S.I. No. 352/2011 - European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011

• (b) within such period as the Bank may specify, any information and returns (not being information or returns specified under paragraph (a) of this Regulation) concerning the business to which the authorisation relates or the carrying on of a business as aforesaid by such person, as the case may be, that the Bank may request in writing, being information and returns which the Bank considers it necessary to have for the due performance of its statutory functions.

• (2) Paragraph (1) shall apply to the business of an associated enterprise to the extent only that the information and returns sought by the Bank are, in the opinion of the Bank, materially relevant to the proper appraisal of the business of the holder of the authorisation to which the associated enterprise relates.

Application by Bank to High Court

• (2) The court when considering the matter may make such interim or interlocutory order as it considers appropriate.

• (3) Where the court is satisfied, because of the nature or the circumstances of the case or otherwise in the interests of justice, that it is desirable, the whole or any part of the proceedings under this Regulation may be heard otherwise than in public.

Replacement of management company or trustee

• (a) it is satisfied that the management company or trustee has failed to demonstrate the competence, probity or experience in the discharge of its functions reasonably required of it,

• (b) it is satisfied that the management company or trustee is not of sufficiently good repute,

• (c) it is satisfied that it is undesirable in the interests of the unit-holders that the management company or trustee remain as management company or trustee, or

• (d) without prejudice to subparagraph (c), it is satisfied that the management company or trustee—

• (i) has contravened any provision of these Regulations,

• (ii) in purported compliance with any such provision, has furnished the Bank with false, inaccurate or misleading information, or

• (iii) has contravened any prohibition or requirement imposed under these Regulations.

• (2) Upon replacement by the Bank under this Regulation of a management company or trustee, the management company or trustee shall cease to act for the UCITS, and the powers and duties of the management company or trustee shall be exercised and carried out by the new management company or trustee, as the case may be.

• (3) The Bank may, by application to the court, seek such interim or interlocutory relief preventing a management company or trustee from acting as such or appointing a person to carry out their functions and the court on such application, having regard to the matters specified in paragraph (1) and the protection of the unit-holders, may make such order as it deems appropriate.

• (4) Where the Bank proposes to replace the management company or trustee, it shall give the management company or trustee notice of its intention to do so, which notice shall contain a statement of the reasons for which the Bank proposes to act and of the right of the management company or trustee under paragraph (5) to make representations.

• (5) A management company or trustee on whom a notice is given under paragraph (4) may, within 15 days from the date on which such notice is given, make representations in writing to the Bank.

• (6) The Bank shall have regard to any representations made to it in accordance with paragraph (5) in determining whether or not to replace the management company or trustee.

Revocation of authorisation

• (a) that any of the requirements for the authorisation of the UCITS are no longer satisfied,

• (b) that it is undesirable in the interests of the unit-holders or potential unit-holders that the UCITS should continue to be authorised,

• (c) without prejudice to subparagraph (b), that the management company or investment company or trustee of the UCITS has seriously or systematically contravened any provision of these Regulations or, in purported compliance with any such provision, has furnished the Bank with false, inaccurate or misleading information or has contravened any prohibition or requirement imposed under these Regulations, or

• (d) that the UCITS has not made use of the authorisation within 12 months of the date on which it was authorised under these Regulations, or has failed to operate as a UCITS for a period of more than 6 months.

• (2) For the purposes of making a determination to revoke the authorisation of a UCITS pursuant to subparagraph (1)(b), the Bank may take into account any matter relating to—

• (a) the unit trust, common contractual fund, management company, investment company or trustee,

• (b) a director or controller of the management company, investment company or trustee, or

• (c) any person employed by or associated with the management company, investment company or trustee in connection with the UCITS.

• (3) The Bank may revoke the authorisation of a UCITS at the request of the management company or investment company or trustee of the UCITS. However, it may refuse to do so if it considers that any matter concerning the UCITS should be investigated as a preliminary to a decision on the question of whether the authorisation should be revoked or that revocation would not be in the interests of the unit-holders.

Notice of intention to revoke

• (2) A management company, investment company or trustee on whom a notice is served under paragraph (1) may, within 15 days of the date of service, make representations in writing to the Bank.

• (3) The Bank shall have regard to any representations made in accordance with paragraph (2) in determining whether to refuse the application or revoke the authorisation, as the case may be.

Directions by Bank

• (a) it is in the public interest to do so,

• (b) it is in the interests of the orderly and proper regulation of UCITS,

• (c) any of the requirements for authorising a UCITS are no longer satisfied, or

• (d) the management company, investment company or trustee of such a UCITS—

• (i) has become or is likely to become unable to meet its obligations to its creditors,

• (ii) has contravened any provision of these Regulations, or has failed to comply with any condition or requirement imposed under these Regulations by the Bank, or in purported compliance with any such provision, has provided the Bank with information that it knows to be false, inaccurate or misleading,

• (iii) is not maintaining adequate capital resources having regard to the volume and nature of its business, or

• (iv) no longer complies with the capital or other financial requirements imposed by the Bank from time to time,

the Bank may give a direction in writing to the management company, investment company or trustee requiring it to take such steps (including the winding-up of the UCITS or the suspension of the issue or redemption of units of the UCITS, or both) from a date specified in that direction until such further date as is specified in that direction, or in another direction, as the Bank considers necessary in the interests of the orderly and proper regulation of UCITS or for the protection of unit-holders or creditors of the UCITS.

• (2) Where a direction under paragraph (1) affects a particular UCITS, the UCITS shall immediately notify its unit-holders of the terms of the direction.

• (3) The revocation of the authorisation of a UCITS does not affect the operation of a direction given under paragraph (1) that is then in force. A direction may be given under that paragraph in relation to a UCITS whose authorisation has been revoked so long as a direction under that paragraph was already in force at the time of revocation.

• (4) For the purposes of paragraph (1), the Bank may take into account any matter relating to the UCITS, management company, investment company, trustee or any person employed by or associated with the management company, investment company or trustee in connection with the UCITS.

• (5) The Bank may revoke a direction under paragraph (1) unless an order under paragraph (10) has been made in respect of that direction.

• (6) A direction of the Bank given under paragraph (1) is an appealable decision for the purposes of Part VIIA of the Central Bank Act 1942 (No. 22 of 1942) at the instance of—

• (a) a management company, investment company or trustee to which the direction relates, or

• (b) any creditor who is affected by the direction.

• (7) A direction given under paragraph (1) ceases to have effect—

• (a) when the period specified in the direction expires,

• (b) if, on the hearing of an appeal against the direction by the Irish Financial Services Appeals Tribunal, the Tribunal confirms the direction but varies the period, when that period expires, or

• (c) on the making of a winding-up order in respect of the UCITS, or with the sanction of the court, the dissolution of the UCITS, whichever occurs first.

• (8) Where the Bank is of the opinion that, even if the management company, investment company or trustee concerned appears to be able to meet its obligations to its creditors, the circumstances giving rise to the direction are likely to continue to exist after the giving of direction, it may give a further direction in writing to the UCITS or management company or trustee as the case may be requiring it—

• (a) to prepare, in consultation with the Bank, a scheme for the orderly termination of its business and the discharge of its liabilities, and

• (b) to submit the scheme to the Bank for its approval within 3 months after its preparation.

• (9) Where a management company, investment company or trustee of a UCITS—

• (a) has failed, or is failing, to comply with a direction given by the Bank under paragraph (8), or

• (b) has failed, or is failing, to comply with a scheme approved by the Bank under that paragraph, the court may, on the application of the Bank, make such order as it considers appropriate (including an order of committal or a winding-up order on the grounds that it is just and equitable that the UCITS, management company or trustee be wound up).

• (10) The court may, on application under paragraph (9) hear evidence from creditors, and the court may make such interim or interlocutory order, as it considers appropriate.

• (11) While a direction under paragraph (1) is in force—

• (a) the UCITS to which it relates may not be dissolved, and

• (b) the court may, by order, restrain any disposal of the assets of the UCITS on the ground that such a disposal could have the effect of perpetrating a fraud on the UCITS, its creditors or unit-holders.

Penalties

• (2) An auditor who contravenes any provision of these Regulations is guilty of an offence.

• (3) A person who contravenes the conditions of professional secrecy imposed by these Regulations is guilty of an offence.

• (4) A person who, in purported compliance with a provision of these Regulations or a requirement under these Regulations—

• (a) knowingly or recklessly provides an answer or explanation, makes a statement, or produces information, to the Bank that is false or misleading in a material particular, or

• (b) knowingly omits or withholds material information from the Bank,

is guilty of an offence.

• (5) A person who destroys, mutilates or falsifies, or is privy to the destruction, mutilation or falsification of, any record or document required under these Regulations, or makes or is privy to the making of a false entry therein, is guilty of an offence.

• (6) It shall be a defence for a person prosecuted for an offence under paragraph (5) to prove that he or she had no intention to defeat the law.

• (7) A person who fraudulently disposes of, alters or makes an omission in any record or document referred to in paragraph (5), or who is privy to such disposal of, altering or making of an omission in any such record or document, is guilty of an offence.

• (8) A person guilty of an offence under paragraph (1), (2), (3), (4), (5) or (7) is liable—

• (a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 6 months or both, or

• (b) on conviction on indictment, to a fine not exceeding €500,000 or imprisonment for a term not exceeding 3 year or both.

• (9) Summary proceedings in relation to an offence under these Regulations may be brought and prosecuted by the Director of Public Prosecutions or the Bank.

• (10) Notwithstanding section 10(4) of the Petty Sessions (Ireland) Act 1851 (14 &15 Vict. c. 93), summary proceedings for an offence under these Regulations to which that provision applies may be instituted—

• (a) within 12 months from the date on which the offence was committed, or

• (b) within 6 months from the date on which evidence sufficient, in the opinion of the person instituting the proceedings, to justify the proceedings comes to that person’s knowledge,

whichever is the later, provided that no such proceedings shall be commenced later than 2 years from the date on which the offence concerned was committed.

• (11) For the purposes of paragraph (10)(b), a certificate signed by or on behalf of the person initiating the proceedings as to the date on which evidence referred to in that paragraph came to his or her knowledge shall be evidence of that date and, in any legal proceedings, a document purporting to be a certificate under this paragraph and to be so signed shall be admitted as evidence without proof of the signature of the person purporting to sign the certificate, unless the contrary is shown.

• (12) Where an offence under these Regulations is committed by a body corporate or by a person purporting to act on behalf of a body corporate or on behalf of an unincorporated body of persons, and is proved to have been committed with the consent or connivance, or to be attributable to any wilful neglect, of a person who, when the offence is committed, is—

• (a) a director, manager, secretary or other officer of the body, or a person purporting to act in that capacity, or

• (b) a member of the committee of management or other controlling authority of the body, or a person purporting to act in that capacity,

that person is taken to have also committed the offence and may be proceeded against and punished accordingly.

Collaboration with competent authorities in other Member States

• (b) The Bank shall cooperate with other competent authorities even in cases where the conduct under investigation does not constitute an infringement of any regulation in force in the State.

• (2) The Bank shall immediately provide other competent authorities with the information required for the purposes of carrying out their duties under these Regulations or the Directive.

(3)(a) Where the Bank has good reason to suspect that acts contrary to the provisions of these Regulations and the Directive, are being or have been carried out by entities not subject to the Bank’s supervision on the territory of another Member State, it shall notify the competent authority of the other Member State thereof in as specific a manner as possible.

• (b) Where the Bank receives notification of the nature described in subparagraph (a) from the competent authority of another Member State, it shall take appropriate action, shall inform the notifying competent authority of the outcome of that action and, to the extent possible, of significant interim developments.

• (4) The Bank may request the cooperation of the competent authority of another Member State, or vice versa, in a supervisory activity or for an on-the-spot verification or in an investigation on the territory of the latter within the framework of their powers pursuant to these Regulations or the Directive. Where the Bank receives a request with respect to an on-the-spot verification or investigation, it shall—

• (a) carry out the verification or investigation itself,

• (b) allow the requesting authority to carry out the verification or investigation, or

• (c) allow auditors or experts to carry out the verification or investigation.

(5)(a) Where the verification or investigation is carried out in the State by the Bank, the Bank may, upon request from the other competent authority, permit officials of the competent authority of the Member State which has requested cooperation to accompany the Bank’s officials carrying out the verification or investigation. The verification or investigation shall, however, be subject to the overall control of the Bank.

• (b) Where the verification or investigation is carried out in the State by a competent authority of another Member State, the Bank may request that its own officials accompany the officials carrying out the verification or investigation.

• (6) The Bank may refuse to exchange information as provided for in paragraph (2) or to act on a request for cooperation in carrying out an investigation or on-the-spot verification as provided for in paragraph (4), only where—

• (a) such an investigation, on-the-spot verification or exchange of information might adversely affect the sovereignty, security or public policy of the State,

• (b) judicial proceedings have already been initiated in respect of the same persons and the same actions before the authorities of the State, or

• (c) final judgment in respect of the same persons and the same actions has already been delivered in the State.

• (7) The Bank shall notify the requesting competent authority of any decision taken under paragraph (6). That notification shall contain information about the motives of the Bank’s decision.

• (8) The Bank may bring to the attention of the European Securities and Markets Authority established by Regulation (EU) No. 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No. 716/2009/EC and repealing Commission Decision 2009/77/EC¹⁴ , situations where a request—

• (a) to exchange information as provided for in Regulation 136 has been rejected or has not been acted upon within a reasonable time,

• (b) to carry out an investigation or on-the-spot verification as provided for in Regulation 137 has been rejected or has not been acted upon within a reasonable time, or

• (c) for authorisation for its officials to accompany those of the competent authority of the other Member State has been rejected or has not been acted upon within a reasonable time.

Reports by auditor of UCITS

• (a) has reason to believe that the information provided to investors or to the Bank in the reports or other documents of the UCITS does not truly describe the financial situation and the assets and liabilities of the UCITS,

• (b) has reason to believe that the assets of the UCITS are not or have not been invested in accordance with these Regulations or the prospectus or the trust deed or the deed of constitution or the articles,

• (c) has reason to believe that there exist circumstances which are likely to affect materially the ability of the UCITS to fulfil its obligations to unit-holders or meet any of its financial obligations under these Regulations,

• (d) has reason to believe that there are material defects in the financial systems and controls or accounting records of the UCITS,

• (e) has reason to believe that any fact or decision concerning a UCITS is liable to—

• (i) constitute a material breach of the laws, regulations or administrative provisions which lay down the conditions governing authorisation or which specifically govern pursuit of the activities of UCITS,

• (ii) affect the continuous functioning of the UCITS, or

• (iii) lead to a refusal by the auditor to certify the accounts of the UCITS or to the expression of qualifications by the auditor,

• (f) has reason to believe that there are material inaccuracies in or omissions from any returns of a financial nature made by the UCITS to the Bank, or

• (g) proposes to qualify any certificate which he or she is to provide in relation to financial statements or returns of the UCITS under the Companies Acts or these Regulations,

he or she shall report the matter to the Bank in writing without delay.

(2)(a) The auditor of an authorised UCITS shall report to the Bank any facts or decisions referred to in paragraph (1)(e) of which the auditor becomes aware while conducting an audit of an undertaking which has close links resulting from a control relationship with the UCITS concerned.

• (b) For the purposes of this paragraph, “close links” includes, in addition to the definition in Regulation 3(1) of “close links”, an arrangement whereby 2 or more natural or legal persons are permanently linked to one and the same person by a control relationship.

• (3) Where the auditor of a UCITS which has been authorised by the Bank proposes to resign or not to seek re-election or re-appointment as auditor, he or she shall notify the Bank in writing to that effect without delay.

• (4) The auditor of an authorised UCITS shall, where requested by the Bank, furnish to the Bank a report stating whether in his or her opinion and to the best of his or her knowledge the UCITS has or has not complied with a specified obligation of a financial nature under these Regulations.

• (5) Where the auditor of an authorised UCITS so requests, the Bank shall provide to the auditor details in writing of such returns of a financial nature to the Bank by the UCITS as the auditor requests for the purpose of enabling him or her to exercise his or her functions under these Regulations.

• (6) The auditor of an authorised UCITS shall send to the UCITS a copy of any report made by him or her to the Bank under paragraph (1) or (4).

(7)(a) Whenever the Bank is of the opinion that the exercise of its functions under these Regulations or the protection of the interests of unit-holders or shareholders so requires, it may require the auditor of an authorised UCITS to supply it with such information as it may specify in relation to the audit of the business of the UCITS and the auditor shall comply with the requirement.

• (b) The Bank may require that, in supplying information for the purposes of this paragraph, the auditor shall act independently of the authorised UCITS.

• (8) No duty to which the auditor to an authorised UCITS may be subject shall be regarded as contravened and no liability to the UCITS, or its unit-holders, creditors or other interested parties, shall attach to the auditor by reason of his or her compliance with any obligation imposed on him or her or under these Regulations.

• (9) Any communication made in good faith to the Bank by an auditor under paragraph (1)(e) or (2) shall not constitute a breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision and shall not involve the auditor in liability of any kind.

• (10) The requirements of this Regulation shall apply, with all necessary modifications, to auditors of a management company.

Bank to give reasons for decisions, etc

• (2) Any decision taken under the laws, regulations or administrative provisions adopted in accordance with these Regulations shall be properly reasoned. The following decisions of the Bank are appealable decisions for the purposes of Part VIIA of the Central Bank Act 1942 :

• (a) a decision refusing an application for authorisation under Regulation 10(1) or (2) or 17(2);

• (b) a failure to decide an application within the period prescribed by Regulation 11 or 17(11);

• (c) a decision revoking or refusing an application to revoke an authorisation;

• (d) a decision replacing or proposing to replace a management company or trustee under Regulation 128;

• (e) a failure to communicate information to the competent authority of a host Member State under Regulation 27(2).

• (3) Any of the following bodies may, in the interests of consumers and in accordance with national law, take action before the courts or competent administrative bodies to ensure that the national provisions for the implementation of the Directive are applied:

• (a) public bodies or their representatives;

• (b) consumer organisations having a legitimate interest in protecting consumers;

• (c) professional organisations having a legitimate interest in protecting their members.

• (4) A decision by the Bank to refuse an authorised UCITS situated in another Member State permission to market its units in the State or to prohibit further marketing in the State is an appealable decision for the purposes of Part VIIA of the Central Bank Act 1942 .

• (5) A decision by the Bank acting as the competent authority of the host Member State is an appealable decision for the purposes of Part VIIA of the Central Bank Act 1942 .

Exchange of information with other competent authorities

• (2) The Bank shall, without delay, notify the competent authority of the UCITS home Member State of any problem identified at the level of the management company which may materially affect the ability of the management company to perform its duties properly with respect to the UCITS or of any breach of the requirements under Part 4.

• (3) Where the Bank is the competent authority of the UCITS home Member State, the Bank shall, without delay, notify the competent authority of the management company’s home Member State of any problem identified at the level of the UCITS which may materially affect the ability of the management company to perform its duties property or to comply with the requirements of these Regulations.

• (4) The Bank shall, without delay, notify the competent authority of a UCITS host Member State and, if the management company of a UCITS is established in another Member State, the competent authority of the management company’s home Member State of any decision to withdraw authorisation, or any other serious measure taken against a UCITS authorised by the Bank, or any suspension of the issue, repurchase or redemption of units imposed upon it.

Investigation by competent authority in another Member State of management company authorised by Bank

• (a) by inspection of the management company, at that place of business or otherwise, by the authority concerned;

• (b) by inspection of the management company, at that place of business or otherwise, by a person authorised in that capacity by the authority concerned;

• (c) by a request from the authority concerned to the Bank to carry out the inspection on its behalf at that place of business or otherwise.

• (2) This Regulation shall not affect the right of the Bank, in discharging its responsibilities under these Regulations, to inspect or investigate the business of a management company’s branch established within the State.

PART 14 Derogations, Transitional and Final Provisions

Transitional provisions applicable to existing investment firms and management companies

• (2) A UCITS shall comply with Regulation 98, and the other provisions of these Regulations relating to key investor information referred to in that Regulation, before 1 July 2012.

• (3) A UCITS authorised before 1 July 2011 shall, until it is in compliance with Regulation 98, and the other provisions of these Regulations relating to key investor information referred to in that Regulation, as required under paragraph (2), comply with the requirements specified in Schedule 15.

Revocations, etc

• (2) A reference in any other enactment to a provision of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations ( S.I. No. 211 of 2003 ) revoked by paragraph (1) shall be construed as a reference to the corresponding provision of these Regulations as shown in Schedule 16.

• (3) A reference in any other enactment to any of the Regulations revoked by paragraph (1) shall be construed as a reference to these Regulations.

• (4) Notwithstanding paragraph (1), the provisions of these Regulations shall not affect any act or thing done or commenced (but not yet completed), pursuant to any of the Regulations revoked by that paragraph, prior to the coming into effect of these Regulations, including, without limitation, the terms or conditions of Bank authorisations granted pursuant thereto and any such act or thing shall continue to have effect or may be completed and have effect as if done or commenced pursuant to these Regulations.

Regulation 3(1)

SCHEDULE 1 Functions included in Activity of Collective Portfolio Management

• (a) legal and fund management accounting services;

• (b) customer inquiries;

• (c) valuation and pricing (including tax returns);

• (d) regulatory compliance monitoring;

• (e) maintenance of unit-holder register;

• (f) distribution of income;

• (g) unit issues and redemptions;

• (h) contract settlements (including certificate dispatch);

• (i) record keeping.

Regulation 3(1)

SCHEDULE 2 Transferable Securities

Part 1Criteria applicable to transferable securities which fall within paragraph (a), (b) or (c) of definition in regulation 3(1) of “transferable securities”

• (b) The liquidity of the instruments does not compromise the ability of the UCITS to comply with Regulation 104(1);

• (c) Reliable valuation is available for the instruments as follows:

• (i) in the case of securities admitted to or dealt in on a regulated market as referred to in subparagraphs (a) to (d) of paragraph (1) of Regulation 68, in the form of accurate, reliable and regular prices which are market prices or prices made available by valuation systems independent from issuers;

• (ii) in the case of other securities as referred to in subparagraph (a) of paragraph (2) of Regulation 68, in the form of a valuation on a periodic basis which is derived from information from the issuer of the security or from competent investment research.

• (d) Appropriate information is available for the instruments as follows:

• (i) in the case of securities admitted to or dealt in on a regulated market as referred to in subparagraphs (a) to (d) of paragraph (1) of Regulation 68, in the form of regular, accurate and comprehensive information to the market on the security or, where relevant, on the portfolio of the security;

• (ii) in the case of other securities as referred to in subparagraph (a) of paragraph (2) of Regulation 68, in the form of regular and accurate information to the UCITS on the security or, where relevant, on the portfolio of the security.

• (e) The instruments are negotiable.

• (f) The acquisition of the instruments is consistent with the investment objectives or the investment policy, or both, of the UCITS pursuant to these Regulations.

• (g) The instruments’ risks are adequately captured by the risk management process of the UCITS.

• (h) For the purposes of subparagraphs (b) and (e), and unless there is information available to the UCITS that would lead to a different determination, financial instruments which are admitted or dealt in on a regulated market in accordance with subparagraph (a), (b) or (c) of paragraph (1) of Regulation 68 shall be presumed not to compromise the ability of the UCITS to comply with Regulation 104(1) and shall also be presumed to be negotiable.

Part 2Securities specified for purposes of paragraph (d) of definition in Regulation 3(1) of “transferable securities”

• (a) units in closed-ended funds constituted as investment companies or as unit trusts which fulfil the following criteria:

• (i) they fulfil the criteria set out in Part 1 which are applicable to them;

• (ii) they are subject to corporate governance mechanisms applied to companies; and

• (iii) where asset management activity is carried out by another entity on behalf of the closed-ended fund, that entity is subject to national regulation for the purpose of investor protection;

• (b) units in closed-ended funds constituted under the law of contract which fulfil the following criteria:

• (i) they fulfil the criteria set out in Part 1 which are applicable to them;

• (ii) they are subject to corporate governance mechanisms equivalent to those applied to companies as referred to in subparagraph (a)(ii); and

• (iii) they are managed by an entity which is subject to national regulation for the purpose of investor protection;

• (c) financial instruments which fulfil the following criteria:

• (i) they fulfil the criteria set out in Part 1 which are applicable to them; and

• (ii) they are backed by, or linked to the performance of, other assets, which may differ from those referred to in Regulation 68(1); provided that where a financial instrument covered by this subparagraph contains an embedded derivative component as referred to in Regulation 69(4)(c), the requirements of Regulation 69(1), (2), (4) and (6) and shall apply to that component.

Regulation 3(4)

SCHEDULE 3 Interpretation of references in these regulations to money market instruments

• (a) financial instruments which are admitted to trading or dealt in on a regulated market in accordance with subparagraphs (a), (b) and (c) of paragraph (1) of Regulation 68;

• (b) financial instruments which are not admitted to trading.

• (a) they have a maturity at issuance of up to and including 397 days;

• (b) they have a residual maturity of up to and including 397 days;

• (c) they undergo regular yield adjustments in line with money market conditions at least every 397 days;

• (d) their risk profile, including credit and interest rate risks, corresponds to that of financial instruments which have a maturity as referred to in subparagraphs (a) or (b), or are subject to a yield adjustment as referred to in subparagraph (c).

• (a) they enable the UCITS to calculate a net asset value in accordance with the value at which the financial instrument held in the portfolio could be exchanged between knowledgeable, willing parties in an arm’s length transaction; and

• (b) they are based on market data or on valuation models including systems based on amortised costs.

• (a) they fulfil one of the criteria set out in paragraph 2 and all the criteria set out in paragraphs 3 and 4;

• (b) appropriate information is available for them, including information which allows an appropriate assessment of the credit risks related to the investment in such instruments, taking into account paragraphs 7, 8 and 9; and

• (c) they are freely transferable.

• (a) information on both the issue or the issuance programme and the legal and financial situation of the issuer prior to the issue of the money market instrument;

• (b) updates of the information referred to in subparagraph (a) on a regular basis and whenever a significant event occurs;

• (c) the information referred to in subparagraph (a), verified by appropriately qualified third parties not subject to instructions from the issuer; and

• (d) available and reliable statistics on the issue or the issuance programme.

• (a) information on the issue or the issuance programme or on the legal and financial situation of the issuer prior to the issue of the money market instrument;

• (b) updates of the information referred to in subparagraph (a) on a regular basis and whenever a significant event occurs; and

• (c) available and reliable statistics on the issue or the issuance programme or other data enabling an appropriate assessment of the credit risks related to the investment in such instruments.

• (a) it is located in the European Economic Area;

• (b) it is located in the OECD countries belonging to the Group of Ten;

• (c) it has at least investment grade rating;

• (d) it can be demonstrated on the basis of an in-depth analysis of the issuer that the prudential rules applicable to that issuer are at least as stringent as those laid down in a Community act.

Regulation 22(4)

SCHEDULE 4 Prudential Requirements Applicable to Management companies

• (a) establish, implement and maintain decision-making procedures and an organisational structure which clearly and in a documented manner specifies reporting lines and allocates functions and responsibilities;

• (b) ensure that their relevant persons are aware of the procedures which must be followed for the proper discharge of their responsibilities;

• (c) establish, implement and maintain adequate internal control mechanisms designed to secure compliance with decisions and procedures at all levels of the management company;

• (d) establish, implement and maintain effective internal reporting and communication of information at all relevant levels of the management company as well as effective information flows with any third party involved; and

• (e) maintain adequate and orderly records of their business and internal organisation.

Regulation 24(2)

SCHEDULE 5 Conduct requirements applicable to Management Companies

Rules of Conduct: General principles — Duty to act in the best interests of UCITS and their unit-holders

General principles — Due diligence requirements

• (2) Management companies shall exercise due skill, care and diligence when entering into, managing or terminating any arrangements with third parties in relation to the performance of risk management activities. Before entering into such arrangements, management companies shall take the necessary steps in order to verify that the third party has the ability and capacity to perform the risk management activities reliably, professionally and effectively. The management company shall establish methods for the on-going assessment of the standard of performance of the third party.

Handling of subscription and redemption orders — Reporting obligations in respect of execution of subscription and redemption orders

• (2) However, subparagraph (1) shall not apply where the notice would contain the same information as a confirmation that is to be promptly dispatched to the unit-holder by another person.

• (a) the management company identification;

• (b) the name or other designation of the unit-holder;

• (c) the date and time of receipt of the order and method of payment;

• (d) the date of execution;

• (e) the UCITS identification;

• (f) the nature of the order (subscription or redemption);

• (g) the number of units involved;

• (h) the unit value at which the units were subscribed or redeemed;

• (i) the reference value date;

• (j) the gross value of the order including charges for subscription or net amount after charges for redemptions; and

• (k) a total sum of the commissions and expenses charged and, where the investor so requests, an itemised breakdown.

Best execution — Execution of decisions to deal on behalf of managed UCITS

• (a) the objectives, investment policy and risks specific to the UCITS, as indicated in the prospectus or, as the case may be, in the trust deed, deed of constitution or articles of the UCITS;

• (b) the characteristics of the order;

• (c) the characteristics of the financial instruments that are the subject of that order;

• (d) the characteristics of the execution venues to which that order can be directed.

• (2) Management companies shall obtain the prior consent of the investment company on the execution policy. The management company shall make available appropriate information to unit-holders on the policy established in accordance with paragraphs 13 to 17 and on any material changes to their policy.

• (2) In addition, management companies shall review the execution policy on an annual basis. A review shall also be carried out whenever a material change occurs that affects the management company’s ability to continue to obtain the best possible result for the managed UCITS.

Best execution — Placing of orders to deal on behalf of UCITS with other entities for execution

• (2) For those purposes, management companies shall establish and implement a policy to enable them to comply with the obligation referred to in the previous subparagraph. The policy shall identify, in respect of each class of instruments, the entities with which the orders may be placed. The management company shall only enter into arrangements for execution where such arrangements are consistent with obligations laid down in this Regulation. Management companies shall make available to unit-holders appropriate information on the policy established in accordance with this paragraph and on any material changes to this policy.

• (2) In addition, management companies shall review the policy on an annual basis. Such a review shall also be carried out whenever a material change occurs that affects the management company’s ability to continue to obtain the best possible result for the managed UCITS.

Handling of orders — General principles

• (2) The procedures and arrangements implemented by management companies shall satisfy the following conditions:

• (a) ensure that orders executed on behalf of UCITS are promptly and accurately recorded and allocated;

• (b) execute otherwise comparable UCITS orders sequentially and promptly unless the characteristics of the order or prevailing market conditions make this impracticable, or the interests of the UCITS require otherwise.

• (3) Financial instruments or sums of money, received in settlement of the executed orders shall be promptly and correctly delivered to the account of the appropriate UCITS.

Handling of orders — Aggregation and allocation of trading orders

• (a) it must be unlikely that the aggregation of orders will work overall to the disadvantage of any UCITS or clients whose order is to be aggregated;

• (b) an order allocation policy must be established and implemented, providing in sufficiently precise terms for the fair allocation of aggregated orders, including how the volume and price of orders determines allocations and the treatment of partial executions.

• (2) However, if the management company is able to demonstrate to the UCITS or its other client on reasonable grounds that it would not have been able to carry out the order on such advantageous terms without aggregation, or at all, it may allocate the transaction for own account proportionally, in accordance with the policy as referred to in paragraph 24(b).

Inducements — Safeguarding best interests of UCITS

• (a) a fee, commission or non-monetary benefit paid or provided to or by the UCITS or a person on behalf of the UCITS;

• (b) a fee, commission or non-monetary benefit paid or provided to or by a third party or a person acting on behalf of a third party, where the following conditions are satisfied:

• (i) the existence, nature and amount of the fee, commission or benefit, or, where the amount cannot be ascertained, the method of calculating that amount, shall be clearly disclosed to the UCITS in a manner that is comprehensive, accurate and understandable, prior to the provision of the relevant service;

• (ii) the payment of the fee or commission, or the provision of the non-monetary benefit must be designed to enhance the quality of the relevant service and not impair compliance with the management company’s duty to act in the best interests of the UCITS;

• (c) proper fees which enable or are necessary for the provision of the relevant service, including custody costs, settlement and exchange fees, regulatory levies or legal fees, and which, by their nature, cannot give rise to conflicts with the management company’s duties to act honestly, fairly and professionally in accordance with the best interests of the UCITS.

Administrative procedures and control mechanism: General principles — Resources

Administrative and accounting procedures — Electronic data processing

Administrative and accounting procedures — Accounting procedures

• (2) UCITS accounting shall be maintained in such a way that all assets and liabilities of the UCITS can be directly identified at all times.

• (3) Where a UCITS has different sub-funds, separate accounts shall be maintained for each sub-fund.

Internal control mechanisms — Control by senior management and supervisory function

• (a) is responsible for the implementation of the general investment policy for each managed UCITS, as defined, where relevant, in the prospectus, the fund rules or the instruments of incorporation of the investment company,

• (b) oversees the approval of investment strategies for each managed UCITS,

• (c) is responsible for ensuring that the management company has a permanent and effective compliance function, as referred to in paragraphs 45 to 47, even if this function is performed by a third party,

• (d) ensures and verifies on a periodic basis that the general investment policy, the investment strategies and the risk limits of each managed UCITS are properly and effectively implemented and complied with, even if the risk management function is performed by third parties,

• (e) approves and reviews on a periodic basis the adequacy of the internal procedures for undertaking investment decisions for each managed UCITS, so as to ensure that such decisions are consistent with the approved investment strategies,

• (f) approves and reviews on a periodic basis the risk management policy and arrangements, processes and techniques for implementing that policy, as referred to in paragraphs 1 to 3 of Schedule 9, including the risk limit system for each managed UCITS.

• (a) assess and periodically review the effectiveness of the policies, arrangements and procedures put in place to comply with the obligations in these Regulations, and

• (b) take appropriate measures to address any deficiencies.

Internal control mechanisms — Permanent compliance function

• (2) Management companies shall take into account the nature, scale and complexity of the business of the company, and the nature and range of services and activities undertaken in the course of that business.

• (a) to monitor and, on a regular basis, to assess the adequacy and effectiveness of the measures, policies and procedures put in place in accordance with paragraph 45, and the actions taken to address any deficiencies in the management company’s compliance with its obligations; and

• (b) to advise and assist the relevant persons responsible for carrying out services and activities to comply with the management company’s obligations under these Regulations.

• (a) the compliance function must have the necessary authority, resources, expertise and access to all relevant information;

• (b) a compliance officer must be appointed and must be responsible for the compliance function and for any reporting on a frequent basis, and at least annually, to the senior management on matters of compliance, indicating in particular whether the appropriate remedial measures have been taken in the event of any deficiencies;

• (c) the relevant persons involved in the compliance function must not be involved in the performance of services or activities they monitor; and

• (d) the method of determining the remuneration of the relevant persons involved in the compliance function must not compromise their objectivity and must not be likely to do so.

• (2) In situations where, in view of the nature, scale and complexity of its business, and the nature and range of its services and activities, a management company is able to demonstrate that that requirement is not proportionate and that its compliance function continues to be effective, it shall not be required to comply with clause (c) or (d) of subparagraph (1) of paragraph 46.

Internal control mechanisms — Permanent internal audit function

• (a) to establish, implement and maintain an audit plan to examine and evaluate the adequacy and effectiveness of the management company’s systems, internal control mechanisms and arrangements;

• (b) to issue recommendations based on the result of work carried out in accordance with subparagraph (a);