable having regard to the interests of the unitholders and, in any event, within the maximum period mentioned in subrule (6) if—

(a) the scheme property is—

(i) invested or used in breach of this chapter; and

(ii) the breach is beyond the control of both the operator and the independent entity; or

(b) all the following subparagraphs apply:

(i) there is a transaction (the subsequent transaction) deriving from the exercise of a right (for example, the right to convert stock or subscribe to a rights issue) attributable to an investment of the scheme (the original investment);

(ii) the subsequent transaction would, apart from this rule, be a breach of this chapter;


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Rule 12.1.1

(iii) at the time of the acquisition of the original investment, it was reasonable for the operator to expect that a breach would not be caused by the subsequent transaction.

(4) In subrule (3) (b) (i), the reference to the exercise of a right includes the taking effect of a right without any action by or on behalf of the independent entity or operator.

(5) If the independent entity becomes aware of any breach of this chapter in relation to the QFC retail scheme, it must immediately ensure that the operator complies with subrule (2).

(6) The maximum period to ensure that this chapter is complied with under subrule (3) starts on the day the operator finds out about the relevant circumstances and ends—

(a) if the transaction was a transaction under rule 7.4.9 (Permitted transactions in derivatives and forward transactions—QFC retail schemes)—at the close of business 5 business days after that day or, if that period is extended under subrule (7), the period as extended; orNote Business day is defined in the glossary.


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Rule 12.1.2

(b) if the transaction relates to an immovable—2 years after that day; or

(c) in any other case—for 6 months after that day.

(7) The period mentioned in subrule (6) (a) is extended—

(a) if the transaction involved a delivery of a commodity—from 5 to 20 business days; orNote Commodity is defined in the glossary.

(b) if the reason for the breach mentioned in subrule (3) (a) is the inability of the operator to close out a transaction because of a limit in the number or value of transactions imposed by a derivatives market that is an eligible market—until 5 business days after—

(i) the inability resulting from the limit is removed; or

(ii) it becomes, to the operator’s knowledge, practicable and prudent for the transaction to be closed out in another way.

Note Close out is defined in the glossary. Eligible market is defined in r 7.1.7.


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Rule 12.1.1

7.1.3 Treatment of obligations under ch 7—QFC retail schemes(1) If a provision of this chapter allows a QFC retail scheme to enter

into a transaction, or retain an investment, only if possible obligations arising out of the transaction or retention would not breach any limits under this chapter, it must be assumed that the maximum possible liability of the scheme under any other applicable provision of this chapter must also be provided for.

(2) If a provision of this chapter allows a QFC retail scheme to enter into a transaction, or retain an investment, only if the transaction or retention is covered, or any other similar transactions or investments are covered—

(a) it must be assumed that, in applying any of the provisions of this chapter, the scheme must also, simultaneously, satisfy any other applicable obligation relating to cover; and

(b) no element of cover may be used more than once.


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Rule 12.1.2

7.1.4 Valuation for ch 7—QFC retail schemes(1) For this chapter, the value at any time of the scheme property of a

QFC retail scheme is its net asset value at that time calculated in accordance with division 8.2.B (Valuation and pricing—QFC retail schemes).Note Net asset value is defined in the glossary.

(2) In valuing the scheme property for this chapter, the following provisions apply:

(a) the time at which the valuation is conducted (the relevant time) must be treated as if it were a valuation point, but the valuation and the relevant time do not count as a valuation or a valuation point for division 8.2.B;

(b) initial outlay must be regarded as remaining part of the scheme property;Note Initial outlay is defined in the glossary.

(c) if the operator, having taken reasonable care, decides that the scheme will become entitled to any unrealised profit that has been made for a transaction in derivatives—the prospective entitlement must be regarded as part of the scheme property.Note Derivative is defined in the glossary.


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Rule 12.1.1

7.1.5 What is an approved money-market instrument?(1) For these rules, an approved money-market instrument is a money-

market instrument that is normally dealt in on the money market, is liquid and has a value that can be accurately decided at any time.

(2) For this rule, a money-market instrument is normally dealt in on the money market if any of the following apply to it:

(a) it has a maturity at issue of no more than 397 days;

(b) it has a residual maturity of no more than 397 days;

(c) it undergoes regular yield adjustments in line with money market conditions at intervals of no longer than 397 days;

(d) it has a risk profile, including credit and interest rate risks, corresponding to the risk profile of an instrument—

(i) that has a maturity mentioned in paragraph (a) or (b); or

(ii) that is subject to yield adjustments mentioned in paragraph (c).


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Rule 12.1.2

(3) For this rule, a money-market instrument is liquid if it can be sold at limited cost in an adequately short time, taking into account the obligation of the operator to redeem units on the instructions of any unitholder.Note See r 8.1.17 (3) (Issue and redemption generally—QFC retail schemes).

(4) For this rule, a money-market instrument has a value that can be accurately decided at any time if accurate and reliable valuation systems are available for it.

(5) The valuation systems must meet both of the following requirements:

(a) they must enable the operator to calculate a net value of a money-market instrument in accordance with the value at which the instrument could be exchanged between knowledgeable, willing parties in an arm’s length transaction;

(b) they must be based either on market data or on valuation models, including systems based on amortised costs.


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Rule 12.1.1

(6) A money-market instrument that is normally dealt in on the money market and is admitted to or dealt in on an eligible market must be presumed to be liquid and to have a value that can be accurately decided at any time unless there is information available to the operator that would lead to a different decision.Note Eligible market is defined in r 7.1.7.

7.1.6 What is a transferable security?(1) For these rules, a transferable security is an investment that is any

of the following:

(a) a share;

(b) a government or public security;

(c) another debt instrument;

(d) a warrant;

(e) a securities receipt.Note 1 Investment and each of the types of investment mentioned in r (1) are



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Rule 12.1.2

Note 2 For other kinds of investments that are taken to be transferable securities, see the following provisions:

r 7.4.2 (Investments in closed-ended schemes as transferable securities—QFC retail schemes)

r 7.4.3 (Investments linked etc to other assets as transferable securities—QFC retail schemes).

(2) However, an investment is not a transferable security if the title to the investment cannot be transferred, or can be transferred only with the consent of a third party.

(3) In applying subrule (2) to a share or debt instrument issued by a corporation, the need for any consent on the part of the corporation or any of its members, or the debt instrument holders of it, may be disregarded.Note Corporation is defined in the glossary.

(4) Also, an investment is not a transferable security unless the liability of the holder of the investment to contribute to the debts of the issuer is limited to any amount for the time being unpaid by the holder in relation to the investment.


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Rule 12.1.1

7.1.7 What is an eligible market?(1) For these rules, a derivatives or securities market is an eligible

market in relation to a QFC scheme if it meets all the following requirements:

(a) the operator, after consultation with and notification to the independent entity, decides that the market is appropriate for investment of scheme property or dealing in investments for the scheme property;

(b) the market is included in a list in the latest filed prospectus;Note Latest filed prospectus is defined in the glossary.

(c) the independent entity has taken reasonable care to decide that—

(i) adequate custody arrangements can be provided for dealing in investments on the market; and

(ii) all reasonable steps have been taken by the operator in deciding whether the market meets the requirement of this rule.


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Rule 12.1.2

(2) For subrule (1) (a), a market may be considered appropriate only if it meets all the following requirements:

(a) it is regulated;

(b) it operates regularly;

(c) it is recognised as a market or exchange, or as a self-regulating organisation, by an appropriate regulatory or governmental entity;

(d) it is open to the public;

(e) it is adequately liquid;

(f) it has adequate arrangements for unimpeded transmission of income and capital to or to the order of investors.

7.1.8 What is an approved derivative?An approved derivative is a derivative that is traded or dealt in on, or under the rules of, a derivatives market that is an eligible market.Note Derivative and deal are defined in the glossary. Eligible market is

defined in r 7.1.7.


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Rule 12.1.1

7.1.9 What is an approved security?An approved security is a transferable security that is traded on, or under the rules of, a securities market that is an eligible market (otherwise than by the specific permission of the market authority).Note Transferable security is defined in r 7.1.6. Eligible market is defined in

r 7.1.7.

7.1.10 Application of ch 7 to umbrella schemes—QFC retail schemes

(1) This chapter applies to each subscheme of a QFC retail scheme that is an umbrella scheme as it were a separate QFC retail scheme.Note Subscheme and umbrella scheme are defined in r 1.2.11.

(2) However, the following rules apply to the umbrella scheme itself and not separately to each subscheme: rule 7.2.3 (Significant influence through transferable securities

—UCITS type schemes) rule 7.3.10 (Concentration—QFC retail schemes).

(3) Also, a subscheme of an umbrella scheme must not invest in another subscheme of the same umbrella scheme.


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Rule 12.1.2

Part 7.2 Investments generally—QFC retail schemes

7.2.1 Investment powers generally—QFC retail schemes(1) The scheme property of a QFC retail scheme must be invested only

in investments mentioned in rule 7.2.2 (Permissible investments generally—QFC retail schemes) to which the scheme is dedicated.Note Investment and dedicated are defined in the glossary.

(2) The scheme property of a QFC retail scheme must be invested and used only in accordance with the relevant provisions of this chapter, including within any limit or other restriction (however described) of this chapter.

(3) The constitutional document and the latest filed prospectus of a QFC retail scheme may further restrict—

(a) the kinds of property in which the scheme property may be invested; and

(b) the proportion of the capital property of the scheme that may be invested in investments of any kind; and


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Rule 12.1.1

(c) the kinds of transactions permitted by the scheme and any relevant limits; and

(d) the borrowing powers of the scheme.Note Constitutional document is defined in r 3.1.1. Capital property is


(4) Subrule (3) does not limit the further restrictions that the constitutional document and latest filed prospectus may impose on investment and borrowing by the scheme or on the use of the scheme property.

(5) The operator must ensure that any further restrictions are complied with.

7.2.2 Permissible investments generally—QFC retail schemes(1) The scheme property of a QFC retail scheme must be invested only

in any 1 or more of the following:

(a) transferable securities;

(b) money-market instruments;

(c) units in schemes;

(d) derivatives and forward transactions;


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Rule 12.1.2

(e) deposits.Note 1 Transferable security is defined in r 7.1.6.

Note 2 For investments that are treated as transferable securities, see the following provisions:



Note 3 A QFC retail scheme may not invest in immovables, precious metals or commodity contracts.

(2) This rule is subject to the other provisions of this chapter.

7.2.3 Significant influence through transferable securities—UCITS type schemes

(1) The operator of a QFC retail scheme must ensure that the scheme does not acquire transferable securities (the relevant securities) issued by a corporation if—

(a) the relevant securities give the right to vote (whether or not on substantially all matters) at general meetings of the corporation; and


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Rule 12.1.1

(b) either—

(i) the scheme already holds transferable securities issued by the corporation that give the scheme power to influence significantly the conduct of business by the corporation; or

(ii) acquisition of the relevant securities would give the scheme that power.

Note Corporation is defined in the glossary.(2) For subrule (1), the QFC retail scheme is taken to have power to

influence significantly the conduct of business by the corporation if the scheme, or the operator or independent entity (or both acting together), can exercise or control the exercise of at least 1/3 of the voting rights in the corporation because of the transferable securities issued by the corporation that are held by the scheme.

(3) For subrule (2), any temporary suspension of voting rights must be disregarded.


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Rule 12.1.2

7.2.4 Investments by money-market funds—QFC retail schemes

(1) A QFC retail scheme that is a money-market fund must comply with its primary investment objective, and the investment restrictions, mentioned in schedule 2 (Constitutional document content—QFC schemes), rule S2.33 (Primary investment objective etc—QFC money-market funds).Note Money-market fund is defined in r 1.3.12.

(2) For the investment restrictions, an approved money-market instrument is a high-quality approved money-market instrument if—

(a) it has been rated by at least 1 rating agency; and

(b) it has been awarded the highest available credit rating by each rating agency that has rated it.

Note Approved money-market instrument is defined in r 7.1.5. Rating agency is defined in INAP.

(3) If an approved money-market instrument forms part of the scheme property of a QFC retail scheme that is a money-market fund, the operator must monitor the instrument to ensure that it continues to


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Rule 12.1.1

be of high quality, taking into account both its credit risk and its final maturity.

(4) A QFC retail scheme that is a money-market fund must provide liquidity through same day or next day settlement.

(5) The weighted average maturity of its investments must not exceed 60 days.


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Rule 12.1.2

Part 7.3 Investment diversification—QFC retail schemes

7.3.1 Prudent spread of risk—QFC retail schemesThe operator of a QFC retail scheme must ensure that the scheme property provides a prudent spread of risk, taking into account the scheme’s investment objectives, strategies and policy as stated in the constitutional document and latest filed prospectus.Note Constitutional document is defined in r 3.1.1 and latest filed


7.3.2 Spread for certain transferable securities and money-market instruments—QFC retail schemes

(1) This rule applies to a transferable security if—

(a) the transferable security is not an approved security; and

(b) either—

(i) the transferable security has been issued for 1 year or longer; or


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Rule 12.1.1

(ii) the transferable security has been issued for less that 1 year and the terms of issue did not include an undertaking that application would be made for it to be admitted to an eligible market.

Note 1 Transferable security is defined in r 7.1.6. Approved security is defined in r 7.1.9. Eligible market is defined in r 7.1.7.




(2) This rule applies to a money-market instrument if—

(a) the instrument is not an approved money-market instrument; or

(b) the instrument is an approved money-market instrument but the scheme could not invest in it under rule 7.4.4 (Investments in approved money-market instruments not admitted to eligible markets etc—QFC retail schemes).

Note Approved money-market instrument is defined in r 7.1.5.


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Rule 12.1.2

(3) The operator of a QFC retail scheme must ensure that not more than 10% in value of the scheme property consists of transferable securities and money-market instruments to which this rule applies.

7.3.3 Spread for transferable securities and money-market instruments issued by single issuer or group—QFC retail schemes

(1) This rule does not apply to government or public securities.Note 1 Government or public security is defined in the glossary.

Note 2 See r 7.3.5 (Spread for government or public securities issued by single issuer—QFC retail schemes).

(2) The operator of a QFC retail scheme must ensure that not more than 5% in value of the scheme property consists of transferable securities or money-market instruments (or both) issued by a single person.Note 1 Transferable security is defined in r 7.1.6.


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Rule 12.1.1




(3) However, the 5% limit under subrule (2) is raised to 10% in relation to not more than 40% in value of the scheme property.

(4) Covered bonds need not be taken into account for the purpose of applying the raised limit of 10% in relation to 40% in value of the scheme property.Note Covered bond is defined in the glossary.

(5) Also, the 5% limit under subrule (2) is raised to 25% in relation to covered bonds if the total value of the covered bonds held does not exceed 80% in value of the scheme property.

(6) In addition, the 5% limit under subrule (2) may be increased to no more than 20% (or 35%) under rule 7.3.4 (Spread exception for schemes replicating indices—QFC retail schemes).


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Rule 12.1.2

(7) In applying subrules (2) to (6), securities receipts must be treated as equivalent to the underlying security.Note Securities receipt is defined in the glossary.

(8) The operator of a QFC retail scheme must also ensure that not more than 20% in value of the scheme property consists of transferable securities or money-market instruments (or both) issued by members of a single group.Note Group is defined in the glossary.

7.3.4 Spread exception for schemes replicating indices—QFC retail schemes

(1) Despite rule 7.3.3 (2) (Spread for transferable securities and money- market instruments issued by single issuer or group—QFC retail schemes), a QFC retail scheme may invest up to 20% in value of the scheme property in shares and debt instruments that are issued by a single person if the aim of the scheme’s investment objectives, strategies and policy as stated in its constitutional document and latest filed prospectus is to replicate the performance or composition of an index that is a permitted index under subrule (3).Note Share, debt instrument and entity are defined in the glossary.


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Rule 12.1.1

(2) However, the limit in subrule (1) may be increased to no more than 35%, but only in relation to a single person and if—

(a) justified by exceptional market conditions; and

(b) the latest filed prospectus includes a prominent statement of the increased limit.

(3) For subrule (1), a permitted index is an index that meets all the following requirements:

(a) the index is sufficiently diversified (see subrule (5));

(b) the index is a representative benchmark for the market to which it refers (see subrule (6));

(c) the index is published in an appropriate way (see subrule (7)).

(4) For subrule (1), replication of the composition of an index is replication of the composition of the underlying assets, including by way of efficient portfolio management.GuidanceThe scheme property of a scheme replicating an index under this rule need not consist of the exact composition and weighting of the underlying assets if the scheme’s investment objectives, strategies and policy are to achieve a result consistent with the replication of the index rather than an exact replication.

Note Efficient portfolio management is defined in the glossary.


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Rule 12.1.2

(5) For subrule (3) (a), an index is sufficiently diversified if its components comply with this part.

(6) For subrule (3) (b), an index is a representative benchmark for the market to which it refers if its provider uses a recognised methodology that generally does not result in the exclusion of a major issuer of the market to which it refers.

(7) For subrule (3) (c), an index is published in an appropriate way if—

(a) it is accessible to the public; and

(b) the index provider is independent of the QFC retail scheme.

(8) Subrule (7) (b) does not prevent the index provider and the scheme or its operator from being part of the same group, if effective arrangements to manage conflicts of interest are in place.Note Group is defined in the glossary.

7.3.5 Spread for government or public securities issued by single issuer—QFC retail schemes

(1) This rule applies to government or public securities.Note Government or public security is defined in the glossary.


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Rule 12.1.1

(2) If no more than 35% in value of the scheme property of a QFC retail scheme is invested in government or public securities issued by a single issuer, there is no limit on the amount that may be invested in government or public securities or in any single issue.

(3) A QFC retail scheme may invest more than 35% in value of the scheme property in government or public securities issued by a single issuer only if all the following requirements are met:

(a) the operator, after consultation with the independent entity before making the investment, is satisfied that the investment is in accordance with the investment objectives, strategies and policy of the scheme as stated in the constitutional document and latest filed prospectus;

(b) no more than 30% in value of the scheme property consists of government or public securities of a single issue;

(c) the scheme property includes government or public securities of at least 6 different issues, whether they are issued by that issuer or another issuer;

(d) the constitutional document expressly authorises the scheme to invest more than 35% in value of the scheme property in government or public securities issued by a single issuer;


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(e) the disclosure required by subrule (4) has been made.

(4) For subrule (3) (e), the latest filed prospectus must prominently state—

(a) that more than 35% of the scheme property is or may be invested in government or public securities issued by a single issuer; and

(b) the names of the jurisdictions, or the public or local authorities, issuing government or public securities in which the scheme may invest more than 35% of the scheme property.Note Jurisdiction is defined in the glossary.

(5) For this rule, an issue of government or public securities differs from another issue if there is a difference in relation to repayment date, rate of interest, guarantor or other material terms of the issue.

(6) In this rule:

issue includes guarantee.


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Rule 12.1.1

7.3.6 Spread for units in schemes etc—QFC retail schemes(1) The operator of a QFC retail scheme must ensure that not more than

20% in value of the scheme property consists of units in any single collective investment scheme.Note See r 7.4.2 (Investments in closed-ended schemes as transferable

securities—QFC retail schemes) for units in schemes that are treated as transferable securities and not as units in a scheme.

(2) However, subrule (1) does not apply to units in a feeder fund.Note Feeder fund is defined in the glossary.

(3) The operator of a QFC retail scheme must ensure that no more than 30% in value of the scheme property is invested under rule 7.4.6 (Investments in collective investment schemes generally—QFC retail schemes) in units in non-QFC retail customer schemes.Note Non-QFC retail customer scheme is defined in r 1.4.1.

(4) However, subrule (3) does not apply to units in a feeder fund or fund of funds.Note Fund of funds is defined in the glossary.


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Rule 12.1.2

7.3.7 Spread for OTC derivatives—QFC retail schemes(1) The operator of a QFC retail scheme must ensure that the exposure

to a single counterparty in an OTC derivative transaction does not exceed 10% in value of the scheme property.Note OTC derivative is defined in the glossary.

(2) In calculating a limit under this rule, the exposure in relation to an OTC derivative may be reduced to the extent that collateral is held in relation to it if the collateral meets all the following requirements:

(a) it is marked-to-market on a daily basis and its value exceeds the amount at risk;

(b) it is exposed only to negligible risks (for example, risks for government bonds of first credit rating or cash) and is liquid;

(c) it is held by a third-party custodian not related to the provider or is legally secured from the consequences of a failure of a related party;

(d) it can be fully enforced by the QFC retail scheme at any time.Note Collateral is defined in the glossary.


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Rule 12.1.1

(3) In calculating a limit under this rule, OTC derivative positions with the same counterparty may be netted if the netting procedures—

(a) correspond as closely as possible to—

(i) the off-balance sheet netting procedures required to be used by an authorised firm under PIIB, rule 4.7.5; or

(ii) substantially equivalent provisions under the law of another jurisdiction; and

(b) are based on legally binding agreements.Guidance for para (a) (ii)Substantially equivalent provisions would include the conditions in the Banking Consolidation Directive (the Directive of the European Parliament and Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (No 2006/48/EC)), annex III, part 7 (Contractual netting (Contracts for novation and other netting agreements)).

(4) In applying this rule, a derivative transaction is taken to be free of counterparty risk if—

(a) it is performed on an exchange; and


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(b) it is cleared through a clearing house that meets both of the following requirements:

(i) the clearing house is backed by an appropriate performance guarantee;

(ii) the clearing house is characterised by a daily mark-to-market valuation of the derivative position and at least daily margining.

Guidance on spread generallyThe operator of a QFC retail scheme should particularly note rule 7.3.7 (2) (d) under which collateral has to be legally enforceable at any time. The Regulatory Authority, therefore, expects the operator to undertake legal due diligence before entering into any financial collateral arrangement. This is particularly important if the collateral arrangement has a cross-border dimension. The Regulatory Authority also expects the independent entity to exercise reasonable care to review collateral arrangements in accordance with its functions.

7.3.8 Spread for deposits—QFC retail schemes(1) The operator of a QFC retail scheme must ensure that no more than

20% in value of the scheme property consists of deposits placed with any single eligible bank.Note Deposit and eligible bank are defined in the glossary.


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Rule 12.1.1

(2) For subrule (1), all uninvested cash that is capital property of the scheme is taken to be a deposit.Note Capital property is defined in the glossary.

7.3.9 Spread for certain investments with single person—QFC retail schemes

(1) The operator of a QFC retail scheme must ensure that no more than 20% in value of the scheme property consists of any combination of 2 or more of the following issued by or made with a single person:

(a) transferable securities (including covered bonds) or money-market instruments;

(b) deposits;

(c) exposures to an OTC derivative transaction.Note For investments that are treated as transferable securities, see the

following provisions:




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(2) In calculating the limit under this rule, the provisions of rule 7.3.7 (2) to (4) (Spread for OTC derivatives—QFC retail schemes) apply with any necessary changes.

7.3.10 Concentration—QFC retail schemes(1) The operator of a QFC retail scheme must ensure that the scheme

does not acquire transferable securities (other than debt instruments) that—

(a) do not give a right to vote on any matter at a general meeting of the issuer of the transferable securities; and

(b) represent more than 10% of the transferable securities issued by the issuer.

Note 1 Transferable security is defined in r 7.1.6. Debt instrument is defined in the glossary.





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(2) The operator of a QFC retail scheme must ensure that the scheme does not acquire—

(a) more than 10% of the debt instruments issued by a single issuer; or

(b) more than 25% of the units in a collective investment scheme; or

(c) more than 10% of the money-market instruments issued by a single issuer.

(3) However, the operator need not comply with a limit under subrule (2) if, at the time of the acquisition, the net amount in issue of the debt instruments, units in the collective investment scheme or money-market instruments cannot be calculated.

7.3.11 Application of pt 7.3—QFC retail schemesThe provisions of this part do not apply to a QFC retail scheme until 6 months after the day the initial offer period starts if rule 7.3.1 (Prudent spread of risk—QFC retail schemes) is complied with during that period.Note Month and initial offer are defined in the glossary.


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Part 7.4 Particular kinds of investments—QFC retail schemes

Division 7.4.A Transferable securities—QFC retail schemes

7.4.1 General investment requirements for non-approved transferable securities—QFC retail schemes

(1) A QFC retail scheme may invest in a transferable security that is not an approved security if the security meets all the following requirements:

(a) the potential loss that the scheme may incur in relation to holding the transferable security is limited to the amount paid for it;

(b) its liquidity does not compromise the ability of the operator to comply with its obligation under these rules to redeem units on the instructions of any unitholder;Note See r 8.1.17 (3) (Issue and redemption generally—

QFC retail schemes).


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(c) a reliable valuation is available for it (see subrule (2));

(d) appropriate information is available for it (see subrule (3));

(e) it is negotiable;

(f) its risks are adequately captured by the operator’s risk management process.

Note Transferable security is defined in r 7.1.6. Approved security is defined in r 7.1.9.

(2) For subrule (1) (c), reliable valuation is available for the transferable security if—

(a) for a transferable security that is an approved security—there are accurate, reliable and regular prices that are either market prices or prices made available by valuation systems independent from issuers; and

(b) for a transferable security that is not an approved security—there is a valuation on a periodic basis that is derived from information from the issuer of the security or competent independent research.


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Rule 12.1.2

(3) For subrule (1) (d), appropriate information is available for the transferable security if—

(a) for a transferable security that is an approved security—there is regular, accurate and comprehensive information available to the market on the security or, if relevant, on the security’s portfolio; and

(b) for a transferable security that is not an approved security—there is regular and accurate information available to the scheme’s operator on the security or, if relevant, on the security’s portfolio.

(4) Unless there is information available to the scheme’s operator that would lead to a different decision, a transferable security that is an approved security is presumed—

(a) not to compromise the operator’s ability to comply with its obligation under these rules to redeem units at the request of any unitholder; and

(b) to be negotiable.


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Rule 12.1.1

7.4.2 Investments in closed-ended schemes as transferable securities—QFC retail schemes

(1) For this chapter, a unit in a closed-ended scheme is taken to be a transferable security (and not a unit in a scheme) if it would meet all the requirements mentioned in rule 7.4.1 (General investment requirements for non-approved transferable securities—QFC retail schemes) if it were a transferable security and—

(a) for a unit in a closed-ended scheme constituted as a company—both the following requirements are met in relation to that scheme:

(i) the scheme is subject to corporate governance applied to companies;

(ii) if another person carries out asset management activity for the scheme—the other person is subject to regulation by a regulatory or governmental entity for the purposes of investor protection; or

(b) for a unit in a closed-ended scheme constituted as a trust—both the following requirements are met in relation to that scheme:

(i) the scheme is subject to corporate governance equivalent to that applied to companies;


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(ii) if another person carries out asset management activity for the scheme—the other person is subject to regulation by a regulatory or governmental entity for the purposes of investor protection; or

(c) for a unit in a closed-ended scheme constituted as a limited partnership or under contract law—all the following requirements are met in relation to that scheme:

(i) the scheme is subject to corporate governance equivalent to that applied to companies;

(ii) the scheme is managed by a person who is subject to regulation by a regulatory or governmental entity for the purposes of investor protection;

(iii) the assets of the scheme are held separately from the property of the operator of that scheme and the property of any other scheme;

(iv) the scheme is subject to liquidation rules that adequately protect its investors.


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Rule 12.1.1

Guidance for para (b) (i) and (c) (i)In assessing whether a closed-ended scheme in trust or contractual form is subject to corporate governance equivalent to that applied to companies, the operator of a QFC retail scheme should consider whether the trust or contract constituting the closed-ended scheme provides its investors with rights—

(a) to vote on essential decisions affecting the closed-ended scheme, including appointment and removal of its operator, amendment of the trust or contract, changes to its investment objectives, strategies and policy, merger and liquidation; and

(b) to control the closed-ended scheme’s investment objectives, strategies and policy through appropriate mechanisms.

(2) However, a QFC retail scheme must not invest in a unit in a closed-ended scheme under this rule if the purpose of the investment is to circumvent any investment limit or restriction (however described) of this chapter.Note Closed-ended scheme is defined in r 1.2.10 (2).

7.4.3 Investments linked etc to other assets as transferable securities—QFC retail schemes

(1) For this chapter, any other investment is taken to be a transferable security (and not an investment of another kind) if—


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(a) the investment would meet all the requirements mentioned in rule 7.4.1 (General investment requirements for non-approved transferable securities—QFC retail schemes) if it were a transferable security; and

(b) the investment is backed by or linked to the performance of other assets, which may differ from those in which a QFC retail scheme may otherwise invest.

(2) If the investment embeds a derivative, the requirements of this chapter about derivatives and forward positions apply to the embedded derivative component of the investment.

(3) For subrule (2), an investment embeds a derivative if it contains a component that meets all the following requirements:

(a) by virtue of that component some or all of the cash flows that otherwise would be required by the investment (which functions as host contract) can be modified according to a specified interest rate, financial instrument price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, and therefore change in a way similar to a stand-alone derivative;


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Rule 12.1.1

(b) the component’s characteristics and risks are not closely related to the economic characteristics and risks of the investment functioning as host contract;

(c) the component has a significant impact on the risk profile and pricing of the investment;

(d) the component is not transferable by contract independently of the investment.

Note See guidance to r 7.4.8 on transferable securities and money-market instruments that embed derivatives.

Division 7.4.B Money-market instruments—QFC retail schemes

7.4.4 Investments in approved money-market instruments not admitted to eligible markets etc—QFC retail schemes

(1) This rule applies to an approved money-market instrument that is not admitted to or dealt in on an eligible market.Note Approved money-market instrument is defined in r 7.1.5 and eligible

market is defined in r 7.1.7.


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Rule 12.1.2

(2) A QFC retail scheme may invest in the approved money-market instrument if all the following requirements are met:

(a) the instrument is—

(i) issued or guaranteed by—

(A) the State or the central government of a zone 1 country; or

(B) the Qatar Central Bank or the central bank of a zone 1 country; or

(C) a multilateral development bank; orNote Zone 1 country and multilateral development bank are

defined in INAP.

(ii) issued or guaranteed by—

(A) a regional or local authority of the State or a zone 1 country; or

(B) an entity owned by an entity mentioned in subparagraph (i) (A) or (ii) (A) if the first entity exercises regulatory or other non-commercial functions; or


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(iii) issued by an entity if any of its securities are dealt with on an eligible market; or

(iv) issued or guaranteed by an entity that is subject to, and complies with, prudential rules, and meets 1 or more of the following requirements:

(A) it is located in Qatar or a zone 1 country;

(B) it has at least investment grade rating given by a rating agency;Note Rating agency is defined in INAP.

(C) on the basis of an in-depth analysis of the entity, it can be demonstrated that the prudential rules applying to the entity are at least as stringent as those applied by the Regulatory Authority in the QFC;

(b) appropriate information in accordance with subrules (3) to (5) is available for the instrument;

(c) the instrument is freely transferable.

(3) If the approved money-market instrument is issued or guaranteed by an entity mentioned in subrule (2) (a) (i), or issued by an entity


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Rule 12.1.2

mentioned in subrule (2) (a) (ii) and guaranteed by an entity mentioned in subrule (2) (a) (i), information must be available on the issue or the issue programme, or on the legal and financial situation of the issuer before the issue of the instrument.

(4) If the approved money-market instrument is issued or guaranteed by an entity mentioned in subrule (2) (a) (ii) but is not guaranteed by an entity mentioned in subrule (2) (a) (i), or is issued by an entity mentioned in subrule (2) (a) (iii), all the following information must be available:

(a) information on the issue or the issue programme, or on the legal and financial situation of the issuer before the issue of the instrument;

(b) updates of that information on a regular basis and whenever a significant event happens;

(c) available and reliable statistics on the issue or the issue programme, or other data enabling an appropriate assessment of the credit risks related to investment in the instruments.

Guidance for r (4) (b) and r (5) (b)Regular updates of information should normally happen on at least an annual basis.


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(5) If the approved money-market instrument is issued or guaranteed by an entity mentioned in subrule (2) (a) (iv), all the following information must be available:

(a) information both on the issue or the issue programme, and the legal and financial situation of the issuer before the issue of the instrument, verified by appropriately qualified third parties not subject to instructions from the issuer;Guidance for para (a)The appropriately qualified third parties should specialise in the verification of legal or financial documentation and be composed of persons meeting professional standards of integrity.

(b) updates of that information on a regular basis and whenever a significant event happens;

(c) available and reliable statistics on the issue or the issue programme.


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Rule 12.1.2

Division 7.4.C Nil and partly paid securities—QFC retail schemes

7.4.5 Investments in nil and partly paid securities—QFC retail schemesA QFC retail scheme may invest in a transferable security or money-market instrument on which an amount is unpaid only if it is reasonably foreseeable that the amount of any existing and potential call for any amount unpaid could be paid by the scheme, at the time payment is required, without breaching this chapter.Note For other kinds of investments that are taken to be transferable

securities, see the following provisions:




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Rule 12.1.1

Division 7.4.D Collective investment schemes—QFC retail schemes

7.4.6 Investments in collective investment schemes generally—QFC retail schemes

(1) A QFC retail scheme (the investing scheme) may invest in units in a collective investment scheme (the second scheme) only if the second scheme meets all the following requirements:

(a) the second scheme is a QFC retail scheme or a non-QFC retail customer scheme;Note Non-QFC retail customer scheme is defined in r

1.4.1.(b) if the second scheme is a non-QFC retail customer scheme—

the investment and borrowing powers of the second scheme are the same as, or more restrictive than, the investment and borrowing powers of a QFC retail scheme under these rules;

(c) if the second scheme is a non-QFC retail customer scheme—the second scheme and its operator are required to comply with requirements equivalent to the requirements applying under


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Rule 12.1.2

rule 7.4.7 (Investments in associated schemes—QFC retail schemes) in relation to a QFC retail scheme;

(d) the second scheme is prohibited from having more than 10% in value of its scheme property consisting of units in collective investment schemes;

(e) if the second scheme is an umbrella scheme—each subscheme meets the requirements of paragraph (d) and, if the second scheme is a non-QFC retail customer scheme, also of paragraph (c).

Note 1 Umbrella scheme and subscheme are defined in r 1.2.11.

Note 2 Investments to which r 7.4.2 (Investments in closed-ended schemes as transferable securities—QFC retail schemes) applies are treated as investments in transferable securities, and not investments in units in a scheme.

Note 3 See also r 7.3.6 (3) (Spread for units in schemes etc—QFC retail schemes).

(2) To remove any doubt, this rule is subject to rule 7.4.7.


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Rule 12.1.1

7.4.7 Investments in associated schemes—QFC retail schemes(1) For this rule, a scheme is an associated scheme for a QFC retail

scheme if the operator of the first scheme is—

(a) the operator of the QFC retail scheme; or

(b) an associate of the operator of the QFC retail scheme.Note Associate is defined in the glossary.

(2) A QFC retail scheme must not invest in units in an associated scheme unless the latest filed prospectus of the QFC retail scheme clearly states that the scheme property of the QFC retail scheme may include units in the associated scheme.Note Latest filed prospectus is defined in the glossary.

(3) If—

(a) a QFC retail scheme invests in units in an associated scheme or disposes of units in an associated scheme; and

(b) there is a charge in relation to the investment or disposal;

the operator of the QFC retail scheme must pay the QFC retail scheme the amount payable under subrule (4) or (5) within 4 business days after the day the operator agrees to make the investment or disposal.


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Rule 12.1.2

(4) For an investment mentioned in subrule (3), the operator of the QFC retail scheme must pay the QFC retail scheme—

(a) any amount by which the consideration paid by the QFC retail scheme exceeds the price that would have been paid for the benefit of the associated scheme if the units were newly issued or sold by the associated scheme; or

(b) if that price cannot be ascertained by the operator—the maximum amount of any charge permitted to be made by the seller of units in the associated scheme.

(5) For a disposal mentioned in subrule (3), the operator of the QFC retail scheme must pay the QFC retail scheme the amount of any charge made in relation to the disposal for the operator of the associated scheme, the operator of the QFC retail scheme or an associate of either operator.

(6) For this rule—

(a) any addition to or deduction from the consideration paid on the acquisition or disposal by a QFC retail scheme of units in an associated scheme that is applied for the benefit of the associated scheme, and is (or is like) a dilution levy made under rule 8.2.16 (Dilution—QFC retail schemes), must be


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Rule 12.1.1

treated as part of the price of the units and not as part of any charge; and

(b) any charge made in relation to an exchange of units in a subscheme or separate part of the associated scheme for units in another subscheme or separate part of that scheme must be included as part of the consideration paid for the units.

Division 7.4.E Derivatives and forward transactions—QFC retail schemes

7.4.8 Derivatives and forward transactions generally—QFC retail schemes

(1) A transaction in a derivative or a forward transaction must not be effected for a QFC retail scheme unless the transaction is—

(a) permitted under rule 7.4.9 (Permitted transactions in derivatives and forward transactions—QFC retail schemes); and

(b) covered as required by rule 7.5.1 (Cover for transactions in derivatives and forward transactions—QFC retail schemes).

Note Derivative is defined in the glossary.


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Rule 12.1.2

(2) If a QFC retail scheme invests in a derivative, the exposure to the underlying assets must not exceed the limits in part 7.3 (Investment diversification—QFC retail schemes), except as provided in subrule (4).

(3) If a transferable security or money-market instrument embeds a derivative, the embedded derivative component must be taken into account in applying any limit under this chapter.Note See r (7) on working out whether an instrument embeds a derivative.

(4) If—

(a) a QFC retail scheme invests in an index-based derivative; and

(b) rule 7.4.10 (Permitted financial indices—QFC retail schemes) applies to the index;

the underlying constituents do not have to be taken into account in the application of part 7.3 to subrule (2) of this rule.

(5) The relaxation under subrule (4) is subject to the operator complying with rule 7.3.1 (Prudent spread of risk—QFC retail schemes).

(6) A scheme must not use transferable securities or money-market instruments that embed a derivative to circumvent this chapter.


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Rule 12.1.1

(7) Rule 7.4.3 (3) (Investments linked etc to other assets as transferable securities—QFC retail schemes) applies to subrules (3) and (6) of this rule, with any necessary changes, for the purpose of working out whether a transferable security or money-market instrument embeds a derivative.Guidance on transferable securities and money-market instruments that embed derivatives1 Collateralised debt obligations (CDOs) or asset-backed securities using

derivatives, with or without active management, will generally not be considered as embedding a derivative unless—

(a) they are leveraged, that is, the CDOs or asset-backed securities are not limited recourse vehicles and an investor’s loss can be higher than the investor’s initial investment; or

(b) they are not sufficiently diversified.

2 If a transferable security or money-market instrument embedding a derivative is structured as an alternative to an OTC derivative, the requirements of rule 7.4.13 (OTC transactions in derivatives—QFC retail schemes) will apply. This will be the case for tailor-made hybrid instruments, such as a single tranche CDO structured to meet the specific need of a QFC retail scheme. These tailor-made hybrid instruments should be considered to embed a derivative. Such a product offers an alternative to the use of an OTC derivative for the same purpose of achieving a diversified exposure to a pre-set risk level to a portfolio of entities.


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Rule 12.1.2

3 The following list of transferable securities and money-market instruments, which is illustrative and non-exhaustive, could be assumed to embed a derivative:

(a) credit linked notes;

(b) transferable securities and money-market instruments if their performance is linked to the performance of a bond index;

(c) transferable securities and money-market instruments if their performance is linked to the performance of a basket of shares, with or without active management;

(d) transferable securities or money-market instruments with a fully guaranteed nominal value if their performance is linked to the performance of a basket of shares, with or without active management;

(e) convertible bonds;

(f) exchange bonds.

4 Transferable securities and money-market instruments that embed a derivative are subject to the requirements of this chapter applying to derivatives. It is the operator’s responsibility to ensure that these requirements are complied with. The nature, frequency and scope of checks performed should depend on the characteristics of the embedded derivatives and their impact on the scheme, taking into account its investment objectives, strategies and policy and its risk profile.


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Rule 12.1.1

7.4.9 Permitted transactions in derivatives and forward transactions—QFC retail schemes

(1) A transaction in a derivative by a QFC retail scheme must—

(a) be in an approved derivative; orNote Approved derivative is defined in r 7.1.8.

(b) if the transaction is in an OTC derivative—comply with rule 7.4.13 (OTC transactions in derivatives—QFC retail schemes).

(2) The underlying of a transaction in a derivative by a QFC retail scheme must—

(a) comply with part 7.2 (Investments generally—QFC retail schemes) and this part; or

(b) consist of any 1 or more of the following to which the scheme is dedicated:

(i) financial indices that are permitted financial indices under rule 7.4.10 (Permitted financial indices—QFC retail schemes);

(ii) interest rates;

(iii) foreign exchange rates;


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Rule 12.1.2

(iv) currencies.Note Dedicated is defined in the glossary.

(3) A transaction in an approved derivative by a QFC retail scheme must be effected on, or under the rules of, a derivatives market that is an eligible market.Note Eligible market is defined r 7.1.7.

(4) A transaction in a derivative must not cause a QFC retail scheme to diverge from its investment objectives, strategies and policy as stated in the constitutional document and the latest filed prospectus.Note Constitutional document is defined in r 3.1.1. Latest filed prospectus is


(5) A transaction in a derivative must not be effected by a QFC retail scheme if the intended effect is to create the potential for an uncovered sale of any of the following:

(a) transferable securities;

(b) money-market instruments;

(c) units in collective investment schemes;

(d) derivatives.Note Transferable security is defined in r 7.1.6.


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Rule 12.1.1

(6) For subrule (5), a sale is not considered uncovered if the requirements mentioned in rule 7.4.12 (3) (Requirements to cover sales—QFC retail schemes) are met in relation to the sale.

(7) Any forward transaction by a QFC retail scheme must be made with an eligible bank.Note Eligible bank is defined in the glossary.

(8) A QFC retail scheme may not effect a transaction in a derivative on a commodity.Note Commodity is defined in the glossary.

7.4.10 Permitted financial indices—QFC retail schemes(1) For rule 7.4.9 (2) (b) (i) (Permitted transactions in derivatives and

forward transactions—QFC retail schemes), a permitted financial index is a financial index that meets all the following requirements:

(a) the index is sufficiently diversified (see subrule (2));

(b) the index represents an adequate benchmark for the market to which it refers (see subrule (3));

(c) the index is published in an appropriate way (see subrule (4)).


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Rule 12.1.2

(2) For subrule (1) (a), a financial index is sufficiently diversified if—

(a) it is composed in such a way that price movements or trading activities for a component do not unduly influence the performance of the whole index; and

(b) its components are at least as diverse as the investments of a QFC retail scheme are required to be under part 7.3 (Investment diversification—QFC retail schemes).

(3) For subrule (1) (b), a financial index represents an adequate benchmark for the markets to which it refers if—

(a) it measures the performance of a representative group of underlyings in a relevant and appropriate way; and

(b) it is revised and rebalanced periodically, following criteria that are publicly available, to ensure that it continues to reflect the markets to which it refers; and

(c) the underlyings are sufficiently liquid, allowing users to replicate it if necessary.


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Rule 12.1.1

(4) For subrule (1) (c), a financial index is published in an appropriate way if—

(a) its publication process relies on sound procedures to collect prices, and calculate and subsequently publish the index value, including pricing procedures for components for which a market price is not available; and

(b) material information is provided on a wide and timely basis on matters such as index calculation, rebalancing methodologies, index changes, and any operational difficulties in providing timely or accurate information.

(5) If the composition of underlyings of a transaction in a derivative does not satisfy the requirements mentioned in subrule (1) for a permitted financial index, the underlyings for that transaction may be regarded as a combination of the underlyings if they satisfy the requirements of rule 7.4.9 (2) (Permitted transactions in derivatives and forward transactions—QFC retail schemes).Guidance on financial indices underlying derivatives1 An index based on derivatives on commodities or an index on property may

be regarded as a permitted financial index under rule 7.4.10 if it meets all the requirements of the rule.


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Rule 12.1.2

2 If the composition of an index is not sufficiently diversified to avoid undue concentration, its underlying assets should be combined with the other assets of the scheme in assessing compliance with the requirements of rule 7.5.1 (Cover for transactions in derivatives and forward transactions—QFC retail schemes) and part 7.3 (Investment diversification—QFC retail schemes).

3 To avoid undue concentration, if derivatives on an index composed of assets in which a QFC retail scheme cannot invest are used to track or gain high exposure to the index, the index should be at least diversified in a way that is equivalent to the diversification achieved for the scheme by part 7.3.

4 If derivatives on that index are used for risk-diversification purposes and the exposure of the scheme to the index complies with part 7.3, there is no need to look at the underlying components of the index to ensure that it is sufficiently diversified.

7.4.11 Delivery of property under transactions in derivatives and forward transactions—QFC retail schemesA transaction in a derivative or a forward transaction by a QFC retail scheme that will or could lead to the delivery of property for the scheme may be entered into only if—

(a) the property can be held for the scheme; and


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Rule 12.1.1

(b) the operator, having taken reasonable care, decides that delivery of the property under the transaction will not happen or will not lead to a breach of these rules.

Note Property and breach are defined in the glossary.

7.4.12 Requirement to cover sales—QFC retail schemes(1) An agreement must not be made by or on behalf of a QFC retail

scheme to dispose of property or rights unless—

(a) the obligation to make the disposal and any other similar obligation could immediately be honoured by the scheme by delivery of property or the assignment of rights; and

(b) the property or rights mentioned in paragraph (a) are owned by the scheme at the time the agreement is made.

(2) Subrule (1) does not apply to a deposit.Note Deposit is defined in the glossary.

(3) Subrule (1) does not apply if—

(a) the risks of the underlying financial instrument of a derivative can be appropriately represented by another financial instrument and the underlying financial instrument is liquid; or


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Rule 12.1.2

(b) the operator or independent entity has the right to settle a derivative in cash, and cover exists within the scheme property that falls within 1 or more of the following asset classes:

(i) cash;

(ii) liquid debt instruments (for example, government bonds of first credit rating) with appropriate safeguards (in particular, haircuts);

(iii) other liquid assets having regard to their correlation with the underlying of the financial derivative instrument, subject to appropriate safeguards (for example, haircuts if relevant).

(4) In the asset classes mentioned in subrule (3), an asset may be considered as liquid if the financial instrument can be converted into cash in no longer than 7 business days at a price closely corresponding to the current valuation of the instrument on its own market.


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Rule 12.1.1

7.4.13 OTC transactions in derivatives—QFC retail schemes(1) A transaction in an OTC derivative under rule 7.4.9 (1) (b)

(Permitted transactions in derivatives and forward transactions—QFC retail schemes) must be—

(a) with an approved counterparty (see subrule (2)); and

(b) on approved terms (see subrule (3)); and

(c) capable of valuation (see subrule (5)); and

(d) subject to verifiable valuation (see subrule (6)).Note OTC derivative is defined in the glossary.

(2) For subrule (1) (a), a counterparty is an approved counterparty only if the counterparty is an eligible bank.Note Eligible bank is defined in the glossary.

(3) For subrule (1) (b), the terms of a transaction are approved terms if, before the transaction is entered into, the independent entity is satisfied that the counterparty has agreed with the operator—

(a) to provide a reliable and verifiable valuation in relation to the transaction corresponding to its fair value at least daily and at any other time at the operator’s request; or


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Rule 12.1.2

(b) that it or an alternative counterparty will, at the operator’s request, enter into a further transaction to sell, liquidate or close out the transaction at a fair value at any time.Note Close out is defined in the glossary.

(4) For subrule (3) (b), fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

(5) For subrule (1) (c), a transaction in a derivative is capable of valuation if the operator, having taken reasonable care, decides that, if the transaction were entered into, it would be able to value the investment throughout the life of the derivative with reasonable accuracy on a basis of—

(a) an up-to-date market value that the operator and independent entity have agreed is reliable; and

(b) if paragraph (a) does not apply—a pricing model that the operator and independent entity have agreed uses an adequate recognised methodology.


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Rule 12.1.1

(6) For subrule (1) (d), a transaction in a derivative is subject to verifiable valuation if the operator, having taken reasonable care, decides that, if the transaction were entered into, the valuation of the investment would be verified throughout the life of the derivative by—

(a) an appropriate third party independent of the derivative’s counterparty, at an adequate frequency and in such a way that the operator can check it; or

(b) a department within the operator that is independent of the department in charge of managing the scheme property and is adequately equipped to verify the valuation.

(7) Without limiting rule 4.2.3 (Oversight functions of independent entity—all QFC schemes), the independent entity must take reasonable care to ensure that the operator has systems and controls that are adequate to ensure compliance with this rule.


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Rule 12.1.2

7.4.14 Risk management for transactions in derivatives and forward transactions—QFC retail schemes

(1) The operator of a QFC retail scheme must use a risk management process that enables it to monitor and measure, as frequently as appropriate, the risks associated with—

(a) the scheme’s derivatives and forward positions; and

(b) their contribution to the overall risk profile of the scheme.

(2) The operator must tell the Regulatory Authority about the following details of the risk management process before using the process:

(a) the methods for estimating risks in derivative and forward transactions;

(b) the types of derivatives and forward transactions to be used within the scheme together with their underlying risks and any relevant quantitative limits.

(3) The operator must tell the Regulatory Authority in advance about any material change proposed for the details of the risk management process mentioned in subrule (2) (a) or (b).


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Rule 12.1.1

Guidance on risk management process1 The risk management process for a QFC retail scheme should take account

of the investment objectives, strategies and policy of the scheme as stated in the constitutional document and latest filed prospectus.

2 The independent entity should take reasonable care to review the appropriateness of the risk management process in accordance with its functions under these rules.

3 The operator is expected to demonstrate more sophistication in its risk management process for a QFC retail scheme with a complex risk profile than for a QFC retail scheme with a simple risk profile. In particular, the risk management process should take account of any characteristic of non-linear dependence in the value of a position to its underlying.

4 The operator should take reasonable care to establish and maintain the systems and controls appropriate to its business that are required by CTRL.

5 The risk management process should enable the re-calculation required by rule 7.5.3 (Continuing nature of limits and requirements for derivatives and forward positions—QFC retail schemes) to be undertaken at least daily or at each valuation point, whichever the more frequent.

6 The operator should undertake the risk assessment with the highest degree of care if the counterparty to the derivative is an associate of the operator or the credit issuer.


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Rule 12.1.2

Division 7.4.F Deposits—QFC retail schemes

7.4.15 Investments in deposits—QFC retail schemesA QFC retail scheme may invest in a deposit if—

(a) it is with an eligible bank; and

(b) it is either—

(i) repayable on demand; or

(ii) has the right to be withdrawn; and

(c) it matures in no longer than 12 months.Note Deposit, eligible bank and month are defined in the glossary.


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Rule 12.1.1

Part 7.5 Exposure for derivatives and forward transactions—QFC retail schemes

Guidance for pt 7.51 A scheme may invest in derivatives and forward transactions if the exposure

to which the scheme is committed by the transaction itself is suitably covered from within the scheme property. Exposure will include any initial outlay in relation to the transaction.

2 Cover ensures that a scheme is not exposed to the risk of loss of property, including money, to an extent greater than the scheme’s net asset value at any time. Therefore, a scheme is required to hold scheme property sufficient in value or amount to match the exposure arising from a derivative obligation to which the scheme is committed. Rule 7.5.1 (Cover for transactions in derivatives and forward transactions—QFC retail schemes) sets out detailed requirements for cover.

3 In accordance with rule 7.1.3 (2) (b) (Treatment of obligations under ch 7—QFC retail schemes), cover used in relation to a transaction in a derivative or forward transaction must not be used for cover in relation to another transaction in a derivative or forward transaction.


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Rule 12.1.2

7.5.1 Cover for transactions in derivatives and forward transactions—QFC retail schemes

(1) A transaction in a derivative or a forward transaction may be entered into by the operator of a QFC retail scheme only if the maximum exposure, in terms of the principal or notional principal created by the transaction to which the scheme is or may be committed by another person, is covered globally under subrule (2).Note Derivative, principal and notional principal are defined in the glossary.

(2) Exposure is covered globally if adequate cover from within the scheme property is available to meet the scheme’s total exposure, taking into account the value of the underlying assets, any reasonably foreseeable market movement, counterparty risk, and the time available to liquidate any positions.

(3) Cash not yet received into the scheme property but due to be received within 1 month is available as cover for subrule (2).Note Month is defined in the glossary.

(4) Property that is the subject of a transaction under part 7.6 (Stock lending and repos—QFC retail schemes) is only available for cover if the operator has taken reasonable care to decide that it is


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Rule 12.1.1

obtainable (by return or re-acquisition) in time to meet the obligation for which cover is required.

(5) The total exposure relating to derivatives held in the scheme property must not at any time exceed the scheme’s net asset value.Note Net asset value is defined in the glossary.

7.5.2 Borrowing not available for cover—QFC retail schemes(1) Cash obtained from borrowing by or for a QFC retail scheme, and

borrowing that the operator of a QFC retail scheme reasonably regards an eligible bank to be committed to provide, is not available for cover under rule 7.5.1 (Cover for transactions in derivatives and forward transactions—QFC retail schemes).Note Borrowing and eligible bank are defined in the glossary.

(2) If a QFC retail scheme, or the independent entity of a QFC retail scheme acting for the scheme on the operator’s instructions—

(a) borrows an amount of currency from an eligible bank; and

(b) keeps an amount in another currency, at least equal to that borrowing for the time being, on deposit with the eligible bank (or its agent or nominee);


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Rule 12.1.2

this part applies as if the borrowed currency, and not the deposited currency, were part of the scheme property.

7.5.3 Continuing nature of limits and requirements for derivatives and forward positions—QFC retail schemes

(1) The operator of a QFC retail scheme must, as frequently as necessary, re-calculate the amount of cover required in relation to derivatives and forward positions already in existence under this chapter.

(2) Derivatives and forward positions may be retained in the scheme property only so long as they remain covered globally under rule 7.5.1 (Cover for transactions in derivatives and forward transactions—QFC retail schemes).


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Rule 12.1.1

Part 7.6 Stock lending and repos—QFC retail schemes

Notes for pt 7.61 This part covers techniques relating to transferable securities and money-

market instruments that are used for the purpose of efficient portfolio management. It permits the generation of additional income for the benefit of the QFC retail scheme (and its investors) by entry into stock lending arrangements and repo agreements for the scheme.

2 The particular method of stock lending permitted in this part is in fact not a transaction that is a loan in the normal sense. Rather it is an arrangement under which the lender transfers securities to the borrower otherwise than by way of sale and the borrower is to transfer the securities, or securities of the same type and amount, back to the lender at a later date. In accordance with good market practice, a separate transaction by way of transfer of assets is also involved in stock lending arrangements to provide collateral to cover the ‘lender’ against the risk that the future transfer back of the securities may not be satisfactorily completed.


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Rule 12.1.2

7.6.1 Stock lending and repos generally—QFC retail schemesA QFC retail scheme may, or the independent entity of a QFC retail scheme may on the operator’s instructions, enter into a stock lending arrangement or repo agreement if it reasonably appears to the operator to be appropriate to be entered into with a view to generating additional income for the scheme with an acceptable degree of risk.Note Stock lending arrangement and repo agreement are defined in the

glossary.

7.6.2 Stock lending requirements—QFC retail schemes(1) A stock lending arrangement may be entered into by or for a QFC

retail scheme only if all the following requirements are met:

(a) all the terms of the agreement under which securities are to be reacquired by the independent entity for the scheme are in a form that is acceptable to the independent entity and are in accordance with good market practice;

(b) the counterparty is—

(i) an authorised firm; or


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Rule 12.1.1

(ii) a person authorised (however described) under the law of the State or a zone 1 country to deal in investments as principal in relation to OTC derivatives and the person is principally regulated by a regulatory or governmental entity in that jurisdiction;

Note Authorised firm and OTC derivative are defined in the glossary. Zone 1 country is defined in INAP.

(c) collateral is obtained to secure the obligation of the counterparty under the terms mentioned in paragraph (a) and the collateral is—

(i) acceptable to the independent entity; and

(ii) adequate under rule 7.6.3 (1) (Treatment of collateral for stock lending—QFC retail schemes); and

(iii) sufficiently immediate under rule 7.6.3 (2).Note Collateral is defined in the glossary.

(2) For subrule (1), the counterparty is the person who is obliged under the agreement mentioned in subrule (1) (a) to transfer to the independent entity—

(a) the securities transferred by the independent entity under the stock lending arrangement; or


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Rule 12.1.2

(b) securities of the same type and amount.

7.6.3 Treatment of collateral for stock lending—QFC retail schemesGuidance on stock lending—treatment of collateralIf a stock lending arrangement is entered into for a QFC retail scheme, the value of scheme property remains unchanged. The securities transferred cease to be part of the scheme property, but there is an obligation by the counterparty to transfer back the securities or equivalent securities. The independent entity will also receive collateral to set against the risk of default in transfer. The collateral is equally irrelevant to the valuation of the scheme property (because it is transferred against an obligation of equivalent value by way of re-transfer). This rule accordingly makes provision for the treatment of collateral in that context.

(1) For rule 7.6.2 (1) (c) (ii) (Stock lending requirements—QFC retail schemes), collateral is adequate only if it is—

(a) transferred to the independent entity or its nominee or delegate, as appropriate; and

(b) at the time of the transfer to the independent entity, at least equal in value to the value of the securities transferred by the independent entity; and

(c) in the form of 1 or more of the following:

(i) cash;


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Rule 12.1.1

(ii) a certificate of deposit;

(iii) a letter of credit;

(iv) a readily realisable investment;

(v) commercial paper with no embedded derivative content.

(vi) units in an eligible money-market fund.Note Collateral, readily realisable investment and eligible money-market

fund are defined in the glossary.

(2) For rule 7.6.2 (1) (c) (iii), collateral is sufficiently immediate if—

(a) it is transferred before or at the time of the transfer of the securities by the independent entity; or

(b) the independent entity takes reasonable care to decide at the time mentioned in paragraph (a) that it will be transferred at the latest by the close of business on the day of the transfer.

(3) The independent entity must ensure that the value of the collateral is, at all times, at least equal to the value of the securities transferred by the independent entity.

(4) If the validity of any collateral expires or is about to expire, the independent entity’s duty under subrule (3) is satisfied if the independent entity takes reasonable care to ensure that sufficient


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Rule 12.1.2

collateral will be transferred by close of business on the day of the expiry.

(5) Any agreement for transfer at a future date of securities, collateral, or the equivalent of either, under this rule may be regarded, for the purposes of valuation under division 8.2.B (Valuation and pricing—QFC retail schemes), or this chapter, as an unconditional agreement for the sale or transfer of property, whether or not the property is part of the property of the scheme.

(6) Collateral transferred to the independent entity is part of the scheme property for these rules, except in the following respects:

(a) it must not be included in any valuation for division 8.2.B or this chapter, because it is offset under subrule (5) by an obligation to transfer;

(b) it does not count as scheme property for any purpose of this chapter other than this rule.

(7) Subrules (5) and (6) (a) do not apply to any valuation of collateral itself for this rule.


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Rule 12.1.1

7.6.4 No limits on stock lending and repos—QFC retail schemes

(1) There is no limit on the value of the scheme property of a QFC retail scheme that may be the subject of stock lending arrangements or repo agreements under this part.

(2) However, the use of stock lending arrangements or repo agreements, or the reinvestment of cash collateral, must not—

(a) result in a change of the scheme’s investment objectives, strategies and policy; or

(b) add substantial supplementary risks to the scheme’s risk profile.

(3) Collateral in the form of cash may only be invested in 1 or more of the following:

(a) certificates of deposit;

(b) letters of credit;

(c) readily realisable investments;

(d) commercial paper with no embedded derivative component;

(e) units in an eligible money-market fund;


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Rule 12.1.2

(f) deposits, but only if the deposits—

(i) are with an eligible bank; and

(ii) can be withdrawn within 5 business days or any shorter period required under the stock lending arrangement.

Note Readily realisable investment, eligible money-market fund, deposit and eligible bank are defined in the glossary.

(4) If a QFC retail scheme generates leverage through the reinvestment of collateral, this must be taken into account in calculating the scheme’s global exposure.


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Rule 12.1.1

Part 7.7 Cash, borrowing, lending and other provisions—QFC retail schemes

7.7.1 Cash and near cash—QFC retail schemes(1) Cash and near cash must not be retained in the scheme property of a

QFC retail scheme except to the extent that its retention may reasonably be regarded as necessary to enable any of the following:

(a) the pursuit of scheme’s investment objectives, strategies and policy;

(b) the redemption of units;

(c) the efficient management of the scheme in accordance with its investment objectives, strategies and policy;

(d) other purposes that may reasonably be regarded as ancillary to the scheme’s investment objectives, strategies and policy.

Note Near cash and redemption are defined the glossary.


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Rule 12.1.2

(2) However, during the period of the initial offer, the scheme property may consist of cash and near cash without any limit.Note Initial offer is defined in the glossary.

7.7.2 General power to borrow—QFC retail schemes(1) A QFC retail scheme that is a CIC or CIP may, in accordance with

this rule and rule 7.7.3 (Borrowing limits—QFC retail schemes), borrow money for the use of the scheme on terms that the borrowing is to be repaid out of the scheme property.Note CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively. Borrowing

is defined in the glossary.

(2) The independent entity of a QFC retail scheme that is a CIT may, on the operator’s instructions and in accordance with this rule and rule 7.7.3, borrow money for the use of the scheme on terms that the borrowing is to be repaid out of the scheme property.Note CIT is defined in r 1.3.9.

(3) Subrules (1) and (2) are subject to the obligation of the scheme to comply with any restriction in the constitutional document.Note Constitutional document is defined in r 3.1.1.


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Rule 12.1.1

(4) Money may be borrowed under subrule (1) or (2) only from an eligible bank.Note Eligible bank is defined in the glossary.

(5) The operator must ensure that any borrowing is on a temporary basis and that borrowings are not persistent.

(6) For subrule (5), the operator must have regard in particular to the following:

(a) the duration of any borrowing;

(b) the number of times the scheme borrows in any period.

(7) Without limiting subrule (5), the operator must ensure that no borrowing is for longer than 3 months, whether in relation to a particular amount or at all, without the independent entity’s prior agreement.

(8) The independent entity may give its agreement under subrule (7) in relation to a borrowing only on the conditions that appear to the independent entity appropriate to ensure that the borrowing does not cease to be on a temporary basis only.


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Rule 12.1.2

(9) A CIC or CIP must not issue any debt instrument unless it acknowledges or creates a borrowing that complies with subrules (1), (3) and (4).Note Debt instrument is defined in the glossary.

(10) This rule does not apply to back-to-back borrowing.Note Back-to-back borrowing is defined in the glossary.

7.7.3 Borrowing limits—QFC retail schemes(1) The operator of a QFC retail scheme must ensure that the scheme’s

total borrowing does not, on any day, exceed 10% of the value of the scheme property.Note Borrowing is defined in the glossary.

(2) This rule does not apply to back-to-back borrowing.

7.7.4 Restrictions on lending money—QFC retail schemes(1) None of the money in the scheme property of a QFC retail scheme

may be lent.Note Money is defined in the glossary.

(2) For subrule (1), money is lent by the scheme if it is paid to a person on the basis that it must be repaid, whether or not by that person.


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Rule 12.1.1

(3) However, for subrule (1), the following are not lending:

(a) acquiring a debt instrument;

(b) placing money on deposit or in a current account.Note Debt instrument is defined in the glossary.

(4) This rule does not prevent a QFC retail scheme that is a CIC or CIP from—

(a) providing an officer of the scheme with funds to meet expenditure to be incurred by the officer for the purposes of—

(i) the scheme; or

(ii) to perform duties as an officer of the scheme; or

(b) doing anything to enable an officer of the scheme to avoid expenditure mentioned in paragraph (a).

Note CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively.

(5) In this rule:

officer, of a CIC or CIP, means—

(a) a member of the governing body of the CIC or CIP; or

(b) the chief executive, manager, secretary, or other similar officer, of the CIC or CIP.


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Rule 12.1.2

7.7.5 Restrictions on lending property other than money—QFC retail schemes

(1) The scheme property of a QFC retail scheme other than money must not be lent by way of deposit or otherwise.

(2) For subrule (1), transactions permitted by part 7.6 (Stock lending and repos—QFC retail schemes) are not lending.

(3) The scheme property must not be mortgaged.

(4) If transactions in derivatives or forward transactions are used for a QFC retail scheme in accordance with this chapter, this rule does not prevent the scheme, or the independent entity on the operator’s instructions, from—

(a) lending, depositing, pledging or charging scheme property for margin requirements; or

(b) transferring property under the terms of an agreement in relation to margin requirements, if the operator reasonably considers that both the agreement and the margin requirements made under it (including in relation to the level of margin) provide appropriate protection to unitholders.

Note Margin is defined in the glossary.


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Rule 12.1.1

7.7.6 General power to accept or underwrite placings—QFC retail schemes

(1) This rule applies to any agreement entered into by a QFC retail scheme—

(a) that is an underwriting or sub-underwriting agreement; or

(b) that contemplates that securities will or may be issued, subscribed or acquired for the scheme.Note Securities is defined in the glossary.

(2) However, this rule, does not apply to—

(a) an option; or

(b) a purchase of a transferable security that gives a right to—

(i) subscribe for or acquire a transferable security; or

(ii) convert a transferable security into another transferable security.

Note Option is defined in the glossary. Transferable security is defined in r 7.1.6.


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Rule 12.1.2

(3) Any power in this chapter to invest in transferable securities may be used by the QFC retail scheme for the purpose of entering into an agreement to which this rule applies, subject to any restriction in the constitutional document being complied with.Note Constitutional document is defined in r 3.1.1.

(4) The exposure of the QFC retail scheme to agreements to which this rule applies must, on any day, be—

(a) covered under rule 7.5.1 (Cover for transactions in derivatives and forward transactions—QFC retail schemes); and

(b) such that, if all possible obligations arising under them had immediately to be met in full, there would be no breach of this chapter.

(5) In this rule:

agreement includes understanding.

7.7.7 Guarantees and indemnities—QFC retail schemes(1) A QFC retail scheme, and the independent entity of a QFC retail

scheme, must not provide any guarantee or indemnity in relation to the obligation of any person.


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Rule 12.1.1

(2) None of the scheme property of a QFC retail scheme may be used to discharge any obligation arising under a guarantee or indemnity in relation to the obligation of any person.

(3) This rule does not apply to any of the following:

(a) any indemnity or guarantee given for margin requirements if the derivatives or forward transactions are being used in accordance with the provisions of this chapter;Note Margin and derivative are defined in the glossary.

(b) any indemnity given to the independent entity against any liability incurred by it in safeguarding the scheme property;

(c) any indemnity given by the scheme or the independent entity to another person if—

(i) the other person is engaged to assist the independent entity to safeguard any of the scheme property; and

(ii) the indemnity is against any liability incurred by the other person in safeguarding scheme property;


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Rule 12.1.2

(d) for a CIC or CIP—an indemnity given to a person winding up a corporation or scheme (the relevant entity) if the indemnity is given for the purposes of arrangements by which all or part of the property of the relevant entity becomes the first property of the CIC or CIP and the shareholders or unitholders of the relevant entity become the first unitholders of the CIC or CIP;Note CIC and CIP are defined in r 1.3.7 and 1.3.8

respectively. Corporation is defined in the glossary.

(e) for a CIT—an indemnity given to a person winding up a corporation or scheme if all or part of the property of the corporation or scheme is to become part of the scheme property of the CIT by way of unitisation.Note CIT is defined in r 1.3.9. Unitisation is defined in

the glossary.


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Rule 12.1.1

Chapter 8 Operating duties and responsibilities—QFC schemes

Notes for ch 81 This chapter provides the operating framework within which a QFC scheme

must be operated on a day-to-day basis to ensure that persons are treated fairly when they become, while they remain, or as they cease to be, unitholders.

2 The operator operates the scheme on a day-to-day basis. Its operation is governed particularly by the provisions of this chapter.

3 The operator does not necessarily have to carry out all the activities it is responsible for and may outsource functions to others. This chapter sets out the parameters of any outsourcing.

4 The independent entity’s duty is, generally speaking, to safeguard the scheme property and to oversee certain functions of the operator (most notably the dealing, valuation, pricing and investment functions).


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Rule 12.1.2

Part 8.1 Dealing—QFC schemes

Division 8.1.A Dealing—QFC qualified investor schemes

8.1.1 Application of div 8.1.A to umbrella schemes—QFC qualified investor schemes

(1) This division applies to each subscheme of a QFC qualified investor scheme that is an umbrella scheme as if it were a separate QFC qualified investor scheme.Note Umbrella scheme and subscheme are defined in r 1.2.11.

(2) The currency of a subscheme may, if appropriate, be used for the subscheme instead of the base currency of the umbrella scheme.Note Base currency is defined in the glossary.

8.1.2 Initial offer—QFC qualified investor schemes(1) The period of the initial offer for a QFC qualified investor scheme,

and how it ends, must be set out in the latest filed prospectus and must not be of unreasonable length.Note Initial offer and latest filed prospectus are defined in the glossary.


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Rule 12.1.1

(2) During the initial offer period, units may only be issued at the initial price.Note Initial price is defined in the glossary.

8.1.3 How units are issued and redeemed etc—QFC qualified investor schemes

(1) Units in a QFC qualified investor scheme are issued or redeemed on behalf of the scheme by the operator making a record of—

(a) the issue or redemption; and

(b) the number or percentage of the units in each class that are issued or redeemed.

Note Issue, redemption and class are defined in the glossary.

(2) Units in a QFC qualified investor scheme cannot be issued or redeemed in any other way.

(3) The time of an issue or redemption under subrule (1) is the time the record is made.

(4) The operator of a QFC qualified investor scheme may arrange for the independent entity to issue or redeem units on behalf of the scheme if the operator would otherwise be obliged to issue or redeem the units on behalf of the scheme.


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Rule 12.1.2

8.1.4 Controls over issue and redemption of units—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must ensure that at each valuation point there are at least as many units in issue of any class as there are units registered to unitholders of that class.Note Valuation point and class are defined in the glossary.

(2) In issuing or redeeming units, the operator must not do, or fail to do, anything that would, or might, give the operator, or an associated person for the operator, a benefit or advantage at the expense of a unitholder or potential unitholder.Note Issue, redemption and associated person are defined in the glossary.

(3) The operator must, as required by these rules and the latest filed prospectus—

(a) issue and redeem units on behalf of the scheme; and

(b) arrange for the payment of money or transfer of assets to or from the independent entity for scheme.

Note Money and latest filed prospectus are defined in the glossary.

(4) The operator of must keep a record of the issues and redemptions it makes.


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Rule 12.1.1

(5) If the operator breaches subrule (1) or (2), it must—

(a) correct the breach as quickly as possible; and

(b) reimburse the scheme any costs the scheme may have incurred in correcting the breach, subject to any reasonable minimum level for reimbursement provided in the latest filed prospectus.

Note Breach is defined in the glossary.

8.1.5 Issue and redemption of units in multiple classes—QFC qualified investor schemes

(1) This rule applies to a QFC qualified investor scheme if the scheme has 2 or more classes of units in issue.Note Class is defined in the glossary.

(2) The operator may treat all, or any 2 or more, of the classes (the relevant classes) as a single class in deciding how many units are to be issued or redeemed by reference to a particular valuation point if—

(a) either—

(i) the relevant classes have the same entitlement to participate in the scheme property, and the same liability


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Rule 12.1.2

for charges, expenses, and other payments, that may be recovered from the scheme property; or

(ii) the relevant classes differ only as to whether income is distributed or accumulated by periodic credit to capital, and the price of the units in each class is calculated by reference to undivided shares in the scheme property; and

(b) the independent entity gives its prior agreement.

8.1.6 Issue and redemption generally—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must, at all times during a dealing day, be willing to issue units on behalf of the scheme to any eligible person in accordance with any conditions stated in the constitutional document and the latest filed prospectus, unless the operator has reasonable grounds to refuse the issue.Note Dealing day, issue and latest filed prospectus are defined in the

glossary. Constitutional document is defined in r 3.1.1.

(2) Conditions mentioned in subrule (1) must be fair and reasonable as between all unitholders and potential unitholders.


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Rule 12.1.1

(3) The operator of a QFC qualified investor scheme must, at all times during a dealing day, be willing to redeem on behalf of the scheme units of an eligible unitholder in accordance with any conditions in the constitutional document and the latest filed prospectus, unless the operator has reasonable grounds to refuse the redemption.Note Redemption is defined in the glossary.

(4) On agreeing to redeem units under subrule (3), the operator must arrange for the independent entity to pay the appropriate proceeds of the redemption to the unitholder within any reasonable period provided in the constitutional document or the latest filed prospectus, unless the operator or independent entity has reasonable grounds for withholding payment.

(5) Payment of proceeds on redemption must be made in any way provided in the latest filed prospectus.

(6) The way provided for in the latest filed prospectus for subrule (5) must be fair as between redeeming unitholders and continuing unitholders.

(7) The operator must issue or redeem units at a price calculated at the next valuation point for dealing purposes after receiving the instructions to issue or redeem the units.


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Rule 12.1.2

(8) If a QFC qualified investor scheme is operating limited redemption arrangements, the arrangements must provide for the operator to redeem units in the scheme at least once every 6 months.Note Limited redemption arrangements is defined in the glossary.

Guidance on limited redemption periodsThe maximum period between dealing days for a QFC qualified investor scheme will depend on the reasonable expectations of the target investor group and the particular investment objectives, strategies and policy of the scheme. For example, for a scheme aiming to invest in large property developments, the expectation would be that it is reasonable to have a longer period between dealing days for liquidity reasons than for a scheme investing predominantly in listed securities.

8.1.7 When instructions for issue and redemption must be given—QFC qualified investor schemes

(1) The latest filed prospectus of a QFC qualified investor schemes must fix a time before a valuation point (the cut-off point) after which the operator must not accept instructions to issue or redeem units on behalf of the scheme at the valuation point.

(2) The cut-off point must not be earlier than the close of business on the business day before the valuation point to which it relates.


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Rule 12.1.1

(3) However, if there are 2 or more valuation points on a day, the cut-off point for a valuation point must not be earlier than the valuation point immediately before it.ExamplesIf there are 3 valuations points at 10 am, 12 noon and 2 pm on a business day (the relevant day), the cut-off points for the valuations points must comply with the following:

(a) the cut-off point for the 10 am valuation point cannot be earlier than the close of business on the business day before the relevant day;

(b) the cut-off point for the 12 noon valuation point cannot be earlier than 10 am on the relevant day;

(c) the cut-off point for the 2 pm valuation point cannot be earlier than 12 noon on the relevant day.

(4) Different cut-off points may be used to differentiate between the methods of submitting instructions to redeem to the operator but not to differentiate between unitholders or potential unitholders.

8.1.8 Limited issue—QFC qualified investor schemesIf a QFC qualified investor scheme limits the issue of units in any class, units in the class can only be issued if the issue—


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Rule 12.1.2

(a) is in accordance with the constitutional document and the latest filed prospectus; and

(b) will not materially prejudice any existing unitholders.Note Issue, class and latest filed prospectus are defined in the glossary.


8.1.9 Issue only to qualified investors—QFC qualified investor schemesTo remove any doubt, the operator of a QFC qualified investor scheme must not issue units in the scheme to a person who is not a qualified investor for the scheme.Note Issue is defined in the glossary. Qualified investor, for a QFC scheme,

is defined in r 1.2.12 (2).

Division 8.1.B Dealing—QFC retail schemesNotes for div 8.1.B1 The operator of a QFC retail scheme is responsible for issuing and

redeeming units on behalf of the scheme. The provisions of this division are intended to ensure that the operator treats persons fairly if they give instructions to the operator to issue or redeem units.


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Rule 12.1.1

2 This division also sets out common standards for how the amounts in relation to unit transactions are to be paid. These arrangements include the initial offer of units and the exchange of units for scheme property.

8.1.10 Application of div 8.1.B to umbrella schemes—QFC retail schemes

(1) This division applies to each subscheme of a QFC retail scheme that is an umbrella scheme as if it were a separate QFC retail scheme.Note Umbrella scheme and subscheme are defined in r 1.2.11.

(2) The currency of a subscheme may, if appropriate, be used for the subscheme instead of the base currency of the umbrella scheme.Note 1 Base currency is defined in the glossary.

Note 2 Details of the initial offer must be provided in any prospectus available during the initial offer period (see r S4.16 (c) (Dealing)).

8.1.11 Initial offers—QFC retail schemes(1) During the initial offer period for a QFC retail scheme, units may

only be issued at the initial price.Note Initial offer and initial price are defined in the glossary.

(2) The length of the initial offer period must not be unreasonable, taking into account the characteristics of the scheme.


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Rule 12.1.2

(3) The period of the initial offer comes to an end if the operator believes on reasonable grounds that the price that would reflect the current value of the scheme property would differ from the initial price by more than 2%.

8.1.12 How units are issued and redeemed etc—QFC retail schemes

(1) Units in a QFC retail scheme are issued or redeemed on behalf of the scheme by the operator making a record of—

(a) the issue or redemption; and

(b) the number or percentage of the units in each class that are issued or redeemed.

Note Issue, redemption and class are defined in the glossary.

(2) Units in a QFC retail scheme cannot be issued or redeemed in any other way.

(3) The time of an issue or redemption under subrule (1) is the time the record is made.

(4) The operator of a QFC retail scheme may arrange for the independent entity to issue or redeem units on behalf of the scheme


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Rule 12.1.1

if the operator would otherwise be obliged to issue or redeem the units on behalf of the scheme.

8.1.13 Controls over issue and redemption of units—QFC retail schemes

(1) The operator of a QFC retail scheme must ensure that at each valuation point there are at least as many units in issue of any class as there are units registered to unitholders of that class.Note Valuation point and class are defined in the glossary.

(2) In issuing or redeeming units, the operator must not do, or fail to do, anything that would, or might, give the operator, or an associated person for the operator, a benefit or advantage at the expense of a unitholder or a potential unitholder.Note Issue, redemption and associated person are defined in the glossary.

(3) The operator must, as required by these rules and the latest filed prospectus—

(a) issue and redeem units on behalf of the scheme; and


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Rule 12.1.2

(b) arrange for the payment of money or transfer of assets to or from the independent entity for the scheme.Note Money and latest filed prospectus are defined in

the glossary.(4) The operator must keep a record of the issues and redemptions it

makes.

(5) If the operator breaches subrule (1) or (2), it must—

(a) correct the breach as quickly as possible; and

(b) reimburse the scheme any costs the scheme may have incurred in correcting the breach, subject to any reasonable level for reimbursement provided in the latest filed prospectus.

Note Breach is defined in the glossary.

(6) The operator must have systems and controls to ensure compliance with subrule (1).Guidance for controls1 PRIN principle 4 requires an authorised firm to have effective systems and

controls. PRIN principle 7 requires an authorised firm to have regard to its customers’ interests and to treat them fairly.

2 The operator should agree a period with the independent entity during which the operator will issue or redeem units. A period up to the next valuation


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Rule 12.1.1

point, but in all cases within 24 hours, may be acceptable if the provisions mentioned in paragraph 1 are complied with.

8.1.14 Issue and redemption of units in multiple classes—QFC retail schemes

(1) This rule applies to a QFC retail scheme if the scheme has 2 or more classes of units in issue.Note Class is defined in the glossary.

(2) The operator may treat all, or any 2 or more, of the classes (the relevant classes) as a single class in deciding how many units are to be issued or redeemed by reference to a particular valuation point if—

(a) either—

(i) the relevant classes have the same entitlement to participate in the scheme property, and the same liability for charges, expenses, and other payments, that may be recovered from the scheme property; or

(ii) the relevant classes differ only as to whether income is distributed or accumulated by periodic credit to capital, and the price of the units in each class is calculated by reference to undivided shares in the scheme property; and


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Rule 12.1.2

(b) the independent entity gives its prior agreement.

8.1.15 Changes to number of units issued or redeemed—QFC retail schemes

(1) Any instructions to the operator of a QFC retail scheme for the issue or redemption of units may be altered to change the number of units issued or redeemed if the independent entity, after having taken reasonable care in considering the matter—

(a) is satisfied that—

(i) the alteration corrects an error in the instruction; and

(ii) the error is an isolated error; and

(b) agrees with the change.

(2) However, the instruction may be altered only within the period within which payment must be made in relation to the unit under rule 8.1.16 (Payment for issued units—QFC retail schemes) or rule 8.1.19 (Payment for redeemed units—QFC retail schemes).


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Rule 12.1.1

8.1.16 Payment for issued units—QFC retail schemes(1) The operator of a QFC retail scheme must not issue units in the

scheme to a person unless the person has paid the independent entity the price of the units and any payments required under rule 8.2.16 (Dilution—QFC retail schemes).Note Issue and price are defined in the glossary.

(2) Any payment made to the independent entity under this rule must be in cash or cleared funds unless rule 8.1.20 (Issue or redemption otherwise than for cash—QFC retail schemes) applies.

(3) If the operator breaches this rule, the operator must reimburse the scheme for any lost interest unless the amount involved is not, in the independent entity’s opinion, material to the scheme.

8.1.17 Issue and redemption generally—QFC retail schemes(1) The operator of a QFC retail scheme must, at all times during a

dealing day, be willing to issue units on behalf of the scheme to any person in accordance with any conditions stated in the constitutional document and the latest filed prospectus, unless the operator has reasonable grounds to refuse the issue.Note Dealing day, issue and latest filed prospectus are defined in the

glossary. Constitutional document is defined in r 3.1.1.


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Rule 12.1.2

(2) Conditions mentioned in subrule (1) must be fair and reasonable as between all unitholders and potential unitholders.

(3) The operator of a QFC retail scheme must, at all times during a dealing day, be willing to redeem on behalf of the scheme units of a unitholder, unless the operator has reasonable grounds to refuse the redemption.Note Redemption is defined in the glossary.

(4) Subject to rule 8.1.21 (Deferred redemption—QFC retail schemes), the operator of a QFC retail scheme must issue or redeem units at a price calculated at the next valuation point for dealing purposes after the operator receives instructions to issue or redeem the units.

8.1.18 When instructions for issue or redemption must be given—QFC retail schemes

(1) The latest filed prospectus of a QFC retail scheme must fix a time before a valuation point (the cut-off point) after which the operator must not accept instructions to issue or redeem units on behalf of the scheme at the valuation point.

(2) The cut-off point must not be earlier than the close of business on the business day before the valuation point to which it relates.


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Rule 12.1.1

(3) However, if there are 2 or more valuation points on a day, the cut-off point for a valuation point must not be earlier than the valuation point immediately before it.ExamplesIf there are 3 valuations points at 10 am, 12 noon and 2 pm on a business day (the relevant day), the cut-off points for the valuations points must comply with the following:

(a) the cut-off point for the 10 am valuation point cannot be earlier than the close of business on the business day before the relevant day;

(b) the cut-off point for the 12 noon valuation point cannot be earlier than 10 am on the relevant day;

(c) the cut-off point for the 2 pm valuation point cannot be earlier than 12 noon on the relevant day.

Note Rule 8.1.21 (Deferred redemption—QFC retail schemes) allows, in certain circumstances, redemptions at a valuation point to be deferred to the next valuation point.

(4) Different cut-off points may be used to differentiate between the methods of submitting instructions to redeem to the operator but not to differentiate between unitholders or potential unitholders.


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Rule 12.1.2

8.1.19 Payment for redeemed units—QFC retail schemes(1) If the operator of a QFC retail scheme redeems units on behalf of

the scheme, the operator must, before the close of business on the 4th

business day after the day the units are redeemed (or, if later, as soon as practicable after delivery to the independent entity of the evidence of title to the units that the independent entity may reasonably require), request the independent entity to pay the former unitholder the price of the units less any deduction required under rule 8.2.16 (Dilution—QFC retail schemes).Note Redemption, business day and price are defined in the glossary.

(2) The independent entity must make the payment to the unitholder before the close of business on the 6th business day after the day the independent entity receives the request under subrule (1).

(3) If the scheme property does not, and will not within the period required by subrule (2), include sufficient cash to make the payment in the appropriate currency within that period and the scheme cannot borrow the amount needed to make the payment without breaching rule 7.7.3 (Borrowing limits—QFC retail schemes)), the period is extended, for the relevant currency, until the shortage is rectified.Note Borrowing is defined in the glossary.


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Rule 12.1.1

(4) If subrule (3) applies, the operator must take reasonable steps to rectify the currency shortage as quickly as possible.

(5) This rule does not apply if the rule 8.1.20 (Issue or redemption otherwise than for cash—QFC retail schemes) applies.

(6) This rule does not require the independent entity or operator to pay an amount or transfer scheme property for a redemption of units if an amount is owing on the earlier issue of the units.Note Redemption and issue are defined in the glossary.

8.1.20 Issue or redemption otherwise than for cash—QFC retail schemesThe independent entity of a QFC retail scheme may take into or transfer out of the scheme property assets other than cash as payment for the issue or redemption of units, but only if—

(a) it has taken reasonable care to ensure that the assets would not be likely to result in any material prejudice to the interests of unitholders; and


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Rule 12.1.2

(b) the constitutional document and the latest filed prospectus permit it.

Note Issue and redemption are defined in the glossary. Constitutional document is defined in r 3.1.1.

8.1.21 Deferred redemption—QFC retail schemes(1) If a QFC retail schemes has at least 1 valuation point on each

business day, the constitutional document and latest filed prospectus may permit deferral of redemptions at a valuation point to the next valuation point if the requested redemptions exceed—

(a) 10% of the scheme’s value; or

(b) if the latest filed prospectus provides another reasonable percentage—that percentage of the scheme’s value.

Note Constitutional document is defined in r 3.1.1. Latest filed prospectus, business day, redemption and valuation point are defined in the glossary.

(2) Any deferral of redemptions under subrule (1) must be undertaken in accordance with the procedures explained in the latest filed prospectus.


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Rule 12.1.1

(3) The procedures must ensure—

(a) the consistent treatment of all unitholders who have sought to redeem units at any valuation point at which redemptions are deferred; and

(b) that all deals relating to an earlier valuation point are completed before deals relating to a later valuation point are considered.

Note Deal is defined in the glossary.


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Rule 12.1.2

Part 8.2 Valuation and pricing—QFC schemes

Division 8.2.A Valuation and pricing—QFC qualified investor schemes

8.2.1 Application of div 8.2.A to umbrella schemes—QFC qualified investor schemes

(1) This division applies in relation to each subscheme of a QFC qualified investor scheme that is an umbrella scheme as if it were a separate QFC qualified investor scheme.Note Umbrella scheme and subscheme are defined in r 1.2.11.


8.2.2 Valuation—QFC qualified investor schemes(1) For these rules, the value of the scheme property of a QFC qualified

investor scheme is its net asset value.Note Net asset value is defined in the glossary.


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Rule 12.1.1

(2) To calculate the price of units in the scheme, the operator must conduct a fair and accurate valuation of all scheme property, on a forward price basis, in accordance with—


(b) the constitutional document and latest filed prospectus.Note Constitutional document is defined in r 3.1.1. Forward price and latest

filed prospectus are defined in the glossary.

(3) The valuation of investments held as part of the scheme property must reflect their mid-market value.

(4) If single prices are quoted for both buying and selling investments, the latest filed prospectus must explain how the investments must be valued.

(5) If the scheme invests in approved money-market instruments, the operator must value an approved money-market instrument on an amortised cost basis if the instrument has a residual maturity of less than 3 months and has no specific sensitivity to market parameters, including credit risk.Note Approved money-market instrument is defined in r 7.1.5.


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Rule 12.1.2

(6) Any part of the scheme property that is not an investment must be valued by the operator at a fair value.Note Investment is defined in the glossary.

(7) However, an interest in an immovable must be valued by the scheme’s standing independent valuer under division 6.2.C.

(8) Any fiscal charges, commissions, professional fees or other charges that were paid, or would be payable, on acquiring or disposing of an investment or other part of the scheme property must be excluded from the value of the investment or other part of the scheme property.

8.2.3 Valuation points—QFC qualified investor schemes(1) A QFC qualified investor scheme must have a valuation point on

each dealing day, other than a dealing day during the initial offer period.Note Valuation point, dealing day and initial offer are defined in the

glossary.

(2) The operator must prepare a valuation of the scheme property in accordance with rule 8.2.2 at each valuation point.


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Rule 12.1.1

8.2.4 Prices of units—QFC qualified investor schemes(1) The price of the unit at a valuation point must be calculated by the

operator—

(a) on the basis of the valuation under rule 8.2.3 (2) at the valuation point; and

(b) in a way that is fair and reasonable as between unitholders; and

(c) in a way that is otherwise in accordance with the constitutional document and latest filed prospectus.Note Constitutional document is defined in r 3.1.1.

Valuation point and latest filed prospectus are defined in the glossary.

(2) The operator must publish in an appropriate way the price of each class of unit in the scheme, based on each valuation under rule 8.2.3 (2).Note Price and class are defined in the glossary.


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Rule 12.1.2

Division 8.2.B Valuation and pricing—QFC retail schemes

Note for div 8.2.BThe operator of a QFC retail scheme is responsible for valuing the scheme property and for calculating the price of units. This division protects unitholders and potential unitholders by—

(a) setting out rules to ensure that the price of units is calculated fairly and regularly; and

(b) allowing the operator to mitigate the effects of any dilution (reduction) in value of the scheme property caused by buying and selling underlying investments as a result of the issue or redemption of units; and

(c) ensuring that prices are made public in an appropriate way.

8.2.5 Application of div 8.2.B to umbrella schemes—QFC retail schemes

(1) This division applies in relation to each subscheme of a QFC retail scheme that is an umbrella scheme as if it were a separate QFC retail scheme.Note Umbrella scheme and subscheme are defined in r 1.2.11.


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Rule 12.1.1


8.2.6 Duty of operator to rectify breaches of div 8.2.B—QFC retail schemes

(1) The operator of a QFC retail scheme must take immediate action to rectify any breach of this division.Note Breach is defined in the glossary.

(2) If the breach relates to the incorrect pricing of units in relation to the issue of units, the rectification must extend to the reimbursement or payment of amounts by the operator to unitholders, former unitholders or the scheme.Note Issue and money are defined in the glossary.

(3) However, if the independent entity considers that the breach is of minimal significance or that making the reimbursement or payment would be inappropriate, the independent entity may direct that rectification need not extend to reimbursement or payment.


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Rule 12.1.2

(4) The independent entity may consider the breach to be of minimal significance if—

(a) the independent entity has reviewed the operator’s controls (and supporting systems) in accordance with rule 8.2.12 (Review by independent entity of operator’s pricing controls etc—QFC retail schemes); and

(b) the independent entity is satisfied, based on the review, that the operator’s pricing controls comply with rule 8.2.11 (Pricing controls of operator—QFC retail schemes); and

(c) the error in pricing of a unit is less than 0.5% of the correct price.

(5) If the breach was caused by 1 or more factors or existed over a period, then, in deciding whether the breach is of minimal significance, the independent entity must consider each incorrect price separately.

(6) To remove any doubt, even though the independent entity considers the breach to be of minimal significance, the independent entity may require reimbursement or payment of amounts by the operator to unitholders, former unitholders or the scheme.


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Rule 12.1.1

(7) In deciding under subrule (3) whether reimbursement or payment is inappropriate, the independent entity must take into account the need not to prejudice the rights of unitholders or unitholders of a class of units.

(8) If the independent entity decides that making the reimbursement or payment would be inappropriate, the independent entity must tell the Regulatory Authority about the breach and its decision immediately, but within 1 business day.ExamplesSee examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

Note See also r 4.2.4 (Duty of independent entity to report certain breaches of law etc—all QFC schemes).

(9) The independent entity must give the Regulatory Authority any information about the breach and its decision that the authority reasonably requires.

(10) The independent entity must satisfy itself that any reimbursement or payment required under this rule is accurately and promptly calculated and paid.


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Rule 12.1.2

(11) This rule does not require reimbursement to unitholders or former unitholders of amounts that the operator and independent entity reasonably consider to be immaterial.

8.2.7 Valuation requirement——QFC retail schemesTo calculate the price of units in a QFC retail scheme, the operator must conduct a fair and accurate valuation of all scheme property, on a forward price basis, in accordance with—


(b) the constitutional document and latest filed prospectus.Note Constitutional document is defined in r 3.1.1. Forward price and latest

filed prospectus are defined in the glossary.

8.2.8 General rules for valuation of scheme property—QFC retail schemes

(1) The operator of a QFC retail scheme must value the scheme’s investments using a reputable source.

(2) The operator must keep the reliability of the source of prices under regular review.


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Rule 12.1.1

(3) For some or all of the investments held as part of the scheme property, the operator may quote different prices according to whether they are being bought (offer prices) or sold (bid prices).

(4) The valuation of investments held as part of the scheme property must reflect their mid-market value.

(5) If single prices are quoted for both buying and selling investments, the latest filed prospectus must explain how the investments must be valued.Note Latest filed prospectus is defined in the glossary.

(6) If the scheme invests in approved money-market instruments, the operator must value an approved money-market instrument on an amortised cost basis if the instrument has a residual maturity of less than 3 months and has no specific sensitivity to market parameters, including credit risk.Note Approved money-market instrument is defined in r 7.1.5.

(7) Any part of the scheme property that is not an investment must be valued at fair value.

(8) Any fiscal charges, commissions, professional fees or other charges that were paid, or would be payable, on acquiring or disposing of an investment or other part of the scheme property must be excluded


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Rule 12.1.2

from the value of the investment or other part of the scheme property.

(9) The operator must—

(a) document the basis of valuation of the scheme property (including any fair value pricing policy for rule 8.2.9) and, if appropriate, the basis of any methodology; and

(b) act consistently and fairly in making a valuation.

8.2.9 Fair value pricing for securities—QFC retail schemes(1) If the operator of a QFC retail scheme has reasonable grounds to

believe—

(a) that no reliable price exists for a security at a valuation point; or

(b) that the most recent price available for a security does not reflect the operator’s best estimate of the value of the security at the valuation point;

the operator must value the security at a price that, in its opinion, reflects a fair and reasonable price for the security (the fair value price).Note Security and valuation point are defined in the glossary.


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Rule 12.1.1

(2) Without limiting subrule (1), the operator may use the fair market price for the security if—

(a) there has been no recent trade in the security; or

(b) a significant event has happened since the most recent closure of the market where the price of the security is taken.

(3) For subrule (2) (b), an event is significant if, because of the event, the most recent price of the security (or a basket of securities that includes the security) is materially different from the price that the operator believes on reasonable grounds would have existed at the valuation point had the relevant market been open.

(4) In deciding whether to use a fair value price for the security, the operator must consider the following:

(a) the nature of the QFC retail scheme;

(b) the kind of security;

(c) the basis and reliability of the alternative price used;

(d) the operator’s policy on the valuation of scheme property as disclosed in the latest filed prospectus.


(6) If the unit price is calculated by the operator using—


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Rule 12.1.2

(a) properly applied fair value prices in accordance with this rule; and

(b) a documented fair value pricing policy for the scheme;

any subsequent information that indicates that the price should (or should perhaps) have been different from the price calculated by the operator does not, of itself, establish that the price was incorrectly calculated by the operator.

8.2.10 Valuation points—QFC retail schemes(1) A QFC retail scheme must not have less than 2 regular valuation

points in any month and, if there are only 2 valuation points in any month, the regular valuation points must be at least 2 weeks apart.Note The prospectus of a QFC retail scheme must contain information about

its regular valuation points for the purpose of dealing in units in accordance with rule S4.15 (Valuation and pricing).

(2) No valuation points are required during the initial offer period.Note Initial offer is defined in the glossary.

8.2.11 Pricing controls of operator—QFC retail schemes(1) The operator of a QFC retail scheme must be able to demonstrate

that it has effective controls over its calculations of unit prices.


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Rule 12.1.1

(2) Without limiting subrule (1), the controls must be appropriate to ensure that—

(a) prices of units are calculated in accordance with this division; and

(b) the likelihood of incorrect prices is minimised.

(3) In particular, the controls must ensure all the following:

(a) asset prices are accurate and up-to-date;

(b) investment transactions are accurately and promptly reflected in valuations;

(c) the components of the valuation (including stock, cash, and units in issue) are regularly reconciled to their source or prime records and any reconciling items resolved promptly and debtors reviewed for recoverability;

(d) sources of prices not obtained from the main pricing source are recorded and regularly reviewed;

(e) compliance with investment and borrowing powers is regularly reviewed;

(f) dividends are accounted for as soon as securities are quoted ex-dividend (unless it is prudent to account for them on receipt);


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Rule 12.1.2

(g) fixed interest dividends, interest and expenses are accrued at each valuation point;

(h) tax positions are regularly reviewed and adjusted, if necessary;

(i) reasonable tolerances are set for movements in the key elements of a valuation, and movements outside the tolerances are investigated;

(j) the operator regularly reviews the portfolio valuation for accuracy;

(k) valuation of OTC derivatives is accurate, up-to-date and complies with methods agreed with the independent entity.

Note OTC derivative is defined in the glossary.

(4) In exercising its pricing controls, the operator may exercise reasonable discretion in deciding the appropriate frequency of the operation of the controls and may choose a longer interval, if appropriate, given the level of activity in the scheme or the materiality of any effect on the price.

(5) The operator must keep records to demonstrate the exercise of effective pricing controls.


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Rule 12.1.1

8.2.12 Review by independent entity of operator’s pricing controls etc—QFC retail schemes

(1) This rule sets out the reviews that the independent entity of a QFC retail scheme must conduct to be satisfied that the operator has controls that are appropriate to ensure that—

(a) prices of units are calculated in accordance with this division; and

(b) the likelihood of incorrect prices is minimised.

(2) A review must extend to pricing functions that the operator has outsourced to a third party.

(3) In conducting a review, the independent entity must—

(a) thoroughly examine the operator’s controls (and supporting systems) to confirm that they are appropriate; and

(b) analyse the controls (and supporting systems) to decide the extent to which reliance can be placed on them.

(4) A review must be conducted when the independent entity is appointed and afterwards as it considers appropriate given its knowledge of the robustness and stability of the operator’s controls (and supporting systems).


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Rule 12.1.2

(5) A review must be conducted more frequently if the independent entity knows or suspects that the operator’s controls (or any supporting systems) are weak or otherwise unsatisfactory.

(6) In addition, the independent entity must from time to time review other aspects of the valuation of the scheme property, verifying on a sample basis, if necessary—

(a) the assets, liabilities, accruals, units in issue and securities prices (and in particular the prices of securities that are not approved securities and the basis for the valuation of unquoted securities); andNote Approved security is defined in r 7.1.9.

(b) any other relevant matter (for example, an accumulation factor or a currency conversion factor).

(7) The independent entity must ensure that any issue identified in a review is properly followed up and resolved.

8.2.13 Recording and reporting incorrect pricing—QFC retail schemes

(1) The operator must make and keep a record of each instance where the price of a unit is incorrect.


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Rule 12.1.1

(2) The record must be made as soon as the error is discovered.

(3) The operator must—

(a) report each instance to the independent entity as soon a practicable; and

(b) give the independent entity details of the action taken, or to be taken, to avoid repetition of the error.

Note Rule 4.2.4 deals with the duty of the independent entity to report certain breaches of the law.

8.2.14 Prices of units—QFC retail schemes(1) The operator of a QFC retail scheme must ensure that the price of a

unit in any class is calculated—

(a) by reference to the scheme’s net asset value at the relevant time; and

(b) in accordance with these rules, the constitutional document and the latest filed prospectus.

Note Class, net asset value and latest filed prospectus are defined in the glossary. Constitutional document is defined in r 3.1.1.


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Rule 12.1.2

(2) To remove any doubt and without limiting subrule (1), the constitutional document or the latest filed prospectus (or both) may make provision for large deals to be conducted at a higher issue price or lower redemption price than those published for the scheme, if the prices do not exceed the relevant maximum and minimum limits applying under this division.Note Large deal and redemption are defined in the glossary.

(3) Any unit price calculated in accordance with subrule (1) must be expressed in a form that is accurate to at least 4 significant figures.

(4) For each class of units, a single price must be calculated at which units are to be issued and redeemed.

8.2.15 Issue and redemption prices—QFC retail schemesThe operator of a QFC retail scheme must not—

(a) issue a unit for more than the price of a unit in the relevant class at the relevant valuation point, plus—

(i) any issue charge permitted under rule 8.6.4 (Charges on buying and selling units—QFC retail schemes); and

(ii) any payments required under rule 8.2.16 (Dilution—QFC retail schemes); or


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Rule 12.1.1

(b) redeem a unit for less than the price of a unit in the relevant class at the relevant valuation point, less—

(i) any redemption charge permitted under rule 8.6.4; and

(ii) any deductions required under rule 8.2.16.Note Class, valuation point, issue charge and redemption charge are


8.2.16 Dilution—QFC retail schemes(1) In issuing or redeeming units in a QFC retail scheme, the operator

must include in the unit price the dilution adjustment the operator considers necessary to reduce the effect of dilution.Note 1 Issue, redemption, dilution adjustment and dilution are defined in the

glossary.

Note 2 See the independent entity’s duties under r 8.2.17 (Particular duties of independent entity in relation to dilution—QFC retail schemes).

(2) In issuing or redeeming units in a QFC retail scheme, the operator may, in exceptional circumstances, require the payment or deduction of a dilution levy for the purpose of reducing the effect of dilution if the independent entity has agreed that the levy should be required.Note Dilution levy is defined in the glossary.


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Rule 12.1.2

(3) In applying a dilution adjustment or dilution levy, the operator must act in a fair way to reduce dilution and solely for that purpose.Note Dilution is defined in the glossary.

(4) A dilution adjustment is made—

(a) as part of the calculation of the unit price for the purpose of reducing dilution in the scheme; or

(b) to recover any amount the scheme has paid, or the operator reasonably expects it to pay, in relation to the issue or redemption of units.

(5) A dilution levy is payable at the same time as payment or transfer of property is required for the issue or redemption.

(6) As soon as practicable after a valuation point, the operator must tell the independent entity the rate or amount of any dilution adjustment or dilution levy.Note Valuation point is defined in the glossary.


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Rule 12.1.1

8.2.17 Particular duties of independent entity in relation to dilution—QFC retail schemes

(1) The independent entity must take reasonable care to ensure that—

(a) the operator considers whether or not to exercise the power under rule 8.2.16 (Dilution—QFC retail schemes) to require a dilution levy and, if applicable, the rate or amount of any dilution levy that is required; orNote Dilution levy is defined in the glossary.

(b) the operator has, in considering the matters mentioned in paragraph (a), taken into account all factors that are material and relevant to the operator’s decision; and

(c) the operator has, in considering whether to exercise the power under rule 8.2.16 to require a dilution levy, acted in accordance with the restrictions of that rule.

Note See r 4.2.3 (2) for other duties of the independent entity in relation to pricing.

(2) To remove any doubt, the independent entity has no duty in relation to the operator’s exercise of any discretion mentioned in subrule (1).


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Rule 12.1.2

8.2.18 Publication of prices—QFC retail schemes(1) The operator of a QFC retail scheme must make dealing prices

public in an appropriate way.Note Deal is defined in the glossary.

(2) In deciding the appropriate way of making prices public, the operator must ensure all the following requirements are met:

(a) that a unitholder or potential unitholder can obtain the prices at a reasonable cost;

(b) that prices are available at reasonable times;

(c) that publication is consistent with the way and frequency at which the units are dealt in;

(d) that the way prices are made public is disclosed in the latest filed prospectus;Note Latest filed prospectus is defined in the glossary.

(e) that prices are published in a consistent way.

(3) Without limiting subrule (1), publication in the following ways may be appropriate:

(a) publication in a national newspaper;


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Rule 12.1.1

(b) supply through an advertised local rate or freephone telephone number;

(c) publication on the internet;

(d) inclusion in a database of prices that is publicly available;

(e) communication to all existing unitholders.

(4) The operator must make previous prices available to any unitholder or potential unitholder on request.

Division 8.2.C Valuation—money-market funds

8.2.19 Maintaining value—all money-market funds(1) This rule applies to a QFC qualified investor scheme or QFC retail

scheme that is a money-market fund.Note Money-market fund is defined in r 1.3.12.

(2) The operator must conduct a valuation of the scheme property on a mark to market basis at least once every week and at the same valuation point used to value the scheme property on an amortised cost basis.Note Valuation point is defined in the glossary.


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Rule 12.1.2

(3) The operator must ensure that the value of the scheme property when valued on a mark to market basis does not differ by more than 0.5% from the value of the scheme property when valued on an amortised cost basis.

(4) The operator must tell the independent entity in writing whenever a valuation discloses that the mark to market value of the money-market fund differs from its amortised cost basis value by more than 0.1%.

(5) The operator must agree with the independent entity procedures designed to stabilise the money-market fund if the mark to market value of the scheme differs from its amortised cost basis value by 0.1%, 0.2% or 0.3%.


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Rule 12.1.1

Part 8.3 Title and register—QFC schemes

8.3.1 Unitholder register requirements—all QFC schemes(1) The operator of a QFC scheme must ensure that the unitholder

register includes—

(a) the name and address of each person (a relevant person) who is or has been a unitholder (for joint unitholders, no more than 4 persons need to be included); and

(b) the number or percentage of units (including fractions of a unit) in each class held by each relevant person; and

(c) the date each relevant person was registered for the units in the person’s name and, if relevant, ceased to be registered for the units in the person’s name; and

(d) the number or percentage of units in each class currently in issue.

Note 1 Unitholder register is defined in the glossary. Unitholder and unit are defined in r 1.2.5 and r 1.2.4 respectively.

Note 2 For the operator’s obligation to keep the register, see r 4.1.6.


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Rule 12.1.2

(2) The operator must not enter notice of any trust (whether express, implied or constructive) on the register.

(3) The operator and independent entity are not bound by notice of any trust.

(4) The operator and independent entity must rely on the register as conclusive evidence of the persons entitled to the units entered on it.

(5) The operator must take all reasonable steps to ensure that the information on the register is at all times complete and up to date.

(6) Without limiting subrule (5), the operator must do the following in relation to the register:

(a) take reasonable steps to update the register on receiving written notice of a change of name or address of a unitholder;

(b) ensure that the register, or a copy of the register, is available for inspection in the QFC during ordinary business hours by or on behalf of any unitholder, the Regulatory Authority, the independent entity or the auditor of the scheme;

(c) on request by or on behalf of any unitholder, give the unitholder a copy of the register entries relating to the unitholder free of charge;


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Rule 12.1.1

(d) after consultation with the independent entity, carry out the conversion of units allowed under rule 8.3.4 (Conversion of units—all QFC schemes).

(7) However, subrule (5) (b) does not prevent the operator from closing the register for periods of not longer than 30 business days in any year.Note Business day and year are defined in the glossary.

(8) If the operator receives written notice of a change of name of a unitholder and a certificate has been issued for the unitholder’s units, the operator must also either endorse the existing certificate or issue an updated one.

8.3.2 Transfer of units by act of parties—all QFC schemes(1) Every unitholder of a QFC scheme is entitled to transfer units

entered in the unitholder register in the unitholder’s name by an instrument of transfer in any form that the operator approves, but the operator is under no duty to accept the transfer unless it is permitted by the constitutional document and the latest filed prospectus.Note Constitutional document is defined in r 3.1.1. Latest filed prospectus is



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Rule 12.1.2

(2) However, the operator of a QFC qualified investor scheme must not accept the transfer of units entered in the unitholder register unless the transferee is a qualified investor for the scheme.Note Qualified investor, for a QFC scheme, is defined in r 1.2.12 (2).

(3) Every instrument of transfer of units in a QFC scheme must be signed by, or on behalf of, the unitholder transferring the units (or, if the unitholder is a corporation, may be signed by 2 members of its governing body on behalf of the corporation).Note Corporation and governing body are defined in the glossary.

(4) The transferor must be treated as the unitholder until the transferee’s name is entered in the unitholder register.

(5) Every instrument of transfer must be left for registration with the operator accompanied by—

(a) any document required by the law applying in the QFC; and

(b) any other evidence reasonably required by the operator.

(6) The operator must keep an instrument of transfer for at least 6 years after the day it is registered.


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Rule 12.1.1

(7) On registration of an instrument of transfer, a record of the transferor, the transferee and the date of transfer must be made in the unitholder register.

8.3.3 Certificates for units—all QFC schemes(1) If units in a QFC scheme are issued or rule 8.3.2 (Transfer of units

by act of parties—all QFC schemes) is complied with in relation to the transfer of units in a QFC scheme, the operator may issue a document evidencing title to the units in accordance with the constitutional document.Note Document evidencing title is defined in the glossary. Constitutional

document is defined in r 3.1.1.

(2) However, the operator must issue a document evidencing title as soon as practicable if the procedures for redeeming units require unitholders to surrender the document evidencing title.

8.3.4 Conversion of units—all QFC schemes(1) This rule applies to a QFC scheme if there are 2 or more classes of

units offered for issue.Note Class and issue are defined in the glossary.


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Rule 12.1.2

(2) A unitholder has the right to convert the units from a class to another class if converting the units does not breach the latest filed prospectus.Note Latest filed prospectus and breach are defined in the glossary.


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Rule 12.1.1

Part 8.4 Operator and independent entity appointment and removal—QFC schemes

8.4.1 Initial appointment of operator and independent entity—all QFC schemesOn the registration of a scheme under these rules—

(a) the person named in the application for registration as the person who is to become the operator becomes the initial operator of the scheme; and

(b) the person appointed by the operator, and named in the application for registration, as the person who is to become the independent entity becomes the initial independent entity of the scheme.


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Rule 12.1.2

8.4.2 Removal of operator—QFC schemes(1) The independent entity of a QFC scheme may, by written notice

given to the operator, remove the operator if any of the following events happens:

(a) a meeting is called to consider a resolution for winding up the operator;

(b) an application is made to dissolve the operator or strike it off the register of companies;

(c) a petition is presented for winding up the operator;

(d) a composition is made or proposed by the operator with any of the operator’s creditors;

(e) an administrator is appointed for the operator;

(f) anything equivalent to an event mentioned in paragraphs (a) to (e) happens in relation to the operator outside the QFC;

(g) the independent entity forms the reasonable opinion, and states in writing, that a change of operator is desirable in the interest of the unitholders;


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Rule 12.1.1

(h) a special resolution of the unitholders is passed to remove the operator;Note Special resolution is defined in the glossary.

(i) the unitholders of 75% in value of the units in issue make a written request to the independent entity for the operator’s removal.

(2) The independent entity must, by written notice given to the operator, remove the operator if the operator is no longer eligible to be the operator of the scheme under rule 4.1.1 (Requirements for operator—all QFC schemes) because of action taken by the Regulatory Authority under the Financial Services Regulations, whether or not under article 31 (Own initiative action by the Regulatory Authority).

(3) If the independent entity gives the operator a notice under subrule (1) or (2), the independent entity must give the Regulatory Authority a copy of the notice immediately, but within 1 business day after the day the notice is given to the operator.ExamplesSee examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.


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Rule 12.1.2

(4) On receipt of a notice by the independent entity under subrule (1) or (2)—

(a) the operator ceases to be the operator of the scheme; and

(b) is released from all further obligations under these rules and the constitutional document.Note Constitutional document is defined in r 3.1.1.

(5) Subrule (4) (b) does not affect the rights of the independent entity or any other person in relation to an act or omission by the operator before its removal.

(6) The independent entity must appoint another person as the operator of the scheme.

(7) The person appointed must be eligible to be the operator of the scheme under rule 4.1.1.

(8) If the name of the scheme contains a reference to the name of the former operator, the former operator is entitled to require the new operator and the independent entity to propose a change to the name of the scheme.


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Rule 12.1.1

8.4.3 Retirement of operator—all QFC schemes(1) The operator of a QFC scheme is entitled to retire as operator in

favour of another person if—

(a) the operator appoints the other person as operator and assigns all its rights and functions as operator to the person; and

(b) the person is eligible to be the operator of the scheme under rule 4.1.1 (Requirements for operator—all QFC schemes); and

(c) the independent entity approves the appointment of the person as operator.

(2) On the appointment of the person taking effect, the former operator—

(a) is released from all further obligations under these rules and the constitutional document; andNote Constitutional document is defined in r 3.1.1.

(b) may keep any consideration paid to it in relation to the change without having to account for it to any unitholder.

(3) Subrule (2) (a) does not affect the rights of the independent entity or any other person in relation to an act or omission by the former operator before its retirement.


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Rule 12.1.2

(4) On the retirement of the operator, the replacement operator must immediately, but within 1 business day after the day the replacement operator’s appointment takes effect, tell the Regulatory Authority about the retirement and the appointment.ExamplesSee examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

8.4.4 Consequences of removal or retirement of operator—all QFC schemes

(1) If the operator of a QFC scheme is removed or retires, it is entitled to continue to be recorded in the unitholder register for the units it holds.

(2) This rule is subject to any restriction in the latest filed prospectus relating to the permitted categories of unitholders.Note Latest filed prospectus is defined in the glossary.

8.4.5 Removal of independent entity by unitholders—all QFC schemes

(1) The independent entity of a QFC scheme may be removed by a special resolution of the unitholders.Note Special resolution is defined in the glossary.


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Rule 12.1.1

(2) On the removal of the independent entity, the operator must—

(a) tell the Regulatory Authority about the removal immediately, but within 1 business day after the day the independent entity is removed; and

(b) appoint another person as the independent entity.Examples for r (2) (a) and r (4)See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

(3) The person appointed must be eligible to be the independent entity of the scheme under rule 4.2.1 (Requirements for independent entity—all QFC schemes).

(4) On the appointment of the person as the independent entity, the operator must tell the Regulatory Authority about the appointment immediately, but within 1 business day after the day the appointment is made.

8.4.6 Removal of independent entity no longer eligible for appointment—all QFC schemes

(1) This rule applies if the independent entity of a QFC scheme that is an authorised firm is no longer eligible to be the independent entity of the scheme under rule 4.2.1 (Requirements for independent entity


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Rule 12.1.2

—all QFC schemes) because of action taken by the Regulatory Authority under the Financial Services Regulations, whether or not under article 31 (Own initiative action by the Regulatory Authority).

(2) The operator must, by written notice given to the independent entity, remove the independent entity.Note If the independent entity is not an authorised firm, the independent

entity may also be removed under the following rules:

r 4.2.12 (Non-QFC independent entities—removal by operators)

r 4.2.13 (Non-QFC independent entities—removal by Regulatory Authority).

(3) On the removal of the independent entity, the operator must—

(a) tell the Regulatory Authority about the removal immediately, but within 1 business day after the day the independent entity is removed; and

(b) appoint another person as the independent entity.Examples for r (3) (a) and r (5)See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

(4) The person appointed must be eligible to be the independent entity of the scheme under rule 4.2.1.


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Rule 12.1.1

(5) On the appointment of the person as the independent entity, the operator must tell the Regulatory Authority about the appointment immediately, but within 1 business day after the day the appointment is made.

8.4.7 Retirement of independent entity—all QFC schemes(1) The independent entity of a QFC scheme may retire voluntarily only

if—

(a) the operator has appointed another person (the replacement) as the independent entity; and

(b) the independent entity has told the Regulatory Authority and the replacement—

(i) about any matter relating to its retirement that it considers should be drawn to their attention; and

(ii) if there is no such matter—that there is no matter relating to its retirement that it considers should be drawn to their attention.

(2) The replacement must be eligible to be the independent entity of the scheme under rule 4.2.1 (Requirements for independent entity—all QFC schemes).


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Rule 12.1.2

(3) The voluntary retirement of the independent entity takes effect only when the appointment of another person as independent entity takes effect.

(4) On the retirement of the independent entity, the operator must immediately, but within 1 business day after the day the retirement takes effect, tell the Regulatory Authority about the retirement and the appointment of the other person as the independent entity.ExamplesSee examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

8.4.8 Consequences of removal or retirement of independent entity—all QFC schemes

(1) If the independent entity of a QFC scheme is removed or retires, the independent entity must, without delay, transfer or deliver the scheme property held by it to the replacement independent entity unless the QFC Court otherwise orders.

(2) Until all the scheme property has been transferred or delivered, the independent entity remains accountable for it to the unitholders.


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Rule 12.1.1

Part 8.5 Outsourcing—QFC schemes

8.5.1 What is outsourcing?(1) For these rules, outsourcing, for a QFC scheme, is any form of

arrangement that involves the operator or independent entity of the scheme relying on a third party service provider (including a member of its group) for the exercise of a function in relation to the scheme under these rules, any other Rules, the constitutional document or the latest filed prospectus.Note Group, exercise, function and latest filed prospectus are defined in the

glossary. Rules is defined in INAP. Constitutional document is defined in r 3.1.1.

(2) However, outsourcing does not include the following arrangements:

(a) discrete advisory services (including, for example, the provision of legal advice), audit services, procurement of specialised training, billing, and physical security;

(b) supply arrangements and functions (including, for example, the supply of electricity or water and the provision of catering and cleaning services);


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Rule 12.1.2

(c) purchase of standardised services (including, for example, market information services and the provision of prices);

(d) the appointment of a group employee to exercise a controlled function for an authorised firm.

Note Employee, controlled function and authorised firm are defined in the glossary.

8.5.2 Outsourcing by operator—all QFC schemes(1) The operator of a QFC scheme may outsource its functions in

relation to the scheme in accordance with this part, and not otherwise.Note The outsourcing provisions of CTRL do not apply in relation to an

outsourcing of functions under this part (see CTRL, r 5.1.1).

(2) However, the operator must not outsource to the independent entity, or to a related person for the independent entity, any of the functions of the operator under a provision of these rules, the constitutional document, or the latest filed prospectus, if rule 4.2.3 (1) (Oversight functions of independent entity—all QFC schemes) applies to the provision.Note Related person is defined in the glossary.


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Rule 12.1.1

(3) Subrule (2) does not apply to the outsourcing to the independent entity of the function of providing scheme administration.Note Providing scheme administration is defined in the glossary.

(4) Also, the operator must not outsource functions if the outsourcing may adversely impact on the Regulatory Authority’s ability to supervise the operator’s activities.

8.5.3 Outsourcing by independent entity—all QFC schemes(1) The independent entity of a QFC scheme may outsource its

functions in relation to the scheme in accordance with this part, and not otherwise.Note The outsourcing provisions of CTRL do not apply in relation to an

outsourcing of functions under this part (see CTRL, r 5.1.1).


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Rule 12.1.2

(2) However, the independent entity must not—

(a) outsource to the operator (or, if the QFC scheme is a CIC or CIP, to a member (however described) of the governing body of the CIC or CIP) any of the functions of the independent entity under rule 4.2.3 (Oversight functions of independent entity—all QFC schemes) or rule 4.2.6 (Property safeguarding functions of independent entity— all QFC schemes); orNote CIC and CIP are defined in r 1.3.7 and r 1.3.8

respectively. Governing body is defined in the glossary.

(b) outsource to a related person for the operator (or, if the QFC scheme is a CIC or CIP, to a related person for a member (however described) of the governing body of the CIC or CIP) any of the functions of the independent entity mentioned in paragraph (a); orNote Related person is defined in the glossary.


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Rule 12.1.1

(c) outsource to a person the function of holding documents evidencing title to scheme property unless the person is prohibited under the outsourcing agreement from giving them to a third party without the independent entity’s agreement.Note Document evidencing title is defined in the

glossary.(3) Also, the independent entity must not outsource functions if the

outsourcing may adversely impact on the Regulatory Authority’s ability to supervise the independent entity’s activities in relation to the scheme.

8.5.4 Outsourcing notice and information—all QFC schemes(1) The operator or independent entity of a QFC scheme must give the

Regulatory Authority reasonable notice of its intention to outsource a function under this part.

(2) The notice must be given at least 10 business days before the day the operator or independent entity outsources the function.Note Business day is defined in the glossary.

(3) The operator or independent entity must give the Regulatory Authority any information about the proposed outsourcing that the authority reasonably needs.


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Rule 12.1.2

8.5.5 Provisions applying to outsourcing by operator and independent entity—all QFC schemes

(1) This rule applies in relation to an outsourcing of functions made by the operator or independent entity (the regulated entity) of a QFC scheme under this part to another person (the service provider).

(2) The outsourcing must be in writing and in the form of, or part of, an agreement between the regulated entity and the service provider (the outsourcing agreement).

(3) The outsourcing agreement must—

(a) describe in adequate detail the functions (the outsourced functions) to be exercised by the service provider under the outsourcing; and

(b) describe in adequate detail the service standards to be applied by the service provider in exercising the outsourced functions; and

(c) state that it is an outsourcing agreement under these rules; and

(d) ensure that the operator and independent entity can, at all times, effectively monitor the exercise of the outsourced functions by the service provider; and


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Rule 12.1.1

(e) authorise the regulated entity—

(i) to give further instructions to the service provider about the exercise of the outsourced functions; and

(ii) to withdraw the outsourcing at any time, including with immediate effect, if this is in the interests of the unitholders; and

(f) not prevent the operator or independent entity from acting in the best interests of the unitholders in relation to the outsourced functions; and

(g) not prevent the scheme from being managed in the best interests of the unitholders; and

(h) ensure that the scheme’s auditor can effectively exercise its functions in relation to the scheme; and

(i) require the service provider to comply with these rules, and any other law applying in the QFC, in relation to the outsourced functions; and

(j) apply the law of the QFC to the agreement; and


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Rule 12.1.2

(k) ensure that the regulated entity and its internal and external auditors have access to books, records and data relating to the exercise of functions under the outsourcing; and

(l) ensure that the outsourcing provides appropriate protection for confidential information and personal data; andNote Personal data is defined in the glossary.

(m) provide appropriate contingency arrangements; andNote See r 8.5.5 (2) and (3) (Outsourcing management).

(n) require the service provider to deal with the Regulatory Authority in an open and cooperative way in relation to the exercise of the outsourced functions; and

(o) require the service provider to give the Regulatory Authority access to books, records and data relating to the exercise of the outsourced functions; and

(p) require the service provider to give the Regulatory Authority any information it reasonably requires about the outsourced functions; and

(q) require the service provider to keep any records made by the service provider in relation to the outsourced functions for at least 6 years after the day they are made; and


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Rule 12.1.1

(r) prevent the service provider from further outsourcing any of the outsourced functions to another person without the prior approval of—

(i) if the regulated entity is the operator—the operator; or

(ii) if the regulated entity is the independent entity—the independent entity and the operator.

(4) Without limiting subrule (3), the regulated entity must take the steps necessary to mitigate against any operational risks in relation to the outsourcing.

(5) The outsourcing agreement may provide that it has effect only in stated circumstances or subject to stated conditions, limits and directions.

(6) The outsourcing of the outsourced functions to the service provider—

(a) does not relieve the regulated entity from any regulatory obligations in relation to the outsourced functions; and

(b) does not prevent the regulated entity from exercising all or part of the outsourced functions, despite anything in the outsourcing agreement or any other agreement.


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Rule 12.1.2

(7) The regulated entity remains responsible for ensuring—

(a) that all applicable QFC regulatory requirements are complied with in relation to the outsourced functions; and

(b) that the outsourced functions are otherwise properly exercised.

(8) The service provider must exercise the outsourced functions subject to the terms of the outsourcing agreement, including any conditions, limits and directions in the outsourcing agreement.

(9) So far as the outsourcing agreement is expressed to operate as a delegation, these rules, all other laws applying in the QFC, the constitutional document and the latest filed prospectus apply to the service provider in exercising the outsourced functions as if the service provider were the regulated entity.Note Constitutional document is defined in r 3.1.1. Latest filed prospectus is


(10) Without limiting subrule (9), a function may be exercised by the service provider on the service provider’s state of mind if—

(a) the exercise of the function is dependent on the regulated entity’s state of mind; and

(b) the function is included in the outsourced functions; and


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Rule 12.1.1

(c) the outsourcing agreement is expressed to operate as a delegation in relation to the function.

(11) So far as the outsourcing agreement is expressed to operate as a delegation, anything done by or in relation to the service provider in relation to the outsourced functions is taken to have been done by or in relation to the regulated entity.

(12) In this rule:

state of mind includes knowledge, intention, opinion, belief or purpose.

8.5.6 Outsourcing management—all QFC schemes(1) The operator and independent entity of a QFC scheme must exercise

appropriate skill, care and diligence in selecting, entering into and exiting from outsourcings by them under this part.

(2) The operator or independent entity must ensure that—

(a) 1 or more senior managers approve and periodically review its policy and procedures for functions outsourced under this part, including its procedures for the following:

(i) the assessment of feasibility;

(ii) the assessment of risk;


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Rule 12.1.2

(iii) the assessment of impact on its functions;

(iv) the costing of outsourcings;

(v) the criteria for selecting service providers; andNote Senior manager is defined in the glossary.

(b) every service provider has the ability and capacity to exercise reliably and professionally the functions to be outsourced to the service provider, both at the start of the outsourcing and throughout its life cycle, having regard, for example, to—

(i) whether the service provider is regulated, to what extent and by whom; and

(ii) whether the exercise of the outsourced functions is subject to specific regulation or supervision; and

(iii) the risk that outsourced functions are not properly exercised because of the number of other persons using the service provider; and

(iv) the financial stability and expertise of the service provider; and

(v) potential conflicts of interest that may arise in relation to the outsourced functions.


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Rule 12.1.1

(3) The operator or independent entity must ensure that it has a comprehensive contingency arrangement to allow business continuity if there is a significant loss of services from the service provider, including an exit strategy and, if appropriate, partial exit and step-in clauses.

(4) The contingency arrangement must cover, among other things, the following:

(a) a significant loss of resources by the service provider;

(b) financial failure of the service provider;

(c) an unexpected termination of the outsourcing.

8.5.7 Application of pt 8.5 to further outsourcing—all QFC schemes

(1) This part applies to the further outsourcing, whether or not by the third party service provider, of a function outsourced to the third party service provider under this part as if—

(a) the further outsourcing of the function were an outsourcing of the function; and

(b) all necessary changes were made.


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Rule 12.1.2

(2) To remove any doubt, this rule is subject to rule 8.5.5 (3) (r) (Provisions applying to outsourcing by operator and independent entity—all QFC schemes).

8.5.8 Systems and controls for outsourcings—all QFC schemesIf the operator or independent entity of a QFC scheme outsources a function in relation to the scheme under this part, the operator or independent entity must ensure that, as part of its risk management framework, it implements and maintains systems and controls to monitor the exercise of the outsourced function.Note Function and exercise are defined in the glossary.


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Rule 12.1.1

Part 8.6 Payments—QFC schemes

Division 8.6.A Payments—QFC qualified investor schemes

8.6.1 Payments—QFC qualified investor schemes(1) The operator of a QFC qualified investor scheme must ensure that

the scheme does not incur any expense in relation to any movable or immovable property unless—

(a) investing in the property is in accordance with the scheme’s investment objectives, strategies and policy; or

(b) the property is necessary for the direct pursuit of the scheme’s business of investing in any investments to which it is dedicated.

(2) Payments made by the independent entity out of the scheme property may be made from capital property rather than from income if the basis for this is set out in the latest filed prospectus.Note Capital property and latest filed prospectus are defined in the glossary.

(3) Subrule (2) does not apply to payments for redemptions of units.


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Rule 12.1.2

Division 8.6.B Payments—QFC retail schemes

8.6.2 Payments out of scheme property—QFC retail schemes(1) The only payments that may be made from the scheme property of a

QFC retail scheme are payments in relation to—

(a) remunerating the persons operating the scheme; or

(b) the administration of the scheme; or

(c) the investment or safeguarding of the scheme property; or

(d) any taxes payable by the scheme or on scheme property.

(2) A payment under subrule (1) (a) to (c) must not be made from scheme property if it is unfair to (or materially prejudices the interests of) any class of unitholders or potential unitholders.GuidanceThe operator should consider whether any payment to an affected person is unfair because of its amount or because it gives a disproportionate benefit to the affected person.

(3) To remove any doubt, subrule (2) does not invalidate a payment that gives rise to a difference between the rights of separate classes of units if the difference relates solely to the payments that may be taken out of the scheme property.


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Rule 12.1.1

(4) If any annual management charge, or performance fee, (however described) that is payable to the operator in accordance with the latest filed prospectus is not paid when it is payable, the operator must tell the Regulatory Authority about the non-payment immediately, but within 1 business day.ExamplesSee examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

8.6.3 Performance fees—QFC retail schemes(1) The latest filed prospectus of a QFC retail scheme may permit a

payment (a performance fee) for the operator’s periodic charges, or to any investment adviser, to be based on a comparison between fluctuations in the value or price of—

(a) 1 or more aspects of the scheme property; and

(b) property of any description, an index or another factor designed for the purpose.

Note Latest filed prospectus and investment adviser are defined in the glossary.

(2) Any performance fee must be consistent with rule 8.6.2 (Payments out of scheme property—QFC retail schemes).


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Rule 12.1.2

(3) The following provisions apply in deciding whether a performance fee is consistent with rule 8.6.2:

(a) a performance fee must be calculated and paid after all other payments have been considered;

(b) if a performance fee is to be paid on the basis of the performance of the scheme against an index or another factor—the index or other factor must be reasonable given the scheme’s investment objectives, strategies and policy, and must be applied consistently;

(c) a performance fee may be based on performance above a defined positive rate of return (the hurdle rate), which may be fixed or variable;

(d) if paragraph (b) or (c) applies—the index or other factor, or hurdle rate, may be carried forward to future accrual periods;

(e) the period over which the index or other factor, or hurdle rate, accrues and the frequency with which it crystallises must be reasonable;

(f) unless allowed by rule 8.6.2 (1), there must be no arrangements to adjust the price or value of issue or redemption transactions


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Rule 12.1.1

in relation to performance fees accrued or paid if the transactions happen within the accrual period of the charge.

8.6.4 Charges on buying and selling units—QFC retail schemes

(1) Only the operator of a QFC retail scheme may impose charges on unitholders or potential unitholders when they buy or sell units in the scheme.

(2) The operator of a QFC retail scheme must not make any charge or levy in relation to—

(a) the issue of units, except as permitted by subrule (3); or

(b) the redemption of units, except as permitted by subrule (4).Note Issue and redemption are defined in the glossary.

(3) Subrule (2) (a) does not prevent an issue charge made in accordance with the latest filed prospectus if the charge is a fixed amount or calculated as a percentage of the price of a unit.Note Issue charge and latest filed prospectus are defined in the glossary.


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Rule 12.1.2

(4) Subrule (2) (b) does not prevent a redemption charge made in accordance with—

(a) the prospectus that was the latest filed prospectus when the units were purchased by the unitholder; and

(b) rule 8.6.5.Note Redemption charge is defined in the glossary.

(5) This rule is subject to rule 8.2.16 (Dilution—QFC retail schemes).

8.6.5 Redemption charges—QFC retail schemes(1) A redemption charge may be expressed as an amount or percentage.

Note Redemption charge is defined in the glossary.

(2) A redemption charge may also be expressed as diminishing over the time for which the unitholder has held the units or be calculated on the basis of the unit price performance of the units.

(3) However, any redemption charge must not be such that it could be reasonably regarded as restricting any right of redemption.Note For the mandatory content of the prospectus of a QFC retail scheme in

relation to redemption charges, see r S4.19 (Redemption charges).


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Rule 12.1.1

8.6.6 Charges on exchange of units in umbrella schemes—QFC retail schemesFor a QFC retail scheme that is an umbrella scheme, the operator must not make a charge of more than the amount stated in the latest filed prospectus on an exchange of units in a subscheme for units in another subscheme.Note Umbrella scheme and subscheme are defined in r 1.2.11. Latest filed


8.6.7 Allocation of payments to income or capital—QFC retail schemes

(1) The operator of a QFC retail scheme must, in accordance with the latest filed prospectus, decide whether a payment is to be made from the income property or capital property of the scheme.Note Latest filed prospectus, income property and capital property are


(2) In making a decision under subrule (1), the operator must—

(a) have appropriate regard to whether the nature of the cost is income related or capital related and the scheme’s investment objectives, strategies and policy; and


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Rule 12.1.2

(b) agree with the independent entity about how the payment should be treated.

(3) If, for any class of units for any annual accounting period, the amount of the income property is less than the income distributed, the shortfall must, as from the end of that period, be charged to the capital account and must not later be transferred to the income account.GuidanceAny payment as a result of effecting transactions for the scheme should be made from the capital property of the scheme. All other payments should be made from income property in the first instance, but may be transferred to the capital account in accordance with rule 8.6.7 (1).

8.6.8 Prohibition of promotional payments—QFC retail schemes

(1) A payment must not be made from the scheme property of a QFC retail scheme to a person for, or for the promotion of, the issue or redemption of units in the scheme.Examples of prohibited payments1 commission payable to intermediaries

2 payments in relation to the preparation or dissemination of financial communications (unless subrule (2) applies)


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Rule 12.1.1

(2) This rule does not apply to—

(a) a payment to the operator to reimburse the operator for costs of preparing and printing the product disclosure document required under COND for units in the scheme; or

(b) any other payment to the operator if the payment is permitted under these rules.

8.6.9 Expenses in relation to property—QFC retail schemesThe operator of a QFC retail scheme must ensure that the scheme does not incur any expense in relation to any property unless investing in the property is in accordance with the scheme’s investment objectives, strategies and policy.


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Rule 12.1.2

8.6.10 Payment of liabilities on transfer of assets—QFC retail schemes

(1) This rule applies if the scheme property of a QFC retail scheme (the first scheme) is transferred to another QFC retail scheme (or to the independent entity of the other scheme for the other scheme) in consideration of the issue of units in the other scheme to unitholders of the first scheme.Note In the circumstance described in subrule (1), the other scheme (or

independent entity of the other scheme) becomes successor in title to the scheme property transferred.

(2) The other scheme (or independent entity of the other scheme) may pay out of the scheme property of the other scheme any liability arising after the transfer if—

(a) the liability could properly have been paid out of the scheme property transferred had it arisen before the transfer; and

(b) there is nothing in the constitutional document of the other scheme expressly forbidding the payment; andNote Constitutional document is defined in r 3.1.1.

(c) the operator of the other scheme is of the opinion that proper provision was made for meeting the liabilities that were known


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Rule 12.1.1

or could reasonably have been anticipated at the time of the transfer.

8.6.11 Attribution of scheme property to subschemes—QFC retail schemes

(1) For a QFC retail scheme that is an umbrella scheme, any assets to be received into, or any payments out of, the scheme property that are not attributable to only a single subscheme must be attributed by the operator to the respective subschemes.

(2) Any attribution under this rule must be made in a way that is fair to the unitholders of the QFC retail scheme generally.Note Umbrella scheme and subscheme are defined in r 1.2.11.


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Rule 12.1.2

Part 8.7 Accounting periods—QFC schemes

8.7.1 Accounting periods—all QFC schemes(1) A QFC scheme must have—

(a) an annual accounting period; and

(b) a half-yearly accounting period.

(2) A half-yearly accounting period starts on the first day of an annual accounting period and ends—

(a) on the day 6 months before the last day of the annual accounting period; or

(b) on another reasonable date stated in the latest filed prospectus.Note Latest filed prospectus is defined in the glossary.

(3) The first annual accounting period starts—

(a) on the first day of the initial offer period; or


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Rule 12.1.1

(b) if there is not an initial offer period for the scheme—on the date the scheme is registered;

and, in either case, ends on the next accounting reference date unless subrule (4) applies.Note Initial offer and accounting reference date are defined in the glossary.

(4) If the accounting reference date falls less than 6 months after the start of the first annual accounting period, the operator may extend the period to the next accounting reference date.

(5) Each annual accounting period after the first period is for 12 months, starting on the next day after the accounting reference date and ending on the next accounting reference date, unless subrule (7) applies.

(6) Each annual accounting period or half yearly accounting period ends at the end of the day worked out under this rule or, if the operator so decides, at the last valuation point on that day.Note Day and valuation point are defined in the glossary.

(7) If the accounting reference date stated in the scheme’s latest filed prospectus is changed, the operator may extend or shorten the annual accounting period by up to 6 months to end on the next accounting reference date.


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Rule 12.1.2

(8) Before extending or shortening an annual accounting period under subrule (4) or (7), the operator must—

(a) consult the independent entity; and

(b) consult the scheme’s auditor; and

(c) give the Regulatory Authority reasonable notice.

(9) If the annual accounting period is extended under subrule (4) or (7) and this results in a longer than usual period before the publication of reports to unitholders, the operator must make summary information about the scheme’s investment activities available to unitholders during the period in accordance with PRIN, principle 7 (Customers’ interests) and principle 8 (Communications with clients).


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Rule 12.1.1

Part 8.8 Income allocation and distribution—QFC schemes

8.8.1 Application of pt 8.8 to umbrella schemes—all QFC schemesThis part (other than rule 8.8.2 (1) and (2)) applies to a QFC scheme that is an umbrella scheme as if each subscheme were a separate QFC scheme.Note Umbrella scheme and subscheme are defined in r 1.2.11.

8.8.2 Income allocation and distribution—all QFC schemes(1) A QFC scheme must have an annual income allocation date.

Note Annual income allocation date is defined in the glossary.

(2) The annual income allocation date must be within 4 months after the scheme’s accounting reference date.Note Month and accounting reference date are defined in the glossary.


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Rule 12.1.2

(3) A QFC scheme may have an interim income allocation date and interim accounting periods.Note Interim income allocation date and interim accounting period are


(4) An interim income allocation date must be within 4 months after the day the relevant interim accounting period ends.

(5) A QFC scheme must have a distribution account to which the amount of income allocated to unit classes that distribute income is transferred at the end of the relevant accounting period.Note Distribution account and class are defined in the glossary.

(6) The amount available for income allocations must be calculated by—

(a) taking the net revenue after taxation decided in accordance with appropriate, internationally accepted professional standards specified in the constitutional document and the latest filed prospectus; andGuidanceThe constitutional document and latest filed prospectus would be expected to specify a document such as the Statement of Recommended Practice for financial statements of authorised funds issued by the United Kingdom Investment Management Association.


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Rule 12.1.1

(b) making any transfers, to the extent permitted by the latest filed prospectus, between the income account and the capital account so that the amount available for income allocations is calculated as if the revenue from debt instruments had been decided without regard to the effect of—

(i) the change in an index of consumer prices during the period, if the scheme’s investment objectives, strategies and policy are to invest predominantly in debt instruments for which cash flows are decided by reference to the index (or a similar index of consumer prices) and the transfer relates only to amounts in relation to index-linked, gilt-edged securities; or

(ii) amortisation, if the amount available for income allocations is not less than if the transfers had not been made; and

(c) making any other transfers between the income account and the capital account that are required in relation to any of the following:

(i) stock dividends;


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Rule 12.1.2

(ii) income equalisation included in income allocations from other collective investment schemes;

(iii) the allocation of payments in accordance with—

(A) for a QFC qualified investor scheme—the latest filed prospectus; and

(B) for a QFC retail scheme—rule 8.6.7 (Allocation of payments to income or capital—QFC retail schemes);

(iv) taxation;

(v) the total amount of income property included in units issued and units redeemed during the period.

Note Income account, capital account, debt instrument, income equalisation, income property and latest filed prospectus are defined in the glossary.


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Rule 12.1.1

(7) If income is allocated during an accounting period—

(a) with effect from the end of the accounting period, the amount of income allocated to unit classes that accumulate income becomes part of the capital property and requires an adjustment to the proportion of the value of the scheme property to which they relate if other unit classes are in issue during the period; andNote Capital property is defined in the glossary.

(b) the adjustment under paragraph (a) must ensure that the price remains unchanged despite the transfer of income; and

(c) the amount of any interim distribution must not be more than the amount that, in the operator’s opinion, would be available for allocation if the interim accounting period and all previous interim accounting periods in the same annual accounting period, taken together, were an annual accounting period.


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Rule 12.1.2

8.8.3 Unclaimed, minimal and joint unitholders distributions—all QFC schemes

(1) Any distribution of a QFC scheme that is unclaimed after 6 years (or, if the latest filed prospectus provides for a longer period, that period) becomes part of the capital property.Note Latest filed prospectus and capital property are defined in the glossary.

(2) The operator and independent entity of a QFC scheme may agree a minimal amount in relation to which a distribution of income is not required, and how any such amounts are to be treated.

(3) A distribution of a QFC scheme made to the joint unitholder named first on the unitholder register is as effective a discharge to the operator and independent entity as if that joint unitholder had been the sole unitholder.Note Unitholder register is defined in the glossary.


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Rule 12.1.1

Part 8.9 Names—QFC schemes

8.9.1 Name of scheme etc—all QFC schemes(1) The operator of a QFC scheme must ensure that the name of the

scheme, any subscheme of the scheme, or a class of units, is not undesirable or misleading.Note Subscheme is defined in r 1.2.11. Class is defined in the glossary.

Guidance on names of CICA CIC must not include in its name the following words, abbreviations of the following words or similar words or abbreviations:

(a) limited;

(b) unlimited;

(c) public limited company.

(2) If the Regulatory Authority is of the opinion that the operator is in breach of subrule (1) in relation to a name, it may direct the operator to take the steps necessary to have the name changed.


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Rule 12.1.2

(3) In deciding whether to give a direction under subrule (2) in relation to a name for a breach of subrule (1), the Regulatory Authority may consider whether the name—

(a) implies that the scheme (or a part of the scheme) has merits that might, or might not, be justified; or

(b) implies that the operator has merits that might, or might not, be justified; or

(c) is inconsistent with the scheme’s investment objectives, strategies or policy; or

(d) might mislead investors into thinking that a person other than the operator is responsible for managing the scheme (or part of the scheme); or

(e) incorrectly implies that the scheme is not a collective investment scheme, a scheme registered in the QFC or under these rules, or a particular kind of scheme registered under these rules (for example, a qualified investor scheme); or

(f) is, in the Regulatory Authority’s opinion, likely to offend the public or a part of the public; or


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Rule 12.1.1

(g) is substantially similar to the name of—

(i) a scheme registered under PRIV or these rules; or

(ii) a subscheme of an umbrella scheme registered under PRIV or these rules; or

(iii) a class of units for a scheme registered under PRIV or these rules; or

(h) implies a degree of security in relation to the capital or income that is not justified.

Examples of names for para (e)names that include the word ‘plan’ or ‘account’

Examples of names for para (h)names that include the word ‘guaranteed’, ‘protected’ or ‘secured’

(4) Subrule (3) does not limit the matters the Regulatory Authority may consider.

(5) If the name includes the word ‘guaranteed’, ‘protected’ or ‘secured’ (or a similar word), the Regulatory Authority may regard the name as undesirable or misleading unless the operator satisfies it of the matters mentioned in subrules (8) and (9).


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Rule 12.1.2

(6) If the name indicates or implies a guaranteed capital return, income return or both, the Regulatory Authority may regard the name as undesirable or misleading unless the operator satisfies it—

(a) that the total amount paid for a unit is guaranteed under a guarantee; and

(b) of the matters mentioned in subrules (8) and (9).

(7) If the name indicates or implies a degree of capital security (for example, the words ‘capital protected’ or words with a similar meaning), the Regulatory Authority may regard the name as undesirable or misleading unless the operator satisfies it—

(a) that an amount not materially less than the total amount paid for a unit is guaranteed under a guarantee; and

(b) that the scheme’s investment objectives, strategies and policy show a clear intention to provide a material degree of security in relation to the total amount paid for a unit; and

(c) that the degree of capital security is apparent from the name and clearly stated in the latest filed prospectus; and

(d) of the matters mentioned in subrules (8) and (9).


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Rule 12.1.1

(8) For subrule (5), (6) or (7), the operator must satisfy the Regulatory Authority that the scheme has a guarantee in relation to which all the following requirements are met:

(a) the guarantee is given by a person other than the operator, the independent entity or an associated person for the operator or independent entity;Note Associated person is defined in the glossary.

(b) the guarantor has the authority and resources to honour the terms of the guarantee;

(c) the guarantee covers all unitholders of the scheme and is legally enforceable by each unitholder or by a person acting on the unitholder’s behalf;

(d) the guarantee relates to the total amount paid for a unit;

(e) the guarantee provides for payment at a stated date or dates and is unconditional although reasonable commercial exclusions such as force majeure may be included;

(f) if the guarantee applies to different classes of units—it is identical in its application to all classes except for differences attributable to income already received, or charges already incurred, by the different classes of units.


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Rule 12.1.2

(9) For subrule (5), (6) or (7), the operator must also satisfy the Regulatory Authority that the terms of the guarantee and the credentials of the guarantor are clearly set out in detail in the latest filed prospectus and that any exclusions such as force majeure are highlighted.

(10) In deciding whether it is satisfied for subrule (7), the Regulatory Authority must take into account whether the degree of capital security implied by the name fairly reflects the nature of the arrangements for providing the security.

(11) Subrule (10) does not limit the matters the Regulatory Authority may take into account for subrule (7).

(12) In this rule:

total amount paid, for a unit, includes any charge or other cost paid or incurred when the unit was bought.

8.9.2 Use of certain names—all QFC schemes(1) The operator of a QFC scheme must ensure that the name of the

scheme, or of a class of units, does not state or imply that the scheme is an Islamic fund unless the scheme is an Islamic fund.Note Islamic fund is defined in r 1.3.11.


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Rule 12.1.1

(2) The operator of a QFC umbrella scheme must ensure that the name of a subscheme, or of a class of units of a subscheme, does not state or imply that the subscheme is an Islamic fund unless the subscheme is an Islamic fund.Note Umbrella scheme and subscheme are defined in r 1.2.11.

(3) The operator of a QFC scheme must ensure that the name of the scheme, or of a class of units, does not state or imply that the scheme is a money-market fund unless the scheme is a money-market fund.Note Money-market fund is defined in r 1.3.12.

(4) The operator of a QFC umbrella scheme must ensure that the name of a subscheme, or of a class of units of a subscheme, does not state or imply that the subscheme is a money-market fund unless the subscheme is a money-market fund.


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Rule 12.1.2

Part 8.10 Shari’a Supervisory Board—all Islamic funds

8.10.1 Islamic fund must have a supervisory board—all Islamic funds

(1) The operator of a QFC scheme that is an Islamic fund, or is an umbrella scheme that has a subscheme that is an Islamic fund, must ensure that there is at all times a Shari’a Supervisory Board for the fund (or subscheme).Note Islamic fund is defined in r 1.3.11. Umbrella scheme and subscheme

are defined in r 1.2.11.

(2) Any decision relating to the appointment or dismissal of a member of the Shari’a Supervisory Board, or to a change affecting the board, must be made by the operator and approved by the independent entity.


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Rule 12.1.1

(3) ISFI, chapter 6 applies to a QFC scheme that is an Islamic fund, or is an umbrella scheme that has a subscheme that is an Islamic fund, as if—

(a) the scheme (or subscheme) were an authorised firm to which the chapter applies; andNote Authorised firm is defined in the glossary.

(b) a reference to the authorised firm or its governing body were, subject to subrule (2), a reference to the scheme (or subscheme) or the operator, as the context requires; and

(c) all other necessary changes were made.


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Rule 12.1.2

Chapter 9 Suspension, winding up and transfer schemes—QFC schemes

Part 9.1 Suspension and restart of dealings—QFC schemes

9.1.1 Suspension and restart of dealings—all QFC schemes(1) The operator of a QFC scheme may, with the prior agreement of the

independent entity, temporarily suspend dealings in all units or a class of units if, because of exceptional circumstances, it is in the interests of all the unitholders of the scheme to do so.Note Deal and class are defined in the glossary.

(2) If the independent entity requires the operator to suspend dealings in all units or a class of units, the operator must do so without delay.


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Rule 12.1.1

(3) The independent entity may make a requirement under subrule (2) if, because of exceptional circumstances, it is in the interest of all the unitholders of the scheme to do so.

(4) The operator and independent entity must ensure that the suspension continues only for as long as it is justified having regard to the interests of all the unitholders in the scheme.

(5) If the operator suspends dealings under subrule (1) otherwise than because of a requirement of the independent entity under subrule (2), the operator must—

(a) immediately tell the Regulatory Authority orally, giving its reasons for the suspension; and

(b) give written confirmation to the authority of the suspension and its reasons for the suspension within 1 business day.

Examples for this rule on ‘within 1 business day’See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

(6) If the operator suspends dealings under subrule (1) because of a requirement of the independent entity under subrule (2), the independent entity must—

(a) immediately tell the Regulatory Authority orally, giving the reasons for its action; and


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Rule 12.1.2

(b) give written confirmation to the authority of the suspension, and its reasons for its action, within 1 business day.

(7) If the operator suspends dealings under subrule (1) or (2), the operator must—

(a) notify the unitholders about the suspension immediately but within 1 business day after the day dealing is suspended; and

(b) from time to time publish (on its website or by other general means) sufficient information to keep unitholders appropriately informed about the suspension, including, if known, its likely duration.

(8) Notification under subrule (7) (a) must—

(a) tell the unitholders about the exceptional circumstances that resulted in the suspension; and

(b) be clear, fair and not misleading; and

(c) tell the unitholders how to obtain the information it is required to publish under subrule (7) (b).

(9) During the suspension—

(a) none of the obligations under part 8.1 (Dealing—QFC schemes) apply; but


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Rule 12.1.1

(b) the operator must as far as practicable comply with all relevant provisions of part 8.2 (Valuation and pricing—QFC schemes).

(10) The suspension of dealings must end as soon as practicable after the exceptional circumstances mentioned in subrule (1) or (3) cease.

(11) The operator or independent entity must—(a) review the suspension at least every 28 days; and

(b) tell the Regulatory Authority about the results of the review immediately, but with 1 business day after conducting the review.

(12) If the operator or independent entity becomes aware of any material change in circumstances that may affect the continuation of the suspension, the operator or independent entity must tell the Regulatory Authority immediately, but within 1 business day.

(13) The Regulatory Authority may, at any time, direct the operator to end the suspension.

(14) The operator must immediately comply with the direction.

(15) If the operator decides to restart dealings, the operator must—

(a) immediately tell the Regulatory Authority about the decision orally; and


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Rule 12.1.2

(b) give written confirmation to the authority of its decision within 1 business day.

(16) The operator may agree, during the suspension, to deal in units at a price calculated by reference to the first valuation point after restarting dealings.

(17) However, if the scheme is a QFC qualified investor scheme that operates limited redemption arrangements, and the exceptional circumstances have affected a valuation point, the operator must fix an additional valuation point as soon as possible after restarting dealings.Note 1 Limited redemption arrangements and valuation point are defined in

the glossary.

Note 2 The Regulatory Authority has power under the Financial Services Regulations, art 105 to give certain directions in relation to collective investment schemes (which are called collective investment funds in those regulations), including a direction to cease the issue or redemption of units in the scheme and to wind up the scheme.


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Rule 12.1.1

Part 9.2 Winding up—QFC schemes

9.2.1 Application of pt 9.2 to subschemes of QFC umbrella schemes—all QFC schemesThis part applies to a subscheme of a QFC umbrella scheme as if—

(a) a reference to a QFC scheme were a reference to the subscheme; and

(b) a reference to units were a reference to units in the class or classes related to the subscheme; and

(c) a reference to a meeting of unitholders were a reference to a meeting of unitholders of the class or classes mentioned in paragraph (b); and

(d) a reference to a special resolution were a reference to a special resolution passed at a meeting of unitholders mentioned in paragraph (c); and

(e) a reference to the scheme property were a reference to the scheme property attributed to the subscheme; and


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Rule 12.1.2

(f) a reference to liabilities were a reference to liabilities of the scheme attributable to the subscheme; and

(g) all other necessary changes were made.Note Subscheme and umbrella scheme are defined in r 1.2.11.

9.2.2 When scheme may be wound up—all QFC schemesA QFC scheme may be wound up—

(a) by order of the QFC Court under the Insolvency Regulations 2005 or any other regulations in force in the QFC; or

(b) if not inconsistent with any regulations in force in the QFC or these rules—in the way and circumstances provided in the constitutional document; orNote Constitutional document is defined r 3.1.1.

(c) in the way and in any other circumstances provided by these rules or any other rules made by the Regulatory Authority.


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Rule 12.1.1

9.2.3 Winding-up required by constitutional document—all QFC schemes

(1) The constitutional document of a QFC scheme may provide that the scheme is to be wound up—

(a) at a stated time; or

(b) in stated circumstances or on the happening of a stated event.Note Constitutional document is defined r 3.1.1.

(2) However, a provision of the constitutional document that purports to provide that the scheme is to be wound up if a particular person ceases to be the operator or independent entity is of no effect.

9.2.4 Winding-up at direction of unitholders—all QFC schemesThe unitholders of a QFC scheme may, by special resolution, direct the operator or independent entity to wind up the scheme.Note Special resolution is defined in the glossary.


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Rule 12.1.2

9.2.5 Notification to Regulatory Authority that scheme not commercially viable etc—all QFC schemes

(1) If the operator of a QFC scheme believes, on reasonable grounds, that the scheme is not commercially viable or the scheme’s purpose cannot be accomplished, the operator must give the Regulatory Authority notice about the matter immediately, but within 1 business day after the day the operator forms the belief.ExamplesSee examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

(2) The notice must include the following information:

(a) the name of the scheme and its registration number given by the Regulatory Authority;

(b) the size and type of scheme;

(c) the number of unitholders;

(d) whether dealing in the scheme’s units has been suspended;

(e) why the operator believes that the scheme is not commercially viable or the scheme’s purpose cannot be accomplished;

(f) what consideration has been given to the scheme entering into a transfer scheme under part 9.3 (Transfer schemes—QFC


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Rule 12.1.1

schemes) with another scheme registered in the QFC or a subscheme of an umbrella scheme registered in the QFC and the reasons why a transfer scheme is not possible;

(g) whether unitholders have been told of the intention to seek winding-up and, if not, whether and when they will be told of the intention;

(h) details of any proposed rebate of charges to be made to unitholders who recently purchased units;

(i) the preferred date for the start of the winding-up.

(3) The notice must be accompanied by a notice given by the independent entity that includes the following:

(a) a statement that the independent entity, having taken reasonable care in considering the matter, believes that a transfer scheme under part 9.3 is not practicable;

(b) an explanation of the other steps that have been considered that would result in the scheme not needing to be wound up;

(c) confirmation that the operator has exercised its functions in accordance with these rules;Note Exercise and function are defined in the glossary.


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Rule 12.1.2

(d) whether the scheme’s investment and borrowing powers have been exceeded.

(4) The Regulatory Authority may, in writing, require the operator or independent entity to provide any further information or documents that the authority reasonably needs in relation to the scheme.

9.2.6 Winding-up by operator or independent entity—all QFC schemes

(1) This rule applies if any of the following circumstances (the prescribed circumstances) exist in relation to a QFC scheme:

(a) on a request by the operator or independent entity for the cancellation of the scheme’s registration, the Regulatory Authority agrees in principle that it will cancel the scheme’s registration on the completion of the winding-up of the scheme;

(b) the operator believes, on reasonable grounds, that the scheme is not commercially viable or the scheme’s purpose cannot be accomplished;

(c) if the constitutional document states that the duration of the scheme is limited—the stated duration of the scheme ends;


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Rule 12.1.1

(d) the unitholders of the scheme direct the operator or independent entity under rule 9.2.4 (Winding-up at direction of unitholders—all QFC schemes) to wind up the scheme;

(e) if the scheme is subject to a transfer scheme approved under part 9.3 (Transfer schemes—QFC schemes) under which it is to be left with no property—the transfer scheme commences.

(2) If any of the prescribed circumstances apply in relation to the QFC scheme—

(a) the operator and independent entity must cease—

(i) dealing in the scheme’s units; and

(ii) investing or borrowing for the scheme; andNote Dealing and borrowing is defined in the glossary.

(b) the operator or independent entity (or both) must take the steps necessary to wind up the scheme in accordance with any regulations in force in the QFC that apply to the winding-up, these rules, and any other rules made by the Regulatory Authority that apply to the winding-up.


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Rule 12.1.2

(3) If any of the prescribed circumstances mentioned in subrule (1) (a) to (d) apply in relation to the scheme—

(a) the operator or independent entity must realise the scheme property as soon as practicable; and

(b) after meeting or making provision for all the scheme’s liabilities and the costs of the winding-up, the operator or independent entity must distribute the proceeds of the realisation to the unitholders in proportion to their respective interests in the scheme as at the date the relevant prescribed circumstances happened; and

(c) any unclaimed net proceeds or other cash (including unclaimed distribution payments) held by the operator or independent entity after the end of 12 months from the day they became payable must be paid into the QFC Court, after meeting or making provision for the costs of paying them into the QFC Court under this paragraph.

(4) If the operator or independent entity and 1 or more unitholders agree, the requirement to realise the scheme property does not apply to the part of the scheme property proportionate to their entitlement.


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Rule 12.1.1

(5) The operator and the independent entity may distribute the part of the scheme property mentioned in subrule (4) to the unitholders mentioned in that subrule, after making the adjustments or provisions that appear appropriate to ensure that the unitholders bear a proportionate share of the liabilities of the scheme and the costs of the winding-up.

(6) If the prescribed circumstances mentioned in subrule (1) (e) apply in relation to the scheme, the operator or independent entity must wind up the scheme in accordance with the approved transfer scheme.

(7) As soon as practicable after starting the winding-up, the operator or independent entity must—

(a) if rule 9.2.4 (Winding-up at direction of unitholders—all QFC schemes) does not apply—tell the unitholders about the winding-up; and

(b) publish notice of the winding-up in an English and an Arabic language national newspaper and, if the scheme has a website, on the scheme’s website.

(8) If the winding-up is conducted by the operator, the independent entity must approve the terms of the winding-up.


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Rule 12.1.2

(9) Not later than 5 business days after the day the winding-up of the QFC scheme is completed, the operator or independent entity must—

(a) tell the Regulatory Authority about the completion of the winding-up; and

(b) ask the authority to cancel the scheme’s registration.Note Business day is defined in the glossary.

(10) This rule is subject to any order of the QFC Court.

9.2.7 Accounting and reports during winding-up—all QFC schemes

(1) While a QFC scheme is being wound up, whether under rule 9.2.6 (Winding-up by operator or independent entity—all QFC schemes) or otherwise—

(a) the annual accounting periods and half-yearly accounting periods of the scheme continue to run; and

(b) the provisions of these rules about annual and interim allocation of income continue to apply to the scheme; and

(c) reports to unitholders and the Regulatory Authority continue to be required in relation to the scheme.


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Rule 12.1.1

(2) However, if the operator, after consulting the scheme’s auditor and the Regulatory Authority, decides on reasonable grounds that timely preparation of a report under these rules is not required in the interest of unitholders or the Regulatory Authority, the operator may dispense with preparation of the report within the time otherwise required by these rules.

(3) A period to which subrule (2) applies must be covered in the next relevant report required under these rules.

(4) At the completion of the winding-up, the accounting period then running is regarded as the final annual accounting period.

(5) Within 2 months after the end of the final annual accounting period, the final report of the operator must be sent to the Regulatory Authority and each person who was a unitholder immediately before the end of the final annual accounting period.

(6) This rule is subject to any order of the QFC Court.


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Rule 12.1.2

Part 9.3 Transfer schemes—QFC schemes

9.3.1 Purpose—pt 9.3The purpose of this part is to make rules under the Financial Services Regulations, article 103 modifying those regulations, part 16 (Control of Business Transfers) in relation to QFC schemes.

9.3.2 Transfer schemes—all QFC schemes(1) Financial Services Regulations, part 16 is modified in accordance

with the following provisions of this rule.

(2) If, for the purpose of a relevant scheme, it is proposed that scheme property of a QFC scheme should become the property of another scheme registered in the QFC or the property of a subscheme of a QFC umbrella scheme registered in the QFC, the proposal must not be implemented without the approval of a special resolution of the unitholders of the first scheme, unless subrule (3) applies.Note Subscheme and umbrella scheme are defined in r 1.2.11. Special

resolution is defined in the glossary.


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Rule 12.1.1

(3) If, for the purpose of a relevant scheme, it is proposed that scheme property attributable to a subscheme (the first subscheme) of a QFC umbrella scheme (the first umbrella scheme) should become the property of another scheme registered in the QFC or another subscheme of a QFC umbrella scheme registered in the QFC (whether or not of the first umbrella scheme), the proposal must not be implemented without the approval of—

(a) a special resolution of the unitholders in the first subscheme; and

(b) a special resolution of the unitholders of units in the first umbrella scheme, unless implementation of the scheme is not likely to result in any material prejudice to the interests of the unitholders in any other subscheme of the first umbrella scheme.


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Rule 12.1.2

(4) If it is proposed that a QFC scheme or a subscheme of a QFC umbrella scheme should receive property (other than its first property) under a relevant scheme, or an arrangement equivalent to a scheme of arrangement, that is entered into by another scheme registered in the QFC, by a subscheme of an umbrella scheme registered in the QFC or by corporation, the proposal must not be implemented without the approval of a special resolution of the unitholders of the first scheme or of the class or classes of units related to the first subscheme (as appropriate).Note Corporation is defined in the glossary.

(5) However, if the operator and either the independent entity or auditor of the scheme agree that the receipt of the property by the scheme or subscheme as mentioned in subrule (4)—

(a) is not likely to result in any material prejudice to the interests of the unitholders of the scheme; and

(b) is consistent with the investment objectives, strategies and policy of the scheme or subscheme; and


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Rule 12.1.1

(c) could be effected without breaching chapter 6 (Investment and borrowing—QFC qualified investor schemes) or chapter 7 (Investment and borrowing—QFC retail schemes);

the property may be transferred to the scheme or subscheme, and units may be issued in exchange for the property, as part of the relevant scheme without the approval of a special resolution.

(6) To remove any doubt, relevant scheme has the meaning given by the Financial Services Regulations, article 94 (4).


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Rule 12.1.2

Chapter 10 Financial promotions and investment activities—all schemes

Part 10.1 Financial promotions generally—all schemes

10.1.1 Declaration of non-QFC retail customer schemes(1) The Regulatory Authority may, by written notice published on an

approved website, declare that a non-QFC scheme established in a stated jurisdiction that is of a stated type is a retail customer scheme.Note Approved website is defined in INAP.


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Rule 12.1.1

(2) The Regulatory Authority must not specify a type of scheme under subrule (1) unless satisfied that—

(a) all schemes of that type are—

(i) required to be registered, approved or licensed (however described) under the law of the jurisdiction in which they are established; and

(ii) subject to appropriate regulation by a regulatory or governmental entity of that jurisdiction for the purpose of consumer protection; and

(b) the operators of all schemes of that type are—

(i) required to be authorised or licensed (however described) under the law of that jurisdiction; and

(ii) subject to appropriate regulation by a regulatory or governmental entity of that jurisdiction for the purpose of consumer protection.


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Rule 12.1.2

10.1.2 Certain financial promotions only to qualified investors etc—QFC qualified investor schemes

(1) An authorised firm must not make or approve a financial promotion in relation to a QFC qualified investor scheme if the financial promotion is addressed to, or disseminated in such a way that it is likely to be received by, a person who is not a qualified investor for the firm.Note Qualified investor, for an authorised firm, is defined in r 1.2.12 (3).

(2) An authorised firm must not conduct a relevant investment activity for a client in or from the QFC in relation to units in a QFC qualified investor scheme unless the client is a qualified investor for the firm.Note 1 Relevant investment activity is defined in the glossary.

Note 2 Client is defined in COND, r 1.2.1.

(3) For this rule, qualified investor includes a person who is a retail customer for the authorised firm if the firm believes, on reasonable grounds, that the firm could classify the person under COND as a business customer for the firm.Note 1 Retail customer, for an authorised firm, is defined in r 1.2.12 (5).


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Rule 12.1.1

Note 2 Business customer is defined in COND, r 1.2.5. For the classification of retail customers as business customers, see COND, r 2.3.2.

10.1.3 Certain financial promotions only to qualified investors etc—non-QFC qualified client schemes

(1) An authorised firm must not make or approve a financial promotion in relation to a non-QFC qualified client scheme if the financial promotion is addressed to, or disseminated in such a way that it is likely to be received by, a person who is not a qualified investor for the firm.Note 1 Non-QFC qualified client scheme is defined in r 1.4.2.

Note 2 Qualified investor, for an authorised firm, is defined in r 1.2.12 (3).

(2) An authorised firm must not conduct a relevant investment activity for a client in or from the QFC in relation to units in a non-QFC scheme unless—

(a) the scheme is a non-QFC retail customer scheme; or

(b) the client is a qualified investor for the firm.Note 1 Relevant investment activity is defined in the glossary.

Note 2 Non-QFC retail customer scheme is defined in r 1.4.1.

Note 3 Client is defined in COND, r 1.2.1.


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Rule 12.1.2

(3) For this rule, qualified investor includes a person who is a retail customer for the authorised firm if the firm believes, on reasonable grounds, that the firm could classify the person under COND as a business customer for the firm.Note 1 Retail customer, for an authorised firm, is defined in r 1.2.12 (5).

Note 2 Business customer is defined in COND, r 1.2.5. For the classification of retail customers as business customers, see COND, r 2.3.2.

10.1.4 Pt 10.1 additional to CONDThis part is additional to, and does not limit, COND.


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Rule 12.1.1

Part 10.2 Financial promotions—non-QFC schemes

10.2.1 What is a complying disclaimer for a non-QFC scheme?A complying disclaimer for a non-QFC scheme is a written notice that contains statements to the effect of the following:

(a) the scheme is a collective investment scheme that is not registered in the QFC or regulated by the Regulatory Authority;

(b) any prospectus for the scheme, and any related documents, have not been reviewed or approved by the Regulatory Authority;

(c) investors in the scheme may not have the same access to information about the scheme that they would have to information about a collective investment scheme registered in the QFC;


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Rule 12.1.2

(d) recourse against the scheme, and those involved with it, may be limited or difficult and may have to be pursued in a jurisdiction outside the QFC.

10.2.2 Restrictions generally on financial promotions—all non-QFC schemes

(1) An authorised firm must not make or approve a financial promotion in relation to a non-QFC scheme unless the scheme has a written constitution (however described) and written prospectus.Note Writing and prospectus are defined in the glossary.

(2) An authorised firm must not conduct relevant investment activities in or from the QFC in relation to units in a non-QFC scheme unless the scheme has a written constitution (however described) and written prospectus.

(3) Subrule (2) does not apply in relation to an own account transaction of an authorised firm.Note Own account transaction is defined in the glossary.


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Rule 12.1.1

10.2.3 Prospectus and disclaimer must be provided etc—all non-QFC schemes

(1) An authorised firm must not sell, or arrange for the sale of, a unit in a non-QFC scheme to a customer unless it has given the customer, not later than a reasonable time before the customer becomes contractually bound in relation to the sale of the unit—

(a) a prospectus for the scheme; and

(b) a complying disclaimer for the scheme.Note 1 Customer is defined in COND, r 1.2.3 (2) as a business customer or

retail customer. It does not, therefore, include a market counterparty.

Note 2 Prospectus is defined in the glossary and complying disclaimer is defined in r 10.2.1.

(2) If an authorised firm in the exercise of its discretion buys a unit in a non-QFC scheme for a customer, the firm must—

(a) tell the customer that the customer may request a prospectus for the scheme; and

(b) give the customer a prospectus for the scheme on request.

(3) If an authorised firm gives a prospectus for a non-QFC scheme to a customer under subrule (2), the firm must also give the customer a complying disclaimer for the scheme.


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Rule 12.1.2

(4) Subrule (2) (a) does not apply in relation to the purchase by an authorised firm of a unit in a non-QFC scheme for a customer if—

(a) the firm has told the customer, in its terms of business, or in periodic statements, given to the customer under COND, that the customer may request a prospectus for any non-QFC scheme in which the firm buys units for the customer under a discretionary management agreement; and

(b) the firm has given the customer a complying disclaimer for the scheme, all non-QFC schemes or a class of non-QFC schemes in which the scheme is included.

10.2.4 Complying disclaimer must be given with other documents under COND—all non-QFC schemes

(1) This rule applies if an authorised firm is required under COND to give a document to a customer in relation to a non-QFC scheme.

(2) The authorised firm must, at the same time as it gives the document to the customer, give the customer a complying disclaimer.Note Complying disclaimer is defined in r 10.2.1.


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Rule 12.1.1

10.2.5 Authorised firms must pass on documents etc—all non-QFC schemes

(1) This rule applies if—

(a) an authorised firm either—

(i) sells, or arranges for the sale of, a unit in a non-QFC scheme to a customer; or

(ii) buys, or arranges to buy, a unit in a non-QFC scheme for a customer; and

(b) the firm later receives a document or information about the scheme from its operator.

(2) The authorised firm must give the document or information to the customer.

10.2.6 Quarterly returns for financial promotions etc—all non-QFC schemes

(1) This rule applies to an authorised firm in relation to a quarter if, during the quarter, the firm—

(a) makes or approves a financial promotion in relation to a non-QFC scheme; or


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Rule 12.1.2

(b) conducts relevant investment activities in or from the QFC in relation to units in a non-QFC scheme.Note Relevant investment activity is defined in the

glossary.(2) The authorised firm must give the Regulatory Authority a return

under this rule for the quarter within 1 month after the day the quarter ends.

(3) The return must include the following information in relation to each non-QFC scheme in relation to which the firm made or approved a financial promotion, or conducted relevant investment activities in or from the QFC, during the quarter:

(a) the scheme’s name;

(b) the jurisdiction in which the scheme was established;

(c) whether the scheme is a non-QFC qualified client scheme or non-QFC retail customer scheme;Note Non-QFC retail customer scheme is defined in r

1.4.1 and non-QFC qualified client scheme is defined in r 1.4.2.

(d) if the scheme is a non-QFC qualified client scheme—whether the scheme or its operator is subject to regulation by a


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Rule 12.1.1

regulatory or governmental entity of the jurisdiction in which it is established or any other jurisdiction and, if so, the jurisdiction, the name of the regulating entity and the nature of the regulation;

(e) whether the following rules were complied with in relation to the scheme during the quarter: rule 10.2.3 (Prospectus and disclaimer must be provided

etc—all non-QFC schemes) rule 10.2.4 (Complying disclaimer must be given with

other documents under COND—all non-QFC schemes) rule 10.2.5 (Authorised firms must pass on documents etc

—all non-QFC schemes).

(4) In this rule:

quarter means a 3-month period ending on 31 March, 30 June, 30 September or 31 December.


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Rule 12.1.2

10.2.7 Recordkeeping by authorised firms—all non-QFC schemesAn authorised firm must—

(a) keep a copy of each prospectus for a non-QFC scheme that it gives to customers for at least 6 years after the day it is last given to a customer; and

(b) keep a copy of each complying disclaimer for a non-QFC scheme that it gives to customers for at least 6 years after the day it is last given to a customer; and

(c) keep a record of the version of each prospectus for a non-QFC scheme that it gives to each customer, and the day it is given to the customer, for at least 6 years after the day it is given to the customer; and

(d) keep a record of the version of each complying disclaimer for a non-QFC scheme that it gives to each customer, and the day it is given to the customer, for at least 6 years after the day it is given to the customer.

Note 1 Customer is defined in COND, r 1.2.3 (2) as a business customer or retail customer.


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Rule 12.1.1

Note 2 Prospectus is defined in the glossary and complying disclaimer is defined in r 10.2.1.

10.2.8 Pt 10.2 additional to CONDThis part is additional to, and does not limit, COND.


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Rule 12.1.2

Part 10.3 Additional retail customer requirements—non-QFC retail customer schemes

10.3.1 Application—pt 10.3(1) This part applies to an authorised firm in relation to a retail

customer of the firm if the firm conducts a relevant investment activity for the retail customer in or from the QFC in relation to units in a non-QFC retail customer scheme.Note 1 Retail customer, for an authorised firm, is defined in r 1.2.12 (5).

Note 2 Relevant investment activity is defined in the glossary.

Note 3 Non-QFC retail customer scheme is defined in r 1.4.1. An authorised firm may not conduct a relevant business activity for a retail customer in relation to units in a non-QFC scheme that is not a retail customer scheme (see r 10.1.3 (2)).

(2) However, this part ceases to apply to the authorised firm in relation to the retail customer if the retail customer does not become, or ceases to be, a unitholder of the non-QFC retail customer scheme.


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Rule 12.1.1

10.3.2 Facilities to be maintained in QFC—non-QFC retail customer schemes

(1) The authorised firm must maintain facilities that satisfy the requirements of this part.

(2) The authorised firm must take reasonable steps to ensure that the facilities are available during ordinary business hours on each business day.

(3) For this part, a facility is a place of business.

(4) For this part, it is sufficient if a facility is maintained by a person other than the authorised firm if the facility is maintained under arrangements with the firm.

10.3.3 Retail customer to be informed about availability of facilities—non-QFC retail customer schemesBefore conducting relevant investment activities in relation to units in the non-QFC retail customer scheme for the retail customer, the authorised firm must give the retail customer a written notice that tells the retail customer about—

(a) the facilities available under this part; and


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Rule 12.1.2

(b) the address of the facilities and when the facilities are available.

10.3.4 Documents to be available in QFC—non-QFC retail customer schemes

(1) The authorised firm must maintain facilities in the QFC to allow the retail customer to inspect, and obtain copies of, the following documents:

(a) the constitution (however described) of the scheme;

(b) any instrument amending that constitution;

(c) the latest prospectus of the scheme;

(d) the latest annual and interim reports for the scheme.

(2) If a document mentioned in subrule (1) is not in a required language, a translation of the document in that language must also be available for inspection and copies of the translation must also be available to be obtained.

(3) The documents mentioned in subrule (1) (including any translation in a required language) must be available for inspection free of charge.


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Rule 12.1.1

(4) Copies of the latest prospectus (including any translation in a required language) must be available free of charge.

(5) Copies of other documents mentioned in subrule (1) (including any translation in a required language) must be available for no more than the reasonable cost of producing the copy.

(6) A translation of a document available under this rule must clearly state—

(a) the name and address of the person who made the translation; and

(b) the person’s qualifications for making the translation.

(7) In this rule:

required language, for a document, means—

(a) English; or

(b) any other language if the Regulatory Authority, by written notice published on an approved website, requires the document to be available in that language for this rule.Note Approved website is defined in INAP.


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Rule 12.1.2

10.3.5 Pricing and redemption facilities to be available in QFC—non-QFC retail customer schemes

(1) The authorised firm must maintain facilities in the QFC—

(a) where the retail customer may obtain information in a required language about prices of units in the scheme; and

(b) if the retail customer is a unitholder of the scheme—where or through which the retail customer may redeem units and obtain payment.

(2) The authorised firm is taken to comply with subrule (1) (b) if—

(a) unitholders can sell their units on an exchange at a price not significantly different from the net asset value of the property to which the units relates; and

(b) it tells the retail customer about the availability of the exchange.

(3) Subrule (1) (b) does not entitle the retail customer to have units redeemed (or sold as mentioned in subrule (2)) immediately after making a demand to that effect.


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Rule 12.1.1

(4) In this rule:

required language, for information, means—

(a) English; or

(b) any other language if the Regulatory Authority, by written notice published on an approved website, requires the information to be available in that language for this rule.

10.3.6 Other information facilities to be available in QFC—non-QFC retail customer schemes

(1) The authorised firm must maintain facilities in the QFC to tell the retail customer, on request and in a required language—

(a) the nature of the rights represented by the units in the scheme; and

(b) whether persons other than the unitholders can vote at meetings of unitholders and, if so, who those persons are.

(2) In this rule:

required language, for information, means—

(a) English; or


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Rule 12.1.2

(b) any other language if the Regulatory Authority, by written notice published on an approved website, requires information to be available in that language for this rule.

10.3.7 Complaint facilities to be available in QFC—non-QFC retail customer schemesThe authorised firm must maintain facilities in the QFC to allow the retail customer to make complaints to the operator about the operation of the scheme.


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Rule 12.1.1

Chapter 11 Other provisions

Part 11.1 General

11.1.1 Restitution orders for breach of relevant requirements—all schemes

(1) A private person may apply to the QFC Court for a restitution order if the person suffers loss or damage as a result of a breach of a relevant requirement in relation to a scheme.Note 1 This rule is made under Financial Services Regulations, art 65.

Note 2 Person, QFC Court, breach and relevant requirement are defined in the glossary.

(2) In this rule:

private person means—

(a) an individual, except when acting in the course of conducting any regulated activity; or


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Rule 12.1.2

(b) any other person, except when acting in the course of conducting business of any kind.

Note Regulated activity is defined in the glossary.

11.1.2 Service of notices and other documents on unitholders—all QFC schemes

(1) If a provision of these rules authorises or requires any notice or other document to be served on a unitholder of a QFC scheme (whether the word ‘serve’, ‘give’, ‘notify’, ‘send’ or ‘tell’, or some other word, is used), the notice or other document may be served—

(a) by sending it by prepaid post to the unitholder’s postal address shown in the unitholder register; or

(b) by leaving it at the unitholder’s business or residential address shown in the unitholder register; or

(c) by sending it to the unitholder using an electronic medium in accordance with rule 11.1.3 (Notices and other documents to be in legible form etc—all schemes).

Note Unitholder is defined in r 1.2.5. Document and unitholder register are defined in the glossary.


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Rule 12.1.1

(2) Any notice or other document served by post under this rule is taken to have been served when it would have been received in the ordinary course of post.

(3) For subrule (2), it is presumed (unless evidence sufficient to raise doubt about the presumption is presented) that a postal article sent by prepaid post is received on the 5th business day after the day it is posted.Note Business day is defined in the glossary.

(4) Any document left at an address, or served otherwise than by post, under this rule is taken to have been served on that day.

11.1.3 Notices and other documents to be in legible form etc—all schemes

(1) If a provision of these rules authorises or requires any notice or other document to be served on, or information to be given to any person (other than the Regulatory Authority), (whether the word ‘serve’, ‘give’, ‘notify’, ‘send’ or ‘tell’, or some other word, is used), the document or information must be served or given in a legible form.Note Document is defined in the glossary.


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Rule 12.1.2

(2) For subrule (1), any form is a legible form if the form—

(a) is consistent with the knowledge that the person serving the document, or giving the information, has about how the recipient of the document or information wishes or expects to receive it; and

(b) can be provided in a durable medium by the person serving the document or giving the information; and

(c) enables the recipient to know or record the time of receipt; and

(d) is reasonable in the context.

(3) In these rules, any requirement that a document be signed may be satisfied by an electronic signature or electronic evidence of assent.


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Rule 12.1.1

Part 11.2 Fees—QFC schemes

11.2.1 Application fees—all QFC schemes(1) An applicant under these rules for registration of a scheme

established in the QFC must pay the Regulatory Authority an application fee of the relevant amount.

(2) The fee must be paid when the application is filed with the Regulatory Authority.

(3) The Regulatory Authority may also, by written notice given to the applicant, require the applicant to pay a supplementary fee to the authority not later than the time stated in the notice if it expects to incur substantial costs in dealing with the application.

(4) If subrule (2), or a notice under subrule (3), is not complied with, the application is taken not to have been made until the fee is paid.

(5) The fee is non-refundable, whether or not the application is successful.


page 439



Rule 12.1.2

(6) In this rule:

relevant amount, for a scheme, means—

(a) if the scheme is not an umbrella scheme or is an umbrella scheme with only 1 subscheme—US$ 2 000; or

(b) if the scheme is an umbrella scheme with 2 or more subschemes—whichever is the lesser of the following:

(i) US$ 1 000 x number of subschemes;

(ii) US$ 10 000.

11.2.2 Annual fees—all QFC schemes(1) The operator of a QFC scheme must pay the Regulatory Authority

an annual fee for each year that the scheme is registered.Note Year is defined in the glossary.

(2) The annual fee for the first year of registration is the amount calculated as follows:

relevant amount x whole months in year after registration day

12Note Month is defined in the glossary.


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Rule 12.1.1

(3) The annual fee for the first year of registration must be paid within 21 days after the day the scheme is registered.

(4) The annual fee for a subsequent year of registration is the relevant amount.

(5) The annual fee for a subsequent year of registration must be paid on or before 1 January in the year.

(6) If an annual fee is not paid in accordance with this rule, the amount of the fee is increased by 1% for each month, or part of a month, that it remains unpaid after the date it became payable.

(7) Subrule (6) does not limit any action that the Regulatory Authority may take if an annual fee is not paid in accordance with this rule.

(8) In this rule:

relevant amount, for a QFC scheme, means—

(a) if the scheme is not an umbrella scheme or is an umbrella scheme with only 1 subscheme—US$ 2 000; or

(b) if the scheme is an umbrella scheme with 2 or more subschemes—whichever is the lesser of the following:

(i) US$ 1 000 x number of subschemes;

(ii) US$ 10 000.


page 441



Rule 12.1.2

11.2.3 Waiver etc of fees—all QFC schemesThe Regulatory Authority may, if it considers it equitable to do so, reduce, waive or refund all or part of a fee payable under this part.


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Rule 12.1.1

Part 11.3 Providing scheme administration—non-QFC schemes

11.3.1 Client money and assets—all non-QFC schemes(1) An authorised firm that is providing scheme administration for a

non-QFC scheme must not hold or control money or assets belonging to third parties in relation to providing scheme administration for the scheme.Note Providing scheme administration and money are defined in the

glossary.

(2) However, subrule (1) does not apply to the holding of a cheque to the order of the non-QFC scheme’s bank account if the cheque is securely held for a maximum of 3 business days before being deposited into the bank account or returned to the drawer of the cheque.


page 443



Rule 12.1.2


12.1.1 Existing applications for registration(1) This rule applies if—

(a) before the commencement of this rule, an application had been made under the Collective Investment Funds Rulebook for the registration of a scheme; but

(b) the application had not been finally dealt with before the commencement of this rule.

(2) If the scheme’s constitutional document does not contain a statement that the scheme is a private placement fund, the application must be dealt with as if it had been made under these rules.

(3) If the scheme’s constitutional document contains a statement that the scheme is a private placement fund, the application must be dealt with as if it had been made under PRIV.


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Rule 12.1.1

12.1.2 Existing registered QFC qualified investor funds(1) This rule applies if, immediately before its commencement, an

entity was registered under the Collective Investment Funds Rulebook as a qualified investor fund and was not a private placement fund.

(2) The entity is taken, on the commencement of this rule, to be registered under these rules as a qualified investor scheme.

(3) However, if—

(a) immediately before the commencement of this rule, the entity’s constitutional document and latest filed prospectus complied with the Collective Investment Funds Rulebook, after taking into account any waiver or modification in force under the Financial Services Regulations in relation to the entity; butNote Constitutional document is defined in r 3.1.1.

Latest filed prospectus is defined in the glossary(b) after the commencement the constitutional document or latest

filed prospectus (or both) do not comply with a provision of these rules;


page 445



Rule 12.1.2

then—

(c) the constitutional document and latest filed prospectus need not comply with the provision until 31 December 2011; and

(d) until the constitutional document and latest filed prospectus are amended, as required, to comply with the provision, the provision has effect subject to the constitutional document and latest filed prospectus.

(4) Any waiver or modification in force in relation to the entity under the Financial Services Regulations continues to apply in relation to the entity in accordance with its terms until the earlier of the following:

(a) the waiver or modification is revoked;

(b) 31 December 2011.

(5) Subrules (3) and (4) and this subrule expire on 31 December 2011.


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Prospectus content—QFC retail schemes Schedule 4

Rule S4.6

Schedule 1 Arrangements not collective investment schemes

(see r 1.2.1)

S1.1 Individual investment management arrangementsAn arrangement is not a scheme if—

(a) the property to which the arrangement relates (other than cash awaiting investment) consists of investments of 1 or more of the following kinds:

(i) shares;

(ii) debt instruments;

(iii) warrants;

(iv) options;

(v) units in a collective investment scheme;

(vi) long term insurance contracts; andNote Investment, share, debt instrument,

warrant, option and long term insurance


page 447


Schedule 4 Prospectus content—QFC retail schemes

Rule S4.8

contract are defined in the glossary. Unit is defined in r 1.2.4.

(b) each participant in the arrangement is entitled to a part of the property and to withdraw the part at any time; and

(c) each of the following provisions applies to the arrangement:

(i) the contributions of the participants are not pooled;

(ii) the profits or income out of which payments are to be made are not pooled;

(iii) the parts of the property to which the different participants are entitled are bought and sold separately only when a person becomes or ceases to be a participant.


V4



Rule S4.6

S1.2 Pure deposit-based arrangementsAn arrangement is not a scheme if the whole amount of the contribution of each participant in the arrangement is a deposit accepted by an authorised firm with an authorisation for deposit taking.Note Authorised firm, authorisation and deposit taking are defined in

the glossary.

S1.3 Arrangements not operated by way of businessAn arrangement is not a scheme if it is operated otherwise than by way of business.

S1.4 Debt issues(1) An arrangement is not a scheme if it is an arrangement under

which the rights or interests of participants in the arrangement are represented by investments of 1, and only 1, of the following kinds:

(a) debt instruments if they are—

(i) issued by—

(A) a single corporation that is not a CIC; or


page 449



Rule S4.8

(B) a single issuer that is not a corporation; and

(ii) for instruments mentioned in subparagraph (i) (B)—issued or guaranteed by—

(A) the government of any jurisdiction; or

(B) a public or local authority of any jurisdiction; and

(iii) not convertible or exchangeable for investments of any other kind;

Note Debt instrument, corporation, jurisdiction and investment are defined in the glossary. CIC is defined in r 1.3.7.

(b) debt instruments if—

(i) they are instruments to which paragraph (a) (other than subparagraph (iii)) applies; and

(ii) they are convertible or exchangeable for shares; and

(iii) the shares are issued by—

(A) the same person that issued the debt instruments; or


V4



Rule S4.6

(B) a single other issuer;Note Share is defined in the glossary.

(c) warrants if—

(i) they are issued otherwise than by a CIC; and

(ii) they give rights to investments that—

(A) are issued by the same issuer; and

(B) are debt instruments mentioned in paragraph (a) or (b) or shares.

Note Warrant is defined in the glossary.(2) An arrangement must not be taken not to be an arrangement to

which subrule (1) applies only because 1 or more of the participants is a person (the counterparty)—

(a) whose ordinary business—

(i) involves the person in conducting 1 or more relevant activities; or

(ii) would, apart from any exclusions under the Financial Services Regulations, schedule 3 (Regulated Activities and Permitted Activities), part 2 (Specified


page 451



Rule S4.8

Activities), involve the person in conducting 1 or more relevant activities; and

(b) whose rights or interests in the arrangement are or include rights or interests under a swap arrangement.

(3) In this rule:

relevant activities means regulated activities of any of the following kinds:

(a) dealing in investments;

(b) arranging deals in investments;

(c) providing custody services;

(d) arranging the provision of custody services;

(e) managing investments;

(f) advising on investments;

(g) providing credit facilities;

(h) arranging credit facilities;

(i) operating collective investment schemes.Note Regulated activity and the regulated activities mentioned in para

(a) to (i) are defined in the glossary.


V4



Rule S4.6

swap arrangement means an arrangement—

(a) the purpose of which is to facilitate the making of payments to participants, whether or not of a particular amount, in a particular currency or at a particular time or rate of interest; and

(b) under which the counterparty—

(i) is entitled to receive amounts, whether representing principal or interest, payable in relation to any property subject to the arrangement or amounts worked out by reference to those amounts; and

(ii) makes payments, whether or not of the same amount or in the same currency as amounts mentioned in subparagraph (i), that are worked out in accordance with an agreed formula by reference to those amounts.


page 453



Rule S4.8

S1.5 Common accountsAn arrangement is not a scheme if—

(a) it is an arrangement under which the rights or interests of participants are rights to or interests in money held in a common account; and

(b) that money is held in the account on the understanding that an amount representing the contribution of each participant is to be applied—

(i) in making payments to the participant; or

(ii) in satisfaction of amounts owed by the participant; or

(iii) in the acquisition of property for the participant or the provision of services to the participant.

S1.6 Arrangements entered into for commercial purposes related to existing businesses

(1) An arrangement is not a scheme if each of the participants in the arrangement—

(a) conducts a business activity other than an excluded activity; and


V4



Rule S4.6

(b) enters into the arrangement for commercial purposes related to the business activity.

(2) However, subrule (1) does not apply if the participant will conduct the business activity only because the participant is a participant in the arrangement.

(3) In this rule:

excluded activity means regulated activities of any of the following kinds:



(c) providing custody services;

(d) arranging the provision of custody services;

(e) managing investments;

(f) advising on investments;

(g) providing credit facilities;

(h) arranging credit facilities;


page 455



Rule S4.8

(i) operating collective investment schemes.Note Regulated activity and the regulated activities mentioned in para

(a) to (i) are defined in the glossary.

S1.7 Group arrangementsAn arrangement is not a scheme if each of the participants is a corporation in the same group as the person responsible for managing the property held for or in the arrangement.Note Corporation, group and property are defined in the glossary.

S1.8 Franchise arrangements(1) A franchise arrangement is not a scheme.

(2) In this rule:

franchise arrangement means an arrangement under which a person earns profits or income by exploiting a right given by the arrangement to use—

(a) a trade mark or design or other intellectual property; or

(b) the goodwill attached to it.


V4



Rule S4.6

S1.9 Timeshare arrangementsAn arrangement is not a scheme if the rights or interests of the participants are timeshare rights.

S1.10 Other arrangements relating to use or enjoyment of propertyAn arrangement is not a scheme if—

(a) the predominant purpose of the arrangement is to enable the participants in the arrangement to share in the use or enjoyment of property or to make its use or enjoyment available free of charge to others; and

(b) the property to which the arrangement relates—

(i) does not consist of the currency of any jurisdiction; and

(ii) does not consist of or include—

(A) a specified product; or


page 457



Rule S4.8

(B) a product that would be a specified product apart from any exclusion in Financial Services Regulations, schedule 3 (Regulated Activities and Permitted Activities), part 3 (Specified Products).

Note Property, jurisdiction and specified product are defined in the glossary.

S1.11 Arrangements involving issue of certificates representing investmentsAn arrangement is not a scheme if the rights or interests of the participants in the arrangement are securities receipts in relation to securities of a single issuer.Note Securities receipt and security are defined in the glossary.

S1.12 Clearing servicesAn arrangement is not a scheme if its purpose is the provision of clearing services and the services are provided by an authorised firm.Note Authorised firm is defined in the glossary.


V4



Rule S4.6

S1.13 Contracts of insuranceA contract of insurance is not an arrangement that is a scheme.Note Contract of insurance is defined in the glossary.

S1.14 Corporations(1) A corporation incorporated in the QFC is not an arrangement

that is a scheme unless it is—

(a) a CIC; or

(b) a CIP; or

(c) another permitted form of QFC scheme.Note Corporation is defined in the glossary. CIC, CIP and another

permitted form of QFC scheme are defined in div 1.3.B.

(2) A corporation (other than a partnership) incorporated outside the QFC is not an arrangement that is a scheme unless the arrangement meets the property condition in subrule (3) and the investment condition in subrule (4).


page 459



Rule S4.8

(3) For subrule (2), an arrangement meets the property condition if—

(a) it is made in relation to property that belongs beneficially to, and is managed by or on behalf of, the corporation; and

(b) the corporation has for its purpose the investment of its property with the aim of—

(i) spreading investment risk; and

(ii) giving its members the benefit of the results of the management of its property.

Note Property is defined in the glossary.

(4) For subrule (2), an arrangement meets the investment condition if, in relation to the corporation, a reasonable investor would, if the investor were to take part in the arrangement—

(a) expect to be able to realise, within a period appearing to the investor to be reasonable (or, for a closed-ended corporation, at the end of the corporation’s operation), the investor’s investment in the arrangement (represented, at any time, by the value of shares in, or securities of, the


V4



Rule S4.6

corporation held by the investor as a participant in the arrangement); and

(b) be satisfied that the investment, if realised, would be realised on a basis calculated completely or mainly by reference to the value of property in relation to which the corporation makes arrangements.

(5) In deciding whether the investment condition is met, no account may be taken of any actual or potential redemption or repurchase of shares or securities under provisions in force in any jurisdiction other than the QFC corresponding to the Companies Regulations 2005, article 31 (Redemption or purchase of own shares).

(6) However, the Regulatory Authority may, by written notice given to the corporation, declare that subrule (1) or (2) does not apply in relation to the corporation.

(7) The Regulatory Authority may make a declaration under subrule (6) if it considers that making the declaration is desirable to protect—

(a) the interests of participants or potential participants in the corporation; or


page 461



Rule S4.8

(b) the financial system operating in or from the QFC.

(8) If the Regulatory Authority gives the corporation a notice under subrule (6), the notice must—

(a) give reasons for the decision to make the declaration; and

(b) tell the corporation that it may appeal to the Regulatory Tribunal against the decision.

S1.15 Partnerships(1) A partnership incorporated or otherwise established in the QFC

as a partnership (and not a branch) is not an arrangement that is a scheme unless it is—

(a) a CIP; or

(b) another permitted form of QFC scheme.Note CIP and another permitted form of QFC scheme are defined in

div 1.3.B.

(2) A partnership incorporated or otherwise established outside the QFC is not an arrangement that is a scheme unless the arrangement meets the property condition in subrule (3) and the investment condition in subrule (4).


V4



Rule S4.6

(3) For subrule (2), an arrangement meets the property condition if—

(a) it is made in relation to property that belongs beneficially to, and is managed by or on behalf of, the partnership; and

(b) the partnership has for its purpose the investment of its property with the aim of—

(i) spreading investment risk; and

(ii) giving its members the benefit of the results of the management of its property.

Note Property is defined in the glossary.

(4) For subrule (2), an arrangement meets the investment condition if, in relation to the partnership, a reasonable investor would, if the investor were to take part in the arrangement—

(a) expect to be able to realise, within a period appearing to the investor to be reasonable (or, for a closed-ended corporation, at the end of the corporation’s operation), the investor’s investment in the arrangement (whether or not represented, at any time, by the value of the investor’s


page 463



Rule S4.8

percentage interest in, or securities of, the partnership held by the investor as a participant in the arrangement); and

(b) be satisfied that the investment, if realised, would be realised on a basis calculated completely or mainly by reference to the value of property in relation to which the partnership makes arrangements.

(5) However, the Regulatory Authority may, by written notice given to the partnership, declare that subrule (1) or (2) does not apply in relation to the partnership.

(6) The Regulatory Authority may make a declaration under subrule (5) if it considers that making the declaration is desirable to protect—

(a) the interests of participants or potential participants in the partnership; or

(b) the financial system operating in or from the QFC.

(7) If the Regulatory Authority gives the partnership a notice under subrule (5), the notice must—

(a) give reasons for the decision to make the declaration; and


V4



Rule S4.6

(b) tell the partnership that it may appeal to the Regulatory Tribunal against the decision.

S1.16 Profit sharing investment accounts(1) A profit sharing investment account is not an arrangement that

is a scheme.

(2) In subrule (1):

profit sharing investment account has the meaning given by ISFI, rule 1.2.3.


page 465



Rule S4.8

Schedule 2 Constitutional document content—QFC schemes

(see r 3.1.2)

Part S2.1 Constitution requirements—all QFC schemes

S2.1 Name of schemeA statement of the name of the scheme.

S2.2 Scheme is established in QFC etcA statement that—

(a) the scheme is a collective investment scheme established in the QFC; and

(b) the constitutional document is governed by the law applying in the QFC in relation to collective investment schemes.


V4



Rule S4.6

S2.3 Legal form of scheme etcA statement of the legal form of the scheme.Note For the permitted legal forms of QFC schemes, see r 1.3.6.

S2.4 Islamic fundsFor an Islamic fund—

(a) a statement that the scheme (or subscheme) is an Islamic fund and consequently that its entire business operations are conducted in accordance with Shari’a; and

(b) a statement providing details of its Shari’a Supervisory Board.

Note Islamic fund is defined in r 1.3.11. Shari’a Supervisory Board is defined in the glossary.

S2.5 Investment objectives and policy etcThe following statements:

(a) a statement of the scheme’s investment objectives (including its financial objectives) and, in particular—

(i) the types of investments in which it (and, if applicable, each subscheme) may invest; and


page 467



Rule S4.8

(ii) the scheme’s investment strategies, including its approach to borrowing and gearing;

(b) that the object of the scheme is to invest in investments of those types with the aim of spreading investment risk and giving unitholders the benefits of the investments;

(c) a statement of the scheme’s policy for achieving its investment objectives.

Note Investment and borrowing are defined in the glossary. Subscheme is defined in r 1.2.11.

S2.6 Duration of limited schemesIf the duration of the scheme is limited, a statement to that effect, of the duration of the scheme and, if appropriate, of any conditions for extending the duration of the scheme.

S2.7 Unitholder’s liability to pay(1) A provision that—

(a) a unitholder is not liable to make any further payment for a unit after paying the price for the unit; and


V4



Rule S4.6

(b) no further liability can be imposed on the unitholder in relation to the unit.

Note Unit and unitholder are defined in r 1.2.4 and r 1.2.5 respectively. Price is defined in the glossary.

(2) A provision that the unitholders are not liable for—

(a) the debts or other liabilities of the scheme; or

(b) acts or omissions of the operator; or

(c) acts or omissions of the independent entity.

S2.8 Fees, charges and other expenses of schemeEach of the following statements:

(a) that fees, charges and other expenses in relation to the scheme may be taken out of scheme property;

(b) a statement of how the amounts of fees, charges and other expenses are to be calculated.

Note Scheme property is defined r 1.2.3.

S2.9 Classes of unitsA statement of—

(a) the classes of units that may be issued for the scheme; and


page 469



Rule S4.8

(b) for an umbrella scheme—the classes of units that may be issued for each subscheme of the scheme; and

(c) the rights attaching to units in each class, including any provision for the expression of the rights in 2 or more denominations.

Note Class and issue are defined in the glossary. Umbrella scheme and subscheme are defined in r 1.2.11.

S2.10 Income and capital distribution(1) A statement providing details of—

(a) the distribution policy of the scheme; and

(b) the person responsible for calculating, transferring, allocating and distributing income or capital for any class of unit in issue during an accounting period; and

(c) any provision for payment of income or capital and when income or capital must be distributed.

(2) If relevant, a provision for income equalisation.Note Income equalisation is defined in the glossary.


V4



Rule S4.6

S2.11 Investment and borrowing restrictions(1) A statement providing details of all investment restrictions

applying to the scheme.

(2) A statement providing details of all borrowing restrictions applying to the scheme, including, for a qualified investor scheme, the scheme’s permitted percentage under rule 6.4.1 (Borrowing—QFC qualified investor schemes).Note Investment and borrowing are defined in the glossary.

S2.12 Management of borrowing risksA statement providing details of how any risks posed by borrowings of the scheme are to be managed.Note Borrowing is defined in the glossary.

S2.13 Valuation and pricing(1) A statement setting out the basis for, and frequency of,

valuation of the scheme.

(2) A statement setting out the basis for, and frequency of, pricing of each class of units in the scheme.Note Class is defined in the glossary.


page 471



Rule S4.8

S2.14 Base currencyA statement of the base currency of the scheme.Note Base currency is defined in the glossary.

S2.15 Functions of operator and independent entity(1) A statement providing details of the functions of the operator

under these rules in relation to the scheme.

(2) A statement providing details of the functions of the independent entity under these rules in relation to the scheme.

S2.16 Responsibility statementA provision stating that nothing in the constitutional document has the effect of exempting the operator or independent entity from, or indemnifying the operator or independent entity against, any liability of the operator or independent entity to a participant under the law applying in the QFC.Note Operator is defined in r 1.2.8. Independent entity is defined in r

1.2.9. Participant is defined in r 1.2.2.


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Rule S4.6

S2.17 MeetingsA statement providing details of the following:

(a) the procedures for calling meetings of unitholders;

(b) resolutions and voting at meetings of unitholders;

(c) the voting rights of unitholders;

(d) the matters that require the approval of unitholders;

(e) the matters that require the approval of an ordinary resolution;

(f) the matters that require the approval of a special resolution.

Note Ordinary resolution and special resolution are defined in the glossary.

S2.18 Other statements and provisions for CIC(1) For a CIC, the following statements:

(a) a statement that the scheme is an open-ended company with variable share capital;


page 473



Rule S4.8

(b) a statement providing particulars of the scheme’s capital structure, including the maximum and minimum sizes of the scheme’s capital;

(c) a statement of the proportion of a larger denomination share represented by a smaller denomination share for any relevant class of units.

Note CIC is defined in r 1.3.7. Larger denomination share and smaller denomination share are defined in r 3.2.2 (2).

(2) For a CIC, a provision authorising the allocation of redeemable shares without limit by reference to the CIC’s net asset value at the relevant time.Note Net asset value is defined in the glossary.

S2.19 CIP partnership agreement binding etcFor a CIP, a statement that the partnership agreement—

(a) is binding on each unitholder as if the unitholder had been a party to it; and


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Rule S4.6

(b) authorises and requires the operator and independent entity to do everything required or permitted of them by its terms.

Note CIP is defined in r 1.3.8. Partnership agreement is defined in the glossary.

S2.20 CIT trust deed binding etcFor a CIT, a statement that the trust instrument—

(a) is binding on each unitholder as if the unitholder had been a party to it; and

(b) authorises and requires the operator and independent entity to do everything required or permitted of them by its terms.

Note CIT is defined in r 1.3.9. Trust instrument is defined in the glossary.


page 475



Rule S4.8

S2.21 CIT declaration of trustFor a CIT, a statement that, subject to the trust instrument and the Collective Investment Schemes Rules 2010—

(a) the scheme property (other than amounts in any distribution account) is held by the independent entity on trust for the unitholders—

(i) according to the number of units held by each unitholder; or

(ii) if relevant, according to the number of individual shares in the scheme property represented by the units held by each unitholder; and

(b) the amounts in any distribution account are held by the independent entity on trust to distribute or apply in accordance with the trust instrument and those rules.

Note CIT is defined in r 1.3.9. Trust instrument and distribution account are defined in the glossary. Scheme property is defined in r 1.2.3.


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Rule S4.6

S2.22 Assets other than cash for issue or redemptionIf relevant, a statement authorising payment for the issue or redemption of units in the scheme to be made by the transfer of assets other than cash.Note Issue and redemption are defined in the glossary.

S2.23 Suspension and winding-upA statement providing details of—

(a) the grounds on which the operator may initiate a suspension of the scheme; and

(b) the methodology for working out the rights of unitholders to participate in the scheme property on winding-up.

S2.24 Amendment of constitutional documentA statement providing details of how the constitutional document may be amended.


page 477



Rule S4.8

S2.25 Redemption of units held in breach of QFC lawA statement that, if the holding of units by a unitholder is (or is reasonably considered by the operator to be) in breach of the Collective Investment Schemes Rules 2010, any other law applying in the QFC or the constitutional document, the units must be redeemed.Note Redemption is defined in the glossary.

S2.26 Documents evidencing title to unitsA statement providing details of any documents evidencing title to units.Note Document evidencing title is defined in the glossary.

S2.27 Other relevant mattersA statement providing details of the matters—

(a) necessary to enable the scheme, the operator and independent entity to obtain any privilege or power provided in these rules that is not otherwise provided in the constitutional document; and


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Rule S4.6

(b) otherwise required by these rules to be provided in the constitutional document.

Part S2.2 Extra constitution requirements—qualified investor schemes

S2.28 Qualified investor scheme statement—QFC qualified investor schemesA statement that the scheme is a qualified investor scheme.

S2.29 Only qualified investors can be unitholders in qualified investor schemes—QFC qualified investor schemesA statement that units in the scheme can only be recorded in the unitholder register in the name of a person who is a qualified investor.Note Qualified investor, for a QFC scheme, is defined in r 1.2.12 (2).


page 479



Rule S4.8

S2.30 Limits on unit issue and redemption—QFC qualified investor schemesA statement providing details of—

(a) when the issue of units of any particular class may be limited; and

(b) the provisions relating to any restrictions on the right to redeem units of any class.

Note Issue, class and redemption are defined in the glossary.

Part S2.3 Extra constitution requirement—UCITS type schemes

S2.31 UCITS type scheme statement—QFC UCITS type schemesA statement that the scheme is a UCITS type scheme.


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Rule S4.6

Part S2.4 Extra constitution requirements—money-market funds

S2.32 Money-market fund statement—QFC money-market fundsA statement that the scheme is a money-market fund.

S2.33 Primary investment objective etc—QFC money-market funds

(1) A statement that the scheme’s primary investment objective is to maintain the scheme’s net asset value.Note Net asset value is defined in the glossary.

(2) The statement mentioned in subrule (1) must specify whether the scheme’s net asset value is to be maintained—

(a) constant at par (net of earnings); or

(b) at the value of a participant’s initial capital plus earnings.


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Rule S4.8

(3) A statement that, with a view to achieving the scheme’s primary investment objective, the scheme may invest only in—

(a) high quality approved money-market instruments; and

(b) on an ancillary basis, deposits with eligible banks.Note 1 Approved money market instrument is defined in r 7.1.5.

Note 2 For the meaning of high quality approved money-market instrument, see the following: .

r 6.1.5 (2) (Investments by money-market funds—QFC qualified investor schemes)

r 7.2.4 (2) (Investments by money-market funds— QFC retail schemes).

Note 3 Deposit and eligible bank are defined in the glossary.


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Rule S4.6

Schedule 3 Prospectus content—QFC qualified investor schemes

(see r 5.2.3)

S3.1 Document statusA statement that the document is the prospectus of the QFC qualified investor scheme as at a particular date.

S3.2 Description of scheme etcThe following information and statements:

(a) the name of the scheme;

(b) that the scheme is registered as a qualified investor scheme under the Collective Investment Schemes Rules 2010;

(c) the registration number given to the scheme by the Regulatory Authority;

(d) the legal form of the scheme and that it is an open-ended scheme;


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(e) if the scheme (or a subscheme) is an Islamic fund—that the scheme (or subscheme) is an Islamic fund;

(f) if the scheme (or a subscheme) is a money-market fund—that the scheme (or subscheme) is a money-market fund;

(g) that the unitholders are not liable for—

(i) the debts and other liabilities of the scheme; or

(ii) acts or omissions of the operator; or

(iii) acts or omissions of the independent entity;

(h) if the scheme has not started to operate—when the scheme is expected to start to operate;

(i) whether it is a listed scheme or intended to become a listed scheme;

(j) if the duration of the scheme is limited—a statement to that effect, an indication of the duration of the scheme and, if appropriate, of any conditions for extending the duration of the scheme;

(k) the base currency of the scheme;


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(l) if the scheme is a CIC—its capital structure, including the maximum and minimum sizes of its capital;

(m) if applicable, any minimum initial investment in the scheme;

(n) that any notice or other document may be served on the operator or independent entity at its registered address in the QFC or, if the independent entity is not an authorised firm, at its address for service;

(o) the circumstances in which the scheme may be wound up and a summary of the procedure for, and the rights of the unitholders under, a winding-up;

(p) the governing law for the scheme.

S3.3 Islamic fundsIf the scheme (or a subscheme) is an Islamic fund, the following information:

(a) that all operations of the scheme (or subscheme) must be conducted in accordance with Shari’a;

(b) the names of the members of the Shari’a Supervisory Board and their qualifications and education;


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(c) the manner and frequency of Shari’a reviews;

(d) the disclosure required by AAOIFI FAS 14.Note Shari’a Supervisory Board and AAOIFI are defined in the

glossary.

S3.4 Investment objectives and policy etc(1) Sufficient information to enable a unitholder to ascertain the

following:

(a) the scheme’s investment objectives (including its financial objectives) and, in particular—

(i) the types of investments in which it (and, if applicable, each subscheme) may invest; and


(b) the scheme’s policy for achieving its investment objectives, including—

(i) the general nature of the portfolio and any intended specialisation; and


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(ii) any policy for the spreading of risk in the scheme property; and

(iii) its policy in relation to the exercise of borrowing powers;

(c) a description of any restrictions in the assets in which investments may be made;

(d) the extent (if any) to which the investment policy does not envisage the scheme property remaining fully invested at all times;

(e) the scheme’s policy for managing any risks posed by borrowings of the scheme.

Note Rule 5.2.3 (1) (General information requirements for prospectus—all QFC schemes) requires the prospectus to contain information in relation to—

(a) the merits and risks of participating in the scheme; and(b) the extent and characteristics of the risks accepted by

participating in the scheme.

(2) Details of all borrowing restrictions applying to the scheme, including the scheme’s permitted percentage under rule 6.4.1 (Borrowing—QFC qualified investor schemes).


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(3) For investments in immovables, the following information:

(a) the jurisdictions where immovables in which the scheme may invest are located;

(b) the scheme’s policy in relation to insurance of immovables forming part of the scheme property;

(c) the scheme’s policy in relation to granting options over immovables in the scheme property and the purchase of options on immovables;

(d) if investment in a non-Qatari immovable has been, or is to be, made through an intermediate holding vehicle or a series of intermediate holding vehicles—a statement disclosing the existence of the intermediate holding vehicle or series of intermediate holding vehicles and confirming that the purpose of the vehicle, or each of the vehicles, is to enable the scheme to hold immovables located outside Qatar.

(4) If intended, a statement that the scheme property may consist of units in a scheme (the second scheme) that is managed or operated by the operator or a person in the same group as the operator, and a statement about—


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(a) the basis of the maximum amount of the charges in relation to transactions in the second scheme; and

(b) the extent to which the charges must be reimbursed to the scheme.

(5) If intended, a statement that stock lending arrangements or repo agreements may be entered into for the scheme, the procedures that must be applied in relation to them and the collateral that must be required.

S3.5 Distributions, accounting dates etc(1) Relevant details of accounting and distribution dates (including

the accounting reference date), and a description of the procedures—

(a) for calculating and applying income and capital (including how any distributable income and capital is to be paid); and

(b) relating to unclaimed distributions.

(2) Details of the main taxes levied on the scheme’s income and capital, including tax (if any) deducted on distributions to unitholders.


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S3.6 Characteristics of units in the schemeInformation about the following:

(a) if there are 2 or more classes of units in issue or available for issue—the name of each class and the rights attached to each class so far as they differ from the rights attached to other classes;

(b) how unitholders may exercise their voting rights and what these are;

(c) if mandatory redemption or conversion of units from one class to another may be required—in what circumstances that may be required;

(d) for a CIT—the fact that the nature of the right represented by units is that of a beneficial interest under a trust;

(e) if applicable, the circumstances where conversion from one class of units to another is not permitted;

(f) if applicable, the terms on which a unit in one class may be converted to a unit in another class.


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S3.7 OperatorThe following information about the operator:

(a) its name;

(b) the nature of its legal status;

(c) the date and place of its incorporation;

(d) the address of its registered office in the QFC;

(e) if it is a subsidiary—the name of its ultimate parent entity and the jurisdiction where the parent entity is incorporated;

(f) if the duration of its legal status is limited—when its legal status will or may cease;

(g) if it has share capital—the amount of its issued share capital and how much is paid up;

(h) a summary of its functions under these rules in relation to the scheme;

(i) a summary of the material provisions of the contracts to which it is a party in relation to the scheme that may be relevant to unitholders, including provisions (if any)


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relating to remuneration, remuneration sharing, termination, compensation on termination, and indemnity;

(j) a summary of any outsourcings entered into by it under these rules in relation to the scheme;

(k) the operator’s policy in relation to the operator holding units in the scheme.

S3.8 Independent entity(1) The following information about the independent entity:

(a) its name;



(d) whether it is an authorised firm;

(e) if it is an authorised firm—the address of its registered office in the QFC;

(f) if it is not an authorised firm—the following:

(i) its contact details and address for service;

(ii) the regulatory regimes and legal systems (including insolvency laws) to which it is subject;


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(iii) the regulatory authorisations (however described) held by it;

(iv) its arrangements for safeguarding the scheme property and its use of agents and service providers;

(v) the obligations applying to it, and the recourse available against it by the operator, the Regulatory Authority and unitholders, under those regulatory regimes and legal systems in relation to anything done or not done by it in relation to the scheme;

(vi) whether it has submitted to the jurisdiction of the Regulatory Authority, the QFC Court or both;

(g) if it is a subsidiary—the name of its ultimate parent entity and the jurisdiction where that parent entity is incorporated;

(h) if the duration of its legal status is limited—when its legal status will or may cease;

(i) if it has share capital—the amount of its issued share capital and the amount paid up;


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(j) a summary of its functions under these rules in relation to the scheme;

(k) a summary of the material provisions of the contracts to which it is a party in relation to the scheme that may be relevant to unitholders, including provisions (if any) relating to remuneration, remuneration sharing, termination, compensation on termination, and indemnity;

(l) a description of its main business activity;

(m) a summary of any outsourcings entered into by it under these rules in relation to the scheme.

(2) If the independent entity is not an authorised firm, a statement that the scheme property may be held in a jurisdiction outside the QFC and that the market practices, insolvency law and legal system applying in that jurisdiction may differ from those applying in the QFC.


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S3.9 Investment adviser and standing independent valuer(1) If an investment adviser is retained in relation to the business of

the scheme—

(a) its name; and

(b) whether it is an authorised firm; and

(c) if it conducts a significant activity other than providing services to the scheme as an investment adviser—what the significant activity is; and

(d) a summary of the material provisions of the contracts to which it is a party in relation to the scheme that may be relevant to unitholders, including provisions (if any) relating to remuneration, remuneration sharing, termination, compensation on termination, and indemnity.

(2) If the scheme has a standing independent valuer—

(a) its name; and

(b) a summary of the material provisions of the contracts to which it is a party in relation to the scheme that may be relevant to unitholders, including provisions (if any)


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relating to remuneration, remuneration sharing, termination, compensation on termination, and indemnity.

S3.10 AuditorThe name and address of the auditor of the scheme.

S3.11 Register of unitholdersDetails of the address in the QFC where the unitholder register, or a copy of the unitholder register, is available for inspection by unitholders and when it can be inspected.

S3.12 Payments out of scheme property(1) The payments that may be made out of the scheme property to

any person, whether by way of remuneration or charges for services, or reimbursement of expenses.

(2) For each category of remuneration, charges or expenses, the following information:

(a) the current rates or amounts of the remuneration, charges or expenses;

(b) how the remuneration, charges or expenses must be calculated and accrue and when they must be paid;


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(c) if notice has been given to unitholders of the operator’s intention to—

(i) introduce a new category of remuneration for its services; or

(ii) increase the basis of any current charge; or

(iii) change the basis of the treatment of a payment from the capital property;

particulars of that introduction, increase or change and when it will take place;

(d) the types of any other charges and expenses that may be taken out of the scheme property;

(e) if all or part of the remuneration or expenses is to be treated as a charge to capital—

(i) that fact; and

(ii) the basis of the charge that may be treated as a capital charge.

(3) A table substantially in the form of table S3.12 illustrating the effect of charges and expenses, together with the notes and statements following the table.


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Table S3.12 Charges and expenses for the scheme

One-off charges taken before or after you invest

Entry charge [insert percentage]%1

Exit charge [insert percentage]%1

This is the maximum that might be taken out of your money [insert as applicable before

it is invested or before the proceeds of your investment are paid out].

Charges taken from the fund over a year

Ongoing charges [insert percentage]%2

Charges taken from the fund under certain specific conditions

Performance fees [insert percentage]% a year of any returns the

fund achieves above the [insert name of benchmark].


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Note 1 The percentages shown in the entry and exit charges are the maximum figures. In some cases you might pay less.

Note 2 The percentage for the ongoing charges is based on expenses for the year ending [insert year]. This figure may vary from year to year. Ongoing charges excludes—

performance fees

portfolio transaction costs, other than entry and exit charges incurred when buying or selling units in another collective investment scheme.

Statements about charges and expensesThe charges you pay are used to pay the costs of running the scheme, including the costs of marketing and distributing it. These charges reduce the potential growth, and rate of return, of your investment.

S3.13 Dealing(1) Details of the following:

(a) the dealing days, and times on a dealing day, when the operator must receive instructions to issue or redeem units;


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(b) the procedures for—

(i) the issue and redemption of units; and

(ii) the settlement of transactions;

(c) the initial offer period and how it ends;

(d) the steps that must be taken by a unitholder in redeeming units before the unitholder can receive the proceeds in the redemption, including any relevant notice periods and the circumstances in which, and periods for which, payment may be deferred;

(e) the circumstances in which the redemption of units may be deferred, limited or suspended and how unitholders must be notified if this happens;

(f) how unitholders must be notified when the redemption of units is no longer deferred, limited or suspended;

(g) details of the minimum number, percentage or value of each class of unit in the scheme that—

(i) any single person may hold; and

(ii) may be the subject of any single transaction of issue or redemption;


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(h) if relevant, the circumstances in which the operator may arrange for, and the procedure for, the issue or redemption of units otherwise than in cash;

(i) the circumstances in which the issue of units in any class may be limited and the procedures relating to this, including the conditions to be met for the issue of units in the class;

(j) if the scheme is operating limited issue arrangements or limited redemption arrangements—details of the arrangements.Note Limited issue arrangements and limited

redemption arrangements are defined in the glossary.

S3.14 Valuation and pricing(1) A provision stating that there must be only a single forward

price for any unit calculated from time to time by reference to a particular valuation point.


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(2) Details about the following:

(a) how frequently, and at what times of the day, the scheme property must be regularly valued to calculate the price at which units in the scheme may be issued or redeemed, and a description of any circumstances in which the scheme property may be specially valued;

(b) how the value of the scheme property must be calculated in relation to each purpose for which it must be valued;

(c) how the price of units in each class must be calculated.

S3.15 Issue and redemption chargesIf the operator makes any charges on the issue and redemption of units, details of the charging structure and how notice must be provided to unitholders of any increase.

S3.16 General informationDetails of the following:

(a) when annual and half-yearly reports must be published;

(b) the scheme’s accounting standard;


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(c) the address in the QFC where copies of the constitutional document, any amending or supplemental instruments, and the most recent annual and half-yearly reports, may be inspected and copies may be obtained.

S3.17 Mandatory statement about prospectusThe following statement prominently displayed on the first page (not including any cover page) of the prospectus:

‘This prospectus relates to a collective investment scheme established in the Qatar Financial Centre and registered by the Qatar Financial Centre Regulatory Authority (the Regulatory Authority) as a qualified investor scheme.

The Regulatory Authority is not responsible for reviewing or verifying this prospectus or any related documents. The Regulatory Authority has not approved this prospectus or any related documents nor has the Regulatory Authority taken any steps to verify the statements, information or provisions in the prospectus or any related documents. The Regulatory Authority takes no responsibility for the accuracy of statements, information or provisions in this prospectus or any related documents.


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The units to which this prospectus relates may be difficult, and take some time, to sell. Payments of redemption proceeds may also be delayed.

Returns from units can go down as well as up and you may also lose all or part of your investment.

Past performance of units is not a reliable indication of the future performance.

Prospective purchasers of the units offered should conduct their own due diligence and consider seeking independent legal and financial advice before deciding to invest in the scheme.

This prospectus is intended for distribution only to a limited type of investor (a ‘qualified investor’ as defined in the Regulatory Authority’s Collective Investment Schemes Rules 2010) and must not be given to, or relied on, by anyone else’.

S3.18 Additional information for feeder fundsFor a feeder fund, the following information:

(a) a prominent risk warning to alert participants to the fact that they may be subject to higher fees arising from the layered investment structure;


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(b) details of the fees arising at the level of the feeder fund itself and the scheme (or subscheme) to which its investments are dedicated.

S3.19 Additional information for fund of fundsFor a fund of funds, the following information:


(b) details of the fees arising at the level of the fund of funds itself and, to the extent known, the schemes (and subschemes of umbrella schemes) to which its investments are dedicated.

S3.20 Additional statements and information for property fundsFor a property fund, the following statements and information:

(a) the nature of the commitment that participants will enter into;


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(b) a prominent risk warning that refers to the particular circumstances in property markets that can cause difficulties in meeting redemptions;

(c) details of transactions or agreements entered into, or proposed to be entered into, with affected persons;

(d) full particulars of the nature and extent of the interest (if any) of affected persons in the immovables owned, or proposed to be acquired, by the scheme;

(e) details of significant participants and the number or percentage of units held, or proposed to be held, by each of them;

(f) a statement to explain the standards according to which property valuations are conducted for the scheme;

(g) the maximum percentage of the scheme’s net asset value at any time that may consist of property-related assets that are not traded or dealt in on markets provided for in the constitutional document;

(h) the maximum percentage of the scheme’s net asset value at any time that may be invested in any single immovable


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and, if applicable, the conditions under which the scheme may depart from this restriction;

(i) the maximum percentage of the scheme’s net asset value at any time that may consist of immovables that are unoccupied and non-income producing or in the course of substantial development, redevelopment or refurbishment;

(j) the maximum percentage of the scheme’s net asset value at any time that may be invested in immovables that are subject to a security interest held otherwise than by the independent entity or its nominee or delegate.

S3.21 Information on umbrella schemesFor an umbrella scheme, the following information:

(a) that a unitholder may exchange units in a subscheme for units in any other subscheme (other than a subscheme that has limited the issue of units);

(b) that an exchange of units in a subscheme for units in another subscheme is treated as a redemption and issue;


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(c) that a unitholder who exchanges units in a subscheme for units in any other subscheme does not have the right to withdraw from or cancel the transaction;

(d) the operator’s policy for allocating between subschemes any assets of, or costs, charges and expenses payable out of, scheme property that are not attributable to any particular subscheme;

(e) what charges (if any) may be made on exchanging units in a subscheme for units in another subscheme;

(f) for each subscheme—the currency in which the scheme property attributed to it must be valued, and the price of units calculated and payments made, if this currency is not the base currency of the umbrella scheme;

(g) for an umbrella scheme constituted by a CIC—that the subschemes are not ‘ring-fenced’ and, if the umbrella scheme cannot meet liabilities attributable to any particular subscheme out of the assets attributable to that subscheme, the remaining liabilities may have to be met out of the assets attributable to other subschemes.


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S3.22 Application of prospectus contents to umbrella schemeFor an umbrella scheme, information, statements and provisions required must be provided—

(a) for each subscheme if the information, statements or provisions for any subscheme differ from those for any other; and

(b) for the umbrella scheme as a whole, but only if the information, statements or provisions are relevant to the umbrella scheme as a whole.


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(see r 5.2.3)

S4.1 Document statusA statement that the document is the prospectus of the QFC retail scheme as at a particular date.

S4.2 Description of scheme etcThe following information and statements:

(a) the name of the scheme;

(b) that the scheme is registered as a retail scheme under the Collective Investment Schemes Rules 2010;

(c) the registration number given to the scheme by the Regulatory Authority;

(d) the legal form of the scheme and that it is an open-ended scheme;

(e) that it is a UCITS type scheme;


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(f) if the scheme (or a subscheme) is an Islamic fund—that the scheme (or subscheme) is an Islamic fund;

(g) if the scheme (or subscheme) is a money-market fund—that the scheme (or subscheme) is a money-market fund;

(h) that the unitholders are not liable for—

(i) the debts and other liabilities of the scheme; or

(ii) acts or omissions of the operator or independent entity;

(i) if the scheme has not started to operate—when the scheme is expected to start to operate;

(j) whether it is a listed scheme or intended to become a listed scheme;

(k) if the duration of the scheme is limited—a statement to that effect, an indication of the duration of the scheme and, if appropriate, of any conditions for extending the duration of the scheme;

(l) the base currency of the scheme;

(m) if the scheme is a CIC—its capital structure, including the maximum and minimum sizes of its capital;


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(n) if applicable, any minimum initial investment;

(o) that any notice or other document may be served on the operator or independent entity at its registered address in the QFC or, if the independent entity is not an authorised firm, at its address for service;

(p) the circumstances in which the scheme may be wound up and a summary of the procedure for, and the rights of the unitholders under, a winding-up;

(q) the governing law for the scheme.

S4.3 Islamic fundsIf the scheme (or a subscheme) is an Islamic fund, the following information:

(a) that all operations of the scheme (or subscheme) must be conducted in accordance with Shari’a;

(b) the names of the members of the Shari’a Supervisory Board and their qualifications and education;

(c) the manner and frequency of Shari’a reviews;


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(d) the disclosure required by AAOIFI FSA 14.Note Shari’a Supervisory Board and AAOIFI are defined in the

glossary.

S4.4 Investment objectives and policy etcThe following information in relation to the scheme’s investment objectives, strategies and policy:

(a) the scheme’s investment objectives (including its financial objectives) and, in particular—

(i) the types of investments in which it (and, if applicable each subscheme) may invest; and


(b) the scheme’s policy for achieving its investment objectives, including—

(i) the general nature of the portfolio and any intended specialisation; and

(ii) the policy for the spreading of risk in the scheme property; and


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(iii) the policy in relation to the exercise of borrowing powers;

(c) an indication of any limits on the investment policy;

(d) the types of assets that the capital property may consist of;

(e) the proportion of the capital property that may consist of an asset of any description;

(f) the kind of transactions that may be effected for the scheme and an indication of any techniques and instruments or borrowing powers that may be used in the scheme’s management;

(g) for rule 7.1.7 (1) (b) (What is an eligible market?), a list of the markets through which the scheme may invest or deal in investments in accordance with these rules;

(h) any restrictions in the assets in which scheme property may be invested, including restrictions in the extent to which the scheme may invest in any type of asset and an indication of whether the restrictions are more onerous than those otherwise applying under these rules;

(i) the borrowing restrictions applying to the scheme;


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(j) if the scheme may invest in other schemes—the extent to which the scheme property may be invested in units in schemes that are managed by the operator or any associate of the operator;

(k) if the scheme is a feeder fund that (in relation to investment in units in schemes) is dedicated to units in a single scheme—details of the master scheme and the minimum (and, if relevant, maximum) investment that the feeder fund may make in it;

(l) if the scheme invests mainly in units in schemes, deposits or derivatives, or replicates an index—a prominent statement about this investment policy;

(m) if derivatives transactions may be used in the scheme—a prominent statement about whether the transactions are for the purpose of efficient portfolio management (including hedging) or meeting the investment objectives (or both), and the possible outcome of the use of derivatives on the scheme’s risk profile;

(n) the profile of the typical investor for whom the scheme is designed;


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(o) the historical performance of the scheme;Note For the obligations of authorised firms in

relation to information about actual past performance in financial promotions, see COND, r 3.3.3.

(p) if the scheme invests a substantial part of the scheme property in other schemes—a statement of the maximum level of management fees that may be charged to the scheme and to the schemes in which it invests;

(q) if the scheme’s net asset value is likely to have high volatility because of its portfolio composition or the portfolio management techniques that may be used—a prominent statement to that effect;

(r) if the scheme may invest substantially in deposits or money-market instruments—a risk warning drawing attention to the difference between the nature of a deposit and the nature of an investment in the scheme, with particular reference to the risk that the principal invested in the scheme may fluctuate;


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(s) a statement that any unitholder may obtain on request the kinds of information (which must be listed) mentioned in rule 5.2.2 (2) (Prospectus etc to be made available).

S4.5 Distributions, accounting and reporting dates etc(1) Information about reporting, accounting and distribution,

including the following:

(a) the accounting and distribution dates;

(b) a description of procedures—

(i) for calculating and applying income (including how any distributable income must be paid); and

(ii) relating to unclaimed distributions; and

(iii) if relevant, for calculating, paying and accounting for income equalisation;

(c) the accounting reference date and when annual and half-yearly long reports must be published;

(d) when annual and half-yearly short reports must be sent to unitholders.


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(2) Details of the main taxes levied on the scheme’s income and capital, including tax (if any) deducted on distributions to unitholders.

S4.6 Characteristics of units in the schemeInformation about the following:

(a) if there are 2 or more classes of units in issue or available for issue—the name of each class and the rights attached to each class so far as they differ from the rights attached to other classes;

(b) how unitholders may exercise their voting rights and what these are;

(c) if mandatory redemption or conversion of units from a class to another class may be required—in what circumstances that may be required;

(d) for CIT—the fact that the nature of the right represented by units is that of a beneficial interest under a trust;

(e) documents evidencing title to units.


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S4.7 OperatorThe following information about the operator;

(a) its name;



(d) the address of its registered office in the QFC;

(e) if it is a subsidiary—the name of its ultimate parent entity and the jurisdiction where the parent entity is incorporated;

(f) if the duration of its legal status is limited—when its legal status will or may cease;

(g) if it has share capital—the amount of its issued share capital and the amount paid up;

(h) a summary of its functions under these rules in relation to the scheme;

(i) a summary of the material provisions of the contracts to which it is a party in relation to the scheme that may be relevant to unitholders, including provisions (if any)


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relating to remuneration, remuneration sharing, termination, compensation on termination, and indemnity;

(j) a summary of any outsourcings entered into by it under these rules in relation to the scheme;

(k) the operator’s policy in relation to the operator holding units in the scheme.

S4.8 Independent entity(1) The following information about the independent entity:

(a) its name;



(d) whether it is an authorised firm;

(e) if it is an authorised firm—the address of its registered office in the QFC;

(f) if it is not an authorised firm—the following:

(i) its contact details and address for service;

(ii) the regulatory regimes and legal systems (including insolvency laws) to which it is subject;


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(iii) the regulatory authorisations (however described) held by it;

(iv) its arrangements for safeguarding the scheme property and its use of agents and service providers;

(v) the obligations applying to it, and the recourse available against it by the operator, the Regulatory Authority and unitholders, under those regulatory regimes and legal systems in relation to anything done or not done by it in relation to the scheme;

(vi) whether it has submitted to the jurisdiction of the Regulatory Authority, the QFC Court or both;

(g) if it is a subsidiary—the name of its ultimate parent entity and the jurisdiction where the parent company is incorporated;

(h) if the duration of its legal status is limited—when its legal status will or may cease;

(i) if it has share capital—the amount of its issued share capital and the amount paid up;


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(j) a summary of its functions under these rules in relation to the scheme;

(k) a summary of the material provisions of the contracts to which it is a party in relation to the scheme that may be relevant to unitholders, including provisions (if any) relating to remuneration, remuneration sharing, termination, compensation on termination, and indemnity;

(l) a description of its main business activity;

(m) a summary of any outsourcings entered into by it under these rules in relation to the scheme.

(2) If the independent entity is not an authorised firm, a statement that the scheme property may be held in a jurisdiction outside the QFC and that the market practices, insolvency law and legal system applying in that jurisdiction may differ from those applying in the QFC.

S4.9 Investment adviserIf an investment adviser is retained in relation to the business of the scheme—

(a) its name; and


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Rule S4.6

(b) whether it is an authorised firm; and

(c) if it conducts a significant activity other than providing services to the scheme as an investment adviser—what the significant activity is; and

(d) a summary of the material provisions of the contracts to which it is a party in relation to the scheme that may be relevant to unitholders, including provisions (if any) relating to remuneration, remuneration sharing, termination, compensation on termination, and indemnity.

S4.10 AuditorThe name and address of the auditor of the scheme.

S4.11 Relationships with other partiesThe relevant details of the following:

(a) the names of each member (however described) of the governing body of the operator, the independent entity or, for a CIC or CIP, the CIC or CIP;


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Rule S4.8

(b) the business activities of each person named under paragraph (a) if these activities are of significance to the scheme’s business;

(c) if any person named under paragraph (a) is a corporation in a group of which any other corporation member (however described) of the governing body is a member—that fact;

(d) if an investment adviser retained in relation to the business of the scheme is a corporation in a group of which any corporation member (however described) of the governing body of the operator, the independent entity or, for a CIC or CIP, the CIC or CIP is also a member—that fact;

(e) if an investment adviser retained in relation to the business of the scheme has the operator’s authority to make decisions for the operator—that fact and a description of the matters in relation to which it has authority;

(f) what functions (if any) the operator or independent entity has outsourced and to whom;

(g) in what capacity (if any) the operator acts in relation to any other schemes and the name of each of those schemes.


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Rule S4.6

S4.12 Register of unitholdersDetails of the address in the QFC where the register of unitholders, or a copy of the unitholder register, is available for inspection by unitholders and when it can be inspected.

S4.13 Payments out of scheme property(1) In relation to each type of payment from the scheme property,

details of the following:

(a) who the payment is made to;

(b) what the payment is for;

(c) if available, the rate or amount;

(d) if the rate or amount is not available—how it must be calculated and accrued;

(e) when must it be paid;

(f) if a performance fee is taken—a plain English statement of the maximum amount or percentage of the scheme property that the performance fee might represent in an annual accounting period together with examples of the operation of the performance fee.


page 525



Rule S4.8

(2) How notice must be given to unitholders of the operator’s intention to do any of the following:

(a) introduce a new category of remuneration for its services;

(b) increase the basis of any current charge;

(c) change the basis of the treatment of a payment from the capital property.

(3) A table substantially in the form of table S4.13 illustrating the effect of charges and expenses, together with the notes and statements following the table.


V4



Rule S4.6

Table S4.13 Charges and expenses for the scheme

One-off charges taken before or after you invest

Entry charge [insert percentage]%1

Exit charge [insert percentage]%1

This is the maximum that might be taken out of your money [insert as applicable before

it is invested or before the proceeds of your investment are paid out].

Charges taken from the fund over a year

Ongoing charges [insert percentage]%2

Charges taken from the fund under certain specific conditions

Performance fees [insert percentage]% a year of any returns the

fund achieves above [insert name of benchmark].


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Rule S4.8

Note 1 The percentages shown in the entry and exit charges are the maximum figures. In some cases you might pay less.

Note 2 The percentage for the ongoing charges is based on expenses for the year ending [insert year]. This figure may vary from year to year. Ongoing charges excludes—

performance fees

portfolio transaction costs, other than entry and exit charges incurred when buying or selling units in another collective investment scheme.

Statements about charges and expensesThe charges you pay are used to pay the costs of running the scheme, including the costs of marketing and distributing it. These charges reduce the potential growth, and rate of return, of your investment.

S4.14 Allocation of paymentsIf, in accordance with these rules, any income expense payments may be treated as a capital expense—

(a) that fact; and


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Rule S4.6

(b) the operator’s policy for treating any income expense as a capital expense; and

(c) a statement that this policy may result in capital erosion or constrain capital growth.

S4.15 Valuation and pricing(1) A provision stating that there must be only a single forward

price for any unit calculated from time to time by reference to a particular valuation point.

(2) Details of the following:

(a) how frequently, and at what times of the day, the scheme property must be regularly valued to calculate the price at which units in the scheme may be issued or redeemed, and a description of any circumstances in which the scheme property may be specially valued;

(b) how the value of the scheme property must be calculated in relation to each purpose for which it must be valued;

(c) how the price of units in each class must be calculated;

(d) where, and at what frequency, the most recent prices must be published.


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Rule S4.8

S4.16 DealingDetails of the following:

(a) the dealing days, and times on a dealing day, when the operator must receive instructions to issue or redeem units;

(b) the procedures for—

(i) the issue and redemption of units; and

(ii) the settlement of transactions;

(c) for a prospectus available during the initial offer period—

(i) the initial offer period; and

(ii) the initial price of a unit (in the base currency); and

(iii) the arrangements for issuing units during the initial offer period, including the operator’s intentions on investing the subscriptions received during the initial offer period; and

(iv) the circumstances when the initial offer must end; and

(v) whether units may be issued in a currency other than the base currency; and

(vi) any other relevant details of the initial offer;


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Rule S4.6

(d) the steps that must to be taken by a unitholder in redeeming units before the unitholder can receive the proceeds of the redemption, including any relevant notice periods and the circumstances in which, and periods for which, a payment may be deferred;

(e) the circumstances in which the redemption of units may be deferred or suspended and how unitholders must be notified if this happens;

(f) how unitholders must be notified when the redemption of units is no longer deferred or suspended;

(g) details of the minimum number, percentage or value of each class of unit in the scheme that—

(i) any single person may hold; and

(ii) may be the subject of any single transaction of issue or sale;

(h) whether certificates may be issued in relation to registered units;


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Rule S4.8

(i) if relevant, the circumstances in which the operator may arrange for, and the procedure for, the issue or redemption of units otherwise than for cash;

(j) the investment exchanges (if any) on which units in the scheme are or will be listed or dealt.

S4.17 DilutionDetails of what is meant by dilution, including—

(a) a statement explaining—

(i) that is not possible to predict accurately whether dilution is likely to happen; and

(ii) that a dilution adjustment is required to reduce the effect of dilution; and

(iii) the operator’s policy in relation to requiring a dilution levy together with an explanation of how this policy may affect the future growth of the scheme; and


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Rule S4.6

(b) a statement of the following:

(i) the operator’s policy in deciding when to require a dilution levy, including the operator’s policy on large deals;

(ii) the estimated rate or amount of any dilution levy or dilution adjustment based either on historical data or future projections;

(iii) the likelihood that the operator may require a dilution levy or make a dilution adjustment and the basis (historical or projected) on which the statement is made.

S4.18 Issue chargesIf relevant, a statement authorising the operator to make an issue charge and specifying the basis for, and current amount or rate of, the charge.


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Rule S4.8

S4.19 Redemption chargesIf relevant—

(a) a statement authorising the operator to deduct a redemption charge out of the proceeds of redemption; and

(b) if the operator makes a redemption charge—

(i) the current amount of the charge or, if it is variable, the rate or method of calculating it; and

(ii) if the amount, rate or method has been changed—that details of any previous amount, rate or method may be obtained from the operator on request; and

(iii) the order in which the units acquired at different times by a unitholder are taken to be redeemed for the imposition of the redemption charge.

S4.20 Meeting of unitholdersDetails of the following:

(a) the procedures for calling meetings of unitholders;

(b) resolutions and voting at meetings of unitholders;

(c) voting rights of unitholders;


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Rule S4.6

(d) the matters that require the approval of unitholders;

(e) for a CIC—whether annual general meetings must be held.

S4.21 General informationDetails of the following:

(a) the scheme’s accounting standard;

(b) the address in the QFC where copies of the constitutional document, any amending or supplemental instrument, and the most recent annual and half-yearly reports, may be inspected and copies may be obtained;

(c) how any notice or other document must or may be served on unitholders;

(d) the extent to which and the circumstances in which—

(i) the scheme is liable to pay or incur tax on any appreciation in the value of the scheme property or on the income derived from the scheme property; and

(ii) deductions by way of withholding tax may be made from distributions of income to unitholders and


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Rule S4.8

payments made to unitholders on the redemption of units;

(e) any possible fees or expenses not otherwise mentioned in this schedule, distinguishing between those to be paid by a unitholder and those to be paid out of the scheme property;

(f) if applicable, the names and addresses of any banker, lawyer, registrar, and any other person, conducting any significant activities in relation to the scheme.

S4.22 Mandatory statement about prospectusThe following statement prominently displayed on the first page (not including any cover page) of the prospectus:

‘This prospectus relates to a collective investment scheme established in the Qatar Financial Centre and registered by the Qatar Financial Centre Regulatory Authority (the Regulatory Authority) as a retail scheme.

The Regulatory Authority is not responsible for reviewing or verifying this prospectus or any related documents. The Regulatory Authority has not approved this prospectus or any related documents nor has the Regulatory Authority taken any


V4



Rule S4.6

steps to verify the statements, information or provisions in the prospectus or any related documents. The Regulatory Authority takes no responsibility for the accuracy of statements, information or provisions in this prospectus or any related documents.

Returns from units go down as well as up and you may also lose all or part of your investment.

Past performance of units is not a reliable indicator of future performance.

Prospective purchasers of the units offered should conduct their own due diligence and consider seeking independent legal and financial advice before deciding to invest in the scheme.’

S4.23 Additional information for feeder fundsFor a feeder fund, the following information:



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Rule S4.8

(b) details of the fees arising at the level of the feeder fund itself and the scheme (or subscheme) to which its investments are dedicated.

S4.24 Additional information for fund of fundsFor a fund of funds, the following information:


(b) details of the fees arising at the level of the fund of funds itself and, to the extent known, the schemes (and subschemes of umbrella schemes) to which its investments are dedicated.

S4.25 Information on umbrella schemesFor an umbrella scheme, the following information:

(a) that a unitholder may exchange units in a subscheme for units in any other subscheme;

(b) that an exchange of units in a subscheme for units in another subscheme is treated as a redemption and issue;


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Rule S4.6

(c) that a unitholder who exchanges units in a subscheme for units in any other subscheme does not have the right to withdraw from or cancel the transaction;

(d) the policy for allocating between subschemes any assets of, or costs, charges and expenses payable out of, scheme property that are not attributable to any particular subscheme;

(e) what charges (if any) may be made on exchanging units in a subscheme for units in another subscheme;

(f) for each subscheme—the currency in which the scheme property allocated to it must be valued, and the price of units calculated and payments made, if this currency is not the base currency of the umbrella scheme;

(g) for an umbrella scheme constituted by a CIC—that the subschemes are not ‘ring-fenced’ and, if the umbrella scheme cannot meet liabilities attributable to any particular subscheme out of the assets attributable to that subscheme, the remaining liabilities may have to be met out of the assets attributable to other subschemes.


page 539



Rule S4.8

S4.26 Application of prospectus contents to umbrella schemeFor an umbrella scheme, information, statements and provisions required must be provided—

(a) in relation to each subscheme if the information, statements or provisions for any subscheme differ from those for any other; and

(b) for the umbrella scheme as a whole, but only if the information, statements or provisions are relevant to the umbrella scheme as a whole.

S4.27 Additional informationThe following information:

(a) if there is any arrangement intended to result in a particular capital or income return from a holding of units in the scheme or any investment objective of giving protection to the capital value of, or income return from, such a holding—

(i) details of the arrangement or protection; and


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Rule S4.6

(ii) for any related guarantee—sufficient details of the guarantor and the guarantee to enable a fair assessment of the value of the guarantee; and

(iii) a description of the risks that could affect achieving the return or protection; and

(iv) details of the arrangements by which the operator must give the unitholders notice of any action required by the unitholders to obtain the benefit of any related guarantee;

(b) whether notice has been given to unitholders of the operator’s intention to propose a change to the scheme and, if so, particulars of the notice.


page 541


Glossary

Glossary (see r 1.1.4)

AAOIFI means the Accounting and Auditing Organisation for Islamic Financial Institutions.

accounting reference date, for a QFC scheme, means the date stated in the scheme’s latest filed prospectus as the date when the scheme’s annual accounting period ends.Note Latest filed prospectus and annual accounting period are defined in this

glossary.

accumulation unit means a unit in a QFC retail scheme in relation to which income is credited periodically to capital property under rule 8.8.2 (Income allocation and distribution—all QFC schemes).Note Capital property is defined in this glossary.

advising on investments means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 11.Note Regulated activity is defined in this glossary.


V4


Glossary

affected person, for a QFC scheme, has the meaning given by rule 5.1.1.

annual accounting period, for a QFC scheme, means an annual accounting period of the scheme under these rules.

annual income allocation date, for a QFC scheme, means the date in any year stated in the scheme’s latest filed prospectus as the date on or before which an allocation of income is to be made in relation to each annual accounting period.Note Year, latest filed prospectus and annual accounting period are defined

in this glossary.

another permitted form of QFC scheme has the meaning given by rule 1.3.10.

approved derivative has the meaning given by rule 7.1.8.

approved money-market instrument has the meaning given by rule 7.1.5.

approved security has the meaning given by rule 7.1.9.

arranging credit facilities means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 7.Note Regulated activity is defined in this glossary.


page 543


Glossary

arranging deals in investments means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 5.Note Regulated activity is defined in this glossary.

arranging the provision of custody services means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 9.Note Regulated activity is defined in this glossary.

articles of association, for a CIC, means the CIC’s articles of association as amended from time to time.Note CIC is defined in r 1.3.7 and in this glossary.

associate, for a legal person (A), means any legal person in the same group as A.Note Legal person and group are defined in this glossary.

associated person, for a person (A), means any of the following:

(a) if A is a legal person—a legal person in the same group as A;Note Legal person and group are defined in this

glossary.


V4


Glossary

(b) any other person whose business or domestic relationship with A might reasonably be expected to give rise to a community of interest between them that may involve a conflict of interest in dealing with third parties.

Note Legal person, group and person are defined in this glossary.

authorisation means an authorisation granted under the Financial Services Regulations, part 5.

authorised firm means a person that has an authorisation.Note Person and authorisation are defined in this glossary.

back-to-back borrowing means a borrowing under which a QFC scheme, or the independent entity of a QFC scheme on the operator’s instructions—

(a) borrows an amount of currency from an eligible bank; and

(b) keeps an amount in another currency, at least equal to that borrowing for the time being, on deposit with the eligible bank (or its agent or nominee).

Note Borrowing and eligible bank is defined in this glossary.

base currency, for a QFC scheme, means the currency stated in the constitutional document as the base currency of the scheme.


page 545


Glossary

Note Constitutional document is defined in r 3.1.1.

borrowing, for a scheme, includes any arrangement (including a combination of derivatives) designed to achieve a temporary injection of money into the scheme property in the expectation that the amount will be repaid.Note Derivative is defined in this glossary.

breach includes fail or refuse to comply with.

business day means a day that is not a Friday, Saturday, or a public or bank holiday in Qatar.

capital property, for a QFC scheme, means the scheme property, other than income property and any amount in the distribution account.Note Scheme property is defined in r 1.2.3. Income property and distribution

account are defined in this glossary.

CIC means a QFC collective investment company.Note QFC collective investment company is defined in r 1.3.7.

CIP means a QFC collective investment partnership.Note QFC collective investment partnership is defined in r 1.3.8.

CIT means a QFC collective investment trust.


V4


Glossary

Note QFC collective investment trust is defined in r 1.3.9.

class, for a QFC scheme, means—

(a) a particular class of units in the scheme; or

(b) if the scheme is an umbrella scheme—

(i) all the units relating to a single subscheme of the scheme; or

(ii) a particular class of units relating to single subscheme of the scheme.

Note Unit is defined in r 1.2.4. Umbrella scheme and subscheme are defined in r 1.2.11.

closed-ended scheme has the meaning given by rule 1.2.10 (2).

close out a transaction (the original transaction) means enter into a further transaction under which the obligation to deliver or receive property that arises (or, at the option of the other party to the transaction, may arise) under the original transaction is offset by an equivalent and opposite obligation or right to receive or deliver property.Note Property is defined this glossary.

COLL means these rules.


page 547


Glossary

collateral—

(a) in relation to a stock lending arrangement, repo agreement or derivative transaction, means—

(i) a transfer of assets (otherwise than by way of a sale) subject to a right of the transferor to have transferred back to it the same, or equivalent, assets; or

(ii) a letter of credit;

if the assets are transferred, or the letter of credit is issued, to secure the performance of a party to the transaction; and

(b) in any other case—means any form of security, guarantee or indemnity provided by way of security for the discharge of any liability arising from a transaction.

Note Stock lending arrangement, repo agreement and derivative are defined in this glossary.

collective investment scheme has the meaning given by rule 1.2.1.

commodity means a physical asset (other than a financial instrument or cash) that is capable of delivery.

complying disclaimer, for a non-QFC scheme, has the meaning given by rule 10.2.1.


V4


Glossary

COND means the Conduct of Business Rulebook.

constitutional document, for a QFC scheme, has the meaning given by rule 3.1.1.

contract for differences means the specified product described in the Financial Services Regulations, schedule 3, part 3, paragraph 9.Note Specified product is defined in this glossary.

contract of insurance means the specified product described in the Financial Services Regulations, schedule 3, part 3, paragraph 10.Note Specified product is defined in this glossary.

controlled function has the meaning given by the Financial Services Regulations, article 41 (2).Note See CTRL, ch 3, for the functions that are controlled functions.

corporation—to remove any doubt, a corporation includes, but is not limited to—

(a) a company; and

(b) a limited partnership; and

(c) a limited liability partnership.


page 549


Glossary

covered bond means a bond that—

(a) is issued by an eligible bank; and

(b) is subject by law to special public supervision designed to protect bondholders, and in particular protection under which amounts deriving from the issue of the bond must be invested in accordance with the law in assets—

(i) that, during the entire period of the bond, can cover claims attaching to the bond; and

(ii) that, if the issuer fails, would be used on a priority basis for the reimbursement of the principal and payment of the accrued interest.

Note Eligible bank is defined in this glossary.

CTRL means the Governance and Controlled Functions Rules 2012.

currency class unit, for a QFC retail scheme, means a class of unit denominated in a currency that is not the base currency or, if allowed under rule 3.2.7 (3) (Currency class units—QFC retail schemes), denominated in the base currency.Note Base currency is defined in this glossary.


V4


Glossary

day means a period of 24 hours starting at midnight.

deal—

(a) for units in a QFC scheme—means issue or redeem the units; orNote Issue and redemption are defined in this glossary.

(b) for any other investment or other property—means buy, sell, otherwise acquire, subscribe for or underwrite the investment or other property or offer or agree to do so, either as principal or agent, and includes, for an investment that is a contract of insurance, carry out the contract.Note Investment and contract of insurance are

defined in this glossary.dealing day, for a QFC scheme, means the period in a business day during which, in accordance with the latest filed prospectus, the operator must receive instructions to issue or redeem units in the scheme.Note Business day, latest filed prospectus, issue and redemption are defined

in this glossary.

dealing in investments means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 4.


page 551


Glossary

Note Regulated activity is defined in this glossary.

dealing period, for a QFC scheme, means the period between a valuation point and the next.Note Valuation point is defined in this glossary.

debt instrument means the specified product described in the Financial Services Regulations, schedule 3, part 3, paragraph 2.Note Specified product is defined in this glossary.

dedicated, for investments of a scheme, means intended that the unitholders of units in the scheme should participate or receive—

(a) profits or income arising from the acquisition, holding, management or disposal of investments of that kind; or

(b) amounts paid out of profits or income mentioned in paragraph (a).

Note Investment is defined in this glossary.

deposit means the specified product described in the Financial Services Regulations, schedule 3, part 3, paragraph 11.Note Specified product is defined in this glossary.

deposit taking means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 1.


V4


Glossary

Note Regulated activity is defined in this glossary.

derivative means a future, option or contract for differences.Note Future, option and contract for differences are defined in this glossary.

dilution, for a QFC scheme, means the amount of costs for dealing in investments incurred, or expected to be incurred, by the operator to the extent that these costs may reasonably be expected to result, or have resulted, from the acquisition, holding, management or disposal of investments by the operator as a consequence (whether or not immediate) of the increase or decrease of the cash resources of the scheme resulting from the issue or redemption of units over a period, including—

(a) the costs of dealing in investments, and professional fees incurred, or expected to be incurred, in relation to the acquisition or disposal of an immovable; and

(b) if there is a spread between the buying and selling prices of the investment—the indirect cost resulting from the difference between the prices.

Note Investment, issue and redemption are defined in this glossary.


page 553


Glossary

dilution adjustment, for a QFC scheme, means an adjustment to the price of a unit required under these rules for the purpose of reducing the effect of dilution.Note Price and dilution are defined in this glossary.

dilution levy, for a QFC scheme, means a charge at the rate, or of the amount, required by the operator under these rules for the purpose of reducing the effect of dilution.Note Dilution is defined in this glossary.

director, for an entity, includes any person named as director of the entity and any person in accordance with whose instructions the entity is accustomed to act.Note Entity and person are defined in this glossary.

distribution account, for a QFC scheme, means the account (if any) to which the income property must be transferred as at the end of each annual accounting period.Note Income property and annual accounting period are defined in this

glossary.


V4


Glossary

document means a record of information in any form (including electronic form), and includes, for example—

(a) anything in writing or on which there is writing; and

(b) anything on which there are figures, marks, numbers, perforations, symbols or anything else having a meaning for individuals qualified to interpret them; and

(c) a drawing, map, photograph or plan; and

(d) any other item or matter (in whatever form) that is, or could reasonably be considered to be, a record of information.

Note Writing is defined in this glossary.

document evidencing title means any means of evidencing title, whether or not in documentary form.

efficient portfolio management, for a scheme, means the use of techniques and instruments that—

(a) relate to transferable securities and money-market instruments; and

(b) are economically appropriate in that they are realised in a cost-effective way; and


page 555


Glossary

(c) are entered into for 1 or more of the following specific aims:

(i) reduction of risk;

(ii) reduction of costs;

(iii) generation of additional capital or income for the scheme with a risk level consistent with the risk profile of the scheme and the risk diversification required by these rules.

Note Transferable security is defined in r 7.1.6.

eligible bank means—

(a) an eligible bank as defined in INAP, glossary; or

(b) a person that would be an eligible bank as so defined if it accepted deposits.

eligible market has the meaning given by rule 7.1.7.

eligible money-market fund means—

(a) a QFC scheme that is a money-market fund; orNote Money-market fund is defined in r 1.3.12.

(b) a non-QFC scheme with investment objectives and powers that are the same as, or the same in all significant respects as, the


V4


Glossary

investment objectives and powers of a QFC scheme that is a money-market fund.

employee, of a person (A), means an individual—

(a) who is employed or appointed by A, whether under a contract of service or services or otherwise; or

(b) whose services are, under an arrangement between A and a third party, placed at the disposal and under the control of A.

entity means any kind of entity, and includes, for example, any person.Note Person is defined in this glossary.

execute a transaction means carry into effect or perform the transaction, whether as principal or agent, and includes instructing another person to effect or perform the transaction.

exercise a function means exercise or perform the function.Note Function is defined in this glossary.

feeder fund means a scheme dedicated to investments in a single other scheme.Note Dedicated and investment are defined in this glossary.


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Glossary

financial promotion means a communication made using any medium (for example, brochures, telephone calls, the internet, emails and presentations) if the purpose or effect of the communication is—

(a) to promote or advertise—

(i) a specified product; or

(ii) a regulated activity (or any activity that would be a regulated activity if it were conducted in or from the QFC); or

(b) to invite or induce any person—

(i) to enter into an agreement with any person in relation to a specified product; or

(ii) to engage in a regulated activity (or an activity that would be a regulated activity if it were conducted in or from the QFC).

Note Specified product, regulated activity and person are defined in the glossary.


V4


Glossary

forward price, for units in a QFC scheme, means a price calculated by reference to the next valuation point after the operator receives instructions to issue or redeem the units.Note Issue, redemption, price and valuation point are defined in this

glossary.

function means any function, authority, duty or power.

fund of funds means a scheme dedicated to investments in 2 or more of the following:

(a) schemes;

(b) subschemes of umbrella schemes.Note Subscheme and umbrella scheme are defined in r 1.2.11.

future means the specified product described in the Financial Services Regulations, schedule 3, part 3, paragraph 8.Note Specified product is defined in this glossary.

GENE means the General Rulebook.

governing body, of an entity, means its board of directors, committee of management or other governing body (whatever it is called).Note Entity is defined in this glossary.


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Glossary

government or public security means a debt instrument issued by or for—

(a) a jurisdiction; or

(b) a public, regional or local authority of a jurisdiction.Note Debt instrument and jurisdiction are defined in this glossary.

group means the following:

(a) a legal person (A);

(b) any parent entity of A;

(c) any subsidiary (direct or indirect) of A or of any parent entity of A.

Note Legal person, parent entity and subsidiary are defined in this glossary.

half-yearly accounting period, for a QFC scheme, means a half-yearly accounting period of the scheme under these rules.

INAP means the Interpretation and Application Rulebook.


V4


Glossary

income equalisation, for a QFC scheme, means a capital amount that, in accordance with a power in the constitutional document, is included in an allocation of income for a unit issued during the accounting period in relation to which the income allocation is made.Note Constitutional document is defined in r 3.1.1. Issue is defined in this

glossary.

income property, for a QFC scheme, means all amounts considered by the operator, after consultation with the scheme’s auditor, to be of the nature of income received or receivable in relation to the scheme property, other than any amount in the distribution account.Note Scheme property is defined in r 1.2.3. Distribution account is defined

in this glossary.

independent entity, of a scheme, has the meaning given by rule 1.2.9.

INDI means the Individuals Rules 2005.

initial offer means—

(a) for a QFC scheme—an offer for the issue of units in the scheme if all or part of the consideration paid to the scheme for


page 561


Glossary

the units is to be used to acquire the initial scheme property; and

(b) for a subscheme of a QFC umbrella scheme—an offer for the issue of units in the subscheme if all or part of the consideration paid to the subscheme for the units is to be used to acquire the initial scheme property to be attributable to the subscheme.

Note Scheme property is defined in r 1.2.3. Umbrella scheme and subscheme are defined in r 1.2.11. Issue is defined in this glossary.

initial outlay, for a QFC scheme, means the amount that the scheme is required to provide to obtain rights in a transaction in derivatives, excluding any payment or transfer on exercise of rights.Note Derivative is defined in this glossary.

initial price, of a unit in any class in a QFC retail scheme, means the price to be paid during the initial offer period.Note Class and initial offer are defined in this glossary.

instrument means an instrument of any kind, and includes, for example, any writing or other document.Note Writing and document are defined in this glossary.


V4


Glossary

interim accounting period, for a QFC scheme, means a period in an annual accounting period of the scheme in relation to which an allocation of income is to be made.Note Annual accounting period is defined in this glossary.

interim income allocation date, for a QFC scheme, means any date stated in the scheme’s latest filed prospectus as the date on or before which an allocation of income is to be made.Note Latest filed prospectus is defined in this glossary.

intermediate holding vehicle, for a QFC scheme, means an entity (other than a scheme) if the purpose of the entity is to enable the holding of immovables located outside Qatar for the scheme.Note Entity is defined in this glossary.

investment means any investment, including any asset, right or interest.

investment adviser, for a QFC scheme, means a person who is retained by the operator, under a commercial arrangement that is not a contract of service, to provide the operator with advice about—

(a) the merits of investment opportunities for the scheme; or


page 563


Glossary

(b) information relevant to the making of judgments about the merits of investment opportunities for the scheme.

ISFI means the Islamic Finance Rulebook.

Islamic fund has the meaning given by rule 1.3.11.

issue, of a unit in a QFC scheme, means the issue of a new unit in the scheme by the operator on behalf of the scheme.

issue charge, for a QFC scheme, means an amount levied by the operator under these rules on the issue of units.Note Issue is defined in this glossary.

jurisdiction means any kind of legal jurisdiction, and includes, for example—

(a) the State; and

(b) a foreign country (whether or not an independent sovereign jurisdiction), or a state, province or other territory of such a foreign country; and

(c) the Qatar Financial Centre or a similar jurisdiction.Note The State is defined in this glossary.


V4


Glossary

large deal, for a QFC scheme, means a transaction (or series of transactions in a single dealing period) by any person for the issue or redemption of units in the scheme if—

(a) the transaction (or series of transactions) is executed for the purpose of—

(i) a dilution adjustment; or

(ii) a dilution levy; and

(b) the transaction (or series of transactions) is a large deal under the latest filed prospectus.

Note Series of transactions, issue, dealing period, dilution levy, dilution adjustment, redemption and latest filed prospectus are defined in this glossary.

larger denomination share has the meaning given by rule 3.2.2 (2).

latest filed prospectus, of a QFC scheme, means the prospectus (including any revised or supplementary prospectus) of the scheme most recently filed with the Regulatory Authority under these rules.Note Prospectus is defined in this glossary.


page 565


Glossary

latest filed translation, of a prospectus of a QFC scheme in relation to a language, means the translation of the prospectus in that language most recently filed with the Regulatory Authority under these rules.Note Prospectus is defined in this glossary.

legal person means an entity (other than an individual) on which the legal system of a jurisdiction confers rights and imposes duties, and includes, for example, any entity that can own, deal with or dispose of property.Examples1 a company

2 any other corporation

3 a partnership, whether or not incorporated

4 an association or other undertaking, whether or not incorporated

Note Entity, jurisdiction and property are defined in this glossary.

limited issue arrangements, for a QFC qualified investor scheme, means arrangements for the issue of units in the scheme under which the operator limits the issue of units in the scheme in accordance with the latest filed prospectus.Note Issue and latest filed prospectus are defined in this glossary.


V4


Glossary

limited redemption arrangements, for a QFC qualified investor scheme, means arrangements for the redemption of units in the scheme under which the operator redeems units in the scheme less frequently than twice in the month.Note Redemption and month are defined in this glossary.

long term insurance contract means a contract of insurance of the type described in the Financial Services Regulations, schedule 3, part 3, paragraph 10.4.Note Contract of insurance is defined in this glossary.

managing investments means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 10.Note Regulated activity is defined in this glossary.

margin means cash or other property—

(a) paid, transferred or deposited under the terms of a derivative; or

(b) required to be paid, transferred or deposited in relation to a derivative to comply with a requirement imposed by a market on which it is made or traded.

Note Property and derivative are defined in this glossary.


page 567


Glossary

money means any form of money, including cheques and other payable orders.

money-market fund has the meaning given by rule 1.3.12.

month means calendar month.

near cash means any of the following:

(a) money that is deposited with an eligible bank in—

(i) a current account; or

(ii) a deposit account, if the money can be withdrawn immediately and without payment of a penalty exceeding 7 days interest calculated at ordinary commercial rates;

(b) certificates of deposit issued by an eligible bank, if immediately redeemable at the holder’s option;

(c) government or public securities, if redeemable at the holder’s option or bound to be redeemed within 2 years;

(d) bills of exchange that are government or public securities.Note Money, eligible bank and government or public security are defined in

this glossary.


V4


Glossary

net asset value, of a QFC scheme at any time, means the value of the assets (including current assets) of the scheme at that time after deducting—

(a) the current liabilities (including accrued expenses) of the scheme at that time; and

(b) the longer-term liabilities of the scheme.

net asset value per unit, for a QFC scheme at any time, means the net asset value of the scheme at that time divided by the number of units in issue at that time.Note Net asset value is defined in this glossary. Unit is defined in r 1.2.4.

non-QFC qualified client scheme means a non-QFC scheme that is a qualified client scheme.Note Qualified client scheme is defined in r 1.4.2.

non-QFC retail customer scheme means a non-QFC scheme that is a retail customer scheme.Note Retail customer scheme is defined in r 1.4.1.

non-QFC scheme has the meaning given by rule 1.2.7.


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Glossary

notional principal, for a contract for differences, means—

(a) if the contract is an index derivative that resembles a future—the current mark-to-market valuation of the derivative; or

(b) if the contact is an index derivative that resembles an option—the exercise value of the derivative; or

(c) in any other case—the notional lot size of the contract.Note Contract for differences, derivative, future and option are defined in

this glossary.

office includes position.

open-ended scheme has the meaning given by rule 1.2.10 (1).

operating collective investment schemes means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 12 as Operating a Collective Investment Fund.Note Regulated activity is defined in this glossary.

operator, of a scheme, has the meaning given by rule 1.2.8.

option means the specified product described in the Financial Services Regulations, schedule 3, part 3, paragraph 7.Note Specified product is defined in this glossary.


V4


Glossary

ordinary resolution, for a QFC scheme or a class of units in a QFC scheme, means a resolution passed at a general meeting of the scheme or a separate meeting of unitholders of that class of units if—

(a) notice indicating the intention to propose the resolution was properly given; and

(b) the resolution passed by a simple majority of the votes validly cast (whether as a show of hands or on a poll) for or against the resolution at the meeting.

Note Class is defined in this glossary.

OTC derivative means a derivative traded solely in transactions over the counter.Note Derivative and over the counter are defined in this glossary.

outsourcing has the meaning given by rule 8.5.1.

over the counter, for a transaction, means

(a) not effected by means of the facilities and services of an exchange; and

(b) not governed by the rules of an exchange.


page 571


Glossary

own account transaction, for an authorised firm, means a transaction executed by the firm for its own benefit or the benefit of an associate.Note Execute and associate are defined in this glossary.

parent entity, for a legal person (A), means any of the following:

(a) a legal person that holds a majority of the voting power in A;

(b) a legal person that is a member of A (whether direct or indirect, or though legal or beneficial entitlement) and alone, or together with 1 or more legal persons in the same group, holds a majority of the voting power in A;

(c) a parent entity of any legal person that is a parent entity of A.Note Legal person and group are defined in this glossary.

participant in a scheme has the meaning given by rule 1.2.2.

partnership agreement, for a CIP, means the CIP’s partnership agreement as amended from time to time.Note CIP is defined in r 1.3.8 and this glossary.

person means—

(a) an individual (including an individual occupying an office from time to time); or


V4


Glossary

(b) a legal person.Note Office and legal person are defined in this glossary.

personal data means any information relating to an individual who can be identified, directly or indirectly, in particular by reference to an identification number or to 1 or more factors specific to the individual’s physical, physiological, mental, economic, cultural or social identity.

PIIB means the Investment and Banking Business Rules 2005.

price, of a unit in a QFC scheme, means the price of the unit calculated in accordance with these rules.Note Unit is defined in r 1.2.4.

PRIN means the Principles Rulebook.

principal, in relation to an option, future or forward contract, means—

(a) if the contract is an option on a future—the amount or value of the property that must be delivered to satisfy settlement of the future; or


page 573


Glossary

(b) in any other case—the amount or value of the property that must be delivered to satisfy settlement of the contract.

Note Option, future, and property are defined in this glossary.

property means any estate or interest (whether present or future, vested or contingent, or tangible or intangible) in immovables or property of any other kind, and includes, for example—

(a) money of any currency; and

(b) bonds, securities, shares, and other negotiable or non-negotiable instruments of any kind; and

(c) any right to interest, dividends, or other income, on or accruing from or generated by immovables or property of any other kind; and

(d) any other things in action; and

(e) any other charge, claim, demand, easement, encumbrance, lien, power, privilege, right, or title, recognised or protected by the law of any jurisdiction over, or in relation to, immovables or property of any other kind; and


V4


Glossary

(f) any other documents evidencing title to, or to any interest in, immovables or property of any other kind.

Note Money, jurisdiction and document are defined in this glossary.

property fund—a QFC scheme, or subscheme of a QFC umbrella scheme, is a property fund if the scheme or subscheme is dedicated to investments in immovables.Note 1 Subscheme and umbrella scheme are defined in r 1.2.11.

Note 2 Dedicated and investment are defined in this glossary.

property-related assets means any of the following:

(a) shares, debt instruments or warrants issued by an entity if a substantial activity of the entity relates to investment in immovables;

(b) securities receipts that give rights in relation to an investment mentioned in paragraph (a).

Note Share, debt instrument, warrant, entity, investment and securities receipt are defined in this glossary.


page 575


Glossary

prospectus, of a scheme, means a document (whatever called) containing information about the scheme, and includes a revised or supplementary prospectus.Note Document is defined in this glossary.

providing credit services means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 6.Note Regulated activity is defined in this glossary.

providing custody facilities means the regulated activity described in the Financial Services Regulations, schedule 3, part 2, paragraph 8.Note Regulated activity is defined in this glossary.

providing scheme administration means providing 1 or more of the following services in relation to a scheme:

(a) processing dealing instructions, including effecting issues, redemptions and stock transfers, and arranging settlements;

(b) portfolio accounting;

(c) valuing assets and performing net asset value, and net asset value per unit, calculations;

(d) unit pricing;


V4


Glossary

(e) dividend calculation and distribution;

(f) keeping the register of unitholders and unitholder registration details;

(g) performing any regulatory requirements;Examples of requirementsanti-money laundering or combating terrorist financing requirements

(h) undertaking transaction monitoring and reconciliation functions;

(i) producing financial statements, otherwise than as the scheme’s auditor;

(j) communicating with, and providing information to, the participants, the scheme, the operator, the independent entity, the Regulatory Authority and other persons in relation to the scheme.

QFC means the Qatar Financial Centre.

QFC collective investment company (or CIC) has the meaning given by rule 1.3.7.

QFC collective investment partnership (or CIP) has the meaning given rule 1.3.8.


page 577


Glossary

QFC collective investment trust (or CIT) has the meaning given by rule 1.3.9.

QFC Court means the Qatar Financial Centre Civil and Commercial Court.

QFC Law means Law No. (7) of 2005 of the State.Note The State is defined in this glossary.

QFC licensed firm means an entity that has a licence granted by the QFC Authority.

QFC qualified investor scheme means a QFC scheme that is a qualified investor scheme.Note Qualified investor scheme is defined in r 1.3.2.

QFC retail scheme means a QFC scheme that is a retail scheme.Note Retail scheme is defined in r 1.3.3.

QFC scheme has the meaning given by rule 1.2.6.

QFC UCITS type scheme means a QFC retail scheme that is a UCITS type scheme.Note Retail scheme is defined in r 1.3.3. UCITS type scheme is defined in

r 1.3.5.


V4


Glossary

QFC umbrella scheme means a QFC scheme that is an umbrella scheme.Note Umbrella scheme is defined in r 1.2.11.

qualified client scheme has the meaning given by rule 1.4.2 (What is a non-QFC qualified client scheme?).

qualified investor has the meaning given by rule 1.2.12.

qualified investor scheme has the meaning given by rule 1.3.2 (What is a QFC qualified investor scheme?).

readily realisable investment means any of the following:

(a) a government or public security denominated in the currency of the jurisdiction of its issuer;

(b) any other security that is admitted to official listing on, or regularly traded on or under the rules of, a regulated exchange;

(c) a newly issued security that can reasonably be expected to fall within paragraph (b) when trading in it starts.

Note Government or public security, jurisdiction, security and regulated exchange are defined in this glossary.

redemption, of a unit in a QFC scheme, means the redemption of an existing unit in the scheme by the operator on behalf of the scheme.


page 579


Glossary

redemption charge, for a QFC scheme, means an amount levied by the operator under these rules on the redemption of units.Note Redemption is defined in this glossary.

regulated activity means an activity that is a regulated activity under the Financial Services Regulations.

regulated exchange means an exchange that is—

(a) incorporated or otherwise established in a jurisdiction outside the QFC; and

(b) regulated as an exchange by a regulatory or governmental entity in that jurisdiction.

Note Jurisdiction, QFC and entity are defined in this glossary.

regulated financial institution means a person that is not an authorised firm but is authorised or licensed (however described) to conduct any financial service by a regulatory or governmental authority, body or agency in a jurisdiction other than the QFC.Note Authorised firm and jurisdiction are defined in this glossary.

Regulatory Authority means the Regulatory Authority of the QFC.

Regulatory Tribunal means the QFC Regulatory Tribunal.


V4


Glossary

related person—a person (A) is a related person for another person (B) if—

(a) A and B are legal persons and members of the same group; orNote Legal person and group are defined in this

glossary.(b) A is a director or officer of B or of a member of the same

group as B; orNote Director is defined in this glossary.

(c) A is an individual, B is a legal person and A is able to exercise significant influence over B; or

(d) A is a spouse or minor child of an individual (C) and C is a related person for B under paragraph (b) or (c).

relevant investment activities means all or any of the following regulated activities:



(c) advising on investments.Note Regulated activity and the regulated activities mentioned in this

definition are defined in this glossary.


page 581


Glossary

relevant requirement—a person breaches a relevant requirement in the circumstances described in the Financial Services Regulations, article 84.Note Breach is defined in this glossary.

remuneration means any form of remuneration, and includes benefits of any kind.

repo agreement means an agreement—

(a) between a seller and buyer for the sale of securities, under which the seller agrees to repurchase the securities, or equivalent securities, from the buyer on an agreed date and, usually, for a stated price; or

(b) between a buyer and seller for the purchase of securities, under which the buyer agrees to resell the securities, or equivalent securities, to the seller on an agreed date and, usually, for a stated price.

Note Security is defined in this glossary.

retail customer has the meaning given by rule 1.2.12.

retail customer scheme has the meaning given by rule 1.4.1 (What is a non-QFC retail customer scheme?).


V4


Glossary

retail scheme has the meaning given by rule 1.3.3 (What is a QFC retail scheme?).

scheme means a collective investment scheme.Note Collective investment scheme (or scheme) is defined in r 1.2.1.

scheme of arrangement means an arrangement relating to a QFC scheme (the transferor scheme), or to a subscheme of a QFC umbrella scheme (the transferor subscheme), under which—

(a) either—

(i) all or part of the property of the transferor scheme, or all or part of the property attributed to the transferor subscheme, is to become property of 1 or more schemes registered in the QFC (the transferee scheme or transferee schemes); or

(ii) all or part of the property attributed to the transferor subscheme is to become property attributed to 1 or more other subschemes of the same umbrella scheme registered in the QFC (the transferee subscheme or transferee subschemes); and


page 583


Glossary

(b) holders of units in the transferor scheme or transferor subscheme are to receive, in exchange for their respective interests in the property being transferred or reattributed, either—

(i) units in the transferee scheme, or 1 or more of the transferee schemes, to which the property is transferred; or

(ii) units in the transferee subscheme, or 1 or more of the transferee subschemes, to which the property is reattributed.

Note Property is defined in this glossary.

scheme property, of a scheme, has the meaning given by rule 1.2.3.

securities receipt means the specified product described in the Financial Services Regulations, schedule 3, part 3, paragraph 5.Note Specified product is defined in this glossary.

security means any of the following:

(a) a share;

(b) a debt instrument;

(c) a warrant;


V4


Glossary

(d) a securities receipt;

(e) a unit in a collective investment scheme.Note Share, debt instrument, warrant and securities receipt are defined in

this glossary.

sell an investment means sell the investment in any way, and includes the following:

(a) dispose of the investment for valuable consideration;

(b) for an investment consisting of rights under a contract—

(i) surrender, assign or convert the rights for valuable consideration;

(ii) assume the corresponding rights under the contract for valuable consideration;

(c) for an investment consisting of rights under an arrangement— assume the corresponding liabilities under the arrangement for valuable consideration;

(d) for any other investment—issue or create the investment or grant the rights or interests of which it consists.

Note Investment is defined in this glossary.


page 585


Glossary

senior manager, of the operator or independent entity of a QFC scheme, means an individual employed by the operator or independent entity, or by a member of the operator’s or independent entity’s group, who has responsibility either alone or with others for the management or supervision of 1 or more elements of the operator’s or independent entity’s business relevant to its functions in relation to the scheme.Note Group and function are defined in this glossary.

series of transactions means a series of transactions executed to achieve a single investment decision or objective.Note Execute is defined in this glossary.

share means the specified product described in the Financial Services Regulations, schedule 3, part 3, paragraph 1.Note Specified product is defined in this glossary.

Shari’a Supervisory Board, of an Islamic fund, means the board constituted for the Islamic fund under rule 8.10.1.Note Islamic fund is defined in r 1.3.11.

smaller denomination share has the meaning given by rule 3.2.2 (2).


V4


Glossary

special resolution, for a QFC scheme or a class of units in a QFC scheme, means a resolution passed at a general meeting of the scheme or a separate meeting of unitholders of that class of units if—

(a) notice indicating the intention to propose the resolution as a special resolution was properly given; and

(b) the resolution was passed by a majority of at least 75% of the votes validly cast (whether as a show of hands or on a poll) for or against the resolution at the meeting.

Note Class is defined in this glossary.

specified product means an investment or other type of product that is a specified product under the Financial Services Regulations.

standing independent valuer, of a QFC qualified investor scheme, means the person who is appointed under these rules as the standing independent valuer of the scheme.Note QFC qualified investor scheme is defined in r 1.3.2.


page 587


Glossary

stock lending arrangement means an arrangement between a person (the borrower) and another person (the lender) under which—

(a) the lender transfers securities to the borrower otherwise than by way of sale; and

(b) a requirement is imposed on the borrower to transfer back to the lender, otherwise than by way of sale, securities in the same quantity, with the same rights, and of the same type and nominal value, as the transferred securities (or, if agreed between the borrower and lender, assets into which the transferred securities have been transformed following a stock split, consolidation, conversion, merger, takeover, redemption or similar event).Note Security is defined in this glossary.

subscheme, of an umbrella scheme, has the meaning given by rule 1.2.11 (2).

subsidiary—a legal person (A) is a subsidiary of another legal person (B) if B is a parent entity of A.Note Legal person and parent entity are defined in this glossary.

the State means the State of Qatar.


V4


Glossary

transferable security has the meaning given by rule 7.1.6.

trust instrument, for a CIT, means the CIT’s trust instrument as amended from time to time, and includes any instrument expressed to be supplemental to it (as amended from time to time).Note CIT is defined in r 1.3.9 and this glossary. Instrument is defined in this

glossary.

UCITS type scheme has the meaning given by rule 1.3.5.

umbrella scheme has the meaning given by rule 1.2.11 (1).

unit in a scheme has the meaning given by rule 1.2.4.

unitholder, of a unit in a scheme, has the meaning given by rule 1.2.5.Note Unitholder has a special meaning in div 5.5.B (Unitholder meetings—

QFC retail schemes) (see r 5.5.2).

unitholder register, for a QFC scheme, means the register of unitholders kept under these rules for the scheme.

unitisation means arrangements for a newly formed CIT under which—

(a) all or part of the property of a corporation or scheme becomes the first property to be held on the trusts of the CIT; and


page 589


Glossary

(b) the holders of shares in the corporation, or units in the scheme, become the first unitholders in the CIT.

Note CIT is defined in r 1.3.9. Property and corporation are defined in this glossary.

valuation point, for a QFC scheme, means a valuation point fixed by the operator in accordance with these rules and stated in the latest filed prospectus.Note Latest filed prospectus is defined in this glossary.

warrant means the specified product described in the Financial Services Regulations, schedule 3, part 3, paragraph 4.Note Specified product is defined in this glossary.

writing means any form of writing, and includes, for example, any way of representing or reproducing words, numbers, symbols or anything else in legible form (for example, by printing or photocopying).

year means calendar year.


V4


Endnotes 1 Abbreviation key

a = after ins = inserted/added

am = amended om = omitted/repealed

amdt = amendment orig = original

app = appendix par = paragraph/subparagraph

art = article prev = previously

att = attachment pt = part

b = before r = rule/subrule

ch = chapter renum = renumbered

def = definition reloc = relocated

div = division s = section

g = guidance sch = schedule

glos = glossary sdiv = subdivision

hdg = heading sub = substituted

2 Rules history

Collective Investment Schemes Rules 2010

made byCollective Investment Schemes Rules 2010 (QFCRA Rules 2010-5)

Made 5 December 2010


page 591


Endnotes

Commenced 1 January 2011

Version No. 1

as amended byInsurance Mediation Business (Consequential Amendments) Rules 2011 (QFCRA Rules 2011-4 sch 1, pt 1.2)

Made 20 June 2011

Commenced 1 July 2011

Version No. 2

Islamic Finance Amendments Rules 2012 (QFCRA Rules 2012-3 sch 2, pt 2.1)


Commenced 1 February 2013

Version No. 3

Governance and Controlled Functions (Consequential and Miscellaneous) Amendment Rules 2012 (QFCRA Rules 2012-5 sch 4, pt 4.2)


Commenced 1 July 2013

Version No. 4

page 592 Collective Investment Schemes Rules 2010 V4


3 Amendment historyDerivatives and forward transactions—QFC retails schemesDiv 7.4.E, hdg sub Rules 2012-5

Exposure for derivatives and forward transactions—QFC retail schemesPt 7.5, hdg sub Rules 2012-5

Controls over issue and redemption of units—QFC retail schemesr.8.1.13 am Rules 2012-5

Outsourcing by operator—all QFC schemesr.8.5.2 am Rules 2012-5

Outsourcing by independent entity—all QFC schemesr.8.5.3 am Rules 2012-5

Profit sharing investment accountsr S1.16 am Rules 2012-3

Glossarydef controlled function

am Rules 2012-5def CTRL

sub Rules 2012-5def INDI

sub Rules 2012-5def PIIB

sub Rules 2011-4


page 593


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