Despite despondent predictions in 2009 from fund managers in the investments arena, collective investment schemes (“CIS”) and the ability of Financial Services Authority (“FSA”) authorised persons to promote the said schemes will continue to invoke careful consideration for a number of scheme operators.
CISs operate as arrangements that enable investors to pool their assets (being property of any description, including money) which are managed by or on behalf of the operator of the scheme, and with the goal of participants sharing profit or income from the purchase, holding, management or disposal of the assets or sums paid out of such profits or income. Within this definition, an unregulated collective investment scheme (“UCIS”) is effectively a scheme that is not an authorised unit trust scheme, an investment company with variable capital or a scheme recognised under sections 264, 270 and 272 of the Financial Services and Markets Act 2000 (“FSMA 2000”). As a result they may not be as diversified as regulated schemes and can be riskier; meaning that UCISs cannot be promoted to the general public in the UK. Structurally, UCISs can be unauthorised unit trusts, limited partnerships, limited liability partnerships or other pooling arrangements.
While an UCIS is described as ‘unregulated’, it is important to remember that the FSA restrict their promotion extensively (Section 238 FSMA 2000) and as such careful advice must be taken before marketing an UCIS to a group of chosen investors. The FSMA 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (the “Order”) enables authorised persons to promote an UCIS in certain instances. By way of example the Order can apply, but is not limited, to the following categories: investor professionals, certified high net worth individuals, high net worth companies, unincorporated associations etc, certified sophisticated investors and self-certified sophisticated investors. In addition, the FSA Code of Business Sourcebook rule 4.12 provides further categories of exemptions, and the FSA and Treasury may also enable promotion of UCISs in select circumstances.