Chapter III: Authorised unit trust schemes
Section 242: Applications for authorisation of unit trust schemes
464.Applications for an order declaring a unit trust scheme to be authorised must be made to the Authority by the manager and trustee of the scheme. The manager and trustee must be different persons. The section gives the Authority broad scope to determine the form and content of the application, including further information to be contained in it.
Section 243: Authorisation orders
465.If the conditions referred to in the section are met, the Authority may make an authorisation order declaring a unit trust scheme to be authorised. The conditions reflect certain requirements specified in the UCITS Directive which establishes a passporting regime whereby certain types of authorised collective investment scheme established in one EEA State may generally be entitled to equivalent authorisation in others. The section includes requirements that:
the manager and trustee must be bodies corporate which are independent of each other and incorporated in the United Kingdom or another EEA State;
they must be authorised persons holding the appropriate permissions;
the scheme must comply with the requirements of the trust scheme rules (referred to at section 247, below); and
participants must be able to have their units redeemed at a price related to the net asset value of the scheme property or be able to sell their units on an exchange at a similar price.
Section 244: Determination of applications
466.This section sets out the time limits within which applications should be determined (and specifies that completed applications shall be determined within six months). Applicants may withdraw their application at any time before the Authority makes a determination.
Section 245: Procedure when refusing an application
467.If the Authority wishes to refuse an application, it must issue each of the manager and trustee with a warning notice. Either the manager or the trustee may refer a refusal to the Tribunal.
Section 246: Certificates
468.If an authorised unit trust scheme meets with the requirements of the UCITS Directive, the manager or trustee of the scheme can request that the Authority issue a certificate to that effect. The certificate will be needed if the authorised unit trust scheme is to passport into other European jurisdictions.
Section 247: Trust scheme rules
469.This section permits the Authority to make rules (known as “trust scheme rules”) concerning the constitution, management and operation of authorised unit trust schemes. These cover broadly the same matters as constitution and management regulations under section 81 of the FS Act 1986, but without the arrangements under that legislation whereby the Treasury retained a degree of control over certain constitution and management matters (such as the investment and borrowing powers of authorised unit trusts). The Authority has direct responsibility for these matters under this section.
470.The trust scheme rules are binding on the manager, trustee and participants independently of any provisions contained in the trust deed. Participants can seek to enforce the trust scheme rules against the manager or trustee as if the rules were provisions contained directly in the trust deed.
471.The Treasury has the power to modify the Authority’s rule-making powers if there is a change in the company law relating to the rights of beneficial, but not legal, owners of shares. This would enable the rights of nominee holders in authorised unit trusts to be aligned to those of shareholders in companies should the need arise.
Section 248: Scheme particulars rules
472.These are rules which the Authority may make requiring the manager of an authorised unit trust scheme to give details of the scheme to the Authority and to publish or make available to the public on request certain particulars, including changes, concerning the scheme.
473.The scheme particulars rules can provide for compensation to be paid to certain people (described as “qualifying persons”) if they have suffered loss because of an untrue or misleading statement in the particulars or because of an omission from them. Qualifying persons include people who may have a beneficial, but not legal, interest in the scheme (for example, beneficiaries of a trust where the trustees hold units in the scheme).
Section 249: Disqualification of auditor for breach of trust scheme rules
474.The Authority may disqualify an auditor from auditing authorised unit trust schemes or authorised oeics if the auditor does not comply with the trust scheme rules. Warning and decision notice procedures will apply, as well as rights to refer a decision to the Tribunal.
Section 250: Modification or waiver of rules
475.This allows the Authority to modify or waive the application of any of the trust scheme rules or scheme particulars rules in respect of authorised unit trusts. If there is a modification or waiver of rules under this section, certain of the provisions of section 148 (relating to the modification or waiver of various other of the Authority’s rules and providing for the circumstances in which waivers or modifications will be granted) will apply.
Section 251: Alteration of schemes and changes of manager or trustee
476.Alterations to an authorised unit trust scheme or a change in the manager or trustee may not take place without the Authority’s approval, or the Authority not notifying its disapproval. New managers or trustees must satisfy the requirements specified in section 243.
Section 252: Procedure when refusing approval of change of manager or trustee
477.If the Authority proposes to refuse to approve the replacement of the trustee or manager, a warning notice must be given. If the Authority proposes to refuse to approve changes to the scheme, warning and decision notice procedures will apply and the matter can be referred to the Tribunal.
Section 253: Avoidance of exclusion clauses
478.As a result of this section, if a trust deed for an authorised unit trust scheme seeks to avoid the manager’s or trustee’s duty to exercise due care, the deed will be ineffective.
Section 254: Revocation of authorisation order otherwise than by consent
479.The Authority may revoke an order authorising a unit trust in the circumstances specified in the section. These include any of the following situations:
the manager or trustee has contravened a requirement imposed by the Act or the Authority’s rules;
either of them has given the Authority misleading information;
the requirements for making an authorisation order (referred to in section 243) are no longer met;
the scheme has been inactive for 12 months or more; or
it is desirable in the interests of participants to revoke the scheme’s authorisation.
Section 255: Procedure
480.If the Authority wishes to revoke an authorisation order, it must go through the warning and decision notice procedure, giving notice to both the manager and trustee. Either of them may refer the decision to the Tribunal.
Section 256: Requests for revocation of authorisation order
481.The Authority can revoke an authorisation order where the manager or trustee requests it to, but it can also refuse to revoke authorisation where it considers that refusal would be in the interests of participants, or that the public interest requires an investigation before authorisation is revoked. Warning and decision notice procedures will apply and the decision may be referred to the Tribunal.
Section 257: Directions
482.The Authority may give directions requiring the manager of the scheme to cease the issue or redemption of units, or to require the manager and trustee of the scheme to wind it up in the circumstances specified in the section (which are broadly similar to those specified as grounds for revoking a scheme’s authorisation under section 254). If a person contravenes a direction under this section, private persons, and others falling within such categories as may be prescribed in regulations made by the Treasury, who suffer loss as a result may be able to bring an action. Once a direction has been given, the Authority may revoke or vary that direction, either of its own accord, or on the application of the manager or trustee.
Section 258: Applications to the court
483.In cases where the Authority is able to give a direction under section 257, it may also apply to the court for an order removing and replacing the manager or the trustee, or simply removing them and appointing an authorised person to wind up the scheme.
Section 259: Procedure in giving directions under section 257 and varying them on Authority’s own initiative
484.This section sets out the procedure the Authority must follow when it proposes to give, or on its own initiative vary, a direction in relation to an authorised unit trust scheme under section 257. This is the same written notice procedure as described in relation to section 53, except that in this case separate notices must be given to both the manager and trustee of the scheme. If a notice under this section imposes a requirement for the manager of the scheme to cease issue or redemption of units, it will either give a date when the requirement ends, or else provide for the requirement to continue until a further notice is given. If a notice under this section imposes a requirement to wind up a scheme, the scheme must be wound up either by a date given in the notice or else (if no date is given) as soon as possible.
Section 260: Procedure: refusal to revoke or vary direction
485.If the manager or trustee applies to the Authority for it to revoke or vary a direction given under section 257, but the Authority proposes to refuse to do so, the warning and decision notice procedures will apply. The decision may be referred to the Tribunal.
Section 261: Procedure: revocation of direction and grant of request for variation
486.If the Authority decides to revoke a direction under section 257, or to vary a direction in accordance with a request, it must give written notice of that fact. The Authority may publish information about the revocation or variation of the direction.