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Financial Services and Markets Act 2000

Type Public General Act

Publication 2000-06-14

Last updated 2026-09-05

State In force

Department Statute Law Database

Source legislation.gov.uk

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articles Not indexed

An Act to make provision about the regulation of financial services and markets; to provide for the transfer of certain statutory functions relating to building societies, friendly societies, industrial and provident societies and certain other mutual societies; and for connected purposes.

Reform history JSON API

(a) are exercisable by the CMA Board (within the meaning of Schedule 4 to the Enterprise and Regulatory Reform Act 2013), and

(b) relate to the provision of financial services or to the provision of claims management services in Great Britain.

(3) But subsection (1) does not apply to functions under the following sections of the Enterprise Act 2002—

section 166 (duty to maintain register of undertakings and orders);

section 167C (statement of policy in relation to functions under sections 167 and 167A);

section 171 (duty to publish guidance).

section 174E (statement of policy on penalties).

(4) So far as is necessary for the purposes of, or in connection with, subsections (1) and (2)—

(a) references in Part 4 of the Enterprise Act 2002 to the CMA (including references in provisions of that Act applied by that Part) are to be read as including references to the FCA, and

(b) references in that Part to section 5 of that Act are to be read as including references to section 234M of this Act.

(5) But subsection (4) does not apply—

(a) in relation to section 166 , 167C, 171 or 174E of that Act, or

(b) where the context otherwise requires.

(6) Section 130A of the Enterprise Act 2002 has effect in relation to the FCA by virtue of subsections (1) and (2) as if—

(a) in subsection (2)(a) of that section, the reference to the acquisition or supply of goods or services of one or more than one description in the United Kingdom were a reference to the acquisition or provision in the United Kingdom of financial services or in Great Britain of claims management services, and

(b) in subsection (2)(b) of that section, the reference to the extent to which steps can and should be taken were a reference to the extent to which steps that might include steps under Part 4 of that Act can and should be taken.

(7) Before the CMA or the FCA first exercises any of the concurrent functions in relation to any matter, it must consult the other.

(8) Neither the CMA nor the FCA may exercise any of the concurrent functions in relation to any matter if any of those functions have been exercised in relation to that matter by the other.

(9) In making any decision, or otherwise taking action, for the purposes of any of its functions that, by virtue of this section, are functions exercisable concurrently with the CMA, the FCA must have regard to the need for making a decision, or taking action, as soon as reasonably practicable.

The FCA's functions under the Competition Act 1998

234J

(1) The functions to which this subsection applies are to be concurrent functions of the FCA and the CMA.

(2) Subsection (1) applies to the functions of the CMA under the provisions of Part 1 of the Competition Act 1998, so far as relating to any of the following that relate to the provision of financial services or relate to the provision of claims management services in Great Britain—

(a) agreements, decisions or concerted practices of the kind mentioned in section 2(1) of that Act,

(b) conduct of the kind mentioned in section 18(1) of that Act, and

(c) transferred EU anti-trust commitments or transferred EU anti-trust directions (as defined in section 40ZA of that Act).

(3) But subsection (1) does not apply to functions under the following provisions of that Act—

section 31D(1) to (6) (duty to publish guidance);

section 35C (statement of policy in relation to functions under sections 31E, 34 and 35A);

section 38(1) to (6) (duty to publish guidance about penalties);

section 40B(1) to (4) (duty to publish statement of policy on penalties);

section 51 (rules).

(4) So far as necessary for the purposes of, or in connection with, the provisions of subsections (1) and (2), references to the CMA in Part 1 of the Competition Act 1998 (including references in provisions of the Enterprise Act 2002 applied by that Part) are to be read as including references to the FCA.

(5) But subsection (4) does not apply—

(a) in relation to sections 31D(1) to (6) , 35C, 38(1) to (6), 40B(1) to (4), 51, 52(6) and (8) and 54 of that Act, or

(b) where the context otherwise requires.

(6) In making any decision, or otherwise taking action, for the purposes of any of its functions that—

(a) by virtue of this section, are functions exercisable concurrently with the CMA, and

(b) are functions within Schedule 4A to the Enterprise and Regulatory Reform Act 2013 by virtue of paragraph 5 of that Schedule,

the FCA must have regard to the need for making a decision, or taking action, as soon as reasonably practicable.

Duty to consider exercise of powers under Competition Act 1998

234K

(1) Before exercising a power listed in subsection (3), the FCA must consider whether it would be more appropriate to proceed under the Competition Act 1998.

(2) The FCA must not exercise such a power if it considers that it would be more appropriate to proceed under the Competition Act 1998.

(3) Those powers are—

(a) the power under section 55J(2) to vary or cancel a Part 4A permission;

(b) the power under section 55L to impose a requirement on an authorised person with a Part 4A permission, or to vary a requirement imposed under that section;

(d) the power to take action under section 89U;

(e) the power to give a direction under section 192C;

(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision of information and assistance to a CMA group

234L

(1) For the purpose of assisting a CMA group in carrying out a relevant investigation, the FCA must give the CMA group—

(a) any relevant information which the FCA has in its possession, and

(b) any other assistance which the CMA group may reasonably require in relation to any matters falling within the scope of the investigation.

(2) A “relevant investigation” is an investigation carried out on a reference made by the FCA under section 131 of the Enterprise Act 2002 by virtue of section 234I.

(3) “Relevant information”, in relation to a relevant investigation, is information—

(a) which relates to matters falling within the scope of the investigation, and

(b) which—

(i) is requested by the CMA group for the purpose of the investigation, or

(ii) in the FCA's opinion, it would be appropriate to give to the CMA group for that purpose.

(4) A CMA group, in carrying out a relevant investigation, must take into account any information given to it under this section.

(5) In this section “CMA group” has the same meaning as in Schedule 4 to the Enterprise and Regulatory Reform Act 2013.

Function of keeping market under review

234M

(1) For the purpose of the functions conferred on it by sections 234I to 234L the FCA is to have the function of keeping under review the market for financial services and the market in Great Britain for claims management services.

(2) The function conferred by subsection (1) is to be carried out with a view to (among other things) ensuring that the FCA has sufficient information to take informed decisions and to carry out its other functions effectively.

Exclusion of general duties

234N

(1) Section 1B (the FCA's general duties) does not apply in relation to anything done by the FCA in the carrying out of its functions by virtue of sections 234I to 234L.

(2) But in the carrying out of any functions by virtue of sections 234I to 234L, the FCA may have regard to any of the matters in respect of which a duty is imposed by section 1B if it is a matter to which the CMA is entitled to have regard in the carrying out of those functions.

Supplementary provision

234O

(1) If any question arises as to whether, by virtue of section 234I or 234J, any functions fall to be, or are capable of being, carried out by the FCA in relation to any particular case, that question is to be referred to, and determined by, the Treasury.

(2) No objection is to be taken to anything done under the Competition Act 1998 or Part 4 of the Enterprise Act 2002 by or in relation to the FCA on the ground that it should have been done by or in relation to the CMA.

Part XVII — Collective Investment Schemes

Chapter I — Interpretation

Collective investment schemes.

235

(1) In this Part “collective investment scheme” means any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.

(2) The arrangements must be such that the persons who are to participate (“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 to give directions.

(3) The arrangements must also have either or both of the following characteristics—

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

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

(4) If arrangements provide for such pooling as is mentioned in subsection (3)(a) in relation to separate parts of the property, the arrangements are not to be regarded as constituting a single collective investment scheme unless the participants are entitled to exchange rights in one part for rights in another.

(5) The Treasury may by order provide that arrangements do not amount to a collective investment scheme—

(a) in specified circumstances; or

(b) if the arrangements fall within a specified category of arrangement.

Contractual schemes

235A

(1) In this Part “contractual scheme” means—

(a) a co-ownership scheme; or

(b) a partnership scheme.

(2) In this Part “co-ownership scheme” means a collective investment scheme which satisfies the conditions in subsection (3).

(3) The conditions are—

(a) that the arrangements constituting the scheme are contractual;

(b) that they are set out in a deed that is entered into between the operator and a depositary and meets the requirements of subsection (4);

(d) that the property subject to the scheme is held by, or to the order of, a depositary; and

(e) that either—

(i) the property is beneficially owned by the participants as tenants in common (or, in Scotland, is the common property of the participants); or

(ii) where the arrangements constituting the scheme provide for such pooling as is mentioned in section 235(3)(a) in relation to separate parts of the property, each part is beneficially owned by the participants in that part as tenants in common (or, in Scotland, is the common property of the participants in that part).

(4) The deed—

(a) must contain a statement that the arrangements are intended to constitute a co-ownership scheme as defined in section 235A of the Financial Services and Markets Act 2000;

(b) must make provision for the issue and redemption of units;

(i) prohibit the transfer of units,

(ii) allow units to be transferred only if specified conditions are met, or

(iii) where the arrangements constituting the scheme provide for such pooling as is mentioned in section 235(3)(a) in relation to separate parts of the property, in relation to each separate part make provision falling within sub-paragraph (i) or (ii);

(d) must authorise the operator—

(i) to acquire, manage and dispose of property subject to the scheme; and

(ii) to enter into contracts which are binding on participants for the purposes of, or in connection with, the acquisition, management or disposal of property subject to the scheme; and

(e) must make provision requiring the operator and depositary to wind up the scheme in specified circumstances.

(5) In this Part “partnership scheme” means a collective investment scheme which satisfies the conditions in subsection (6).

(6) The conditions are—

(a) that the scheme is a limited partnership;

(aa) that the limited partnership is not designated under section 8(2) of the Limited Partnerships Act 1907 as a private fund limited partnership;

(b) that the limited partnership—

(i) at any time has only one general partner; and

(ii) on formation has only one limited partner, who is a person nominated by the general partner (“the nominated partner”);

(c) that the arrangements constituting the partnership are set out in a deed that is entered into between the general partner and the nominated partner;

(d) that the deed prohibits such pooling as is mentioned in section 235(3)(a) in relation to separate parts of the property; and

(e) that the deed provides that if an authorisation order is made in respect of the limited partnership under section 261D(1)—

(i) the property subject to the scheme is to be held by, or to the order of, a person appointed to be a depositary;

(ii) the limited partners, other than the nominated partner, are to be the participants in the scheme; and

(iii) the partnership is not dissolved on any person ceasing to be a limited partner provided that there remains at least one limited partner.

(7) In this section “general partner”, “limited partner” and “limited partnership” have the same meaning as in the Limited Partnerships Act 1907.

(8) In this Part “contractual scheme deed” means—

(a) in relation to a co-ownership scheme, the deed referred to in subsection (3)(b); and

(b) in relation to a partnership scheme, the deed referred to in subsection (6)(c).

Open-ended investment companies.

236

(1) In this Part “an open-ended investment company” means a collective investment scheme which satisfies both the property condition and the investment condition.

(2) The property condition is that the property belongs beneficially to, and is managed by or on behalf of, a body corporate (“BC”) having as its purpose the investment of its funds with the aim of—

(a) spreading investment risk; and

(b) giving its members the benefit of the results of the management of those funds by or on behalf of that body.

(3) The investment condition is that, in relation to BC, a reasonable investor would, if he were to participate in the scheme—

(a) expect that he would be able to realize, within a period appearing to him to be reasonable, his investment in the scheme (represented, at any given time, by the value of shares in, or securities of, BC held by him as a participant in the scheme); and

(b) be satisfied that his investment would be realized on a basis calculated wholly or mainly by reference to the value of property in respect of which the scheme makes arrangements.

(4) In determining whether the investment condition is satisfied, no account is to be taken of any actual or potential redemption or repurchase of shares or securities under—

(a) Chapters 3 to 7 of Part 18 of the Companies Act 2006;

(d) provisions in force in a country or territory ... which the Treasury have, by order, designated as corresponding provisions.

(5) The Treasury may by order amend the definition of “an open-ended investment company” for the purposes of this Part.

Meaning of “UCITS”

236A

(1) For the purposes of this Act, and subject to subsection (4), “UCITS” means an undertaking established in the United Kingdom or an EEA State—

(a) with the sole object of collective investment, operating on the principle of risk-spreading, in transferable securities or other liquid financial assets mentioned in subsection (3), of capital raised from the public; and

(b) with units which are, at the request of holders, repurchased or redeemed, directly or indirectly, out of the undertaking's assets.

(2) A UCITS may consist of several sub-funds (see section 237(4)).

(3) The transferable securities or other liquid financial assets referred to in subsection (1)(a) are—

(a) in the case of an undertaking established in the United Kingdom, those permitted by section 2 of chapter 5 of the Collective Investment Schemes sourcebook; or

(b) in the case of an undertaking established in an EEA State, those referred to in Article 50(1) of the UCITS directive.

(4) For the purposes of subsection (1)(b), action taken by the undertaking to ensure that the price of its units on an investment exchange does not significantly vary from their net asset value is to be regarded as equivalent to the repurchase or redemption of units at the request of holders.

(5) An undertaking is not a UCITS if it is any of the following—

(a) a collective investment undertaking of the closed-ended type;

(b) a collective investment undertaking which raises capital without promoting the sale of its units to the public within the relevant area or any part of it;

(c) an open-ended investment company, or other collective investment undertaking, the units of which may, under its fund rules or instruments of incorporation, be sold only to the public in countries or territories outside the relevant area.

(6) In subsection (5) “the relevant area” means—

(a) in the case of an undertaking established in the United Kingdom, the United Kingdom;

(b) in the case of an undertaking established in an EEA State, the EEA States.

Other definitions.

237

(1) In this Part “unit trust scheme” means a collective investment scheme under which the property is held on trust for the participants , except that it does not include a contractual scheme.

(2) In this Part—

“trustee”, in relation to a unit trust scheme, means the person holding the property in question on trust for the participants;

“depositary”, in relation to—a collective investment scheme which is constituted by a body incorporated by virtue of regulations under section 262, orany other collective investment scheme which is not a unit trust scheme,means any person to whom the property subject to the scheme is entrusted for safekeeping;

“management company” means an undertaking, as defined in section 1161 of the Companies Act 2006, whose regular business is the management of UK UCITS;

“the operator”—in relation to a unit trust scheme with a separate trustee, means the manager; in relation to a co-ownership scheme, means the operator appointed under the terms of the contractual scheme deed;in relation to a partnership scheme, means the general partner; ... in relation to an open-ended investment company, means that company; ... , and in relation to a recognised scheme, means the legal entity with overall responsibility for the management and performance of the functions of the scheme....

“units” means the rights or interests (however described) of the participants in a collective investment scheme.

“working day” has the meaning given in section 191G(2).

(3) In this Part—

“an authorised unit trust scheme” means a unit trust scheme which is authorised for the purposes of this Act by an authorisation order in force under section 243;

“an authorised contractual scheme” means a contractual scheme which is authorised for the purposes of this Act by an authorisation order in force under section 261D(1);

“an authorised open-ended investment company” means a body incorporated by virtue of regulations under section 262 in respect of which an authorisation order is in force under any provision made in such regulations by virtue of subsection (2)(l) of that section;

“the Collective Investment Schemes sourcebook” means the Collective Investment Schemes sourcebook made under this Act by the FCA, as it has effect on IP completion day;

“EEA UCITS” means a UCITS which is authorised pursuant to Article 5 of the UCITS directive in an EEA State;

“feeder UCITS” means— a UK UCITS which has been approved by the FCA to invest 85% or more of the total property which is subject to the collective investment scheme constituted by the UK UCITS in units of—another UK UCITS,a sub-fund of another UK UCITS,an EEA UCITS, ora sub-fund of an EEA UCITS, ora sub-fund of a UK UCITS which has been approved by the FCA to invest 85% or more of the sub-fund's separate pool of the property of the UK UCITS in units of—another UK UCITS,another sub-fund of a UK UCITS,an EEA UCITS, ora sub-fund of an EEA UCITS;

“master UCITS”, in relation to a feeder UCITS, means (as the case may be)—the other UK UCITS mentioned in paragraph (a)(i) or (b)(i) of the definition of “feeder UCITS”,the EEA UCITS mentioned in paragraph (a)(iii) or (b)(iii) of that definition, orthe sub-fund mentioned in paragraph (a)(ii) or (iv) or (b)(ii) or (iv) of that definition;

“a recognised scheme” means a section 271A scheme or a scheme recognised under section ... 272 (and see also section 282C).

“a section 271A scheme” means a scheme recognised under section 271A (and see also section 271S);

“UCITS-related direct EU legislation” means—Commission Regulation (EU) 2010/583 of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than paper or by means of a website, orCommission Delegated Regulation (EU) 2016/438 of 17 December 2015 supplementing Directive 2009/65/EC of the European Parliament and of the Council with regard to obligations of depositaries;

“UK UCITS” means a UCITS which is an authorised unit trust scheme , an authorised contractual scheme or an authorised open-ended investment company.

(4) In this Part, references to a sub-fund of a UCITS are references to a part of the property of the UCITS which forms a separate pool where—

(a) the UCITS provides arrangements for separate pooling of the contributions of the participants and the profits and income out of which payments are made to them; and

(b) the participants are entitled to exchange rights in one pool for rights in another.

(5) In this Part “umbrella co-ownership scheme” means an authorised contractual scheme which satisfies the conditions in subsection (6).

(6) The conditions are—

(a) that the scheme is a co-ownership scheme;

(b) that the arrangements constituting the scheme provide for such pooling as is mentioned in section 235(3)(a) in relation to separate parts of the property; and

(c) that the participants are entitled under the terms of the scheme to exchange rights in one part for rights in another.

(7) In this Part “sub-scheme”, in relation to an umbrella co-ownership scheme, means the arrangements constituting the scheme so far as they relate to a separate part of the property.

(8) In this Part “stand-alone co-ownership scheme” means an authorised contractual scheme which—

(a) is a co-ownership scheme; and

(b) is not an umbrella co-ownership scheme.

Chapter II — Restrictions on Promotion

Restrictions on promotion.

238

(1) An authorised person must not communicate an invitation or inducement to participate in a collective investment scheme.

(2) But that is subject to the following provisions of this section and to section 239.

(3) Subsection (1) applies in the case of a communication originating outside the United Kingdom only if the communication is capable of having an effect in the United Kingdom.

(4) Subsection (1) does not apply in relation to—

(a) an authorised unit trust scheme;

(aa) an authorised contractual scheme;

(b) a scheme constituted by an authorised open-ended investment company; or

(5) Subsection (1) does not apply to anything done in accordance with rules made by the FCA for the purpose of exempting from that subsection the promotion otherwise than to the general public of schemes of specified descriptions.

(6) The Treasury may by order specify circumstances in which subsection (1) does not apply.

(7) An order under subsection (6) may, in particular, provide that subsection (1) does not apply in relation to communications—

(a) of a specified description;

(b) originating in a specified country or territory outside the United Kingdom;

(c) originating in a country or territory which falls within a specified description of country or territory outside the United Kingdom; or

(d) originating outside the United Kingdom.

(8) The Treasury may by order repeal subsection (3).

(9) “Communicate” includes causing a communication to be made.

(10) “Promotion otherwise than to the general public” includes promotion in a way designed to reduce, so far as possible, the risk of participation by persons for whom participation would be unsuitable.

(11) “Participate”, in relation to a collective investment scheme, means become a participant (within the meaning given by section 235(2)) in the scheme.

Single property schemes.

239

(1) The Treasury may by regulations make provision for exempting single property schemes from section 238(1).

(2) For the purposes of subsection (1) a single property scheme is a scheme which has the characteristics mentioned in subsection (3) and satisfies such other requirements as are prescribed by the regulations conferring the exemption.

(3) The characteristics are—

(a) that the property subject to the scheme (apart from cash or other assets held for management purposes) consists of—

(i) a single building (or a single building with ancillary buildings) managed by or on behalf of the operator of the scheme, or

(ii) a group of adjacent or contiguous buildings managed by him or on his behalf as a single enterprise,

with or without ancillary land and with or without furniture, fittings or other contents of the building or buildings in question; and

(b) that the units of the participants in the scheme are either dealt in on a recognised investment exchange or offered on terms such that any agreement for their acquisition is conditional on their admission to dealings on such an exchange.

(4) If regulations are made under subsection (1), the FCA may make rules imposing duties or liabilities on the operator and (if any) the trustee or depositary of a scheme exempted by the regulations.

(5) The rules may include, to such extent as the FCA thinks appropriate, provision for purposes corresponding to those for which provision can be made under section 248 in relation to authorised unit trust schemes.

Restriction on approval of promotion.

240

(1) An authorised person may not approve for the purposes of section 21 the content of a communication relating to a collective investment scheme if he would be prohibited by section 238(1) from effecting the communication himself or from causing it to be communicated.

(2) For the purposes of determining in any case whether there has been a contravention of section 21(1), an approval given in contravention of subsection (1) is to be regarded as not having been given.

Actions for damages.

241

If an authorised person contravenes a requirement imposed on him by section 238 or 240, section 138D applies to the contravention as it applies to a contravention mentioned in section 138D(2).

CHAPTER 2A — PROHIBITION ON ISSUE OF BEARER UNITS

Bearer units no longer to be issued

241A

(1) No bearer units in a collective investment scheme may be issued, converted or cancelled after 1 January 2021.

(2) Subsection (1) applies in relation to a collective investment scheme even if the arrangements constituting the scheme purport to authorise the issue, conversion or cancellation of bearer units in the scheme.

(3) In this section “bearer units”, in relation to a collective investment scheme, means units in the scheme evidenced by a certificate, or any other documentary evidence of title, which indicates—

(a) that the holder of the document is entitled to the units specified in it; and

(b) that no entry identifying the holder of those units will be made in any register, or other record, of participants in the scheme.

(4) Subsection (1) does not apply to a collective investment scheme constituted by an open-ended investment company, but regulation 48 of the Open-Ended Investment Companies Regulations 2001 (S.I. 2001/1228) makes corresponding provision.

Chapter III — Authorised Unit Trust Schemes

Applications for authorisation

Applications for authorisation of unit trust schemes.

242

(1) The manager and trustee, or proposed manager and trustee, of a unit trust scheme may apply to the FCA for—

(a) an order declaring the scheme to be an authorised unit trust scheme;

(b) an order declaring the scheme to be an authorised money market fund.

(2) The manager and trustee (or proposed manager and trustee) must be different persons.

(3) An application —

(a) must be made in such manner as the FCA may direct; and

(b) must contain or be accompanied by such information as the FCA may reasonably require for the purpose of determining the application.

(4) At any time after receiving an application and before determining it, the FCA may require the applicants to provide it with such further information as it reasonably considers necessary to enable it to determine the application.

(5) Different directions may be given, and different requirements imposed, in relation to different applications.

(6) The FCA may require applicants to present information which they are required to give under this section in such form, or to verify it in such a way, as the FCA may direct.

Authorisation orders : authorised unit trust schemes.

243

(1) If, on an application under section 242(1)(a) in respect of a unit trust scheme, the FCA—

(a) is satisfied that the scheme complies with the requirements set out in this section,

(b) is satisfied that the scheme complies with the requirements of the trust scheme rules, and

(c) has been provided with a copy of the trust deed and a certificate signed by a solicitor to the effect that it complies with such of the requirements of this section or those rules as relate to its contents,

the FCA may make an order declaring the scheme to be an authorised unit trust scheme.

(2) If the FCA makes an order under subsection (1), it must give written notice of the order to the applicant.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The manager and the trustee must be persons who are independent of each other.

(5) The manager and the trustee must each be a body corporate incorporated in the United Kingdom ..., and the affairs of each must be administered in the United Kingdom.

(5A) The manager and the trustee must each have a place of business in the United Kingdom.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) The manager and the trustee must each be an authorised person and the manager must have permission to act as manager and the trustee must have permission to act as trustee.

(7A) The manager must be a fit and proper person to manage the unit trust scheme to which the application relates.

(8) The name of the scheme must not be undesirable or misleading.

(9) The purposes of the scheme must be reasonably capable of being successfully carried into effect.

(10) The participants must be entitled to have their units redeemed in accordance with the scheme at a price—

(a) related to the net value of the property to which the units relate; and

(b) determined in accordance with the scheme.

(11) But a scheme is to be treated as complying with subsection (10) if it requires the manager to ensure that a participant is able to sell his units on an investment exchange at a price not significantly different from that mentioned in that subsection.

Authorisation orders: authorised money market funds

243A

(1) If, on an application under section 242(1)(b) in respect of a unit trust scheme, conditions A and B are met the FCA may make an order declaring the scheme to be an authorised money market fund.

(2) Condition A is that the FCA is satisfied that the scheme will be able to comply with the requirements imposed on a money market fund under the MMF Regulation.

(3) Condition B is that—

(a) the scheme is an authorised unit trust scheme, or

(b) the scheme—

(i) is the subject of an application under section 242(1)(a), and

(ii) the conditions in section 243(1)(a) to (c) are met in relation to that application.

(4) If the FCA makes an order under subsection (1), it must give written notice of the order to the applicant.

(5) In this Chapter “authorisation order” means—

(a) an order under section 243(1), or

(b) an order under subsection (1) of this section.

Determination of applications.

244

(1) Subject to subsection (1A), An application under section 242(1)(a) must be determined by the FCA before the end of the period of six months beginning with the date on which it receives the completed application.

(1A) An application under section 242(1)(a) in respect of a unit trust scheme which is a UCITS, or an application under section 242(1)(b), must be determined by the FCA before the end of two months beginning with the date on which it receives the application.

(2) The FCA may determine an incomplete application if it considers it appropriate to do so; and it must in any event determine such an application within twelve months beginning with the date on which it first receives the application.

(3) The applicant may withdraw his application, by giving the FCA written notice, at any time before the FCA determines it.

Applications refused

Procedure when refusing an application.

245

(1) If the FCA proposes to refuse an application made under section 242 it must give each of the applicants a warning notice.

(2) If the FCA decides to refuse the application—

(a) it must give each of the applicants a decision notice; and

(b) either applicant may refer the matter to the Tribunal.

Certificates

Certificates.

246

(1) If the manager or trustee of a unit trust scheme which complies with the conditions necessary for it to be a UK UCITS so requests, the FCA may issue a certificate to the effect that the scheme complies with those conditions.

(2) Such a certificate may be issued on the making of an authorisation order in respect of the scheme or at any subsequent time.

Rules

Trust scheme rules.

247

(1) The FCA may make rules (“trust scheme rules”) as to—

(a) the constitution, management and operation of authorised unit trust schemes;

(b) the powers, duties, rights and liabilities of the manager and trustee of any such scheme;

(d) the winding up of any such scheme.

(2) Trust scheme rules may, in particular, make provision—

(a) as to the issue and redemption of the units under the scheme;

(b) as to the expenses of the scheme and the means of meeting them;

(d) for restricting or regulating the investment and borrowing powers exercisable in relation to the scheme;

(e) requiring the keeping of records with respect to the transactions and financial position of the scheme and for the inspection of those records;

(f) requiring the preparation of periodical reports with respect to the scheme and the provision of those reports to the participants and to the FCA; and

(g) with respect to the amendment of the scheme.

(3) Trust scheme rules may make provision as to the contents of the trust deed, including provision requiring any of the matters mentioned in subsection (2) to be dealt with in the deed.

(4) But trust scheme rules are binding on the manager, trustee and participants independently of the contents of the trust deed and, in the case of the participants, have effect as if contained in it.

(5) If—

(a) a modification is made of the statutory provisions in force in the United Kingdom relating to companies,

(b) the modification relates to the rights and duties of persons who hold the beneficial title to any shares in a company without also holding the legal title, and

(c) it appears to the Treasury that, for the purpose of assimilating the law relating to authorised unit trust schemes to the law relating to companies as so modified, it is expedient to modify the rule-making powers conferred on the FCA by this section,

the Treasury may by order make such modifications of those powers as they consider appropriate.

Scheme particulars rules.

248

(1) The FCA may make rules (“scheme particulars rules”) requiring the manager of an authorised unit trust scheme—

(a) to submit scheme particulars to the FCA; and

(b) to publish scheme particulars or make them available to the public on request.

(2) “Scheme particulars” means particulars in such form, containing such information about the scheme and complying with such requirements, as are specified in scheme particulars rules.

(3) Scheme particulars rules may require the manager of an authorised unit trust scheme to submit, and to publish or make available, revised or further scheme particulars if there is a significant change affecting any matter—

(a) which is contained in scheme particulars previously published or made available; and

(b) whose inclusion in those particulars was required by the rules.

(4) Scheme particulars rules may require the manager of an authorised unit trust scheme to submit, and to publish or make available, revised or further scheme particulars if—

(a) a significant new matter arises; and

(b) the inclusion of information in respect of that matter would have been required in previous particulars if it had arisen when those particulars were prepared.

(5) Scheme particulars rules may provide for the payment, by the person or persons who in accordance with the rules are treated as responsible for any scheme particulars, of compensation to any qualifying person who has suffered loss as a result of—

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

(b) the omission from them of any matter required by the rules to be included.

(6) “Qualifying person” means a person who—

(a) has become or agreed to become a participant in the scheme; or

(b) although not being a participant, has a beneficial interest in units in the scheme.

(7) Scheme particulars rules do not affect any liability which any person may incur apart from the rules.

Disciplinary measures

249

(1) If it appears to the FCA that an auditor has failed to comply with a duty imposed on him by trust scheme rules, it may do one or more of the following—

(a) disqualify the auditor from being the auditor of any authorised unit trust scheme , authorised contractual scheme or authorised open-ended investment company;

(b) publish a statement to the effect that it appears to the FCA that the auditor has failed to comply with the duty;

(2) Sections 345B to 345E have effect in relation to the taking of action under subsection (1) as they have effect in relation to the taking of action under section 345(2).

Modification or waiver of rules.

250

(1) In this section “rules” means—

(a) trust scheme rules; or

(b) scheme particulars rules.

(2) The FCA may, on the application or with the consent of any person to whom any rules apply, direct that all or any of the rules—

(a) are not to apply to him as respects a particular scheme; or

(b) are to apply to him, as respects a particular scheme, with such modifications as may be specified in the direction.

(3) The FCA may, on the application or with the consent of the manager and trustee of a particular scheme acting jointly, direct that all or any of the rules—

(a) are not to apply to the scheme; or

(b) are to apply to the scheme with such modifications as may be specified in the direction.

(4) Section 138A and subsections (1) to (3), (5) and (6) of section 138B have effect in relation to a direction under subsection (2) as they have effect in relation to a direction under section 138A(1) but with the following modifications—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) any reference to the person is to be read as a reference to the person mentioned in subsection (2); and

(c) section 138B(3)(c) is to be read, in relation to a participant of the scheme, as if the word “commercial” were omitted.

(5) Section 138A and subsections (1) to (3), (5) and (6) of section 138B have effect in relation to a direction under subsection (3) as they have effect in relation to a direction under section 138A(1) but with the following modifications—

(a) subsection (4)(a) of section 138A is to be read as if the words “by the . . . person” were omitted;

(b) section 138B(3)(c) and the definition of “immediate group” in section 421ZA as it applies to that section are to be read as if references to the . . . person were references to each of the manager and the trustee of the scheme;

(c) section 138B(3)(c) is to be read, in relation to a participant of the scheme, as if the word “commercial” were omitted;

(d) section 138B(5) is to be read as if the reference to the . . . person concerned were a reference to the scheme concerned and to its manager and trustee; and

(e) section 138A(7) is to be read as if the reference to the . . . person were a reference to the manager and trustee of the scheme acting jointly.

Alterations

Alteration of schemes and changes of manager or trustee.

251

(A1) This section applies where the manager of an authorised unit trust scheme proposes—

(a) to make an alteration to the scheme, other than an alteration—

(i) to which section 252A applies; or

(ii) to which Part 4 of the Undertakings for Collective Investment in Transferable Securities Regulations 2011 (mergers) applies; or

(b) to replace its trustee.

(1) The manager must give written notice of the proposal to the FCA.

(2) Any notice given in respect of a proposal to alter the scheme involving a change in the trust deed must be accompanied by a certificate signed by a solicitor to the effect that the change will not affect the compliance of the deed with the trust scheme rules.

(3) The trustee of an authorised unit trust scheme must give written notice to the FCA of any proposal to replace the manager of the scheme.

(4) Effect is not to be given to any proposal of which notice has been given under subsection (1) or (3) unless—

(a) the FCA, by written notice, has given its approval to the proposal; or

(b) one month, beginning with the date on which the notice was given, has expired without the manager or trustee having received from the FCA a warning notice under section 252 in respect of the proposal.

(5) The FCA must not approve a proposal to replace the manager or the trustee of an authorised unit trust scheme unless it is satisfied that, if the proposed replacement is made, the scheme will continue to comply with the requirements of section 243(4) to (7).

Procedure when refusing approval of a proposal under section 251.

252

(1) If the FCA proposes to refuse approval of a proposal under section 251 to replace the trustee or manager of an authorised unit trust scheme, it must give a warning notice to the person by whom notice of the proposal was given under section 251(1) or (3).

(2) If the FCA proposes to refuse approval of a proposal under section 251 to alter an authorised unit trust scheme it must give separate warning notices to the manager and the trustee of the scheme.

(3) To be valid the warning notice must be received by that person before the end of one month beginning with the date on which notice of the proposal was given.

(4) If, having given a warning notice to a person, the FCA decides to refuse approval—

(a) it must give him a decision notice; and

(b) he may refer the matter to the Tribunal.

Proposal to convert to a non-feeder UCITS

252A

(1) This section applies where the manager of an authorised unit trust scheme which is a feeder UCITS proposes to make an alteration to the scheme which—

(a) involves a change in the trust deed, and

(b) will enable the scheme to convert into a UK UCITS which is not a feeder UCITS.

(2) The manager must give written notice of the proposal to the FCA.

(3) Any notice given in respect of such a proposal must be accompanied by—

(a) a certificate signed by a solicitor to the effect that the change will not affect the compliance of the deed with the trust scheme rules; and

(b) the specified information.

(4) The FCA must, within 15 working days after the date on which it received the notice under subsection (2), give—

(a) written notice to the manager of the scheme that the FCA approves the proposed amendments to the trust deed, or

(b) separate warning notices to the manager and trustee of the scheme that the FCA proposes to refuse approval of the proposed amendments.

(5) Effect is not to be given to any proposal of which notice has been given under subsection (2) unless the FCA, by written notice, has given its approval to the proposal.

(6) If, having given a warning notice to a person, the FCA decides to refuse approval—

(a) it must give that person a decision notice; and

(b) that person may refer the matter to the Tribunal.

(7) Subsection (8) applies where—

(a) the notice given under subsection (2) relates to a proposal to amend the trust deed of a feeder UCITS to enable it to convert into a UK UCITS which is not a feeder UCITS following the winding-up of its master UCITS; and

(b) the proceeds of the winding-up are to be paid to the feeder UCITS before the date on which the feeder UCITS proposes to start investing in accordance with the new investment objectives and policy provided for in its amended trust deed and scheme rules.

(8) Where this subsection applies, the FCA may only approve the proposal subject to the conditions set out in section 283A(5) and (6).

(9) In this section, “specified” means—

(a) specified in rule 11.6.3(2) of the Collective Investment Schemes sourcebook, or

(b) specified in UCITS-related direct EU legislation.

Exclusion clauses

Avoidance of exclusion clauses.

253

Any provision of the trust deed of an authorised unit trust scheme is void in so far as it would have the effect of exempting the manager or trustee from liability for any failure to exercise due care and diligence in the discharge of his functions in respect of the scheme.

Ending of authorisation

254

(1) An authorisation order may be revoked by an order made by the FCA if it appears to the FCA that—

(a) one or more of the requirements for the making of the order are no longer satisfied;

(b) the manager or trustee of the scheme concerned has contravened a requirement imposed on him by or under this Act;

(c) the manager or trustee of the scheme has, in purported compliance with any such requirement, knowingly or recklessly given the FCA information which is false or misleading in a material particular;

(d) no regulated activity is being carried on in relation to the scheme and the period of that inactivity began at least twelve months earlier; or

(e) none of paragraphs (a) to (d) applies, but it is desirable to revoke the authorisation order in order to protect the interests of participants or potential participants in the scheme.

(2) For the purposes of subsection (1)(e), the FCA may take into account any matter relating to—

(a) the scheme;

(b) the manager or trustee;

(d) any director of the manager or trustee;

(e) any person exercising influence over the manager or trustee;

(f) any body corporate in the same group as the manager or trustee;

(g) any director of any such body corporate;

(h) any person exercising influence over any such body corporate.

Procedure.

255

(1) If the FCA proposes to make an order under section 254 revoking an authorisation order (“a revoking order”), it must give separate warning notices to the manager and the trustee of the scheme.

(2) If the FCA decides to make a revoking order, it must without delay give each of them a decision notice and either of them may refer the matter to the Tribunal.

Requests for revocation of authorisation order.

256

(1) An authorisation order may be revoked by an order made by the FCA at the request of the manager or trustee of the scheme concerned.

(2) If the FCA makes an order under subsection (1), it must give written notice of the order to the manager and trustee of the scheme concerned.

(3) The FCA may refuse a request to make an order under this section if it considers that—

(a) the public interest requires that any matter concerning the scheme should be investigated before a decision is taken as to whether the authorisation order should be revoked; or

(b) revocation would not be in the interests of the participants ....

(4) If the FCA proposes to refuse a request under this section, it must give separate warning notices to the manager and the trustee of the scheme.

(5) If the FCA decides to refuse the request, it must without delay give each of them a decision notice and either of them may refer the matter to the Tribunal.

Powers of intervention

Directions.

257

(1) The FCA may give a direction under this section if it appears to the FCA that—

(a) one or more of the requirements for the making of an authorisation order are no longer satisfied;

(b) the manager or trustee of an authorised unit trust scheme has contravened, or is likely to contravene, a requirement imposed—

(i) by or under this Act; ...

(ii) by UCITS-related direct EU legislation; or

(iii) by the MMF Regulation or any directly applicable regulation or decision made under that Regulation which constitutes assimilated direct legislation;

(c) the manager or trustee of such a scheme has, in purported compliance with any such requirement, knowingly or recklessly given the FCA information which is false or misleading in a material particular; or

(d) none of paragraphs (a) to (c) applies, but it is desirable to give a direction in order to protect the interests of participants or potential participants in such a scheme.

(2) A direction under this section may—

(a) require the manager of the scheme to cease the issue or redemption, or both the issue and redemption, of units under the scheme;

(b) require the manager and trustee of the scheme to wind it up.

(3) If the authorisation order is revoked, the revocation does not affect any direction under this section which is then in force.

(4) A direction may be given under this section in relation to a scheme in the case of which the authorisation order has been revoked if a direction under this section was already in force at the time of revocation.

(5) If a person contravenes a direction under this section, section 138D applies to the contravention as it applies to a contravention mentioned in that section.

(6) The FCA may, either on its own initiative or on the application of the manager or trustee of the scheme concerned, revoke or vary a direction given under this section if it appears to the FCA—

(a) in the case of revocation, that it is no longer necessary for the direction to take effect or continue in force;

(b) in the case of variation, that the direction should take effect or continue in force in a different form.

Applications to the court.

258

(1) If the FCA could give a direction under section 257, it may also apply to the court for an order—

(a) removing the manager or the trustee, or both the manager and the trustee, of the scheme; and

(b) replacing the person or persons removed with a suitable person or persons nominated by the FCA.

(2) The FCA may nominate a person for the purposes of subsection (1)(b) only if it is satisfied that, if the order was made, the requirements of section 243(4) to (7) would be complied with.

(3) If it appears to the FCA that there is no person it can nominate for the purposes of subsection (1)(b), it may apply to the court for an order—

(a) removing the manager or the trustee, or both the manager and the trustee, of the scheme; and

(b) appointing an authorised person to wind up the scheme.

(4) On an application under this section the court may make such order as it thinks fit.

(5) The court may, on the application of the FCA, rescind any such order as is mentioned in subsection (3) and substitute such an order as is mentioned in subsection (1).

(6) The FCA must give written notice of the making of an application under this section to the manager and trustee of the scheme concerned.

(7) The jurisdiction conferred by this section may be exercised by—

(a) the High Court;

(b) in Scotland, the Court of Session.

Winding up or merger of master UCITS

258A

(1) Subsection (2) applies if a master UCITS which has one or more feeder UCITS which are authorised unit trust schemes is wound up, whether as a result of a direction given by the FCA under section 257 or 261X, an order of the court under section 258 or 261Y, rules made by the FCA or otherwise.

(2) The FCA must direct the manager and trustee of any authorised unit trust scheme which is a feeder UCITS of the master UCITS to wind up the feeder UCITS unless—

(a) the FCA approves under section 283A the investment by the feeder UCITS of at least 85% of the total property which is subject to the collective investment scheme constituted by the feeder UCITS in units of another UCITS or master UCITS; or

(b) the FCA approves under section 252A an amendment of the trust deed of the feeder UCITS which would enable it to convert into a UK UCITS which is not a feeder UCITS.

(3) Subsection (4) applies if a master UCITS which has one or more feeder UCITS which are authorised unit trust schemes—

(a) merges with another UCITS, or

(b) is divided into two or more UCITS.

(4) The FCA must direct the manager and trustee of any authorised unit trust scheme which is a feeder UCITS of the master UCITS to wind up the scheme unless—

(a) the FCA approves under section 283A the investment by the scheme of at least 85% of the total property which is subject to the collective investment scheme constituted by the feeder UCITS in the units of—

(i) the master UCITS which results from the merger;

(ii) one of the UCITS resulting from the division; or

(iii) another UCITS or master UCITS;

(b) the FCA approves under section 252A an amendment of the trust deed of the scheme which would enable it to convert into a UK UCITS which is not a feeder UCITS.

Procedure on giving directions under section 257 or 258A and varying them on FCA's own initiative.

259

(1) A direction under section 257 or 258A takes effect—

(a) immediately, if the notice given under subsection (3) states that that is the case;

(b) on such date as may be specified in the notice; or

(2) A direction under section 257 may be expressed to take effect immediately (or on a specified date) only if the FCA, having regard to the ground on which it is exercising its power under that section, considers that it is necessary for the direction to take effect immediately (or on that date).

(3) If the FCA proposes to give a direction under section 257 or 258A, or gives a direction under either section with immediate effect, it must give separate written notice to the manager and the trustee of the scheme concerned.

(4) The notice must—

(a) give details of the direction;

(b) inform the person to whom it is given of when the direction takes effect;

(d) inform the person to whom it is given that he may make representations to the FCA within such period as may be specified in it (whether or not he has referred the matter to the Tribunal); and

(e) inform him of his right to refer the matter to the Tribunal.

(5) If the direction imposes a requirement under section 257(2)(a), the notice must state that the requirement has effect until—

(a) a specified date; or

(b) a further direction.

(6) If the direction is given under section 257(2)(b) or section 258A(2) or (4), the scheme must be wound up—

(a) by a date specified in the notice; or

(b) if no date is specified, as soon as practicable.

(7) The FCA may extend the period allowed under the notice for making representations.

(8) If, having considered any representations made by a person to whom the notice was given, the FCA decides—

(a) to give the direction in the way proposed, or

(b) if it has been given, not to revoke the direction,

it must give separate written notice to the manager and the trustee of the scheme concerned.

(9) If, having considered any representations made by a person to whom the notice was given, the FCA decides—

(a) not to give the direction in the way proposed,

(b) to give the direction in a way other than that proposed, or

it must give separate written notice to the manager and the trustee of the scheme concerned.

(10) A notice given under subsection (8) must inform the person to whom it is given of his right to refer the matter to the Tribunal.

(11) A notice under subsection (9)(b) must comply with subsection (4).

(12) If a notice informs a person of his right to refer a matter to the Tribunal, it must give an indication of the procedure on such a reference.

(13) This section applies to the variation of a direction on the FCA's own initiative as it applies to the giving of a direction.

(14) For the purposes of subsection (1)(c), whether a matter is open to review is to be determined in accordance with section 391(8).

Procedure: refusal to revoke or vary direction.

260

(1) If on an application under section 257(6) for a direction to be revoked or varied the FCA proposes—

(a) to vary the direction otherwise than in accordance with the application, or

(b) to refuse to revoke or vary the direction,

it must give the applicant a warning notice.

(2) If the FCA decides to refuse to revoke or vary the direction—

(a) it must give the applicant a decision notice; and

(b) the applicant may refer the matter to the Tribunal.

Procedure: revocation of direction and grant of request for variation.

261

(1) If the FCA decides on its own initiative to revoke a direction under section 257 it must give separate written notices of its decision to the manager and trustee of the scheme.

(2) If on an application under section 257(6) for a direction to be revoked or varied the FCA decides to revoke the direction or vary it in accordance with the application, it must give the applicant written notice of its decision.

(3) A notice under this section must specify the date on which the decision takes effect.

(4) The FCA may publish such information about the revocation or variation, in such way, as it considers appropriate.

Information for home state regulator

261A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Information for feeder UCITS

261B

(1) The FCA must immediately inform the operator of any authorised unit trust scheme which is a feeder UCITS of an authorised unit trust scheme , an authorised contractual scheme or an authorised open-ended investment company (the master UCITS) of—

(a) any failure of which the FCA becomes aware by the master UCITS to comply with a provision made by or under any enactment in implementation of Chapter VIII of the UCITS directive;

(b) any warning notice or decision notice given to the master UCITS in relation to a contravention of any provision made in implementation of Chapter VIII of the UCITS directive by or under any enactment or in rules of the FCA;

(c) any information reported to the FCA pursuant to rules of the FCA made to implement Article 106(1) of the UCITS directive which relates to the master UCITS, or to one or more of its directors, or its management company, trustee, depositary or auditor.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER3A — AUTHORISED CONTRACTUAL SCHEMES

Applications for authorisation

Applications for authorisation of contractual schemes

261C

(1) The operator and depositary, or proposed operator and depositary, of a contractual scheme may apply to the FCA for—

(a) an order declaring the scheme to be an authorised contractual scheme;

(b) an order declaring the scheme to be an authorised money market fund.

(2) An application under subsection (1)(a)—

(a) must be made in such manner as the FCA may direct;

(b) must state the name and the registered office, or if it does not have a registered office, the head office, of the operator or proposed operator and of the depositary or proposed depositary; and

(c) in the case of a partnership scheme, must be accompanied by a copy of the certificate of registration as a limited partnership under the Limited Partnerships Act 1907.

(2A) An application under subsection (1)(b) must—

(a) be made in such a manner as the FCA may direct, and

(b) contain or be accompanied by such information as the FCA may reasonably require for the purpose of determining the application.

(3) At any time after receiving an application and before determining it, the FCA may require the applicants to provide it with such further information as it reasonably considers necessary to enable it to determine the application.

(4) Different directions may be given, and different requirements imposed, in relation to different applications.

(5) The FCA may require applicants to present information which they are required to give under this section in such form, or to verify it in such a way, as the FCA may direct.

Authorisation orders : authorised contractual schemes

261D

(1) If, on an application under section 261C(1)(a) in respect of a contractual scheme, the FCA—

(a) is satisfied that the scheme complies with the requirements set out in this section and section 261E,

(b) is satisfied that the scheme complies with the requirements of contractual scheme rules, and

(c) has been provided with a copy of the contractual scheme deed and a certificate signed by a solicitor to the effect that it complies with such of the requirements of this section or those rules as relate to its contents,

the FCA may make an order declaring the scheme to be an authorised contractual scheme.

(2) If the FCA makes an order under subsection (1), it must give written notice of the order to the applicants.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The operator and the depositary must be persons who are independent of each other.

(5) The operator and the depositary must each be a body corporate incorporated in the United Kingdom ..., and the affairs of each must be administered in the United Kingdom.

(6) The operator and the depositary must each have a place of business in the United Kingdom.

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) The operator and the depositary must each be an authorised person, and the operator must have such permission as may be necessary to act as operator and the depositary must have permission to act as depositary.

(9) The operator must be a fit and proper person to manage the scheme to which the application relates.

(10) The name of the scheme must not be undesirable or misleading.

(11) The purposes of the scheme must be reasonably capable of being successfully carried into effect.

Authorised contractual schemes: holding of units

261E

(A1) This section sets out requirements for the purposes of section 261D(1)(a) (authorisation orders).

(1) The participants in the scheme must be entitled to have their units redeemed in accordance with the scheme at a price—

(a) related to the net value of the property to which the units relate; and

(b) determined in accordance with the scheme.

(2) The scheme must not allow units in the scheme to be issued to anyone other than—

(a) a professional investor;

(b) a large investor; or

(3) The scheme must require the operator, if it becomes aware that units have become vested in a person to whom as a result of subsection (2) the units could not have been issued, to redeem the units as soon as practicable.

(4) In subsection (2)—

“professional investor” means a person who falls within one of the categories (a) to (d) of paragraph 3 of Schedule 1 to the markets in financial instruments regulation; and

“large investor” means a person who, in exchange for units in the scheme, makes a payment of, or contributes property with a value of, not less than £1,000,000.

Authorisation orders: authorised money market funds

261EA

(1) If, on an application under section 261C(1)(b) in respect of a contractual scheme, conditions A and B are met the FCA may make an order declaring the scheme to be an authorised money market fund.

(2) Condition A is that the FCA is satisfied that the scheme will be able to comply with the requirements imposed on a money market fund under the MMF Regulation.

(3) Condition B is that—

(a) the scheme is an authorised contractual scheme, or

(b) the scheme—

(i) is the subject of an application under section 261C(1)(a), and

(ii) the conditions in section 261D(1)(a) to (c) are met in relation to that application.

(4) If the FCA makes an order under subsection (1), it must give written notice of the order to the applicant.

(5) In this Chapter “authorisation order” means—

(a) an order under section 261D(1), or

(b) an order under subsection (1) of this section.

Determination of applications

261F

(1) Subject to subsection (2), an application under section 261C(1)(a) must be determined by the FCA before the end of the period of six months beginning with the date on which it receives the completed application.

(2) An application under section 261C(1)(a) in respect of a contractual scheme which is a UCITS, or an application under section 261C(1)(b), must be determined by the FCA before the end of two months beginning with the date on which it receives the application.

(3) The FCA may determine an incomplete application if it considers it appropriate to do so; and it must in any event determine such an application within twelve months beginning with the date on which it first receives the application.

(4) The applicants may withdraw the application, by giving the FCA written notice, at any time before the FCA determines it.

Applications refused

Procedure when refusing an application

261G

(1) If the FCA proposes to refuse an application made under section 261C, it must give each of the applicants a warning notice.

(2) If the FCA decides to refuse the application—

(a) it must give each of the applicants a decision notice; and

(b) either applicant may refer the matter to the Tribunal.

Certificates

261H

(1) If the operator of a contractual scheme which complies with the conditions necessary for it to be a UK UCITS so requests, the FCA may issue a certificate to the effect that the scheme complies with those conditions.

(2) Such a certificate may be issued on the making of an authorisation order in respect of the scheme or at any subsequent time.

Rules

Contractual scheme rules

261I

(1) The FCA may by rules (“contractual scheme rules”) make in relation to authorised contractual schemes provision corresponding to that which may be made under section 247 in relation to authorised unit trust schemes.

(2) For the purposes of subsection (1), section 247 is to be read with the following modifications—

(a) a reference to trust scheme rules is to be read as a reference to contractual scheme rules;

(b) a reference to authorised unit trust schemes is to be read as a reference to authorised contractual schemes;

(d) a reference to the trustee is to be read as a reference to the depositary; and

(e) a reference to the trust deed is to be read as a reference to the contractual scheme deed.

(3) The Treasury’s power by order under section 247(5) to modify the FCA’s power to make trust scheme rules shall also be exercisable in relation to the FCA’s power to make contractual scheme rules.

(4) For the purposes of subsection (3), section 247(5) is to be read as if the reference to authorised unit trust schemes were a reference to authorised contractual schemes.

Contractual scheme particulars rules

261J

(1) The FCA may by rules (“contractual scheme particulars rules”) make in relation to authorised contractual schemes provision corresponding to that which may be made under section 248 in relation to authorised unit trust schemes.

(2) For the purposes of subsection (1), section 248 is to be read with the following modifications—

(a) a reference to scheme particulars rules is to be read as a reference to contractual scheme particulars rules;

(b) a reference to scheme particulars is to be read as a reference to contractual scheme particulars; and

(c) a reference to the manager of an authorised unit trust scheme is to be read as a reference to the operator of an authorised contractual scheme.

Disciplinary measures

261K

(1) If it appears to the FCA that an auditor has failed to comply with a duty imposed on the auditor by contractual scheme rules, it may do one or more of the following—

(a) disqualify the auditor from being the auditor of any authorised unit trust scheme, authorised contractual scheme or authorised open-ended investment company;

(b) publish a statement to the effect that it appears to the FCA that the auditor has failed to comply with the duty;

(2) Sections 345B to 345E have effect in relation to the taking of action under subsection (1) as they have effect in relation to the taking of action under section 345(2).

Modification or waiver of rules

261L

(1) In this section “rules” means—

(a) contractual scheme rules; or

(b) contractual scheme particulars rules.

(2) The FCA may, on the application or with the consent of any person to whom rules apply, direct that all or any of the rules—

(a) are not to apply to that person as respects a particular scheme; or

(b) are to apply to that person, as respects a particular scheme, with such modifications as may be specified in the direction.

(3) The FCA may, on the application or with the consent of the operator and depositary of a particular scheme acting jointly, direct that all or any of the rules—

(a) are not to apply to the scheme; or

(b) are to apply to the scheme with such modifications as may be specified in the direction.

(4) Section 138A and subsections (1) to (3), (5) and (6) of section 138B have effect in relation to a direction under subsection (2) as they have effect in relation to a direction under section 138A(1) but with the following modifications—

(a) any reference to the person is to be read as a reference to the person mentioned in subsection (2); and

(b) section 138B(3)(c) is to be read, in relation to a participant in the scheme, as if the word “commercial” were omitted.

(5) Section 138A and subsections (1) to (3), (5) and (6) of section 138B have effect in relation to a direction under subsection (3) as they have effect in relation to a direction under section 138A(1) but with the following modifications—

(a) subsection (4)(a) of section 138A is to be read as if the words “by the person” were omitted;

(b) section 138B(3)(c) and the definition of “immediate group” in section 421ZA as it applies to that section are to be read as if references to the person were references to each of the operator and the depositary of the scheme;

(c) section 138B(3)(c) is to be read, in relation to a participant in the scheme, as if the word “commercial” were omitted;

(d) section 138B(5) is to be read as if the reference to the person concerned were a reference to the scheme concerned and to its operator and depositary; and

(e) section 138A(7) is to be read as if the reference to the person were a reference to the operator and depositary of the scheme acting jointly.

Co-ownership schemes: rights and liabilities of participants

Contracts

261M

(1) In this section “authorised contract” means a contract which the operator of a co-ownership scheme is authorised to enter into on behalf of the relevant participants for the purposes of, or in connection with, the acquisition, management or disposal of property subject to the scheme (but does not include a contract by which a person becomes a participant in the scheme).

(2) The relevant participants are—

(a) in the case of a contract relating to a stand-alone co-ownership scheme, the participants in the scheme;

(b) in the case of a contract relating to an umbrella co-ownership scheme, the participants in the sub-scheme of the umbrella co-ownership scheme to which the contract relates.

(3) The operator on behalf of the relevant participants may—

(a) exercise rights under an authorised contract;

(b) bring and defend proceedings for the resolution of any matter relating to an authorised contract; and

(4) The relevant participants may not themselves do any of the things mentioned in subsection (3), but this does not affect their rights as against the operator.

(5) A person who enters into a contract which purports to be an authorised contract is deemed to have actual knowledge of the scope of the authority given to the operator by the contractual scheme deed.

(6) The validity of an authorised contract is not to be called into question on the ground that a participant lacks capacity to authorise the operator to enter into such a contract.

(7) An authorised contract must make provision for any property which is acquired under or by virtue of the contract to be held by, or to the order of, the depositary of the scheme concerned.

Effect of becoming or ceasing to be a participant

261N

(1) A person who at any time becomes a participant in a relevant scheme acquires the rights and becomes subject to the liabilities to which the other participants in the relevant scheme are entitled or subject at that time under, or in connection with, authorised contracts.

(2) A person who ceases to be a participant in a relevant scheme ceases to have any of the rights and to be subject to any of the liabilities to which a participant in the relevant scheme is entitled or subject under, or in connection with, authorised contracts.

(3) In this section—

(a) “authorised contract” has the meaning given in section 261M(1); and

(b) each of the following is a “relevant scheme”—

(i) a stand-alone co-ownership scheme; and

(ii) a sub-scheme of an umbrella co-ownership scheme.

Limited liability

261O

(1) The debts of a relevant scheme are to be paid by the operator out of the property subject to the relevant scheme.

(2) The participants in a relevant scheme are not liable for the debts of the relevant scheme beyond the amount of the property subject to the relevant scheme which is available to the operator to meet the debts.

(3) In this section—

(a) a reference to the debts of a relevant scheme is a reference to debts and obligations incurred under, or in connection with, authorised contracts;

(b) “authorised contract” has the meaning given in section 261M(1); and

Segregated liability in relation to umbrella co-ownership schemes

261P

(1) The property subject to a sub-scheme of an umbrella co-ownership scheme must not be used to discharge any liabilities of, or meet any claims against, any person other than the participants in that sub-scheme.

(2) Any provision contained in any contract, agreement or other document is void in so far as it is inconsistent with subsection (1), and any transaction involving the application of property in contravention of that subsection is void.

(3) The FCA may give a direction under section 261X(2) in relation to a sub-scheme of an umbrella co-ownership scheme as if the sub-scheme were an authorised contractual scheme, but this subsection does not enable the FCA to apply to the court for an order under section 261Y in relation to a sub-scheme of an umbrella co-ownership scheme.

(4) Where such a direction is given, the reference in section 261Z1(6) to the scheme is to be read as a reference to the sub-scheme concerned.

Alterations

Alteration of contractual schemes and changes of operator or depositary

261Q

(1) This section applies where the operator of an authorised contractual scheme proposes to make an alteration to the scheme, other than an alteration—

(a) to which section 261S applies; or

(b) to which Part 4 of the Undertakings for Collective Investment in Transferable Securities Regulations 2011 (mergers) applies.

(2) The operator must give written notice of the proposal to the FCA.

(3) Any notice given in respect of a proposal to alter the scheme involving a change in the contractual scheme deed must be accompanied by a certificate signed by a solicitor to the effect that the change will not affect the compliance of the deed with the contractual scheme rules.

(4) The operator of an authorised contractual scheme must give written notice to the FCA of any proposal to replace the depositary of the scheme.

(5) The depositary of an authorised contractual scheme must give written notice to the FCA of any proposal to replace the operator of the scheme.

(6) Effect is not to be given to any proposal of which notice has been given under subsection (2), (4) or (5) unless—

(a) the FCA, by written notice, has given its approval to the proposal; or

(b) one month, beginning with the date on which the notice was given, has expired without the operator or the depositary having received from the FCA a warning notice under section 261R in respect of the proposal.

(7) The FCA must not approve a proposal to replace the operator or the depositary of an authorised contractual scheme unless it is satisfied that, if the proposed replacement is made, the scheme will continue to comply with the requirements of section 261D(4) to (9).

Procedure when refusing approval of a proposal under section 261Q

261R

(1) If the FCA proposes to refuse approval of a proposal under section 261Q to replace the depositary or operator of an authorised contractual scheme, it must give a warning notice to the person by whom notice of the proposal was given under section 261Q(4) or (5).

(2) If the FCA proposes to refuse approval of a proposal under section 261Q to alter an authorised contractual scheme, it must give separate warning notices to the operator and the depositary of the scheme.

(3) To be valid the warning notice must be received by the person to whom it is given before the end of one month beginning with the date on which notice of the proposal was given.

(4) If, having given a warning notice to a person, the FCA decides to refuse approval—

(a) it must give that person a decision notice; and

(b) that person may refer the matter to the Tribunal.

Proposal to convert to a non-feeder UCITS

261S

(1) This section applies where the operator of an authorised contractual scheme which is a feeder UCITS proposes to make an alteration to the scheme which—

(a) involves a change in the contractual scheme deed, and

(b) will enable the scheme to convert into a UK UCITS which is not a feeder UCITS.

(2) The operator must give written notice of the proposal to the FCA.

(3) Any notice given in respect of such a proposal must be accompanied by—

(a) a certificate signed by a solicitor to the effect that the change will not affect the compliance of the deed with the contractual scheme rules; and

(b) the specified information.

(4) The FCA must, within 15 working days after the date on which it received the notice under subsection (2), give—

(a) written notice to the operator of the scheme that the FCA approves the proposed amendments to the contractual scheme deed, or

(b) separate warning notices to the operator and depositary of the scheme that the FCA proposes to refuse approval of the proposed amendments.

(5) Effect is not to be given to any proposal of which notice has been given under subsection (2) unless the FCA, by written notice, has given its approval to the proposal.

(6) If, having given a warning notice to a person, the FCA decides to refuse approval—

(a) it must give that person a decision notice; and

(b) that person may refer the matter to the Tribunal.

(7) Subsection (8) applies where—

(a) the notice given under subsection (2) relates to a proposal to amend the contractual scheme deed of a feeder UCITS to enable it to convert into a UK UCITS which is not a feeder UCITS following the winding-up of its master UCITS; and

(b) the proceeds of the winding-up are to be paid to the feeder UCITS before the date on which the feeder UCITS proposes to start investing in accordance with the new investment objectives and policy provided for in its amended contractual scheme deed and contractual scheme rules.

(8) Where this subsection applies, the FCA may only approve the proposal subject to the conditions set out in section 283A(5) and (6).

(9) In this section “specified” means—

(a) specified in rule 11.6.3(2) of the Collective Investment Schemes sourcebook, or

(b) specified in UCITS-related direct EU legislation.

Exclusion clauses

Avoidance of exclusion clauses

261T

Any provision—

(a) of the contractual scheme deed of an authorised contractual scheme, or

(b) in the case of an authorised contractual scheme which is a partnership scheme, of the contract under which the depositary of the scheme is appointed,

is void in so far as it would have the effect of exempting the operator or the depositary from liability for any failure to exercise due care and diligence in the discharge of its functions in respect of the scheme.

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Financial Services and Markets Act 2000

The FCA's functions under the Competition Act 1998

234J

Duty to consider exercise of powers under Competition Act 1998

234K

Provision of information and assistance to a CMA group

234L

Function of keeping market under review

234M

Exclusion of general duties

234N

Supplementary provision

234O

Part XVII — Collective Investment Schemes

Chapter I — Interpretation

Collective investment schemes.

235

Contractual schemes

235A

Open-ended investment companies.

236

Meaning of “UCITS”

236A

Other definitions.

237

Chapter II — Restrictions on Promotion

Restrictions on promotion.

238

Single property schemes.

239

Restriction on approval of promotion.

240

Actions for damages.

241

CHAPTER 2A — PROHIBITION ON ISSUE OF BEARER UNITS

Bearer units no longer to be issued

241A

Chapter III — Authorised Unit Trust Schemes

Applications for authorisation

Applications for authorisation of unit trust schemes.

242

Authorisation orders : authorised unit trust schemes.

243

Authorisation orders: authorised money market funds

243A

Determination of applications.

244

Applications refused

Procedure when refusing an application.

245

Certificates

Certificates.

246

Rules

Trust scheme rules.

247

Scheme particulars rules.

248

Disciplinary measures

249

Modification or waiver of rules.

250

Alterations

Alteration of schemes and changes of manager or trustee.

251

Procedure when refusing approval of a proposal under section 251.

252

Proposal to convert to a non-feeder UCITS

252A

Exclusion clauses

Avoidance of exclusion clauses.

253

Ending of authorisation

Revocation of authorisation order otherwise than by consent.

254

Procedure.

255

Requests for revocation of authorisation order.

256

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