Investment Association Guidance: Renunciation or transfer of units/shares in authorised investment funds

On 4 January 2016, the Investment Association (“IA”) issued a guidance paper aimed at operators of UK authorised collective investment schemes. The paper aims to ensure that authorised fund managers are acting in compliance with COLL4.4.13R(3)(b) and paragraph 4C of Schedule 4 to the Open-Ended Investment Companies Regulations 2001. This is targeted specifically at satisfying the requirement for them to take reasonable steps to ensure the authenticity of their instructions.

It should be noted that the IA’s guidance does not affect the legislation already in place regarding the transfer/renunciation of title to shares by way of an appropriately signed physical document. Title to units in UK-authorised unit trusts, authorised contractual schemes and open-ended investment companies may still be transferred on the strength of an authority given by electronic means, so long as the unit manager or ACD takes reasonable steps to ensure that the communication is given by the unit holder.

The overall objective of the above discussed provisions and the newly issued IA guidance, is to encourage firms to provide adequate control mechanisms which would satisfy the rules requiring authority to be given by the incumbent holder of units (or someone legally appointed to act on their behalf). Having such mechanisms and controls in place would permit for a more efficient investor onboarding process and more adequate protection against fraud.

In this regard, the following forms of electronic media have been considered by the IA as being able to provide a sufficiently robust medium for assurance as to the identity of the person lodging the authority:

  • telephone;
  • secure e-mail;
  • proprietary internet site of the fund manager; and
  • secure message network/hub.

To view the IA network/hub of what reasonable steps should be taken to ensure the authenticity of instructions flowing through each of these mediums please follow this link.

Should you require any further advice or information on the above, Cleveland & Co, your external in-house counsel, are here to help.

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