The Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019

Made: 19th February 2019

Coming into force in accordance with regulation 1(2) and (3)

The Treasury are designated for the purpose of section 2(2) of the European Communities Act 1972 in relation to financial services.

The Treasury make these Regulations in exercise of the powers conferred by section 2(2) of the European Communities Act 1972 and section 8(1) of, and paragraph 21 of Schedule 7 to, the European Union (Withdrawal) Act 2018 .

In accordance with paragraph 2(2) of Schedule 2 to the European Communities Act 1972 and paragraph 1(1) and (2) of Schedule 7 to the European Union (Withdrawal) Act 2018, a draft of this instrument has been laid before Parliament and approved by a resolution of each House of Parliament.

PART 1 — General Provisions

Citation and commencement

1

• (1) These Regulations may be cited as the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019.

• (2) Subject to paragraph (3), these Regulations come into force on exit day.

• (3) Regulations 50(6), 58 and 61 to 71 come into force on the day after the day on which these Regulations are made.

Interpretation

2

In these Regulations “the 2000 Act” means the Financial Services and Markets Act 2000 .

PART 2 — Amendments of the Financial Services and Markets Act 2000

Introductory provision

3

The 2000 Act is amended in accordance with this Part.

Persons authorised as a result of Schedule 5

4

For section 36 substitute—

(36) Schedule 5 makes provision about authorised open-ended investment companies.

Open-ended investment companies

5

In section 236 (open-ended investment companies), in subsection (4)—

• (a) omit paragraph (c) (but not the “or” at the end);

• (b) in paragraph (d), omit “other than an EEA state”.

Meaning of “UCITS”

6

After section 236 insert—

(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 for Part 17

7

• (1) Section 237 (other definitions for Part 17) is amended as follows.

• (2) In subsection (2)—

• (a) for the definition of “management company” substitute—

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

• (b) in the definition of “the operator”—

• (i) at the end of paragraph (ab), insert “ and ”;

• (ii) omit the “and” at the end of paragraph (b);

• (iii) omit paragraph (c).

• (3) In subsection (3)—

• (a) after the definition of “an authorised open-ended investment company” insert—

“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;

• (b) for the definition of “feeder UCITS” substitute—

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

• (c) in the definition of “a recognised scheme”, omit “264 or”;

• (d) before the definition of “UK UCITS” insert—

“UCITS-related direct EU legislation” means— (a) 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, or (b) Commission 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;

Authorisation orders: unit trust schemes

8

• (1) Section 243 (authorisation orders) is amended as follows.

• (2) In subsection (5) —

• (a) omit “or another EEA State”;

• (b) for “country in which it is incorporated” substitute “ United Kingdom ”.

• (3) For subsection (5A) substitute—

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

• (4) Omit subsection (6).

Certificates: unit trust schemes

9

In section 246 (certificates), in subsection (1) , for the words from “enjoy” to “instrument” substitute “ be a UK UCITS ”.

Proposal to convert to a non-feeder UCITS: unit trust schemes

10

• (1) Section 252A (proposal to convert to a non-feeder UCITS) is amended as follows.

• (2) In subsection (1)(b), after “convert into a” insert “ UK ”.

• (3) In subsection (7)(a), after “convert into a” insert “ UK ”.

• (4) In subsection (9), for paragraphs (a) and (b) substitute—

(a) specified in rule 11.6.3(2) of the Collective Investment Schemes sourcebook, or (b) specified in UCITS-related direct EU legislation.

Requests for revocation of authorisation order: unit trust schemes

11

In section 256 (requests for revocation of authorisation order), in subsection (3)(b), omit “or would be incompatible with an EU obligation”.

Directions: unit trust schemes

12

In section 257 (directions), in subsection (1)(b)—

• (a) in sub-paragraph (ii), for the words from “any” to “UCITS directive” substitute “ UCITS-related direct EU legislation; ”;

• (b) in sub-paragraph (iii), after “that Regulation” insert “ which constitutes retained direct EU legislation ”.

Winding up or merger of master UCITS: unit trust schemes

13

• (1) Section 258A (winding up or merger of master UCITS) is amended as follows.

• (2) In subsection (2)(b), after “convert into a” insert “ UK ”.

• (3) In subsection (4)(b), after “convert into a” insert “ UK ”.

Information for home state regulator: unit trust schemes

14

Omit section 261A (information for home state regulator).

Information for feeder UCITS: unit trust schemes

15

• (1) Section 261B (information for feeder UCITS) is amended as follows.

• (2) In subsection (1)(a), after “made” insert “ by or under any enactment ”.

• (3) Omit subsections (2) and (3).

Authorisation orders: contractual schemes

16

• (1) Section 261D (authorisation orders) is amended as follows.

• (2) In subsection (5)—

• (a) omit “or another EEA State”;

• (b) for “country in which it is incorporated” substitute “ United Kingdom ”.

• (3) For subsection (6) substitute—

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

• (4) Omit subsection (7).

Authorisation orders: holding of units

17

In section 261E (authorisation orders: holding of units), in the definition of “professional investor” in subsection (4), for “(1) to (4) of Section I of Annex II to the markets in financial instruments directive (professional clients for the purpose of that directive)” substitute “ (a) to (d) of paragraph 3 of Schedule 1 to the markets in financial instruments regulation ” .

Certificates: contractual schemes

18

In section 261H (certificates), in subsection (1), for “enjoy the rights conferred by any relevant EU instrument” substitute “ be a UK UCITS ”.

Proposal to convert to a non-feeder UCITS: contractual schemes

19

• (1) Section 261S (proposal to convert to a non-feeder UCITS) is amended as follows.

• (2) In subsection (1)(b), after “convert into a” insert “ UK ”.

• (3) In subsection (7)(a), after “convert into a” insert “ UK ”.

• (4) In subsection (9), for paragraphs (a) and (b) substitute—

(a) specified in rule 11.6.3(2) of the Collective Investment Schemes sourcebook, or (b) specified in UCITS-related direct EU legislation.

Requests for revocation of authorisation order: contractual schemes

20

In section 261W (requests for revocation of authorisation order), in subsection (3)(b), omit “or would be incompatible with an EU obligation”.

Directions: contractual schemes

21

In section 261X (directions), in subsection (1)(b)—

• (a) in sub-paragraph (ii), for the words from “any” to “UCITS directive” substitute “ UCITS-related direct EU legislation; ”;

• (b) in sub-paragraph (iii), after “that Regulation” insert “ which constitutes retained direct EU legislation ”.

Winding up or merger of master UCITS: contractual schemes

22

• (1) Section 261Z (winding up or merger of master UCITS) is amended as follows.

• (2) In subsection (2)(b), after “convert into a” insert “ UK ”.

• (3) In subsection (4)(b), after “convert into a” insert “ UK ”.

Information for home state regulator: contractual schemes

23

Omit section 261Z4 (information for home state regulator).

Information for feeder UCITS: contractual schemes

24

• (1) Section 261Z5 (information for feeder UCITS) is amended as follows.

• (2) In subsection (1)(a), after “made” insert “ by or under any enactment ”.

• (3) Omit subsections (2) and (3).

Schemes constituted in other EEA States

25

Omit sections 264 to 269 (schemes constituted in other EEA States).

Individually recognised overseas schemes

26

In section 272 (individually recognised overseas schemes), in subsection (1)—

• (a) at the end of paragraph (a) insert “ and ”;

• (b) omit paragraph (b) and the “and” immediately following it.

Master-feeder structures

27

• (1) Section 283A (master-feeder structures) is amended as follows.

• (2) In subsection (1), for the words from “rules made” to “directive” substitute “ rule 5.2.11(9) of the Collective Investment Schemes sourcebook ”.

• (3) In subsection (3)(a)—

• (a) for “that the UCITS” substitute “ that the UK UCITS ”;

• (b) in sub-paragraph (i) for “Chapter VIII of the UCITS directive,” substitute “ the Chapter 8 provisions, ”.

• (4) After subsection (3) insert—

(3A) In subsection (3)(a)(i) “the Chapter 8 provisions” means— (a) in relation to a UK UCITS or its operator, trustee or depositary, or auditor, any provision made by or under an enactment in implementation of Chapter 8 of the UCITS directive, and (b) in relation to an EEA UCITS or its operator, Chapter 8 of the UCITS directive.

Reports on derivative instruments

28

• (1) Section 283B (reports on derivative instruments) is amended as follows.

• (2) In subsection (1), after “in relation to a” insert “ UK ”.

• (3) In subsection (4), for paragraphs (a) and (b) substitute—

(a) in rules 6.12.3 and 6.12.3A, and annex 2R to chapter 6, of the Collective Investment Schemes sourcebook, or (b) in UCITS-related direct EU legislation.

FCA's and PRA's procedures

29

In section 395 (procedures of the FCA and PRA), omit subsection (13)(e).

Definitions

30

In section 417 (definitions), in subsection (1), in the definition of “UCITS”, for “Article 1.2 of the UCITS directive” substitute “ section 236A ”.

Expressions relating to authorisation elsewhere in the single market

31

In section 425 (expressions relating to authorisation elsewhere in the single market), in subsection (1), omit paragraph (aa) (but not the “and” at the end).

Persons concerned in collective investment schemes

32

• (1) Schedule 5 (persons concerned in collective investment schemes) is amended as follows.

• (2) In paragraph 1 —

• (a) omit sub-paragraphs (1) and (2), and

• (b) in sub-paragraph (4), for paragraph (b) substitute—

(b) which is a UCITS as defined in section 236A,

• (3) In paragraph 2, omit sub-paragraph (1).

PART 3 — Amendments of the Undertakings for Collective Investment in Transferable Securities Regulations 2011

Introductory provision

33

The Undertakings for Collective Investment in Transferable Securities Regulations 2011 are amended in accordance with this Part.

Interpretation of Part 4 (mergers)

34

• (1) Regulation 7 is amended as follows.

• (2) In paragraph (1)—

• (a) omit the definition of “cross-border merger”;

• (b) in the definition of “depositary”—

• (i) at the end of sub-paragraph (aa), insert “ and ”;

• (ii) at the end of sub-paragraph (b), omit “and”;

• (iii) omit sub-paragraph (c);

• (c) omit the definition of “domestic merger”;

• (d) omit the definition of “EEA management company”;

• (e) for the definition of “EEA UCITS” substitute—

“feeder UCITS” has the meaning given in section 237(3) of the Act;

• (f) in the definition of “implementing provision”, in paragraph (b), for “implements” substitute “ implemented ”;

• (g) in the definition of “manager” omit sub-paragraph (c);