Collective Investment Schemes Rules 2010...5.5.2 Special meaning of unitholder in div 5.5.B—QFC...

Collective Investment

Schemes Rules 2010

(COLL)

Version No. 8

Effective: 1 January 2020

Includes amendments made by

COND Repeal and Miscellaneous Amendments Rules 2019

(QFCRA Rules 2019-4) Collective Investments Amendments Rules 2019

(QFCRA Rules 2019-5)

V8 Collective Investment Schemes Rules 2010 contents 1 Effective: 1/Jan/20

Collective Investment Schemes Rules 2010

made under the

Financial Services Regulations

Contents

Page

Chapter 1 General provisions 1

Part 1.1 Introductory 1

1.1.1 Name of rules 1

1.1.2 Commencement 1

1.1.3 Application of COLL 1

1.1.4 Glossary 1

Part 1.2 Basic concepts and key terms—all schemes 3

Division 1.2.A Collective investment schemes 3

1.2.1 What is a collective investment scheme? 3

Contents

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contents 2 Collective Investment Schemes Rules 2010 V8 Effective: 1/Jan/20

Division 1.2.B Participants, scheme property, units and unitholders 4

1.2.2 Who is a participant? 4

1.2.3 What is the scheme property? 4

1.2.4 What is a unit? 4

1.2.5 Who is the unitholder? 4

Division 1.2.C QFC schemes and non-QFC schemes 5

1.2.6 What is a QFC scheme? 5

1.2.7 What is a non-QFC scheme? 5

Division 1.2.D Operator and independent entity 5

1.2.8 Who is the operator? 5

1.2.9 Who is the independent entity? 6

Division 1.2.E Open-ended and closed-ended schemes 7

1.2.10 What are open-ended and closed-ended schemes? 7

Division 1.2.F Umbrella schemes 7

1.2.11 What are umbrella schemes and subschemes? 7

Division 1.2.G Qualified investors and retail customers 8

1.2.12 Who is a qualified investor or retail customer? 8

Part 1.3 Basic concepts and key terms—QFC schemes 10

Division 1.3.A Types of QFC schemes generally 10

1.3.1 QFC schemes are qualified investor or retail schemes 10

1.3.2 What is a QFC qualified investor scheme? 10

1.3.3 What is a QFC retail scheme? 10

1.3.4 Types of QFC retail schemes 10

1.3.5 What is a QFC UCITS type scheme? 10

1.3.5A What is a QFC retail property fund? 11

Division 1.3.B Legal forms for QFC schemes 11

1.3.6 Permitted legal forms for QFC schemes 11

1.3.7 What is a QFC collective investment company (or CIC)? 11

1.3.8 What is a QFC collective investment partnership (or CIP)? 12

1.3.9 What is a QFC collective investment trust (or CIT)? 12

1.3.10 What is another permitted form of QFC scheme? 12

Contents

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Division 1.3.C Particular types of QFC schemes 13

1.3.11 Islamic funds 13

1.3.12 Money-market funds 13

1.3.13 Other types of QFC schemes 14

Part 1.4 Basic concepts and key terms—non-QFC schemes 15

1.4.1 What is a non-QFC retail customer scheme? 15

1.4.2 What is a non-QFC qualified client scheme? 15

Chapter 2 Registration of schemes in QFC 16

2.1.1 Schemes established in QFC must be registered 16

2.1.2 Application for registration of scheme established in QFC 16

2.1.3 Decision on application for registration of scheme established in QFC 17

Chapter 3 Constitutional requirements—QFC schemes 20

Part 3.1 Constitutional document—QFC schemes 20

3.1.1 What is the constitutional document for a QFC scheme? 20

3.1.2 Matters to be included in constitutional document—all QFC schemes 20

3.1.3 Relationship between constitutional document and these rules—all QFC schemes 20

3.1.4 Constitutional document and checklist to be filed with registration application—all QFC schemes 21

3.1.5 Amendments of constitutional document—all QFC schemes 21

3.1.6 Prohibited amendments of constitutional document—QFC UCITS type schemes 22

Part 3.2 Units—QFC schemes 23

Division 3.2.A Units—all QFC schemes 23

3.2.1 Fractions of units—all QFC schemes 23

3.2.2 Smaller and larger denomination shares etc—CICs 23

3.2.3 Bearer certificates must not be issued—all QFC schemes 24

Division 3.2.B Units—QFC qualified investor schemes 24

3.2.4 Classes of units—QFC qualified investor schemes 24

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3.2.5 Limited issue—QFC qualified investor schemes 24

Division 3.2.C Units—QFC retail schemes 25

3.2.6 Classes of units—QFC retail schemes 25

3.2.7 Currency class units—QFC retail schemes 25

3.2.8 Rights of unit classes—QFC retail schemes 26

3.2.9 Smaller and larger denomination shares—QFC retail schemes 27

3.2.10 Subdivision and consolidation of units—QFC retail schemes 28

3.2.11 Guarantees and capital protection—QFC retail schemes 28

3.2.12 Switching rights—QFC retail umbrella schemes 29

Chapter 4 The operator and independent entity—QFC schemes 30

Part 4.1 The operator—all QFC schemes 30

4.1.1 Requirements for operator—all QFC schemes 30

4.1.2 Operator must comply with legal and regulatory requirements—all QFC schemes 31

4.1.3 Functions of operator generally—all QFC schemes 32

4.1.4 Duty of operator to report certain breaches of law—all QFC schemes 33

4.1.5 Particular duties of operator—all QFC schemes 34

4.1.6 Register of unitholders—all QFC schemes 35

4.1.7 Records of operator—all QFC schemes 35

4.1.8 Operator must give information etc to independent entity and auditor—all QFC schemes 37

4.1.9 Maintenance of capital notification—CIC’s 37

Part 4.2 The independent entity—QFC schemes 38

Division 4.2.A Independent entity generally—QFC schemes 38

4.2.1 Requirements for independent entity—all QFC schemes 38

4.2.2 Independent entity must comply with legal and regulatory requirements—all QFC schemes 41

4.2.3 Oversight functions of independent entity—all QFC schemes 42

4.2.4 Duty of independent entity to report certain breaches of law etc—all QFC schemes 43

4.2.5 Particular duties of independent entity—all QFC schemes 44

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4.2.6 Property safeguarding functions of independent entity—all QFC schemes 45

4.2.7 Records of independent entity—all QFC schemes 47

4.2.8 Independent entity must give information etc to operator and auditor—all QFC schemes 48

Division 4.2.B Non-QFC independent entities—QFC schemes 48

4.2.9 Non-QFC independent entities—criteria for Regulatory Authority action 48

4.2.10 Non-QFC independent entities—annual compliance certificate 49

4.2.11 Non-QFC independent entities—oversight of property safeguarding functions by operators 50

4.2.12 Non-QFC independent entities—removal by operators 50

4.2.13 Non-QFC independent entities—removal by Regulatory Authority 51

Part 4.3 Operator and independent entity other provisions—QFC schemes 54

4.3.1 Duties of officers etc of operator and independent entity—all QFC schemes 54

4.3.2 Provisions of ch 4 do not limit other functions 54

Chapter 5 Investor relations—QFC schemes 56

Part 5.1 Transactions with affected persons—QFC schemes 56

5.1.1 Who is an affected person for a QFC scheme? 56

5.1.2 Transactions with affected persons—general rule for all QFC schemes 57

5.1.3 Transactions with affected persons—prior notice to unitholders of QFC schemes 57

5.1.4 Transactions with affected persons—transactions involving 5% or more of QFC scheme’s net asset value 58

5.1.5 Transactions with affected persons—details required for QFC scheme’s annual reports 58

5.1.6 Transactions with affected persons—additional restrictions for QFC retail schemes 59

Part 5.2 Prospectus requirements—QFC schemes 63

5.2.1 Prospectus to be drawn up—all QFC schemes 63

5.2.2 Prospectus etc to be made available—all QFC schemes 63

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5.2.3 General information requirements for prospectus—all QFC schemes 64

5.2.4 Other general requirements for prospectus—all QFC schemes 64

5.2.5 Prospectus, checklist and any translations to be filed with registration application—all QFC schemes 65

5.2.6 Revisions of prospectus etc—all QFC schemes 66

Part 5.3 Prospectus responsibility—QFC schemes 69

5.3.1 Persons responsible for prospectus—all QFC schemes 69

5.3.2 Responsibility for expert statements in prospectus—all QFC schemes 70

5.3.3 Liability for prospectus—all QFC schemes 70

5.3.4 Exceptions from liability for prospectus—all QFC schemes 71

Part 5.4 Unitholder approvals and notice—QFC schemes 74

Division 5.4.A Unitholder approvals and notice—QFC qualified investor schemes 74

5.4.1 Changes requiring unitholder approval or notice—QFC qualified investor schemes 74

Division 5.4.B Unitholder approvals and notice—QFC retail schemes 75

5.4.2 Fundamental changes requiring prior approval by unitholder meeting—QFC retail schemes 75

5.4.3 Significant changes requiring pre-event notification—QFC retail schemes 76

5.4.4 Notifiable changes—QFC retail schemes 77

Part 5.5 Unitholder meetings—QFC schemes 78

Division 5.5.A Unitholder meetings—QFC qualified investor schemes 78

5.5.1 Unitholder meetings—QFC qualified investor schemes 78

Division 5.5.B Unitholder meetings—QFC retail schemes 78

5.5.2 Special meaning of unitholder in div 5.5.B—QFC retail schemes 78

5.5.3 Application of div 5.5.B to class meetings—QFC retail schemes 79

5.5.4 General meetings of unitholders—QFC retail schemes 79

5.5.5 Notice of general meetings of unitholders—QFC retail schemes 80

5.5.6 Quorum for unitholder meetings—QFC retail schemes 81

5.5.7 Resolutions at unitholder meetings—QFC retail schemes 82

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5.5.8 Voting rights at unitholder meetings—QFC retail schemes 82

5.5.9 Right to demand poll at unitholder meetings—QFC retail schemes 84

5.5.10 Proxies at unitholder meetings—QFC retail schemes 84

5.5.11 Chair, adjournment and minutes of unitholder meetings—QFC retail schemes 85

Part 5.6 Reports, accounts and auditors—QFC schemes 86

Division 5.6.A Accounting standards and auditors—all QFC schemes 86

5.6.1 Accounting standards—all QFC schemes 86

5.6.2 Appointment and removal of auditors etc—all QFC schemes 87

Division 5.6.B Reports and accounts—QFC qualified investor schemes 88

5.6.3 Reports and accounts generally—QFC qualified investor schemes 88

5.6.4 Contents of annual reports—QFC qualified investor schemes 89

5.6.5 Contents of half-yearly reports—QFC qualified investor schemes 90

5.6.6 Operator’s reports—QFC qualified investor schemes 91

5.6.7 Independent entity’s reports—QFC qualified investor schemes 91

5.6.8 Auditor’s reports—QFC qualified investor schemes 92

Division 5.6.C Reports and accounts—QFC retail schemes 93

5.6.9 Preparation of long and short reports—QFC retail schemes 93

5.6.10 Contents of short reports—QFC retail schemes 93

5.6.11 Contents of annual long reports—QFC retail schemes 95

5.6.12 Contents of half-yearly long reports—QFC retail schemes 97

5.6.13 Operator’s reports—QFC retail schemes 98

5.6.14 Comparative tables—QFC retail schemes 100

5.6.15 Independent entity’s reports—QFC retail schemes 101

5.6.16 Auditor’s reports—QFC retail schemes 102

5.6.17 Provision of short reports—QFC retail schemes 102

5.6.18 Publication and availability of annual and half-yearly long reports—QFC retail schemes 103

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Chapter 6 Investment and borrowing—QFC qualified investor schemes 104

Part 6.1 Investment and borrowing generally—QFC qualified investor schemes 104

6.1.1 General duties of operator in relation to investment and borrowing—QFC qualified investor schemes 104

6.1.2 Investment powers generally—QFC qualified investor schemes 104

6.1.3 Permissible investments generally—QFC qualified investor schemes 105

6.1.4 Spread of risk—QFC qualified investor schemes 105

6.1.5 Investments by money-market funds—QFC qualified investor schemes 106

6.1.6 Application of ch 6 to umbrella schemes—QFC qualified investor schemes 107

Part 6.2 Particular kinds of investments and transactions—QFC qualified investor schemes 108

Division 6.2.A Collective investments schemes—QFC qualified investor schemes 108

6.2.1 Investments in schemes—QFC qualified investor schemes 108

Division 6.2.B Derivatives, forward transactions and commodity contracts—QFC qualified investor schemes 109

6.2.2 Delivery of property under transactions in derivatives etc—QFC qualified investor schemes 109

6.2.3 Valuation of OTC derivatives—QFC qualified investor schemes 109

6.2.4 Cover for transactions in derivatives and forward transactions—QFC qualified investor schemes 110

6.2.5 Continuing nature of limits and requirements for derivatives and forward positions—QFC qualified investor schemes 111

Division 6.2.C Immovables—QFC qualified investor schemes 111

6.2.6 Standing independent valuer—QFC qualified investor schemes 111

6.2.7 Requirements for making investments in immovables—QFC qualified investor schemes 111

6.2.8 Investments in non-Qatari immovables through intermediate holding vehicles—QFC qualified investor schemes 113

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6.2.9 Additional requirements for immovables—QFC qualified investor schemes 114

6.2.10 Reports on valuation of immovables before acquisition or disposal—QFC qualified investor schemes 115

6.2.11 Valuation of immovables part of scheme property—QFC qualified investor schemes 116

6.2.12 Annual and other periodic valuation reports—QFC qualified investor schemes 118

6.2.13 Basis of valuation by standing independent valuer—QFC qualified investor schemes 119

6.2.14 Appointment of standing independent valuer—QFC qualified investor schemes 120

6.2.15 Standing independent valuer not to deal in immovables etc—QFC qualified investor schemes 121

6.2.16 Removal of standing independent valuer—QFC qualified investor schemes 122

Part 6.3 Stock lending and repos—QFC qualified investor schemes 123

6.3.1 Permitted stock lending and repos—QFC qualified investor schemes 123

Part 6.4 Borrowing—QFC qualified investor schemes 124

6.4.1 Borrowing—QFC qualified investor schemes 124

Chapter 7 Investment and borrowing—QFC retail schemes 125

Part 7.1 Investment and borrowing introduction—QFC retail schemes 125

7.1.1 Objects of ch 7—QFC retail schemes 125

7.1.2 General duties of operator in relation to investment and borrowing—QFC retail schemes 125

7.1.3 Treatment of obligations under ch 7—QFC retail schemes 127

7.1.4 Valuation for ch 7—QFC retail schemes 128

7.1.5 What is an approved money-market instrument? 129

7.1.6 What is a transferable security? 130

7.1.7 What is an eligible market? 131

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7.1.8 What is an approved derivative? 132

7.1.9 What is an approved security? 132

7.1.10 Application of ch 7 to umbrella schemes—QFC retail schemes 132

Part 7.2 Investments generally—QFC retail schemes 134

7.2.1 Investment powers generally—QFC retail schemes 134

7.2.2 Permissible investments generally—QFC retail schemes 135

7.2.3 Significant influence through transferable securities—UCITS type schemes 135

7.2.4 Investments by money-market funds—QFC retail schemes 136

Part 7.3 Investment diversification—QFC retail schemes 138

7.3.1 Prudent spread of risk—QFC retail schemes 138

7.3.2 Spread for certain transferable securities and money-market instruments—QFC retail schemes 138

7.3.3 Spread for transferable securities and money-market instruments issued by single issuer or group—QFC retail schemes 139

7.3.4 Spread exception for schemes replicating indices—QFC retail schemes 140

7.3.5 Spread for government or public securities issued by single issuer—QFC retail schemes 142

7.3.6 Spread for units in schemes etc—QFC retail schemes 143

7.3.7 Spread for OTC derivatives—QFC retail schemes 144

7.3.8 Spread for deposits—QFC retail schemes 145

7.3.9 Spread for certain investments with single person—QFC retail schemes 146

7.3.10 Concentration—QFC retail schemes 146

7.3.11 Application of pt 7.3—QFC retail schemes 147

Part 7.4 Particular kinds of investments—QFC retail schemes 148

Division 7.4.A Transferable securities—QFC retail schemes 148

7.4.1 General investment requirements for non-approved transferable securities—QFC retail schemes 148

7.4.2 Investments in closed-ended schemes as transferable securities—QFC retail schemes 149

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7.4.3 Investments linked etc to other assets as transferable securities—QFC retail schemes 151

Division 7.4.B Money-market instruments—QFC retail schemes 152

7.4.4 Investments in approved money-market instruments not admitted to eligible markets etc—QFC retail schemes 152

Division 7.4.C Nil and partly paid securities—QFC retail schemes 155

7.4.5 Investments in nil and partly paid securities—QFC retail schemes 155

Division 7.4.D Collective investment schemes—QFC retail schemes 156

7.4.6 Investments in collective investment schemes generally—QFC retail schemes 156

7.4.7 Investments in associated schemes—QFC retail schemes 157

Division 7.4.E Derivatives and forward transactions—QFC retail schemes 158

7.4.8 Derivatives and forward transactions generally—QFC retail schemes 158

7.4.9 Permitted transactions in derivatives and forward transactions—QFC retail schemes 160

7.4.10 Permitted financial indices—QFC retail schemes 162

7.4.11 Delivery of property under transactions in derivatives and forward transactions—QFC retail schemes 164

7.4.12 Requirement to cover sales—QFC retail schemes 164

7.4.13 OTC transactions in derivatives—QFC retail schemes 165

7.4.14 Risk management for transactions in derivatives and forward transactions—QFC retail schemes 167

Division 7.4.F Deposits—QFC retail schemes 168

7.4.15 Investments in deposits—QFC retail schemes 168

Part 7.5 Exposure for derivatives and forward transactions—QFC retail schemes 169

7.5.1 Cover for transactions in derivatives and forward transactions—QFC retail schemes 169

7.5.2 Borrowing not available for cover—QFC retail schemes 170

7.5.3 Continuing nature of limits and requirements for derivatives and forward positions—QFC retail schemes 171

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Part 7.6 Stock lending and repos—QFC retail schemes 172

7.6.1 Stock lending and repos generally—QFC retail schemes 172

7.6.2 Stock lending requirements—QFC retail schemes 172

7.6.3 Treatment of collateral for stock lending—QFC retail schemes 173

7.6.4 No limits on stock lending and repos—QFC retail schemes 175

Part 7.7 Cash, borrowing, lending and other provisions—QFC retail schemes 177

7.7.1 Cash and near cash—QFC retail schemes 177

7.7.2 General power to borrow—QFC retail schemes 177

7.7.3 Borrowing limits—QFC retail schemes 179

7.7.4 Restrictions on lending money—QFC retail schemes 179

7.7.5 Restrictions on lending property other than money—QFC retail schemes 180

7.7.6 General power to accept or underwrite placings—QFC retail schemes 180

7.7.7 Guarantees and indemnities—QFC retail schemes 182

Chapter 8 Operating duties and responsibilities—QFC schemes 184

Part 8.1 Dealing—QFC schemes 184

Division 8.1.A Dealing—QFC qualified investor schemes 184

8.1.1 Application of div 8.1.A to umbrella schemes—QFC qualified investor schemes 184

8.1.2 Initial offer—QFC qualified investor schemes 185

8.1.3 How units are issued and redeemed etc—QFC qualified investor schemes 185

8.1.4 Controls over issue and redemption of units—QFC qualified investor schemes 186

8.1.5 Issue and redemption of units in multiple classes—QFC qualified investor schemes 187

8.1.6 Issue and redemption generally—QFC qualified investor schemes 187

8.1.7 When instructions for issue and redemption must be given—QFC qualified investor schemes 189

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8.1.8 Limited issue—QFC qualified investor schemes 189

8.1.9 Issue only to qualified investors—QFC qualified investor schemes 190

Division 8.1.B Dealing—QFC retail schemes 190

8.1.10 Application of div 8.1.B to umbrella schemes—QFC retail schemes 190

8.1.11 Initial offers—QFC retail schemes 191

8.1.12 How units are issued and redeemed etc—QFC retail schemes 191

8.1.13 Controls over issue and redemption of units—QFC retail schemes 192

8.1.14 Issue and redemption of units in multiple classes—QFC retail schemes 193

8.1.15 Changes to number of units issued or redeemed—QFC retail schemes 193

8.1.16 Payment for issued units—QFC retail schemes 194

8.1.17 Issue and redemption generally—QFC retail schemes 194

8.1.18 When instructions for issue or redemption must be given—QFC retail schemes 195

8.1.19 Payment for redeemed units—QFC retail schemes 196

8.1.20 Issue or redemption otherwise than for cash—QFC retail schemes 197

8.1.21 Deferred redemption—QFC retail schemes 197

Part 8.2 Valuation and pricing—QFC schemes 199

Division 8.2.A Valuation and pricing—QFC qualified investor schemes 199

8.2.1 Application of div 8.2.A to umbrella schemes—QFC qualified investor schemes 199

8.2.2 Valuation—QFC qualified investor schemes 199

8.2.3 Valuation points—QFC qualified investor schemes 200

8.2.4 Prices of units—QFC qualified investor schemes 200

Division 8.2.B Valuation and pricing—QFC retail schemes 201

8.2.5 Application of div 8.2.B to umbrella schemes—QFC retail schemes 201

8.2.6 Duty of operator to rectify breaches of div 8.2.B—QFC retail schemes 202

8.2.7 Valuation requirement——QFC retail schemes 203

8.2.8 General rules for valuation of scheme property—QFC retail schemes 204

8.2.9 Fair value pricing for securities—QFC retail schemes 205

8.2.10 Valuation points—QFC retail schemes 206

8.2.11 Pricing controls of operator—QFC retail schemes 206

8.2.12 Review by independent entity of operator’s pricing controls etc—QFC retail schemes 208

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8.2.13 Recording and reporting incorrect pricing—QFC retail schemes 209

8.2.14 Prices of units—QFC retail schemes 210

8.2.15 Issue and redemption prices—QFC retail schemes 210

8.2.16 Dilution—QFC retail schemes 211

8.2.17 Particular duties of independent entity in relation to dilution—QFC retail schemes 212

8.2.18 Publication of prices—QFC retail schemes 212

Division 8.2.C Valuation—money-market funds 213

8.2.19 Maintaining value—all money-market funds 213

Part 8.3 Title and register—QFC schemes 215

8.3.1 Unitholder register requirements—all QFC schemes 215

8.3.2 Transfer of units by act of parties—all QFC schemes 216

8.3.3 Certificates for units—all QFC schemes 218

8.3.4 Conversion of units—all QFC schemes 218

Part 8.4 Operator and independent entity appointment and removal—QFC schemes 219

8.4.1 Initial appointment of operator and independent entity—all QFC schemes 219

8.4.2 Removal of operator—QFC schemes 219

8.4.3 Retirement of operator—all QFC schemes 221

8.4.4 Consequences of removal or retirement of operator—all QFC schemes 222

8.4.5 Removal of independent entity by unitholders—all QFC schemes 222

8.4.6 Removal of independent entity no longer eligible for appointment—all QFC schemes 223

8.4.7 Retirement of independent entity—all QFC schemes 224

8.4.8 Consequences of removal or retirement of independent entity—all QFC schemes 224

Part 8.5 Outsourcing—QFC schemes 226

8.5.1 What is outsourcing? 226

8.5.2 Outsourcing by operator—all QFC schemes 226

8.5.3 Outsourcing by independent entity—all QFC schemes 227

8.5.4 Outsourcing notice and information—all QFC schemes 228

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8.5.5 Provisions applying to outsourcing by operator and independent entity—all QFC schemes 228

8.5.6 Outsourcing management—all QFC schemes 232

8.5.7 Application of pt 8.5 to further outsourcing—all QFC schemes 233

8.5.8 Systems and controls for outsourcings—all QFC schemes 234

Part 8.6 Payments—QFC schemes 235

Division 8.6.A Payments—QFC qualified investor schemes 235

8.6.1 Payments—QFC qualified investor schemes 235

Division 8.6.B Payments—QFC retail schemes 235

8.6.2 Payments out of scheme property—QFC retail schemes 235

8.6.3 Performance fees—QFC retail schemes 236

8.6.4 Charges on buying and selling units—QFC retail schemes 237

8.6.5 Redemption charges—QFC retail schemes 238

8.6.6 Charges on exchange of units in umbrella schemes—QFC retail schemes 238

8.6.7 Allocation of payments to income or capital—QFC retail schemes 239

8.6.8 Prohibition of promotional payments—QFC retail schemes 240

8.6.9 Expenses in relation to property—QFC retail schemes 240

8.6.10 Payment of liabilities on transfer of assets—QFC retail schemes 240

8.6.11 Attribution of scheme property to subschemes—QFC retail schemes 241

Part 8.7 Accounting periods—QFC schemes 242

8.7.1 Accounting periods—all QFC schemes 242

Part 8.8 Income allocation and distribution—QFC schemes 244

8.8.1 Application of pt 8.8 to umbrella schemes—all QFC schemes 244

8.8.2 Income allocation and distribution—all QFC schemes 244

8.8.3 Unclaimed, minimal and joint unitholders distributions—all QFC schemes 246

Part 8.9 Names—QFC schemes 248

8.9.1 Name of scheme etc—all QFC schemes 248

8.9.2 Use of certain names—all QFC schemes 251

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Part 8.10 Shari’a Supervisory Board—all Islamic funds 253

8.10.1 Islamic fund must have a supervisory board—all Islamic funds 253

Chapter 9 Suspension, winding up and transfer schemes—QFC schemes 254

Part 9.1 Suspension and restart of dealings—QFC schemes 254

9.1.1 Suspension and restart of dealings—all QFC schemes 254

Part 9.2 Winding up—QFC schemes 258

9.2.1 Application of pt 9.2 to subschemes of QFC umbrella schemes—all QFC schemes 258

9.2.2 When scheme may be wound up—all QFC schemes 258

9.2.3 Winding-up required by constitutional document—all QFC schemes 259

9.2.4 Winding-up at direction of unitholders—all QFC schemes 259

9.2.5 Notification to Regulatory Authority that scheme not commercially viable etc—all QFC schemes 259

9.2.6 Winding-up by operator or independent entity—all QFC schemes 261

9.2.7 Accounting and reports during winding-up—all QFC schemes 263

Part 9.3 Transfer schemes—QFC schemes 265

9.3.1 Purpose—pt 9.3 265

9.3.2 Transfer schemes—all QFC schemes 265

Chapter 10 Financial promotions and investment activities—all schemes 267

Part 10.1 Financial promotions generally—all schemes 267

10.1.1 Declaration of non-QFC retail customer schemes 267

10.1.2 Certain financial promotions only to qualified investors etc—QFC qualified investor schemes 268

10.1.3 Certain financial promotions only to qualified investors etc—non-QFC qualified client schemes 268

10.1.4 Part 10.1 additional to CIPR 269

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Part 10.2 Financial promotions—non-QFC schemes 270

10.2.1 What is a complying disclaimer for a non-QFC scheme? 270

10.2.2 Restrictions generally on financial promotions—all non-QFC schemes 270

10.2.3 Prospectus and disclaimer must be provided etc—all non-QFC schemes 271

10.2.4 Complying disclaimer must be given with other documents under CIPR—all non-QFC schemes 272

10.2.5 Authorised firms must pass on documents etc—all non-QFC schemes 272

10.2.6 Quarterly returns for financial promotions etc—all non-QFC schemes 272

10.2.7 Recordkeeping by authorised firms—all non-QFC schemes 274

10.2.8 Part 10.2 additional to CIPR 274

Part 10.3 Additional retail customer requirements—non-QFC retail customer schemes 275

10.3.1 Application—pt 10.3 275

10.3.2 Facilities to be maintained in QFC—non-QFC retail customer schemes 275

10.3.3 Retail customer to be informed about availability of facilities—non-QFC retail customer schemes 276

10.3.4 Documents to be available in QFC—non-QFC retail customer schemes 276

10.3.5 Pricing and redemption facilities to be available in QFC—non-QFC retail customer schemes 277

10.3.6 Other information facilities to be available in QFC—non-QFC retail customer schemes 278

10.3.7 Complaint facilities to be available in QFC—non-QFC retail customer schemes 278

Chapter 11 Other provisions 280

Part 11.1 General 280

11.1.1 Restitution orders for breach of relevant requirements—all schemes 280

11.1.2 Service of notices and other documents on unitholders—all QFC schemes 280

11.1.3 Notices and other documents to be in legible form etc—all schemes 281

Part 11.2 Fees—QFC schemes 283

11.2.1 Application fees—all QFC schemes 283

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11.2.2 Annual fees—all QFC schemes 283

11.2.3 Waiver etc of fees—all QFC schemes 284

Part 11.3 Providing scheme administration—non-QFC schemes 285

11.3.1 Client money and assets—all non-QFC schemes 285

Chapter 12 QFC retail property funds 286

Part 12.1 General 286

12.1.1 Introduction 286

12.1.2 Concepts relating to property funds 286

12.1.3 Application of Chapter 12 286

12.1.4 Permissible investments—QFC retail property funds 287

12.1.5 Use of certain names—QFC retail property funds 288

12.1.6 Other provisions continue to apply to QFC retail property funds that are not REITs 288

12.1.7 Offer of QFC retail property funds 291

Part 12.2 Constitutional document and prospectus—QFC retail property funds 291

12.2.1 Extra constitution requirements—QFC retail property funds 291

12.2.2 Prohibited amendments of constitutional document—QFC retail property funds 292

Part 12.3 Custody, joint ownership and intermediate holding vehicles—QFC retail property funds 292

12.3.1 Operator may make alternative custody arrangements for immovables in certain jurisdictions—QFC retail property funds 292

12.3.2 Joint ownership arrangements—QFC retail property funds 293

12.3.3 Information about joint ownership arrangements—QFC retail property funds 295

12.3.4 Use of intermediate holding vehicles to hold immovables—QFC retail property funds 296

12.3.5 Duty of operator in relation to intermediate holding vehicles 298

Contents

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12.3.6 Report on use of intermediate holding vehicles to purchase immovables—QFC retail property funds 299

Part 12.4 Standing independent valuer—QFC retail property funds 301

12.4.1 Appointment of standing independent valuer—QFC retail property funds 301

12.4.2 Standing independent valuer not to deal in immovables—QFC retail property funds 302

12.4.3 Basis of valuation by standing independent valuer—QFC retail property funds 302

12.4.4 Reappointment of standing independent valuer—QFC retail property funds 303

12.4.5 Removal of standing independent valuer—QFC retail property funds 304

Part 12.5 Investments—QFC retail property funds 306

12.5.1 Investment committee—QFC retail property funds 306

12.5.2 Requirements for making investments in immovables—QFC retail property funds 306

12.5.3 Operator’s duties in relation to title and insurance of immovables—QFC retail property funds 307

12.5.4 Operator’s duties in relation to option premiums and disposal of immovables—QFC retail property funds 308

12.5.5 Reports on valuation of immovables before acquisition or disposal—QFC retail property funds 309

12.5.6 Annual and periodic valuation of immovables—QFC retail property funds 310

12.5.7 Annual and other periodic valuation reports—QFC retail property funds 311

12.5.8 Valuation of financial instruments—QFC retail property funds 312

12.5.9 Borrowing by QFC retail property funds 313

Part 12.6 Real estate investment trusts 314

12.6.1 Application of Part 12.6 314

12.6.2 Real estate investment trusts or REITs 314

12.6.3 Legal forms—REITs 316

12.6.4 Other provisions continue to apply to REITs 316

12.6.5 Extra constitution requirements—REITs 320

12.6.6 Proposal to distribute less than stated percentage 320

Contents

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12.6.7 REITs and intermediate holding vehicles 321

12.6.8 Investments by REITs in immovables under development 321

12.6.9 Custody of immovables by REIT operator 321

12.6.10 Transactions with affected persons—REITs 322

12.6.11 Depositing cash with, and borrowing money from, affected persons—REITs 324

12.6.12 Changes to disclosure about business with affected persons—REITs 324

12.6.13 When additional approval required from independent entity—REITs 325

12.6.14 Duty to notify relevant exchange—REITs 325

12.6.15 Duty to notify Regulatory Authority of trading suspension 326

Schedule 1 Arrangements not collective investment schemes 327

S1.1 Individual investment management arrangements 327

S1.2 Pure deposit-based arrangements 328

S1.3 Arrangements not operated by way of business 328

S1.4 Debt issues 328

S1.5 Common accounts 331

S1.6 Arrangements entered into for commercial purposes related to existing businesses 331

S1.7 Group arrangements 332

S1.8 Franchise arrangements 332

S1.9 Timeshare arrangements 333

S1.10 Other arrangements relating to use or enjoyment of property 333

S1.11 Arrangements involving issue of certificates representing investments 334

S1.12 Clearing services 334

S1.13 Contracts of insurance 334

S1.14 Corporations 334

S1.15 Partnerships 336

S1.16 Profit sharing investment accounts 338

Schedule 2 Constitutional document content—QFC schemes 339

Part S2.1 Constitution requirements—all QFC schemes 339

Contents

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S2.1 Name of scheme 339

S2.2 Scheme is established in QFC etc 339

S2.3 Legal form of scheme etc 339

S2.4 Islamic funds 339

S2.5 Investment objectives and policy etc 340

S2.6 Duration of limited schemes 340

S2.7 Unitholder’s liability to pay 340

S2.8 Fees, charges and other expenses of scheme 341

S2.9 Classes of units 341

S2.10 Income and capital distribution 341

S2.11 Investment and borrowing restrictions 342

S2.12 Management of borrowing risks 342

S2.13 Valuation and pricing 342

S2.14 Base currency 342

S2.15 Functions of operator and independent entity 342

S2.16 Responsibility statement 343

S2.17 Meetings 343

S2.18 Other statements and provisions for CIC 343

S2.19 CIP partnership agreement binding etc 344

S2.20 CIT trust deed binding etc 344

S2.21 CIT declaration of trust 345

S2.22 Assets other than cash for issue or redemption 345

S2.23 Suspension and winding-up 345

S2.24 Amendment of constitutional document 346

S2.25 Redemption of units held in breach of QFC law 346

S2.26 Documents evidencing title to units 346

S2.27 Other relevant matters 346

Part S2.2 Extra constitution requirements—qualified investor schemes 347

S2.28 Qualified investor scheme statement—QFC qualified investor schemes 347

S2.29 Only qualified investors can be unitholders in qualified investor schemes—QFC qualified investor schemes 347

S2.30 Limits on unit issue and redemption—QFC qualified investor schemes 347

Part S2.3 Extra constitution requirement—UCITS type schemes 347

S2.31 UCITS type scheme statement—QFC UCITS type schemes 347

Contents

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Part S2.4 Extra constitution requirements—money-market funds 348

S2.32 Money-market fund statement—QFC money-market funds 348

S2.33 Primary investment objective etc—QFC money-market funds 348

Schedule 3 Prospectus content—QFC qualified investor schemes 349

S3.1 Document status 349

S3.2 Description of scheme etc 349



S3.5 Distributions, accounting dates etc 353

S3.6 Characteristics of units in the scheme 353

S3.7 Operator 354

S3.8 Independent entity 354

S3.9 Investment adviser and standing independent valuer 357

S3.10 Auditor 357

S3.11 Register of unitholders 357

S3.12 Payments out of scheme property 358

S3.13 Dealing 360


S3.15 Issue and redemption charges 361

S3.16 General information 361

S3.17 Mandatory statement about prospectus 362

S3.18 Additional information for feeder funds 363

S3.19 Additional information for fund of funds 363

S3.20 Additional statements and information for property funds 363

S3.21 Information on umbrella schemes 364

S3.22 Application of prospectus contents to umbrella scheme 365

Schedule 4 Prospectus content—QFC retail schemes 367



S4.2A Additional information—QFC retail property funds 368


Contents

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S4.5 Distributions, accounting and reporting dates etc 372

S4.6 Characteristics of units in the scheme 373

S4.7 Operator 373


S4.9 Investment adviser and independent valuer 376

S4.10 Auditor 377

S4.11 Relationships with other parties 377



S4.14 Allocation of payments 380


S4.16 Dealing 380

S4.17 Dilution 382

S4.18 Issue charges 383

S4.19 Redemption charges 383

S4.20 Meeting of unitholders 383



S4.23 Additional information for feeder funds 385

S4.24 Additional information for fund of funds 385

S4.25 Information on umbrella schemes 386

S4.26 Application of prospectus contents to umbrella scheme 387

S4.27 Additional information 387

Schedule 5 Prospectus content—REITs 389





S5.5 Distributions, accounting and reporting dates etc 394

S5.6 Characteristics of units in the REIT 394

S5.7 Operator 395


S5.9 Investment adviser and independent valuer 397

Contents

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S5.10 Auditor 398

S5.11 Relationships with other parties 398



S5.14 Allocation of payments 401


S5.16 Dealing 402

S5.17 Disclosure about transactions with affected persons 403

S5.18 Disclosure about competing business of affected persons 403

S5.19 Disclosure about sale of immovable by affected persons 404

S5.20 Disclosure about custodianship by operator and transactions of operator with affected persons 404

S5.21 Dilution 405

S5.22 Issue charges 405

S5.23 Meeting of unitholders 406



S5.26 Other additional information 407

Glossary 409

Endnotes 441

General provisions Chapter 1 Introductory Part 1.1

Rule 1.1.1

V8 Collective Investment Schemes Rules 2010 page 1 Effective: 1/Jan/20

Chapter 1 General provisions

Part 1.1 Introductory

1.1.1 Name of rules

These rules are the Collective Investment Schemes Rules 2010 (or

COLL).

1.1.2 Commencement

These rules commence on 1 January 2011.

1.1.3 Application of COLL

These rules do not apply to a collective investment scheme that is

registered under the Private Placement Schemes Rules 2010 (PRIV).

Note A collective investment scheme that is established in the QFC may be

registered under PRIV as a private placement scheme.

1.1.4 Glossary

The glossary at the end of these rules is part of these rules.

Note 1 There are also relevant definitions in the INAP glossary. To assist the

reader, the application of a definition in that glossary would usually be

indicated by the word(s) being in italics (other than bold italics).

Note 2 By contrast, the application of a definition in the glossary in these rules

is not indicated by the word(s) being in italics.

Note 3 For the application of definitions, see INAP, r 2.1.8 (Application of

definitions).

Note 4 A note in or to these rules is explanatory and is not part of the rules (see

INAP, r 2.1.6 (1) and r 2.1.7).

Note 5 However, examples and guidance are part of these rules (see INAP,

r 2.1.4 (1) (b) and (2)).

Chapter 1 General provisions Part 1.1 Introductory

Rule 1.1.4

page 2 Collective Investment Schemes Rules 2010 V8 Effective: 1/Jan/20

Note 6 An example is not exhaustive, and may extend, but does not limit the

meaning of these rules or the particular provision of these rules to which

it relates (see INAP, r 2.1.5).

Note 7 For the effect of guidance, see the Financial Services Regulations, art 17

(4).

General provisions Chapter 1 Basic concepts and key terms—all schemes Part 1.2

Rule 1.2.1


Part 1.2 Basic concepts and key terms—all schemes

Division 1.2.A Collective investment schemes

1.2.1 What is a collective investment scheme?

A collective investment scheme (or scheme) is an arrangement that

is a collective investment fund under the Financial Services

Regulations (other than an arrangement that is not a scheme under

schedule 1).

Note on FSR definition of collective investment fund

The Financial Services Regulations (FSR), schedule 3, part 3, paragraphs 6.2 to 6.6

provide as follows:

6.2 Subject to paragraphs 6.5 and 6.6, a collective investment fund is any

arrangement:

(1) the purpose or effect of which is to enable persons taking part in the

arrangements (the participants) to participate in or receive profits or

income arising from the acquisition, holding, management or disposal

of property or sums paid out of such profits or income;

(2) that meets the property condition in paragraph 6.3 and the investment

condition in paragraph 6.4.

6.3 An arrangement will meet the property condition referred to in paragraph (2)

if:

(1) the arrangement is made with respect to property of any description,

including money, whether the participants become owners of the

property or any part of it or otherwise; and

(2) any of the 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 give directions in respect of the property.

6.4 An arrangement will meet the investment condition referred to in

paragraph 6.2 if:

(1) the contributions of the participants and the profits or income out of

which payments to be made are pooled; or

(2) the property is managed as a whole by or on behalf of the operator of

the scheme.

Chapter 1 General provisions Part 1.2 Basic concepts and key terms—all schemes

Rule 1.2.2


6.5 Arrangements for such pooling as is mentioned in paragraph 6.4 (1) in relation

to separate parts of the property are not to be regarded as constituting a single

collective investment fund unless the participants are entitled to exchange

rights in one part for rights in another.

6.6 The Regulatory Authority may make Rules specifying the circumstances in

which particular arrangements do not constitute a collective investment fund

for the purposes of paragraph 6.1.

Division 1.2.B Participants, scheme property, units and unitholders

1.2.2 Who is a participant?

A participant in a collective investment scheme (or scheme) is a

person who takes part (or is to take part) in the scheme by making a

contribution to the scheme property.

1.2.3 What is the scheme property?

The scheme property of a collective investment scheme (or scheme)

is the property held for or in the scheme.

Note Property is defined in the glossary.

1.2.4 What is a unit?

A unit in a collective investment scheme (or scheme) is a unit

representing the rights or interests (however described) of a

participant in the scheme.

Note The nature of the rights or interests will differ according to the form of

the scheme. If the scheme is a company, the units would be shares in the

company.

1.2.5 Who is the unitholder?

The unitholder of a unit in a collective investment scheme (or

scheme) is the person whose name is entered for the unit in the

scheme’s records (however described).

Note 1 For a QFC scheme, the name would be entered in:

(a) the scheme’s unitholder register (see rule 4.1.6 (1)); or


Rule 1.2.6


(b) if the unit is a listed unit—the QCSD’s, or relevant exchange’s,

registry or system (see rule 4.1.6 (3)).

Note 2 Unitholder has a special meaning in div 5.5.B (Unitholder meetings—

QFC retail schemes) (see r 5.5.2).

Division 1.2.C QFC schemes and non-QFC schemes

1.2.6 What is a QFC scheme?

A QFC scheme is a collective investment scheme (or scheme) that is

established in the QFC and registered under these rules.

Note Collective investment scheme (or scheme) is defined in r 1.2.1.

1.2.7 What is a non-QFC scheme?

A non-QFC scheme is a collective investment scheme (or scheme)

that is not established in the QFC.

Division 1.2.D Operator and independent entity

1.2.8 Who is the operator?

(1) The operator of a collective investment scheme (or scheme) is the

person (however described) responsible for managing the scheme,

including all of the scheme property.

Note 1 Scheme property is defined in r 1.2.3.

Note 2 For a QFC scheme, this person is described in these rules as the scheme’s

‘operator’ (see r 4.1.3 (Functions of operator generally—all QFC

schemes)). For a non-QFC scheme, this person may, for example, be

described as the scheme’s ‘manager’.

Note 3 The operator of a QFC scheme may outsource the management of all or

a part of the scheme property (see pt 8.5).

(2) The law of the jurisdiction where the scheme is established is applied

in deciding who is the person responsible for managing the scheme.

Note 1 Jurisdiction is defined in the glossary.


Rule 1.2.9


Note 2 For a QFC scheme, see pt 8.4 (Operator and independent entity

appointment and removal—QFC schemes).

(3) The operator may also have other functions under the law of the

jurisdiction where the scheme is established.

Note For a QFC scheme, see eg r 4.1.3 (Functions of operator generally—all

QFC schemes).

1.2.9 Who is the independent entity?

(1) The independent entity of a collective investment scheme (or

scheme) is the person (however described) responsible, under

rule 4.2.6, for safeguarding the scheme property.

Note 1 Scheme property is defined in r 1.2.3.

Note 2 For a QFC scheme, this person is described in these rules as the scheme’s

‘independent entity’. For a non-QFC scheme, this person may, for

example, be described as the scheme’s ‘depository’ or ‘trustee’.

(2) The law of the jurisdiction where the scheme is established is applied

in deciding who is the person responsible for safeguarding the scheme

property.

Note 1 Jurisdiction is defined in the glossary.

Note 2 For a QFC scheme, see pt 8.4 (Operator and independent entity

appointment and removal—QFC schemes).

(3) The independent entity may also have other functions under the law

of the jurisdiction where the scheme is established.

Note For a QFC scheme, see eg r 4.2.3 (Oversight functions of independent

entity—all QFC schemes).


Rule 1.2.10


Division 1.2.E Open-ended and closed-ended schemes

1.2.10 What are open-ended and closed-ended schemes?

(1) An open-ended scheme is a collective investment scheme (or

scheme) that permits its units to be redeemed, whether continuously

or periodically.

Note Unit is defined in r 1.2.4. Redemption is defined in the glossary.

(2) A closed-ended scheme is a collective investment scheme (or

scheme) that does not permit its units to be redeemed.

(3) Subject to subrule (4), a scheme registered under these rules must be

an open-ended scheme.

(4) A QFC retail scheme that is a property fund may be closed-ended or

open-ended. A REIT must be a closed-ended scheme.

Division 1.2.F Umbrella schemes

1.2.11 What are umbrella schemes and subschemes?

(1) An umbrella scheme is a collective investment scheme (or scheme)

under which the contributions of the unitholders, and the profit or

income out of which payments are to be made to them, are pooled

separately in relation to separate parts of the scheme property.

Note Unitholder is defined in r 1.2.5 and scheme property is defined in r 1.2.3.

(2) A subscheme of an umbrella scheme is a part of the scheme property

that is pooled separately.


Rule 1.2.12


Division 1.2.G Qualified investors and retail customers

1.2.12 Who is a qualified investor or retail customer?

(1) For these rules, a person can be a qualified investor or retail customer

for a QFC scheme or an authorised firm (or for both).

(2) A qualified investor for a QFC scheme is:

(a) a person who would (if the scheme were an authorised firm and

the person were a customer of the scheme) be a business

customer or market counterparty of the scheme in relation to

dealings in investments that consist of (or include) units in the

scheme; or

(b) a person who is a business customer or market counterparty of

any authorised firm in relation to dealings in investments that

consist of (or include) units in the scheme.

Note Authorised firm, business customer and dealing in investments are

defined in the Glossary.

(3) A qualified investor for an authorised firm in relation to units in a

scheme is a person who is a business customer or market counterparty

of the firm in relation to dealings in investments that consist of (or

include) units in the scheme.

(4) For these rules, a retail customer of an authorised firm in relation to

units in a scheme is a customer of the firm who is neither a business

customer nor a market counterparty of the firm in relation to dealings

in investments that consist of (or include) units in the scheme.

(5) Despite subrule (4), each of following persons is taken to be a retail

customer of a QFC scheme:

(a) a person who would (if the scheme were an authorised firm and

the person were a customer of the scheme) be a retail customer

of the scheme in relation to dealings in investments that consist

of (or include) units in the scheme;


Rule 1.2.12


(b) a person who is a retail customer of any authorised firm in

relation to dealings in investments that consist of (or include)

units in the scheme.

(6) In this rule:

market counterparty has the same meaning as in the Investment

Management and Advisory Rules 2014.

Chapter 1 General provisions Part 1.3 Basic concepts and key terms—QFC schemes

Rule 1.3.1


Part 1.3 Basic concepts and key terms—QFC schemes

Division 1.3.A Types of QFC schemes generally

1.3.1 QFC schemes are qualified investor or retail schemes

A QFC scheme registered under these rules is either—

(a) a qualified investor scheme; or

(b) a retail scheme.

1.3.2 What is a QFC qualified investor scheme?

A QFC scheme is a qualified investor scheme if it is registered under

these rules as a qualified investor scheme.

1.3.3 What is a QFC retail scheme?

A QFC scheme is a retail scheme if it is registered under these rules

as a retail scheme.

1.3.4 Types of QFC retail schemes

QFC retail schemes may be UCITS type schemes or property funds.

1.3.5 What is a QFC UCITS type scheme?

A QFC retail scheme is a UCITS type scheme if—

(a) the scheme’s constitutional document contains the statement

required by part S2.31 (Extra constitution requirement—UCITS

type schemes); or

(b) the scheme is an umbrella scheme that is a UCITS type scheme

and each subscheme would be a UCITS type scheme if it were

a separate scheme.

Note Umbrella scheme and subscheme are defined in r 1.2.11.

General provisions Chapter 1 Basic concepts and key terms—QFC schemes Part 1.3

Rule 1.3.5A


1.3.5A What is a QFC retail property fund?

A QFC retail scheme is a property fund if:

(a) the scheme’s constitutional document contains the statement

required by rule 12.2.1 (Extra constitution requirements—QFC

retail property funds); or

(b) the scheme is an umbrella scheme that is a property fund and

each subscheme would be a property fund if it were a separate

scheme.

Division 1.3.B Legal forms for QFC schemes

1.3.6 Permitted legal forms for QFC schemes

A QFC scheme must take 1 of the following legal forms:

(a) a QFC collective investment company (or CIC);

(b) a QFC collective investment partnership (or CIP);

(c) a QFC collective investment trust (or CIT);

(d) another permitted form of QFC scheme.

Note The permitted legal forms of QFC schemes are defined in r 1.3.7 to

r 1.3.10.

1.3.7 What is a QFC collective investment company (or CIC)?

(1) A company incorporated under the Companies Regulations 2005 is a

QFC collective investment company (or CIC) if its articles of

association provide that the company is established for the sole

purpose of constituting a collective investment scheme.

Note Articles of association is defined in the glossary.

(2) If the CIC is an open-ended scheme, it must be an open-ended

company with variable share capital.


Rule 1.3.8


1.3.8 What is a QFC collective investment partnership (or CIP)?

A QFC collective investment partnership (or CIP) is a limited

partnership registered under the Partnership Regulations 2007 if its

partnership agreement provides that the partnership is established for

the sole purpose of constituting a collective investment scheme.

Note Partnership agreement is defined in the glossary.

1.3.9 What is a QFC collective investment trust (or CIT)?

A QFC collective investment trust (or CIT) is an express trust created

under the Trust Regulations 2007 if its trust instrument provides that

the trust is established for the sole purpose of constituting a collective

investment scheme.

Note Trust instrument is defined in the glossary.

1.3.10 What is another permitted form of QFC scheme?

Another permitted form of QFC scheme is an entity (other than a

CIC, CIP or CIT) if—

(a) the legal form of the entity—

(i) is permitted under regulations made under the QFC Law or

rules made by the Regulatory Authority or QFC Authority;

or

(ii) otherwise permitted under an approval, authority, or

licence, (however described) given by the QFC Authority

under the QFC Law; and

(b) an instrument creating the legal form of the entity provides that

the entity is established for the sole purpose of constituting a

collective investment scheme.

Note Entity, QFC Law and instrument are defined in the glossary.

General provisions Chapter 1 Basic concepts and key terms—QFC schemes Part 1.3

Rule 1.3.11


Division 1.3.C Particular types of QFC schemes

1.3.11 Islamic funds

A QFC scheme, or a subscheme of a QFC umbrella scheme, is an

Islamic fund if the constitutional document of the scheme states that

the scheme or subscheme is an Islamic fund.

Note 1 Umbrella scheme and subscheme are defined in r 1.2.11. Constitutional

document is defined in r 3.1.1.

Note 2 The following provisions must be complied with in relation to Islamic

funds:

• r 5.6.1 (2) and (3) (Accounting standards—all QFC schemes)

• pt 8.10 (Shari’a Supervisory Board—all Islamic funds)

• sch 2 (Constitutional document content—QFC schemes), r S2.4

(Islamic funds)

• sch 3 (Prospectus content—QFC qualified investor schemes), r S3.2

(e) (Description of scheme etc) and r S3.3 (Islamic funds)

• sch 4 (Prospectus content—QFC retail schemes), r S4.2 (f)

(Description of scheme etc) and r S4.3 (Islamic funds).

1.3.12 Money-market funds

A QFC scheme, or a subscheme of a QFC umbrella scheme, is a

money-market fund if the constitutional document of the scheme

states that the scheme or subscheme is a money-market fund.

Note 1 Umbrella scheme and subscheme are defined in r 1.2.11. Constitutional


Note 2 The following provisions must be complied with in relation to money-

market funds:

• r 6.1.5 (Investments by money-market funds—QFC qualified

investor schemes)

• r 7.2.4 (Investments by money-market funds—QFC retail schemes)

• r 8.2.19 (Maintaining value—all money-market funds)

• pt S2.4 (Extra constitution requirements—money-market funds)

• sch 3 (Prospectus content—QFC qualified investor schemes),

r S3.2 (f) (Description of scheme etc)


Rule 1.3.13


• sch 4 (Prospectus content—QFC retail schemes), r S4.2 (g)

(Description of scheme etc) (see also r S4.4 (r) (Investment

objectives and policy etc)).

1.3.13 Other types of QFC schemes

This division does not limit by implication the types of QFC schemes

permitted under these rules.

Note 1 See, for example, the definitions of feeder fund, fund of fund and

property fund in the glossary.

Note 2 For guaranteed funds and similar funds, see r 8.9.1 (5) to (11) (Name of

scheme etc—all QFC schemes).

General provisions Chapter 1 Basic concepts and key terms—non-QFC schemes Part 1.4

Rule 1.4.1


Part 1.4 Basic concepts and key terms—non-QFC schemes

1.4.1 What is a non-QFC retail customer scheme?

A non-QFC scheme is a retail customer scheme if it is a non-QFC

scheme declared to be a retail customer scheme under rule 10.1.1

(Declaration of non-QFC retail customer schemes).

Note Non-QFC scheme is defined in rule 1.2.7.

1.4.2 What is a non-QFC qualified client scheme?

A non-QFC scheme is a qualified client scheme if is not a retail

customer scheme.

Note Non-QFC scheme is defined in rule 1.2.7.

Chapter 2 Registration of schemes in QFC

Rule 2.1.1



2.1.1 Schemes established in QFC must be registered

(1) A person must not operate a scheme that is established in the QFC

unless it is registered under these rules or PRIV.

Note PRIV relates to private placement schemes.

(2) In this rule:

operate a scheme includes being responsible for managing the

scheme or any of the scheme property.

Note Scheme is defined in r 1.2.1. Scheme property is defined in r 1.2.3.

2.1.2 Application for registration of scheme established in QFC

(1) The person who is to become the initial operator of a scheme

established in the QFC may apply to the Regulatory Authority for

registration of the scheme under these rules as either—

(a) a qualified investor scheme; or

(b) a retail scheme.

Note 1 Operator is defined in r 1.2.8.

Note 2 See the following provisions:

• r 3.1.4 (Constitutional document and checklist to be filed with

registration application—all QFC schemes)

• r 5.2.5 (Prospectus, checklist and any translations to be filed with

registration application—all QFC schemes).

(2) The Regulatory Authority may, in writing, require the applicant to

give the authority additional information or documents that the

authority reasonably needs to decide the application.

(3) If the applicant does not comply with the requirement, the Regulatory

Authority may refuse to consider the application.

(4) The applicant may withdraw the application by notice given to the

Regulatory Authority at any time before the application is decided.

Registration of schemes in QFC Chapter 2

Rule 2.1.3


(5) If, at any time between the making of the application and the

application being withdrawn or decided, the applicant becomes aware

of a material change that is reasonably likely to be relevant to the

Regulatory Authority’s consideration of the application, the applicant

must tell the authority about the change immediately, but by no later

than the next business day.

Note Business day is defined in the glossary.

2.1.3 Decision on application for registration of scheme established in QFC

(1) On an application under rule 2.1.2 for registration of a scheme, the

Regulatory Authority must—

(a) register the scheme under these rules as either—

(i) a qualified investor scheme; or

(ii) a retail scheme; or

(b) refuse to register the scheme under these rules.

(2) The Regulatory Authority must register the scheme unless it

considers that—

(a) the constitutional document does not comply with rule 3.1.2

(Matters to be included in constitutional document—all QFC

schemes) or contains a provision that conflicts with any

provision of these rules; or

(b) the name of the scheme, any subscheme of the scheme, or a class

of units—

(i) is substantially similar to the name of—

(A) a scheme registered under PRIV or these rules; or

(B) a subscheme of an umbrella scheme registered under

PRIV or these rules; or


Rule 2.1.3


(C) a class of units for a scheme registered under PRIV or

these rules; or

(ii) is otherwise undesirable or misleading; or

Note Umbrella scheme and subscheme are defined in r 1.2.11. Class is

defined in the glossary.

Guidance on names of CIC

A CIC must not include in its name the following words, abbreviations of the

following words or similar words or abbreviations:

(a) limited;

(b) unlimited;

(c) public limited company.

(c) the person named in the application as the person who is to

become the initial operator of the scheme is not eligible, on the

scheme’s registration, to be the operator of the scheme under

rule 4.1.1 (Requirements for operator—all QFC schemes); or

Note Operator is defined in r 1.2.8.

(d) the person appointed by the operator, and named in the

application, as the person who is to become the initial

independent entity of the scheme is not—

(i) an authorised firm that is eligible, on the scheme’s

registration, to be the independent entity of the scheme

under rule 4.2.1 (Requirements for independent entity—all

QFC schemes); or

(ii) otherwise an appropriate person to be the independent

entity of the scheme; or

Note 1 Constitutional document is defined in r 3.1.1. Independent entity

is defined in r 1.2.9.

Note 2 For para (d) (ii), see r 4.2.9 (Non-QFC independent entities—

criteria for Regulatory Authority action).

(e) the person named in the application as the person who is to

become the initial auditor of the scheme is not eligible to be the

auditor of the scheme under GENE, section 9.7 (Auditors) as

Registration of schemes in QFC Chapter 2

Rule 2.1.3


applied by rule 5.6.2 (7) (Appointment and removal of auditors

etc—all QFC schemes); or

(f) the prospectus drawn up for the scheme does not comply with

these rules; or

Note Prospectus is defined in the glossary.

(g) the scheme does not otherwise comply with these rules; or

(h) it is otherwise inappropriate for the scheme to be registered

under these rules.

Note The Regulatory Authority has power under the Financial Services

Regulations, art 105 to give certain directions in relation to collective

investment funds, including a direction to cease the issue or redemption

of units in the fund and to wind up the fund.

(3) The Regulatory Authority may register the scheme either—

(a) without conditions, restrictions or requirements; or

(b) with the conditions, restrictions or requirements it considers

appropriate.

(4) The Regulatory Authority must give the applicant written notice of

its decision on the application.

(5) If the Regulatory Authority refuses to register the scheme or registers

the scheme with conditions, restrictions or requirements not agreed to

by the applicant, the notice must—

(a) give reasons for the decision; and

(b) tell the applicant that the applicant may appeal to the

Regulatory Tribunal against the decision.

Chapter 3 Constitutional requirements—QFC schemes Part 3.1 Constitutional document—QFC schemes

Rule 3.1.1


Chapter 3 Constitutional requirements—QFC schemes

Part 3.1 Constitutional document—QFC schemes

3.1.1 What is the constitutional document for a QFC scheme?

The constitutional document, for a QFC scheme, is—

(a) for a CIC—the articles of association of the company; and

(b) for a CIP—the partnership agreement of the partnership; and

(c) for a CIT—the trust instrument of the trust; and

(d) for another permitted form of QFC scheme—any instrument

creating the legal form of the entity.

Note CIC, CIP, CIT and another permitted form of QFC scheme are defined

in div 1.3.B (Legal forms for QFC schemes). Articles of association,

partnership agreement and trust instrument are defined in the glossary.

3.1.2 Matters to be included in constitutional document—all QFC schemes

The constitutional document of a QFC scheme must include the

statements and provisions required by schedule 2 (Constitutional

document content—QFC schemes) for the scheme.

3.1.3 Relationship between constitutional document and these rules—all QFC schemes

(1) The constitutional document of a QFC scheme must not contain a

provision—

(a) that conflicts with any provision of these rules; or

Constitutional requirements—QFC schemes Chapter 3 Constitutional document—QFC schemes Part 3.1

Rule 3.1.4


(b) that is unfairly prejudicial to the interest of unitholders generally

or to the unitholders of any class of units.

Note Class is defined in the glossary.

(2) A provision of the constitutional document of a QFC scheme has no

effect to the extent—

(a) that it conflicts with any provision of these rules; or

(b) that it is unfairly prejudicial to the interest of unitholders

generally or to the unitholders of any class of units.

(3) However, a provision of the constitutional document of a QFC

scheme must not be taken to conflict with a provision of these rules

to the extent it can operate concurrently with the provision of these

rules.

(4) Any power given by these rules to a QFC scheme, or to the operator

or independent entity of a QFC scheme, is subject to any applicable

condition, restriction or requirement in the scheme’s constitutional

document.

3.1.4 Constitutional document and checklist to be filed with registration application—all QFC schemes

The person who is to become the operator of a scheme under these

rules must file with the application for registration of the scheme—

(a) a copy of the scheme’s constitutional document; and

(b) a checklist prepared by the person listing all the statements and

provisions required by these rules and indicating where they are

in the constitutional document.

3.1.5 Amendments of constitutional document—all QFC schemes

(1) This rule applies if the constitutional document of a QFC scheme is

amended.

Chapter 3 Constitutional requirements—QFC schemes Part 3.1 Constitutional document—QFC schemes

Rule 3.1.6


(2) Not later than 21 days after the day the amendment is made, the

operator must file with the Regulatory Authority—

(a) a copy of the amendment and the constitutional document as

amended; and

(b) a written certificate by the operator stating that—

(i) the amendment was made in accordance with these rules

and the scheme’s constitutional document; and

(ii) the constitutional document as amended does not contain a

provision that conflicts with any provision of these rules.

Note See pt 5.4 (Unitholder approvals and notice—QFC schemes) for the

unitholder approval or notice required for amendments of the

constitutional document.

3.1.6 Prohibited amendments of constitutional document—QFC UCITS type schemes

The constitutional document of a QFC UCITS type scheme must not

be amended in such a way that it ceases to be a UCITS type scheme.

Note UCITS type scheme is defined in r 1.3.5.

Constitutional requirements—QFC schemes Chapter 3 Units—QFC schemes Part 3.2

Rule 3.2.1


Part 3.2 Units—QFC schemes

Division 3.2.A Units—all QFC schemes

3.2.1 Fractions of units—all QFC schemes

The constitutional document of a QFC scheme may authorise the

scheme to issue fractions of units.

Note Constitutional document is defined in r 3.1.1.

3.2.2 Smaller and larger denomination shares etc—CICs

(1) The constitutional document of a CIC may provide that the rights

attached to shares of any class are to be expressed in 2 denominations;

one of which (the smaller denomination) is to be such proportion of

the other (the larger denomination) as is fixed by the constitutional

document.

Note CIC is defined in r 1.3.7. Constitutional document is defined in r 3.1.1.

(2) For any class of shares of a CIC to which subrule (1) applies, any

share with rights expressed in the smaller denomination is a smaller

denomination share, and any share with rights expressed in the larger

denomination is a larger denomination share.

(3) For any class of shares of a CIC that is not expressed in

2 denominations, the rights that attach to a share of the class are equal

to the rights that attach to every other share of that class.

(4) For any class of shares of a CIC that is expressed in

2 denominations—

(a) the rights that attach to a share of the class are equal to the rights

that attach to every other share of that class of the same

denomination; and

(b) the rights that attach to a smaller denomination share of the class

are the relevant proportion of the rights that attach to a larger

denomination share of that class.

Chapter 3 Constitutional requirements—QFC schemes Part 3.2 Units—QFC schemes

Rule 3.2.3


(5) For subrule (4) (b):

relevant proportion means the proportion fixed by the constitutional

document (as mentioned in subrule (1)).

3.2.3 Bearer certificates must not be issued—all QFC schemes

(1) Bearer certificates must not be issued for units in a QFC scheme.

(2) In this rule:

bearer certificate means a certificate or other document evidencing

title that indicates that the bearer is entitled to the units in the QFC

scheme stated in it.

Note Document evidencing title is defined in the glossary.

Division 3.2.B Units—QFC qualified investor schemes

3.2.4 Classes of units—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme may issue the

classes of units that are set out in the constitutional document.

Note Class is defined in the glossary. Constitutional document is defined in

r 3.1.1.

(2) However, the operator may issue a class of units only if the rights of

unitholders of any class are not unfairly prejudiced as against the

interests of the unitholders of any other class of units.

3.2.5 Limited issue—QFC qualified investor schemes

(1) This rule applies to units in a QFC qualified investor scheme if, under

the constitutional document, the issue of the units may be limited.

(2) The operator may only issue the units if the issue—

(a) is permitted by the constitutional document; and

(b) is in accordance with the conditions, restrictions and

requirements (if any) stated in the latest filed prospectus; and


Rule 3.2.6


(c) will not materially prejudice any existing unitholders.

Note Latest filed prospectus is defined in the glossary.

Division 3.2.C Units—QFC retail schemes

3.2.6 Classes of units—QFC retail schemes

(1) The constitutional document of a QFC retail scheme may—

(a) provide for different classes of units to be issued; and

(b) if the scheme is an umbrella scheme—provide for different

classes of units to be issued for a subscheme.

Note Constitutional document is defined in r 3.1.1. Umbrella scheme and

subscheme are defined in r 1.2.11.

(2) However, a new unit class must not be issued, or an existing unit class

amended, if that would result in prejudice to unitholders of any other

unit class.

(3) Also, the nature, operation and effect of a unit class must be

reasonably capable of being explained clearly to prospective

unitholders.

3.2.7 Currency class units—QFC retail schemes

(1) This rule applies to a currency class unit in a QFC retail scheme.

Note 1 A currency class unit differs from other units mainly in that its price,

having been calculated initially in the base currency will be quoted (and

normally paid for) in the currency of the designation of the class. Income

distributions will also be paid for in the currency of designation of the

class.

Note 2 Currency class unit, base currency and class are defined in the glossary.

(2) The currency of the class must not be the base currency.

(3) However, if the units in a subscheme are, in accordance with a

statement in the latest filed prospectus, to be valued in a currency


Rule 3.2.8


other than the base currency, the currency of the class may be in the

base currency, but must not be in that other currency.

Note Subscheme is defined in r 1.2.11.

(4) The price must be expressed in the currency of the class.

Note Price is defined in the glossary.

(5) Any distribution must be paid in the currency of the class.

(6) Statements of amounts of money or values included in statements

must be given in the currency of the class (whether or not also given

in the base currency).

3.2.8 Rights of unit classes—QFC retail schemes

(1) If any class of units in a QFC retail scheme has different rights from

another class of units in the scheme, the constitutional document must

provide a method for calculating the proportion of the value of the

scheme property, and the proportion of income available for

allocation, attributable to each such class.


(2) For a QFC retail scheme that is not an umbrella scheme, the

constitutional document must not provide for any class of units in

relation to which—

(a) the extent of the rights to participate in the capital property,

income property or distribution account would be decided

differently from the extent of the corresponding rights for any

other class of units; or

(b) payments or accumulation of income or capital would differ in

source or form from those of any other class of units.

Note Capital property, income property and distribution account are defined

in the glossary.

(3) For a QFC retail scheme that is an umbrella scheme, subrule (2) (a)

applies to classes of units in relation to each subscheme as if each

subscheme were a separate QFC retail scheme.


Rule 3.2.9


(4) Subrules (2) and (3) do not prohibit a difference between the rights

attached to classes of units that relates solely to any of the following:

(a) the accumulation of income by way of periodical credit to

capital rather than distribution;

(b) charges and expenses that may be taken out of the scheme

property or payable by the unitholders;

(c) the currency in which prices or values are expressed or payments

made.

Note Price is defined in the glossary.

3.2.9 Smaller and larger denomination shares—QFC retail schemes

(1) This rule applies if the constitutional document of a CIC that is a QFC

retail scheme provides, in relation to any class of shares, for smaller

denomination shares and larger denomination shares.

Note CIC is defined in r 1.3.7. Smaller denomination share and larger

denomination share are defined in r 3.2.2 (2).

(2) If a registered holding of shares includes a number of smaller

denomination shares that can be consolidated into a larger

denomination share of the same class, the operator must consolidate

the relevant number of the smaller denomination shares into a larger

denomination share.

(3) To effect a transaction in shares, the operator may substitute the

relevant number of smaller denomination shares for a larger

denomination share.

(4) If the operator acts under subrule (3), subrule (2) does not apply to

the resulting smaller denomination share holding until the transaction

is completed.


Rule 3.2.10


3.2.10 Subdivision and consolidation of units—QFC retail schemes

(1) Unless expressly forbidden by the constitutional document, the

operator of a QFC retail scheme may decide—

(a) that each unit in any class is to be subdivided into 2 or more

units; or

(b) that units in any class are to be consolidated.

(2) The operator must immediately give notice to each unitholder (or the

first named of joint unitholders) of any subdivision or consolidation

under subrule (1).

(3) Subrule (2) does not apply if the operator had given the notice before

the subdivision or consolidation became effective.

3.2.11 Guarantees and capital protection—QFC retail schemes

(1) This rule applies if there is—

(a) any arrangement intended to result in a particular capital or

income return from a holding of units in a QFC retail scheme;

or

(b) any investment objective of giving protection to the capital

value of, or income return from, a holding of units in a QFC

retail scheme.

(2) The arrangement or protection must not create the possibility of a

conflict of interest as between—

(a) unitholders and the operator or independent entity; or

(b) unitholders intended and not intended to benefit from the

arrangement.

(3) If, in accordance with any information mentioned in schedule 4

(Prospectus content—QFC retail schemes), rule S4.27 (a) (iv)

(Additional information), action is required by the unitholders to


Rule 3.2.12


obtain the benefit of any guarantee, the operator must provide

reasonable written notice to unitholders before the action is required.

Note The Regulatory Authority may direct the operator of a QFC scheme to

change the name of the scheme if the name implies a degree of security

in relation to the capital or income that is not justified (see r 8.9.1 (3) (h)

and (5) to (11).

3.2.12 Switching rights—QFC retail umbrella schemes

In accordance with the Financial Services Regulations, schedule 3,

part 3, paragraph 6.5, the participants in a QFC retail scheme that is

an umbrella scheme are entitled to exchange rights in a subscheme

for rights in another subscheme of the umbrella scheme.


Chapter 4 The operator and independent entity—QFC schemes Part 4.1 The operator—all QFC schemes

Rule 4.1.1


Chapter 4 The operator and independent entity—QFC schemes

Part 4.1 The operator—all QFC schemes

4.1.1 Requirements for operator—all QFC schemes

(1) The operator of a QFC scheme must be an authorised firm that—

(a) is a corporation; and

Note Corporation is defined in the glossary.

(b) has an authorisation for each of the following regulated

activities:

(i) operating collective investment schemes;

(ii) dealing in investments;

(iii) managing investments; and

Note Authorisation, regulated activity and the regulated activities

mentioned in this paragraph are defined in the glossary.

(c) is permitted under the scope of its authorisation to be the

operator of the scheme, QFC schemes of that kind or any scheme

registered in the QFC; and

(d) is a different person from the independent entity; and

(e) for a CIC or CIP—is a different person from the scheme; and

Note CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively.

(f) is independent of—

(i) the independent entity; and

(ii) if the scheme is a CIC or CIP—the scheme; and

The operator and independent entity—QFC schemes Chapter 4 The operator—all QFC schemes Part 4.1

Rule 4.1.2


(iii) a member (however described) of the governing body of

the independent entity or, for a CIC or CIP, the scheme.

Note Governing body is defined in the glossary.

(2) Without limiting subrule (1) (f), the operator is not independent of

another person if—

(a) the operator has at any time during the last 2 years been involved

in material business dealings with the person (otherwise than in

the exercise of their respective functions as the holders of

positions in relation to any scheme); or

(b) the person has a material interest in the operator or the operator

has a material interest in the person.

Note Function is defined in the glossary.

4.1.2 Operator must comply with legal and regulatory requirements—all QFC schemes

(1) The operator of a QFC scheme must comply with every legal and

regulatory requirement applying to the operator—

(a) in relation to the scheme; or

(b) as the operator of a QFC scheme; or

(c) as an authorised firm.

(2) Without limiting subrule (1), the operator must act in accordance with

the following:

(a) these rules;

(b) any regulations under which the QFC scheme is established,

including any law applied by, or that supplements, those

regulations;

(c) the other provisions of the law applying in the QFC in relation

to—

(i) the scheme; or


Rule 4.1.3


(ii) the operator as the operator of a QFC scheme or as an

authorised firm;

(d) the scope of the operator’s authorisation, including any

conditions, restrictions or requirements;

Note Authorisation is defined in the glossary.

(e) the scope of the scheme’s registration, including any conditions,

restrictions or requirements;

(f) the constitutional document;


(g) the latest filed prospectus.

Note Latest filed prospectus is defined the glossary.

4.1.3 Functions of operator generally—all QFC schemes

(1) The operator of a QFC scheme is responsible for managing the

scheme, including all the scheme property.

Note Scheme property is defined in r 1.2.3.

(2) Without limiting subrule (1), the operator of a QFC scheme must—

(a) ensure that decisions about investments and borrowings by the

scheme are made in accordance with the scheme’s investment

objectives, strategies and policy as stated in the constitutional

document and latest filed prospectus; and

Note Borrowing and latest filed prospectus are defined in the glossary.

Constitutional document is defined in r 3.1.1

(b) value the scheme property in accordance with these rules; and

(c) calculate the scheme’s net asset value, net asset value per unit,

and the price of units for issue and redemption, in accordance

with these rules; and

Note Net asset value and net asset value per unit are defined in the

glossary.


Rule 4.1.4


(d) ensure the scheme property is—

(i) clearly identified as scheme property; and

(ii) held separately from the operator’s own property, and the

property of any other scheme; and

(e) give the independent entity instructions about the exercise of

rights in relation to the scheme property; and

(f) not acquire or dispose of immovables without first giving the

independent entity written notice of the acquisition or disposal.

Note The operator also has functions in relation to the scheme under a number

of other provisions of these rules eg see pt 8.2 (Valuation and pricing—

QFC schemes).

4.1.4 Duty of operator to report certain breaches of law—all QFC schemes

(1) This rule applies if—

(a) the operator of a QFC scheme becomes aware that the operator,

the independent entity or any other person has breached, or

suspects on reasonable grounds that the operator, the

independent entity or any other person may have breached or

may be about to breach, in relation to the scheme any provision

of these rules, any other Rules, any other law of the QFC or the

law of any other jurisdiction; and

Note Rules is defined INAP. Breach and jurisdiction are defined in the

glossary.

(b) the breach has had, or is likely to have, a material adverse effect

on the scheme or the interests of unitholders.

(2) The operator must tell the Regulatory Authority about the breach

immediately, but within 1 business day.

Examples—meaning of ‘within 1 business day’

1 If, on a business day, the operator becomes aware of the breach, the operator

must tell the authority about it immediately, but on that day.


Rule 4.1.5


2 If, on a day that is not a business day, the operator becomes aware of the

breach, the operator must tell the authority about it immediately, but by no

later than the next business day.


(3) The operator must give the Regulatory Authority any information

about the breach that the authority reasonably requires.

Note Under GENE, rule 4.1.3, an authorised firm must also advise the

Authority of certain significant events.

4.1.5 Particular duties of operator—all QFC schemes

The operator of a QFC scheme must—

(a) act honestly; and

(b) exercise the degree of care and diligence that a reasonable

person would exercise in the operator’s position; and

(c) act in the best interests of the unitholders and, if there is a

conflict between the unitholders’ interests and its own interests,

give priority to the unitholders’ interests; and

(d) treat unitholders who hold units in the same class equally and

unitholders who hold units in different classes fairly; and


(e) not make improper use of information acquired as a result of

being the operator—

(i) to gain, directly or indirectly, a personal advantage or an

advantage for another person; or

(ii) to cause detriment to the unitholders; and

(f) not make improper use of the position of operator—



(ii) to cause detriment to the unitholders.


Rule 4.1.6


4.1.6 Register of unitholders—all QFC schemes

(1) Subject to subrule (3), the operator of a QFC scheme must ensure that

a register of unitholders is kept as part of the operator’s records under

rule 4.1.7.

(2) The operator must exercise all due diligence and take reasonable care

to ensure that—

(a) the register is accurate, complete and up to date; and

(b) for a qualified investor scheme—only a person who is a

qualified investor for the scheme is recorded in the register.

Note 1 Qualified investor scheme, and qualified investor for a QFC scheme, are

defined in r 1.3.2 and r 1.2.12 (2) respectively.

Note 2 Rule 8.3.1 specifies the information that must be included in the register.

(3) For a QFC scheme that is listed in the Qatar Stock Exchange or in any

other regulated exchange, the records (held in the QCSD’s, or in the

relevant exchange’s, registry or system) of transfers or titles to units

in the scheme is taken to be the unitholder register. A record in the

QCSD’s, or relevant exchange’s, registry or system is conclusive

evidence of title.

4.1.7 Records of operator—all QFC schemes

(1) The operator of a QFC scheme must make the records necessary—

(a) to enable the operator to comply with—

(i) these rules; and

(ii) the other provisions of the law applying in the QFC in

relation to—

(A) the scheme; or

(B) the operator as the operator of a QFC scheme or as an

authorised firm; and


Rule 4.1.7


(b) to demonstrate at all times whether it has complied with these

rules.

(2) If the scheme is a QFC qualified investor scheme and the latest filed

prospectus states that the operator’s policy is to require a dilution

adjustment or dilution levy, the operator must make a record of—

(a) how it calculates and estimates dilution; and

(b) its policy and method for deciding the rate or amount of any

dilution adjustment or dilution levy.

Note Latest filed prospectus, dilution adjustment, dilution levy and dilution

are defined in the glossary.

(3) If the scheme is a QFC retail scheme, the operator must make a record

of—

(a) how it calculates and estimates dilution; and

(b) its policy and method for deciding the rate or amount of any

dilution adjustment or dilution levy.

(4) Subrules (2) and (3) do not limit subrule (1).

(5) The operator must keep records made for this rule for at least 6 years

after the day they are made.

(6) The operator must, at the request of the Regulatory Authority, the

independent entity or the auditor—

(a) make records kept under this rule available for inspection within

a reasonable period of not longer than 3 days; and

(b) provide a copy of any of the records, in the requested form (if

any), within a reasonable period of not longer than 3 days.

(7) The operator must not charge for making records available, or

providing a copy of any records, under subrule (6).

Note GENE, ch 6 also contains provisions about record-keeping.


Rule 4.1.8


4.1.8 Operator must give information etc to independent entity and auditor—all QFC schemes

The operator of a QFC scheme must, on request, immediately give

the independent entity or auditor of the scheme the information and

explanations in relation to the scheme that the independent entity or

auditor reasonably requires.

4.1.9 Maintenance of capital notification—CIC’s

If the capital of a CIC changes so that it falls below the minimum, or

exceeds the maximum, stated in the constitutional document, the

operator must tell the Regulatory Authority about the change

immediately, but within 1 business day after the day the change

happens.

Examples

See examples to rule 4.1.4 (2) on the meaning of ‘within 1 business day’.

Note CIC is defined in r 1.3.7.

Chapter 4 The operator and independent entity—QFC schemes Part 4.2 The independent entity—QFC schemes

Rule 4.2.1


Part 4.2 The independent entity—QFC schemes

Division 4.2.A Independent entity generally—QFC schemes

4.2.1 Requirements for independent entity—all QFC schemes

(1) The independent entity of a QFC scheme must be—

(a) appointed by the operator; and

(b) either—

(i) an authorised firm that—

(A) has an authorisation for providing custody services

and operating collective investment schemes; and

(B) is permitted under the scope of its authorisation to be

the independent entity of the scheme, QFC schemes

of that kind or any QFC scheme; and

(C) is a corporation; or

Note Authorised firm, authorisation, corporation and the

regulated activities mentioned in para (i) (A) are defined in

the glossary.

(ii) a corporation that is not an authorised firm or another QFC

licensed firm if the operator has certified in writing that,

after performing due diligence, it is satisfied that—

(A) the corporation is an appropriate person to be the

independent entity of the scheme; and

(B) the corporation can effectively exercise the

independent entity’s functions under these rules; and

The operator and independent entity—QFC schemes Chapter 4 The independent entity—QFC schemes Part 4.2

Rule 4.2.1


(C) the appointment of the corporation as independent

entity of the scheme is in the interest of participants

and potential participants in the scheme; and

Note QFC licensed firm, exercise and function are defined in the

glossary. Participant is defined in r 1.2.2.

(c) a different person from the operator and, if the scheme is a CIC

or CIP, the scheme; and


(d) independent of—

(i) the operator; and



the operator or, for a CIC or CIP, the scheme; and

Note 1 Governing body is defined in the glossary.

Note 2 See r (4) on the meaning of ‘independent’.

(e) for a CIT—the trustee of the trust.

Note CIT is defined in r 1.3.9.

(2) In deciding whether to give a certificate under subrule (1) (b) (ii) in

relation to a corporation, the operator must consider each of the

following matters:

(a) anything the Regulatory Authority could consider in assessing

the corporation’s fitness and propriety (within the meaning

given by FSR, article 29) if the corporation were an applicant

for an authorisation, including the following:

(i) the corporation’s expertise and market reputation;

(ii) the corporation’s credit rating, capital and financial

resources;

(iii) the corporation’s regulatory status and history;


Rule 4.2.1


(iv) the other members of the corporation’s group and their

activities;

Note Group is defined in the glossary.

(b) the need to ensure that the corporation provides protection for

unitholders at least equivalent to the protection that would be

provided by an independent entity that is an authorised firm;

(c) the regulatory regimes and legal systems (including insolvency

laws) to which the corporation is subject;

(d) the regulatory authorisations (however described) held by the

corporation;

(e) whether the corporation has entered into an agreement with the

operator and, if so, the terms of the agreement;

(f) the corporation’s arrangements for safeguarding the scheme

property and its use of agents and service providers;

(g) the obligations applying to the corporation, and the recourse

available against the corporation by the operator, the Regulatory

Authority and participants, under those regulatory regimes and

legal systems in relation to anything done or not done by the

corporation in relation to the scheme;

(h) whether the corporation has submitted to the jurisdiction of the

Regulatory Authority, the QFC Court or both.

(3) Subrule (2) does not limit the matters the operator may consider.

(4) Without limiting subrule (1) (d), the independent entity is not

independent of another person if—

(a) the independent entity has at any time during the last 2 years

been involved in material business dealings with the person

(otherwise than in the exercise of their respective functions as

holders of positions in relation to a scheme); or

(b) the person has a material interest in the independent entity or the

independent entity has a material interest in the person.


Rule 4.2.2


4.2.2 Independent entity must comply with legal and regulatory requirements—all QFC schemes

(1) The independent entity of a QFC scheme must comply with every

legal and regulatory requirement applying to the independent entity—

(a) in relation to the scheme; or

(b) as the independent entity of a QFC scheme; or

(c) if the independent entity is an authorised firm—as an authorised

firm.

(2) Without limiting subrule (1), the independent entity must act in

accordance with the following:

(a) these rules;

(b) any regulations under which the QFC scheme is established,

including any law applied by, or that supplements, those

regulations;

(c) the other provisions of the law applying in the QFC in relation

to—

(i) the scheme; or

(ii) the independent entity as the independent entity of a QFC

scheme; or

(iii) if the independent entity is an authorised firm—the

independent entity as an authorised firm;

(d) if the independent entity is an authorised firm—the scope of the

independent entity’s authorisation, including any conditions,


Note Authorisation is defined in the glossary.

(e) the scope of the scheme’s registration, including any conditions,


(f) the constitutional document;


Rule 4.2.3


(g) the latest filed prospectus.


4.2.3 Oversight functions of independent entity—all QFC schemes

(1) The independent entity of a QFC scheme must take reasonable care

to ensure that the scheme is managed by the operator in accordance

with—

(a) the following provisions of these rules (as far as they apply to

the scheme):

• part 5.1 (Transactions with affected persons—QFC

schemes)

• rule 5.6.6 (Operator’s reports—QFC qualified investor

schemes)

• rule 5.6.13 (Operator’s reports—QFC retail schemes)

• chapter 6 (Investment and borrowing—QFC qualified

investor schemes)

• chapter 7 (Investment and borrowing—QFC retail schemes)

• part 8.1 (Dealing—QFC schemes)

• part 8.2 (Valuation and pricing—QFC schemes)

• part 8.7 (Accounting periods—QFC schemes)

• part 8.8 (Income allocation and distribution—QFC

schemes); and

(b) the provisions of the constitutional document, and the latest filed

prospectus, that relate to any of the following matters:

(i) transactions with affected persons;

(ii) reports of the operator about the scheme;

(iii) investment and borrowing by the scheme;

(iv) dealing in units;

(v) valuation of the scheme property and pricing of units;


Rule 4.2.4


(vi) income and capital of the scheme, including their

distribution.

(2) Without limiting subrule (1), the independent entity must take

reasonable care to ensure on a continuing basis that—

(a) the operator is adopting appropriate procedures to ensure that

the scheme’s net asset value, and the price per unit in each class,

are calculated for each valuation point in accordance with these

rules; and

(b) the operator has made and kept sufficient records to show that

the scheme’s net asset value, and the price per unit in each class,

have been calculated for each valuation point in accordance with

these rules.

Note Net asset value, class, price and valuation point are defined in the

glossary.

4.2.4 Duty of independent entity to report certain breaches of law etc—all QFC schemes

(1) This rule applies if the independent entity of a QFC scheme becomes

aware that the operator or any other person has breached, or suspects

on reasonable grounds that the operator or any other person may have

breached or may be about to breach, in relation to the scheme any

provision of these rules, any other law of the QFC or the law of any

other jurisdiction.

Note Breach and jurisdiction are defined in the glossary.

(2) The independent entity must immediately tell the operator in writing

about the breach.

(3) Subrule (4) applies if—

(a) the independent entity is of the opinion that the operator has not

taken, or does not propose to take, appropriate action in relation

to the breach; and


Rule 4.2.5


(b) the breach—

(i) is of a provision mentioned in rule 4.2.3 (1) (Oversight

functions of independent entity—all QFC schemes); or

(ii) has had, or is likely to have, a material adverse effect on

the scheme or the interests of unitholders.

(4) If this subrule applies, the independent entity must tell the Regulatory

Authority about the breach immediately, but within 1 business day.

Examples


(5) The independent entity must give the Regulatory Authority any

information about the breach that the authority reasonably requires.

4.2.5 Particular duties of independent entity—all QFC schemes

The independent entity of a QFC scheme must—

(a) act honestly; and

(b) exercise the degree of care and diligence that a reasonable

person would exercise in the independent entity’s position; and

(c) be independent of the operator; and

(d) act as independent entity solely in the interests of the

unitholders; and

(e) treat unitholders who hold units in the same class equally and

unitholders who hold units in different classes fairly; and


(f) not make improper use of information acquired as a result of

being the independent entity—



(ii) to cause detriment to the unitholders; and


Rule 4.2.6


(g) not make improper use of the position of independent entity—



(ii) to cause detriment to the unitholders.

4.2.6 Property safeguarding functions of independent entity—all QFC schemes

(1) The independent entity of a QFC scheme is responsible for

safeguarding all the scheme property.

Note For the exceptions to this rule, see rule 4.2.6 (6).

(2) Without limiting subrule (1), the independent entity must—

(a) ensure that all the scheme property is properly accounted for;

and

(b) ensure that all the scheme property is—

(i) clearly identified as scheme property; and

(ii) held separately from the independent entity’s own

property, the operator’s own property and the property of

any other person; and

(c) take all steps and complete all documents needed to ensure

completion of transactions properly entered into for the scheme;

and

(d) ensure that instructions properly given by the operator about the

exercise of rights in relation to the scheme property are carried

out; and

(e) ensure that any scheme property in registrable form is registered

as soon as practicable in its own name or in the name of its

nominee or delegate, as appropriate; and


Rule 4.2.6


(f) take into its custody or control all documents evidencing title to

the scheme property, other than in relation to derivatives and

forward positions; and

Note Document evidencing title and derivative are defined in the

glossary.

(g) ensure that any resulting benefit of a derivative or forward

transaction is received by it for the scheme property; and

(h) collect, hold and deal with income in relation to the scheme

property.

(3) If the scheme property includes units in any other scheme operated

by the operator or an associate of the operator, the independent entity

must exercise any voting rights given by the units in accordance with

what the independent entity reasonably believes to be in the interest

of the unitholders of the QFC scheme.

Note Associate is defined in the glossary.

(4) If the independent entity is of the opinion that a deal in property in

relation to the scheme breaches these rules or the constitutional

document, the independent entity may require the operator—

(a) to cancel the transaction or make a disposal or acquisition to

restore the previous situation; and

(b) to meet any resulting loss or expense.

Note Deal and breach is defined in the glossary.

(5) If the independent entity is of the opinion that—

(a) an acquisition of property necessarily involves documents

evidencing title being kept in the custody of a person other than

the independent entity; and

(b) the independent entity cannot reasonably be expected to accept

the responsibility that would otherwise be placed on it if it were

to permit custody by the other person;


Rule 4.2.7


the operator must either cancel the transaction or make a

corresponding disposal if the independent entity asks it to take action

under this subrule.

(6) This rule does not apply in relation to an immovable that is part of the

scheme property if:

(a) the operator of the fund has made adequate alternative

arrangements for the immovable in accordance with rule 12.3.1;

or

(b) the fund is a REIT and the operator of the fund holds the

immovable as custodian in accordance with rule 12.6.9.

Note The operator of the fund is responsible for safeguarding an immovable

described in rule 4.2.6 (6).

4.2.7 Records of independent entity—all QFC schemes

(1) The independent entity of a QFC scheme must make the records

necessary—

(a) to enable the independent entity to comply with—

(i) these rules; and

(ii) the other provisions of the law applying in the QFC in

relation to—

(A) the scheme; or

(B) the independent entity as the independent entity of a

QFC scheme or, if the independent entity is an

authorised firm, as an authorised firm; and

(b) to demonstrate at all times whether it has complied with these

rules.

(2) The independent entity must keep records made for this rule for at

least 6 years after the day they are made.


Rule 4.2.8


(3) The independent entity must, at the request of the Regulatory

Authority, operator or auditor—

(a) make records kept under this rule available for inspection within

a reasonable period of not longer than 3 days; and

(b) provide a copy of any of the records, in the requested form (if

any), within a reasonable period of not longer than 3 days.

(4) The independent entity must not charge for making records available,

or providing a copy of any records, under subrule (3).

Note GENE, ch 6 also contains provisions about record-keeping by

independent entities that are authorised firms.

4.2.8 Independent entity must give information etc to operator and auditor—all QFC schemes

The independent entity of a QFC scheme must, on request,

immediately give the operator or auditor of the scheme the

information and explanations in relation to the scheme that the

operator or auditor reasonably requires.

Division 4.2.B Non-QFC independent entities—QFC schemes

4.2.9 Non-QFC independent entities—criteria for Regulatory Authority action

(1) This rule applies in relation to the making of a decision by the

Regulatory Authority under these rules about whether a corporation

that is not an authorised firm or another QFC licensed firm is an

appropriate person to be the independent entity of a QFC scheme (or

a scheme established in the QFC that is proposed to become a QFC

scheme).

Note This rule applies to decisions under the following provisions:

• r 2.1.3 (2) (d) (ii) (Decision on application for registration of scheme

established in QFC)

• r 4.2.13 (2) (a) (Non-QFC independent entities—removal by

Regulatory Authority).


Rule 4.2.10


(2) The Regulatory Authority may consider all or any of the matters

mentioned in rule 4.2.1 (2) (a) to (h) (Requirements for independent


(3) Subrule (2) does not limit the matters the Regulatory Authority may

consider.

4.2.10 Non-QFC independent entities—annual compliance certificate

(1) This rule applies to the independent entity of a QFC scheme if the

independent entity is not an authorised firm.

(2) Not later than 1 February in each year, the independent entity must

give the operator a written certificate about its compliance with the

following provisions in relation to the QFC scheme during the

previous year (the reporting year):

• rule 4.2.3 (Oversight functions of independent entity—all QFC

schemes)

• rule 4.2.6 (Property safeguarding functions of independent


(3) The certificate must—

(a) name the QFC scheme; and

(b) state whether the independent entity complied fully with all

relevant provisions in relation to its functions under rule 4.2.3

and rule 4.2.6 and, if it did not fully comply with all relevant

provisions, the details of any material non-compliance.

Note Function is defined in the glossary.

(3A) If the QFC scheme is a property fund and the exception in

rule 4.2.6 (6) (a) or (b) applies, the certificate must include a

description of the immovable for which the independent entity is not

responsible.


Rule 4.2.11


(4) In this rule:

relevant provisions means the provisions of—

(a) these rules; and

(b) any other law of the QFC applying in relation to the scheme; and

(c) the law of any other jurisdiction (if any) applying in relation to

the scheme.

Note Jurisdiction is defined in the glossary.

4.2.11 Non-QFC independent entities—oversight of property safeguarding functions by operators

(1) This rule applies in relation to the independent entity of a QFC

scheme if the independent entity is not an authorised firm.

(2) The operator must take reasonable care to ensure that the independent

entity exercises its functions under rule 4.2.6 (Property safeguarding

functions of independent entity—all QFC schemes) in accordance

with the provisions of—


(b) any other law of the QFC applying in relation to the scheme; and

(c) the law of any other jurisdiction (if any) applying in relation to

the scheme.

4.2.12 Non-QFC independent entities—removal by operators

(1) This rule applies in relation to the independent entity of a QFC

scheme if—

(a) the independent entity is not an authorised firm; and

(b) the operator considers that the independent entity is not, or is no

longer, an appropriate person to be the independent entity of the

scheme.


Rule 4.2.13


(2) In making a decision for subrule (1) (b), the operator must consider

the matters mentioned in rule 4.2.1 (2) (a) to (h) (Requirements for

independent entity—all QFC schemes).


(4) If this rule applies, the operator must—

(a) by written notice given to the independent entity, remove the

independent entity; and

(b) appoint another person as the independent entity of the scheme.

(5) The person appointed must be eligible to be the independent entity of

the scheme under rule 4.2.1.

(6) If the independent entity is removed under this rule, the operator must

tell the Regulatory Authority about the removal immediately, but

within 1 business day after the day the independent entity is removed.

(7) If another person is appointed as the independent entity under this

rule, the operator must tell the Regulatory Authority about the

appointment immediately, but within 1 business day after the day the

appointment is made.

Examples for r (6) and r (7)


(8) This rule is additional to, and does not limit, part 8.4 (Operator and

independent entity appointment and removal—QFC schemes).

4.2.13 Non-QFC independent entities—removal by Regulatory Authority

(1) The rule applies in relation to the independent entity of a QFC scheme

if the independent entity is not an authorised firm.


Rule 4.2.13


(2) The Regulatory Authority may, by written notice given to the

operator, require the operator to remove the independent entity and

appoint another person as the independent entity if satisfied that—

(a) the independent entity is not, or is no longer, an appropriate

person to be the independent entity of the scheme; or

Note See r 4.2.9 (Non-QFC independent entities—criteria for

Regulatory Authority action)).

(b) it is desirable to remove the independent entity to protect

participants or potential participants in the scheme or the

financial system operating in or from the QFC; or

(c) the independent entity is in breach of, or has been in breach of,

these rules, any other law of the QFC or the law of any other

jurisdiction; or

(d) a request has been received under the Financial Services

Regulations, article 20 (International relations and co-operation)

in relation to the independent entity.

(3) The Regulatory Authority may give a notice under subrule (2) only if

it has—

(a) given the independent entity and the operator prior notice of its

intention to give the notice; and

(b) given the independent entity and the operator a reasonable

opportunity to make representations; and

(c) considered any representations made.

(4) However, subrule (3) does not apply if—

(a) the Regulatory Authority considers that any delay likely to arise

because of the application of the subrule would be prejudicial to

participants or potential participants in the QFC scheme or the

financial system operating in or from the QFC; or

(b) the power is to be exercised following a decision by the

Regulatory Authority under the Financial Services Regulations,

part 9 (Disciplinary and enforcement powers), or by the


Rule 4.2.13


Regulatory Tribunal or the QFC Court, in relation to the

independent entity.

(5) If subrule (4) (a) applies, the Regulatory Authority must—

(a) give the independent entity and the operator an opportunity to

make representations promptly after the notice under subrule (2)

has been given; and

(b) consider any representations made.

(6) If the Regulatory Authority gives a notice under subrule (2), it must

give the independent entity a written notice—

(a) stating that it has given the notice under subrule (2); and

(b) giving reasons for the notice; and

(c) tell the independent entity that the independent entity may

appeal to the Regulatory Tribunal against the decision.

(7) The operator must give effect to a notice under subrule (2).

(8) The person appointed by the operator as the replacement independent

entity must be eligible to be the independent entity of the scheme

under rule 4.2.1 (Requirements for independent entity—all QFC

schemes).

(9) This rule is additional to, and does not limit, any other powers of the

Regulatory Authority to remove the independent entity of a QFC

scheme.

Chapter 4 The operator and independent entity—QFC schemes Part 4.3 Operator and independent entity other provisions—QFC schemes

Rule 4.3.1


Part 4.3 Operator and independent entity other provisions—QFC schemes

4.3.1 Duties of officers etc of operator and independent entity—all QFC schemes

(1) This rule applies to a person who is an officer, employee or agent of

the operator or independent entity of a QFC scheme.

(2) The person must not—

(a) make improper use of information acquired as a result of being

a person to whom this rule applies—



(ii) to cause detriment to unitholders; or

(b) make improper use of the person’s position as a person to whom

this rule applies—



(ii) to cause detriment to unitholders.

4.3.2 Provisions of ch 4 do not limit other functions

(1) This rule applies to a provision of this chapter that gives a function

(however expressed) to the Regulatory Authority, the operator or

independent entity of a QFC scheme or another person.

Note Function is defined in this glossary.

(2) To remove any doubt, the provision is additional to, and does not

limit, any function given to the Regulatory Authority, operator,

independent entity or other person under—

(a) any other provision of these rules; or

(b) any other law of the QFC; or

The operator and independent entity—QFC schemes Chapter 4 Operator and independent entity other provisions—QFC schemes Part 4.3

Rule 4.3.2


(c) for the operator—the constitutional document.

Chapter 5 Investor relations—QFC schemes Part 5.1 Transactions with affected persons—QFC schemes

Rule 5.1.1


Chapter 5 Investor relations—QFC schemes

Part 5.1 Transactions with affected persons—QFC schemes

5.1.1 Who is an affected person for a QFC scheme?

An affected person for a QFC scheme is any of the following:

(a) the operator;

(b) the independent entity;

(c) a member (however described) of the governing body of the

operator, the independent entity or, for a CIC or CIP, the

scheme;

(d) any standing independent valuer of the scheme;

(e) any investment adviser for the scheme;

(f) a person to whom functions of the operator or independent entity

in relation to the scheme are outsourced;

(g) the auditor of the scheme;

(h) any associated person for any person mentioned in

paragraphs (a) to (g);

(i) a unitholder with 5% or more in value of all the units then in

issue.

Note Governing body, standing independent valuer, investment adviser,

function and associated person are defined in the glossary. CIC and CIP

are defined in r 1.3.7 and r 1.3.8 respectively.

Investor relations—QFC schemes Chapter 5 Transactions with affected persons—QFC schemes Part 5.1

Rule 5.1.2


5.1.2 Transactions with affected persons—general rule for all QFC schemes

(1) This rule applies to a transaction by the operator of a QFC scheme in

relation to the scheme property if the transaction is with an affected

person.

(2) The operator must ensure that the transaction—

(a) is on terms at least as favourable to the scheme as any

comparable transaction on normal commercial terms negotiated

at arm’s length with an independent third party; and

(b) does not breach any other provision of this part; and

(c) is not prohibited by the constitutional document or the latest

filed prospectus.

Note Constitutional document is defined in r 3.1.1. Breach and latest

filed prospectus are defined in the glossary.

5.1.3 Transactions with affected persons—prior notice to unitholders of QFC schemes

(1) Subject to subrule (3), this rule applies to a proposed transaction by

the operator of a QFC scheme in relation to the scheme property if

the transaction is with an affected person.

(2) The operator must not enter into the transaction unless the operator

has given the unitholders prior written notice of the transaction (or

transactions that include the transaction), including an explanation of

how rule 5.1.2 has been complied with in relation to the transaction

(or the transactions).

Example of written notice

notice given in the scheme’s latest filed prospectus

(3) This rule does not apply to a REIT if the transaction is for the

acquisition or sale of an immovable in Qatar and all of the conditions

in rule 12.6.10 are satisfied.


Rule 5.1.4


5.1.4 Transactions with affected persons—transactions involving 5% or more of QFC scheme’s net asset value

(1) Subject to subrule (4), this rule applies to a proposed transaction by

the operator of a QFC scheme in relation to the scheme property if—

(a) the transaction is with an affected person; and

(b) the total consideration for, or value of, the transaction (or the

transaction and all earlier such transactions within the last

12 months) is 5% or more of the latest net asset value of the

scheme, as disclosed in the scheme’s latest audited accounts.

Note Net asset value is defined in the glossary.

(2) The operator must not enter into the transaction unless the unitholders

have given prior approval to the transaction at a general meeting in

accordance with the constitutional document. If the scheme is a

property fund, the approval may be by ordinary resolution of the

unitholders.

(3) For subrule (2), the operator must give notice to unitholders of the

results of the voting in relation to the approval. The notice must be

given as soon as practicable after the general meeting.

(4) This rule does not apply to a REIT if the transaction is for the

acquisition or sale of an immovable in Qatar and all of the conditions

in rule 12.6.10 are satisfied.

5.1.5 Transactions with affected persons—details required for QFC scheme’s annual reports

(1) If the operator of a QFC scheme enters into any transaction with an

affected person in relation to the scheme property during an annual

accounting period, the scheme’s annual report, or the scheme’s

annual long and short reports, for the period must include—

(a) a summary of the total value of transactions with affected

persons in relation to the scheme property during the period; and

(b) a summary of the nature of the transactions; and


Rule 5.1.6


(c) a summary of the identities of the affected persons; and

(d) if the unitholders voted at a general meeting held during the

period to approve a transaction with an affected person—details

of the approval and the results of the voting in relation to the

approval; and

(e) a written certificate by the operator stating that each transaction

was in accordance with these rules and the scheme’s


(2) If the operator of a QFC scheme does not enter into a transaction with

an affected person in relation to the scheme property during an annual

accounting period, the scheme’s annual report, or the scheme’s

annual long and short reports, for the period must include a statement

to that effect.

5.1.6 Transactions with affected persons—additional restrictions for QFC retail schemes

(1) The operator of a QFC retail scheme must take reasonable care to

ensure that the following transactions, arrangements or agreements

are not entered into:

(a) the putting of cash on deposit by the scheme with an affected

person, unless that person is an authorised firm or regulated

financial institution and the transaction complies with the arm’s

length requirement in subrule (2);

Note Deposit, authorised firm and regulated financial institution are


(b) the lending of money by an affected person to or for the scheme,

unless the affected person is an authorised firm or regulated

financial institution and the transaction complies with the arm’s

length requirement in subrule (2);


Rule 5.1.6


(c) the dealing in property by an affected person with or in relation

to the scheme (or the independent entity acting for the scheme),

unless subrule (3) applies;

Note Deal is defined in the glossary.

(d) the vesting of property (other than cash) by an affected person

in the scheme (or with the independent entity acting for the

scheme) against the issue of units in the scheme, unless—

(i) subrule (3) applies; or

(ii) the purpose of the vesting is for—

(A) all or part of the property of a corporation or another

collective investment scheme to become the first

property of the QFC retail scheme; and

(B) holders of shares or units in the corporation or other

collective investment scheme to become the first

unitholders in the QFC retail scheme;


(e) the acquisition of scheme property by an affected person from

the scheme (or the independent entity acting for the scheme),

unless subrule (3) applies or the acquisition is otherwise

permitted by the constitutional document or under these rules;

Note See r 8.1.20 (Issue or redemption otherwise than for cash—QFC

retail schemes).

(f) a stock lending arrangement or repo agreement with or in

relation to the scheme, unless the transaction complies with the

arm’s length requirement in subrule (2).

Note Stock lending arrangement and repo agreement are defined in the

glossary.

(2) A transaction mentioned in subrule (1) (a), (b) or (f) must be as

favourable to the scheme as any comparable arrangement on normal

commercial terms negotiated at arm’s length between the affected

person and an independent third party.


Rule 5.1.6


(3) A transaction does not breach subrule (1) (c), (d) or (e) if the

transaction complies with—

(a) subrule (4) (the best execution on-exchange requirement); or

(b) subrule (5) (the independent valuation requirement); or

(c) subrule (6) (the arm’s length transaction requirement).

(4) For subrule (3), the transaction complies with this subrule (the best

execution on-exchange requirement) if—

(a) the property is an approved derivative or approved security; and

Note Approved derivative is defined in r 7.1.8. Approved security is

defined in r 7.1.9.

(b) the transaction is effected under the rules of the relevant market

with or through a person who is bound by those rules; and

(c) there is written evidence of the effecting of the transaction and

its terms; and

(d) the operator has taken all reasonable steps to ensure that the

transaction is effected on the terms that are the best available for

the scheme.

(5) For subrule (3), the transaction complies with this subrule (the

independent valuation requirement) if—

(a) the value of the property is certified in writing for the purpose

of the transaction by a person approved by the independent

entity as—

(i) independent of any affected person; and

(ii) qualified to value property of the relevant kind; and

(b) the independent entity is of the opinion that the terms of the

transaction are not likely to result in any material prejudice to

unitholders.


Rule 5.1.6


(6) For subrule (3), the transaction complies with this subrule (the arm’s

length transaction requirement) if—

(a) the property is not an approved derivative or approved security;

and

(b) it is not reasonably practicable to comply with subrule (5) (the

independent valuation requirement); and

(c) the independent entity has reliable evidence that the transaction

is or will be on terms that comply with the arm’s length

requirement in subrule (2).

Investor relations—QFC schemes Chapter 5 Prospectus requirements—QFC schemes Part 5.2

Rule 5.2.1


Part 5.2 Prospectus requirements—QFC schemes

5.2.1 Prospectus to be drawn up—all QFC schemes

The operator of a QFC scheme must ensure that a prospectus is drawn

up for the scheme in accordance with these rules.

Note Prospectus is defined in the glossary.

5.2.2 Prospectus etc to be made available—all QFC schemes

(1) The operator of a QFC scheme must make available free of charge

the latest filed prospectus, and the latest filed translation of the

prospectus in each language for which there is a translation prepared

by or for the operator, to any person eligible to invest in the scheme

before the person buys units (or additional units) in the scheme.

Note Latest filed prospectus and latest filed translation are defined in the

glossary.

(2) The operator of a UCITS type scheme must, on the request of a

unitholder of the scheme, give the unitholder the following

information supplementary to the information provided by the latest

filed prospectus:

(a) the quantitative limits applying to the risk management of the

scheme;

(b) the methods used in relation to risk management;

(c) any recent developments in relation to the risk and yield of the

main categories of investment.

Note UCITS type scheme is defined in r 1.3.5.

Chapter 5 Investor relations—QFC schemes Part 5.2 Prospectus requirements—QFC schemes

Rule 5.2.3


5.2.3 General information requirements for prospectus—all QFC schemes

(1) The operator of a QFC scheme must ensure that the scheme’s

prospectus at all times contains all the information that investors and

their professional advisers would reasonably require, and reasonably

expect to have drawn to their attention, in the prospectus for the

purpose of making an informed judgment about—

(a) the merits and risks of participating in the scheme; and

(b) the extent and characteristics of the risks accepted by

participating in the scheme.

(2) The operator must ensure that at all times the prospectus contains a

clear and easily understandable explanation of any risks that

investment in the scheme may reasonably be regarded as presenting

to investors in the scheme.

(3) Without limiting subrules (1) and (2), the operator must ensure that

at all times the prospectus includes the information, statements and

provisions required for the QFC scheme by—

(a) if the scheme is a qualified investor scheme—Schedule 3

(Prospectus content—QFC qualified investor schemes);

(b) if the scheme is a retail scheme other than a REIT—Schedule 4

(Prospectus content—QFC retail schemes); and

(c) if the scheme is a REIT—Schedule 5 (Prospectus content—

REITs).

5.2.4 Other general requirements for prospectus—all QFC schemes

(1) The operator of a QFC scheme must ensure that any prospectus for

the scheme—

(a) is in English; and

(b) presents information about the scheme clearly and fairly; and


Rule 5.2.5


(c) does not contain any untrue or misleading statement; and

(d) otherwise complies with these rules.

(2) Subrule (1) (a) does not prevent the operator preparing, or arranging

for the preparation of, a translation of the prospectus in any other

language.

(3) However, the operator must ensure that any translation of a

prospectus prepared by or for the operator—

(a) presents information about the scheme clearly and fairly; and

(b) does not contain any untrue or misleading statement; and

(c) is otherwise a correct translation; and

(d) prominently displays the date of the translation; and

(e) states that it is a translation authorised by the operator; and

(f) otherwise complies with these rules.

5.2.5 Prospectus, checklist and any translations to be filed with registration application—all QFC schemes

(1) The person who is to become the operator of a collective investment

scheme established in the QFC must file with the application for

registration of the scheme under these rules—

(a) the original prospectus for the scheme; and

(b) a checklist prepared by the person listing all the statements and

information required by these rules and indicating where they

are in the original prospectus; and

(c) each translation of the original prospectus that has been prepared

by or for the person; and

(d) for each translation mentioned in paragraph (c)—a certificate by

the person who made the translation stating that the translation

is a correct translation of the original prospectus.


Rule 5.2.6


(2) If the person mentioned in subrule (1) (either before or after becoming

the initial operator of the scheme), or a person who is a later operator

of the scheme, prepares another translation of the original prospectus

or has another translation prepared, the person must immediately, but

within 1 business day after the day the translation is prepared, file

with the Regulatory Authority—

(a) the translation; and

(b) a certificate by the person who made the translation stating that

the translation is a correct translation of the original prospectus.

Examples


(3) The certificate of a person under subrule (1) (d) or (2) (b) must state,

in English, the person’s—

(a) full name and address; and

(b) qualifications for making the translation.

5.2.6 Revisions of prospectus etc—all QFC schemes

(1) The operator of a QFC scheme must keep the latest filed prospectus

under review.

(2) If the operator becomes aware of the happening of any fundamental

change affecting a statement or information required to be included

in the prospectus, the operator must—

(a) immediately revise the prospectus and immediately file a

revised or supplementary prospectus with the Regulatory

Authority; and

(b) if a translation of the latest filed prospectus has been filed with

the authority in a particular language—the operator must

immediately prepare, or arrange for the preparation of, a

translation of the revised or supplementary prospectus in that

language and immediately file the translation with the authority.

Note For what constitutes fundamental change, see definition in glossary and

rule 5.4.2.


Rule 5.2.6


(3) Without limiting subrules (1) and (2), the operator must, at least once

every year—

(a) review the latest filed prospectus, make any revisions necessary

and, whether or not revisions are necessary, immediately file a

prospectus or revised prospectus with the Regulatory Authority;

and

(b) if a translation of the latest filed prospectus has been filed with

the authority in a particular language—file with any revised or

supplementary prospectus filed under paragraph (a) a translation

of that prospectus in the same language.

(4) To remove any doubt, subrules (2) and (3) do not prevent the

operator—

(a) revising the latest filed prospectus at any other time; or

(b) preparing, or arranging for the preparation of, a translation or

revised translation of the latest filed prospectus in any language.

(5) If the operator revises the latest filed prospectus otherwise than under

subrule (2) or (3), the operator must immediately file a revised or

supplementary prospectus with the Regulatory Authority.

(6) If the operator prepares, or arranges for the preparation of, a

translation or revised translation of the latest filed prospectus

otherwise than under subrule (2) or (3), the operator must

immediately file the translation with the Regulatory Authority.

(7) A prospectus filed under this rule must be accompanied by a checklist

prepared by the operator listing all the statements and information

required by these rules and indicating where they are in the

prospectus.

(8) A translation of a prospectus filed under this rule must be

accompanied by a certificate signed by the person who made the

translation stating that the translation is a correct translation of the

prospectus.


Rule 5.2.6


(9) The certificate of a person under subrule (8) must state, in English,

the person’s—

(a) full name and address; and

(b) qualifications for making the translation.

(10) If, under this rule, the operator is required to do something

immediately, the operator must do the thing immediately, but within

1 business day after the day the requirement to do the thing arises.

Examples


Investor relations—QFC schemes Chapter 5 Prospectus responsibility—QFC schemes Part 5.3

Rule 5.3.1


Part 5.3 Prospectus responsibility—QFC schemes

5.3.1 Persons responsible for prospectus—all QFC schemes

(1) Each of the following persons is responsible for a QFC scheme’s

prospectus:

(a) the operator;

(b) each member (however described) of the governing body of the

operator;


(c) subject to subrules (2) and (3), each person who has accepted,

and is stated in the prospectus to have accepted, responsibility

for the prospectus or any part of it;

(d) subject to subrules (2) and (3), each person who is taken under

rule 5.3.2 (Responsibility for expert statements in prospectus—

all QFC schemes) to have accepted responsibility for part of the

prospectus;

(e) subject to subrules (2) and (3), each person not mentioned in

paragraphs (a) to (d) who has authorised, and is stated in the

prospectus to have authorised, the prospectus or any part of it.

(2) If a person accepts (or is taken under rule 5.3.2 to have accepted)

responsibility for, or authorises, only part of a prospectus, the person

is responsible only for that part of the prospectus.

(3) However, the person is responsible for that part of the prospectus only

if it is included in, or substantially in, the form and context in which

the person accepted responsibility for it, consented to its inclusion or

authorised it.

(4) This rule does not make a person responsible for a prospectus only

because the person gave advice about its contents, in a professional

capacity, to a person mentioned in subrule (1) (a) to (e).

Chapter 5 Investor relations—QFC schemes Part 5.3 Prospectus responsibility—QFC schemes

Rule 5.3.2


5.3.2 Responsibility for expert statements in prospectus—all QFC schemes

(1) For this rule, an expert is a person whose profession or reputation

gives authority to statements made by the person.

(2) For rule 5.3.1 (1) (d), an expert is taken to have accepted

responsibility for a part of a QFC scheme’s prospectus if—

(a) the part is a statement made by, or is based on a statement made

by, the expert; and

(b) the expert gave the operator written consent for the statement to

be included in the prospectus; and

(c) the prospectus states that the expert authorised the statement;

and

(d) the expert does not withdraw the consent, by written notice

given to the operator, before the prospectus is filed with the

Regulatory Authority.

(3) The operator must keep the following for at least 6 years after the day

the prospectus is last made available to a person eligible to invest in

the scheme:

(a) the expert’s consent;

(b) any written notice given to the operator withdrawing the

expert’s consent.

5.3.3 Liability for prospectus—all QFC schemes

(1) A person responsible under rule 5.3.1 (Persons responsible for

prospectus—all QFC schemes) for a prospectus is liable to pay

compensation to another person who acquires (or contracts to

acquire) units in the scheme for any loss or damage arising from—

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

(b) the omission from the prospectus of any matter required by these

rules to have been included in it.


Rule 5.3.4


(2) However, if rule 5.3.1 (1) (c), (d) or (e) applies to the person, the

person is only liable to pay compensation in relation to a part of the

prospectus for which the person is responsible under rule 5.3.1 (2)

and (3).

(3) Also, this rule is subject to rule 5.3.4.

(4) To remove any doubt, this rule does not limit any liability that exists

apart from this rule.

(5) In this rule:

prospectus includes a translation of the prospectus prepared by or for

the operator.

5.3.4 Exceptions from liability for prospectus—all QFC schemes

(1) A person (other than the operator) is not liable under rule 5.3.3 to pay

compensation, in relation to a statement in, or omission from, a QFC

scheme’s prospectus, to another person who acquires units in the

scheme if—

(a) at the time the prospectus was filed with the Regulatory

Authority, the person believed on reasonable grounds, after

having made all inquiries that were reasonable—

(i) that the statement was true and not misleading; or

(ii) that the omitted matter was properly omitted; and

Note See defs acquire and prospectus in r (6).

(b) 1 or more of the following subparagraphs apply:

(i) the person continued in that belief until the units were

acquired;

(ii) the units were acquired before it was reasonably

practicable to bring a correction to the attention of potential

purchasers of the units;

Chapter 5 Investor relations—QFC schemes Part 5.3 Prospectus responsibility—QFC schemes

Rule 5.3.4


(iii) before the units were acquired, the person had already

taken all reasonable steps to ensure that a correction was

brought to the attention of potential purchasers of the units;

(iv) the person who acquired the units was not materially

influenced or affected by the statement or omission in

making the decision to invest.

(2) A person (the first person) is not liable under rule 5.3.3 to pay

compensation, in relation to a statement in a QFC scheme’s

prospectus, to another person who acquired units in the scheme if—

(a) the statement is a part of the prospectus for which a third person

(the expert) is taken, under rule 5.3.2 (Responsibility for expert

statements in prospectus—all QFC schemes), to have accepted

responsibility; and

(b) at the time the prospectus was filed with the Regulatory

Authority, the first person believed on reasonable grounds, after

having made all inquiries that were reasonable—

(i) that the expert was competent to make the statement; and

(ii) that the expert gave the operator written consent to include

the statement in the prospectus; and

(iii) that the expert had not withdrawn the consent; and

(iv) that the statement was included in, or substantially in, the

form and context in which the expert consented to its

inclusion; and

(c) 1 or more of the following subparagraphs apply:

(i) the first person continued in that belief until the units were

acquired;

(ii) the units were acquired before it was reasonably

practicable to bring a correction to the attention of potential

purchasers of the units;


Rule 5.3.4


(iii) before the units were acquired, the first person had already

taken all reasonable steps to ensure that a correction was

brought to the attention of potential purchasers of the units;

(iv) the person who acquired the units was not materially

influenced by the statement in making the decision to

invest.

(3) For the application of subrule (1) (b) (iii) or (2) (c) (iii) in relation to

a person, it is sufficient if, before the units were acquired—

(a) the correction had been published in a way likely to bring it to

the attention of potential purchasers of the units; or

(b) the person took all reasonable steps to ensure that such a

correction was published and believed on reasonable grounds

the correction had been published.

(4) A person is not liable under rule 5.3.3 to pay compensation, in relation

to a statement in or omission from a QFC scheme’s prospectus, to

another person who acquired units in the scheme if the other person

knew, at the time of acquisition, that the statement was untrue or

misleading or of the omission.

(5) For this rule—

(a) a revised or supplementary prospectus is taken to be a different

prospectus from the original prospectus; and

(b) each revised or supplementary prospectus filed with the

Regulatory Authority is taken to be a different prospectus from

each other revised or supplementary prospectus filed with the

authority.

(6) In this rule:

acquire units includes contract to acquire them.

prospectus includes a translation of the prospectus prepared by or for

the operator.

Chapter 5 Investor relations—QFC schemes Part 5.4 Unitholder approvals and notice—QFC schemes

Rule 5.4.1


Part 5.4 Unitholder approvals and notice—QFC schemes

Division 5.4.A Unitholder approvals and notice—QFC qualified investor schemes

5.4.1 Changes requiring unitholder approval or notice—QFC qualified investor schemes

(1) Any proposed change or event that would reasonably be considered a

fundamental change in relation to a QFC qualified investor scheme

requires the prior approval of an ordinary resolution of the

unitholders.

(2) Any proposed change or event that would not reasonably be

considered a fundamental change in relation to a QFC qualified

investor scheme, but that would reasonably be considered a

significant change, requires the giving of reasonable notice to

unitholders to become effective.

(3) If a change mentioned in subrule (1) or (2) affects only a particular

subscheme or class of units, it is sufficient to comply with the subrule

only in relation to unitholders of the subscheme or class of units.

(4) For subrule (3), the provisions of these rules apply in relation to the

change as if—

(a) a reference to unitholders of the scheme were a reference to the

unitholders of the subscheme or class of units; and

(b) all other necessary changes were made.

(5) The operator of a QFC qualified investor scheme must ensure this

rule is complied with in relation to the scheme.

(6) If a fundamental change in relation to a QFC qualified investor

scheme happens, the operator must give the Regulatory Authority

Investor relations—QFC schemes Chapter 5 Unitholder approvals and notice—QFC schemes Part 5.4

Rule 5.4.2


written notice of the change not later than 21 days after the day the

change happens.

Note For what constitutes fundamental change, see definition in glossary and

rule 5.4.2.

Division 5.4.B Unitholder approvals and notice—QFC retail schemes

5.4.2 Fundamental changes requiring prior approval by unitholder meeting—QFC retail schemes

(1) The operator of a QFC retail scheme must, by way of a special

resolution, obtain prior approval from the unitholders for any

proposed change or event in relation to the scheme that is a

fundamental change.

Note Special resolution is defined in the glossary.

(2) For this rule, a fundamental change is a change or event—

(a) that changes the purpose or nature of the scheme; or

(b) that may materially prejudice a unitholder; or

(c) that changes the risk profile of the scheme; or

(d) that introduces any new type of payment out of scheme property.

Guidance on fundamental changes

1 Any change or event may be fundamental depending on its degree of

materiality and effect on the scheme and its unitholders. Consequently, the

operator will need to decide in each case whether a particular change is

fundamental in nature.

2 For rule 5.4.2 (2) (a) to (c), a fundamental change is likely to include any of

the following:

(a) any proposal for a scheme of arrangement;

(b) a change in the investment objectives, strategies or policy to achieve

capital growth from investment in one jurisdiction rather than another

jurisdiction;

Chapter 5 Investor relations—QFC schemes Part 5.4 Unitholder approvals and notice—QFC schemes

Rule 5.4.3


(c) a change in the investment objectives, strategies or policy to achieve

capital growth from investments in fixed interest rather than investments

in equity;

(d) a change in the investment objectives, strategies or policy to allow the

scheme to invest in derivatives as an investment strategy that increases

its volatility;

(e) a change to the characteristics of the scheme to distribute income

annually rather than monthly.

5.4.3 Significant changes requiring pre-event notification—QFC retail schemes

(1) The operator of a QFC retail scheme must give prior written notice of

not less than 60 days to unitholders of any proposed change or event

in relation to the scheme that is a significant change.

(2) For this rule, a significant change is a change or event that is not a

fundamental change under rule 5.4.2, but—

(a) affects a unitholder’s ability to exercise rights in relation to the

unitholder’s investment; or

(b) would reasonably be expected to cause the unitholder to

reconsider participation in the scheme; or

(c) results in any increased payments out of the scheme property to

the operator or an associated person for the operator; or

Note Associated person is defined in the glossary.

(d) materially increases other types of payments out of scheme

property.

Guidance on significant changes

1 Any change or event may be significant depending on its degree of materiality

and effect on the scheme and its unitholders. Consequently, the operator will

need to decide in each case whether a particular change is significant in nature.

2 For rule 5.4.3, a significant change is likely to include any of the following:

(a) a change in how the scheme property is valued;

(b) a change in the method of price publication;

(c) a change in the operator’s operational policy (for example, allocation of

payments policy).

Investor relations—QFC schemes Chapter 5 Unitholder approvals and notice—QFC schemes Part 5.4

Rule 5.4.4


5.4.4 Notifiable changes—QFC retail schemes

(1) The operator of a QFC retail scheme must notify unitholders in an

appropriate way, and within a reasonable time, of any change or event

in relation to the scheme that is a notifiable change.

(2) For this rule, a notifiable change is a change or event, other than a

fundamental change under rule 5.4.2 or a significant change under

rule 5.4.3, that is reasonably likely to affect, or has affected, the

scheme or its operation unless the operator decides that the change or

event is insignificant.

Guidance on notifiable changes

1 The circumstances causing a notifiable change may or may not be within the

control of the operator.

2 For rule 5.4.4, a notifiable change is likely to include any of the following:

(a) a change of named investment manager if the scheme has been marketed

on the basis of the manager’s involvement;

(b) a change of named investment adviser if the scheme has been marketed

on the basis of the adviser’s involvement;

(c) a significant political event that affects the scheme or its operation;

(d) a change on the time of the valuation point;

(e) a change of independent entity;

(f) a change in the scheme’s name.

3 The appropriate way and reasonable time for notification would depend on the

nature of the change or event. Consequently, the operator will need to assess

each change or event individually.

4 An appropriate way for notification could include any or all the following:

(a) sending a notice to unitholders;

(b) publishing the information on a website;

(c) including the information in the next annual report of the scheme.

Chapter 5 Investor relations—QFC schemes Part 5.5 Unitholder meetings—QFC schemes

Rule 5.5.1


Part 5.5 Unitholder meetings—QFC schemes

Division 5.5.A Unitholder meetings—QFC qualified investor schemes

5.5.1 Unitholder meetings—QFC qualified investor schemes

(1) The constitutional document of a QFC qualified investor scheme

must set out details of the procedures for the calling and conducting

of meetings, and for resolutions, of unitholders.

(2) The procedures must be reasonable and fair as between the parties.

(3) The operator must record minutes of all proceedings to which

rule 5.4.1 (Changes requiring unitholder approval or notice—QFC

qualified investor schemes) or this rule apply.

(4) The operator must keep the minutes for at least for 6 years after the

day they are made.

Division 5.5.B Unitholder meetings—QFC retail schemes

5.5.2 Special meaning of unitholder in div 5.5.B—QFC retail schemes

(1) A reference in this division to a unitholder of a QFC retail scheme in

relation to a meeting is a reference to a unitholder of the scheme as at

a cut-off date for the meeting selected by—

(a) if the independent entity calls the meeting—the independent

entity; and

(b) in any other case—the operator.

(2) The date selected by the independent entity or operator must be a

reasonable time before notices of the meeting are sent out.

Investor relations—QFC schemes Chapter 5 Unitholder meetings—QFC schemes Part 5.5

Rule 5.5.3


5.5.3 Application of div 5.5.B to class meetings—QFC retail schemes

(1) This division applies to a class meeting for a class of units in a QFC

retail scheme as if—

(a) a reference to a general meeting of the scheme were a reference

to the class meeting; and

(b) a reference to units were a reference to units in the class; and

(c) a reference to unitholders were a reference to unitholders of

units in the class; and

(d) a reference to prices of units were a reference to prices of units

in the class; and

(e) all other necessary changes were made.


(2) In this rule:

class meeting, for a class of units in the scheme, means a separate

meeting of unitholders of that class of units.

5.5.4 General meetings of unitholders—QFC retail schemes

(1) The operator or independent entity of a QFC retail scheme may call

a general meeting of unitholders at any time.

(2) The unitholders may, at any time, request the calling of a general

meeting of unitholders.

(3) The request must—

(a) state the object of the meeting; and

(b) be dated; and

(c) be signed by unitholders who, at that date, are registered as the

unitholders of units representing not less than the required

percentage in value of all the units then in issue; and


Rule 5.5.5


(d) be given to the operator or independent entity.

(4) If the operator or independent entity is given a request for a general

meeting of unitholders that complies with subrule (3), the operator or

independent entity must immediately call a general meeting.

(5) The date fixed for the general meeting called under subrule (4) must

not be later than 8 weeks after the day the request is given to the

operator or independent entity.

(6) In this rule:

required percentage means—

(a) 10%; or

(b) if the constitutional document provides for a lower percentage—

that percentage.

5.5.5 Notice of general meetings of unitholders—QFC retail schemes

(1) This rule applies if the operator or independent entity of a QFC retail

scheme (the initiating entity) decides to call a general meeting to

unitholders.

(2) The initiating entity must give unitholders notice of the meeting.

(3) The notice must—

(a) be given to each unitholder at least 14 days before the date fixed

for the meeting; and

(b) state the place, date and time of the meeting; and

(c) state the terms of the resolutions to be proposed.

Note Rule 5.5.10 (3) also requires a notice to contain a reasonably prominent

statement that a unitholder may appoint a proxy if the unitholder is

entitled to attend and vote.

(4) If the meeting is adjourned, the initiating entity must give unitholders

notice of the adjourned (or further adjourned) meeting.


Rule 5.5.6


(5) Notice of an adjourned meeting (including a further adjourned

meeting) must—

(a) be given to each unitholder at least 14 days before the date of

the adjourned meeting; and

(b) state the place, date and time of the adjourned meeting; and

(c) state that, although 2 unitholders present in person or by proxy

are required for a quorum at the adjourned meeting, this may be

reduced to 1 if a quorum is not present after a reasonable time

from the time fixed for the start of the meeting.

Note See r 5.5.6 (Quorum for unitholder meetings—QFC retail

schemes).

(6) In working out the 14-day period for subrule (3) (a) or (5) (a), the day

the notice is given and the day of the meeting are included.

(7) If the operator is the initiating entity, the operator must give a copy

of each notice under subrule (2) or (4) to the independent entity not

later than the start of the 14-day period mentioned in subrule (3) (a)

or (5) (a).

(8) If the independent entity is the initiating entity, the independent entity

must give a copy of each notice under subrule (2) or (4) to the operator

not later than the start of the 14-day period mentioned in subrule (3)

(a) or (5) (a).

(9) The accidental failure to give notice to, or the non-receipt of notice

by, any unitholder does not invalidate the proceedings at any meeting.

5.5.6 Quorum for unitholder meetings—QFC retail schemes

(1) The quorum required to conduct business at a meeting of unitholders

of a QFC retail scheme is 2 unitholders, present in person or by proxy.

(2) If a quorum is not present after a reasonable time from the time fixed

for the start of the meeting, the meeting—

(a) if called at the request of unitholders—must be dissolved; and


Rule 5.5.7


(b) in any other case—must be adjourned to—

(i) a day and time that is at least 7 days after the day and time

of the meeting; and

(ii) a place to be appointed by the chair of the meeting.

(3) If, at an adjourned meeting under subrule (2) (b), a quorum is not

present after a reasonable time from the time fixed for the start of the

meeting, a single person who is entitled to be counted in a quorum,

and is present at the meeting, is taken to be a quorum.

5.5.7 Resolutions at unitholder meetings—QFC retail schemes

(1) Unless a special resolution is required or permitted by these rules, any

resolution of unitholders of a QFC retail scheme is passed by a simple

majority of the votes validly cast at a general meeting of unitholders.


(2) But, if the votes are equal, the chair of the meeting is entitled to a

casting vote.

(3) If a resolution (including a special resolution) is required to conduct

business at a meeting of unitholders, and every unitholder is

prohibited under rule 5.5.8 from voting—

(a) it is not necessary to call a meeting of unitholders; and

(b) a resolution may, with the prior written agreement of the

independent entity, instead be passed with the written consent of

the unitholders representing 50% or more (or, for a special

resolution, 75% or more) of the units in issue.

5.5.8 Voting rights at unitholder meetings—QFC retail schemes

(1) On a show of hands at a general meeting of unitholders of a QFC

retail scheme, every unitholder of the scheme who is present in person

has 1 vote.


Rule 5.5.8


(2) On a poll, the following provisions apply:

(a) votes may be given in person, by proxy or in another way

permitted by the constitutional document;

(b) the voting rights for each unit are calculated in accordance with

the following formula:

where:

A is the total number of the voting rights given by all the units

in issue at the cut-off date selected by the operator under rule

5.5.2 (Special meaning of unitholder in div 5.5.B—QFC retail

schemes).

B is the price of the unit.

C is the total of the prices of all the units in issue at the cut-off

date selected by the operator under rule 5.5.2;

Note See r (6) for the treatment of the operator’s units.

(c) a unitholder need not use all the unitholder’s votes or cast all the

unitholder’s votes in the same way.

Note Price and issue are defined in the glossary.

(3) For joint unitholders, the vote of the most senior unitholder who

votes, whether in person or by proxy, must be accepted to the

exclusion of the votes of the other joint unitholders. For this purpose

seniority is decided by the order in which the names are recorded in

the unitholder register.

(4) The operator cannot be counted in the quorum of any meeting of the

scheme, and neither the operator nor any associate of the operator

may vote at any meeting of the scheme.


C

BA


Rule 5.5.9


(5) The prohibition in subrule (4) against voting at any meeting of the

scheme does not apply in relation to units held on behalf of, or jointly,

with a person if—

(a) the person would be entitled to vote if the person were the

registered unitholder; and

(b) the operator or associate of the operator has received voting

instructions from the person.

(6) For this division, units held, or treated as held, by the operator must

not be taken to be in issue unless subrule (5) applies to them.

5.5.9 Right to demand poll at unitholder meetings—QFC retail schemes

(1) A resolution put to the vote at a general meeting of unitholders of a

QFC retail scheme must be decided on a show of hands unless a poll

is demanded by—

(a) the chair of the meeting; or

(b) at least 2 unitholders; or

(c) the independent entity.

(2) The poll may be demanded only before or on the declaration of the

result of the show of hands.

(3) Unless a poll is demanded in accordance with this rule, a declaration

by the chair of the meeting about the result of a resolution is

conclusive evidence of the result.

5.5.10 Proxies at unitholder meetings—QFC retail schemes

(1) A unitholder of a QFC retail scheme may appoint another person to

attend a general meeting of unitholders of the scheme and vote in the

unitholder’s place.

(2) Unless the constitutional document provides otherwise, a unitholder

of a QFC retail scheme may appoint more than 1 proxy to attend on

the same occasion but a proxy may vote only on a poll.


Rule 5.5.11


(3) Every notice calling a meeting of unitholders of a QFC retail scheme

must contain a reasonably prominent statement that a unitholder may

appoint a proxy if the unitholder is entitled to attend and vote.

(4) Any document relating to the appointment of a proxy must not be

required to be received more than 48 hours before the time fixed for

the start of the meeting or adjourned meeting.

5.5.11 Chair, adjournment and minutes of unitholder meetings—QFC retail schemes

(1) A meeting of unitholders of a QFC retail scheme must have a chair

for the meeting who is nominated by the independent entity.

(2) If the chair is not present after a reasonable time from the time fixed

for the start of the meeting, the unitholders present must choose a

unitholder present to be the chair of the meeting.

(3) The chair of the meeting may adjourn the meeting from time to time,

and from place to place, if a quorum is present at the meeting and the

meeting agrees.

(4) The chair of the meeting must adjourn the meeting from time to time,

and from place to place, if directed to do so by the meeting.

(5) Business must not be transacted at any adjourned meeting unless it

could have been lawfully transacted at the original meeting.

(6) The operator must ensure that—

(a) minutes of all resolutions and proceedings at every meeting of

unitholders are made and kept for at least 6 years after the day

of the meeting; and

(b) any minute under paragraph (a) is signed by the chair of the

meeting.

(7) Any minute mentioned in subrule (6) (b) is conclusive evidence of

the matters stated in it.

Chapter 5 Investor relations—QFC schemes Part 5.6 Reports, accounts and auditors—QFC schemes

Rule 5.6.1


Part 5.6 Reports, accounts and auditors—QFC schemes

Division 5.6.A Accounting standards and auditors—all QFC schemes

5.6.1 Accounting standards—all QFC schemes

(1) The operator of a QFC scheme must prepare and keep the scheme’s

financial accounts and statements in accordance with IFRS,

US GAAP or other accounting standards approved in writing by the

Regulatory Authority.

(1A) If the operator decides to prepare and keep the financial accounts and

statements in accordance with a standard other than the one it has

previously used, it must notify the authority in writing before

beginning to do so.

(2) If the scheme is an Islamic fund, the operator must prepare and keep

all financial accounts and statements in accordance with the

accounting standards of AAOIFI FAS 14.

Note Islamic fund is defined in r 1.3.11. AAOIFI is defined in the glossary.

(3) If the operator of an umbrella scheme operates 1 or more subschemes

that are Islamic funds, it must prepare and keep all financial accounts

and statements in accordance with IFRS, as supplemented by AAOIFI

FAS 14.

Note 1 Umbrella scheme and subscheme are defined in r 1.2.11.

Note 2 AAOIFI FAS 14 sets out the accounting rules for conventional

institutions that offer Islamic financial services.

(4) In this rule:

IFRS means International Financial Reporting Standards.

US GAAP means generally accepted accounting principles in the

United States of America.

Investor relations—QFC schemes Chapter 5 Reports, accounts and auditors—QFC schemes Part 5.6

Rule 5.6.2


5.6.2 Appointment and removal of auditors etc—all QFC schemes

(1) The operator of a QFC scheme must ensure that there is an auditor of

the scheme at all times, and that the auditor is a QFC approved

auditor.

(2) The operator of a QFC scheme may, from time to time, appoint a QFC

approved auditor as auditor of the scheme.

(3) The audit fees of the auditor are as decided by the operator.

(4) The operator may remove the auditor at any time.

(5) The operator may exercise a power under subrule (2), (3) or (4) only

with the independent entity’s approval.

(6) The power under subrule (4) has effect despite anything in any

agreement between the auditor and all or any of the following:

(a) the operator;


(c) the scheme.

(7) GENE, section 9.7 (Auditors) applies to the appointment and removal

of the auditor of the QFC scheme as if the scheme were an authorised

firm.

Note Authorised firm is defined in the glossary.


Rule 5.6.3


Division 5.6.B Reports and accounts—QFC qualified investor schemes

5.6.3 Reports and accounts generally—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must prepare a

report for each annual accounting period and half-yearly accounting

period in accordance with this division.

Note Annual accounting period and half-yearly accounting period are


(2) However if the first annual accounting period is less than 12 months,

a half-yearly report need not be prepared for that period.

(3) A report for an annual accounting period must be prepared within

4 months after the day the period ends, and a report for a half-yearly

accounting period must be prepared within 3 months after the day the

period ends.

(4) The operator must give a copy of an annual or half-yearly report free

of charge to any unitholder on request.

(5) If a person eligible to invest in the scheme asks for a copy of the latest

annual or half-yearly report, the operator must give a copy free of

charge to the person before any sale (or further sale) of units to the

person is concluded.

(6) The operator must give a copy of each annual and half-yearly report

to the Regulatory Authority within 21 days after the day the report is

prepared.

(7) If the scheme is an umbrella scheme, any annual report given to a

unitholder or other person under subrule (4) or (5) may be a report

prepared under rule 5.6.4 (3) for the relevant subscheme.

(8) However, the operator must also give the unitholder or other person

a copy of the annual report prepared under rule 5.6.4 (2) for the

scheme as a whole if the unitholder or other person asks for it.


Rule 5.6.4


5.6.4 Contents of annual reports—QFC qualified investor schemes

(1) An annual report for a QFC qualified investor scheme other than a

QFC umbrella scheme must contain the following:

(a) the full audited accounts for the annual accounting period;

(b) the operator’s report for the period in accordance with rule 5.6.6

(Operator’s reports—QFC qualified investor schemes);

(c) the independent entity’s report for the period in accordance with

rule 5.6.7 (Independent entity’s reports—QFC qualified

investor schemes);

(d) the auditor’s report for the period in accordance with rule 5.6.8

(Auditor’s reports—QFC qualified investor schemes).

Note See also r 5.1.5 (Transactions with affected persons—details required for

QFC scheme’s annual reports).

(2) An annual report for a QFC qualified investor scheme that is an

umbrella scheme must be prepared for the scheme as a whole and

must contain the following:

(a) for each subscheme—the full audited accounts for the

subscheme for the annual accounting period and the operator’s

report for the subscheme for the period in accordance with

rule 5.6.6;

(b) an aggregation of all the accounts required by paragraph (a);

(c) the independent entity’s report for the scheme for the period in

accordance with rule 5.6.7;

(d) the auditor’s report for the scheme for the period in accordance

with rule 5.6.8.

(3) If the scheme is an umbrella scheme, the operator may, in addition to

complying with subrule (2), prepare a further annual report for any 1

or more individual subschemes.


Rule 5.6.5


(4) A report under subrule (3) for a subscheme must contain the

following:

(a) the full audited accounts for the subscheme for the annual

accounting period;

(b) the operator’s report for the subscheme for the period in





with rule 5.6.8.

(5) The operator of a QFC qualified investor scheme must ensure that the

accounts mentioned in subrule (1) (a), (2) (a) and (4) (a) give a true

and fair view of—

(a) the net income and the net gains and losses on the scheme

property of the scheme (or subscheme) for the annual

accounting period; and

(b) the financial position of the scheme (or subscheme) as at the end

of the period.

5.6.5 Contents of half-yearly reports—QFC qualified investor schemes

(1) A half-yearly report for a QFC qualified investor scheme, or a

subscheme of a QFC umbrella scheme, must contain—

(a) the full accounts for the half-yearly accounting period; and

(b) the operator’s report for the period in accordance with rule 5.6.6.

(2) If the scheme is an umbrella scheme, the operator may choose

whether the half-yearly report is prepared for the scheme as a whole,

each individual subscheme, or both.


Rule 5.6.6


5.6.6 Operator’s reports—QFC qualified investor schemes

A report of the operator of a QFC qualified investor scheme for a

period must include the following:

(a) a review of the investment activities of the scheme (or

subscheme) during the period against the prospectus applying to

the period;

(b) particulars of any fundamental or significant change in relation

to the scheme (or subscheme) since the date of the operator’s

last report;

(c) any other information that would enable unitholders to make an

informed judgment on the development of the activities of the

scheme (or subscheme) during the period and the results of those

activities as at the end of the period.

5.6.7 Independent entity’s reports—QFC qualified investor schemes

(1) The independent entity of a QFC qualified investor scheme must

make an annual report to the unitholders.

(2) The report for an annual accounting period must include the

following:

(a) a description, which may be in summary form, of the functions

of the independent entity under these rules;

(b) a statement whether, in any material respect, the provisions

mentioned in rule 4.2.3 (1) (Oversight functions of independent

entity—all QFC schemes) have not been complied with during

the period;

(c) a statement whether, in any material respect, the investment and

borrowing powers and restrictions applying to the scheme have

been exceeded during the period.

(3) The independent entity must give the report to the operator for

inclusion in the annual report prepared under rule 5.6.3 (Reports and


Rule 5.6.8


accounts generally—QFC qualified investor schemes) for the annual

accounting period.

5.6.8 Auditor’s reports—QFC qualified investor schemes

The operator of a QFC qualified investor scheme must ensure that the

report of the auditor to the unitholders for an annual accounting

period includes the following statements:

(a) whether, in the auditor’s opinion, the accounts have been

properly prepared in accordance with these rules and the

constitutional document;

(b) whether, in the auditor’s opinion, the accounts give a true and

fair view of—

(i) the net income and the net gains or losses of the scheme

property for the period; and

(ii) the financial position of the scheme as at the end of the

period;

(c) whether the auditor is of the opinion that proper accounting

records for the scheme have been kept and whether the accounts

are in agreement with the accounting records;

(d) whether the auditor has been given all the information and

explanations that, to the best of the auditor’s knowledge and

belief, are necessary for the purposes of the audit;

(e) whether the auditor is of the opinion that the information given

in the operator’s report for the period is consistent with the

accounts.


Rule 5.6.9


Division 5.6.C Reports and accounts—QFC retail schemes

5.6.9 Preparation of long and short reports—QFC retail schemes

(1) The operator of a QFC retail scheme must prepare:

(a) a long report for each annual accounting period; and

(b) a short report for each half-yearly accounting period that does

not end at the end of an annual accounting period.

(2) The long report and short report must be prepared in accordance with

this Division.

Note Annual accounting period and half-yearly accounting period are


(3) For a QFC retail scheme that is an umbrella scheme, the operator must

prepare a short report for each subscheme but need not prepare a short

report for the QFC retail scheme as a whole.

5.6.10 Contents of short reports—QFC retail schemes

(1) The short report for a QFC retail scheme (or, for a QFC retail scheme

that is an umbrella scheme, a subscheme) for a period must contain

the following for the period:

(a) the name of the scheme (or subscheme), its investment

objectives, strategies and policy, a brief assessment of its risk

profile, and the name and address of the operator;

(b) a review of the scheme’s (or subscheme’s) investment activities

and investment performance during the period;

(c) a performance record consistent with rule 5.6.14 (Comparative

tables—QFC retail schemes) that enables a unitholder to put into

context the results of the investment activities of the scheme (or

subscheme) during the period;


Rule 5.6.10


(d) sufficient information to enable unitholders to form a view of

where the portfolio is invested at the end of the period and the

extent to which that has changed over the period;

(e) any other significant information that would reasonably enable

unitholders to make an informed judgment on the activities of

the scheme (or subscheme) during the period and the results of

those activities at the end of the period;

(f) a statement that the latest long report is available on request.



(2) Without limiting subrule (1) (d) and (e), the short report must include

the following for the relevant period:

(a) particulars of any change or event in relation to the scheme

during the period that is a fundamental change under rule 5.4.2

(Fundamental changes requiring prior approval by unitholder

meeting—QFC retail schemes);

(b) particulars of any change or event in relation to the scheme

during the period that is a significant change under rule 5.4.3

(Significant changes requiring pre-event notification—QFC

retail schemes), if the change or event affects the unitholders’

ability to make an informed judgment on the activities of the

scheme (or subscheme);

(c) particulars of any other developments in relation to the

investment objectives, strategies and policy of the scheme (or

subscheme) or the instruments used by it during the period;

(d) the total expense ratio;

(e) particulars of any qualification of the reports of the auditor and

independent entity;

(f) particulars of any income or distribution relating to the period.


Rule 5.6.11


(3) The operator must take reasonable steps to ensure that the short report

is structured and written in such a way that it can be easily understood

by the average investor.

(4) The short report must be in the form of a separate stand-alone

document and must not include any extraneous material.

Note Document is defined in the glossary.

(5) The inclusion in a single document of the short reports of 2 or more

QFC retail schemes with the same operator (or 2 or more subschemes

of a QFC retail scheme that is an umbrella scheme) does not breach

subrule (4) if each of the reports is discrete and easily identifiable.

(6) The operator must ensure that the information given in the short

report is consistent with the long report for the relevant accounting

period prepared under rule 5.6.11 (Contents of annual long reports—

QFC retail schemes) or rule 5.6.12 (Contents of half-yearly long

report—QFC retail schemes).

5.6.11 Contents of annual long reports—QFC retail schemes

(1) An annual long report for a QFC retail scheme other than an umbrella

scheme must contain the following:

(a) the full audited accounts for the annual accounting period;

(b) the operator’s report for the period in accordance with rule

5.6.13 (Operator’s reports—QFC retail schemes);

(c) the comparative table for the period in accordance with rule

5.6.14 (Comparative tables—QFC retail schemes);

(d) the independent entity’s report for the period in accordance with

rule 5.6.15 (Independent entity’s reports—QFC retail schemes);

(e) the auditor’s report for the period in accordance with rule 5.6.16

(Auditor’s reports—QFC retail schemes).




Rule 5.6.11


(2) An annual long report for a QFC retail scheme that is an umbrella

scheme must be prepared for the scheme as a whole and must contain

the following:

(a) for each subscheme—the following:

(i) the full audited accounts for the subscheme for the annual

accounting period;

(ii) the operator’s report for the subscheme for the period in


(iii) the comparative table for the subscheme for the period in


(b) the aggregation of all the accounts required by paragraph (a) (i);




with rule 5.6.16.

(3) If the scheme is an umbrella scheme, the operator may, in addition to

complying with subrule (2), prepare a further annual long report for

any 1 or more individual subschemes of the scheme.

(4) A report under subrule (3) for a subscheme must contain the

following:

(a) the full accounts for the subscheme for the annual accounting

period;

(b) the operator’s report for the subscheme for the period in


(c) the comparative table for the subscheme for the period in


(d) the independent entity’s report for the scheme for the period in



Rule 5.6.12


(e) the auditor’s report for the scheme for the period in accordance

with rule 5.6.16.

(5) The operator of a QFC retail scheme must ensure that the accounts

mentioned in subrule (1) (a), (2) (a) (i) and (4) (a) give a true and fair

view of—

(a) the net income and the net gains and losses on the scheme

property of the scheme (or subscheme) for the annual

accounting period; and

(b) the financial position of the scheme (or subscheme) as at the end

of the period.

5.6.12 Contents of half-yearly long reports—QFC retail schemes

(1) A half-yearly long report for a QFC retail scheme that is not an

umbrella scheme must contain—

(a) the full accounts for the half-yearly accounting period; and

(b) the operator’s report for the period in accordance with rule

5.6.13 (Operator’s reports—QFC retail schemes).

(2) A half-yearly long report for a QFC retail scheme that is an umbrella

scheme must be prepared for the scheme as a whole and must contain

the following:

(a) for each subscheme—the following:

(i) the full accounts for the subscheme for the half-yearly

accounting period;

(ii) the operator’s report for the subscheme for the period in


(b) the aggregation of all the accounts required by paragraph (a) (i).

(3) The operator of a QFC retail scheme that is an umbrella scheme may,

in addition to complying with subrule (2), prepare a further half-

yearly long report for any 1 or more individual subschemes.


Rule 5.6.13


(4) A report under subrule (3) for a subscheme must contain the full

accounts, and the operator’s report, that would be required by subrule

(1) if the subscheme were a separate QFC retail scheme.

5.6.13 Operator’s reports—QFC retail schemes

A report of the operator of a QFC retail scheme must include the

following:

(a) the names and addresses of the following:

(i) the operator;

(ii) the independent entity;

(iii) any investment adviser;

(iv) the auditor;

(b) for a CIC—the names of the directors of the CIC;

(c) for a CIP—the name of the general partner of the CIP;

(d) a statement that the scheme is registered under these rules;

(e) a statement that the unitholders are not liable for—

(i) the debts or other liabilities of the scheme; or

(ii) acts or omissions of the operator or independent entity;

(f) the scheme’s investment objectives, strategies and policy;

(g) a review of the investment activities during the period to which

the report relates;

(h) particulars of any change or event in relation to the scheme

during the period that is a fundamental change under rule 5.4.2

(Fundamental changes requiring prior approval by unitholder

meeting—QFC retail schemes);

(i) particulars of any change or event in relation to the scheme

during the period that is a significant change under rule 5.4.3

(Significant changes requiring pre-event notification—QFC


Rule 5.6.13


retail schemes), if the change or event affects the unitholders’

ability to make an informed judgment on the activities of the

scheme (or subscheme);

(j) for a scheme that invests a substantial part of the scheme

property in other schemes—a statement of the maximum

proportion of management fees charged to the scheme itself and

to other schemes in which it invests;

(k) any other information that would enable unitholders to make an

informed judgment on the development of the scheme’s

activities during the period and the results of the schemes

activities as at the end of that period;

(l) for a report on an umbrella scheme prepared in accordance with

rule 5.6.11 (2) (Contents of annual long reports—QFC retail

schemes) or rule 5.6.12 (2) (Contents of half-yearly long

reports—QFC retail schemes)—

(i) for a CIC—a statement to the effect that, as a subscheme is

not a legal entity, if the assets attributable to any

subscheme were insufficient to meet the liabilities

attributable to it, the shortfall might have to be met out of

the assets attributable to 1 or more other subschemes of the

CIC; and

(ii) for each subscheme—the information mentioned in

paragraphs (a) to (j) if it would differ from the information

given for the umbrella scheme as a whole;

(m) for a report on an individual subscheme of an umbrella scheme

prepared in accordance with rule 5.6.11 (3) or rule 5.6.12 (3)—

(i) for a CIC—a statement corresponding to that required by

paragraph (l) (i) making it clear that, if the liability relates

to another subscheme of the umbrella scheme, the shortfall

(or any part of it) might have to be met out of the assets of

the subscheme to which the report relates; and


Rule 5.6.14


(ii) a statement that the latest long report prepared for the

scheme as a whole is available on request.

5.6.14 Comparative tables—QFC retail schemes

(1) The comparative table required by rule 5.6.11 (1) (c) or (4) (c)

(Contents of annual long reports—QFC retail schemes) must set out

the following:

(a) a performance record over the last 5 years (or, if the scheme has

not been in existence for 5 years, the years in which it has been

in existence) showing—

(i) the highest and the lowest price of a unit in each class in

issue during each of those years;

(ii) the net income distributed (or, for accumulation units,

allocated) for a unit in each class in issue during each of

those years, taking into account any subdivision or

consolidation of units that happened during those years;

Note Year and accumulation unit are defined in the glossary.

(b) as at the end of the last 3 annual accounting periods (or, if the

scheme has had less than 3 annual accounting periods, all of the

scheme’s annual accounting periods), the following:

(i) the net asset value;

(ii) the net asset value per unit;

(iii) the number of units in issue of each class;

(iv) the price per unit in each class.

Note Net asset value, net asset value per unit and price are defined in

the glossary.

(2) If, in the period covered by the table—

(a) the scheme has been the subject of a change or event (for

example, a scheme of arrangement) having a material effect on


Rule 5.6.15


the size of the scheme, but excluding any issue or redemption of

units for cash; or

Note Scheme of arrangement is defined in the glossary.

(b) there have been changes in the scheme’s investment objectives,

strategies or policy;

the table must include an indication, related in the body of the table

to the relevant year in the table, of the date of the change or event and

a brief description of its nature.

5.6.15 Independent entity’s reports—QFC retail schemes

(1) The independent entity of a QFC retail scheme must make an annual

report to the unitholders.

(2) The report for an annual accounting period must include the

following:

(a) a description, which may be in summary form, of the functions

of the independent entity under these rules;

(b) a statement whether, in any material respect, any of the

following matters have not been carried out during the period in

accordance with these rules or, if applicable, the constitutional

document:

(i) the sale, issue and redemption of units;

(ii) the calculation of the price of units;

(iii) the application of the scheme’s income;

(c) a statement whether, in any material respect, the investment and

borrowing powers and restrictions applying to the scheme have

been exceeded during the period.


Rule 5.6.16


5.6.16 Auditor’s reports—QFC retail schemes

The operator of a QFC retail scheme must ensure that the report of

the auditor to the unitholders for an annual accounting period includes

the following statements:

(a) whether, in the auditor’s opinion, the accounts have been

properly prepared in accordance with these rules and the


(b) whether, in the auditor’s opinion, the accounts give a true and

fair view of—

(i) the net revenue, and the net capital gains or losses on the

scheme property, for the period; and

(ii) the financial position of the scheme as at the end of the

period;

(c) whether the auditor is of the opinion that proper accounting

records for the scheme have been kept and whether the accounts

are in agreement with those records;

(d) whether the auditor has been given all the information and

explanations that, to the best of the auditor’s knowledge and

belief, are necessary for the purpose of the audit;

(e) whether the auditor is of the opinion that the information given

in the operator’s report for the period is consistent with the

accounts.

5.6.17 Provision of short reports—QFC retail schemes

(1) Within 4 months after the end of each annual accounting period and

within 3 months after the end of each half-yearly accounting period,

the operator of a QFC retail scheme must send a copy of the short

report for the period prepared in accordance with rule 5.6.10

(Contents of short reports—QFC retail schemes) to—

(a) each unitholder (or to the first named of joint unitholders)

entered in or entitled to be entered in the unitholder register at


Rule 5.6.18


the close of business on the last day of the accounting period;

and

(b) any other person on request.

Note Annual accounting period, half-yearly accounting period and month


(2) Unitholders of a QFC retail scheme that is an umbrella scheme must

be sent a short report for the relevant period for the particular

subscheme in which they hold units.

(3) However, a unitholder of a subscheme must also be provided with the

long report for the period for the umbrella scheme on request.

(4) A report provided under this rule must be provided free of charge.

5.6.18 Publication and availability of annual and half-yearly long reports—QFC retail schemes

(1) Within 4 months after the end of each annual accounting period and

3 months after the end of each half-yearly accounting period, the

operator of a QFC retail scheme must publish and make available the

long report for the period prepared in accordance with rule 5.6.11

(Contents of annual long reports—QFC retail schemes) or rule 5.6.12

(Contents of half-yearly long reports—QFC retail schemes).

Note Annual accounting period, half-yearly accounting period and month


(2) The long report must—

(a) be given free of charge to any person on request; and

(b) be available in English, and any other language in which they

have been published, for inspection by the public free of charge

during ordinary office hours at a place in the QFC; and

(c) be given to the Regulatory Authority as soon as it is available,

but within the relevant period mentioned in subrule (1).

Chapter 6 Investment and borrowing—QFC qualified investor schemes Part 6.1 Investment and borrowing generally—QFC qualified investor

schemes

Rule 6.1.1


Chapter 6 Investment and borrowing—QFC qualified investor schemes

Part 6.1 Investment and borrowing generally—QFC qualified investor schemes

6.1.1 General duties of operator in relation to investment and borrowing—QFC qualified investor schemes


scheme property is not invested or used in breach of this chapter.

Note Breach is defined in the glossary.

(2) If the operator becomes aware of a breach of this chapter, the operator

must take action to rectify the breach at its own expense.

(3) The operator must take action under subrule (2) immediately unless

subrule (4) applies.

(4) If the operator believes on reasonable grounds that taking action

under subrule (2) immediately would not be in the best interests of

the unitholders, the operator must take the action as soon as it is in

the interests of unitholders to do so.

6.1.2 Investment powers generally—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must ensure that

investments included in the scheme property are investments to which

the scheme is dedicated.

Note Investment and dedicated are defined in the glossary.

(2) Subrule (1) is subject to the other provisions of this chapter.

Investment and borrowing—QFC qualified investor schemes Chapter 6 Investment and borrowing generally—QFC qualified investor

schemes Part 6.1

Rule 6.1.3


(3) The constitutional document and the latest filed prospectus may

further restrict—

(a) the kinds of property in which the scheme property may be

invested; and

(b) the kinds of transactions permitted by the scheme and any

relevant limits.

(4) Subrule (3) does not limit the further restrictions that the

constitutional document and latest filed prospectus may impose on

investment by the scheme or on the use of the scheme property.

(5) The operator must ensure that any further restrictions are complied

with.

6.1.3 Permissible investments generally—QFC qualified investor schemes

(1) The scheme property of a QFC qualified investor scheme must be

invested only in 1 or more of the following:

(a) specified products;

(b) immovables;

(c) gold, silver, platinum and palladium;

(d) commodity contracts traded on an eligible exchange.

(2) This rule is subject to the other provisions of this chapter.

6.1.4 Spread of risk—QFC qualified investor schemes

The operator of a QFC qualified investor scheme must take

reasonable steps to ensure that the scheme property provides a spread

of risk, taking into account the scheme’s investment objectives,

strategies and policy as stated in the constitutional document and the

latest filed prospectus, and, in particular, any investment objective

Chapter 6 Investment and borrowing—QFC qualified investor schemes Part 6.1 Investment and borrowing generally—QFC qualified investor

schemes

Rule 6.1.5


about return to the unitholders (whether from capital appreciation,

income or both).

Note Constitutional document is defined in r 3.1.1 and latest filed prospectus

is defined in the glossary.

6.1.5 Investments by money-market funds—QFC qualified investor schemes

(1) A QFC qualified investor scheme that is a money-market fund must

comply with its primary investment objective, and the investment

restrictions, mentioned in schedule 2 (Constitutional document

content—QFC schemes), rule S2.33 (Primary investment objective

etc—QFC money-market funds).

Note Money-market fund is defined in r 1.3.12.

(2) For the investment restrictions, an approved money-market

instrument is a high-quality approved money-market instrument if—

(a) it has been rated by at least 1 rating agency; and

(b) it has been awarded the highest available credit rating by each

rating agency that has rated it.

Note Approved money-market instrument is defined in r 7.1.5. Rating agency

is defined in INAP.

(3) If an approved money-market instrument forms part of the scheme

property of a QFC qualified investor scheme that is a money-market

fund, the operator must monitor the instrument to ensure that it

continues to be of high quality, taking into account both its credit risk

and its final maturity.

(4) A QFC qualified investor scheme that is a money-market fund must

provide liquidity through same day or next day settlement.

(5) The weighted average maturity of its investments must not exceed

60 days.

Investment and borrowing—QFC qualified investor schemes Chapter 6 Investment and borrowing generally—QFC qualified investor

schemes Part 6.1

Rule 6.1.6


6.1.6 Application of ch 6 to umbrella schemes—QFC qualified investor schemes

(1) This chapter applies to each subscheme of a QFC qualified investor

scheme that is an umbrella scheme as if it were a separate QFC

qualified investor scheme.

Note Subscheme and umbrella scheme are defined in r 1.2.11.

(2) However, a subscheme of an umbrella scheme must not invest in

another subscheme of the same umbrella scheme.

Chapter 6 Investment and borrowing—QFC qualified investor schemes Part 6.2 Particular kinds of investments and transactions—QFC qualified

investor schemes

Rule 6.2.1


Part 6.2 Particular kinds of investments and transactions—QFC qualified investor schemes

Division 6.2.A Collective investments schemes—QFC qualified investor schemes

6.2.1 Investments in schemes—QFC qualified investor schemes


scheme invests in units in a collective investment scheme (the second

scheme) only if—

(a) the second scheme is a QFC scheme; or

(b) the second scheme is a non-QFC scheme, but the operator has

taken reasonable care to decide that the second scheme meets all

the following requirements:

(i) it is subject to an independent annual audit conducted in

accordance with international accounting standards;

(ii) it has its value verified by a person independent of the

scheme’s operator in relation to each day on which dealing

in the scheme’s units may take place;

(iii) there are mechanisms in place to enable unitholders of the

scheme to redeem their units within a reasonable time;

(iv) it is prohibited from having more than 15% of its value in

units in schemes;

(v) it operates in accordance with the principle of risk

spreading.

(2) If the second scheme is an umbrella scheme, subrule (1) applies to

each subscheme as if it were a separate scheme.

Investment and borrowing—QFC qualified investor schemes Chapter 6 Particular kinds of investments and transactions—QFC qualified

investor schemes Part 6.2

Rule 6.2.2


Division 6.2.B Derivatives, forward transactions and commodity contracts—QFC qualified investor schemes

6.2.2 Delivery of property under transactions in derivatives etc—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must take

reasonable care to decide the following when entering into any

transaction in derivatives, or any commodity contract, that may result

in any asset becoming part of the scheme property:

(a) if it is an asset in which the scheme property could be invested—

that the transaction—

(i) can be readily closed out; or

(ii) would, at the expected time of delivery, relate to an asset

that could be included in the scheme property under this

chapter;

(b) in any other case—that the transaction can be readily closed out.

Note Derivative, commodity and close out are defined in the glossary.

(2) If the operator makes a decision under subrule (1) in relation to an

asset that proves to be incorrect, the operator may nevertheless

acquire the asset for the scheme if the operator decides on reasonable

grounds that the acquisition is in the interest of the unitholders.

(3) An asset acquired under subrule (2) may form part of the scheme

property until the position can be rectified.

(4) Subrule (3) applies despite any other provision of this chapter.

6.2.3 Valuation of OTC derivatives—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must ensure that a

transaction by the scheme in an OTC derivative can be valued.


investor schemes

Rule 6.2.4


Note OTC derivative is defined in the glossary.

(2) For subrule (1), the transaction can be valued only if the operator

having taken reasonable care decides that, if the transaction were to

be entered into, the operator could value the investment throughout

the life of the OTC derivative with reasonable accuracy—

(a) on the basis of an up-to-date market value that the operator and

independent entity have agreed is reliable; or

(b) if such a value is not available—on the basis of a pricing model

that the operator and independent entity have agreed uses an

adequate recognised methodology.

6.2.4 Cover for transactions in derivatives and forward transactions—QFC qualified investor schemes

(1) A transaction in derivatives or a forward transaction may be entered

into by the operator of a QFC qualified investor scheme only if the

maximum exposure, in terms of the principal or notional principal

created by the transaction to which the scheme is or may be

committed by another person, is covered globally under subrule (2).

Note Derivative, principal and notional principal are defined in the glossary.

(2) Exposure is covered globally if adequate cover from within the

scheme property is available to meet the scheme’s total exposure

taking into account any reasonably foreseeable market movement.

(3) The total exposure relating to derivatives held in the scheme property

must not at any time exceed the scheme’s net asset value.


(4) No element of cover may be used more than once.



Rule 6.2.5


6.2.5 Continuing nature of limits and requirements for derivatives and forward positions—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must, as frequently

as necessary to ensure compliance with rule 6.2.4 (Cover for

transactions in derivatives and forward transactions—QFC qualified

investor schemes), re-calculate the amount of cover required in

relation to derivatives and forward positions.

(2) Derivatives and forward positions may be kept in the scheme property

only so long as they remain covered globally under rule 6.2.4 (2).

(3) The operator must use a risk management process to monitor and

measure as frequently as appropriate the risk of the scheme’s

derivatives and forward positions and their contribution to the

scheme’s overall risk profile.

Division 6.2.C Immovables—QFC qualified investor schemes

6.2.6 Standing independent valuer—QFC qualified investor schemes

A QFC qualified investor scheme that holds, or proposes to hold,

immovables as part of the scheme property must at all times have a

valuer of the scheme (the standing independent valuer).

6.2.7 Requirements for making investments in immovables—QFC qualified investor schemes


scheme does not invest in an immovable to be held as part of the

scheme property unless all the following requirements are met:

(a) the immovable must be located in a jurisdiction identified in the

latest filed prospectus;


investor schemes

Rule 6.2.7


(b) the operator must have taken reasonable care to decide that the

title to the interest to be acquired in the immovable is a good

marketable title;

(c) the standing independent valuer has valued the interest and the

operator and independent entity have received a report on the

valuation that states either—

(i) that, in the valuer’s opinion, the interest in the immovable

could, if acquired by the scheme, be disposed of reasonably

quickly at the valuation stated in the report; or

(ii) that—

(A) the immovable is adjacent to or in the vicinity of

another immovable already included in the scheme

property; and

(B) in the valuer’s opinion, the total value of the interests

in the immovables would at least equal the total of the

price payable for the interest in the immovable and

the existing value of the interest in the other

immovable.

Note See r 6.2.10 (Reports on valuation of immovables before

acquisition or disposal—QFC qualified investor schemes).

(2) However, a report of the standing independent valuer must not be

relied on to acquire the interest in the immovable if—

(a) the interest is not acquired, or agreed by enforceable contract to

be acquired, within 3 months after the date of the report; or

(b) it is (or should reasonably be) apparent to the operator that the

standing independent valuer’s report cannot, or can no longer,

reasonably be relied on; or

(c) the price of the interest is, or becomes, more than 105% of the

valuation of the interest stated in the report.



Rule 6.2.8


6.2.8 Investments in non-Qatari immovables through intermediate holding vehicles—QFC qualified investor schemes

(1) An immovable located outside Qatar may be held by a QFC qualified

investor scheme through an intermediate holding vehicle, or a series

of intermediate holding vehicles, if—

(a) the purpose of the vehicle, or each of the vehicles, is to enable

the scheme to hold immovables located outside Qatar; and

(b) the vehicle, or each of the vehicles, is wholly owned by the

scheme, or by another intermediate holding vehicle or series of

intermediate holding vehicles wholly owned by the scheme,

unless and to the extent that the law of the jurisdiction where the

immovable is located requires local ownership; and

(c) the vehicle, or each of the vehicles, undertakes the purchase, sale

and management of immovables on behalf of the scheme in

accordance with the scheme’s investment objectives, strategies

and policy; and

(d) the interests of the unitholders are otherwise adequately

protected.

Note Intermediate holding vehicle is defined in the glossary.

(2) Any investment in an intermediate holding vehicle for the purpose of

holding an immovable located outside Qatar must be treated for this

chapter as if it were a direct investment in the immovable.

(3) The operator of a QFC qualified investor scheme may, by the use of

inter-company debt, transfer capital and income between the scheme

and an intermediate holding vehicle of the scheme if—

(a) the purpose of the transfer is for investment in immovables

located outside Qatar or repatriation of income generated by

such an investment; and


investor schemes

Rule 6.2.9


(b) a record of inter-company debt is kept to provide an accurate

audit trail; and

(c) interest paid out on the debt instruments that gave rise to the

inter-company debt is equivalent to the net rental income earned

from the immovables less the intermediate holding vehicle’s

reasonable running costs (including tax).

(4) If practicable, an intermediate holding vehicle of a QFC qualified

investor scheme must have the same auditor and accounting reference

date as the scheme.

(5) The accounts of any intermediate holding vehicle of a QFC qualified

investor scheme must be consolidated into the annual and half-yearly

reports of the scheme.

6.2.9 Additional requirements for immovables—QFC qualified investor schemes

(1) The operator must ensure that the following requirements are

complied with in relation to interests in immovables held as part of

the scheme property of a QFC qualified investor scheme:

(a) the amount secured by mortgages over any immovable must not

exceed 100% of the latest valuation of the scheme’s interest in

the immovable stated in a report by the scheme’s standing

independent valuer;

(b) no option may be granted to a person to buy or obtain an interest

in any immovable if this might unduly prejudice the ability to

provide redemption;

(c) the total of all premiums paid for options to purchase interests

in immovables must not exceed 10% of the value of the scheme

property in any 12-month period, calculated at the date of the

granting of the option;



Rule 6.2.10


(d) an interest in an immovable must not be disposed of unless—

(i) the standing independent valuer has valued the interest;

and

(ii) the operator and independent entity have received a report

on the valuation;

Note See r 6.2.10 (Reports on valuation of immovables before

acquisition or disposal—QFC qualified investor schemes).

(e) each immovable must be adequately protected by appropriate

insurance that is sufficient to cover its reinstatement.


relied on under subrule (1) (d) to dispose of an interest in an

immovable if the interest is not disposed of, or agreed by enforceable

contract to be disposed of, within 3 months after the date of the report.

6.2.10 Reports on valuation of immovables before acquisition or disposal—QFC qualified investor schemes

(1) This rule applies to a report by the standing independent valuer of a

QFC qualified investor scheme in relation to the proposed acquisition

or disposal for the scheme of an interest in an immovable.

Note See the following provisions:

• r 6.2.7 (2) (c) (Requirements for making investments in

immovables—QFC qualified investor schemes)

• r 6.2.9 (1) (d) (Additional requirements for immovables—QFC

qualified investor schemes).

(2) The report must—

(a) include a brief description of the immovable, including—

(i) its location and existing use; and

(ii) the nature of the interest the scheme is proposed to acquire,

or dispose of, in the immovable; and


investor schemes

Rule 6.2.11


(iii) any encumbrances affecting the immovable; and

(iv) whether the immovable is leased and, if leased, the terms

of the lease and its expiry; and

(v) the capital value of the immovable at the date of valuation;

and

(vi) the net monthly income (if any) from the immovable; and

(vii) any other matters that may affect the immovable or the

value of the interest; and

(b) include all material details about the basis of valuation and the

assumptions used; and

(c) describe and explain the valuation methods used; and

(d) if more than 1 valuation method is available—explain the

reasons for choosing a particular method; and

(e) outline the structure and condition of the relevant market,

including an analysis of the supply and demand situation, the

market trend, and investment activities; and

(f) confirm the professional status of the standing independent

valuer and that the report is prepared on a fair and unbiased

basis; and

(g) be dated as at the date the valuation is made.

6.2.11 Valuation of immovables part of scheme property—QFC qualified investor schemes

(1) The following provisions apply in relation to the valuation of interests

in immovables held as part of the scheme property of a QFC qualified

investor scheme:

(a) the operator must ensure that the standing independent valuer—

(i) values, at least once a year, all the interests in immovables

held as part of the scheme property, on the basis of a full



Rule 6.2.11


valuation with physical inspection (including, if the

immovable is or includes a building, internal inspection of

the building); and

(ii) gives the operator and independent entity a report on the

valuation;

(b) for paragraph (a), any inspection in relation to adjacent

properties of a similar nature and value may be limited to the

inspection of only a single representative property;

(c) the operator must also ensure that the standing independent

valuer—

(i) values, at least once a month, all the interests in

immovables held as part of the scheme property, on the

basis of a review of the last full valuation (unless the valuer

decides that the valuation of an interest in an immovable

should be conducted on the basis mentioned in paragraph

(a)); and


valuation;

Note Month is defined in the glossary.

(d) if the operator or independent entity becomes aware of any

matter that appears likely—

(i) to affect the valuation of an interest in an immovable; or

(ii) to cause the standing independent valuer to decide to value

on the basis mentioned in paragraph (a) instead of on the

basis mentioned in paragraph (c);

it must immediately tell the standing independent valuer about

the matter;

(e) the operator must use its best endeavours to ensure that any other

affected person immediately tells the standing independent


investor schemes

Rule 6.2.12


valuer if the affected person becomes aware of a matter

mentioned in paragraph (d).

Note Affected person is defined in r 5.1.1.

(2) The valuation of an interest in an immovable under this rule has effect

for these rules until the next valuation of the interest under this rule.

6.2.12 Annual and other periodic valuation reports—QFC qualified investor schemes

(1) This rule applies to a report by the standing independent valuer of a

QFC qualified investor scheme under rule 6.2.11 (Valuation of

immovables part of scheme property—QFC qualified investor

schemes).

(2) The report must—

(a) include a brief description of each immovable in which the

scheme holds an interest, including—

(i) its location and existing use; and

(ii) the nature of the interest the scheme holds in the

immovable; and

(iii) any encumbrances affecting the immovable; and


of the lease and its expiry; and


and


(vii) any other matters that may affect the immovable or the

value of the interest; and

(b) include all material details about the basis of valuation and the

assumptions used; and

(c) describe and explain the valuation methods used; and



Rule 6.2.13


(d) if more than 1 valuation method is available—explain the

reasons for choosing a particular method; and

(e) outline the structure and condition of the relevant market,


market trend, and investment activities; and

(f) confirm the professional status of the standing independent

valuer and that the report is prepared on a fair and unbiased

basis; and

(g) be dated as at the date the valuation is made.

6.2.13 Basis of valuation by standing independent valuer—QFC qualified investor schemes

(1) Any valuation of an interest in an immovable by the standing

independent valuer of a QFC qualified investor scheme must be—

(a) on the basis of ‘open market value’ (as defined in the

constitutional document and the latest filed prospectus); or

(b) on another appropriate basis.

Guidance

1 The constitutional document and latest filed prospectus would be expected to

define ‘open market value’ using an authoritative text such as the latest edition

of the Royal Institute of Chartered Surveyors’ Appraisal and Valuation

Standards (the ‘Red Book’).

2 In considering whether valuation of an interest in an immovable by the

standing independent valuer is made on another basis that is appropriate, the

operator must consider whether the valuation was made in accordance with

internationally accepted valuation principles, procedures and definitions as set

out in the International Valuations Standards published by the International

Valuation Standards Committee.

(2) The basis on which the standing independent valuer makes a

valuation is subject to the constitutional document and the latest filed

prospectus.


investor schemes

Rule 6.2.14


(3) In making a valuation, the standing independent valuer—

(a) may treat the contents of any building as part of the building;

and

(b) must disregard any arrangement to dispose of an interest in an

immovable forming part of the scheme property unless the

valuer is satisfied on reasonable grounds that the arrangement is

legally enforceable.

6.2.14 Appointment of standing independent valuer—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme that holds, or

proposes to hold, immovables as part of the scheme property must, as

required from time to time and with the independent entity’s

approval, appoint a person as the standing independent valuer.

(2) A person must not be appointed as the standing independent valuer

unless—

(a) the person conducts the business of valuing immovables; and

(b) the operator and the independent entity are satisfied that the

person has the skills, experience, qualifications and attributes to

be the standing independent valuer of the scheme, having regard

in particular to the scheme’s investment objectives, strategies

and policy; and

(c) the person is independent of—

(i) the operator and independent entity; and



the operator, the independent entity or, for a CIC or CIP,

the scheme.




Rule 6.2.15


Guidance for para (b)

The operator and independent entity should be satisfied that the person meets all

the following requirements:

(a) the person is a fellow or associate (however described), or has key personnel

who are fellows or associates (however described), of a relevant recognised

professional body of surveyors or property valuers (for example, a member of

the Royal Institute of Chartered Surveyors (MRICS), a RICS registered valuer

or a body recognised by RICS);

(b) the person has, or has access to, expertise relevant to the scheme and, in

particular, knowledge and experience in the valuation of immovables of the

relevant kind in the relevant area;

(c) the person has robust internal controls and checks and balances to ensure—

(i) the integrity of valuation reports; and

(ii) that valuation reports are properly and professionally prepared in

accordance with international best practice;

(d) the person has adequate professional indemnity insurance;

(e) the person does not have ownership or other commercial links with other

persons providing services to the scheme (for example, investment advisers)

that could impair the person’s ability to provide independent and objective

valuation services to the scheme.

(3) Without limiting (2) (c), a person (A) is not independent of another

person (B) if—

(a) A has at any time during the last 2 years been involved in

material business dealings with B (otherwise than in the exercise

of their respective functions as the holders of positions in

relation to any scheme); or

(b) B has a material interest in A or A has a material interest in B.

6.2.15 Standing independent valuer not to deal in immovables etc—QFC qualified investor schemes

The standing independent valuer of a QFC qualified investor scheme

must not be personally engaged, and must not have an associated


investor schemes

Rule 6.2.16


person who is engaged, in finding immovables for the scheme or

finding the scheme for immovables.


6.2.16 Removal of standing independent valuer—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme may, with the

independent entity’s approval, remove the standing independent

valuer at any time.

(2) The operator of a QFC qualified investor scheme must remove a

person as the standing independent valuer if—

(a) a special resolution of the unitholders is passed to remove the

person as the standing independent valuer; or


(b) the person breaches rule 6.2.15 (Standing independent valuer

not to deal in immovables etc—QFC qualified investor

schemes); or

(c) the person:

(i) becomes insolvent;

(ii) is wound up or put into liquidation; or

(iii) is placed in receivership or administration; or

(d) the person ceases to be eligible to be appointed as the standing

independent valuer.

(3) The power to remove the standing independent valuer under this rule

has effect despite anything in any agreement between the valuer and

all or any of the following:

(a) the operator;


(c) the scheme.

Investment and borrowing—QFC qualified investor schemes Chapter 6 Stock lending and repos—QFC qualified investor schemes Part 6.3

Rule 6.3.1


Part 6.3 Stock lending and repos—QFC qualified investor schemes

6.3.1 Permitted stock lending and repos—QFC qualified investor schemes

(1) The independent entity of a QFC qualified investor scheme may, at

the operator’s request, enter into a stock lending arrangement or repo

agreement.


glossary.

(2) Subrule (1) is subject to the constitutional document and the latest

filed prospectus.

(3) The independent entity must ensure that the value of any collateral

for a stock lending arrangement is at all times at least equal to the

value of the securities transferred by the independent entity.

(4) If the validity of any collateral expires, the independent entity’s duty

under subrule (3) is satisfied if the independent entity or the operator,

as appropriate, takes reasonable care to ensure that sufficient

collateral will be transferred by close of business on the day of the

expiry.

Note Collateral is defined in the glossary.

Chapter 6 Investment and borrowing—QFC qualified investor schemes Part 6.4 Borrowing—QFC qualified investor schemes

Rule 6.4.1


Part 6.4 Borrowing—QFC qualified investor schemes

6.4.1 Borrowing—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must—

(a) ensure that the scheme’s total borrowing does not, on any day,

exceed the permitted percentage of the scheme’s net asset value;

and

Note Borrowing and net asset value are defined in the glossary.

(b) ensure that any further borrowing restrictions in the

constitutional document and latest filed prospectus are complied

with; and

(c) take reasonable care to ensure that arrangements are in place that

will enable borrowings to be closed out to ensure that paragraphs

(a) and (b) are complied with.

Note Close out is defined in the glossary.

(2) For subrule (1) (a), the permitted percentage is—

(a) 100 %; or

(b) if the Regulatory Authority, by written notice, sets a different

percentage (whether higher or lower) for the scheme (whether at

the time of registration or later) or for QFC qualified investor

schemes that include the scheme—the percentage set.

(3) If the Regulatory Authority sets a different percentage by notice

under subrule (2) (b), the authority must—

(a) publish the notice on an approved website; and

(b) give a copy of the notice to the operator of each scheme to which

the notice applies.

Note Approved website is defined in INAP.

Investment and borrowing—QFC retail schemes Chapter 7 Investment and borrowing introduction—QFC retail schemes Part 7.1

Rule 7.1.1


Chapter 7 Investment and borrowing—QFC retail schemes

Part 7.1 Investment and borrowing introduction—QFC retail schemes

7.1.1 Objects of ch 7—QFC retail schemes

(1) The objects of this chapter include helping to protect investors in QFC

retail schemes by providing minimum standards for the investments

that may be held by a QFC retail scheme.

(2) In particular, this chapter—

(a) restricts the proportion of the scheme property of a QFC retail

scheme that may be held in transferable securities that are not

approved securities and derivatives that are not approved

derivatives; and

Note Approved security is defined in r 7.1.9 and approved derivative is

defined in r 7.1.8.

(b) requires a QFC retail scheme to comply with a number of

investment rules that require the spreading of risk.

(3) The intention of the restriction mentioned in subrule (2) (a) is, in part,

to limit investment in transferable securities and derivatives that

cannot be accurately valued and readily disposed of.

7.1.2 General duties of operator in relation to investment and borrowing—QFC retail schemes

(1) The operator of a QFC retail scheme must ensure that, except to the

extent permitted by subrule (3) (b), the scheme property is not

invested or used in breach of this chapter.


Chapter 7 Investment and borrowing—QFC retail schemes Part 7.1 Investment and borrowing introduction—QFC retail schemes

Rule 7.1.2


(2) If the operator becomes aware of a breach of this chapter in relation

to the QFC retail scheme, the operator must immediately take action,

at its own expense, to rectify the breach, unless the breach happened

because of circumstances to which subrule (3) applies.

(3) The operator must ensure that this chapter is complied with as soon

as practicable having regard to the interests of the unitholders and, in

any event, within the maximum period mentioned in subrule (6) if—

(a) the scheme property is—

(i) invested or used in breach of this chapter; and

(ii) the breach is beyond the control of both the operator and

the independent entity; or

(b) all the following subparagraphs apply:

(i) there is a transaction (the subsequent transaction) deriving

from the exercise of a right (for example, the right to

convert stock or subscribe to a rights issue) attributable to

an investment of the scheme (the original investment);

(ii) the subsequent transaction would, apart from this rule, be

a breach of this chapter;

(iii) at the time of the acquisition of the original investment, it

was reasonable for the operator to expect that a breach

would not be caused by the subsequent transaction.

(4) In subrule (3) (b) (i), the reference to the exercise of a right includes

the taking effect of a right without any action by or on behalf of the

independent entity or operator.

(5) If the independent entity becomes aware of any breach of this chapter

in relation to the QFC retail scheme, it must immediately ensure that

the operator complies with subrule (2).


Rule 7.1.3


(6) The maximum period to ensure that this chapter is complied with

under subrule (3) starts on the day the operator finds out about the

relevant circumstances and ends—

(a) if the transaction was a transaction under rule 7.4.9 (Permitted

transactions in derivatives and forward transactions—QFC

retail schemes)—at the close of business 5 business days after

that day or, if that period is extended under subrule (7), the

period as extended; or


(b) if the transaction relates to an immovable—2 years after that

day; or

(c) in any other case—for 6 months after that day.

(7) The period mentioned in subrule (6) (a) is extended—

(a) if the transaction involved a delivery of a commodity—from 5 to

20 business days; or

Note Commodity is defined in the glossary.

(b) if the reason for the breach mentioned in subrule (3) (a) is the

inability of the operator to close out a transaction because of a

limit in the number or value of transactions imposed by a

derivatives market that is an eligible market—until 5 business

days after—

(i) the inability resulting from the limit is removed; or

(ii) it becomes, to the operator’s knowledge, practicable and

prudent for the transaction to be closed out in another way.

Note Close out is defined in the glossary. Eligible market is defined in r 7.1.7.

7.1.3 Treatment of obligations under ch 7—QFC retail schemes

(1) If a provision of this chapter allows a QFC retail scheme to enter into

a transaction, or retain an investment, only if possible obligations

arising out of the transaction or retention would not breach any limits


Rule 7.1.4


under this chapter, it must be assumed that the maximum possible

liability of the scheme under any other applicable provision of this

chapter must also be provided for.

(2) If a provision of this chapter allows a QFC retail scheme to enter into

a transaction, or retain an investment, only if the transaction or

retention is covered, or any other similar transactions or investments

are covered—

(a) it must be assumed that, in applying any of the provisions of this

chapter, the scheme must also, simultaneously, satisfy any other

applicable obligation relating to cover; and

(b) no element of cover may be used more than once.

7.1.4 Valuation for ch 7—QFC retail schemes

(1) For this chapter, the value at any time of the scheme property of a

QFC retail scheme is its net asset value at that time calculated in

accordance with division 8.2.B (Valuation and pricing—QFC retail

schemes).


(2) In valuing the scheme property for this chapter, the following

provisions apply:

(a) the time at which the valuation is conducted (the relevant time)

must be treated as if it were a valuation point, but the valuation

and the relevant time do not count as a valuation or a valuation

point for division 8.2.B;

(b) initial outlay must be regarded as remaining part of the scheme

property;

Note Initial outlay is defined in the glossary.

(c) if the operator, having taken reasonable care, decides that the

scheme will become entitled to any unrealised profit that has


Rule 7.1.5


been made for a transaction in derivatives—the prospective

entitlement must be regarded as part of the scheme property.

Note Derivative is defined in the glossary.

7.1.5 What is an approved money-market instrument?

(1) For these rules, an approved money-market instrument is a money-

market instrument that is normally dealt in on the money market, is

liquid and has a value that can be accurately decided at any time.

(2) For this rule, a money-market instrument is normally dealt in on the

money market if any of the following apply to it:

(a) it has a maturity at issue of no more than 397 days;

(b) it has a residual maturity of no more than 397 days;

(c) it undergoes regular yield adjustments in line with money

market conditions at intervals of no longer than 397 days;

(d) it has a risk profile, including credit and interest rate risks,

corresponding to the risk profile of an instrument—

(i) that has a maturity mentioned in paragraph (a) or (b); or

(ii) that is subject to yield adjustments mentioned in paragraph

(c).

(3) For this rule, a money-market instrument is liquid if it can be sold at

limited cost in an adequately short time, taking into account the

obligation of the operator to redeem units on the instructions of any

unitholder.

Note See r 8.1.17 (3) (Issue and redemption generally—QFC retail schemes).

(4) For this rule, a money-market instrument has a value that can be

accurately decided at any time if accurate and reliable valuation

systems are available for it.


Rule 7.1.6


(5) The valuation systems must meet both of the following requirements:

(a) they must enable the operator to calculate a net value of a

money-market instrument in accordance with the value at which

the instrument could be exchanged between knowledgeable,

willing parties in an arm’s length transaction;

(b) they must be based either on market data or on valuation models,

including systems based on amortised costs.

(6) A money-market instrument that is normally dealt in on the money

market and is admitted to or dealt in on an eligible market must be

presumed to be liquid and to have a value that can be accurately

decided at any time unless there is information available to the

operator that would lead to a different decision.

Note Eligible market is defined in r 7.1.7.

7.1.6 What is a transferable security?

(1) For these rules, a transferable security is an investment that is any of

the following:

(a) a share;

(b) a government or public security;

(c) another debt instrument;

(d) a warrant;

(e) a securities receipt.

Note 1 Investment and each of the types of investment mentioned in r (1) are


Note 2 For other kinds of investments that are taken to be transferable securities,

see the following provisions:

• r 7.4.2 (Investments in closed-ended schemes as transferable

securities—QFC retail schemes)

• r 7.4.3 (Investments linked etc to other assets as transferable

securities—QFC retail schemes).


Rule 7.1.7


(2) However, an investment is not a transferable security if the title to

the investment cannot be transferred, or can be transferred only with

the consent of a third party.

(3) In applying subrule (2) to a share or debt instrument issued by a

corporation, the need for any consent on the part of the corporation or

any of its members, or the debt instrument holders of it, may be

disregarded.


(4) Also, an investment is not a transferable security unless the liability

of the holder of the investment to contribute to the debts of the issuer

is limited to any amount for the time being unpaid by the holder in

relation to the investment.

7.1.7 What is an eligible market?

(1) For these rules, a derivatives or securities market is an eligible market

in relation to a QFC scheme if it meets all the following requirements:

(a) the operator, after consultation with and notification to the

independent entity, decides that the market is appropriate for

investment of scheme property or dealing in investments for the

scheme property;

(b) the market is included in a list in the latest filed prospectus;


(c) the independent entity has taken reasonable care to decide that—

(i) adequate custody arrangements can be provided for

dealing in investments on the market; and

(ii) all reasonable steps have been taken by the operator in

deciding whether the market meets the requirement of this

rule.


Rule 7.1.8


(2) For subrule (1) (a), a market may be considered appropriate only if it

meets all the following requirements:

(a) it is regulated;

(b) it operates regularly;

(c) it is recognised as a market or exchange, or as a self-regulating

organisation, by an appropriate regulatory or governmental

entity;

(d) it is open to the public;

(e) it is adequately liquid;

(f) it has adequate arrangements for unimpeded transmission of

income and capital to or to the order of investors.

7.1.8 What is an approved derivative?

An approved derivative is a derivative that is traded or dealt in on, or

under the rules of, a derivatives market that is an eligible market.

Note Derivative and deal are defined in the glossary. Eligible market is

defined in r 7.1.7.

7.1.9 What is an approved security?

An approved security is a transferable security that is traded on, or

under the rules of, a securities market that is an eligible market

(otherwise than by the specific permission of the market authority).

Note Transferable security is defined in r 7.1.6. Eligible market is defined in

r 7.1.7.

7.1.10 Application of ch 7 to umbrella schemes—QFC retail schemes

(1) This chapter applies to each subscheme of a QFC retail scheme that

is an umbrella scheme as it were a separate QFC retail scheme.



Rule 7.1.10


(2) However, the following rules apply to the umbrella scheme itself and

not separately to each subscheme:

• rule 7.2.3 (Significant influence through transferable securities—UCITS type schemes)

• rule 7.3.10 (Concentration—QFC retail schemes).

(3) Also, a subscheme of an umbrella scheme must not invest in another

subscheme of the same umbrella scheme.

Chapter 7 Investment and borrowing—QFC retail schemes Part 7.2 Investments generally—QFC retail schemes

Rule 7.2.1


Part 7.2 Investments generally—QFC retail schemes

7.2.1 Investment powers generally—QFC retail schemes

(1) The scheme property of a QFC retail scheme must be invested only

in investments mentioned in rule 7.2.2 (Permissible investments

generally—QFC retail schemes) to which the scheme is dedicated.

Note Investment and dedicated are defined in the glossary.

(2) The scheme property of a QFC retail scheme must be invested and

used only in accordance with the relevant provisions of this chapter,

including within any limit or other restriction (however described) of

this chapter.

(3) The constitutional document and the latest filed prospectus of a QFC

retail scheme may further restrict—

(a) the kinds of property in which the scheme property may be

invested; and

(b) the proportion of the capital property of the scheme that may be

invested in investments of any kind; and

(c) the kinds of transactions permitted by the scheme and any

relevant limits; and

(d) the borrowing powers of the scheme.

Note Constitutional document is defined in r 3.1.1. Capital property is defined

in the glossary.

(4) Subrule (3) does not limit the further restrictions that the

constitutional document and latest filed prospectus may impose on

investment and borrowing by the scheme or on the use of the scheme

property.

(5) The operator must ensure that any further restrictions are complied

with.

Investment and borrowing—QFC retail schemes Chapter 7 Investments generally—QFC retail schemes Part 7.2

Rule 7.2.2


7.2.2 Permissible investments generally—QFC retail schemes

The scheme property of a QFC retail scheme (other than a QFC retail

property fund) must be invested only in any 1 or more of the

following:

(a) transferable securities;

(b) money-market instruments;

(c) units in schemes;

(d) derivatives and forward transactions;

(e) deposits.

Note 1 A QFC retail scheme cannot invest in precious metals or commodity

contracts. A QFC retail scheme that is a QFC retail property fund can

invest in immovables, property-related assets and other investments (see

rule 12.1.4).

Note 2 Transferable security is defined in rule 7.1.6. For investments that are

treated as transferable securities, see the following provisions:

• rule 7.4.2 (Investments in closed-ended schemes as transferable


• rule 7.4.3 (Investments linked etc to other assets as transferable


7.2.3 Significant influence through transferable securities—UCITS type schemes

(1) The operator of a QFC retail scheme must ensure that the scheme does

not acquire transferable securities (the relevant securities) issued by

a corporation if—

(a) the relevant securities give the right to vote (whether or not on

substantially all matters) at general meetings of the corporation;

and

Chapter 7 Investment and borrowing—QFC retail schemes Part 7.2 Investments generally—QFC retail schemes

Rule 7.2.4


(b) either—

(i) the scheme already holds transferable securities issued by

the corporation that give the scheme power to influence

significantly the conduct of business by the corporation; or

(ii) acquisition of the relevant securities would give the

scheme that power.


(2) For subrule (1), the QFC retail scheme is taken to have power to

influence significantly the conduct of business by the corporation if

the scheme, or the operator or independent entity (or both acting

together), can exercise or control the exercise of at least 1/3 of the

voting rights in the corporation because of the transferable securities

issued by the corporation that are held by the scheme.

(3) For subrule (2), any temporary suspension of voting rights must be

disregarded.

7.2.4 Investments by money-market funds—QFC retail schemes

(1) A QFC retail scheme that is a money-market fund must comply with

its primary investment objective, and the investment restrictions,

mentioned in schedule 2 (Constitutional document content—QFC

schemes), rule S2.33 (Primary investment objective etc—QFC

money-market funds).


(2) For the investment restrictions, an approved money-market

instrument is a high-quality approved money-market instrument if—

(a) it has been rated by at least 1 rating agency; and

(b) it has been awarded the highest available credit rating by each

rating agency that has rated it.

Note Approved money-market instrument is defined in r 7.1.5. Rating agency

is defined in INAP.

Investment and borrowing—QFC retail schemes Chapter 7 Investments generally—QFC retail schemes Part 7.2

Rule 7.2.4


(3) If an approved money-market instrument forms part of the scheme

property of a QFC retail scheme that is a money-market fund, the

operator must monitor the instrument to ensure that it continues to be

of high quality, taking into account both its credit risk and its final

maturity.

(4) A QFC retail scheme that is a money-market fund must provide

liquidity through same day or next day settlement.

(5) The weighted average maturity of its investments must not exceed 60

days.

Chapter 7 Investment and borrowing—QFC retail schemes Part 7.3 Investment diversification—QFC retail schemes

Rule 7.3.1


Part 7.3 Investment diversification—QFC retail schemes

7.3.1 Prudent spread of risk—QFC retail schemes

The operator of a QFC retail scheme must ensure that the scheme

property provides a prudent spread of risk, taking into account the

scheme’s investment objectives, strategies and policy as stated in the

constitutional document and latest filed prospectus.

Note Constitutional document is defined in r 3.1.1 and latest filed prospectus


7.3.2 Spread for certain transferable securities and money-market instruments—QFC retail schemes

(1) This rule applies to a transferable security if—

(a) the transferable security is not an approved security; and

(b) either—

(i) the transferable security has been issued for 1 year or

longer; or

(ii) the transferable security has been issued for less than

1 year and the terms of issue did not include an undertaking

that application would be made for it to be admitted to an

eligible market.

Note 1 Transferable security is defined in r 7.1.6. Approved security is defined

in r 7.1.9. Eligible market is defined in r 7.1.7.

Note 2 For investments that are treated as transferable securities, see the

following provisions:





Investment and borrowing—QFC retail schemes Chapter 7 Investment diversification—QFC retail schemes Part 7.3

Rule 7.3.3


(2) This rule applies to a money-market instrument if—

(a) the instrument is not an approved money-market instrument; or

(b) the instrument is an approved money-market instrument but the

scheme could not invest in it under rule 7.4.4 (Investments in

approved money-market instruments not admitted to eligible

markets etc—QFC retail schemes).

Note Approved money-market instrument is defined in r 7.1.5.

(3) The operator of a QFC retail scheme must ensure that not more than

10% in value of the scheme property consists of transferable

securities and money-market instruments to which this rule applies.

7.3.3 Spread for transferable securities and money-market instruments issued by single issuer or group—QFC retail schemes

(1) This rule does not apply to government or public securities.

Note 1 Government or public security is defined in the glossary.

Note 2 See r 7.3.5 (Spread for government or public securities issued by single

issuer—QFC retail schemes).


5% in value of the scheme property consists of transferable securities

or money-market instruments (or both) issued by a single person.

Note 1 Transferable security is defined in r 7.1.6.







(3) However, the 5% limit under subrule (2) is raised to 10% in relation

to not more than 40% in value of the scheme property.


Rule 7.3.4


(4) Covered bonds need not be taken into account for the purpose of

applying the raised limit of 10% in relation to 40% in value of the

scheme property.

Note Covered bond is defined in the glossary.

(5) Also, the 5% limit under subrule (2) is raised to 25% in relation to

covered bonds if the total value of the covered bonds held does not

exceed 80% in value of the scheme property.

(6) In addition, the 5% limit under subrule (2) may be increased to no

more than 20% (or 35%) under rule 7.3.4 (Spread exception for

schemes replicating indices—QFC retail schemes).

(7) In applying subrules (2) to (6), securities receipts must be treated as

equivalent to the underlying security.

Note Securities receipt is defined in the glossary.

(8) The operator of a QFC retail scheme must also ensure that not more

than 20% in value of the scheme property consists of transferable

securities or money-market instruments (or both) issued by members

of a single group.


7.3.4 Spread exception for schemes replicating indices—QFC retail schemes

(1) Despite rule 7.3.3 (2) (Spread for transferable securities and money-

market instruments issued by single issuer or group—QFC retail

schemes), a QFC retail scheme may invest up to 20% in value of the

scheme property in shares and debt instruments that are issued by a

single person if the aim of the scheme’s investment objectives,

strategies and policy as stated in its constitutional document and latest

filed prospectus is to replicate the performance or composition of an

index that is a permitted index under subrule (3).

Note Share, debt instrument and entity are defined in the glossary.


Rule 7.3.4


(2) However, the limit in subrule (1) may be increased to no more than

35%, but only in relation to a single person and if—

(a) justified by exceptional market conditions; and

(b) the latest filed prospectus includes a prominent statement of the

increased limit.

(3) For subrule (1), a permitted index is an index that meets all the

following requirements:

(a) the index is sufficiently diversified (see subrule (5));

(b) the index is a representative benchmark for the market to which

it refers (see subrule (6));

(c) the index is published in an appropriate way (see subrule (7)).

(4) For subrule (1), replication of the composition of an index is

replication of the composition of the underlying assets, including by

way of efficient portfolio management.

Guidance

The scheme property of a scheme replicating an index under this rule need not

consist of the exact composition and weighting of the underlying assets if the

scheme’s investment objectives, strategies and policy are to achieve a result

consistent with the replication of the index rather than an exact replication.

Note Efficient portfolio management is defined in the glossary.

(5) For subrule (3) (a), an index is sufficiently diversified if its

components comply with this part.

(6) For subrule (3) (b), an index is a representative benchmark for the

market to which it refers if its provider uses a recognised

methodology that generally does not result in the exclusion of a major

issuer of the market to which it refers.

(7) For subrule (3) (c), an index is published in an appropriate way if—

(a) it is accessible to the public; and

(b) the index provider is independent of the QFC retail scheme.


Rule 7.3.5


(8) Subrule (7) (b) does not prevent the index provider and the scheme or

its operator from being part of the same group, if effective

arrangements to manage conflicts of interest are in place.


7.3.5 Spread for government or public securities issued by single issuer—QFC retail schemes

(1) This rule applies to government or public securities.

Note Government or public security is defined in the glossary.

(2) If no more than 35% in value of the scheme property of a QFC retail

scheme is invested in government or public securities issued by a

single issuer, there is no limit on the amount that may be invested in

government or public securities or in any single issue.

(3) A QFC retail scheme may invest more than 35% in value of the

scheme property in government or public securities issued by a single

issuer only if all the following requirements are met:

(a) the operator, after consultation with the independent entity

before making the investment, is satisfied that the investment is

in accordance with the investment objectives, strategies and

policy of the scheme as stated in the constitutional document

and latest filed prospectus;

(b) no more than 30% in value of the scheme property consists of

government or public securities of a single issue;

(c) the scheme property includes government or public securities of

at least 6 different issues, whether they are issued by that issuer

or another issuer;

(d) the constitutional document expressly authorises the scheme to

invest more than 35% in value of the scheme property in

government or public securities issued by a single issuer;

(e) the disclosure required by subrule (4) has been made.


Rule 7.3.6


(4) For subrule (3) (e), the latest filed prospectus must prominently

state—

(a) that more than 35% of the scheme property is or may be invested

in government or public securities issued by a single issuer; and

(b) the names of the jurisdictions, or the public or local authorities,

issuing government or public securities in which the scheme

may invest more than 35% of the scheme property.

Note Jurisdiction is defined in the glossary.

(5) For this rule, an issue of government or public securities differs from

another issue if there is a difference in relation to repayment date, rate

of interest, guarantor or other material terms of the issue.

(6) In this rule:

issue includes guarantee.

7.3.6 Spread for units in schemes etc—QFC retail schemes


20% in value of the scheme property consists of units in any single

collective investment scheme.

Note See r 7.4.2 (Investments in closed-ended schemes as transferable

securities—QFC retail schemes) for units in schemes that are treated as

transferable securities and not as units in a scheme.

(2) However, subrule (1) does not apply to units in a feeder fund.

Note Feeder fund is defined in the glossary.

(3) The operator of a QFC retail scheme must ensure that no more than

30% in value of the scheme property is invested under

rule 7.4.6 (Investments in collective investment schemes generally—

QFC retail schemes) in units in non-QFC retail customer schemes.

Note Non-QFC retail customer scheme is defined in r 1.4.1.


Rule 7.3.7


(4) However, subrule (3) does not apply to units in a feeder fund or fund

of funds.

Note Fund of funds is defined in the glossary.

7.3.7 Spread for OTC derivatives—QFC retail schemes

(1) The operator of a QFC retail scheme must ensure that the exposure to

a single counterparty in an OTC derivative transaction does not

exceed 10% in value of the scheme property.


(2) In calculating a limit under this rule, the exposure in relation to an

OTC derivative may be reduced to the extent that collateral is held in

relation to it if the collateral meets all the following requirements:

(a) it is marked-to-market on a daily basis and its value exceeds the

amount at risk;

(b) it is exposed only to negligible risks (for example, risks for

government bonds of first credit rating or cash) and is liquid;

(c) it is held by a third-party custodian not related to the provider or

is legally secured from the consequences of a failure of a related

party;

(d) it can be fully enforced by the QFC retail scheme at any time.


(3) In calculating a limit under this rule, OTC derivative positions with

the same counterparty may be netted if the netting procedures—

(a) correspond as closely as possible to—

(i) the off-balance sheet netting procedures required to be

used by an authorised firm under BANK, Division 4.5.E;

or

(ii) substantially equivalent provisions under the law of

another jurisdiction; and

(b) are based on legally binding agreements.


Rule 7.3.8


Guidance for para (a) (ii)

Substantially equivalent provisions would include the conditions in the Banking

Consolidation Directive (the Directive of the European Parliament and Council of

14 June 2006 relating to the taking up and pursuit of the business of credit

institutions (No 2006/48/EC)), annex III, part 7 (Contractual netting (Contracts for

novation and other netting agreements)).

(4) In applying this rule, a derivative transaction is taken to be free of

counterparty risk if—

(a) it is performed on an exchange; and

(b) it is cleared through a clearing house that meets both of the


(i) the clearing house is backed by an appropriate performance

guarantee;

(ii) the clearing house is characterised by a daily mark-to-

market valuation of the derivative position and at least

daily margining.

Guidance on spread generally

The operator of a QFC retail scheme should particularly note rule 7.3.7 (2) (d) under

which collateral has to be legally enforceable at any time. The Regulatory

Authority, therefore, expects the operator to undertake legal due diligence before

entering into any financial collateral arrangement. This is particularly important if

the collateral arrangement has a cross-border dimension. The Regulatory Authority

also expects the independent entity to exercise reasonable care to review collateral

arrangements in accordance with its functions.

7.3.8 Spread for deposits—QFC retail schemes


20% in value of the scheme property consists of deposits placed with

any single eligible bank.

Note Deposit and eligible bank are defined in the glossary.

(2) For subrule (1), all uninvested cash that is capital property of the

scheme is taken to be a deposit.

Note Capital property is defined in the glossary.


Rule 7.3.9


7.3.9 Spread for certain investments with single person—QFC retail schemes


20% in value of the scheme property consists of any combination of

2 or more of the following issued by or made with a single person:

(a) transferable securities (including covered bonds) or money-

market instruments;

(b) deposits;

(c) exposures to an OTC derivative transaction.

Note For investments that are treated as transferable securities, see the






(2) In calculating the limit under this rule, the provisions of rule 7.3.7 (2)

to (4) (Spread for OTC derivatives—QFC retail schemes) apply with

any necessary changes.

7.3.10 Concentration—QFC retail schemes

(1) The operator of a QFC retail scheme must ensure that the scheme

does not acquire transferable securities (other than debt instruments)

that—

(a) do not give a right to vote on any matter at a general meeting of

the issuer of the transferable securities; and

(b) represent more than 10% of the transferable securities issued by

the issuer.

Note 1 Transferable security is defined in r 7.1.6. Debt instrument is defined in

the glossary.


Rule 7.3.11








(2) The operator of a QFC retail scheme must ensure that the scheme

does not acquire—

(a) more than 10% of the debt instruments issued by a single issuer;

or

(b) more than 25% of the units in a collective investment scheme;

or

(c) more than 10% of the money-market instruments issued by a

single issuer.

(3) However, the operator need not comply with a limit under subrule (2)

if, at the time of the acquisition, the net amount in issue of the debt

instruments, units in the collective investment scheme or money-

market instruments cannot be calculated.

7.3.11 Application of pt 7.3—QFC retail schemes

The provisions of this part do not apply to a QFC retail scheme until

6 months after the day the initial offer period starts if rule 7.3.1

(Prudent spread of risk—QFC retail schemes) is complied with

during that period.

Note Month and initial offer are defined in the glossary.

Chapter 7 Investment and borrowing—QFC retail schemes Part 7.4 Particular kinds of investments—QFC retail schemes

Rule 7.4.1


Part 7.4 Particular kinds of investments—QFC retail schemes

Division 7.4.A Transferable securities—QFC retail schemes

7.4.1 General investment requirements for non-approved transferable securities—QFC retail schemes

(1) A QFC retail scheme may invest in a transferable security that is not

an approved security if the security meets all the following

requirements:

(a) the potential loss that the scheme may incur in relation to

holding the transferable security is limited to the amount paid

for it;

(b) its liquidity does not compromise the ability of the operator to

comply with its obligation under these rules to redeem units on

the instructions of any unitholder;

Note See r 8.1.17 (3) (Issue and redemption generally—QFC retail

schemes).

(c) a reliable valuation is available for it (see subrule (2));

(d) appropriate information is available for it (see subrule (3));

(e) it is negotiable;

(f) its risks are adequately captured by the operator’s risk

management process.

Note Transferable security is defined in r 7.1.6. Approved security is defined

in r 7.1.9.

(2) For subrule (1) (c), reliable valuation is available for the transferable

security if—

(a) for a transferable security that is an approved security—there are

accurate, reliable and regular prices that are either market prices

Investment and borrowing—QFC retail schemes Chapter 7 Particular kinds of investments—QFC retail schemes Part 7.4

Rule 7.4.2


or prices made available by valuation systems independent from

issuers; and

(b) for a transferable security that is not an approved security—

there is a valuation on a periodic basis that is derived from

information from the issuer of the security or competent

independent research.

(3) For subrule (1) (d), appropriate information is available for the

transferable security if—

(a) for a transferable security that is an approved security—there is

regular, accurate and comprehensive information available to

the market on the security or, if relevant, on the security’s

portfolio; and

(b) for a transferable security that is not an approved security—

there is regular and accurate information available to the

scheme’s operator on the security or, if relevant, on the

security’s portfolio.

(4) Unless there is information available to the scheme’s operator that

would lead to a different decision, a transferable security that is an

approved security is presumed—

(a) not to compromise the operator’s ability to comply with its

obligation under these rules to redeem units at the request of any

unitholder; and

(b) to be negotiable.

7.4.2 Investments in closed-ended schemes as transferable

securities—QFC retail schemes

(1) For this chapter, a unit in a closed-ended scheme is taken to be a

transferable security (and not a unit in a scheme) if it would meet all

the requirements mentioned in rule 7.4.1 (General investment

requirements for non-approved transferable securities—QFC retail

schemes) if it were a transferable security and—


Rule 7.4.2


(a) for a unit in a closed-ended scheme constituted as a company—

both the following requirements are met in relation to that

scheme:

(i) the scheme is subject to corporate governance applied to

companies;

(ii) if another person carries out asset management activity for

the scheme—the other person is subject to regulation by a

regulatory or governmental entity for the purposes of

investor protection; or

(b) for a unit in a closed-ended scheme constituted as a trust—both

the following requirements are met in relation to that scheme:

(i) the scheme is subject to corporate governance equivalent

to that applied to companies;

(ii) if another person carries out asset management activity for

the scheme—the other person is subject to regulation by a

regulatory or governmental entity for the purposes of

investor protection; or

(c) for a unit in a closed-ended scheme constituted as a limited

partnership or under contract law—all the following

requirements are met in relation to that scheme:

(i) the scheme is subject to corporate governance equivalent

to that applied to companies;

(ii) the scheme is managed by a person who is subject to

regulation by a regulatory or governmental entity for the

purposes of investor protection;

(iii) the assets of the scheme are held separately from the

property of the operator of that scheme and the property of

any other scheme;

(iv) the scheme is subject to liquidation rules that adequately

protect its investors.


Rule 7.4.3


Guidance for para (b) (i) and (c) (i)

In assessing whether a closed-ended scheme in trust or contractual form is subject

to corporate governance equivalent to that applied to companies, the operator of a

QFC retail scheme should consider whether the trust or contract constituting the

closed-ended scheme provides its investors with rights—

(a) to vote on essential decisions affecting the closed-ended scheme, including

appointment and removal of its operator, amendment of the trust or contract,

changes to its investment objectives, strategies and policy, merger and

liquidation; and

(b) to control the closed-ended scheme’s investment objectives, strategies and

policy through appropriate mechanisms.

(2) However, a QFC retail scheme must not invest in a unit in a closed-

ended scheme under this rule if the purpose of the investment is to

circumvent any investment limit or restriction (however described) of

this chapter.

Note Closed-ended scheme is defined in r 1.2.10 (2).

7.4.3 Investments linked etc to other assets as transferable securities—QFC retail schemes

(1) For this chapter, any other investment is taken to be a transferable

security (and not an investment of another kind) if—

(a) the investment would meet all the requirements mentioned in

rule 7.4.1 (General investment requirements for non-approved

transferable securities—QFC retail schemes) if it were a

transferable security; and

(b) the investment is backed by or linked to the performance of

other assets, which may differ from those in which a QFC retail

scheme may otherwise invest.

(2) If the investment embeds a derivative, the requirements of this

chapter about derivatives and forward positions apply to the

embedded derivative component of the investment.


Rule 7.4.4


(3) For subrule (2), an investment embeds a derivative if it contains a

component that meets all the following requirements:

(a) by virtue of that component some or all of the cash flows that

otherwise would be required by the investment (which functions

as host contract) can be modified according to a specified

interest rate, financial instrument price, foreign exchange rate,

index of prices or rates, credit rating or credit index or other

variable, and therefore change in a way similar to a stand-alone

derivative;

(b) the component’s characteristics and risks are not closely related

to the economic characteristics and risks of the investment

functioning as host contract;

(c) the component has a significant impact on the risk profile and

pricing of the investment;

(d) the component is not transferable by contract independently of

the investment.

Note See guidance to r 7.4.8 on transferable securities and money-market

instruments that embed derivatives.

Division 7.4.B Money-market instruments—QFC retail schemes

7.4.4 Investments in approved money-market instruments not admitted to eligible markets etc—QFC retail schemes

(1) This rule applies to an approved money-market instrument that is not

admitted to or dealt in on an eligible market.

Note Approved money-market instrument is defined in r 7.1.5 and eligible

market is defined in r 7.1.7.


Rule 7.4.4


(2) A QFC retail scheme may invest in the approved money-market

instrument if all the following requirements are met:

(a) the instrument is—

(i) issued or guaranteed by—

(A) the State or the central government of a

zone 1 country; or

(B) the Qatar Central Bank or the central bank of a zone 1

country; or

(C) a multilateral development bank; or

Note Zone 1 country and multilateral development bank are

defined in INAP.

(ii) issued or guaranteed by—

(A) a regional or local authority of the State or a

zone 1 country; or

(B) an entity owned by an entity mentioned in

subparagraph (i) (A) or (ii) (A) if the first entity

exercises regulatory or other non-commercial

functions; or

(iii) issued by an entity if any of its securities are dealt with on

an eligible market; or

(iv) issued or guaranteed by an entity that is subject to, and

complies with, prudential rules, and meets 1 or more of the


(A) it is located in Qatar or a zone 1 country;

(B) it has at least investment grade rating given by a

rating agency;

Note Rating agency is defined in INAP.


Rule 7.4.4


(C) on the basis of an in-depth analysis of the entity, it can

be demonstrated that the prudential rules applying to

the entity are at least as stringent as those applied by

the Regulatory Authority in the QFC;

(b) appropriate information in accordance with subrules (3) to (5) is

available for the instrument;

(c) the instrument is freely transferable.

(3) If the approved money-market instrument is issued or guaranteed by

an entity mentioned in subrule (2) (a) (i), or issued by an entity

mentioned in subrule (2) (a) (ii) and guaranteed by an entity

mentioned in subrule (2) (a) (i), information must be available on the

issue or the issue programme, or on the legal and financial situation

of the issuer before the issue of the instrument.


an entity mentioned in subrule (2) (a) (ii) but is not guaranteed by an

entity mentioned in subrule (2) (a) (i), or is issued by an entity

mentioned in subrule (2) (a) (iii), all the following information must

be available:

(a) information on the issue or the issue programme, or on the legal

and financial situation of the issuer before the issue of the

instrument;

(b) updates of that information on a regular basis and whenever a

significant event happens;

(c) available and reliable statistics on the issue or the issue

programme, or other data enabling an appropriate assessment of

the credit risks related to investment in the instruments.

Guidance for r (4) (b) and r (5) (b)

Regular updates of information should normally happen on at least an annual basis.


Rule 7.4.5



an entity mentioned in subrule (2) (a) (iv), all the following

information must be available:

(a) information both on the issue or the issue programme, and the

legal and financial situation of the issuer before the issue of the

instrument, verified by appropriately qualified third parties not

subject to instructions from the issuer;

Guidance for para (a)

The appropriately qualified third parties should specialise in the verification

of legal or financial documentation and be composed of persons meeting

professional standards of integrity.

(b) updates of that information on a regular basis and whenever a

significant event happens;

(c) available and reliable statistics on the issue or the issue

programme.

Division 7.4.C Nil and partly paid securities—QFC retail schemes

7.4.5 Investments in nil and partly paid securities—QFC retail schemes

A QFC retail scheme may invest in a transferable security or money-

market instrument on which an amount is unpaid only if it is

reasonably foreseeable that the amount of any existing and potential

call for any amount unpaid could be paid by the scheme, at the time

payment is required, without breaching this chapter.

Note For other kinds of investments that are taken to be transferable securities,

see the following provisions:






Rule 7.4.6


Division 7.4.D Collective investment schemes—QFC retail schemes

7.4.6 Investments in collective investment schemes generally—QFC retail schemes

(1) A QFC retail scheme (the investing scheme) may invest in units in a

collective investment scheme (the second scheme) only if the second

scheme meets all the following requirements:

(a) the second scheme is a QFC retail scheme or a non-QFC retail

customer scheme;

Note Non-QFC retail customer scheme is defined in r 1.4.1.

(b) if the second scheme is a non-QFC retail customer scheme—the

investment and borrowing powers of the second scheme are the

same as, or more restrictive than, the investment and borrowing

powers of a QFC retail scheme under these rules;

(c) if the second scheme is a non-QFC retail customer scheme—the

second scheme and its operator are required to comply with

requirements equivalent to the requirements applying under rule

7.4.7 (Investments in associated schemes—QFC retail schemes)

in relation to a QFC retail scheme;

(d) the second scheme is prohibited from having more than 10% in

value of its scheme property consisting of units in collective

investment schemes;

(e) if the second scheme is an umbrella scheme—each subscheme

meets the requirements of paragraph (d) and, if the second

scheme is a non-QFC retail customer scheme, also of paragraph

(c).

Note 1 Umbrella scheme and subscheme are defined in r 1.2.11.

Note 2 Investments to which r 7.4.2 (Investments in closed-ended schemes as

transferable securities—QFC retail schemes) applies are treated as

investments in transferable securities, and not investments in units in a

scheme.


Rule 7.4.7


Note 3 See also r 7.3.6 (3) (Spread for units in schemes etc—QFC retail

schemes).

(2) To remove any doubt, this rule is subject to rule 7.4.7.

7.4.7 Investments in associated schemes—QFC retail schemes

(1) For this rule, a scheme is an associated scheme for a QFC retail

scheme if the operator of the first scheme is—

(a) the operator of the QFC retail scheme; or

(b) an associate of the operator of the QFC retail scheme.


(2) A QFC retail scheme must not invest in units in an associated scheme

unless the latest filed prospectus of the QFC retail scheme clearly

states that the scheme property of the QFC retail scheme may include

units in the associated scheme.


(3) If—

(a) a QFC retail scheme invests in units in an associated scheme or

disposes of units in an associated scheme; and

(b) there is a charge in relation to the investment or disposal;

the operator of the QFC retail scheme must pay the QFC retail scheme

the amount payable under subrule (4) or (5) within 4 business days

after the day the operator agrees to make the investment or disposal.

(4) For an investment mentioned in subrule (3), the operator of the QFC

retail scheme must pay the QFC retail scheme—

(a) any amount by which the consideration paid by the QFC retail

scheme exceeds the price that would have been paid for the

benefit of the associated scheme if the units were newly issued

or sold by the associated scheme; or


Rule 7.4.8


(b) if that price cannot be ascertained by the operator—the

maximum amount of any charge permitted to be made by the

seller of units in the associated scheme.

(5) For a disposal mentioned in subrule (3), the operator of the QFC retail

scheme must pay the QFC retail scheme the amount of any charge

made in relation to the disposal for the operator of the associated

scheme, the operator of the QFC retail scheme or an associate of

either operator.

(6) For this rule—

(a) any addition to or deduction from the consideration paid on the

acquisition or disposal by a QFC retail scheme of units in an

associated scheme that is applied for the benefit of the associated

scheme, and is (or is like) a dilution levy made under rule 8.2.16

(Dilution—QFC retail schemes), must be treated as part of the

price of the units and not as part of any charge; and

(b) any charge made in relation to an exchange of units in a

subscheme or separate part of the associated scheme for units in

another subscheme or separate part of that scheme must be

included as part of the consideration paid for the units.

Division 7.4.E Derivatives and forward transactions—QFC retail schemes

7.4.8 Derivatives and forward transactions generally—QFC retail schemes

(1) A transaction in a derivative or a forward transaction must not be

effected for a QFC retail scheme unless the transaction is—

(a) permitted under rule 7.4.9 (Permitted transactions in derivatives

and forward transactions—QFC retail schemes); and

(b) covered as required by rule 7.5.1 (Cover for transactions in

derivatives and forward transactions—QFC retail schemes).

Note Derivative is defined in the glossary.


Rule 7.4.8


(2) If a QFC retail scheme invests in a derivative, the exposure to the

underlying assets must not exceed the limits in part 7.3 (Investment

diversification—QFC retail schemes), except as provided in

subrule (4).

(3) If a transferable security or money-market instrument embeds a

derivative, the embedded derivative component must be taken into

account in applying any limit under this chapter.

Note See r (7) on working out whether an instrument embeds a derivative.

(4) If—

(a) a QFC retail scheme invests in an index-based derivative; and

(b) rule 7.4.10 (Permitted financial indices—QFC retail schemes)

applies to the index;

the underlying constituents do not have to be taken into account in

the application of part 7.3 to subrule (2) of this rule.

(5) The relaxation under subrule (4) is subject to the operator complying

with rule 7.3.1 (Prudent spread of risk—QFC retail schemes).

(6) A scheme must not use transferable securities or money-market

instruments that embed a derivative to circumvent this chapter.

(7) Rule 7.4.3 (3) (Investments linked etc to other assets as transferable

securities—QFC retail schemes) applies to subrules (3) and (6) of this

rule, with any necessary changes, for the purpose of working out

whether a transferable security or money-market instrument embeds

a derivative.

Guidance on transferable securities and money-market instruments that embed derivatives

1 Collateralised debt obligations (CDOs) or asset-backed securities using

derivatives, with or without active management, will generally not be

considered as embedding a derivative unless—

(a) they are leveraged, that is, the CDOs or asset-backed securities are not

limited recourse vehicles and an investor’s loss can be higher than the

investor’s initial investment; or

(b) they are not sufficiently diversified.


Rule 7.4.9


2 If a transferable security or money-market instrument embedding a derivative

is structured as an alternative to an OTC derivative, the requirements of rule

7.4.13 (OTC transactions in derivatives—QFC retail schemes) will apply. This

will be the case for tailor-made hybrid instruments, such as a single tranche

CDO structured to meet the specific need of a QFC retail scheme. These tailor-

made hybrid instruments should be considered to embed a derivative. Such a

product offers an alternative to the use of an OTC derivative for the same

purpose of achieving a diversified exposure to a pre-set risk level to a portfolio

of entities.

3 The following list of transferable securities and money-market instruments,

which is illustrative and non-exhaustive, could be assumed to embed a

derivative:

(a) credit linked notes;

(b) transferable securities and money-market instruments if their

performance is linked to the performance of a bond index;

(c) transferable securities and money-market instruments if their

performance is linked to the performance of a basket of shares, with or

without active management;

(d) transferable securities or money-market instruments with a fully

guaranteed nominal value if their performance is linked to the

performance of a basket of shares, with or without active management;

(e) convertible bonds;

(f) exchange bonds.

4 Transferable securities and money-market instruments that embed a derivative

are subject to the requirements of this chapter applying to derivatives. It is the

operator’s responsibility to ensure that these requirements are complied with.

The nature, frequency and scope of checks performed should depend on the

characteristics of the embedded derivatives and their impact on the scheme,

taking into account its investment objectives, strategies and policy and its risk

profile.

7.4.9 Permitted transactions in derivatives and forward transactions—QFC retail schemes

(1) A transaction in a derivative by a QFC retail scheme must—

(a) be in an approved derivative; or

Note Approved derivative is defined in r 7.1.8.


Rule 7.4.9


(b) if the transaction is in an OTC derivative—comply with

rule 7.4.13 (OTC transactions in derivatives—QFC retail

schemes).

(2) The underlying of a transaction in a derivative by a QFC retail scheme

must—

(a) comply with part 7.2 (Investments generally—QFC retail

schemes) and this part; or

(b) consist of any 1 or more of the following to which the scheme is

dedicated:

(i) financial indices that are permitted financial indices under

rule 7.4.10 (Permitted financial indices—QFC retail

schemes);

(ii) interest rates;

(iii) foreign exchange rates;

(iv) currencies.

Note Dedicated is defined in the glossary.

(3) A transaction in an approved derivative by a QFC retail scheme must

be effected on, or under the rules of, a derivatives market that is an

eligible market.

Note Eligible market is defined r 7.1.7.

(4) A transaction in a derivative must not cause a QFC retail scheme to

diverge from its investment objectives, strategies and policy as stated

in the constitutional document and the latest filed prospectus.

Note Constitutional document is defined in r 3.1.1. Latest filed prospectus is


(5) A transaction in a derivative must not be effected by a QFC retail

scheme if the intended effect is to create the potential for an

uncovered sale of any of the following:

(a) transferable securities;


Rule 7.4.10


(b) money-market instruments;

(c) units in collective investment schemes;

(d) derivatives.

Note Transferable security is defined in r 7.1.6.

(6) For subrule (5), a sale is not considered uncovered if the requirements

mentioned in rule 7.4.12 (3) (Requirements to cover sales—QFC

retail schemes) are met in relation to the sale.

(7) Any forward transaction by a QFC retail scheme must be made with

an eligible bank.

Note Eligible bank is defined in the glossary.

(8) A QFC retail scheme must not effect a transaction in a derivative on

a commodity.

Note Commodity is defined in the glossary.

7.4.10 Permitted financial indices—QFC retail schemes

(1) For rule 7.4.9 (2) (b) (i) (Permitted transactions in derivatives and

forward transactions—QFC retail schemes), a permitted financial

index is a financial index that meets all the following requirements:

(a) the index is sufficiently diversified (see subrule (2));

(b) the index represents an adequate benchmark for the market to

which it refers (see subrule (3));

(c) the index is published in an appropriate way (see subrule (4)).

(2) For subrule (1) (a), a financial index is sufficiently diversified if—

(a) it is composed in such a way that price movements or trading

activities for a component do not unduly influence the

performance of the whole index; and

(b) its components are at least as diverse as the investments of a

QFC retail scheme are required to be under part 7.3 (Investment

diversification—QFC retail schemes).


Rule 7.4.10


(3) For subrule (1) (b), a financial index represents an adequate

benchmark for the markets to which it refers if—

(a) it measures the performance of a representative group of

underlyings in a relevant and appropriate way; and

(b) it is revised and rebalanced periodically, following criteria that

are publicly available, to ensure that it continues to reflect the

markets to which it refers; and

(c) the underlyings are sufficiently liquid, allowing users to

replicate it if necessary.

(4) For subrule (1) (c), a financial index is published in an appropriate

way if—

(a) its publication process relies on sound procedures to collect

prices, and calculate and subsequently publish the index value,

including pricing procedures for components for which a market

price is not available; and

(b) material information is provided on a wide and timely basis on

matters such as index calculation, rebalancing methodologies,

index changes, and any operational difficulties in providing

timely or accurate information.

(5) If the composition of underlyings of a transaction in a derivative does

not satisfy the requirements mentioned in subrule (1) for a permitted

financial index, the underlyings for that transaction may be regarded

as a combination of the underlyings if they satisfy the requirements

of rule 7.4.9 (2) (Permitted transactions in derivatives and forward

transactions—QFC retail schemes).

Guidance on financial indices underlying derivatives

1 An index based on derivatives on commodities or an index on property may

be regarded as a permitted financial index under rule 7.4.10 if it meets all the

requirements of the rule.

2 If the composition of an index is not sufficiently diversified to avoid undue

concentration, its underlying assets should be combined with the other assets

of the scheme in assessing compliance with the requirements of rule 7.5.1


Rule 7.4.11


(Cover for transactions in derivatives and forward transactions—QFC retail

schemes) and part 7.3 (Investment diversification—QFC retail schemes).

3 To avoid undue concentration, if derivatives on an index composed of assets

in which a QFC retail scheme cannot invest are used to track or gain high

exposure to the index, the index should be at least diversified in a way that is

equivalent to the diversification achieved for the scheme by part 7.3.

4 If derivatives on that index are used for risk-diversification purposes and the

exposure of the scheme to the index complies with part 7.3, there is no need

to look at the underlying components of the index to ensure that it is

sufficiently diversified.

7.4.11 Delivery of property under transactions in derivatives and forward transactions—QFC retail schemes

A transaction in a derivative or a forward transaction by a QFC retail

scheme that will or could lead to the delivery of property for the

scheme may be entered into only if—

(a) the property can be held for the scheme; and

(b) the operator, having taken reasonable care, decides that delivery

of the property under the transaction will not happen or will not

lead to a breach of these rules.

Note Property and breach are defined in the glossary.

7.4.12 Requirement to cover sales—QFC retail schemes

(1) An agreement must not be made by or on behalf of a QFC retail

scheme to dispose of property or rights unless—

(a) the obligation to make the disposal and any other similar

obligation could immediately be honoured by the scheme by

delivery of property or the assignment of rights; and

(b) the property or rights mentioned in paragraph (a) are owned by

the scheme at the time the agreement is made.

(2) Subrule (1) does not apply to a deposit.

Note Deposit is defined in the glossary.


Rule 7.4.13


(3) Subrule (1) does not apply if—

(a) the risks of the underlying financial instrument of a derivative

can be appropriately represented by another financial instrument

and the underlying financial instrument is liquid; or

(b) the operator or independent entity has the right to settle a

derivative in cash, and cover exists within the scheme property

that falls within 1 or more of the following asset classes:

(i) cash;

(ii) liquid debt instruments (for example, government bonds of

first credit rating) with appropriate safeguards (in

particular, haircuts);

(iii) other liquid assets having regard to their correlation with

the underlying of the financial derivative instrument,

subject to appropriate safeguards (for example, haircuts if

relevant).

(4) In the asset classes mentioned in subrule (3), an asset may be

considered as liquid if the financial instrument can be converted into

cash in no longer than 7 business days at a price closely corresponding

to the current valuation of the instrument on its own market.

7.4.13 OTC transactions in derivatives—QFC retail schemes

(1) A transaction in an OTC derivative under rule 7.4.9 (1) (b) (Permitted

transactions in derivatives and forward transactions—QFC retail

schemes) must be—

(a) with an approved counterparty (see subrule (2)); and

(b) on approved terms (see subrule (3)); and

(c) capable of valuation (see subrule (5)); and

(d) subject to verifiable valuation (see subrule (6)).



Rule 7.4.13


(2) For subrule (1) (a), a counterparty is an approved counterparty only

if the counterparty is an eligible bank.


(3) For subrule (1) (b), the terms of a transaction are approved terms if,

before the transaction is entered into, the independent entity is

satisfied that the counterparty has agreed with the operator—

(a) to provide a reliable and verifiable valuation in relation to the

transaction corresponding to its fair value at least daily and at

any other time at the operator’s request; or

(b) that it or an alternative counterparty will, at the operator’s

request, enter into a further transaction to sell, liquidate or close

out the transaction at a fair value at any time.

Note Close out is defined in the glossary.

(4) For subrule (3) (b), fair value is the amount for which an asset could

be exchanged, or a liability settled, between knowledgeable, willing

parties in an arm’s length transaction.

(5) For subrule (1) (c), a transaction in a derivative is capable of

valuation if the operator, having taken reasonable care, decides that,

if the transaction were entered into, it would be able to value the

investment throughout the life of the derivative with reasonable

accuracy on a basis of—

(a) an up-to-date market value that the operator and independent

entity have agreed is reliable; and

(b) if paragraph (a) does not apply—a pricing model that the

operator and independent entity have agreed uses an adequate

recognised methodology.

(6) For subrule (1) (d), a transaction in a derivative is subject to verifiable

valuation if the operator, having taken reasonable care, decides that,


Rule 7.4.14


if the transaction were entered into, the valuation of the investment

would be verified throughout the life of the derivative by—

(a) an appropriate third party independent of the derivative’s

counterparty, at an adequate frequency and in such a way that

the operator can check it; or

(b) a department within the operator that is independent of the

department in charge of managing the scheme property and is

adequately equipped to verify the valuation.

(7) Without limiting rule 4.2.3 (Oversight functions of independent

entity—all QFC schemes), the independent entity must take

reasonable care to ensure that the operator has systems and controls

that are adequate to ensure compliance with this rule.

7.4.14 Risk management for transactions in derivatives and forward transactions—QFC retail schemes

(1) The operator of a QFC retail scheme must use a risk management

process that enables it to monitor and measure, as frequently as

appropriate, the risks associated with—

(a) the scheme’s derivatives and forward positions; and

(b) their contribution to the overall risk profile of the scheme.

(2) The operator must tell the Regulatory Authority about the following

details of the risk management process before using the process:

(a) the methods for estimating risks in derivative and forward

transactions;

(b) the types of derivatives and forward transactions to be used

within the scheme together with their underlying risks and any

relevant quantitative limits.

(3) The operator must tell the Regulatory Authority in advance about any

material change proposed for the details of the risk management

process mentioned in subrule (2) (a) or (b).


Rule 7.4.15


Guidance on risk management process

1 The risk management process for a QFC retail scheme should take account of

the investment objectives, strategies and policy of the scheme as stated in the

constitutional document and latest filed prospectus.

2 The independent entity should take reasonable care to review the

appropriateness of the risk management process in accordance with its

functions under these rules.

3 The operator is expected to demonstrate more sophistication in its risk

management process for a QFC retail scheme with a complex risk profile than

for a QFC retail scheme with a simple risk profile. In particular, the risk

management process should take account of any characteristic of non-linear

dependence in the value of a position to its underlying.

4 The operator should take reasonable care to establish and maintain the systems

and controls appropriate to its business that are required by CTRL.

5 The risk management process should enable the re-calculation required by rule

7.5.3 (Continuing nature of limits and requirements for derivatives and

forward positions—QFC retail schemes) to be undertaken at least daily or at

each valuation point, whichever the more frequent.

6 The operator should undertake the risk assessment with the highest degree of

care if the counterparty to the derivative is an associate of the operator or the

credit issuer.

Division 7.4.F Deposits—QFC retail schemes

7.4.15 Investments in deposits—QFC retail schemes

A QFC retail scheme may invest in a deposit if—

(a) it is with an eligible bank; and

(b) it is either—

(i) repayable on demand; or

(ii) has the right to be withdrawn; and

(c) it matures in no longer than 12 months.

Note Deposit, eligible bank and month are defined in the glossary.

Investment and borrowing—QFC retail schemes Chapter 7 Exposure for derivatives and forward transactions—QFC retail

schemes Part 7.5

Rule 7.5.1


Part 7.5 Exposure for derivatives and forward transactions—QFC retail schemes

Guidance for pt 7.5

1 A scheme may invest in derivatives and forward transactions if the exposure

to which the scheme is committed by the transaction itself is suitably covered

from within the scheme property. Exposure will include any initial outlay in

relation to the transaction.

2 Cover ensures that a scheme is not exposed to the risk of loss of property,

including money, to an extent greater than the scheme’s net asset value at any

time. Therefore, a scheme is required to hold scheme property sufficient in

value or amount to match the exposure arising from a derivative obligation to

which the scheme is committed. Rule 7.5.1 (Cover for transactions in

derivatives and forward transactions—QFC retail schemes) sets out detailed

requirements for cover.

3 In accordance with rule 7.1.3 (2) (b) (Treatment of obligations under ch 7—

QFC retail schemes), cover used in relation to a transaction in a derivative or

forward transaction must not be used for cover in relation to another

transaction in a derivative or forward transaction.

7.5.1 Cover for transactions in derivatives and forward

transactions—QFC retail schemes

(1) A transaction in a derivative or a forward transaction may be entered

into by the operator of a QFC retail scheme only if the maximum

exposure, in terms of the principal or notional principal created by the

transaction to which the scheme is or may be committed by another

person, is covered globally under subrule (2).

Note Derivative, principal and notional principal are defined in the glossary.

(2) Exposure is covered globally if adequate cover from within the

scheme property is available to meet the scheme’s total exposure,

taking into account the value of the underlying assets, any reasonably

foreseeable market movement, counterparty risk, and the time

available to liquidate any positions.

Chapter 7 Investment and borrowing—QFC retail schemes Part 7.5 Exposure for derivatives and forward transactions—QFC retail

schemes

Rule 7.5.2


(3) Cash not yet received into the scheme property but due to be received

within 1 month is available as cover for subrule (2).


(4) Property that is the subject of a transaction under part 7.6 (Stock

lending and repos—QFC retail schemes) is only available for cover

if the operator has taken reasonable care to decide that it is obtainable

(by return or re-acquisition) in time to meet the obligation for which

cover is required.

(5) The total exposure relating to derivatives held in the scheme property

must not at any time exceed the scheme’s net asset value.


7.5.2 Borrowing not available for cover—QFC retail schemes

(1) Cash obtained from borrowing by or for a QFC retail scheme, and

borrowing that the operator of a QFC retail scheme reasonably

regards an eligible bank to be committed to provide, is not available

for cover under rule 7.5.1 (Cover for transactions in derivatives and

forward transactions—QFC retail schemes).

Note Borrowing and eligible bank are defined in the glossary.

(2) If a QFC retail scheme, or the independent entity of a QFC retail

scheme acting for the scheme on the operator’s instructions—

(a) borrows an amount of currency from an eligible bank; and

(b) keeps an amount in another currency, at least equal to that

borrowing for the time being, on deposit with the eligible bank

(or its agent or nominee);

this part applies as if the borrowed currency, and not the deposited

currency, were part of the scheme property.

Investment and borrowing—QFC retail schemes Chapter 7 Exposure for derivatives and forward transactions—QFC retail

schemes Part 7.5

Rule 7.5.3


7.5.3 Continuing nature of limits and requirements for derivatives and forward positions—QFC retail schemes

(1) The operator of a QFC retail scheme must, as frequently as necessary,

re-calculate the amount of cover required in relation to derivatives

and forward positions already in existence under this chapter.

(2) Derivatives and forward positions may be retained in the scheme

property only so long as they remain covered globally under rule 7.5.1

(Cover for transactions in derivatives and forward transactions—QFC

retail schemes).

Chapter 7 Investment and borrowing—QFC retail schemes Part 7.6 Stock lending and repos—QFC retail schemes

Rule 7.6.1


Part 7.6 Stock lending and repos—QFC retail schemes

Notes for pt 7.6

1 This part covers techniques relating to transferable securities and money-

market instruments that are used for the purpose of efficient portfolio

management. It permits the generation of additional income for the benefit of

the QFC retail scheme (and its investors) by entry into stock lending

arrangements and repo agreements for the scheme.

2 The particular method of stock lending permitted in this part is in fact not a

transaction that is a loan in the normal sense. Rather it is an arrangement under

which the lender transfers securities to the borrower otherwise than by way of

sale and the borrower is to transfer the securities, or securities of the same type

and amount, back to the lender at a later date. In accordance with good market

practice, a separate transaction by way of transfer of assets is also involved in

stock lending arrangements to provide collateral to cover the ‘lender’ against

the risk that the future transfer back of the securities may not be satisfactorily

completed.

7.6.1 Stock lending and repos generally—QFC retail schemes

A QFC retail scheme may, or the independent entity of a QFC retail

scheme may on the operator’s instructions, enter into a stock lending

arrangement or repo agreement if it reasonably appears to the operator

to be appropriate to be entered into with a view to generating

additional income for the scheme with an acceptable degree of risk.


glossary.

7.6.2 Stock lending requirements—QFC retail schemes

(1) A stock lending arrangement may be entered into by or for a QFC

retail scheme only if all the following requirements are met:

(a) all the terms of the agreement under which securities are to be

reacquired by the independent entity for the scheme are in a

form that is acceptable to the independent entity and are in

accordance with good market practice;

Investment and borrowing—QFC retail schemes Chapter 7 Stock lending and repos—QFC retail schemes Part 7.6

Rule 7.6.3


(b) the counterparty is—

(i) an authorised firm; or

(ii) a person authorised (however described) under the law of

the State or a zone 1 country to deal in investments as

principal in relation to OTC derivatives and the person is

principally regulated by a regulatory or governmental

entity in that jurisdiction;

Note Authorised firm and OTC derivative are defined in the glossary.

Zone 1 country is defined in INAP.

(c) collateral is obtained to secure the obligation of the counterparty

under the terms mentioned in paragraph (a) and the collateral

is—

(i) acceptable to the independent entity; and

(ii) adequate under rule 7.6.3 (1) (Treatment of collateral for

stock lending—QFC retail schemes); and

(iii) sufficiently immediate under rule 7.6.3 (2).


(2) For subrule (1), the counterparty is the person who is obliged under

the agreement mentioned in subrule (1) (a) to transfer to the

independent entity—

(a) the securities transferred by the independent entity under the

stock lending arrangement; or

(b) securities of the same type and amount.

7.6.3 Treatment of collateral for stock lending—QFC retail schemes

Guidance on stock lending—treatment of collateral

If a stock lending arrangement is entered into for a QFC retail scheme, the value of

scheme property remains unchanged. The securities transferred cease to be part of

the scheme property, but there is an obligation by the counterparty to transfer back

the securities or equivalent securities. The independent entity will also receive


Rule 7.6.3


collateral to set against the risk of default in transfer. The collateral is equally

irrelevant to the valuation of the scheme property (because it is transferred against

an obligation of equivalent value by way of re-transfer). This rule accordingly

makes provision for the treatment of collateral in that context.

(1) For rule 7.6.2 (1) (c) (ii) (Stock lending requirements—QFC retail

schemes), collateral is adequate only if it is—

(a) transferred to the independent entity or its nominee or delegate,

as appropriate; and

(b) at the time of the transfer to the independent entity, at least equal

in value to the value of the securities transferred by the

independent entity; and

(c) in the form of 1 or more of the following:

(i) cash;

(ii) a certificate of deposit;

(iii) a letter of credit;

(iv) a readily realisable investment;

(v) commercial paper with no embedded derivative content.

(vi) units in an eligible money-market fund.

Note Collateral, readily realisable investment and eligible money-market

fund are defined in the glossary.

(2) For rule 7.6.2 (1) (c) (iii), collateral is sufficiently immediate if—

(a) it is transferred before or at the time of the transfer of the

securities by the independent entity; or

(b) the independent entity takes reasonable care to decide at the time

mentioned in paragraph (a) that it will be transferred at the latest

by the close of business on the day of the transfer.

(3) The independent entity must ensure that the value of the collateral is,

at all times, at least equal to the value of the securities transferred by

the independent entity.

Investment and borrowing—QFC retail schemes Chapter 7 Stock lending and repos—QFC retail schemes Part 7.6

Rule 7.6.4


(4) If the validity of any collateral expires or is about to expire, the

independent entity’s duty under subrule (3) is satisfied if the

independent entity takes reasonable care to ensure that sufficient

collateral will be transferred by close of business on the day of the

expiry.

(5) Any agreement for transfer at a future date of securities, collateral, or

the equivalent of either, under this rule may be regarded, for the

purposes of valuation under division 8.2.B (Valuation and pricing—

QFC retail schemes), or this chapter, as an unconditional agreement

for the sale or transfer of property, whether or not the property is part

of the property of the scheme.

(6) Collateral transferred to the independent entity is part of the scheme

property for these rules, except in the following respects:

(a) it must not be included in any valuation for division 8.2.B or this

chapter, because it is offset under subrule (5) by an obligation to

transfer;

(b) it does not count as scheme property for any purpose of this

chapter other than this rule.

(7) Subrules (5) and (6) (a) do not apply to any valuation of collateral

itself for this rule.

7.6.4 No limits on stock lending and repos—QFC retail schemes

(1) There is no limit on the value of the scheme property of a QFC retail

scheme that may be the subject of stock lending arrangements or repo

agreements under this part.

(2) However, the use of stock lending arrangements or repo agreements,

or the reinvestment of cash collateral, must not—

(a) result in a change of the scheme’s investment objectives,

strategies and policy; or

(b) add substantial supplementary risks to the scheme’s risk profile.


Rule 7.6.4


(3) Collateral in the form of cash may only be invested in 1 or more of

the following:

(a) certificates of deposit;

(b) letters of credit;

(c) readily realisable investments;

(d) commercial paper with no embedded derivative component;

(e) units in an eligible money-market fund;

(f) deposits, but only if the deposits—

(i) are with an eligible bank; and

(ii) can be withdrawn within 5 business days or any shorter

period required under the stock lending arrangement.

Note Readily realisable investment, eligible money-market fund, deposit and

eligible bank are defined in the glossary.

(4) If a QFC retail scheme generates leverage through the reinvestment

of collateral, this must be taken into account in calculating the

scheme’s global exposure.

Investment and borrowing—QFC retail schemes Chapter 7 Cash, borrowing, lending and other provisions—QFC retail schemes Part 7.7

Rule 7.7.1


Part 7.7 Cash, borrowing, lending and other provisions—QFC retail schemes

7.7.1 Cash and near cash—QFC retail schemes

(1) Cash and near cash must not be retained in the scheme property of a

QFC retail scheme except to the extent that its retention may

reasonably be regarded as necessary to enable any of the following:

(a) the pursuit of scheme’s investment objectives, strategies and

policy;

(b) the redemption of units;

(c) the efficient management of the scheme in accordance with its

investment objectives, strategies and policy;

(d) other purposes that may reasonably be regarded as ancillary to

the scheme’s investment objectives, strategies and policy.

Note Near cash and redemption are defined the glossary.

(2) However, during the period of the initial offer, the scheme property

may consist of cash and near cash without any limit.

Note Initial offer is defined in the glossary.

7.7.2 General power to borrow—QFC retail schemes

(1) A QFC retail scheme that is a CIC or CIP may, in accordance with

this rule and rule 7.7.3 (Borrowing limits—QFC retail schemes),

borrow money for the use of the scheme on terms that the borrowing

is to be repaid out of the scheme property.

Note CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively. Borrowing


(2) The independent entity of a QFC retail scheme that is a CIT may, on

the operator’s instructions and in accordance with this rule and

Chapter 7 Investment and borrowing—QFC retail schemes Part 7.7 Cash, borrowing, lending and other provisions—QFC retail schemes

Rule 7.7.2


rule 7.7.3, borrow money for the use of the scheme on terms that the

borrowing is to be repaid out of the scheme property.

Note CIT is defined in r 1.3.9.

(3) Subrules (1) and (2) are subject to the obligation of the scheme to

comply with any restriction in the constitutional document.


(4) Money may be borrowed under subrule (1) or (2) only from an

eligible bank.


(5) The operator must ensure that any borrowing is on a temporary basis

and that borrowings are not persistent.

(6) For subrule (5), the operator must have regard in particular to the

following:

(a) the duration of any borrowing;

(b) the number of times the scheme borrows in any period.

(7) Without limiting subrule (5), the operator must ensure that no

borrowing is for longer than 3 months, whether in relation to a

particular amount or at all, without the independent entity’s prior

agreement.

(8) The independent entity may give its agreement under subrule (7) in

relation to a borrowing only on the conditions that appear to the

independent entity appropriate to ensure that the borrowing does not

cease to be on a temporary basis only.

(9) A CIC or CIP must not issue any debt instrument unless it

acknowledges or creates a borrowing that complies with subrules (1),

(3) and (4).

Note Debt instrument is defined in the glossary.

(10) This rule does not apply to back-to-back borrowing.

Note Back-to-back borrowing is defined in the glossary.


Rule 7.7.3


7.7.3 Borrowing limits—QFC retail schemes

(1) The operator of a QFC retail scheme (other than a retail property

fund) must ensure that the scheme’s total borrowing does not, on any

day, exceed 10% of its net asset value.

Note For the limits on borrowing by QFC retail property funds, see rule 12.5.9.

(2) This rule does not apply to back-to-back borrowing.

7.7.4 Restrictions on lending money—QFC retail schemes

(1) None of the money in the scheme property of a QFC retail scheme

may be lent.

Note Money is defined in the glossary.

(2) For subrule (1), money is lent by the scheme if it is paid to a person

on the basis that it must be repaid, whether or not by that person.

(3) However, for subrule (1), the following are not lending:

(a) acquiring a debt instrument;

(b) placing money on deposit or in a current account.

Note Debt instrument is defined in the glossary.

(4) This rule does not prevent a QFC retail scheme that is a CIC or CIP

from—

(a) providing an officer of the scheme with funds to meet

expenditure to be incurred by the officer for the purposes of—

(i) the scheme; or

(ii) to perform duties as an officer of the scheme; or

(b) doing anything to enable an officer of the scheme to avoid

expenditure mentioned in paragraph (a).



Rule 7.7.5


(5) In this rule:

officer, of a CIC or CIP, means—

(a) a member of the governing body of the CIC or CIP; or

(b) the chief executive, manager, secretary, or other similar officer,

of the CIC or CIP.

7.7.5 Restrictions on lending property other than money—QFC retail schemes

(1) The scheme property of a QFC retail scheme other than money must

not be lent by way of deposit or otherwise.

(2) For subrule (1), transactions permitted by part 7.6 (Stock lending and

repos—QFC retail schemes) are not lending.

(3) The scheme property must not be mortgaged.

(4) If transactions in derivatives or forward transactions are used for a

QFC retail scheme in accordance with this chapter, this rule does not

prevent the scheme, or the independent entity on the operator’s

instructions, from—

(a) lending, depositing, pledging or charging scheme property for

margin requirements; or

(b) transferring property under the terms of an agreement in relation

to margin requirements, if the operator reasonably considers that

both the agreement and the margin requirements made under it

(including in relation to the level of margin) provide appropriate

protection to unitholders.

Note Margin is defined in the glossary.

7.7.6 General power to accept or underwrite placings—QFC retail schemes

(1) This rule applies to any agreement entered into by a QFC retail

scheme—

(a) that is an underwriting or sub-underwriting agreement; or


Rule 7.7.6


(b) that contemplates that securities will or may be issued,

subscribed or acquired for the scheme.

Note Securities is defined in the glossary.

(2) However, this rule, does not apply to—

(a) an option; or

(b) a purchase of a transferable security that gives a right to—

(i) subscribe for or acquire a transferable security; or

(ii) convert a transferable security into another transferable

security.

Note Option is defined in the glossary. Transferable security is defined in

r 7.1.6.

(3) Any power in this chapter to invest in transferable securities may be

used by the QFC retail scheme for the purpose of entering into an

agreement to which this rule applies, subject to any restriction in the

constitutional document being complied with.


(4) The exposure of the QFC retail scheme to agreements to which this

rule applies must, on any day, be—

(a) covered under rule 7.5.1 (Cover for transactions in derivatives

and forward transactions—QFC retail schemes); and

(b) such that, if all possible obligations arising under them had

immediately to be met in full, there would be no breach of this

chapter.

(5) In this rule:

agreement includes understanding.


Rule 7.7.7


7.7.7 Guarantees and indemnities—QFC retail schemes

(1) A QFC retail scheme, and the independent entity of a QFC retail

scheme, must not provide any guarantee or indemnity in relation to

the obligation of any person.

(2) None of the scheme property of a QFC retail scheme may be used to

discharge any obligation arising under a guarantee or indemnity in

relation to the obligation of any person.

(3) This rule does not apply to any of the following:

(a) any indemnity or guarantee given for margin requirements if the

derivatives or forward transactions are being used in accordance

with the provisions of this chapter;

Note Margin and derivative are defined in the glossary.

(b) any indemnity given to the independent entity against any

liability incurred by it in safeguarding the scheme property;

(c) any indemnity given by the scheme or the independent entity to

another person if—

(i) the other person is engaged to assist the independent entity

to safeguard any of the scheme property; and

(ii) the indemnity is against any liability incurred by the other

person in safeguarding scheme property;

(d) for a CIC or CIP—an indemnity given to a person winding up a

corporation or scheme (the relevant entity) if the indemnity is

given for the purposes of arrangements by which all or part of

the property of the relevant entity becomes the first property of

the CIC or CIP and the shareholders or unitholders of the

relevant entity become the first unitholders of the CIC or CIP;

Note CIC and CIP are defined in r 1.3.7 and 1.3.8 respectively.

Corporation is defined in the glossary.

(e) for a CIT—an indemnity given to a person winding up a

corporation or scheme if all or part of the property of the


Rule 7.7.7


corporation or scheme is to become part of the scheme property

of the CIT by way of unitisation.

Note CIT is defined in r 1.3.9. Unitisation is defined in the glossary.

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.1 Dealing—QFC schemes

Rule 8.1.1


Chapter 8 Operating duties and responsibilities—QFC schemes

Notes for ch 8

1 This chapter provides the operating framework within which a QFC scheme

must be operated on a day-to-day basis to ensure that persons are treated fairly

when they become, while they remain, or as they cease to be, unitholders.

2 The operator operates the scheme on a day-to-day basis. Its operation is

governed particularly by the provisions of this chapter.

3 The operator does not necessarily have to carry out all the activities it is

responsible for and may outsource functions to others. This chapter sets out

the parameters of any outsourcing.

4 The independent entity’s duty is, generally speaking, to safeguard the scheme

property and to oversee certain functions of the operator (most notably the

dealing, valuation, pricing and investment functions).

Part 8.1 Dealing—QFC schemes

Division 8.1.A Dealing—QFC qualified investor schemes

8.1.1 Application of div 8.1.A to umbrella schemes—QFC qualified investor schemes

(1) This division applies to each subscheme of a QFC qualified investor

scheme that is an umbrella scheme as if it were a separate QFC



(2) The currency of a subscheme may, if appropriate, be used for the

subscheme instead of the base currency of the umbrella scheme.

Note Base currency is defined in the glossary.

Operating duties and responsibilities—QFC schemes Chapter 8 Dealing—QFC schemes Part 8.1

Rule 8.1.2


8.1.2 Initial offer—QFC qualified investor schemes

(1) The period of the initial offer for a QFC qualified investor scheme,

and how it ends, must be set out in the latest filed prospectus and must

not be of unreasonable length.

Note Initial offer and latest filed prospectus are defined in the glossary.

(2) During the initial offer period, units may only be issued at the initial

price.

Note Initial price is defined in the glossary.

8.1.3 How units are issued and redeemed etc—QFC qualified investor schemes

(1) Units in a QFC qualified investor scheme are issued or redeemed on

behalf of the scheme by the operator making a record of—

(a) the issue or redemption; and

(b) the number or percentage of the units in each class that are

issued or redeemed.

Note Issue, redemption and class are defined in the glossary.

(2) Units in a QFC qualified investor scheme cannot be issued or

redeemed in any other way.

(3) The time of an issue or redemption under subrule (1) is the time the

record is made.

(4) The operator of a QFC qualified investor scheme may arrange for the

independent entity to issue or redeem units on behalf of the scheme

if the operator would otherwise be obliged to issue or redeem the units

on behalf of the scheme.


Rule 8.1.4


8.1.4 Controls over issue and redemption of units—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must ensure that at

each valuation point there are at least as many units in issue of any

class as there are units registered to unitholders of that class.

Note Valuation point and class are defined in the glossary.

(2) In issuing or redeeming units, the operator must not do, or fail to do,

anything that would, or might, give the operator, or an associated

person for the operator, a benefit or advantage at the expense of a

unitholder or potential unitholder.

Note Issue, redemption and associated person are defined in the glossary.

(3) The operator must, as required by these rules and the latest filed

prospectus—

(a) issue and redeem units on behalf of the scheme; and

(b) arrange for the payment of money or transfer of assets to or from

the independent entity for scheme.

Note Money and latest filed prospectus are defined in the glossary.

(4) The operator of must keep a record of the issues and redemptions it

makes.

(5) If the operator breaches subrule (1) or (2), it must—

(a) correct the breach as quickly as possible; and

(b) reimburse the scheme any costs the scheme may have incurred

in correcting the breach, subject to any reasonable minimum

level for reimbursement provided in the latest filed prospectus.



Rule 8.1.5


8.1.5 Issue and redemption of units in multiple classes—QFC qualified investor schemes

(1) This rule applies to a QFC qualified investor scheme if the scheme

has 2 or more classes of units in issue.


(2) The operator may treat all, or any 2 or more, of the classes (the

relevant classes) as a single class in deciding how many units are to

be issued or redeemed by reference to a particular valuation point if—

(a) either—

(i) the relevant classes have the same entitlement to

participate in the scheme property, and the same liability

for charges, expenses, and other payments, that may be

recovered from the scheme property; or

(ii) the relevant classes differ only as to whether income is

distributed or accumulated by periodic credit to capital, and

the price of the units in each class is calculated by reference

to undivided shares in the scheme property; and

(b) the independent entity gives its prior agreement.

8.1.6 Issue and redemption generally—QFC qualified investor schemes

(1) The operator of a QFC qualified investor scheme must, at all times

during a dealing day, be willing to issue units on behalf of the scheme

to any eligible person in accordance with any conditions stated in the

constitutional document and the latest filed prospectus, unless the

operator has reasonable grounds to refuse the issue.

Note Dealing day, issue and latest filed prospectus are defined in the glossary.

Constitutional document is defined in r 3.1.1.

(2) Conditions mentioned in subrule (1) must be fair and reasonable as

between all unitholders and potential unitholders.


Rule 8.1.6


(3) The operator of a QFC qualified investor scheme must, at all times

during a dealing day, be willing to redeem on behalf of the scheme

units of an eligible unitholder in accordance with any conditions in

the constitutional document and the latest filed prospectus, unless the

operator has reasonable grounds to refuse the redemption.

Note Redemption is defined in the glossary.

(4) On agreeing to redeem units under subrule (3), the operator must

arrange for the independent entity to pay the appropriate proceeds of

the redemption to the unitholder within any reasonable period

provided in the constitutional document or the latest filed prospectus,

unless the operator or independent entity has reasonable grounds for

withholding payment.

(5) Payment of proceeds on redemption must be made in any way

provided in the latest filed prospectus.

(6) The way provided for in the latest filed prospectus for subrule (5)

must be fair as between redeeming unitholders and continuing

unitholders.

(7) The operator must issue or redeem units at a price calculated at the

next valuation point for dealing purposes after receiving the

instructions to issue or redeem the units.

(8) If a QFC qualified investor scheme is operating limited redemption

arrangements, the arrangements must provide for the operator to

redeem units in the scheme at least once every 6 months.

Note Limited redemption arrangements is defined in the glossary.

Guidance on limited redemption periods

The maximum period between dealing days for a QFC qualified investor scheme

will depend on the reasonable expectations of the target investor group and the

particular investment objectives, strategies and policy of the scheme. For example,

for a scheme aiming to invest in large property developments, the expectation

would be that it is reasonable to have a longer period between dealing days for

liquidity reasons than for a scheme investing predominantly in listed securities.


Rule 8.1.7


8.1.7 When instructions for issue and redemption must be given—QFC qualified investor schemes

(1) The latest filed prospectus of a QFC qualified investor schemes must

fix a time before a valuation point (the cut-off point) after which the

operator must not accept instructions to issue or redeem units on

behalf of the scheme at the valuation point.

(2) The cut-off point must not be earlier than the close of business on the

business day before the valuation point to which it relates.

(3) However, if there are 2 or more valuation points on a day, the cut-off

point for a valuation point must not be earlier than the valuation point

immediately before it.

Examples

If there are 3 valuations points at 10 am, 12 noon and 2 pm on a business day (the

relevant day), the cut-off points for the valuations points must comply with the

following:

(a) the cut-off point for the 10 am valuation point cannot be earlier than the close

of business on the business day before the relevant day;

(b) the cut-off point for the 12 noon valuation point cannot be earlier than 10 am

on the relevant day;

(c) the cut-off point for the 2 pm valuation point cannot be earlier than 12 noon

on the relevant day.

(4) Different cut-off points may be used to differentiate between the

methods of submitting instructions to redeem to the operator but not

to differentiate between unitholders or potential unitholders.

8.1.8 Limited issue—QFC qualified investor schemes

If a QFC qualified investor scheme limits the issue of units in any

class, units in the class can only be issued if the issue—

(a) is in accordance with the constitutional document and the latest

filed prospectus; and


Rule 8.1.9


(b) will not materially prejudice any existing unitholders.

Note Issue, class and latest filed prospectus are defined in the glossary.


8.1.9 Issue only to qualified investors—QFC qualified investor schemes

To remove any doubt, the operator of a QFC qualified investor

scheme must not issue units in the scheme to a person who is not a

qualified investor for the scheme.

Note Issue is defined in the glossary. Qualified investor, for a QFC scheme, is

defined in r 1.2.12 (2).

Division 8.1.B Dealing—QFC retail schemes

Notes for div 8.1.B

1 The operator of a QFC retail scheme is responsible for issuing and redeeming

units on behalf of the scheme. The provisions of this division are intended to

ensure that the operator treats persons fairly if they give instructions to the

operator to issue or redeem units.

2 This division also sets out common standards for how the amounts in relation

to unit transactions are to be paid. These arrangements include the initial offer

of units and the exchange of units for scheme property.

8.1.10 Application of div 8.1.B to umbrella schemes—QFC retail schemes

(1) This division applies to each subscheme of a QFC retail scheme that

is an umbrella scheme as if it were a separate QFC retail scheme.




Note 1 Base currency is defined in the glossary.

Note 2 Details of the initial offer must be provided in any prospectus available

during the initial offer period (see r S4.16 (c) (Dealing)).


Rule 8.1.11


8.1.11 Initial offers—QFC retail schemes

(1) During the initial offer period for a QFC retail scheme, units may only

be issued at the initial price.

Note Initial offer and initial price are defined in the glossary.

(2) The length of the initial offer period must not be unreasonable, taking

into account the characteristics of the scheme.

(3) The period of the initial offer comes to an end if the operator believes

on reasonable grounds that the price that would reflect the current

value of the scheme property would differ from the initial price by

more than 2%.

8.1.12 How units are issued and redeemed etc—QFC retail schemes

(1) Units in a QFC retail scheme are issued or redeemed on behalf of the

scheme by the operator making a record of—

(a) the issue or redemption; and

(b) the number or percentage of the units in each class that are

issued or redeemed.

Note Issue, redemption and class are defined in the glossary.

(2) Units in a QFC retail scheme cannot be issued or redeemed in any

other way.

(3) The time of an issue or redemption under subrule (1) is the time the

record is made.

(4) The operator of a QFC retail scheme may arrange for the independent

entity to issue or redeem units on behalf of the scheme if the operator

would otherwise be obliged to issue or redeem the units on behalf of

the scheme.


Rule 8.1.13


8.1.13 Controls over issue and redemption of units—QFC retail schemes

(1) The operator of a QFC retail scheme must ensure that at each

valuation point there are at least as many units in issue of any class as

there are units registered to unitholders of that class.

Note Valuation point and class are defined in the glossary.

(2) In issuing or redeeming units, the operator must not do, or fail to do,

anything that would, or might, give the operator, or an associated

person for the operator, a benefit or advantage at the expense of a

unitholder or a potential unitholder.

Note Issue, redemption and associated person are defined in the glossary.

(3) The operator must, as required by these rules and the latest filed

prospectus—

(a) issue and redeem units on behalf of the scheme; and

(b) arrange for the payment of money or transfer of assets to or from

the independent entity for the scheme.

Note Money and latest filed prospectus are defined in the glossary.

(4) The operator must keep a record of the issues and redemptions it

makes.

(5) If the operator breaches subrule (1) or (2), it must—

(a) correct the breach as quickly as possible; and

(b) reimburse the scheme any costs the scheme may have incurred

in correcting the breach, subject to any reasonable level for

reimbursement provided in the latest filed prospectus.


(6) The operator must have systems and controls to ensure compliance

with subrule (1).


Rule 8.1.14


Guidance for controls

1 GENE principle 4 requires an authorised firm to have effective systems and

controls. GENE principle 7 requires an authorised firm to have regard to its

customers’ interests and to treat them fairly.

2 The operator should agree a period with the independent entity during which

the operator will issue or redeem units. A period up to the next valuation point,

but in all cases within 24 hours, may be acceptable if the provisions mentioned

in paragraph 1 are complied with.

8.1.14 Issue and redemption of units in multiple classes—QFC retail schemes

(1) This rule applies to a QFC retail scheme if the scheme has 2 or more

classes of units in issue.


(2) The operator may treat all, or any 2 or more, of the classes (the

relevant classes) as a single class in deciding how many units are to

be issued or redeemed by reference to a particular valuation point if—

(a) either—

(i) the relevant classes have the same entitlement to

participate in the scheme property, and the same liability

for charges, expenses, and other payments, that may be

recovered from the scheme property; or

(ii) the relevant classes differ only as to whether income is

distributed or accumulated by periodic credit to capital, and

the price of the units in each class is calculated by reference

to undivided shares in the scheme property; and

(b) the independent entity gives its prior agreement.

8.1.15 Changes to number of units issued or redeemed—QFC retail schemes

(1) Any instructions to the operator of a QFC retail scheme for the issue

or redemption of units may be altered to change the number of units


Rule 8.1.16


issued or redeemed if the independent entity, after having taken

reasonable care in considering the matter—

(a) is satisfied that—

(i) the alteration corrects an error in the instruction; and

(ii) the error is an isolated error; and

(b) agrees with the change.

(2) However, the instruction may be altered only within the period within

which payment must be made in relation to the unit under rule 8.1.16

(Payment for issued units—QFC retail schemes) or rule 8.1.19

(Payment for redeemed units—QFC retail schemes).

8.1.16 Payment for issued units—QFC retail schemes

(1) The operator of a QFC retail scheme must not issue units in the

scheme to a person unless the person has paid the independent entity

the price of the units and any payments required under rule 8.2.16

(Dilution—QFC retail schemes).

Note Issue and price are defined in the glossary.

(2) Any payment made to the independent entity under this rule must be

in cash or cleared funds unless rule 8.1.20 (Issue or redemption

otherwise than for cash—QFC retail schemes) applies.

(3) If the operator breaches this rule, the operator must reimburse the

scheme for any lost interest unless the amount involved is not, in the

independent entity’s opinion, material to the scheme.

8.1.17 Issue and redemption generally—QFC retail schemes

(1) The operator of a QFC retail scheme must, at all times during a

dealing day, be willing to issue units on behalf of the scheme to any

person in accordance with any conditions stated in the constitutional

document and the latest filed prospectus, unless the operator has

reasonable grounds to refuse the issue.

Note Dealing day, issue and latest filed prospectus are defined in the glossary.



Rule 8.1.18


(2) Conditions mentioned in subrule (1) must be fair and reasonable as

between all unitholders and potential unitholders.

(3) The operator of a QFC retail scheme must, at all times during a

dealing day, be willing to redeem on behalf of the scheme units of a

unitholder, unless the operator has reasonable grounds to refuse the

redemption.


(4) Subject to rule 8.1.21 (Deferred redemption—QFC retail schemes),

the operator of a QFC retail scheme must issue or redeem units at a

price calculated at the next valuation point for dealing purposes after

the operator receives instructions to issue or redeem the units.

8.1.18 When instructions for issue or redemption must be given—QFC retail schemes

(1) The latest filed prospectus of a QFC retail scheme must fix a time

before a valuation point (the cut-off point) after which the operator

must not accept instructions to issue or redeem units on behalf of the

scheme at the valuation point.

(2) The cut-off point must not be earlier than the close of business on the

business day before the valuation point to which it relates.

(3) However, if there are 2 or more valuation points on a day, the cut-off

point for a valuation point must not be earlier than the valuation point

immediately before it.

Examples

If there are 3 valuations points at 10 am, 12 noon and 2 pm on a business day (the

relevant day), the cut-off points for the valuations points must comply with the

following:

(a) the cut-off point for the 10 am valuation point cannot be earlier than the close

of business on the business day before the relevant day;

(b) the cut-off point for the 12 noon valuation point cannot be earlier than 10 am

on the relevant day;


Rule 8.1.19


(c) the cut-off point for the 2 pm valuation point cannot be earlier than 12 noon

on the relevant day.

Note Rule 8.1.21 (Deferred redemption—QFC retail schemes) allows, in

certain circumstances, redemptions at a valuation point to be deferred to

the next valuation point.

(4) Different cut-off points may be used to differentiate between the

methods of submitting instructions to redeem to the operator but not

to differentiate between unitholders or potential unitholders.

8.1.19 Payment for redeemed units—QFC retail schemes

(1) If the operator of a QFC retail scheme redeems units on behalf of the

scheme, the operator must, before the close of business on the 4th

business day after the day the units are redeemed (or, if later, as soon

as practicable after delivery to the independent entity of the evidence

of title to the units that the independent entity may reasonably

require), request the independent entity to pay the former unitholder

the price of the units less any deduction required under rule 8.2.16

(Dilution—QFC retail schemes).

Note Redemption, business day and price are defined in the glossary.

(2) The independent entity must make the payment to the unitholder

before the close of business on the 6th business day after the day the

independent entity receives the request under subrule (1).

(3) If the scheme property does not, and will not within the period

required by subrule (2), include sufficient cash to make the payment

in the appropriate currency within that period and the scheme cannot

borrow the amount needed to make the payment without breaching

rule 7.7.3 (Borrowing limits—QFC retail schemes)), the period is

extended, for the relevant currency, until the shortage is rectified.

Note Borrowing is defined in the glossary.

(4) If subrule (3) applies, the operator must take reasonable steps to

rectify the currency shortage as quickly as possible.

(5) This rule does not apply if the rule 8.1.20 (Issue or redemption

otherwise than for cash—QFC retail schemes) applies.


Rule 8.1.20


(6) This rule does not require the independent entity or operator to pay

an amount or transfer scheme property for a redemption of units if an

amount is owing on the earlier issue of the units.

Note Redemption and issue are defined in the glossary.

8.1.20 Issue or redemption otherwise than for cash—QFC retail schemes

The independent entity of a QFC retail scheme may take into or

transfer out of the scheme property assets other than cash as payment

for the issue or redemption of units, but only if—

(a) it has taken reasonable care to ensure that the assets would not

be likely to result in any material prejudice to the interests of

unitholders; and

(b) the constitutional document and the latest filed prospectus

permit it.

Note Issue and redemption are defined in the glossary. Constitutional


8.1.21 Deferred redemption—QFC retail schemes

(1) If a QFC retail schemes has at least 1 valuation point on each business

day, the constitutional document and latest filed prospectus may

permit deferral of redemptions at a valuation point to the next

valuation point if the requested redemptions exceed—

(a) 10% of the scheme’s value; or

(b) if the latest filed prospectus provides another reasonable

percentage—that percentage of the scheme’s value.

Note Constitutional document is defined in r 3.1.1. Latest filed prospectus,

business day, redemption and valuation point are defined in the glossary.

(2) Any deferral of redemptions under subrule (1) must be undertaken in

accordance with the procedures explained in the latest filed

prospectus.


Rule 8.1.21


(3) The procedures must ensure—

(a) the consistent treatment of all unitholders who have sought to

redeem units at any valuation point at which redemptions are

deferred; and

(b) that all deals relating to an earlier valuation point are completed

before deals relating to a later valuation point are considered.


Operating duties and responsibilities—QFC schemes Chapter 8 Valuation and pricing—QFC schemes Part 8.2

Rule 8.2.1


Part 8.2 Valuation and pricing—QFC schemes

Division 8.2.A Valuation and pricing—QFC qualified investor schemes

8.2.1 Application of div 8.2.A to umbrella schemes—QFC qualified investor schemes

(1) This division applies in relation to each subscheme of a QFC qualified

investor scheme that is an umbrella scheme as if it were a separate

QFC qualified investor scheme.





8.2.2 Valuation—QFC qualified investor schemes

(1) For these rules, the value of the scheme property of a QFC qualified

investor scheme is its net asset value.


(2) To calculate the price of units in the scheme, the operator must

conduct a fair and accurate valuation of all scheme property, on a

forward price basis, in accordance with—


(b) the constitutional document and latest filed prospectus.

Note Constitutional document is defined in r 3.1.1. Forward price and latest


(3) The valuation of investments held as part of the scheme property must

reflect their mid-market value.

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.2 Valuation and pricing—QFC schemes

Rule 8.2.3


(4) If single prices are quoted for both buying and selling investments,

the latest filed prospectus must explain how the investments must be

valued.

(5) If the scheme invests in approved money-market instruments, the

operator must value an approved money-market instrument on an

amortised cost basis if the instrument has a residual maturity of less

than 3 months and has no specific sensitivity to market parameters,

including credit risk.


(6) Any part of the scheme property that is not an investment must be

valued by the operator at a fair value.

Note Investment is defined in the glossary.

(7) An interest in an immovable must be valued by the scheme’s standing

independent valuer under division 6.2.C.

(8) Any fiscal charges, commissions, professional fees or other charges

that were paid, or would be payable, on acquiring or disposing of an

investment or other part of the scheme property must be excluded

from the value of the investment or other part of the scheme property.

8.2.3 Valuation points—QFC qualified investor schemes

(1) A QFC qualified investor scheme must have a valuation point on each

dealing day, other than a dealing day during the initial offer period.

Note Valuation point, dealing day and initial offer are defined in the glossary.

(2) The operator must prepare a valuation of the scheme property in

accordance with rule 8.2.2 at each valuation point.

8.2.4 Prices of units—QFC qualified investor schemes

(1) The price of the unit at a valuation point must be calculated by the

operator—

(a) on the basis of the valuation under rule 8.2.3 (2) at the valuation

point; and


Rule 8.2.5


(b) in a way that is fair and reasonable as between unitholders; and

(c) in a way that is otherwise in accordance with the constitutional

document and latest filed prospectus.

Note Constitutional document is defined in r 3.1.1. Valuation point and

latest filed prospectus are defined in the glossary.

(2) The operator must publish in an appropriate way the price of each

class of unit in the scheme, based on each valuation under

rule 8.2.3 (2).

Note Price and class are defined in the glossary.

Division 8.2.B Valuation and pricing—QFC retail schemes

Note for div 8.2.B

The operator of a QFC retail scheme is responsible for valuing the scheme

property and for calculating the price of units. This division protects

unitholders and potential unitholders by—

(a) setting out rules to ensure that the price of units is calculated fairly and

regularly; and

(b) allowing the operator to mitigate the effects of any dilution (reduction)

in value of the scheme property caused by buying and selling underlying

investments as a result of the issue or redemption of units; and

(c) ensuring that prices are made public in an appropriate way.

8.2.5 Application of div 8.2.B to umbrella schemes—QFC retail schemes

(1) This division applies in relation to each subscheme of a QFC retail

scheme that is an umbrella scheme as if it were a separate QFC retail

scheme.






Rule 8.2.6


8.2.6 Duty of operator to rectify breaches of div 8.2.B—QFC retail schemes

(1) The operator of a QFC retail scheme must take immediate action to

rectify any breach of this division.


(2) If the breach relates to the incorrect pricing of units in relation to the

issue of units, the rectification must extend to the reimbursement or

payment of amounts by the operator to unitholders, former

unitholders or the scheme.

Note Issue and money are defined in the glossary.

(3) However, if the independent entity considers that the breach is of

minimal significance or that making the reimbursement or payment

would be inappropriate, the independent entity may direct that

rectification need not extend to reimbursement or payment.

(4) The independent entity may consider the breach to be of minimal

significance if—

(a) the independent entity has reviewed the operator’s controls (and

supporting systems) in accordance with rule 8.2.12 (Review by

independent entity of operator’s pricing controls etc—QFC

retail schemes); and

(b) the independent entity is satisfied, based on the review, that the

operator’s pricing controls comply with rule 8.2.11 (Pricing

controls of operator—QFC retail schemes); and

(c) the error in pricing of a unit is less than 0.5% of the correct price.

(5) If the breach was caused by 1 or more factors or existed over a period,

then, in deciding whether the breach is of minimal significance, the

independent entity must consider each incorrect price separately.

(6) To remove any doubt, even though the independent entity considers

the breach to be of minimal significance, the independent entity may

require reimbursement or payment of amounts by the operator to

unitholders, former unitholders or the scheme.


Rule 8.2.7


(7) In deciding under subrule (3) whether reimbursement or payment is

inappropriate, the independent entity must take into account the need

not to prejudice the rights of unitholders or unitholders of a class of

units.

(8) If the independent entity decides that making the reimbursement or

payment would be inappropriate, the independent entity must tell the

Regulatory Authority about the breach and its decision immediately,

but within 1 business day.

Examples


Note See also r 4.2.4 (Duty of independent entity to report certain breaches of

law etc—all QFC schemes).

(9) The independent entity must give the Regulatory Authority any

information about the breach and its decision that the authority

reasonably requires.

(10) The independent entity must satisfy itself that any reimbursement or

payment required under this rule is accurately and promptly

calculated and paid.

(11) This rule does not require reimbursement to unitholders or former

unitholders of amounts that the operator and independent entity

reasonably consider to be immaterial.

8.2.7 Valuation requirement——QFC retail schemes

To calculate the price of units in a QFC retail scheme, the operator

must conduct a fair and accurate valuation of all scheme property, on

a forward price basis, in accordance with—


(b) the constitutional document and latest filed prospectus.

Note Constitutional document is defined in r 3.1.1. Forward price and latest



Rule 8.2.8


8.2.8 General rules for valuation of scheme property—QFC retail schemes

(1) The operator of a QFC retail scheme must value the scheme’s

investments using a reputable source.

(2) The operator must keep the reliability of the source of prices under

regular review.

(3) For some or all of the investments held as part of the scheme property,

the operator may quote different prices according to whether they are

being bought (offer prices) or sold (bid prices).

(4) The valuation of investments held as part of the scheme property must

reflect their mid-market value.

(5) If single prices are quoted for both buying and selling investments,

the latest filed prospectus must explain how the investments must be

valued.


(6) If the scheme invests in approved money-market instruments, the

operator must value an approved money-market instrument on an

amortised cost basis if the instrument has a residual maturity of less

than 3 months and has no specific sensitivity to market parameters,

including credit risk.


(7) Any part of the scheme property that is not an investment must be

valued at fair value. An interest in an immovable held by a QFC retail

property fund must be valued by the fund’s standing independent

valuer under rule 12.5.6.

Note Under rules 12.3.2 (3) and 12.5.6, an investment in an intermediate

holding vehicle for the purpose of holding an immovable:

(a) must be treated as if it were a direct investment in the immovable;

and

(b) must be valued as an immovable.

(8) Any fiscal charges, commissions, professional fees or other charges

that were paid, or would be payable, on acquiring or disposing of an


Rule 8.2.9


investment or other part of the scheme property must be excluded

from the value of the investment or other part of the scheme property.

(9) The operator must—

(a) document the basis of valuation of the scheme property

(including any fair value pricing policy for rule 8.2.9) and, if

appropriate, the basis of any methodology; and

(b) act consistently and fairly in making a valuation.

8.2.9 Fair value pricing for securities—QFC retail schemes

(1) If the operator of a QFC retail scheme has reasonable grounds to

believe—

(a) that no reliable price exists for a security at a valuation point; or

(b) that the most recent price available for a security does not reflect

the operator’s best estimate of the value of the security at the

valuation point;

the operator must value the security at a price that, in its opinion,

reflects a fair and reasonable price for the security (the fair value

price).

Note Security and valuation point are defined in the glossary.

(2) Without limiting subrule (1), the operator may use the fair market

price for the security if—

(a) there has been no recent trade in the security; or

(b) a significant event has happened since the most recent closure

of the market where the price of the security is taken.

(3) For subrule (2) (b), an event is significant if, because of the event,

the most recent price of the security (or a basket of securities that

includes the security) is materially different from the price that the

operator believes on reasonable grounds would have existed at the

valuation point had the relevant market been open.


Rule 8.2.10


(4) In deciding whether to use a fair value price for the security, the

operator must consider the following:

(a) the nature of the QFC retail scheme;

(b) the kind of security;

(c) the basis and reliability of the alternative price used;

(d) the operator’s policy on the valuation of scheme property as

disclosed in the latest filed prospectus.


(6) If the unit price is calculated by the operator using—

(a) properly applied fair value prices in accordance with this rule;

and

(b) a documented fair value pricing policy for the scheme;

any subsequent information that indicates that the price should (or

should perhaps) have been different from the price calculated by the

operator does not, of itself, establish that the price was incorrectly

calculated by the operator.

8.2.10 Valuation points—QFC retail schemes

(1) A QFC retail scheme must not have less than 2 regular valuation

points in any month and, if there are only 2 valuation points in any

month, the regular valuation points must be at least 2 weeks apart.

Note The prospectus of a QFC retail scheme must contain information about

its regular valuation points for the purpose of dealing in units in

accordance with rule S4.15 (Valuation and pricing).

(2) No valuation points are required during the initial offer period.

Note Initial offer is defined in the glossary.

8.2.11 Pricing controls of operator—QFC retail schemes

(1) The operator of a QFC retail scheme must be able to demonstrate that

it has effective controls over its calculations of unit prices.


Rule 8.2.11


(2) Without limiting subrule (1), the controls must be appropriate to

ensure that—

(a) prices of units are calculated in accordance with this division;

and

(b) the likelihood of incorrect prices is minimised.

(3) In particular, the controls must ensure all the following:

(a) asset prices are accurate and up-to-date;

(b) investment transactions are accurately and promptly reflected in

valuations;

(c) the components of the valuation (including stock, cash, and units

in issue) are regularly reconciled to their source or prime records

and any reconciling items resolved promptly and debtors

reviewed for recoverability;

(d) sources of prices not obtained from the main pricing source are

recorded and regularly reviewed;

(e) compliance with investment and borrowing powers is regularly

reviewed;

(f) dividends are accounted for as soon as securities are quoted ex-

dividend (unless it is prudent to account for them on receipt);

(g) fixed interest dividends, interest and expenses are accrued at

each valuation point;

(h) tax positions are regularly reviewed and adjusted, if necessary;

(i) reasonable tolerances are set for movements in the key elements

of a valuation, and movements outside the tolerances are

investigated;

(j) the operator regularly reviews the portfolio valuation for

accuracy;


Rule 8.2.12


(k) valuation of OTC derivatives is accurate, up-to-date and

complies with methods agreed with the independent entity.


(4) In exercising its pricing controls, the operator may exercise

reasonable discretion in deciding the appropriate frequency of the

operation of the controls and may choose a longer interval, if

appropriate, given the level of activity in the scheme or the materiality

of any effect on the price.

(5) The operator must keep records to demonstrate the exercise of

effective pricing controls.

8.2.12 Review by independent entity of operator’s pricing controls etc—QFC retail schemes

(1) This rule sets out the reviews that the independent entity of a QFC

retail scheme must conduct to be satisfied that the operator has

controls that are appropriate to ensure that—

(a) prices of units are calculated in accordance with this division;

and

(b) the likelihood of incorrect prices is minimised.

(2) A review must extend to pricing functions that the operator has

outsourced to a third party.

(3) In conducting a review, the independent entity must—

(a) thoroughly examine the operator’s controls (and supporting

systems) to confirm that they are appropriate; and

(b) analyse the controls (and supporting systems) to decide the

extent to which reliance can be placed on them.

(4) A review must be conducted when the independent entity is appointed

and afterwards as it considers appropriate given its knowledge of the

robustness and stability of the operator’s controls (and supporting

systems).


Rule 8.2.13


(5) A review must be conducted more frequently if the independent entity

knows or suspects that the operator’s controls (or any supporting

systems) are weak or otherwise unsatisfactory.

(6) In addition, the independent entity must from time to time review

other aspects of the valuation of the scheme property, verifying on a

sample basis, if necessary—

(a) the assets, liabilities, accruals, units in issue and securities prices

(and in particular the prices of securities that are not approved

securities and the basis for the valuation of unquoted securities);

and

Note Approved security is defined in r 7.1.9.

(b) any other relevant matter (for example, an accumulation factor

or a currency conversion factor).

(7) The independent entity must ensure that any issue identified in a

review is properly followed up and resolved.

8.2.13 Recording and reporting incorrect pricing—QFC retail schemes

(1) The operator must make and keep a record of each instance where the

price of a unit is incorrect.

(2) The record must be made as soon as the error is discovered.

(3) The operator must—

(a) report each instance to the independent entity as soon a

practicable; and

(b) give the independent entity details of the action taken, or to be

taken, to avoid repetition of the error.

Note Rule 4.2.4 deals with the duty of the independent entity to report certain

breaches of the law.


Rule 8.2.14


8.2.14 Prices of units—QFC retail schemes

(1) The operator of a QFC retail scheme must ensure that the price of a

unit in any class is calculated—

(a) by reference to the scheme’s net asset value at the relevant time;

and

(b) in accordance with these rules, the constitutional document and

the latest filed prospectus.

Note Class, net asset value and latest filed prospectus are defined in the

glossary. Constitutional document is defined in r 3.1.1.

(2) To remove any doubt and without limiting subrule (1), the

constitutional document or the latest filed prospectus (or both) may

make provision for large deals to be conducted at a higher issue price

or lower redemption price than those published for the scheme, if the

prices do not exceed the relevant maximum and minimum limits

applying under this division.

Note Large deal and redemption are defined in the glossary.

(3) Any unit price calculated in accordance with subrule (1) must be

expressed in a form that is accurate to at least 4 significant figures.

(4) For each class of units, a single price must be calculated at which

units are to be issued and redeemed.

8.2.15 Issue and redemption prices—QFC retail schemes

The operator of a QFC retail scheme must not—

(a) issue a unit for more than the price of a unit in the relevant class

at the relevant valuation point, plus—

(i) any issue charge permitted under rule 8.6.4 (Charges on

buying and selling units—QFC retail schemes); and

(ii) any payments required under rule 8.2.16 (Dilution—QFC

retail schemes); or


Rule 8.2.16


(b) redeem a unit for less than the price of a unit in the relevant class

at the relevant valuation point, less—

(i) any redemption charge permitted under rule 8.6.4; and

(ii) any deductions required under rule 8.2.16.

Note Class, valuation point, issue charge and redemption charge are defined

in the glossary.

8.2.16 Dilution—QFC retail schemes

(1) In issuing or redeeming units in a QFC retail scheme, the operator

must include in the unit price the dilution adjustment the operator

considers necessary to reduce the effect of dilution.

Note 1 Issue, redemption, dilution adjustment and dilution are defined in the

glossary.

Note 2 See the independent entity’s duties under r 8.2.17 (Particular duties of

independent entity in relation to dilution—QFC retail schemes).

(2) In issuing or redeeming units in a QFC retail scheme, the operator

may, in exceptional circumstances, require the payment or deduction

of a dilution levy for the purpose of reducing the effect of dilution if

the independent entity has agreed that the levy should be required.

Note Dilution levy is defined in the glossary.

(3) In applying a dilution adjustment or dilution levy, the operator must

act in a fair way to reduce dilution and solely for that purpose.

Note Dilution is defined in the glossary.

(4) A dilution adjustment is made—

(a) as part of the calculation of the unit price for the purpose of

reducing dilution in the scheme; or

(b) to recover any amount the scheme has paid, or the operator

reasonably expects it to pay, in relation to the issue or

redemption of units.


Rule 8.2.17


(5) A dilution levy is payable at the same time as payment or transfer of

property is required for the issue or redemption.

(6) As soon as practicable after a valuation point, the operator must tell

the independent entity the rate or amount of any dilution adjustment

or dilution levy.

Note Valuation point is defined in the glossary.

8.2.17 Particular duties of independent entity in relation to dilution—QFC retail schemes

(1) The independent entity must take reasonable care to ensure that—

(a) the operator considers whether or not to exercise the power

under rule 8.2.16 (Dilution—QFC retail schemes) to require a

dilution levy and, if applicable, the rate or amount of any

dilution levy that is required; or

Note Dilution levy is defined in the glossary.

(b) the operator has, in considering the matters mentioned in

paragraph (a), taken into account all factors that are material and

relevant to the operator’s decision; and

(c) the operator has, in considering whether to exercise the power

under rule 8.2.16 to require a dilution levy, acted in accordance

with the restrictions of that rule.

Note See r 4.2.3 (2) for other duties of the independent entity in relation to

pricing.

(2) To remove any doubt, the independent entity has no duty in relation

to the operator’s exercise of any discretion mentioned in subrule (1).

8.2.18 Publication of prices—QFC retail schemes

(1) The operator of a QFC retail scheme must make dealing prices public

in an appropriate way.



Rule 8.2.19


(2) In deciding the appropriate way of making prices public, the operator

must ensure all the following requirements are met:

(a) that a unitholder or potential unitholder can obtain the prices at

a reasonable cost;

(b) that prices are available at reasonable times;

(c) that publication is consistent with the way and frequency at

which the units are dealt in;

(d) that the way prices are made public is disclosed in the latest filed

prospectus;


(e) that prices are published in a consistent way.

(3) Without limiting subrule (1), publication in the following ways may

be appropriate:

(a) publication in a national newspaper;

(b) supply through an advertised local rate or freephone telephone

number;

(c) publication on the internet;

(d) inclusion in a database of prices that is publicly available;

(e) communication to all existing unitholders.

(4) The operator must make previous prices available to any unitholder

or potential unitholder on request.

Division 8.2.C Valuation—money-market funds

8.2.19 Maintaining value—all money-market funds

(1) This rule applies to a QFC qualified investor scheme or QFC retail

scheme that is a money-market fund.



Rule 8.2.19


(2) The operator must conduct a valuation of the scheme property on a

mark to market basis at least once every week and at the same

valuation point used to value the scheme property on an amortised

cost basis.

Note Valuation point is defined in the glossary.

(3) The operator must ensure that the value of the scheme property when

valued on a mark to market basis does not differ by more than 0.5%

from the value of the scheme property when valued on an amortised

cost basis.

(4) The operator must tell the independent entity in writing whenever a

valuation discloses that the mark to market value of the money-

market fund differs from its amortised cost basis value by more than

0.1%.

(5) The operator must agree with the independent entity procedures

designed to stabilise the money-market fund if the mark to market

value of the scheme differs from its amortised cost basis value by

0.1%, 0.2% or 0.3%.

Operating duties and responsibilities—QFC schemes Chapter 8 Title and register—QFC schemes Part 8.3

Rule 8.3.1


Part 8.3 Title and register—QFC schemes

8.3.1 Unitholder register requirements—all QFC schemes

(1) The operator of a QFC scheme must ensure that the unitholder

register includes—

(a) the name and address of each person (a relevant person) who is

or has been a unitholder (for joint unitholders, no more than 4

persons need to be included); and

(b) the number or percentage of units (including fractions of a unit)

in each class held by each relevant person; and

(c) the date each relevant person was registered for the units in the

person’s name and, if relevant, ceased to be registered for the

units in the person’s name; and

(d) the number or percentage of units in each class currently in

issue.

Note 1 Unitholder register is defined in the glossary. Unitholder and unit are

defined in r 1.2.5 and r 1.2.4 respectively.

Note 2 For the operator’s obligation to keep the register, see r 4.1.6.

(2) The operator must not enter notice of any trust (whether express,

implied or constructive) on the register.

(3) The operator and independent entity are not bound by notice of any

trust.

(4) The operator and independent entity must rely on the unitholder

register as conclusive evidence of the persons entitled to the units

entered on it, unless the units are listed units.

Note Under rule 4.1.6 (3), the records (held in the QCSD or in the relevant

exchange’s registry or system) of transfers or titles to units in the scheme

are taken to be the definitive unitholder register and a record in that

registry or system is conclusive evidence of title to a listed unit.

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.3 Title and register—QFC schemes

Rule 8.3.2


(5) The operator must take all reasonable steps to ensure that the

information on the register is at all times complete and up to date.

(6) Without limiting subrule (5), the operator must do the following in

relation to the register:

(a) take reasonable steps to update the register on receiving written

notice of a change of name or address of a unitholder;

(b) ensure that the register, or a copy of the register, is available for

inspection in the QFC during ordinary business hours by or on

behalf of any unitholder, the Regulatory Authority, the

independent entity or the auditor of the scheme;

(c) on request by or on behalf of any unitholder, give the unitholder

a copy of the register entries relating to the unitholder free of

charge;

(d) after consultation with the independent entity, carry out the

conversion of units allowed under rule 8.3.4 (Conversion of

units—all QFC schemes).

(7) However, subrule (6) (b) does not prevent the operator from closing

the register for periods of not longer than 30 business days in any

year.

Note Business day and year are defined in the glossary.

(8) If the operator receives written notice of a change of name of a

unitholder and a certificate has been issued for the unitholder’s units,

the operator must also either endorse the existing certificate or issue

an updated one.

8.3.2 Transfer of units by act of parties—all QFC schemes

(1) Every unitholder of a QFC scheme is entitled to transfer units entered

in the unitholder register in the unitholder’s name by an instrument of

transfer in any form that the operator approves, but the operator is

Operating duties and responsibilities—QFC schemes Chapter 8 Title and register—QFC schemes Part 8.3

Rule 8.3.2


under no duty to accept the transfer unless it is permitted by the

constitutional document and the latest filed prospectus.



(2) However, the operator of a QFC qualified investor scheme must not

accept the transfer of units entered in the unitholder register unless

the transferee is a qualified investor for the scheme.

Note Qualified investor, for a QFC scheme, is defined in r 1.2.12 (2).

(3) Every instrument of transfer of units in a QFC scheme must be signed

by, or on behalf of, the unitholder transferring the units (or, if the

unitholder is a corporation, may be signed by 2 members of its

governing body on behalf of the corporation).

Note Corporation and governing body are defined in the glossary.

(4) The transferor must be treated as the unitholder until the transferee’s

name is entered in the unitholder register.

(5) Every instrument of transfer must be left for registration with the

operator accompanied by—

(a) any document required by the law applying in the QFC; and

(b) any other evidence reasonably required by the operator.

(6) The operator must keep an instrument of transfer for at least 6 years

after the day it is registered.

(7) On registration of an instrument of transfer, a record of the transferor,

the transferee and the date of transfer must be made in the unitholder

register.

(8) Despite anything in this rule, the transfer of a listed unit may be made

electronically or in any other way permitted by the rules of the

exchange where it is listed (or by the regulator of that exchange). A

transfer made in such a way is sufficient to transfer title to the unit.

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.3 Title and register—QFC schemes

Rule 8.3.3


8.3.3 Certificates for units—all QFC schemes

(1) If units in a QFC scheme are issued or rule 8.3.2 (Transfer of units by

act of parties—all QFC schemes) is complied with in relation to the

transfer of units in a QFC scheme, the operator may issue a document

evidencing title to the units in accordance with the constitutional

document.

Note Document evidencing title is defined in the glossary. Constitutional


(2) However, the operator must issue a document evidencing title as soon

as practicable if the procedures for redeeming units require

unitholders to surrender the document evidencing title.

(3) For a QFC scheme that is listed in the Qatar Stock Exchange or in any

other regulated exchange, a record (held in the QCSD’s, or relevant

exchange’s, registry or system) of a transfer or title to a unit is taken

to be a document evidencing title to the unit.

8.3.4 Conversion of units—all QFC schemes

(1) This rule applies to a QFC scheme if there are 2 or more classes of

units offered for issue.

Note Class and issue are defined in the glossary.

(2) A unitholder has the right to convert the units from a class to another

class if converting the units does not breach the latest filed prospectus.

Note Latest filed prospectus and breach are defined in the glossary.

Operating duties and responsibilities—QFC schemes Chapter 8 Operator and independent entity appointment and removal—QFC

schemes Part 8.4

Rule 8.4.1


Part 8.4 Operator and independent entity appointment and removal—QFC schemes

8.4.1 Initial appointment of operator and independent entity—all QFC schemes

On the registration of a scheme under these rules—

(a) the person named in the application for registration as the person

who is to become the operator becomes the initial operator of

the scheme; and

(b) the person appointed by the operator, and named in the

application for registration, as the person who is to become the

independent entity becomes the initial independent entity of the

scheme.

8.4.2 Removal of operator—QFC schemes

(1) The independent entity of a QFC scheme may, by written notice given

to the operator, remove the operator if any of the following events

happens:

(a) a meeting is called to consider a resolution for winding up the

operator;

(b) an application is made to dissolve the operator or strike it off the

register of companies;

(c) a petition is presented for winding up the operator;

(d) a composition is made or proposed by the operator with any of

the operator’s creditors;

(e) an administrator is appointed for the operator;

(f) anything equivalent to an event mentioned in paragraphs (a) to

(e) happens in relation to the operator outside the QFC;

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.4 Operator and independent entity appointment and removal—QFC

schemes

Rule 8.4.2


(g) the independent entity forms the reasonable opinion, and states

in writing, that a change of operator is desirable in the interest

of the unitholders;

(h) a special resolution of the unitholders is passed to remove the

operator;


(i) the unitholders of 75% in value of the units in issue make a

written request to the independent entity for the operator’s

removal.

(2) The independent entity must, by written notice given to the operator,

remove the operator if the operator is no longer eligible to be the

operator of the scheme under rule 4.1.1 (Requirements for operator—

all QFC schemes) because of action taken by the Regulatory

Authority under the Financial Services Regulations, whether or not

under article 31 (Own initiative action by the Regulatory Authority).

(3) If the independent entity gives the operator a notice under subrule (1)

or (2), the independent entity must give the Regulatory Authority a

copy of the notice immediately, but within 1 business day after the

day the notice is given to the operator.

Examples


(4) On receipt of a notice by the independent entity under subrule (1) or

(2)—

(a) the operator ceases to be the operator of the scheme; and

(b) is released from all further obligations under these rules and the



(5) Subrule (4) (b) does not affect the rights of the independent entity or

any other person in relation to an act or omission by the operator

before its removal.


schemes Part 8.4

Rule 8.4.3


(6) The independent entity must appoint another person as the operator

of the scheme.

(7) The person appointed must be eligible to be the operator of the

scheme under rule 4.1.1.

(8) If the name of the scheme contains a reference to the name of the

former operator, the former operator is entitled to require the new

operator and the independent entity to propose a change to the name

of the scheme.

8.4.3 Retirement of operator—all QFC schemes

(1) The operator of a QFC scheme is entitled to retire as operator in

favour of another person if—

(a) the operator appoints the other person as operator and assigns all

its rights and functions as operator to the person; and

(b) the person is eligible to be the operator of the scheme under

rule 4.1.1 (Requirements for operator—all QFC schemes); and

(c) the independent entity approves the appointment of the person

as operator.

(2) On the appointment of the person taking effect, the former operator—

(a) is released from all further obligations under these rules and the

constitutional document; and


(b) may keep any consideration paid to it in relation to the change

without having to account for it to any unitholder.

(3) Subrule (2) (a) does not affect the rights of the independent entity or

any other person in relation to an act or omission by the former

operator before its retirement.

(4) On the retirement of the operator, the replacement operator must

immediately, but within 1 business day after the day the replacement


schemes

Rule 8.4.4


operator’s appointment takes effect, tell the Regulatory Authority

about the retirement and the appointment.

Examples


8.4.4 Consequences of removal or retirement of operator—all QFC schemes

(1) If the operator of a QFC scheme is removed or retires, it is entitled to

continue to be recorded in the unitholder register for the units it holds.

(2) This rule is subject to any restriction in the latest filed prospectus

relating to the permitted categories of unitholders.


8.4.5 Removal of independent entity by unitholders—all QFC schemes

(1) The independent entity of a QFC scheme may be removed by a

special resolution of the unitholders.


(2) On the removal of the independent entity, the operator must—

(a) tell the Regulatory Authority about the removal immediately,

but within 1 business day after the day the independent entity is

removed; and

(b) appoint another person as the independent entity.

Examples for r (2) (a) and r (4)



the scheme under rule 4.2.1 (Requirements for independent entity—

all QFC schemes).

(4) On the appointment of the person as the independent entity, the

operator must tell the Regulatory Authority about the appointment


schemes Part 8.4

Rule 8.4.6


immediately, but within 1 business day after the day the appointment

is made.

8.4.6 Removal of independent entity no longer eligible for appointment—all QFC schemes

(1) This rule applies if the independent entity of a QFC scheme that is an

authorised firm is no longer eligible to be the independent entity of

the scheme under rule 4.2.1 (Requirements for independent entity—

all QFC schemes) because of action taken by the Regulatory

Authority under the Financial Services Regulations, whether or not

under article 31 (Own initiative action by the Regulatory Authority).

(2) The operator must, by written notice given to the independent entity,

remove the independent entity.

Note If the independent entity is not an authorised firm, the independent entity

may also be removed under the following rules:

• r 4.2.12 (Non-QFC independent entities—removal by operators)

• r 4.2.13 (Non-QFC independent entities—removal by Regulatory

Authority).

(3) On the removal of the independent entity, the operator must—

(a) tell the Regulatory Authority about the removal immediately,

but within 1 business day after the day the independent entity is

removed; and

(b) appoint another person as the independent entity.

Examples for r (3) (a) and r (5)



the scheme under rule 4.2.1.

(5) On the appointment of the person as the independent entity, the

operator must tell the Regulatory Authority about the appointment

immediately, but within 1 business day after the day the appointment

is made.


schemes

Rule 8.4.7


8.4.7 Retirement of independent entity—all QFC schemes

(1) The independent entity of a QFC scheme may retire voluntarily only

if—

(a) the operator has appointed another person (the replacement) as

the independent entity; and

(b) the independent entity has told the Regulatory Authority and the

replacement—

(i) about any matter relating to its retirement that it considers

should be drawn to their attention; and

(ii) if there is no such matter—that there is no matter relating

to its retirement that it considers should be drawn to their

attention.

(2) The replacement must be eligible to be the independent entity of the

scheme under rule 4.2.1 (Requirements for independent entity—all

QFC schemes).

(3) The voluntary retirement of the independent entity takes effect only

when the appointment of another person as independent entity takes

effect.

(4) On the retirement of the independent entity, the operator must

immediately, but within 1 business day after the day the retirement

takes effect, tell the Regulatory Authority about the retirement and

the appointment of the other person as the independent entity.

Examples


8.4.8 Consequences of removal or retirement of independent entity—all QFC schemes

(1) If the independent entity of a QFC scheme is removed or retires, the

independent entity must, without delay, transfer or deliver the scheme

property held by it to the replacement independent entity unless the

QFC Court otherwise orders.


schemes Part 8.4

Rule 8.4.8


(2) Until all the scheme property has been transferred or delivered, the

independent entity remains accountable for it to the unitholders.

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.5 Outsourcing—QFC schemes

Rule 8.5.1


Part 8.5 Outsourcing—QFC schemes

8.5.1 What is outsourcing?

(1) For these rules, outsourcing, for a QFC scheme, is any form of

arrangement that involves the operator or independent entity of the

scheme relying on a third party service provider (including a member

of its group) for the exercise of a function in relation to the scheme

under these rules, any other Rules, the constitutional document or the

latest filed prospectus.

Note Group, exercise, function and latest filed prospectus are defined in the

glossary. Rules is defined in INAP. Constitutional document is defined

in r 3.1.1.

(2) However, outsourcing does not include the following arrangements:

(a) discrete advisory services (including, for example, the provision

of legal advice), audit services, procurement of specialised

training, billing, and physical security;

(b) supply arrangements and functions (including, for example, the

supply of electricity or water and the provision of catering and

cleaning services);

(c) purchase of standardised services (including, for example,

market information services and the provision of prices);

(d) the appointment of a group employee to exercise a controlled

function for an authorised firm.

Note Employee, controlled function and authorised firm are defined in the

glossary.

8.5.2 Outsourcing by operator—all QFC schemes

(1) The operator of a QFC scheme may outsource its functions in relation

to the scheme in accordance with this part, and not otherwise.

Note The outsourcing provisions of CTRL do not apply in relation to an

outsourcing of functions under this part (see CTRL, r 5.1.1).

Operating duties and responsibilities—QFC schemes Chapter 8 Outsourcing—QFC schemes Part 8.5

Rule 8.5.3


(2) However, the operator must not outsource to the independent entity,

or to a related person for the independent entity, any of the functions

of the operator under a provision of these rules, the constitutional

document, or the latest filed prospectus, if rule 4.2.3 (1) (Oversight

functions of independent entity—all QFC schemes) applies to the

provision.

Note Related person is defined in the glossary.

(3) Subrule (2) does not apply to the outsourcing to the independent

entity of the function of providing scheme administration.

Note Providing scheme administration is defined in the glossary.

(4) Also, the operator must not outsource functions if the outsourcing

may adversely impact on the Regulatory Authority’s ability to

supervise the operator’s activities.

8.5.3 Outsourcing by independent entity—all QFC schemes

(1) The independent entity of a QFC scheme may outsource its functions

in relation to the scheme in accordance with this part, and not

otherwise.

Note The outsourcing provisions of CTRL do not apply in relation to an

outsourcing of functions under this part (see CTRL, r 5.1.1).

(2) However, the independent entity must not—

(a) outsource to the operator (or, if the QFC scheme is a CIC or CIP,

to a member (however described) of the governing body of the

CIC or CIP) any of the functions of the independent entity under

rule 4.2.3 (Oversight functions of independent entity—all QFC

schemes) or rule 4.2.6 (Property safeguarding functions of

independent entity— all QFC schemes); or


Governing body is defined in the glossary.

(b) outsource to a related person for the operator (or, if the QFC

scheme is a CIC or CIP, to a related person for a member

(however described) of the governing body of the CIC or CIP)


Rule 8.5.4


any of the functions of the independent entity mentioned in

paragraph (a); or

Note Related person is defined in the glossary.

(c) outsource to a person the function of holding documents

evidencing title to scheme property unless the person is

prohibited under the outsourcing agreement from giving them to

a third party without the independent entity’s agreement.


(3) Also, the independent entity must not outsource functions if the

outsourcing may adversely impact on the Regulatory Authority’s

ability to supervise the independent entity’s activities in relation to

the scheme.

8.5.4 Outsourcing notice and information—all QFC schemes

(1) The operator or independent entity of a QFC scheme must give the

Regulatory Authority reasonable notice of its intention to outsource a

function under this part.

(2) The notice must be given at least 10 business days before the day the

operator or independent entity outsources the function.


(3) The operator or independent entity must give the Regulatory

Authority any information about the proposed outsourcing that the

authority reasonably needs.

8.5.5 Provisions applying to outsourcing by operator and independent entity—all QFC schemes

(1) This rule applies in relation to an outsourcing of functions made by

the operator or independent entity (the regulated entity) of a QFC

scheme under this part to another person (the service provider).

(2) The outsourcing must be in writing and in the form of, or part of, an

agreement between the regulated entity and the service provider (the

outsourcing agreement).


Rule 8.5.5


(3) The outsourcing agreement must—

(a) describe in adequate detail the functions (the outsourced

functions) to be exercised by the service provider under the

outsourcing; and

(b) describe in adequate detail the service standards to be applied by

the service provider in exercising the outsourced functions; and

(c) state that it is an outsourcing agreement under these rules; and

(d) ensure that the operator and independent entity can, at all times,

effectively monitor the exercise of the outsourced functions by

the service provider; and

(e) authorise the regulated entity—

(i) to give further instructions to the service provider about the

exercise of the outsourced functions; and

(ii) to withdraw the outsourcing at any time, including with

immediate effect, if this is in the interests of the

unitholders; and

(f) not prevent the operator or independent entity from acting in the

best interests of the unitholders in relation to the outsourced

functions; and

(g) not prevent the scheme from being managed in the best interests

of the unitholders; and

(h) ensure that the scheme’s auditor can effectively exercise its

functions in relation to the scheme; and

(i) require the service provider to comply with these rules, and any

other law applying in the QFC, in relation to the outsourced

functions; and

(j) apply the law of the QFC to the agreement; and


Rule 8.5.5


(k) ensure that the regulated entity and its internal and external

auditors have access to books, records and data relating to the

exercise of functions under the outsourcing; and

(l) ensure that the outsourcing provides appropriate protection for

confidential information and personal data; and

Note Personal data is defined in the glossary.

(m) provide appropriate contingency arrangements; and

Note See r 8.5.5 (2) and (3) (Outsourcing management).

(n) require the service provider to deal with the Regulatory

Authority in an open and cooperative way in relation to the

exercise of the outsourced functions; and

(o) require the service provider to give the Regulatory Authority

access to books, records and data relating to the exercise of the

outsourced functions; and

(p) require the service provider to give the Regulatory Authority

any information it reasonably requires about the outsourced

functions; and

(q) require the service provider to keep any records made by the

service provider in relation to the outsourced functions for at

least 6 years after the day they are made; and

(r) prevent the service provider from further outsourcing any of the

outsourced functions to another person without the prior

approval of—

(i) if the regulated entity is the operator—the operator; or

(ii) if the regulated entity is the independent entity—the

independent entity and the operator.

(4) Without limiting subrule (3), the regulated entity must take the steps

necessary to mitigate against any operational risks in relation to the

outsourcing.


Rule 8.5.5


(5) The outsourcing agreement may provide that it has effect only in

stated circumstances or subject to stated conditions, limits and

directions.

(6) The outsourcing of the outsourced functions to the service provider—

(a) does not relieve the regulated entity from any regulatory

obligations in relation to the outsourced functions; and

(b) does not prevent the regulated entity from exercising all or part

of the outsourced functions, despite anything in the outsourcing

agreement or any other agreement.

(7) The regulated entity remains responsible for ensuring—

(a) that all applicable QFC regulatory requirements are complied

with in relation to the outsourced functions; and

(b) that the outsourced functions are otherwise properly exercised.

(8) The service provider must exercise the outsourced functions subject

to the terms of the outsourcing agreement, including any conditions,

limits and directions in the outsourcing agreement.

(9) So far as the outsourcing agreement is expressed to operate as a

delegation, these rules, all other laws applying in the QFC, the

constitutional document and the latest filed prospectus apply to the

service provider in exercising the outsourced functions as if the

service provider were the regulated entity.



(10) Without limiting subrule (9), a function may be exercised by the

service provider on the service provider’s state of mind if—

(a) the exercise of the function is dependent on the regulated

entity’s state of mind; and

(b) the function is included in the outsourced functions; and


Rule 8.5.6


(c) the outsourcing agreement is expressed to operate as a

delegation in relation to the function.

(11) So far as the outsourcing agreement is expressed to operate as a

delegation, anything done by or in relation to the service provider in

relation to the outsourced functions is taken to have been done by or

in relation to the regulated entity.

(12) In this rule:

state of mind includes knowledge, intention, opinion, belief or

purpose.

8.5.6 Outsourcing management—all QFC schemes

(1) The operator and independent entity of a QFC scheme must exercise

appropriate skill, care and diligence in selecting, entering into and

exiting from outsourcings by them under this part.

(2) The operator or independent entity must ensure that—

(a) 1 or more senior managers approve and periodically review its

policy and procedures for functions outsourced under this part,

including its procedures for the following:

(i) the assessment of feasibility;

(ii) the assessment of risk;

(iii) the assessment of impact on its functions;

(iv) the costing of outsourcings;

(v) the criteria for selecting service providers; and

Note Senior manager is defined in the glossary.

(b) every service provider has the ability and capacity to exercise

reliably and professionally the functions to be outsourced to the

service provider, both at the start of the outsourcing and

throughout its life cycle, having regard, for example, to—

(i) whether the service provider is regulated, to what extent

and by whom; and


Rule 8.5.7


(ii) whether the exercise of the outsourced functions is subject

to specific regulation or supervision; and

(iii) the risk that outsourced functions are not properly

exercised because of the number of other persons using the

service provider; and

(iv) the financial stability and expertise of the service provider;

and

(v) potential conflicts of interest that may arise in relation to

the outsourced functions.

(3) The operator or independent entity must ensure that it has a

comprehensive contingency arrangement to allow business continuity

if there is a significant loss of services from the service provider,

including an exit strategy and, if appropriate, partial exit and step-in

clauses.

(4) The contingency arrangement must cover, among other things, the

following:

(a) a significant loss of resources by the service provider;

(b) financial failure of the service provider;

(c) an unexpected termination of the outsourcing.

8.5.7 Application of pt 8.5 to further outsourcing—all QFC schemes

(1) This part applies to the further outsourcing, whether or not by the

third party service provider, of a function outsourced to the third party

service provider under this part as if—

(a) the further outsourcing of the function were an outsourcing of

the function; and

(b) all necessary changes were made.


Rule 8.5.8


(2) To remove any doubt, this rule is subject to rule 8.5.5 (3) (r)

(Provisions applying to outsourcing by operator and independent


8.5.8 Systems and controls for outsourcings—all QFC schemes

If the operator or independent entity of a QFC scheme outsources a

function in relation to the scheme under this part, the operator or

independent entity must ensure that, as part of its risk management

framework, it implements and maintains systems and controls to

monitor the exercise of the outsourced function.

Note Function and exercise are defined in the glossary.

Operating duties and responsibilities—QFC schemes Chapter 8 Payments—QFC schemes Part 8.6

Rule 8.6.1


Part 8.6 Payments—QFC schemes

Division 8.6.A Payments—QFC qualified investor schemes

8.6.1 Payments—QFC qualified investor schemes


scheme does not incur any expense in relation to any movable or

immovable property unless—

(a) investing in the property is in accordance with the scheme’s

investment objectives, strategies and policy; or

(b) the property is necessary for the direct pursuit of the scheme’s

business of investing in any investments to which it is dedicated.

(2) Payments made by the independent entity out of the scheme property

may be made from capital property rather than from income if the

basis for this is set out in the latest filed prospectus.

Note Capital property and latest filed prospectus are defined in the glossary.

(3) Subrule (2) does not apply to payments for redemptions of units.

Division 8.6.B Payments—QFC retail schemes

8.6.2 Payments out of scheme property—QFC retail schemes

(1) The only payments that may be made from the scheme property of a

QFC retail scheme are payments in relation to—

(a) remunerating the persons operating the scheme; or

(b) the administration of the scheme; or

(c) the investment or safeguarding of the scheme property; or

(d) any taxes payable by the scheme or on scheme property.

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.6 Payments—QFC schemes

Rule 8.6.3


(2) A payment under subrule (1) (a) to (c) must not be made from scheme

property if it is unfair to (or materially prejudices the interests of) any

class of unitholders or potential unitholders.

Guidance

The operator should consider whether any payment to an affected person is unfair

because of its amount or because it gives a disproportionate benefit to the affected

person.

(3) To remove any doubt, subrule (2) does not invalidate a payment that

gives rise to a difference between the rights of separate classes of

units if the difference relates solely to the payments that may be taken

out of the scheme property.

(4) If any annual management charge, or performance fee, (however

described) that is payable to the operator in accordance with the latest

filed prospectus is not paid when it is payable, the operator must tell

the Regulatory Authority about the non-payment immediately, but

within 1 business day.

Examples


8.6.3 Performance fees—QFC retail schemes

(1) The latest filed prospectus of a QFC retail scheme may permit a

payment (a performance fee) for the operator’s periodic charges, or

to any investment adviser, to be based on a comparison between

fluctuations in the value or price of—

(a) 1 or more aspects of the scheme property; and

(b) property of any description, an index or another factor designed

for the purpose.

Note Latest filed prospectus and investment adviser are defined in the

glossary.

(2) Any performance fee must be consistent with rule 8.6.2 (Payments

out of scheme property—QFC retail schemes).


Rule 8.6.4


(3) The following provisions apply in deciding whether a performance

fee is consistent with rule 8.6.2:

(a) a performance fee must be calculated and paid after all other

payments have been considered;

(b) if a performance fee is to be paid on the basis of the performance

of the scheme against an index or another factor—the index or

other factor must be reasonable given the scheme’s investment

objectives, strategies and policy, and must be applied

consistently;

(c) a performance fee may be based on performance above a defined

positive rate of return (the hurdle rate), which may be fixed or

variable;

(d) if paragraph (b) or (c) applies—the index or other factor, or

hurdle rate, may be carried forward to future accrual periods;

(e) the period over which the index or other factor, or hurdle rate,

accrues and the frequency with which it crystallises must be

reasonable;

(f) unless allowed by rule 8.6.2 (1), there must be no arrangements

to adjust the price or value of issue or redemption transactions

in relation to performance fees accrued or paid if the transactions

happen within the accrual period of the charge.

8.6.4 Charges on buying and selling units—QFC retail schemes

(1) Only the operator of a QFC retail scheme may impose charges on

unitholders or potential unitholders when they buy or sell units in the

scheme.

(2) The operator of a QFC retail scheme must not make any charge or

levy in relation to—

(a) the issue of units, except as permitted by subrule (3); or


Rule 8.6.5


(b) the redemption of units, except as permitted by subrule (4).

Note Issue and redemption are defined in the glossary.

(3) Subrule (2) (a) does not prevent an issue charge made in accordance

with the latest filed prospectus if the charge is a fixed amount or

calculated as a percentage of the price of a unit.

Note Issue charge and latest filed prospectus are defined in the glossary.

(4) Subrule (2) (b) does not prevent a redemption charge made in

accordance with—

(a) the prospectus that was the latest filed prospectus when the units

were purchased by the unitholder; and

(b) rule 8.6.5.

Note Redemption charge is defined in the glossary.

(5) This rule is subject to rule 8.2.16 (Dilution—QFC retail schemes).

8.6.5 Redemption charges—QFC retail schemes

(1) A redemption charge may be expressed as an amount or percentage.

Note Redemption charge is defined in the glossary.

(2) A redemption charge may also be expressed as diminishing over the

time for which the unitholder has held the units or be calculated on

the basis of the unit price performance of the units.

(3) However, any redemption charge must not be such that it could be

reasonably regarded as restricting any right of redemption.

Note For the mandatory content of the prospectus of a QFC retail scheme in

relation to redemption charges, see r S4.19 (Redemption charges).

8.6.6 Charges on exchange of units in umbrella schemes—QFC retail schemes

For a QFC retail scheme that is an umbrella scheme, the operator must

not make a charge of more than the amount stated in the latest filed


Rule 8.6.7


prospectus on an exchange of units in a subscheme for units in another

subscheme.

Note Umbrella scheme and subscheme are defined in r 1.2.11. Latest filed

prospectus is defined in the glossary.

8.6.7 Allocation of payments to income or capital—QFC retail schemes

(1) The operator of a QFC retail scheme must, in accordance with the

latest filed prospectus, decide whether a payment is to be made from

the income property or capital property of the scheme.

Note Latest filed prospectus, income property and capital property are defined

in the glossary.

(2) In making a decision under subrule (1), the operator must—

(a) have appropriate regard to whether the nature of the cost is

income related or capital related and the scheme’s investment

objectives, strategies and policy; and

(b) agree with the independent entity about how the payment should

be treated.

(3) If, for any class of units for any annual accounting period, the amount

of the income property is less than the income distributed, the

shortfall must, as from the end of that period, be charged to the capital

account and must not later be transferred to the income account.

Guidance

Any payment as a result of effecting transactions for the scheme should be made

from the capital property of the scheme. All other payments should be made from

income property in the first instance, but may be transferred to the capital account

in accordance with rule 8.6.7 (1).


Rule 8.6.8


8.6.8 Prohibition of promotional payments—QFC retail schemes

(1) A payment must not be made from the scheme property of a QFC

retail scheme to a person for, or for the promotion of, the issue or

redemption of units in the scheme.

Examples of prohibited payments

1 commission payable to intermediaries

2 payments in relation to the preparation or dissemination of financial

communications (unless subrule (2) applies)

(2) This rule does not apply to—

(a) a payment to the operator to reimburse the operator for costs of

preparing and printing the key information document required

under CIPR; or

(b) any other payment to the operator if the payment is permitted

under these rules.

8.6.9 Expenses in relation to property—QFC retail schemes

The operator of a QFC retail scheme must ensure that the scheme

does not incur any expense in relation to any property unless investing

in the property is in accordance with the scheme’s investment

objectives, strategies and policy.

8.6.10 Payment of liabilities on transfer of assets—QFC retail schemes

(1) This rule applies if the scheme property of a QFC retail scheme (the

first scheme) is transferred to another QFC retail scheme (or to the

independent entity of the other scheme for the other scheme) in

consideration of the issue of units in the other scheme to unitholders

of the first scheme.

Note In the circumstance described in subrule (1), the other scheme (or

independent entity of the other scheme) becomes successor in title to the

scheme property transferred.


Rule 8.6.11


(2) The other scheme (or independent entity of the other scheme) may

pay out of the scheme property of the other scheme any liability

arising after the transfer if—

(a) the liability could properly have been paid out of the scheme

property transferred had it arisen before the transfer; and

(b) there is nothing in the constitutional document of the other

scheme expressly forbidding the payment; and


(c) the operator of the other scheme is of the opinion that proper

provision was made for meeting the liabilities that were known

or could reasonably have been anticipated at the time of the

transfer.

8.6.11 Attribution of scheme property to subschemes—QFC retail schemes

(1) For a QFC retail scheme that is an umbrella scheme, any assets to be

received into, or any payments out of, the scheme property that are

not attributable to only a single subscheme must be attributed by the

operator to the respective subschemes.

(2) Any attribution under this rule must be made in a way that is fair to

the unitholders of the QFC retail scheme generally.


Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.7 Accounting periods—QFC schemes

Rule 8.7.1


Part 8.7 Accounting periods—QFC schemes

8.7.1 Accounting periods—all QFC schemes

(1) A QFC scheme must have—

(a) an annual accounting period; and

(b) a half-yearly accounting period.

(2) A half-yearly accounting period starts on the first day of an annual

accounting period and ends—

(a) on the day 6 months before the last day of the annual accounting

period; or

(b) on another reasonable date stated in the latest filed prospectus.


(3) The first annual accounting period starts—

(a) on the first day of the initial offer period; or

(b) if there is not an initial offer period for the scheme—on the date

the scheme is registered;

and, in either case, ends on the next accounting reference date unless

subrule (4) applies.

Note Initial offer and accounting reference date are defined in the glossary.

(4) If the accounting reference date falls less than 6 months after the start

of the first annual accounting period, the operator may extend the

period to the next accounting reference date.

(5) Each annual accounting period after the first period is for 12 months,

starting on the next day after the accounting reference date and ending

on the next accounting reference date, unless subrule (7) applies.

Operating duties and responsibilities—QFC schemes Chapter 8 Accounting periods—QFC schemes Part 8.7

Rule 8.7.1


(6) Each annual accounting period or half yearly accounting period ends

at the end of the day worked out under this rule or, if the operator so

decides, at the last valuation point on that day.

Note Day and valuation point are defined in the glossary.

(7) If the accounting reference date stated in the scheme’s latest filed

prospectus is changed, the operator may extend or shorten the annual

accounting period by up to 6 months to end on the next accounting

reference date.

(8) Before extending or shortening an annual accounting period under

subrule (4) or (7), the operator must—

(a) consult the independent entity; and

(b) consult the scheme’s auditor; and

(c) give the Regulatory Authority reasonable notice.

(9) If the annual accounting period is extended under subrule (4) or (7)

and this results in a longer than usual period before the publication of

reports to unitholders, the operator must make summary information

about the scheme’s investment activities available to unitholders

during the period.

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.8 Income allocation and distribution—QFC schemes

Rule 8.8.1


Part 8.8 Income allocation and distribution—QFC schemes

8.8.1 Application of pt 8.8 to umbrella schemes—all QFC schemes

This part (other than rule 8.8.2 (1) and (2)) applies to a QFC scheme

that is an umbrella scheme as if each subscheme were a separate QFC

scheme.


8.8.2 Income allocation and distribution—all QFC schemes

(1) A QFC scheme must have an annual income allocation date.

Note Annual income allocation date is defined in the glossary.

(2) The annual income allocation date must be within 4 months after the

scheme’s accounting reference date.

Note Month and accounting reference date are defined in the glossary.

(3) A QFC scheme may have an interim income allocation date and

interim accounting periods.

Note Interim income allocation date and interim accounting period are


(4) An interim income allocation date must be within 4 months after the

day the relevant interim accounting period ends.

(5) A QFC scheme must have a distribution account to which the amount

of income allocated to unit classes that distribute income is

transferred at the end of the relevant accounting period.

Note Distribution account and class are defined in the glossary.

(6) The amount available for income allocations must be calculated by—

(a) taking the net revenue after taxation decided in accordance with

appropriate, internationally accepted professional standards

Operating duties and responsibilities—QFC schemes Chapter 8 Income allocation and distribution—QFC schemes Part 8.8

Rule 8.8.2


specified in the constitutional document and the latest filed

prospectus; and

Guidance

The constitutional document and latest filed prospectus would be expected to

specify a document such as the Statement of Recommended Practice for

financial statements of authorised funds issued by the United Kingdom

Investment Management Association.

(b) making any transfers, to the extent permitted by the latest filed

prospectus, between the income account and the capital account

so that the amount available for income allocations is calculated

as if the revenue from debt instruments had been decided

without regard to the effect of—

(i) the change in an index of consumer prices during the

period, if the scheme’s investment objectives, strategies

and policy are to invest predominantly in debt instruments

for which cash flows are decided by reference to the index

(or a similar index of consumer prices) and the transfer

relates only to amounts in relation to index-linked, gilt-

edged securities; or

(ii) amortisation, if the amount available for income

allocations is not less than if the transfers had not been

made; and

(c) making any other transfers between the income account and the

capital account that are required in relation to any of the

following:

(i) stock dividends;

(ii) income equalisation included in income allocations from

other collective investment schemes;

(iii) the allocation of payments in accordance with—

(A) for a QFC qualified investor scheme—the latest filed

prospectus; and

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.8 Income allocation and distribution—QFC schemes

Rule 8.8.3


(B) for a QFC retail scheme—rule 8.6.7 (Allocation of

payments to income or capital—QFC retail schemes);

(iv) taxation;

(v) the total amount of income property included in units

issued and units redeemed during the period.

Note Income account, capital account, debt instrument, income

equalisation, income property and latest filed prospectus are defined in

the glossary.

(7) If income is allocated during an accounting period—

(a) with effect from the end of the accounting period, the amount of

income allocated to unit classes that accumulate income

becomes part of the capital property and requires an adjustment

to the proportion of the value of the scheme property to which

they relate if other unit classes are in issue during the period;

and

Note Capital property is defined in the glossary.

(b) the adjustment under paragraph (a) must ensure that the price

remains unchanged despite the transfer of income; and

(c) the amount of any interim distribution must not be more than the

amount that, in the operator’s opinion, would be available for

allocation if the interim accounting period and all previous

interim accounting periods in the same annual accounting

period, taken together, were an annual accounting period.

8.8.3 Unclaimed, minimal and joint unitholders distributions—all QFC schemes

(1) Any distribution of a QFC scheme that is unclaimed after 6 years (or,

if the latest filed prospectus provides for a longer period, that period)

becomes part of the capital property.

Note Latest filed prospectus and capital property are defined in the glossary.

Operating duties and responsibilities—QFC schemes Chapter 8 Income allocation and distribution—QFC schemes Part 8.8

Rule 8.8.3


(2) The operator and independent entity of a QFC scheme may agree a

minimal amount in relation to which a distribution of income is not

required, and how any such amounts are to be treated.

(3) A distribution of a QFC scheme made to the joint unitholder named

first on the unitholder register is as effective a discharge to the

operator and independent entity as if that joint unitholder had been

the sole unitholder.

Note Unitholder register is defined in the glossary.

Chapter 8 Operating duties and responsibilities—QFC schemes Part 8.9 Names—QFC schemes

Rule 8.9.1


Part 8.9 Names—QFC schemes

8.9.1 Name of scheme etc—all QFC schemes

(1) The operator of a QFC scheme must ensure that the name of the

scheme, any subscheme of the scheme, or a class of units, is not

undesirable or misleading.

Note Subscheme is defined in r 1.2.11. Class is defined in the glossary.

Guidance on names of CIC

A CIC must not include in its name the following words, abbreviations of the

following words or similar words or abbreviations:

(a) limited;

(b) unlimited;

(c) public limited company.

(2) If the Regulatory Authority is of the opinion that the operator is in

breach of subrule (1) in relation to a name, it may direct the operator

to take the steps necessary to have the name changed.

(3) In deciding whether to give a direction under subrule (2) in relation

to a name for a breach of subrule (1), the Regulatory Authority may

consider whether the name—

(a) implies that the scheme (or a part of the scheme) has merits that

might, or might not, be justified; or

(b) implies that the operator has merits that might, or might not, be

justified; or

(c) is inconsistent with the scheme’s investment objectives,

strategies or policy; or

(d) might mislead investors into thinking that a person other than

the operator is responsible for managing the scheme (or part of

the scheme); or

(e) incorrectly implies that the scheme is not a collective investment

scheme, a scheme registered in the QFC or under these rules, or

Operating duties and responsibilities—QFC schemes Chapter 8 Names—QFC schemes Part 8.9

Rule 8.9.1


a particular kind of scheme registered under these rules (for

example, a qualified investor scheme); or

(f) is, in the Regulatory Authority’s opinion, likely to offend the

public or a part of the public; or

(g) is substantially similar to the name of—

(i) a scheme registered under PRIV or these rules; or

(ii) a subscheme of an umbrella scheme registered under PRIV

or these rules; or

(iii) a class of units for a scheme registered under PRIV or these

rules; or

(h) implies a degree of security in relation to the capital or income

that is not justified.

Examples of names for para (e)

names that include the word ‘plan’ or ‘account’

Examples of names for para (h)

names that include the word ‘guaranteed’, ‘protected’ or ‘secured’


consider.

(5) If the name includes the word ‘guaranteed’, ‘protected’ or ‘secured’

(or a similar word), the Regulatory Authority may regard the name as

undesirable or misleading unless the operator satisfies it of the

matters mentioned in subrules (8) and (9).

(6) If the name indicates or implies a guaranteed capital return, income

return or both, the Regulatory Authority may regard the name as

undesirable or misleading unless the operator satisfies it—

(a) that the total amount paid for a unit is guaranteed under a

guarantee; and

(b) of the matters mentioned in subrules (8) and (9).


Rule 8.9.1


(7) If the name indicates or implies a degree of capital security (for

example, the words ‘capital protected’ or words with a similar

meaning), the Regulatory Authority may regard the name as

undesirable or misleading unless the operator satisfies it—

(a) that an amount not materially less than the total amount paid for

a unit is guaranteed under a guarantee; and

(b) that the scheme’s investment objectives, strategies and policy

show a clear intention to provide a material degree of security in

relation to the total amount paid for a unit; and

(c) that the degree of capital security is apparent from the name and

clearly stated in the latest filed prospectus; and

(d) of the matters mentioned in subrules (8) and (9).

(8) For subrule (5), (6) or (7), the operator must satisfy the Regulatory

Authority that the scheme has a guarantee in relation to which all the

following requirements are met:

(a) the guarantee is given by a person other than the operator, the

independent entity or an associated person for the operator or

independent entity;


(b) the guarantor has the authority and resources to honour the terms

of the guarantee;

(c) the guarantee covers all unitholders of the scheme and is legally

enforceable by each unitholder or by a person acting on the

unitholder’s behalf;

(d) the guarantee relates to the total amount paid for a unit;

(e) the guarantee provides for payment at a stated date or dates and

is unconditional although reasonable commercial exclusions

such as force majeure may be included;

(f) if the guarantee applies to different classes of units—it is

identical in its application to all classes except for differences

Operating duties and responsibilities—QFC schemes Chapter 8 Names—QFC schemes Part 8.9

Rule 8.9.2


attributable to income already received, or charges already

incurred, by the different classes of units.

(9) For subrule (5), (6) or (7), the operator must also satisfy the

Regulatory Authority that the terms of the guarantee and the

credentials of the guarantor are clearly set out in detail in the latest

filed prospectus and that any exclusions such as force majeure are

highlighted.

(10) In deciding whether it is satisfied for subrule (7), the Regulatory

Authority must take into account whether the degree of capital

security implied by the name fairly reflects the nature of the

arrangements for providing the security.


take into account for subrule (7).

(12) In this rule:

total amount paid, for a unit, includes any charge or other cost paid

or incurred when the unit was bought.

8.9.2 Use of certain names—all QFC schemes


scheme, or of a class of units, does not state or imply that the scheme

is an Islamic fund unless the scheme is an Islamic fund.

Note Islamic fund is defined in r 1.3.11.

(2) The operator of a QFC umbrella scheme must ensure that the name

of a subscheme, or of a class of units of a subscheme, does not state

or imply that the subscheme is an Islamic fund unless the subscheme

is an Islamic fund.




is a money-market fund unless the scheme is a money-market fund.



Rule 8.9.2



of a subscheme, or of a class of units of a subscheme, does not state

or imply that the subscheme is a money-market fund unless the

subscheme is a money-market fund.

Operating duties and responsibilities—QFC schemes Chapter 8 Shari’a Supervisory Board—all Islamic funds Part 8.10

Rule 8.10.1


Part 8.10 Shari’a Supervisory Board—all Islamic funds

8.10.1 Islamic fund must have a supervisory board—all Islamic funds

(1) The operator of a QFC scheme that is an Islamic fund, or is an

umbrella scheme that has a subscheme that is an Islamic fund, must

ensure that there is at all times a Shari’a Supervisory Board for the

fund (or subscheme).

Note Islamic fund is defined in r 1.3.11. Umbrella scheme and subscheme are

defined in r 1.2.11.

(2) Any decision relating to the appointment or dismissal of a member of

the Shari’a Supervisory Board, or to a change affecting the board,

must be made by the operator and approved by the independent entity.

(3) ISFI, chapter 6 applies to a QFC scheme that is an Islamic fund, or is

an umbrella scheme that has a subscheme that is an Islamic fund, as

if—

(a) the scheme (or subscheme) were an authorised firm to which the

chapter applies; and


(b) a reference to the authorised firm or its governing body were,

subject to subrule (2), a reference to the scheme (or subscheme)

or the operator, as the context requires; and

(c) all other necessary changes were made.

Chapter 9 Suspension, winding up and transfer schemes—QFC schemes Part 9.1 Suspension and restart of dealings—QFC schemes

Rule 9.1.1


Chapter 9 Suspension, winding up and transfer schemes—QFC schemes

Part 9.1 Suspension and restart of dealings—QFC schemes

Note for Part 9.1

Nothing in this Part diminishes the power of the exchange where units are listed (or

the power of the regulator of that exchange) to suspend, in accordance with its rules,

trading in the listed units.

9.1.1 Suspension and restart of dealings—all QFC schemes

(1) The operator of a QFC scheme may, with the prior agreement of the

independent entity, temporarily suspend dealings in all units or a class

of units if, because of exceptional circumstances, it is in the interests

of all the unitholders of the scheme to do so.

Note Deal and class are defined in the glossary.

(2) If the independent entity requires the operator to suspend dealings in

all units or a class of units, the operator must do so without delay.

(3) The independent entity may make a requirement under subrule (2) if,

because of exceptional circumstances, it is in the interest of all the

unitholders of the scheme to do so.

(4) The operator and independent entity must ensure that the suspension

continues only for as long as it is justified having regard to the

interests of all the unitholders in the scheme.

(5) If the operator suspends dealings under subrule (1) otherwise than

because of a requirement of the independent entity under subrule (2),

the operator must—

(a) immediately tell the Regulatory Authority orally, giving its

reasons for the suspension; and

Suspension, winding up and transfer schemes—QFC schemes Chapter 9 Suspension and restart of dealings—QFC schemes Part 9.1

Rule 9.1.1


(b) give written confirmation to the authority of the suspension and

its reasons for the suspension within 1 business day.

Examples for this rule on ‘within 1 business day’


(6) If the operator suspends dealings under subrule (1) because of a

requirement of the independent entity under subrule (2), the

independent entity must—

(a) immediately tell the Regulatory Authority orally, giving the

reasons for its action; and

(b) give written confirmation to the authority of the suspension, and

its reasons for its action, within 1 business day.

(7) If the operator suspends dealings under subrule (1) or (2), the operator

must—

(a) notify the unitholders about the suspension immediately but

within 1 business day after the day dealing is suspended; and

(b) from time to time publish (on its website or by other general

means) sufficient information to keep unitholders appropriately

informed about the suspension, including, if known, its likely

duration.

(8) Notification under subrule (7) (a) must—

(a) tell the unitholders about the exceptional circumstances that

resulted in the suspension; and

(b) be clear, fair and not misleading; and

(c) tell the unitholders how to obtain the information it is required

to publish under subrule (7) (b).

(9) During the suspension—

(a) none of the obligations under part 8.1 (Dealing—QFC schemes)

apply; but

Chapter 9 Suspension, winding up and transfer schemes—QFC schemes Part 9.1 Suspension and restart of dealings—QFC schemes

Rule 9.1.1


(b) the operator must as far as practicable comply with all relevant

provisions of part 8.2 (Valuation and pricing—QFC schemes).

(10) The suspension of dealings must end as soon as practicable after the

exceptional circumstances mentioned in subrule (1) or (3) cease.

(11) The operator or independent entity must—

(a) review the suspension at least every 28 days; and

(b) tell the Regulatory Authority about the results of the review

immediately, but within 1 business day after conducting the

review.

(12) If the operator or independent entity becomes aware of any material

change in circumstances that may affect the continuation of the

suspension, the operator or independent entity must tell the

Regulatory Authority immediately, but within 1 business day.

(13) The Regulatory Authority may, at any time, direct the operator to end

the suspension.

(14) The operator must immediately comply with the direction.

(15) If the operator decides to restart dealings, the operator must—

(a) immediately tell the Regulatory Authority about the decision

orally; and

(b) give written confirmation to the authority of its decision within

1 business day.

(16) The operator may agree, during the suspension, to deal in units at a

price calculated by reference to the first valuation point after

restarting dealings.

(17) However, if the scheme is a QFC qualified investor scheme that

operates limited redemption arrangements, and the exceptional

circumstances have affected a valuation point, the operator must fix

Suspension, winding up and transfer schemes—QFC schemes Chapter 9 Suspension and restart of dealings—QFC schemes Part 9.1

Rule 9.1.1


an additional valuation point as soon as possible after restarting

dealings.

Note 1 Limited redemption arrangements and valuation point are defined in the

glossary.

Note 2 The Regulatory Authority has power under the Financial Services

Regulations, art 105 to give certain directions in relation to collective

investment schemes (which are called collective investment funds in

those regulations), including a direction to cease the issue or redemption

of units in the scheme and to wind up the scheme.

Chapter 9 Suspension, winding up and transfer schemes—QFC schemes Part 9.2 Winding up—QFC schemes

Rule 9.2.1


Part 9.2 Winding up—QFC schemes

9.2.1 Application of pt 9.2 to subschemes of QFC umbrella schemes—all QFC schemes

This part applies to a subscheme of a QFC umbrella scheme as if—

(a) a reference to a QFC scheme were a reference to the subscheme;

and

(b) a reference to units were a reference to units in the class or

classes related to the subscheme; and

(c) a reference to a meeting of unitholders were a reference to a

meeting of unitholders of the class or classes mentioned in

paragraph (b); and

(d) a reference to a special resolution were a reference to a special

resolution passed at a meeting of unitholders mentioned in

paragraph (c); and

(e) a reference to the scheme property were a reference to the

scheme property attributed to the subscheme; and

(f) a reference to liabilities were a reference to liabilities of the

scheme attributable to the subscheme; and

(g) all other necessary changes were made.


9.2.2 When scheme may be wound up—all QFC schemes

A QFC scheme may be wound up—

(a) by order of the QFC Court under the Insolvency Regulations

2005 or any other regulations in force in the QFC; or

(b) if not inconsistent with any regulations in force in the QFC or

these rules—in the way and circumstances provided in the

constitutional document; or

Note Constitutional document is defined r 3.1.1.

Suspension, winding up and transfer schemes—QFC schemes Chapter 9 Winding up—QFC schemes Part 9.2

Rule 9.2.3


(c) in the way and in any other circumstances provided by these

rules or any other rules made by the Regulatory Authority.

9.2.3 Winding-up required by constitutional document—all QFC schemes

(1) The constitutional document of a QFC scheme may provide that the

scheme is to be wound up—

(a) at a stated time; or

(b) in stated circumstances or on the happening of a stated event.

Note Constitutional document is defined r 3.1.1.

(2) However, a provision of the constitutional document that purports to

provide that the scheme is to be wound up if a particular person ceases

to be the operator or independent entity is of no effect.

9.2.4 Winding-up at direction of unitholders—all QFC schemes

The unitholders of a QFC scheme may, by special resolution, direct

the operator or independent entity to wind up the scheme.


9.2.5 Notification to Regulatory Authority that scheme not commercially viable etc—all QFC schemes

(1) If the operator of a QFC scheme believes, on reasonable grounds, that

the scheme is not commercially viable or the scheme’s purpose

cannot be accomplished, the operator must give the Regulatory

Authority notice about the matter immediately, but within 1 business

day after the day the operator forms the belief.

Examples


(2) The notice must include the following information:

(a) the name of the scheme and its registration number given by the

Regulatory Authority;


Rule 9.2.5


(b) the size and type of scheme;

(c) the number of unitholders;

(d) whether dealing in the scheme’s units has been suspended;

(e) why the operator believes that the scheme is not commercially

viable or the scheme’s purpose cannot be accomplished;

(f) what consideration has been given to the scheme entering into a

transfer scheme under part 9.3 (Transfer schemes—QFC

schemes) with another scheme registered in the QFC or a

subscheme of an umbrella scheme registered in the QFC and the

reasons why a transfer scheme is not possible;

(g) whether unitholders have been told of the intention to seek

winding-up and, if not, whether and when they will be told of

the intention;

(h) details of any proposed rebate of charges to be made to

unitholders who recently purchased units;

(i) the preferred date for the start of the winding-up.

(3) The notice must be accompanied by a notice given by the independent

entity that includes the following:

(a) a statement that the independent entity, having taken reasonable

care in considering the matter, believes that a transfer scheme

under part 9.3 is not practicable;

(b) an explanation of the other steps that have been considered that

would result in the scheme not needing to be wound up;

(c) confirmation that the operator has exercised its functions in

accordance with these rules;

Note Exercise and function are defined in the glossary.

(d) whether the scheme’s investment and borrowing powers have

been exceeded.


Rule 9.2.6


(4) The Regulatory Authority may, in writing, require the operator or

independent entity to provide any further information or documents

that the authority reasonably needs in relation to the scheme.

9.2.6 Winding-up by operator or independent entity—all QFC schemes

(1) This rule applies if any of the following circumstances (the

prescribed circumstances) exist in relation to a QFC scheme:

(a) on a request by the operator or independent entity for the

cancellation of the scheme’s registration, the Regulatory

Authority agrees in principle that it will cancel the scheme’s

registration on the completion of the winding-up of the scheme;

(b) the operator believes, on reasonable grounds, that the scheme is

not commercially viable or the scheme’s purpose cannot be

accomplished;

(c) if the constitutional document states that the duration of the

scheme is limited—the stated duration of the scheme ends;

(d) the unitholders of the scheme direct the operator or independent

entity under rule 9.2.4 (Winding-up at direction of unitholders—

all QFC schemes) to wind up the scheme;

(e) if the scheme is subject to a transfer scheme approved under part

9.3 (Transfer schemes—QFC schemes) under which it is to be

left with no property—the transfer scheme commences.

(2) If any of the prescribed circumstances apply in relation to the QFC

scheme—

(a) the operator and independent entity must cease—

(i) dealing in the scheme’s units; and

(ii) investing or borrowing for the scheme; and

Note Dealing and borrowing is defined in the glossary.


Rule 9.2.6


(b) the operator or independent entity (or both) must take the steps

necessary to wind up the scheme in accordance with any

regulations in force in the QFC that apply to the winding-up,

these rules, and any other rules made by the Regulatory

Authority that apply to the winding-up.

(3) If any of the prescribed circumstances mentioned in subrule (1) (a) to

(d) apply in relation to the scheme—

(a) the operator or independent entity must realise the scheme

property as soon as practicable; and

(b) after meeting or making provision for all the scheme’s liabilities

and the costs of the winding-up, the operator or independent

entity must distribute the proceeds of the realisation to the

unitholders in proportion to their respective interests in the

scheme as at the date the relevant prescribed circumstances

happened; and

(c) any unclaimed net proceeds or other cash (including unclaimed

distribution payments) held by the operator or independent

entity after the end of 12 months from the day they became

payable must be paid into the QFC Court, after meeting or

making provision for the costs of paying them into the QFC

Court under this paragraph.

(4) If the operator or independent entity and 1 or more unitholders agree,

the requirement to realise the scheme property does not apply to the

part of the scheme property proportionate to their entitlement.

(5) The operator and the independent entity may distribute the part of the

scheme property mentioned in subrule (4) to the unitholders

mentioned in that subrule, after making the adjustments or provisions

that appear appropriate to ensure that the unitholders bear a

proportionate share of the liabilities of the scheme and the costs of

the winding-up.

(6) If the prescribed circumstances mentioned in subrule (1) (e) apply in

relation to the scheme, the operator or independent entity must wind

up the scheme in accordance with the approved transfer scheme.


Rule 9.2.7


(7) As soon as practicable after starting the winding-up, the operator or

independent entity must—

(a) if rule 9.2.4 (Winding-up at direction of unitholders—all QFC

schemes) does not apply—tell the unitholders about the

winding-up; and

(b) publish notice of the winding-up in an English and an Arabic

language national newspaper and, if the scheme has a website,

on the scheme’s website.

(8) If the winding-up is conducted by the operator, the independent entity

must approve the terms of the winding-up.

(9) Not later than 5 business days after the day the winding-up of the QFC

scheme is completed, the operator or independent entity must—

(a) tell the Regulatory Authority about the completion of the

winding-up; and

(b) ask the authority to cancel the scheme’s registration.


(10) This rule is subject to any order of the QFC Court.

9.2.7 Accounting and reports during winding-up—all QFC schemes

(1) While a QFC scheme is being wound up, whether under rule 9.2.6

(Winding-up by operator or independent entity—all QFC schemes)

or otherwise—

(a) the annual accounting periods and half-yearly accounting

periods of the scheme continue to run; and

(b) the provisions of these rules about annual and interim allocation

of income continue to apply to the scheme; and

(c) reports to unitholders and the Regulatory Authority continue to

be required in relation to the scheme.


Rule 9.2.7


(2) However, if the operator, after consulting the scheme’s auditor and

the Regulatory Authority, decides on reasonable grounds that timely

preparation of a report under these rules is not required in the interest

of unitholders or the Regulatory Authority, the operator may dispense

with preparation of the report within the time otherwise required by

these rules.

(3) A period to which subrule (2) applies must be covered in the next

relevant report required under these rules.

(4) At the completion of the winding-up, the accounting period then

running is regarded as the final annual accounting period.

(5) Within 2 months after the end of the final annual accounting period,

the final report of the operator must be sent to the Regulatory

Authority and each person who was a unitholder immediately before

the end of the final annual accounting period.

(6) This rule is subject to any order of the QFC Court.

Suspension, winding up and transfer schemes—QFC schemes Chapter 9 Transfer schemes—QFC schemes Part 9.3

Rule 9.3.1


Part 9.3 Transfer schemes—QFC schemes

9.3.1 Purpose—pt 9.3

The purpose of this part is to make rules under the Financial Services

Regulations, article 103 modifying those regulations, part 16 (Control

of Business Transfers) in relation to QFC schemes.

9.3.2 Transfer schemes—all QFC schemes

(1) Financial Services Regulations, part 16 is modified in accordance

with the following provisions of this rule.

(2) If, for the purpose of a relevant scheme, it is proposed that scheme

property of a QFC scheme should become the property of another

scheme registered in the QFC or the property of a subscheme of a

QFC umbrella scheme registered in the QFC, the proposal must not

be implemented without the approval of a special resolution of the

unitholders of the first scheme, unless subrule (3) applies.

Note Subscheme and umbrella scheme are defined in r 1.2.11. Special

resolution is defined in the glossary.

(3) If, for the purpose of a relevant scheme, it is proposed that scheme

property attributable to a subscheme (the first subscheme) of a QFC

umbrella scheme (the first umbrella scheme) should become the

property of another scheme registered in the QFC or another

subscheme of a QFC umbrella scheme registered in the QFC (whether

or not of the first umbrella scheme), the proposal must not be

implemented without the approval of—

(a) a special resolution of the unitholders in the first subscheme; and

(b) a special resolution of the unitholders of units in the first

umbrella scheme, unless implementation of the scheme is not

likely to result in any material prejudice to the interests of the

unitholders in any other subscheme of the first umbrella scheme.

Chapter 9 Suspension, winding up and transfer schemes—QFC schemes Part 9.3 Transfer schemes—QFC schemes

Rule 9.3.2


(4) If it is proposed that a QFC scheme or a subscheme of a QFC umbrella

scheme should receive property (other than its first property) under a

relevant scheme, or an arrangement equivalent to a scheme of

arrangement, that is entered into by another scheme registered in the

QFC, by a subscheme of an umbrella scheme registered in the QFC

or by corporation, the proposal must not be implemented without the

approval of a special resolution of the unitholders of the first scheme

or of the class or classes of units related to the first subscheme (as

appropriate).


(5) However, if the operator and either the independent entity or auditor

of the scheme agree that the receipt of the property by the scheme or

subscheme as mentioned in subrule (4)—

(a) is not likely to result in any material prejudice to the interests of

the unitholders of the scheme; and

(b) is consistent with the investment objectives, strategies and

policy of the scheme or subscheme; and

(c) could be effected without breaching chapter 6 (Investment and

borrowing—QFC qualified investor schemes) or chapter 7

(Investment and borrowing—QFC retail schemes);

the property may be transferred to the scheme or subscheme, and

units may be issued in exchange for the property, as part of the

relevant scheme without the approval of a special resolution.

(6) To remove any doubt, relevant scheme has the meaning given by the

Financial Services Regulations, article 94 (4).

Financial promotions and investment activities—all schemes Chapter 10 Financial promotions generally—all schemes Part 10.1

Rule 10.1.1


Chapter 10 Financial promotions and investment activities—all schemes

Part 10.1 Financial promotions generally—all schemes

10.1.1 Declaration of non-QFC retail customer schemes

(1) The Regulatory Authority may, by written notice published on an

approved website, declare that a non-QFC scheme established in a

stated jurisdiction that is of a stated type is a retail customer scheme.


(2) The Regulatory Authority must not specify a type of scheme under

subrule (1) unless satisfied that—

(a) all schemes of that type are—

(i) required to be registered, approved or licensed (however

described) under the law of the jurisdiction in which they

are established; and

(ii) subject to appropriate regulation by a regulatory or

governmental entity of that jurisdiction for the purpose of

consumer protection; and

(b) the operators of all schemes of that type are—

(i) required to be authorised or licensed (however described)

under the law of that jurisdiction; and

(ii) subject to appropriate regulation by a regulatory or

governmental entity of that jurisdiction for the purpose of

consumer protection.

Chapter 10 Financial promotions and investment activities—all schemes Part 10.1 Financial promotions generally—all schemes

Rule 10.1.2


10.1.2 Certain financial promotions only to qualified investors etc—QFC qualified investor schemes

(1) An authorised firm must not make or approve a financial promotion

in relation to a QFC qualified investor scheme if the financial

promotion is addressed to, or disseminated in such a way that it is

likely to be received by, a person who is not a qualified investor for

the firm.

Note Qualified investor, for an authorised firm, is defined in r 1.2.12 (3).

(2) An authorised firm must not conduct a relevant investment activity

for a customer in or from the QFC in relation to units in a QFC

qualified investor scheme unless the customer is a qualified investor

for the firm.

Note Relevant investment activity is defined in the Glossary.

(3) For this rule, qualified investor includes a person who is a retail

customer for the authorised firm if the firm believes, on reasonable

grounds, that the firm could classify the person under CIPR as a

business customer for the firm.

Note 1 Retail customer, for an authorised firm, is defined in r 1.2.12 (5).

Note 2 Business customer is defined in the Glossary.

10.1.3 Certain financial promotions only to qualified investors etc—non-QFC qualified client schemes


in relation to a non-QFC qualified client scheme if the financial

promotion is addressed to, or disseminated in such a way that it is

likely to be received by, a person who is not a qualified investor for

the firm.

Note 1 Non-QFC qualified client scheme is defined in r 1.4.2.

Note 2 Qualified investor, for an authorised firm, is defined in r 1.2.12 (3).

Financial promotions and investment activities—all schemes Chapter 10 Financial promotions generally—all schemes Part 10.1

Rule 10.1.4


(2) An authorised firm must not conduct a relevant investment activity

for a customer in or from the QFC in relation to units in a non-QFC

scheme unless:

(a) the scheme is a non-QFC retail customer scheme; or

(b) the customer is a qualified investor for the firm.

Note Relevant investment activity is defined in the Glossary and non-QFC

retail customer scheme is defined in rule 1.4.1.

(3) For this rule, qualified investor includes a person who is a retail

customer for the authorised firm if the firm believes, on reasonable

grounds, that the firm could classify the person under CIPR as a

business customer for the firm.


Note 2 Business customer is defined in the Glossary.

10.1.4 Part 10.1 additional to CIPR

This Part is additional to, and does not limit, CIPR.

Chapter 10 Financial promotions and investment activities—all schemes Part 10.2 Financial promotions—non-QFC schemes

Rule 10.2.1


Part 10.2 Financial promotions—non-QFC schemes

10.2.1 What is a complying disclaimer for a non-QFC scheme?

A complying disclaimer for a non-QFC scheme is a written notice

that contains statements to the effect of the following:

(a) the scheme is a collective investment scheme that is not

registered in the QFC or regulated by the Regulatory Authority;

(b) any prospectus for the scheme, and any related documents, have

not been reviewed or approved by the Regulatory Authority;

(c) investors in the scheme may not have the same access to

information about the scheme that they would have to

information about a collective investment scheme registered in

the QFC;

(d) recourse against the scheme, and those involved with it, may be

limited or difficult and may have to be pursued in a jurisdiction

outside the QFC.

10.2.2 Restrictions generally on financial promotions—all non-QFC schemes


in relation to a non-QFC scheme unless the scheme has a written

constitution (however described) and written prospectus.

Note Writing and prospectus are defined in the glossary.

(2) An authorised firm must not conduct relevant investment activities in

or from the QFC in relation to units in a non-QFC scheme unless the

scheme has a written constitution (however described) and written

prospectus.

(3) Subrule (2) does not apply in relation to an own account transaction

of an authorised firm.

Note Own account transaction is defined in the glossary.

Financial promotions and investment activities—all schemes Chapter 10 Financial promotions—non-QFC schemes Part 10.2

Rule 10.2.3


10.2.3 Prospectus and disclaimer must be provided etc—all non-QFC schemes

(1) An authorised firm must not sell, or arrange for the sale of, a unit in

a non-QFC scheme to a customer unless it has given the customer,

not later than a reasonable time before the customer becomes

contractually bound in relation to the sale of the unit:

(a) a prospectus for the scheme; and

(b) a complying disclaimer for the scheme.

Note Customer and prospectus are defined in the Glossary and complying

disclaimer is defined in rule 10.2.1.

(2) If an authorised firm in the exercise of its discretion buys a unit in a

non-QFC scheme for a customer, the firm must:

(a) tell the customer that the customer may request a prospectus for

the scheme; and

(b) give the customer a prospectus for the scheme on request.

(3) If an authorised firm gives a prospectus for a non-QFC scheme to a

customer under subrule (2), the firm must also give the customer a

complying disclaimer for the scheme.

(4) Subrule (2) (a) does not apply in relation to the purchase by an

authorised firm of a unit in a non-QFC scheme for a customer if:

(a) the firm has told the customer, in its terms of business, or in

periodic statements, given to the customer under CIPR, that the

customer may request a prospectus for any non-QFC scheme in

which the firm buys units for the customer under a discretionary

management agreement; and

(b) the firm has given the customer a complying disclaimer for the

scheme, all non-QFC schemes or a class of non-QFC schemes

in which the scheme is included.


Rule 10.2.4


10.2.4 Complying disclaimer must be given with other documents under CIPR—all non-QFC schemes

(1) This rule applies if an authorised firm is required under CIPR to give

a key information document to a customer in relation to a non-QFC

scheme.

(2) The authorised firm must, at the same time as it gives the document

to the customer, give the customer a complying disclaimer.

Note Complying disclaimer is defined in rule 10.2.1.

10.2.5 Authorised firms must pass on documents etc—all non-QFC schemes

(1) This rule applies if:

(a) an authorised firm either:

(i) sells, or arranges for the sale of, a unit in a non-QFC

scheme to a customer; or

(ii) buys, or arranges to buy, a unit in a non-QFC scheme for

a customer; and

(b) the firm later receives a document or information about the

scheme from its operator.

(2) The authorised firm must give the document or information to the

customer.

10.2.6 Quarterly returns for financial promotions etc—all non-QFC schemes

(1) This rule applies to an authorised firm in relation to a quarter if,

during the quarter, the firm—

(a) makes or approves a financial promotion in relation to a non-

QFC scheme; or

Financial promotions and investment activities—all schemes Chapter 10 Financial promotions—non-QFC schemes Part 10.2

Rule 10.2.6


(b) conducts relevant investment activities in or from the QFC in

relation to units in a non-QFC scheme.

Note Relevant investment activity is defined in the glossary.

(2) The authorised firm must give the Regulatory Authority a return

under this rule for the quarter within 1 month after the day the quarter

ends.

(3) The return must include the following information in relation to each

non-QFC scheme in relation to which the firm made or approved a

financial promotion, or conducted relevant investment activities in or

from the QFC, during the quarter:

(a) the scheme’s name;

(b) the jurisdiction in which the scheme was established;

(c) whether the scheme is a non-QFC qualified client scheme or

non-QFC retail customer scheme;

Note Non-QFC retail customer scheme is defined in r 1.4.1 and non-

QFC qualified client scheme is defined in r 1.4.2.

(d) if the scheme is a non-QFC qualified client scheme—whether

the scheme or its operator is subject to regulation by a regulatory

or governmental entity of the jurisdiction in which it is

established or any other jurisdiction and, if so, the jurisdiction,

the name of the regulating entity and the nature of the regulation;

(e) whether the following rules were complied with in relation to

the scheme during the quarter:

• rule 10.2.3 (Prospectus and disclaimer must be provided

etc—all non-QFC schemes)

• rule 10.2.4 (Complying disclaimer must be given with other

documents under CIPR—all non-QFC schemes)

• rule 10.2.5 (Authorised firms must pass on documents etc—

all non-QFC schemes).


Rule 10.2.7


(4) In this rule:

quarter means a 3-month period ending on 31 March, 30 June, 30

September or 31 December.

10.2.7 Recordkeeping by authorised firms—all non-QFC schemes

An authorised firm must keep:

(a) a copy of each prospectus for a non-QFC scheme that it gives to

customers for at least 6 years after the day it is last given to a

customer;

(b) a copy of each complying disclaimer for a non-QFC scheme that

it gives to customers for at least 6 years after the day it is last

given to a customer;

(c) a record of the version of each prospectus for a non-QFC scheme

that it gives to each customer, and the day it is given to the

customer, for at least 6 years after the day it is given to the

customer; and

(d) a record of the version of each complying disclaimer for a non-

QFC scheme that it gives to each customer, and the day it is

given to the customer, for at least 6 years after the day it is given

to the customer.

Note Customer and prospectus are defined in the Glossary and complying

disclaimer is defined in rule 10.2.1.

10.2.8 Part 10.2 additional to CIPR

This Part is additional to, and does not limit, CIPR.

Financial promotions and investment activities—all schemes Chapter 10 Additional retail customer requirements—non-QFC retail customer

schemes Part 10.3

Rule 10.3.1


Part 10.3 Additional retail customer requirements—non-QFC retail customer schemes

10.3.1 Application—pt 10.3

(1) This part applies to an authorised firm in relation to a retail customer

of the firm if the firm conducts a relevant investment activity for the

retail customer in or from the QFC in relation to units in a non-QFC

retail customer scheme.


Note 2 Relevant investment activity is defined in the glossary.

Note 3 Non-QFC retail customer scheme is defined in r 1.4.1. An authorised

firm must not conduct a relevant business activity for a retail customer in

relation to units in a non-QFC scheme that is not a retail customer scheme

(see r 10.1.3 (2)).

(2) However, this part ceases to apply to the authorised firm in relation

to the retail customer if the retail customer does not become, or ceases

to be, a unitholder of the non-QFC retail customer scheme.

10.3.2 Facilities to be maintained in QFC—non-QFC retail customer schemes

(1) The authorised firm must maintain facilities that satisfy the

requirements of this part.

(2) The authorised firm must take reasonable steps to ensure that the

facilities are available during ordinary business hours on each

business day.

(3) For this part, a facility is a place of business.

(4) For this part, it is sufficient if a facility is maintained by a person other

than the authorised firm if the facility is maintained under

arrangements with the firm.

Chapter 10 Financial promotions and investment activities—all schemes Part 10.3 Additional retail customer requirements—non-QFC retail customer

schemes

Rule 10.3.3


10.3.3 Retail customer to be informed about availability of facilities—non-QFC retail customer schemes

Before conducting relevant investment activities in relation to units

in the non-QFC retail customer scheme for the retail customer, the

authorised firm must give the retail customer a written notice that tells

the retail customer about—

(a) the facilities available under this part; and

(b) the address of the facilities and when the facilities are available.

10.3.4 Documents to be available in QFC—non-QFC retail customer schemes

(1) The authorised firm must maintain facilities in the QFC to allow the

retail customer to inspect, and obtain copies of, the following

documents:

(a) the constitution (however described) of the scheme;

(b) any instrument amending that constitution;

(c) the latest prospectus of the scheme;

(d) the latest annual and interim reports for the scheme.

(2) If a document mentioned in subrule (1) is not in a required language,

a translation of the document in that language must also be available

for inspection and copies of the translation must also be available to

be obtained.

(3) The documents mentioned in subrule (1) (including any translation in

a required language) must be available for inspection free of charge.

(4) Copies of the latest prospectus (including any translation in a required

language) must be available free of charge.

(5) Copies of other documents mentioned in subrule (1) (including any

translation in a required language) must be available for no more than

the reasonable cost of producing the copy.


schemes Part 10.3

Rule 10.3.5


(6) A translation of a document available under this rule must clearly

state—

(a) the name and address of the person who made the translation;

and

(b) the person’s qualifications for making the translation.

(7) In this rule:

required language, for a document, means—

(a) English; or

(b) any other language if the Regulatory Authority, by written

notice published on an approved website, requires the document

to be available in that language for this rule.


10.3.5 Pricing and redemption facilities to be available in QFC—non-QFC retail customer schemes

(1) The authorised firm must maintain facilities in the QFC—

(a) where the retail customer may obtain information in a required

language about prices of units in the scheme; and

(b) if the retail customer is a unitholder of the scheme—where or

through which the retail customer may redeem units and obtain

payment.

(2) The authorised firm is taken to comply with subrule (1) (b) if—

(a) unitholders can sell their units on an exchange at a price not

significantly different from the net asset value of the property to

which the units relates; and

(b) it tells the retail customer about the availability of the exchange.

Chapter 10 Financial promotions and investment activities—all schemes Part 10.3 Additional retail customer requirements—non-QFC retail customer

schemes

Rule 10.3.6


(3) Subrule (1) (b) does not entitle the retail customer to have units

redeemed (or sold as mentioned in subrule (2)) immediately after

making a demand to that effect.

(4) In this rule:

required language, for information, means—

(a) English; or


notice published on an approved website, requires the

information to be available in that language for this rule.

10.3.6 Other information facilities to be available in QFC—non-QFC retail customer schemes

(1) The authorised firm must maintain facilities in the QFC to tell the

retail customer, on request and in a required language—

(a) the nature of the rights represented by the units in the scheme;

and

(b) whether persons other than the unitholders can vote at meetings

of unitholders and, if so, who those persons are.

(2) In this rule:

required language, for information, means—

(a) English; or


notice published on an approved website, requires information

to be available in that language for this rule.

10.3.7 Complaint facilities to be available in QFC—non-QFC retail customer schemes

The authorised firm must maintain facilities in the QFC to allow the

retail customer to make complaints to the operator about the operation

of the scheme.


schemes Part 10.3

Rule 10.3.7


Chapter 11 Other provisions Part 11.1 General

Rule 11.1.1


Chapter 11 Other provisions

Part 11.1 General

11.1.1 Restitution orders for breach of relevant requirements—all schemes

(1) A private person may apply to the QFC Court for a restitution order

if the person suffers loss or damage as a result of a breach of a relevant

requirement in relation to a scheme.

Note 1 This rule is made under Financial Services Regulations, art 65.

Note 2 Person, QFC Court, breach and relevant requirement are defined in the

glossary.

(2) In this rule:

private person means—

(a) an individual, except when acting in the course of conducting

any regulated activity; or

(b) any other person, except when acting in the course of conducting

business of any kind.

Note Regulated activity is defined in the glossary.

11.1.2 Service of notices and other documents on unitholders—all QFC schemes

(1) If a provision of these rules authorises or requires any notice or other

document to be served on a unitholder of a QFC scheme (whether the

word ‘serve’, ‘give’, ‘notify’, ‘send’ or ‘tell’, or some other word, is

used), the notice or other document may be served—

(a) by sending it by prepaid post to the unitholder’s postal address

shown in the unitholder register; or

Other provisions Chapter 11 General Part 11.1

Rule 11.1.3


(b) by leaving it at the unitholder’s business or residential address

shown in the unitholder register; or

(c) by sending it to the unitholder using an electronic medium in

accordance with rule 11.1.3 (Notices and other documents to be

in legible form etc—all schemes).

Note Unitholder is defined in r 1.2.5. Document and unitholder register are


(2) Any notice or other document served by post under this rule is taken

to have been served when it would have been received in the ordinary

course of post.

(3) For subrule (2), it is presumed (unless evidence sufficient to raise

doubt about the presumption is presented) that a postal article sent by

prepaid post is received on the 5th business day after the day it is

posted.


(4) Any document left at an address, or served otherwise than by post,

under this rule is taken to have been served on that day.

11.1.3 Notices and other documents to be in legible form etc—all schemes

(1) If a provision of these rules authorises or requires any notice or other

document to be served on, or information to be given to any person

(other than the Regulatory Authority), (whether the word ‘serve’,

‘give’, ‘notify’, ‘send’ or ‘tell’, or some other word, is used), the

document or information must be served or given in a legible form.

Note Document is defined in the glossary.

(2) For subrule (1), any form is a legible form if the form—

(a) is consistent with the knowledge that the person serving the

document, or giving the information, has about how the

recipient of the document or information wishes or expects to

receive it; and

Chapter 11 Other provisions Part 11.1 General

Rule 11.1.3


(b) can be provided in a durable medium by the person serving the

document or giving the information; and

(c) enables the recipient to know or record the time of receipt; and

(d) is reasonable in the context.

(3) In these rules, any requirement that a document be signed may be

satisfied by an electronic signature or electronic evidence of assent.

Other provisions Chapter 11 Fees—QFC schemes Part 11.2

Rule 11.2.1


Part 11.2 Fees—QFC schemes

11.2.1 Application fees—all QFC schemes

(1) An applicant under these rules for registration of a scheme established

in the QFC must pay the Regulatory Authority an application fee of

the relevant amount.

(2) The fee must be paid when the application is filed with the Regulatory

Authority.

(3) The Regulatory Authority may also, by written notice given to the

applicant, require the applicant to pay a supplementary fee to the

authority not later than the time stated in the notice if it expects to

incur substantial costs in dealing with the application.

(4) If subrule (2), or a notice under subrule (3), is not complied with, the

application is taken not to have been made until the fee is paid.

(5) The fee is non-refundable, whether or not the application is

successful.

(6) In this rule:

relevant amount, for a scheme, means—

(a) if the scheme is not an umbrella scheme or is an umbrella

scheme with only 1 subscheme—US$ 2 000; or

(b) if the scheme is an umbrella scheme with 2 or more

subschemes—whichever is the lesser of the following:

(i) US$ 1 000 x number of subschemes;

(ii) US$ 10 000.

11.2.2 Annual fees—all QFC schemes

(1) The operator of a QFC scheme must pay the Regulatory Authority an

annual fee for each year that the scheme is registered.

Note Year is defined in the glossary.

Chapter 11 Other provisions Part 11.2 Fees—QFC schemes

Rule 11.2.3


(2) The annual fee for the first year of registration is the amount

calculated as follows:

relevant amount x whole months in year after registration day

12


(3) The annual fee for the first year of registration must be paid within

21 days after the day the scheme is registered.

(4) The annual fee for a subsequent year of registration is the relevant

amount.

(5) The annual fee for a subsequent year of registration must be paid on

or before 1 January in the year.

(6) If an annual fee is not paid in accordance with this rule, the amount

of the fee is increased by 1% for each month, or part of a month, that

it remains unpaid after the date it became payable.

(7) Subrule (6) does not limit any action that the Regulatory Authority

may take if an annual fee is not paid in accordance with this rule.

(8) In this rule:

relevant amount, for a QFC scheme, means—

(a) if the scheme is not an umbrella scheme or is an umbrella

scheme with only 1 subscheme—US$ 2 000; or

(b) if the scheme is an umbrella scheme with 2 or more

subschemes—whichever is the lesser of the following:

(i) US$ 1 000 x number of subschemes;

(ii) US$ 10 000.

11.2.3 Waiver etc of fees—all QFC schemes

The Regulatory Authority may, if it considers it equitable to do so,

reduce, waive or refund all or part of a fee payable under this part.

Other provisions Chapter 11 Providing scheme administration—non-QFC schemes Part 11.3

Rule 11.3.1


Part 11.3 Providing scheme administration—non-QFC schemes

11.3.1 Client money and assets—all non-QFC schemes

(1) An authorised firm that is providing scheme administration for a non-

QFC scheme must not hold or control money or assets belonging to

third parties in relation to providing scheme administration for the

scheme.

Note Providing scheme administration and money are defined in the glossary.

(2) However, subrule (1) does not apply to the holding of a cheque to the

order of the non-QFC scheme’s bank account if the cheque is securely

held for a maximum of 3 business days before being deposited into

the bank account or returned to the drawer of the cheque.

Chapter 12 QFC retail property funds Part 12.1 General

Rule 12.1.1


Chapter 12 QFC retail property funds

Part 12.1 General

12.1.1 Introduction

(1) In addition to UCITS type schemes, Islamic funds and money-market

funds, QFC schemes may be property funds, feeder funds and funds

of funds.

(2) This Chapter sets out specific requirements that apply to QFC retail

property funds, including real estate investment trusts or REITs.

12.1.2 Concepts relating to property funds

(1) A property fund may be a qualified investor scheme or a retail

scheme. A property fund may or may not be listed in the Qatar Stock

Exchange or in any other regulated exchange.

Note Qualified investor scheme and retail scheme are defined in rules 1.3.2

and 1.3.3 respectively. A REIT must be listed in the Qatar Stock

Exchange or another regulated exchange (see rule 12.6.2 (2) (b)).

(2) A property fund that is a qualified investor scheme must be open-

ended so as to allow redemption of units. A property fund that is a

retail scheme may be closed-ended or open-ended.

Note For open-ended scheme and closed-ended scheme, see rule 1.2.10. A

REIT must be closed-ended (see rule 12.6.2 (2) (a)).

12.1.3 Application of Chapter 12

(1) This Chapter applies only to a QFC retail scheme that is a property

fund (QFC retail property fund). REITs are a subset of QFC retail

property funds.

(2) This Chapter applies to each subscheme of a QFC retail property fund

that is an umbrella scheme as if each subscheme were a separate retail

property fund. However, a REIT cannot be an umbrella scheme.

QFC retail property funds Chapter 12 General 12.1.2

Rule 12.1.4


12.1.4 Permissible investments—QFC retail property funds

(1) At least 75% of the gross asset value of a QFC retail property fund

must at all times be invested in at least 3 immovables that generate

recurrent rental income.

Guidance

The Regulatory Authority expects the choice of immovables to be appropriate for,

and consistent with, fund diversification and risk-spreading.

(2) Subject to subrule (3), the remaining 25% of the gross asset value of

the fund may be invested (for purposes of liquidity and

diversification) in a combination of the following investments:

(a) immovables (whether or not the immovables generate recurrent

rental income);

(b) property-related assets;

(c) units in other property funds;

(d) cash;

(e) government or public securities.

(3) For subrule (2):

(a) no more than 5% of the remaining 25% may be invested in a

combination of property-related assets and units in other

property funds (but only if the investment or investments do not

result in a fundamental change in the fund’s overall risk profile);

and

(b) no more than 5% of the remaining 25% may be invested in

assets, units, government or public securities issued by a single

issuer.

(4) Subrules (1) to (3) do not apply:

(a) during the initial 6-month period of the fund’s operation;

(b) during any period specified for the purpose in the fund’s

prospectus; or

Chapter 12 QFC retail property funds 12.1.2 General

Rule 12.1.5


(c) during any period approved for the purpose by special resolution

of the unitholders.

(5) If a REIT invests in property-related assets, units in other property

funds, government or public securities under subrule (2), the assets,

units or securities must be listed and traded on a recognised exchange

(within the meaning of the Banking Business Prudential Rules 2014).

Note In the Banking Business Prudential Rules 2014 recognised exchange

means:

(a) one of over 100 exchanges listed in Schedule 1 of those rules

(including the major exchanges in the Gulf region); or

(b) an exchange listed in a notice published by the Regulatory

Authority on an approved website.

12.1.5 Use of certain names—QFC retail property funds



is a property fund unless the scheme is a property fund.


of a subscheme, or of a class of units in a subscheme, does not state

or imply that the subscheme is a property fund unless the subscheme

is a property fund.

Note 1 Other restrictions on the use of the term “real estate investment trust” or

REIT may apply (see rule 12.6.2 (1)).

Note 2 A REIT cannot be an umbrella scheme (see rule 12.1.3 (2)).

12.1.6 Other provisions continue to apply to QFC retail property funds that are not REITs

(1) Except as set out in column 3 of table 12.1.6A, the provisions of these

rules described in columns 1 and 2 continue to apply to a QFC retail

property fund that is not a REIT.

Note For the provisions of these rules that apply to REITs, see rule 12.6.4 and

table 12.6.4A.

QFC retail property funds Chapter 12 General 12.1.2

Rule 12.1.6


(2) Neither table 12.1.6A nor 12.1.6B is exhaustive. Each table is a guide

for those who intend to establish and register a QFC retail property

fund that is not a REIT.

Table 12.1.6A Application of provisions to QFC retail property funds

column 1

applicable provisions

column 2

description of contents of provisions

column 3

provisions that do not apply

Chapter 1 general provisions, basic

concepts and key terms

Chapter 2 registration of scheme

Chapter 3 constitutional

requirements and units

Division 3.2.B

rules 3.1.1 (b) and

3

.

2

.

1

2

Chapter 4 operator and independent

entity

Chapter 5 investor relations,

affected persons,

prospectus, approvals,

meetings, reports,

accounts and auditors

Divisions 5.4.A, 5.5.A

and 5.6.B

Chapter 12 QFC retail property funds 12.1.2 General

Rule 12.1.6


column 1


column 2


column 3


Chapter 7 investment and

borrowing

Parts 7.2, 7.3, 7.4, 7.5

and 7.6

rules 7.7.2, 7.7.3 and

7.7.6

Chapter 8 operating duties and

responsibilities, dealing,

valuation pricing,

register, outsourcing,

payments, accounting

and income distribution

Divisions 8.1.A,

8.2.A, 8.2.C and 8.6.A

Chapter 9 suspension, winding up

and transfer schemes

Chapter 10 financial promotions and

investment activities

Parts 10.2 and 10.3

Chapter11 other provisions and fees Part 11.3

Schedule 1 arrangements that are not

collective investment

schemes

Schedule 2 contents of constitutional

document

Parts S2.2, S2.3 and

S2.4

Schedule 4 contents of prospectus rules S4.23 and S4.24

(3) CIPR also deals with collective investment schemes, and the

definitions of packaged investment product and issuer in those rules

include a unit in a collective investment scheme and the operator of a

collective investment scheme, respectively. The provisions of CIPR

described in table 12.1.6B may, among others, apply to QFC retail

property funds.

QFC retail property funds Chapter 12 Constitutional document and prospectus—QFC retail property funds Part 12.2

Rule 12.1.7


Table 12.1.6B CIPR provisions that may apply to QFC retail property funds

column 1

provisions

column 2


rules 3.5.7 to 3.5.9 inducements

Part 3.6 personal account transactions

Parts 4.2 and 4.3 advertisements, personal contacts and

telephone contacts

Part 4.4 initial disclosure document/terms of

business

rule 5.3.4 independent investment advice

Part 5.4 and Schedule 1 key information document—form

and contents

12.1.7 Offer of QFC retail property funds

An offer of units in a listed QFC retail property fund (including a

REIT) must be in accordance with the IOSCO principles and the

practices and procedures of the Qatar Stock Exchange or other

regulated exchange where it is listed.

Part 12.2 Constitutional document and prospectus—QFC retail property funds

12.2.1 Extra constitution requirements—QFC retail property funds

In addition to the matters required under Schedule 2 (Constitutional

document content—QFC schemes), the constitutional document of a

QFC retail property fund must include the following:

(a) a statement that the fund is a QFC retail property fund;

Chapter 12 QFC retail property funds Part 12.3 Custody, joint ownership and intermediate holding vehicles—QFC

retail property funds

Rule 12.2.2


(b) a statement whether the fund is a closed-ended scheme or an

open-ended scheme;

(c) a statement whether the aim of the fund is to spread investment

risks.

(d) a statement that the fund invests in at least 3 immovables that

generate recurrent rental income.

Note For statements on restrictions on investment and borrowing, see

rule S2.11. See also rule 12.1.4 on permissible investments and

rule 12.5.9 for borrowing limits.

12.2.2 Prohibited amendments of constitutional document—QFC retail property funds

The constitutional document of a QFC retail property fund must not

be amended in such a way that the fund ceases to be a property fund.

Part 12.3 Custody, joint ownership and intermediate holding vehicles—QFC retail property funds

12.3.1 Operator may make alternative custody arrangements for immovables in certain jurisdictions—QFC retail property funds

(1) For the purpose of meeting legal requirements in relation to the

ownership of an immovable in the jurisdiction where the immovable

is located, the operator of a QFC retail property fund may make

alternative arrangements for the custody of the immovable.

Example

This rule may apply if legal title to an immovable cannot be held in Qatar or another

GCC country because of the law of another jurisdiction. In such a situation, custody

of the immovable by the independent entity may not be possible, and arrangements

for declarations of trust, indemnities and resolutions relating to the transfer of

custody may have to be made.

QFC retail property funds Chapter 12 Custody, joint ownership and intermediate holding vehicles—QFC

retail property funds Part 12.3

Rule 12.3.2


(2) The arrangements must not give the operator unfettered control over

the scheme property. If the arrangements involve joint ownership or

the use of intermediate holding vehicles, the arrangements must be in

accordance with whichever of rules 12.3.2 to 12.3.6 apply.

(3) The operator must satisfy the Regulatory Authority that the

arrangements:

(a) are for the purpose stated in subrule (1);

(b) comply with subrule (2); and

(c) are legally effective in the QFC and in the jurisdiction where the

immovable is located.

Note Under rule 4.2.6 (6) (a), the independent entity of a property fund is not

responsible in relation to an immovable that is subject to alternative

arrangements in accordance with this rule.

12.3.2 Joint ownership arrangements—QFC retail property funds

(1) A QFC retail property fund may enter into an arrangement for the

joint ownership of an immovable in accordance with this rule (joint

ownership arrangement).

(2) Before a QFC retail property fund enters into a joint ownership

arrangement, the operator of the fund:

(a) must be able to demonstrate that the arrangement is in the

interests of the unitholders;

(b) must ensure that, under the arrangement:

(i) the fund has a majority stake or holding in relation to the

arrangement;

(ii) the fund has, at all times, more than 50% ownership and

control of each immovable subject to the arrangement;



Rule 12.3.2


(iii) the fund has the freedom to dispose of its interest in each

immovable; and

(iv) the liability of the fund does not exceed the percentage of

its interest in the arrangement;

(c) must ensure that due diligence is conducted to identify

restrictions and constraints that may limit the fund’s direct

ownership of a 100% interest in any immovable subject to the

arrangement; and

(d) must obtain a legal opinion about the arrangement.

(3) An investment in an intermediate holding vehicle for the purpose of

holding an immovable (whether wholly or through a joint ownership

arrangement) must be treated as if it were a direct investment in the

immovable. The investment must be valued as an immovable under

rule 12.5.6.

(4) Despite subrule (2) (b) (i), the Regulatory Authority may permit a

QFC retail property fund to enter into a joint ownership arrangement

in which the fund does not have a majority stake or holding if:

(a) the authority is satisfied that the interests of the unitholders are

adequately protected (for example, the other joint owner of the

property is a public sector entity in Qatar); or

(b) the law of the jurisdiction where the immovable is located

requires local ownership or control of 51% or more.

(5) Despite subrule (2) (b) (ii), the Regulatory Authority may permit a

QFC retail property fund to hold title to an immovable under a joint

ownership arrangement, but without holding more than 50%

ownership and control of the immovable, if the authority is satisfied

that the interests of the unitholders are adequately protected.

(6) For subrule (2) (d), the legal opinion must include:

(a) a description of the significant terms of the arrangement;



Rule 12.3.3


(b) a statement whether the fund will have good marketable legal

and beneficial title in each immovable subject to the

arrangement;

(c) a description of the equity and profit-sharing arrangements of

the parties to the contract;

(d) a statement that the contract and joint ownership arrangements

are legal, valid, binding and enforceable under applicable law;

(e) a statement that all necessary licences and consents required in

the jurisdiction where the immovable is located have been

obtained;

(f) any restriction on the fund disposing of its interest, in whole or

in part, in the immovable; and

(g) if relevant, the implication of any foreign law that may limit the

fund’s direct ownership of a 100% interest in the immovable.

12.3.3 Information about joint ownership arrangements—QFC retail property funds

The operator of a QFC retail property fund that has entered into a joint

ownership arrangement in an immovable must include in the next

operator’s report under rule 5.6.13:

(a) the ownership structure of the fund’s interest and the material

terms of the arrangements, including:

(i) restrictions on the fund disposing of its interest; and

(ii) the effect of the restrictions on the value of the interest;

(b) the identity, background and ownership of the other legal and

beneficial owners of the immovable;

(c) any previous transactions by the other owners with the fund in

relation to the immovable;



Rule 12.3.4


(d) agreements for remuneration, fee-sharing and other financial

matters that have been, or will be, entered into between the fund

and the other owners or their associates;

(e) a summary of the legal opinion required by rule 12.3.2 (2) (d) in

relation to the immovable;

(f) if there are any restrictions on foreign ownership of the

immovable subject to the arrangement:

(i) the nature and duration of the restrictions;

(ii) the effect of the restrictions on the operations and financial

position of the fund as a whole; and

(iii) the standing independent valuer’s opinion and evaluation

of the effect of the restrictions on the value of the

immovable; and

(g) any other information that the unitholders may reasonably

require to make an informed judgment about the arrangements.

12.3.4 Use of intermediate holding vehicles to hold immovables—QFC retail property funds

(1) Subject to subrule (2), an immovable may be held by a QFC retail

property fund through 1 or 2 intermediate holding vehicles, if:

(a) the purpose of each vehicle is to enable the fund to hold

immovables; and

(b) either:

(i) the vehicle or each vehicle is majority-owned or majority-

held by the fund; or

(ii) an intermediate holding vehicle that is majority-owned or

majority-held by the fund (the first vehicle) holds the

immovable through another intermediate holding vehicle

(the second vehicle) for the sole purpose of directly

holding the immovable for the fund (or arranging



Rule 12.3.4


financing for the fund) and the second vehicle is majority-

owned or majority-held by the first.

Note An investment in an intermediate holding vehicle for the purpose

of holding an immovable must be treated as if were a direct

investment in the immovable, see rule 12.3.2 (3).

(2) The Regulatory Authority may permit a QFC retail property fund to

hold an immovable through a series of more than 2 intermediate

holding vehicles if the operator of the fund satisfies the authority that

it is necessary to do so (for example when it is necessary for the fund

to meet a legal or regulatory requirement in another jurisdiction).

Guidance

In giving permission for a fund to have more than 2 intermediate holding vehicles,

the Regulatory Authority would be guided by, among others, the structure of the

fund and whether the structure is clear, easily understood and transparent to retail

investors.

(3) If practicable, an intermediate holding vehicle of a QFC retail

property fund must have the same auditor and accounting reference

date as the fund.

(4) The accounts of any intermediate holding vehicle of a QFC retail

property fund must be consolidated into the annual and half-yearly

reports of the fund.

(5) Despite subrule (1) (b), the Regulatory Authority may permit a QFC

retail property fund (or the first intermediate holding vehicle) to hold

an immovable through an intermediate holding vehicle even if the

fund or vehicle does not have a majority ownership or holding if the

authority is satisfied that less than majority ownership or holding is



Rule 12.3.5


reasonable in the circumstances and the interests of the unitholders

are adequately protected.

12.3.5 Duty of operator in relation to intermediate holding vehicles

(1) The operator of a QFC retail property fund that uses an intermediate

holding vehicle or vehicles to hold immovables must ensure that:

(a) neither the constitution of the intermediate holding vehicle or

vehicles nor the organisation, transactions or activities of any of

the vehicles contravenes a requirement of this Chapter;

(b) subject to subrule (3), the governing body of each of the vehicles

is appointed by the operator with the approval of the fund’s

independent entity and investment committee (if any);

(c) each of the vehicles undertakes the purchase, sale and

management of immovables on behalf of the fund in accordance

with the fund’s investment objectives, strategies and policy; and

(d) the interests of the unitholders are otherwise adequately

protected.

(2) The operator of a QFC retail property fund may, by the use of inter-

company debt, transfer capital and income between the fund and an

intermediate holding vehicle of the fund if:

(a) the purpose of the transfer is for investment in immovables or

the repatriation of income generated by such an investment;

(b) a record of inter-company debt is kept to provide an accurate

audit trail; and

(c) interest paid out on the debt instruments that gave rise to the

inter-company debt is equivalent to the net rental income earned

from the immovables less the intermediate holding vehicle’s

reasonable running costs (including tax).

(3) Subrule (1) (b) does not apply to an intermediate holding vehicle if:



Rule 12.3.6


(a) the vehicle does not have a majority stake or holding in relation

to a joint ownership arrangement over the immovable; or

(b) the vehicle, at the time the immovable was acquired, was already

established in another jurisdiction.

12.3.6 Report on use of intermediate holding vehicles to purchase immovables—QFC retail property funds

(1) If a QFC retail property fund purchases an immovable through the

acquisition of an intermediate holding vehicle, the operator of the

fund must ensure that a report is prepared on:

(a) the profit and loss of the vehicle for each of the 3 years preceding

the transaction (or any shorter period for which the intermediate

holding vehicle was in existence); and

(b) the assets and liabilities of the vehicle as at a date that is not

earlier than 6 months from the date of the report.

(2) Despite subrule (1) (b), the Regulatory Authority may require that the

report on the assets and liabilities of the vehicle be as at a date closer

to the date of the report.

Example

The Regulatory Authority may require (generally or for a particular case) a different

date if an intervening event has made the date used, or proposed to be used,

unreliable.

(3) The report may be prepared by the fund’s auditor or another QFC

approved auditor. The report may also be prepared by an auditor from

a jurisdiction which registers and regulates auditors in a way

comparable to QFC approved auditors, but only if the operator of the



Rule 12.3.6


fund notifies the Regulatory Authority of the auditor’s name and

address before the report is prepared.

(4) The report:

(a) must state how the profits and losses of the vehicle would have

affected the fund if the fund had, at all material times, held the

shares proposed to be acquired; and

(b) if the intermediate holding vehicle has subsidiaries—must deal

with the profits or losses and the assets and liabilities of the

vehicle and its subsidiaries (whether jointly or separately).

(5) The operator must also ensure that a valuation report for the

intermediate holding vehicle’s interest in immovables is prepared in

accordance with rules 12.4.3, 12.5.6 and 12.5.7.

QFC retail property funds Chapter 12 Standing independent valuer—QFC retail property funds Part 12.4

Rule 12.4.1


Part 12.4 Standing independent valuer—QFC retail property funds

12.4.1 Appointment of standing independent valuer—QFC retail property funds

(1) A QFC retail property fund must at all times have a valuer for the

fund (standing independent valuer).

(2) The operator of a QFC retail property fund must, with the

independent entity’s approval, appoint a person as standing

independent valuer.

Note As a general rule, a person cannot be the standing independent valuer for

the same fund for more than 5 continuous years (see rule 12.4.4).

(3) A person must not be appointed as the standing independent valuer

unless:

(a) the person carries on the business of valuing immovables;

(b) the operator and the independent entity are satisfied that the

person has the skills, experience, qualifications and attributes to

be the standing independent valuer of the fund, having regard to

the fund’s investment objectives, strategies and policy; and

(c) the person is independent of:

(i) the operator and independent entity;

(ii) if the fund is a CIC—the fund; and


the operator, the independent entity or, for a CIC, the fund.

Guidance for para (3) (b)

The operator and independent entity should be satisfied that:

(a) the person is a fellow or associate (however described), or has key personnel

who are fellows or associates (however described), of a relevant recognised

professional body of surveyors or property valuers (for example, a member of

the Royal Institute of Chartered Surveyors (MRICS), a RICS registered valuer

or a body recognised by RICS);

Chapter 12 QFC retail property funds Part 12.4 Standing independent valuer—QFC retail property funds

Rule 12.4.2


(b) the person has, or has access to, expertise relevant to the fund and, in

particular, knowledge and experience in the valuation of immovables of the

relevant kind in the relevant area;

(c) the person has robust internal controls and checks and balances to ensure:

(i) the integrity of valuation reports; and

(ii) that valuation reports are properly and professionally prepared in

accordance with international best practice;

(d) the person has adequate professional indemnity insurance; and

(e) the person does not have ownership or other commercial links with other

persons providing services to the fund (for example, investment advisers) that

could impair the person’s ability to provide independent and objective

valuation services to the fund.

(4) Without limiting subrule (3) (c), a person (A) is not independent of

another person (B) if:

(a) A has, at any time during the last 2 years, been involved in

material business dealings with B (otherwise than in the exercise

of their respective functions as the holders of positions in

relation to any scheme); or

(b) B has a material interest in A or A has a material interest in B.

12.4.2 Standing independent valuer not to deal in immovables—QFC retail property funds

The standing independent valuer of a QFC retail property fund must

not be personally engaged, and must not have an associated person

who is engaged, in finding immovables for the fund or finding the

fund for immovables.

12.4.3 Basis of valuation by standing independent valuer—QFC retail property funds

(1) A valuation of an interest in an immovable by the standing

independent valuer of a QFC retail property fund must be:

(a) on the basis of ‘open market value’ (as defined in the

constitutional document and the latest filed prospectus); or


Rule 12.4.4


(b) on another appropriate basis.

Guidance

1 The constitutional document and latest filed prospectus would be expected to

define “open market value” using an authoritative text such as the latest edition

of the Royal Institute of Chartered Surveyors’ publication called “RICS

Valuation - Professional Standards (the Red Book)”.

2 In considering whether valuation of an interest in an immovable by the

standing independent valuer is made on an appropriate basis, the operator

should consider whether the valuation was made in accordance with

internationally accepted valuation principles, procedures and definitions as set

out in the International Valuations Standards published by the International

Valuation Standards Committee.

(2) The basis on which the standing independent valuer makes a

valuation is subject to the constitutional document and the latest filed

prospectus.

(3) In making a valuation, the standing independent valuer:

(a) may treat the contents of a building as part of the building; and

(b) must disregard any arrangement to dispose of an interest in an

immovable held as part of the scheme property unless the valuer

is satisfied on reasonable grounds that the arrangement is legally

enforceable.

Note For the valuations that a standing independent valuer is required to do,

see:

• rule 12.5.2 (1) (c) (valuation before acquisition of immovables)

• rule 12.5.4 (1) (b) (valuation before disposal of immovables)

• rule 12.5.6 (annual and periodic valuations of immovables)

12.4.4 Reappointment of standing independent valuer—QFC retail property funds

(1) No person may be a standing independent valuer of a QFC retail

property fund for a continuous period of 5 years, unless the person is

reappointed in accordance with this rule.

Chapter 12 QFC retail property funds Part 12.4 Standing independent valuer—QFC retail property funds

Rule 12.4.5


(2) If the operator of a QFC retail property fund wishes to reappoint a

person after the person has served 5 continuous years, the operator

must put the position to tender before the end of the 5 years.

(3) If the operator decides (with the approval of the independent entity)

to reappoint the same person following the tender process, the

operator must state the reasons, and summarise the evidence, for the

reappointment in the next operator’s report under rule 5.6.13.

(4) A reappointment under this rule must not exceed 5 years and cannot

be further extended.

12.4.5 Removal of standing independent valuer—QFC retail property funds

(1) The operator of a QFC retail property fund may, with the independent

entity’s approval, remove the standing independent valuer at any

time.

(2) The operator of a QFC retail property fund must remove a person as

the standing independent valuer if:

(a) a special resolution of the unitholders is passed to remove the

person;

(b) the person breaches the prohibition against dealing in

immovables under rule 12.4.2;

(c) the person:

(i) becomes insolvent;

(ii) is wound up or put into liquidation; or

(iii) is placed in receivership or administration; or

(d) the person ceases to be eligible to be appointed as the standing

independent valuer.


Rule 12.4.5


(3) The power to remove the standing independent valuer has effect

despite anything in any agreement between the valuer and all or any

of the following:

(a) the operator;


(c) the fund.

Chapter 12 QFC retail property funds Part 12.5 Investments—QFC retail property funds

Rule 12.5.1


Part 12.5 Investments—QFC retail property funds

12.5.1 Investment committee—QFC retail property funds

(1) This rule applies to a QFC retail property fund that is not a CIT.

Note Rule 12.5.1 does not apply to a REIT (see table 12.6.4A).

(2) The fund must have an investment committee of at least 3 members.

The operator must make arrangements for the unitholders to elect the

members of the committee after the fund starts operations, and

thereafter:

(a) at least once every 5 years; and

(b) each time there is a vacancy.

(3) A person is not eligible for election as a member unless the operator

and independent entity are satisfied that the person has the skills,

experience and qualifications to review investment opportunities for

the fund.

(4) The members of the committee must be independent of the operator

and must not be involved in the fund’s day to day management. No

person may be a member for more than 5 continuous years.

12.5.2 Requirements for making investments in immovables—QFC retail property funds

(1) The operator of a QFC retail property fund must ensure that the fund

does not invest in an immovable to be held as part of the scheme

property unless all the following requirements are complied with:

(a) the immovable must be located in a jurisdiction specified in the

latest filed prospectus;

(b) the operator must have taken reasonable care to determine that

the title to the interest to be acquired in the immovable is a good

marketable legal and beneficial title;

QFC retail property funds Chapter 12 Investments—QFC retail property funds Part 12.5

Rule 12.5.3


(c) the standing independent valuer has valued the interest and the

operator and independent entity have received a report on the

valuation.

Note See rule 12.5.5 (Reports on valuation of immovables before acquisition

or disposal—QFC retail property funds).

(2) However, the report of the standing independent valuer must not be

relied on to acquire the interest in an immovable if:

(a) the interest is not acquired, or agreed by enforceable contract to

be acquired, within 6 months after the date of the report;

(b) it is (or should reasonably be) apparent to the operator that the

valuer’s report cannot, or can no longer, reasonably be relied on;

or

(c) the price of the interest is, or becomes, more than 105% of the

valuation of the interest stated in the report.

12.5.3 Operator’s duties in relation to title and insurance of immovables—QFC retail property funds

(1) The operator of a QFC retail property fund must ensure that the fund

holds good marketable legal and beneficial title in all its immovables

(whether directly or through an intermediate holding vehicle or

vehicles).

(2) An arrangement entered into in relation to scheme property for the

purposes of Islamic finance arrangements where the legal title to the

property is held by a financial institution complies with subrule (1) if:

(a) there is a statement in the fund’s prospectus that the fund may

enter into such arrangements; or


Rule 12.5.4


(b) the unitholders have by special resolution approved the fund’s

entry into such arrangements.

Guidance

Under rule 12.5.3 (2) operators can use certain Islamic structures such as ijara for

transactions that require the financial institution providing the financing to be the

legal owner of the immovable.

(3) The operator must ensure that the fund does not grant any person an

option to acquire any scheme property.

(4) The operator must take all reasonable care to arrange adequate

property insurance and public liability insurance for immovables held

as part of the scheme property.

12.5.4 Operator’s duties in relation to option premiums and disposal of immovables—QFC retail property funds

(1) The operator of a QFC retail property fund must ensure that the

following requirements are complied with in relation to interests in

immovables held as part of the fund’s scheme property:

(a) the total of all premiums paid in any 12-month period for options

to purchase interests in immovables must not exceed 10% of the

fund’s gross asset value, calculated at the date of the granting of

the option;

(b) an interest in an immovable must not be disposed of unless:

(i) the standing independent valuer has valued the interest;

and

(ii) the operator and independent entity have received a report

on the valuation.

Note See rule 12.5.5 (Reports on valuation of immovables before

acquisition or disposal—QFC retail property funds).


relied on under subrule (1) (b) to dispose of an interest in an

immovable if the interest is not disposed of, or agreed by enforceable

contract to be disposed of, within 6 months after the date of the report.


Rule 12.5.5


12.5.5 Reports on valuation of immovables before acquisition or disposal—QFC retail property funds

(1) This rule applies to a report by a standing independent valuer in

relation to a proposed acquisition or disposal of an interest in an

immovable.

Note For the valuation in relation to proposed acquisition of an immovable, see

rule 12.5.2 (1) (c). For the valuation in relation to proposed disposal of

an immovable, see rule 12.5.4 (1) (b).

(2) The report:

(a) must include a brief description of the immovable, including:

(i) its location and existing use;

(ii) the nature of the interest the fund is proposing to acquire,

or dispose of, in the immovable;

(iii) any encumbrances affecting the immovable;


of the lease and its expiry;



(vii) any other matter that may affect the immovable or the

value of the interest;

(b) must include all material details about the basis of valuation and

the assumptions used;

(c) must describe and explain the valuation methods used;

(d) if more than 1 valuation method is available—must explain the

reasons for choosing a particular method;

(e) must outline the structure and condition of the relevant market,


market trend, and investment activities;


Rule 12.5.6


(f) must confirm that the valuer continues to be eligible to be the

standing independent valuer for the firm and that the report is

prepared on a fair and unbiased basis; and

(g) must be dated as at the date the valuation is made.

12.5.6 Annual and periodic valuation of immovables—QFC retail property funds

(1) The following provisions apply in relation to the valuation of interests

in immovables (including investments in intermediate holding

vehicles for the purpose of holding immovables) held as part of the

scheme property of a QFC retail property fund:

(a) the operator must ensure that the standing independent valuer:

(i) values, at least once a year, all the interests in immovables

held as part of the scheme property, on the basis of a full

valuation with physical inspection (including, if the

immovable is or includes a building, internal inspection of

the building); and


valuation;

(b) for paragraph (a), any inspection in relation to adjacent

properties of a similar nature and value may be limited to the

inspection of only a single representative property;

(c) the operator must ensure that the standing independent valuer:

(i) values, at least once a month, all the interests in

immovables held as part of the scheme property, on the

basis of a review of the last full valuation (unless the valuer

decides that the valuation of an interest in an immovable

should be made on the basis mentioned in paragraph (a));

and


valuation;

Note Subrule (1) (c) does not apply to a REIT (see table 12.6.4A).


Rule 12.5.7


(d) if the operator or independent entity becomes aware of any

matter that appears likely:

(i) to affect the valuation of an interest in an immovable; or

(ii) to cause the standing independent valuer to decide to value

on the basis mentioned in paragraph (a) instead of on the

basis mentioned in paragraph (c);

it must immediately notify the standing independent valuer

about the matter;

(e) the operator must use its best endeavours to ensure that any other

affected person immediately notifies the standing independent

valuer if the affected person becomes aware of a matter

mentioned in paragraph (d).

(2) The valuation of an interest in an immovable under this rule has effect

for these rules until the next valuation of the interest under this rule.

12.5.7 Annual and other periodic valuation reports—QFC retail property funds

(1) This rule applies to a report by a standing independent valuer in

relation to a valuation of interests in immovables under rule 12.5.6.

(2) The report:

(a) must include a brief description of each immovable in which the

fund holds an interest, including:

(i) its location and existing use;

(ii) the nature of the interest the fund holds in the immovable;

(iii) any encumbrances affecting the immovable;


of the lease and its expiry;




Rule 12.5.8


(vii) any other matter that may affect the immovable or the

value of the interest;

(b) must include all material details about the basis of valuation and

the assumptions used;

(c) must describe and explain the valuation methods used;

(d) if more than 1 valuation method is available—must explain the

reasons for choosing a particular method;

(e) must outline the structure and condition of the relevant market,


market trend, and investment activities;

(f) must confirm that the valuer continues to be eligible to be the

standing independent valuer for the firm and that the report is

prepared on a fair and unbiased basis; and

(g) must be dated as at the date the valuation is made.

12.5.8 Valuation of financial instruments—QFC retail property funds

(1) This rule applies in relation to the valuation of financial instruments

of the following kinds held as part of the scheme property of a QFC

retail property fund:

(a) securities listed on the Qatar Stock Exchange or another

regulated exchange;

(b) unlisted debt securities;

(c) government or public securities;

(d) instruments issued by other property funds.

(2) The instruments must be valued independently and fairly, on a regular

basis, in accordance with the fund’s constitutional document. The

valuation must be done in accordance with the accounting standards

adopted for preparing the fund’s financial statements and with

industry standards and best practices.


Rule 12.5.9


12.5.9 Borrowing by QFC retail property funds

(1) A QFC retail property fund may borrow money (directly or through

any intermediate holding vehicle) for the use of the fund to finance

an investment or for operating purposes. The loan must be repaid out

of the scheme property.

(2) Money may be borrowed under subrule (1) only from an eligible

bank.

(3) The operator of the fund must ensure that any borrowing is entered

into, maintained and monitored in accordance with the borrowing

policy as stated in the fund’s prospectus. The operator must have

regard in particular to:

(a) the duration of any borrowing; and

(b) the number of times the fund borrows in any period.

(4) The operator of the fund must also ensure that the fund’s total

borrowing does not, on any day, exceed 50% of its gross asset value.

(5) All borrowing by the fund must be at arm’s length. The operator may

pledge the fund’s assets to secure the borrowing.

(6) If the borrowing limit is exceeded, the operator must use its best

endeavours to reduce the excess borrowing as soon as practicable.

The operator must notify the unitholders and the Regulatory

Authority of:

(a) the breach;

(b) the cause of the breach; and

(c) any action that has been, or will be, taken to correct the breach.

(7) For this rule, borrowing by intermediate holding vehicles of the fund

must be aggregated in calculating the total of the fund’s borrowing.

(8) This rule is subject to the obligation of the fund to comply with any

restriction in the constitutional document. This rule does not apply to

back-to-back borrowing.

Chapter 12 QFC retail property funds Part 12.6 Real estate investment trusts

Rule 12.6.1


Part 12.6 Real estate investment trusts

12.6.1 Application of Part 12.6

This Part applies to real estate investment trusts. The operator of a

retail property fund that is, or is held out as, a REIT must (subject to

rule 12.6.4) comply with this Part in addition to the other Parts of this

Chapter.

12.6.2 Real estate investment trusts or REITs

(1) An operator, or any person marketing a fund, must not use the term

“Real Estate Investment Trust” or “REIT”, or refer to a fund or

otherwise hold out a fund as being a real estate investment trust,

unless the fund is a QFC retail property fund that satisfies

subrules (2), (2A) and (2C).

(2) A QFC retail property fund is a real estate investment trust (REIT)

if:

(a) the fund is a closed-ended scheme;

(b) the fund is listed in the Qatar Stock Exchange or another

regulated exchange; and

(c) the fund’s constitutional document and prospectus state that:

(i) the fund will not invest in vacant land;

(ii) 75% of the fund’s assets will be invested in income-

producing immovables; and

(iii) the fund will distribute to unitholders at least 80% of its

audited annual net income (adjusted to exclude any fair

value capital gains).

Guidance

1 For a REIT that holds an immovable through an intermediate holding vehicle

or vehicles, the timing of distributions of income may depend on the law of

the jurisdiction where the vehicle or vehicles are established.

2 Nothing in this rule prevents a REIT from distributing more than the

percentage stated in its constitutional document and prospectus. If the REIT

QFC retail property funds Chapter 12 Real estate investment trusts Part 12.6

Rule 12.6.1


proposes to distribute less than that percentage, rule 12.6.6 would apply and

prior approval from unitholders would be required.

Note A REIT must be a QFC collective investment company or a QFC

collective investment trust (see rule 12.6.3). A REIT must be primarily

aimed at investments in income-producing immovables (see definition of

property fund).

(2A) A REIT must provide a guarantee (or similar instrument of assurance)

of the fund’s income, covering the first 5 years of the fund’s

operation, from income-producing immovables. The guarantee or

instrument must meet the requirements in subrule (2B).

(2B) A guarantee or instrument meets the requirements of this subrule if it

is provided by:

(a) a banking business firm (within the meaning given by BANK);

(b) an Islamic banking business firm (within the meaning given by

IBANK);

(c) a bank in the State; or

(d) another bank that is regulated by a banking regulator, and is

acceptable to the Regulatory Authority.

(2C) If the fund was listed in a regulated exchange other than the Qatar

Stock Exchange, then, at the time at which it was listed:

(a) according to the fund’s annual financial statements, any

hospitality-based asset of the fund (such as a hotel) had

generated operating revenue in each of the previous 7 years;

(b) according to the fund’s annual financial statements, any other

asset of the fund had generated operating revenue in each of the

previous 5 years; and

(c) all leases of assets of the fund had a weighted unexpired term of

at least 5 years.

Guidance

The Qatar Stock Exchange’s listing rules contain requirements corresponding to

those in subrule (2C). However, a REIT that is listed on another regulated exchange


Rule 12.6.3


can be registered in the QFC (see rule 12.6.2 (2) (b)). The rules of the other

exchange might not impose those requirements. Subrule (2C) ensures that those

requirements apply to a REIT that is registered in the QFC but listed in another

regulated exchange.

(3) If a REIT fails to satisfy a requirement in subrule (2), (2A) or (2C),

the operator and the independent entity of the REIT must notify the

Regulatory Authority and the relevant exchange immediately, but

within 1 business day. The notice must state any action that has been,

or will be, taken to correct the breach.

12.6.3 Legal forms—REITs

A real estate investment trust must take the form of a QFC collective

investment company or a QFC collective investment trust.

Note QFC collective investment company (CIC) and QFC collective

investment trust (CIT) are defined in rules 1.3.7 and 1.3.9 respectively.

12.6.4 Other provisions continue to apply to REITs

(1) Except as set out in column 3 of table 12.6.4A, the provisions of these

rules described in columns 1 and 2 continue to apply to a REIT.

(2) Neither table 12.6.4A nor 12.6.4B is exhaustive. Each table is a guide

for those who intend to establish and register a REIT.

(3) Because a REIT cannot take the form of a partnership, provisions that

require a QFC retail property fund to be a QFC collective investment

partnership or CIP do not apply. As a general rule, provisions that

deal with umbrella schemes or the redemption of units do not apply

to REITs since REITs must be closed-ended.


Rule 12.6.4


Table 12.6.4A Application of provisions to REITs

column 1


column 2


column 3


Chapter 1 general

provisions,

basic concepts

and key terms

rules 1.3.6 (b) and 1.3.8

Chapter 2 registration of

scheme

Chapter 3 constitutional

requirements

and units

Division 3.2.B

rules 3.1.1 (b) and 3.2.12

Chapter 4 operator and

independent

entity

Chapter 5 investor

relations,

affected

persons,

prospectus,

approvals,

meetings,

reports,

accounts and

auditors

Divisions 5.4.A, 5.5.A and 5.6.B

rules 5.6.1 (3), 5.6.9 (3), 5.6.11 (2) to

(4), 5.6.12 (2) to (4), 5.6.13 (c), (l) and

(m) and 5.6.17 (2) and (3),

Chapter 7 investment and

borrowing

Parts 7.2, 7.3, 7.4, 7.5 and 7.6

rules 7.1.10, 7.7.2 , 7.7.3 and 7.7.6


Rule 12.6.4


column 1


column 2


column 3


Chapter 8 operating duties

and

responsibilities,

dealing,

valuation

pricing,

register,

outsourcing,

payments,

accounting and

income

distribution

Divisions 8.1.A, 8.2.A, 8.2.C and 8.6.A

rules 8.1.10, 8.2.5, 8.2.14, 8.3.1,

8.3.3 (2), 8.3.4, 8.6.6, 8.6.11, 8.8.1,

8.8.2 and 8.9.2 (2) and (4)

Divisions 8.1.B, 8.2.B and 8.6.B in so

far as they mention or allow redemption

Chapter 9 suspension,

winding up and

transfer

schemes

rules 9.1.1 and 9.2.1

Chapter 10 financial

promotions and

investment

activities

Parts 10.2 and 10.3

Chapter 11 other provisions

and fees

Part 11.3

Chapter 12 QFC retail

property funds

rules 12.5.1 and 12.5.6 (1) (c)

Schedule 1 arrangements

that are not

collective

investment

schemes

rules S1.14 (1) (b) and S1.15


Rule 12.6.4


column 1


column 2


column 3


Schedule 2 contents of

constitutional

document

Parts S2.2, S2.3 and S2.4

rules S2.9 (b), S2.18 and S2.19

Schedule 5 contents of

prospectus

(4) CIPR also deal with collective investment schemes, and the

definitions of packaged investment product and issuer in those rules

include a unit in a collective investment scheme and the operator of a

collective investment scheme, respectively. The provisions of CIPR

described in table 12.6.4B may, among others, apply to REITs.

Table 12.6.4B CIPR provisions that may apply to REITs

column 1

provisions

column 2


rules 3.5.7 to 3.5.9 inducements

Part 3.6 personal account transactions

Parts 4.2 and 4.3 advertisements, personal contacts and

telephone contacts

Part 4.4 initial disclosure document/terms of

business

rule 5.3.4 independent investment advice

Part 5.4 and Schedule 1 key information document—form

and contents


Rule 12.6.5


12.6.5 Extra constitution requirements—REITs

(1) The constitutional document of a REIT must state:

(a) that the fund is a real estate investment trust;

(b) the exchange where the fund is listed;

(c) the percentage (at least 80%) of its audited annual net income

(adjusted to exclude any fair value capital gains) that the fund

intends to distribute to unitholders; and

(d) whether the fund is a collective investment company or a

collective investment trust.

Note Because a REIT is a QFC retail property fund, its constitutional document

must also include the matters set out in rule 12.2.1, such as a statement

that the fund invests in at least 3 immovables that generate recurrent

rental income.

(2) The income distribution policy required to be stated in the REIT’s

constitutional document must include:

(a) the REIT’s proposed distribution date or dates;

(b) the person responsible for determining any adjustments (such as

evaluation surplus and gains on disposal of immovables) to

distributable income;

(c) the basis for any adjustments mentioned in paragraph (b); and

(d) if relevant, the procedures for calculating, paying and

accounting for income equalisation.

Note For the other statements about income distribution that the constitutional

document of a REIT must contain, see rule S2.10.

12.6.6 Proposal to distribute less than stated percentage

If, for a particular annual distribution, the operator of a REIT

proposes not to distribute the percentage (at least 80%) of its audited

annual net income (adjusted to exclude any fair value capital gains)


Rule 12.6.7


as stated in its constitutional document and prospectus, the proposal

is taken to be a fundamental change for purposes of rule 5.4.2.

Note Under rule 5.4.2, any fundamental change must have prior approval from

the unitholders.

12.6.7 REITs and intermediate holding vehicles

If a REIT holds an immovable (whether located in or outside Qatar)

through an intermediate holding vehicle, or a series of intermediate

holding vehicles, the operator of the REIT must ensure that the

vehicle, or each of the vehicles, distributes its income to the REIT.

The income is to be distributed to the extent permitted by the law of

the jurisdiction where the vehicle is established.

12.6.8 Investments by REITs in immovables under development

(1) Subject to subrule (2), the operator of a REIT must ensure that any

investment in an immovable that is in the course of development

(whether by the REIT on its own or in joint venture) is undertaken

only if the REIT intends to hold the immovable on completion.

(2) The total contract value of the immovable under development or

redevelopment must not exceed 30% of the gross asset value of the

REIT.

(3) For this rule, development includes redevelopment but does not

include refurbishment, retrofitting and renovation.

12.6.9 Custody of immovables by REIT operator

(1) The operator of a REIT may act as custodian of an immovable that is

part of the fund’s scheme property if the operator has:

(a) adequate systems and controls to segregate and protect the

immovable; and


Rule 12.6.10


(b) effective arrangements to ensure that the immovable is not

available to creditors of the operator if the operator becomes

insolvent.

Note Under rule 4.2.6 (6) (b), the independent entity of a REIT is not

responsible in relation to an immovable held by the operator of the REIT

as custodian in accordance with this rule. If the REIT operator acts as

custodian, the fund’s prospectus must state that fact (see rule S5.20 (1)).

(2) The systems and controls to segregate and protect the immovable

must ensure that:

(a) legal title to the immovable is registered in the name of the fund;

(b) the operator identifies, manages and monitors any conflicts of

interest as a result of it acting as custodian; and

(c) the operator designates by name or position the employees who

are responsible for safeguarding the ownership rights of the fund

over the immovable, including safekeeping documents

evidencing title to the immovable.

(3) In designating an employee under subrule (2) (c), the operator must

have regard to conflicts of interest that may arise between the

employee’s function of safeguarding ownership rights and the

employee’s other functions.

Guidance

In identifying, managing and monitoring conflicts of interest that may arise from

acting as custodian, the operator must take into account that it is required to give

priority to unitholders’ interests if there is a conflict between its own interests and

those of unitholders.

12.6.10 Transactions with affected persons—REITs

(1) The operator of a REIT need not comply with rules 5.1.3 and 5.1.4

(relating to notice and approval) for a transaction with an affected

person if:

(a) the transaction is for the acquisition or sale of an immovable in

Qatar;


Rule 12.6.10


(b) the operator has general unitholder approval to enter into such a

transaction; and

(c) the fund’s independent entity has confirmed in writing, before

the transaction is entered into:

(i) that the transaction is on terms that comply with the

requirement to negotiate at arm’s length in

rule 5.1.2 (2) (a); and

(ii) that all other requirements have been complied with.

(2) For subrule (1) (b), the unitholder approval must be by ordinary

resolution passed at the previous annual general meeting of the fund.

A unitholder who is an affected person proposing to enter into an

affected person transaction, or a unitholder who is an associate of the

affected person, must not vote on the resolution.

(3) The resolution must authorise the operator to enter into transactions

with affected persons for the acquisition or sale of immovables in

Qatar without obtaining prior unitholder approval in each case during

the period for which the resolution is valid. The resolution is valid

only until the date of the next annual general meeting of the fund

(when it may be renewed).

Note The operator of a REIT must disclose the existence of such an approval

in the fund’s prospectus (see rule S5.20 (2)).

(4) If the operator of a REIT enters into a transaction with an affected

person under this rule, the operator must notify unitholders of the

details of the transaction, including the identity of the affected person

and the nature and extent of the person’s interest. The notice must be

given as soon as practicable after entering into the transaction.

Note For service and form of notices to unitholders, see rules 11.1.2 and 11.1.3.

Notice may be given in the fund’s latest filed prospectus.

(5) If the operator operates more than 1 fund and a transaction involves

2 or more of them, the transaction is taken to be a transaction with an

affected person for each fund.


Rule 12.6.11


12.6.11 Depositing cash with, and borrowing money from, affected persons—REITs

(1) The operator of a REIT must not deposit, with an affected person,

cash that is part of the REIT’s assets unless:

(a) the affected person is a regulated financial institution licensed to

accept deposits; and

(b) the rate of interest that is to be paid on the deposit is not lower

than the prevailing commercial rate for a deposit of that size and

term.

(2) The operator of a REIT must not borrow money from an affected

person unless:

(a) the affected person is a regulated financial institution licensed to

lend money; and

(b) the rate of interest to be charged on the borrowing is not higher

than the prevailing commercial rate for a borrowing of that size

and term.

12.6.12 Changes to disclosure about business with affected persons—REITs

If after the initial disclosure there is a significant change in the

information and statements required under rule S5.18 relating to the

competing business of an affected person, the operator must notify

the unitholders of the change.

Note For service and form of notices to unitholders, see rules 11.1.2 and 11.1.3.

Notice may be given in the fund’s latest filed prospectus.


Rule 12.6.13


12.6.13 When additional approval required from independent entity—REITs

(1) This rule applies to a transaction between a REIT and an affected

person if:

(a) the transaction is in relation to:

(i) services provided in the ordinary course of estate

management of an immovable of the fund (for example,

renovation and maintenance work); or

(ii) engaging a property agent to provide services to the fund

(for example, advisory services in transactions involving

immovables); and

(b) the value of the transaction is 5% or more of the fund’s gross

asset value, as disclosed in its latest audited accounts.

(2) The operator must ensure that such a transaction is entered into only

with the approval of the fund’s independent entity.

12.6.14 Duty to notify relevant exchange—REITs

(1) The operator and the independent entity of a REIT must notify the

exchange in which the REIT is listed if a material event occurs in

relation to the REIT. The notice must be given immediately, but


(2) In this rule, material event includes:

(a) an event, or change in circumstances, that is likely to have a

significant adverse effect on the REIT or its unitholders;

(b) an event, or change in circumstances, that is likely to result in

material prejudice or damage to the REIT or its unitholders;

(c) a failure, in a material respect, to comply with the operator’s or

independent entity’s functions under these rules;

(d) a major breach of the restrictions on the fund’s investment and

borrowing;


Rule 12.6.15


(e) a material change in the fund’s risk management process;

(f) any matter (other than the issue or redemption of units in the

ordinary course of business) that has a material effect on the size

of the fund or the price of its units; and

(g) any other matter that is likely to result in (or that is, under the

exchange’s rules, ground for) the suspension by the exchange of

trading in listed units.

12.6.15 Duty to notify Regulatory Authority of trading suspension

(1) If an exchange on which a REIT is listed suspends trading in the

REIT’s units, the operator of the REIT:

(a) must immediately notify the Regulatory Authority orally about

the suspension, giving the reasons (so far as the operator is

aware of them) for the suspension; and

(b) must give the authority written confirmation of the suspension

and those reasons within 1 business day.

(2) If the exchange permits trading in the units to re-start, the operator:

(a) must immediately notify the Regulatory Authority about the

exchange’s decision orally; and

(b) must give the authority written confirmation of the decision


Arrangements not collective investment schemes Schedule 1

Rule S1.1


Schedule 1 Arrangements not collective investment schemes

(see r 1.2.1)

S1.1 Individual investment management arrangements

An arrangement is not a scheme if—

(a) the property to which the arrangement relates (other than

cash awaiting investment) consists of investments of 1 or

more of the following kinds:

(i) shares;

(ii) debt instruments;

(iii) warrants;

(iv) options;

(v) units in a collective investment scheme;

(vi) long term insurance contracts; and

Note Investment, share, debt instrument, warrant, option and

long term insurance contract are defined in the glossary.

Unit is defined in r 1.2.4.

(b) each participant in the arrangement is entitled to a part of

the property and to withdraw the part at any time; and

(c) each of the following provisions applies to the arrangement:

(i) the contributions of the participants are not pooled;

(ii) the profits or income out of which payments are to be

made are not pooled;

(iii) the parts of the property to which the different

participants are entitled are bought and sold separately


Rule S1.2


only when a person becomes or ceases to be a

participant.

S1.2 Pure deposit-based arrangements

An arrangement is not a scheme if the whole amount of the

contribution of each participant in the arrangement is a deposit

accepted by an authorised firm with an authorisation for deposit

taking.

Note Authorised firm, authorisation and deposit taking are defined in

the glossary.

S1.3 Arrangements not operated by way of business

An arrangement is not a scheme if it is operated otherwise than

by way of business.

S1.4 Debt issues

(1) An arrangement is not a scheme if it is an arrangement under

which the rights or interests of participants in the arrangement are

represented by investments of 1, and only 1, of the following

kinds:

(a) debt instruments if they are—

(i) issued by—

(A) a single corporation that is not a CIC; or

(B) a single issuer that is not a corporation; and

(ii) for instruments mentioned in subparagraph (i) (B)—

issued or guaranteed by—

(A) the government of any jurisdiction; or

(B) a public or local authority of any jurisdiction; and


Rule S1.4


(iii) not convertible or exchangeable for investments of any

other kind;

Note Debt instrument, corporation, jurisdiction and investment

are defined in the glossary. CIC is defined in r 1.3.7.

(b) debt instruments if—

(i) they are instruments to which paragraph (a) (other than

subparagraph (iii)) applies; and

(ii) they are convertible or exchangeable for shares; and

(iii) the shares are issued by—

(A) the same person that issued the debt instruments;

or

(B) a single other issuer;

Note Share is defined in the glossary.

(c) warrants if—

(i) they are issued otherwise than by a CIC; and

(ii) they give rights to investments that—

(A) are issued by the same issuer; and

(B) are debt instruments mentioned in paragraph (a)

or (b) or shares.

Note Warrant is defined in the glossary.

(2) An arrangement must not be taken not to be an arrangement to

which subrule (1) applies only because 1 or more of the

participants is a person (the counterparty)—

(a) whose ordinary business—

(i) involves the person in conducting 1 or more relevant

activities; or


Rule S1.4


(ii) would, apart from any exclusions under the Financial

Services Regulations, schedule 3 (Regulated Activities

and Permitted Activities), part 2 (Specified Activities),

involve the person in conducting 1 or more relevant

activities; and

(b) whose rights or interests in the arrangement are or include

rights or interests under a swap arrangement.

(3) In this rule:

relevant activities means regulated activities of any of the

following kinds:

(a) dealing in investments;

(b) arranging deals in investments;

(c) providing custody services;

(d) arranging the provision of custody services;

(e) managing investments;

(f) advising on investments;

(g) providing credit facilities;

(h) arranging credit facilities;

(i) operating collective investment schemes.

Note Regulated activity and the regulated activities mentioned in para (a)

to (i) are defined in the glossary.

swap arrangement means an arrangement—

(a) the purpose of which is to facilitate the making of payments

to participants, whether or not of a particular amount, in a

particular currency or at a particular time or rate of interest;

and


Rule S1.5


(b) under which the counterparty—

(i) is entitled to receive amounts, whether representing

principal or interest, payable in relation to any property

subject to the arrangement or amounts worked out by

reference to those amounts; and

(ii) makes payments, whether or not of the same amount

or in the same currency as amounts mentioned in

subparagraph (i), that are worked out in accordance

with an agreed formula by reference to those amounts.

S1.5 Common accounts


(a) it is an arrangement under which the rights or interests of

participants are rights to or interests in money held in a

common account; and

(b) that money is held in the account on the understanding that

an amount representing the contribution of each participant

is to be applied—

(i) in making payments to the participant; or

(ii) in satisfaction of amounts owed by the participant; or

(iii) in the acquisition of property for the participant or the

provision of services to the participant.

S1.6 Arrangements entered into for commercial purposes related to existing businesses

(1) An arrangement is not a scheme if each of the participants in the

arrangement—

(a) conducts a business activity other than an excluded activity;

and


Rule S1.7


(b) enters into the arrangement for commercial purposes related

to the business activity.

(2) However, subrule (1) does not apply if the participant will

conduct the business activity only because the participant is a

participant in the arrangement.

(3) In this rule:

excluded activity means regulated activities of any of the

following kinds:



(c) providing custody services;

(d) arranging the provision of custody services;

(e) managing investments;

(f) advising on investments;

(g) providing credit facilities;

(h) arranging credit facilities;

(i) operating collective investment schemes.

Note Regulated activity and the regulated activities mentioned in para (a)

to (i) are defined in the glossary.

S1.7 Group arrangements

An arrangement is not a scheme if each of the participants is a

corporation in the same group as the person responsible for

managing the property held for or in the arrangement.

Note Corporation, group and property are defined in the glossary.

S1.8 Franchise arrangements

(1) A franchise arrangement is not a scheme.


Rule S1.9


(2) In this rule:

franchise arrangement means an arrangement under which a

person earns profits or income by exploiting a right given by the

arrangement to use—

(a) a trade mark or design or other intellectual property; or

(b) the goodwill attached to it.

S1.9 Timeshare arrangements

An arrangement is not a scheme if the rights or interests of the

participants are timeshare rights.

S1.10 Other arrangements relating to use or enjoyment of property


(a) the predominant purpose of the arrangement is to enable the

participants in the arrangement to share in the use or

enjoyment of property or to make its use or enjoyment

available free of charge to others; and

(b) the property to which the arrangement relates—

(i) does not consist of the currency of any jurisdiction;

and

(ii) does not consist of or include—

(A) a specified product; or

(B) a product that would be a specified product apart

from any exclusion in Financial Services

Regulations, schedule 3 (Regulated Activities

and Permitted Activities), part 3 (Specified

Products).

Note Property, jurisdiction and specified product are defined in the

glossary.


Rule S1.11


S1.11 Arrangements involving issue of certificates representing investments

An arrangement is not a scheme if the rights or interests of the

participants in the arrangement are securities receipts in relation

to securities of a single issuer.

Note Securities receipt and security are defined in the glossary.

S1.12 Clearing services

An arrangement is not a scheme if its purpose is the provision of

clearing services and the services are provided by an authorised

firm.


S1.13 Contracts of insurance

A contract of insurance is not an arrangement that is a scheme.

Note Contract of insurance is defined in the glossary.

S1.14 Corporations

(1) A corporation incorporated in the QFC is not an arrangement that

is a scheme unless it is—

(a) a CIC; or

(b) a CIP; or

(c) another permitted form of QFC scheme.

Note Corporation is defined in the glossary. CIC, CIP and another

permitted form of QFC scheme are defined in div 1.3.B.

(2) A corporation (other than a partnership) incorporated outside the

QFC is not an arrangement that is a scheme unless the

arrangement meets the property condition in subrule (3) and the

investment condition in subrule (4).


Rule S1.14


(3) For subrule (2), an arrangement meets the property condition if—

(a) it is made in relation to property that belongs beneficially

to, and is managed by or on behalf of, the corporation; and

(b) the corporation has for its purpose the investment of its

property with the aim of—

(i) spreading investment risk; and

(ii) giving its members the benefit of the results of the

management of its property.


(4) For subrule (2), an arrangement meets the investment condition

if, in relation to the corporation, a reasonable investor would, if

the investor were to take part in the arrangement—

(a) expect to be able to realise, within a period appearing to the

investor to be reasonable (or, for a closed-ended

corporation, at the end of the corporation’s operation), the

investor’s investment in the arrangement (represented, at

any time, by the value of shares in, or securities of, the

corporation held by the investor as a participant in the

arrangement); and

(b) be satisfied that the investment, if realised, would be

realised on a basis calculated completely or mainly by

reference to the value of property in relation to which the

corporation makes arrangements.

(5) In deciding whether the investment condition is met, no account

may be taken of any actual or potential redemption or repurchase

of shares or securities under provisions in force in any

jurisdiction other than the QFC corresponding to the Companies

Regulations 2005, article 31 (Redemption or purchase of own

shares).


Rule S1.15


(6) However, the Regulatory Authority may, by written notice given

to the corporation, declare that subrule (1) or (2) does not apply

in relation to the corporation.

(7) The Regulatory Authority may make a declaration under subrule

(6) if it considers that making the declaration is desirable to

protect—

(a) the interests of participants or potential participants in the

corporation; or

(b) the financial system operating in or from the QFC.

(8) If the Regulatory Authority gives the corporation a notice under

subrule (6), the notice must—

(a) give reasons for the decision to make the declaration; and

(b) tell the corporation that it may appeal to the Regulatory

Tribunal against the decision.

S1.15 Partnerships

(1) A partnership incorporated or otherwise established in the QFC

as a partnership (and not a branch) is not an arrangement that is a

scheme unless it is—

(a) a CIP; or

(b) another permitted form of QFC scheme.

Note CIP and another permitted form of QFC scheme are defined in

div 1.3.B.

(2) A partnership incorporated or otherwise established outside the

QFC is not an arrangement that is a scheme unless the

arrangement meets the property condition in subrule (3) and the

investment condition in subrule (4).

(3) For subrule (2), an arrangement meets the property condition if—

(a) it is made in relation to property that belongs beneficially

to, and is managed by or on behalf of, the partnership; and


Rule S1.15


(b) the partnership has for its purpose the investment of its

property with the aim of—

(i) spreading investment risk; and

(ii) giving its members the benefit of the results of the

management of its property.


(4) For subrule (2), an arrangement meets the investment condition

if, in relation to the partnership, a reasonable investor would, if

the investor were to take part in the arrangement—

(a) expect to be able to realise, within a period appearing to the

investor to be reasonable (or, for a closed-ended

corporation, at the end of the corporation’s operation), the

investor’s investment in the arrangement (whether or not

represented, at any time, by the value of the investor’s

percentage interest in, or securities of, the partnership held

by the investor as a participant in the arrangement); and

(b) be satisfied that the investment, if realised, would be

realised on a basis calculated completely or mainly by

reference to the value of property in relation to which the

partnership makes arrangements.

(5) However, the Regulatory Authority may, by written notice given

to the partnership, declare that subrule (1) or (2) does not apply

in relation to the partnership.

(6) The Regulatory Authority may make a declaration under subrule

(5) if it considers that making the declaration is desirable to

protect—

(a) the interests of participants or potential participants in the

partnership; or

(b) the financial system operating in or from the QFC.


Rule S1.16


(7) If the Regulatory Authority gives the partnership a notice under

subrule (5), the notice must—

(a) give reasons for the decision to make the declaration; and

(b) tell the partnership that it may appeal to the Regulatory

Tribunal against the decision.

S1.16 Profit sharing investment accounts

(1) A profit sharing investment account is not an arrangement that is

a scheme.

(2) In this rule:

profit-sharing investment account (or PSIA) is an account,

portfolio or fund that satisfies the following conditions:

(a) it is managed by an authorised firm in accordance with

Shari’a and is held out as such;

(b) under the management agreement with the firm, the

investment account holder concerned and the firm agree to

share any profit in a specified ratio, and the holder agrees to

bear any loss not caused by the firm’s negligence or breach

of contract.

Constitutional document content—QFC schemes Schedule 2 Constitution requirements—all QFC schemes Part S2.1

Rule S2.1


Schedule 2 Constitutional document content—QFC schemes

(see r 3.1.2)

Part S2.1 Constitution requirements—all QFC schemes

S2.1 Name of scheme

A statement of the name of the scheme.

S2.2 Scheme is established in QFC etc

A statement that—

(a) the scheme is a collective investment scheme established in

the QFC; and

(b) the constitutional document is governed by the law applying

in the QFC in relation to collective investment schemes.

S2.3 Legal form of scheme etc

A statement of the legal form of the scheme.

Note For the permitted legal forms of QFC schemes, see r 1.3.6.

S2.4 Islamic funds

For an Islamic fund—

(a) a statement that the scheme (or subscheme) is an Islamic

fund and consequently that its entire business operations are

conducted in accordance with Shari’a; and

(b) a statement providing details of its Shari’a Supervisory

Board.

Note Islamic fund is defined in r 1.3.11. Shari’a Supervisory Board is


Schedule 2 Constitutional document content—QFC schemes Part S2.1 Constitution requirements—all QFC schemes

Rule S2.5


S2.5 Investment objectives and policy etc

The following statements:

(a) a statement of the scheme’s investment objectives

(including its financial objectives) and, in particular—

(i) the types of investments in which it (and, if applicable,

each subscheme) may invest; and

(ii) the scheme’s investment strategies, including its

approach to borrowing and gearing;

(b) that the object of the scheme is to invest in investments of

those types with the aim of spreading investment risk and

giving unitholders the benefits of the investments;

(c) a statement of the scheme’s policy for achieving its

investment objectives.

Note Investment and borrowing are defined in the glossary. Subscheme

is defined in r 1.2.11.

S2.6 Duration of limited schemes

If the duration of the scheme is limited, a statement to that effect,

of the duration of the scheme and, if appropriate, of any

conditions for extending the duration of the scheme.

S2.7 Unitholder’s liability to pay

(1) A provision that—

(a) a unitholder is not liable to make any further payment for a

unit after paying the price for the unit; and

(b) no further liability can be imposed on the unitholder in

relation to the unit.

Note Unit and unitholder are defined in r 1.2.4 and r 1.2.5 respectively.

Price is defined in the glossary.

(2) A provision that the unitholders are not liable for—

(a) the debts or other liabilities of the scheme; or


Rule S2.8


(b) acts or omissions of the operator; or

(c) acts or omissions of the independent entity.

S2.8 Fees, charges and other expenses of scheme

Each of the following statements:

(a) that fees, charges and other expenses in relation to the

scheme may be taken out of scheme property;

(b) a statement of how the amounts of fees, charges and other

expenses are to be calculated.

Note Scheme property is defined r 1.2.3.

S2.9 Classes of units

A statement of—

(a) the classes of units that may be issued for the scheme; and

(b) for an umbrella scheme—the classes of units that may be

issued for each subscheme of the scheme; and

(c) the rights attaching to units in each class, including any

provision for the expression of the rights in 2 or more

denominations.

Note Class and issue are defined in the glossary. Umbrella scheme and

subscheme are defined in r 1.2.11.

S2.10 Income and capital distribution

(1) A statement providing details of—

(a) the distribution policy of the scheme; and

(b) the person responsible for calculating, transferring,

allocating and distributing income or capital for any class of

unit in issue during an accounting period; and

(c) any provision for payment of income or capital and when

income or capital must be distributed.


Rule S2.11


(2) If relevant, a provision for income equalisation.

Note Income equalisation is defined in the glossary.

S2.11 Investment and borrowing restrictions

(1) A statement providing details of all investment restrictions

applying to the scheme.

(2) A statement providing details of all borrowing restrictions

applying to the scheme, including, for a qualified investor

scheme, the scheme’s permitted percentage under rule 6.4.1

(Borrowing—QFC qualified investor schemes).

Note Investment and borrowing are defined in the glossary.

S2.12 Management of borrowing risks

A statement providing details of how any risks posed by

borrowings of the scheme are to be managed.

Note Borrowing is defined in the glossary.

S2.13 Valuation and pricing

(1) A statement setting out the basis for, and frequency of, valuation

of the scheme.

(2) A statement setting out the basis for, and frequency of, pricing of

each class of units in the scheme.


S2.14 Base currency

A statement of the base currency of the scheme.


S2.15 Functions of operator and independent entity

(1) A statement providing details of the functions of the operator

under these rules in relation to the scheme.


Rule S2.16


(2) A statement providing details of the functions of the independent

entity under these rules in relation to the scheme.

S2.16 Responsibility statement

A provision stating that nothing in the constitutional document

has the effect of exempting the operator or independent entity

from, or indemnifying the operator or independent entity against,

any liability of the operator or independent entity to a participant

under the law applying in the QFC.

Note Operator is defined in r 1.2.8. Independent entity is defined in

r 1.2.9. Participant is defined in r 1.2.2.

S2.17 Meetings

A statement providing details of the following:

(a) the procedures for calling meetings of unitholders;

(b) resolutions and voting at meetings of unitholders;

(c) the voting rights of unitholders;

(d) the matters that require the approval of unitholders;

(e) the matters that require the approval of an ordinary

resolution;

(f) the matters that require the approval of a special resolution.

Note Ordinary resolution and special resolution are defined in the

glossary.

S2.18 Other statements and provisions for CIC

(1) For a CIC, the following statements:

(a) the scheme is a closed-ended company, or an open-ended

company with variable share capital;


Rule S2.19


(b) a statement providing particulars of the scheme’s capital

structure, including the maximum and minimum sizes of the

scheme’s capital;

(c) a statement of the proportion of a larger denomination share

represented by a smaller denomination share for any

relevant class of units.

Note CIC is defined in r 1.3.7. Larger denomination share and smaller

denomination share are defined in r 3.2.2 (2).

(2) For a CIC that is open-ended, a provision authorising the

allocation of redeemable shares without limit by reference to the

CIC’s net asset value at the relevant time.


S2.19 CIP partnership agreement binding etc

For a CIP, a statement that the partnership agreement—

(a) is binding on each unitholder as if the unitholder had been a

party to it; and

(b) authorises and requires the operator and independent entity

to do everything required or permitted of them by its terms.

Note CIP is defined in r 1.3.8. Partnership agreement is defined in the

glossary.

S2.20 CIT trust deed binding etc

For a CIT, a statement that the trust instrument—

(a) is binding on each unitholder as if the unitholder had been a

party to it; and

(b) authorises and requires the operator and independent entity

to do everything required or permitted of them by its terms.

Note CIT is defined in r 1.3.9. Trust instrument is defined in the glossary.


Rule S2.21


S2.21 CIT declaration of trust

For a CIT, a statement that, subject to the trust instrument and the

Collective Investment Schemes Rules 2010—

(a) the scheme property (other than amounts in any distribution

account) is held by the independent entity on trust for the

unitholders—

(i) according to the number of units held by each

unitholder; or

(ii) if relevant, according to the number of individual

shares in the scheme property represented by the units

held by each unitholder; and

(b) the amounts in any distribution account are held by the

independent entity on trust to distribute or apply in

accordance with the trust instrument and those rules.

Note CIT is defined in r 1.3.9. Trust instrument and distribution account

are defined in the glossary. Scheme property is defined in r 1.2.3.

S2.22 Assets other than cash for issue or redemption

If relevant, a statement authorising payment for the issue or

redemption of units in the scheme to be made by the transfer of

assets other than cash.

Note Issue and redemption are defined in the glossary.

S2.23 Suspension and winding-up

A statement providing details of—

(a) the grounds on which the operator may initiate a suspension

of the scheme; and

(b) the methodology for working out the rights of unitholders

to participate in the scheme property on winding-up.


Rule S2.24


S2.24 Amendment of constitutional document

A statement providing details of how the constitutional document

may be amended.

S2.25 Redemption of units held in breach of QFC law

A statement that, if the holding of units by a unitholder is (or is

reasonably considered by the operator to be) in breach of the

Collective Investment Schemes Rules 2010, any other law

applying in the QFC or the constitutional document, the units

must be redeemed.


S2.26 Documents evidencing title to units

A statement providing details of any documents evidencing title

to units.


S2.27 Other relevant matters

A statement providing details of the matters—

(a) necessary to enable the scheme, the operator and

independent entity to obtain any privilege or power

provided in these rules that is not otherwise provided in the

constitutional document; and

(b) otherwise required by these rules to be provided in the


Constitutional document content—QFC schemes Schedule 2 Extra constitution requirements—qualified investor schemes Part S2.2

Rule S2.28


Part S2.2 Extra constitution requirements—qualified investor schemes

S2.28 Qualified investor scheme statement—QFC qualified investor schemes

A statement that the scheme is a qualified investor scheme.

S2.29 Only qualified investors can be unitholders in qualified investor schemes—QFC qualified investor schemes

A statement that units in the scheme can only be recorded in the

unitholder register in the name of a person who is a qualified

investor.

Note Qualified investor, for a QFC scheme, is defined in r 1.2.12 (2).

S2.30 Limits on unit issue and redemption—QFC qualified investor schemes

A statement providing details of—

(a) when the issue of units of any particular class may be

limited; and

(b) the provisions relating to any restrictions on the right to

redeem units of any class.

Note Issue, class and redemption are defined in the glossary.

Part S2.3 Extra constitution requirement—UCITS type schemes

S2.31 UCITS type scheme statement—QFC UCITS type schemes

A statement that the scheme is a UCITS type scheme.

Schedule 2 Constitutional document content—QFC schemes Part S2.4 Extra constitution requirements—money-market funds

Rule S2.32


Part S2.4 Extra constitution requirements—money-market funds

S2.32 Money-market fund statement—QFC money-market funds

A statement that the scheme is a money-market fund.

S2.33 Primary investment objective etc—QFC money-market funds

(1) A statement that the scheme’s primary investment objective is to

maintain the scheme’s net asset value.


(2) The statement mentioned in subrule (1) must specify whether the

scheme’s net asset value is to be maintained—

(a) constant at par (net of earnings); or

(b) at the value of a participant’s initial capital plus earnings.

(3) A statement that, with a view to achieving the scheme’s primary

investment objective, the scheme may invest only in—

(a) high quality approved money-market instruments; and

(b) on an ancillary basis, deposits with eligible banks.

Note 1 Approved money market instrument is defined in r 7.1.5.

Note 2 For the meaning of high quality approved money-market

instrument, see the following: .

• r 6.1.5 (2) (Investments by money-market funds—QFC

qualified investor schemes)

• r 7.2.4 (2) (Investments by money-market funds—

QFC retail schemes).

Note 3 Deposit and eligible bank are defined in the glossary.

Prospectus content—QFC qualified investor schemes Schedule 3

Rule S3.1


Schedule 3 Prospectus content—QFC qualified investor schemes

(see r 5.2.3)

S3.1 Document status

A statement that the document is the prospectus of the QFC

qualified investor scheme as at a particular date.

S3.2 Description of scheme etc

The following information and statements:

(a) the name of the scheme;

(b) that the scheme is registered as a qualified investor scheme

under the Collective Investment Schemes Rules 2010;

(c) the registration number given to the scheme by the


(d) the legal form of the scheme and that it is an open-ended

scheme;

(e) if the scheme (or a subscheme) is an Islamic fund—that the

scheme (or subscheme) is an Islamic fund;

(f) if the scheme (or a subscheme) is a money-market fund—

that the scheme (or subscheme) is a money-market fund;

(g) that the unitholders are not liable for—

(i) the debts and other liabilities of the scheme; or

(ii) acts or omissions of the operator; or

(iii) acts or omissions of the independent entity;

(h) if the scheme has not started to operate—when the scheme

is expected to start to operate;


Rule S3.3


(i) whether it is a listed scheme or intended to become a listed

scheme;

(j) if the duration of the scheme is limited—a statement to that

effect, an indication of the duration of the scheme and, if

appropriate, of any conditions for extending the duration of

the scheme;

(k) the base currency of the scheme;

(l) if the scheme is a CIC—its capital structure, including the

maximum and minimum sizes of its capital;

(m) if applicable, any minimum initial investment in the

scheme;

(n) that any notice or other document may be served on the

operator or independent entity at its registered address in the

QFC or, if the independent entity is not an authorised firm,

at its address for service;

(o) the circumstances in which the scheme may be wound up

and a summary of the procedure for, and the rights of the

unitholders under, a winding-up;

(p) the governing law for the scheme.

S3.3 Islamic funds

If the scheme (or a subscheme) is an Islamic fund, the following

information:

(a) that all operations of the scheme (or subscheme) must be

conducted in accordance with Shari’a;

(b) the names of the members of the Shari’a Supervisory Board

and their qualifications and education;

(c) the manner and frequency of Shari’a reviews;

(d) the disclosure required by AAOIFI FAS 14.

Note Shari’a Supervisory Board and AAOIFI are defined in the glossary.


Rule S3.4



(1) Sufficient information to enable a unitholder to ascertain the

following:

(a) the scheme’s investment objectives (including its financial

objectives) and, in particular—

(i) the types of investments in which it (and, if applicable,




(b) the scheme’s policy for achieving its investment objectives,

including—

(i) the general nature of the portfolio and any intended

specialisation; and

(ii) any policy for the spreading of risk in the scheme

property; and

(iii) its policy in relation to the exercise of borrowing

powers;

(c) a description of any restrictions in the assets in which

investments may be made;

(d) the extent (if any) to which the investment policy does not

envisage the scheme property remaining fully invested at all

times;

(e) the scheme’s policy for managing any risks posed by

borrowings of the scheme.

Note Rule 5.2.3 (1) (General information requirements for prospectus—

all QFC schemes) requires the prospectus to contain information in

relation to—

(a) the merits and risks of participating in the scheme; and

(b) the extent and characteristics of the risks accepted by

participating in the scheme.


Rule S3.4


(2) Details of all borrowing restrictions applying to the scheme,

including the scheme’s permitted percentage under rule 6.4.1

(Borrowing—QFC qualified investor schemes).

(3) For investments in immovables, the following information:

(a) the jurisdictions where immovables in which the scheme

may invest are located;

(b) the scheme’s policy in relation to insurance of immovables

forming part of the scheme property;

(c) the scheme’s policy in relation to granting options over

immovables in the scheme property and the purchase of

options on immovables;

(d) if investment in a non-Qatari immovable has been, or is to

be, made through an intermediate holding vehicle or a series

of intermediate holding vehicles—a statement disclosing

the existence of the intermediate holding vehicle or series of

intermediate holding vehicles and confirming that the

purpose of the vehicle, or each of the vehicles, is to enable

the scheme to hold immovables located outside Qatar.

(4) If intended, a statement that the scheme property may consist of

units in a scheme (the second scheme) that is managed or

operated by the operator or a person in the same group as the

operator, and a statement about—

(a) the basis of the maximum amount of the charges in relation

to transactions in the second scheme; and

(b) the extent to which the charges must be reimbursed to the

scheme.

(5) If intended, a statement that stock lending arrangements or repo

agreements may be entered into for the scheme, the procedures

that must be applied in relation to them and the collateral that

must be required.


Rule S3.5


S3.5 Distributions, accounting dates etc

(1) Relevant details of accounting and distribution dates (including

the accounting reference date), and a description of the

procedures—

(a) for calculating and applying income and capital (including

how any distributable income and capital is to be paid); and

(b) relating to unclaimed distributions.

(2) Details of the main taxes levied on the scheme’s income and

capital, including tax (if any) deducted on distributions to

unitholders.

S3.6 Characteristics of units in the scheme

Information about the following:

(a) if there are 2 or more classes of units in issue or available

for issue—the name of each class and the rights attached to

each class so far as they differ from the rights attached to

other classes;

(b) how unitholders may exercise their voting rights and what

these are;

(c) if mandatory redemption or conversion of units from one

class to another may be required—in what circumstances

that may be required;

(d) for a CIT—the fact that the nature of the right represented

by units is that of a beneficial interest under a trust;

(e) if applicable, the circumstances where conversion from one

class of units to another is not permitted;

(f) if applicable, the terms on which a unit in one class may be

converted to a unit in another class.


Rule S3.7


S3.7 Operator

The following information about the operator:

(a) its name;

(b) the nature of its legal status;

(c) the date and place of its incorporation;

(d) the address of its registered office in the QFC;

(e) if it is a subsidiary—the name of its ultimate parent entity

and the jurisdiction where the parent entity is incorporated;

(f) if the duration of its legal status is limited—when its legal

status will or may cease;

(g) if it has share capital—the amount of its issued share capital

and how much is paid up;

(h) a summary of its functions under these rules in relation to

the scheme;

(i) a summary of the material provisions of the contracts to

which it is a party in relation to the scheme that may be

relevant to unitholders, including provisions (if any)

relating to remuneration, remuneration sharing, termination,

compensation on termination, and indemnity;

(j) a summary of any outsourcings entered into by it under

these rules in relation to the scheme;

(k) the operator’s policy in relation to the operator holding units

in the scheme.

S3.8 Independent entity

(1) The following information about the independent entity:

(a) its name;




Rule S3.8


(d) whether it is an authorised firm;

(e) if it is an authorised firm—the address of its registered

office in the QFC;

(f) if it is not an authorised firm—the following:

(i) its contact details and address for service;

(ii) the regulatory regimes and legal systems (including

insolvency laws) to which it is subject;

(iii) the regulatory authorisations (however described) held

by it;

(iv) its arrangements for safeguarding the scheme property

and its use of agents and service providers;

(v) the obligations applying to it, and the recourse

available against it by the operator, the Regulatory

Authority and unitholders, under those regulatory

regimes and legal systems in relation to anything done

or not done by it in relation to the scheme;

(vi) whether it has submitted to the jurisdiction of the

Regulatory Authority, the QFC Court or both;

(g) if it is a subsidiary—the name of its ultimate parent entity

and the jurisdiction where that parent entity is incorporated;

(h) if the duration of its legal status is limited—when its legal


(i) if it has share capital—the amount of its issued share capital

and the amount paid up;

(j) a summary of its functions under these rules in relation to

the scheme;

(k) a summary of the material provisions of the contracts to




Rule S3.8




(l) a description of its main business activity;

(m) a summary of any outsourcings entered into by it under

these rules in relation to the scheme.

(2) If the independent entity is not an authorised firm, a statement

that the scheme property may be held in a jurisdiction outside the

QFC and that the market practices, insolvency law and legal

system applying in that jurisdiction may differ from those

applying in the QFC.


Rule S3.9


S3.9 Investment adviser and standing independent valuer

(1) If an investment adviser is retained in relation to the business of

the scheme—

(a) its name; and

(b) whether it is an authorised firm; and

(c) if it conducts a significant activity other than providing

services to the scheme as an investment adviser—what the

significant activity is; and

(d) a summary of the material provisions of the contracts to




compensation on termination, and indemnity.

(2) If the scheme has a standing independent valuer—

(a) its name; and

(b) a summary of the material provisions of the contracts to





S3.10 Auditor

The name and address of the auditor of the scheme.

S3.11 Register of unitholders

(1) The address in the QFC where the unitholder register, or a copy

of the register, is available for inspection by unitholders and when

it can be inspected.

(2) For a QFC scheme that is listed in the Qatar Stock Exchange or

in any other regulated exchange, how and when unitholders can


Rule S3.12


obtain information about their holdings of the listed units and

substantial holders of such units.

S3.12 Payments out of scheme property

(1) The payments that may be made out of the scheme property to

any person, whether by way of remuneration or charges for

services, or reimbursement of expenses.

(2) For each category of remuneration, charges or expenses, the

following information:

(a) the current rates or amounts of the remuneration, charges or

expenses;

(b) how the remuneration, charges or expenses must be

calculated and accrue and when they must be paid;

(c) if notice has been given to unitholders of the operator’s

intention to—

(i) introduce a new category of remuneration for its

services; or

(ii) increase the basis of any current charge; or

(iii) change the basis of the treatment of a payment from

the capital property;

particulars of that introduction, increase or change and when

it will take place;

(d) the types of any other charges and expenses that may be

taken out of the scheme property;

(e) if all or part of the remuneration or expenses is to be treated

as a charge to capital—

(i) that fact; and

(ii) the basis of the charge that may be treated as a capital

charge.


Rule S3.12


(3) A table substantially in the form of table S3.12 illustrating the

effect of charges and expenses, together with the notes and

statements following the table.

Table S3.12 Charges and expenses for the scheme

One-off charges taken before or after you invest

Entry charge [insert percentage]%1

Exit charge [insert percentage]%1

This is the maximum that might be taken out of your money [insert as applicable before

it is invested or before the proceeds of your investment are paid out].

Charges taken from the fund over a year

Ongoing charges [insert percentage]%2

Charges taken from the fund under certain specific conditions

Performance fees [insert percentage]% a year of any returns the

fund achieves above the [insert name of benchmark].

Note 1 The percentages shown in the entry and exit charges are the

maximum figures. In some cases you might pay less.

Note 2 The percentage for the ongoing charges is based on expenses for the

year ending [insert year]. This figure may vary from year to year.

Ongoing charges excludes—

• performance fees

• portfolio transaction costs, other than entry and exit charges

incurred when buying or selling units in another collective

investment scheme.

Statements about charges and expenses

The charges you pay are used to pay the costs of running the scheme, including

the costs of marketing and distributing it. These charges reduce the potential

growth, and rate of return, of your investment.


Rule S3.13


S3.13 Dealing

(1) Details of the following:

(a) the dealing days, and times on a dealing day, when the

operator must receive instructions to issue or redeem units;

(b) the procedures for—

(i) the issue and redemption of units; and

(ii) the settlement of transactions;

(c) the initial offer period and how it ends;

(d) the steps that must be taken by a unitholder in redeeming

units before the unitholder can receive the proceeds in the

redemption, including any relevant notice periods and the

circumstances in which, and periods for which, payment

may be deferred;

(e) the circumstances in which the redemption of units may be

deferred, limited or suspended and how unitholders must be

notified if this happens;

(f) how unitholders must be notified when the redemption of

units is no longer deferred, limited or suspended;

(g) details of the minimum number, percentage or value of each

class of unit in the scheme that—

(i) any single person may hold; and

(ii) may be the subject of any single transaction of issue or

redemption;

(h) if relevant, the circumstances in which the operator may

arrange for, and the procedure for, the issue or redemption

of units otherwise than in cash;

(i) the circumstances in which the issue of units in any class

may be limited and the procedures relating to this, including

the conditions to be met for the issue of units in the class;


Rule S3.14


(j) if the scheme is operating limited issue arrangements or

limited redemption arrangements—details of the

arrangements.

Note Limited issue arrangements and limited redemption

arrangements are defined in the glossary.


(1) A provision stating that there must be only a single forward price

for any unit calculated from time to time by reference to a

particular valuation point.

(2) Details about the following:

(a) how frequently, and at what times of the day, the scheme

property must be regularly valued to calculate the price at

which units in the scheme may be issued or redeemed, and

a description of any circumstances in which the scheme

property may be specially valued;

(b) how the value of the scheme property must be calculated in

relation to each purpose for which it must be valued;

(c) how the price of units in each class must be calculated.

S3.15 Issue and redemption charges

If the operator makes any charges on the issue and redemption of

units, details of the charging structure and how notice must be

provided to unitholders of any increase.

S3.16 General information

Details of the following:

(a) when annual and half-yearly reports must be published;

(b) the scheme’s accounting standard;

(c) the address in the QFC where copies of the constitutional

document, any amending or supplemental instruments, and


Rule S3.17


the most recent annual and half-yearly reports, may be

inspected and copies may be obtained.

S3.17 Mandatory statement about prospectus

The following statement prominently displayed on the first page

(not including any cover page) of the prospectus:

‘This prospectus relates to a collective investment scheme

established in the Qatar Financial Centre and registered by the

Qatar Financial Centre Regulatory Authority (the Regulatory

Authority) as a qualified investor scheme.

The Regulatory Authority is not responsible for reviewing or

verifying this prospectus or any related documents. The

Regulatory Authority has not approved this prospectus or any

related documents nor has the Regulatory Authority taken any

steps to verify the statements, information or provisions in the

prospectus or any related documents. The Regulatory Authority

takes no responsibility for the accuracy of statements,

information or provisions in this prospectus or any related

documents.

The units to which this prospectus relates may be difficult, and

take some time, to sell. Payments of redemption proceeds may

also be delayed.

Returns from units can go down as well as up and you may also

lose all or part of your investment.

Past performance of units is not a reliable indication of the future

performance.

Prospective purchasers of the units offered should conduct their

own due diligence and consider seeking independent legal and

financial advice before deciding to invest in the scheme.

This prospectus is intended for distribution only to a limited type

of investor (a ‘qualified investor’ as defined in the Regulatory


Rule S3.18


Authority’s Collective Investment Schemes Rules 2010) and must

not be given to, or relied on, by anyone else’.

S3.18 Additional information for feeder funds

For a feeder fund, the following information:

(a) a prominent risk warning to alert participants to the fact that

they may be subject to higher fees arising from the layered

investment structure;

(b) details of the fees arising at the level of the feeder fund itself

and the scheme (or subscheme) to which its investments are

dedicated.

S3.19 Additional information for fund of funds

For a fund of funds, the following information:




(b) details of the fees arising at the level of the fund of funds

itself and, to the extent known, the schemes (and

subschemes of umbrella schemes) to which its investments

are dedicated.

S3.20 Additional statements and information for property funds

For a property fund, the following statements and information:

(a) the nature of the commitment that participants will enter

into;

(b) a prominent risk warning that refers to the particular

circumstances in property markets that can cause difficulties

in meeting redemptions;


Rule S3.21


(c) details of transactions or agreements entered into, or

proposed to be entered into, with affected persons;

(d) full particulars of the nature and extent of the interest (if

any) of affected persons in the immovables owned, or

proposed to be acquired, by the scheme;

(e) details of significant participants and the number or

percentage of units held, or proposed to be held, by each of

them;

(f) a statement to explain the standards according to which

property valuations are conducted for the scheme;

(g) the maximum percentage of the scheme’s net asset value at

any time that may consist of property-related assets that are

not traded or dealt in on markets provided for in the


(h) the maximum percentage of the scheme’s net asset value at

any time that may be invested in any single immovable and,

if applicable, the conditions under which the scheme may

depart from this restriction;

(i) the maximum percentage of the scheme’s net asset value at

any time that may consist of immovables that are

unoccupied and non-income producing or in the course of

substantial development, redevelopment or refurbishment;

(j) the maximum percentage of the scheme’s net asset value at

any time that may be invested in immovables that are

subject to a security interest held otherwise than by the

independent entity or its nominee or delegate.

S3.21 Information on umbrella schemes

For an umbrella scheme, the following information:

(a) that a unitholder may exchange units in a subscheme for

units in any other subscheme (other than a subscheme that

has limited the issue of units);


Rule S3.22


(b) that an exchange of units in a subscheme for units in another

subscheme is treated as a redemption and issue;

(c) that a unitholder who exchanges units in a subscheme for

units in any other subscheme does not have the right to

withdraw from or cancel the transaction;

(d) the operator’s policy for allocating between subschemes any

assets of, or costs, charges and expenses payable out of,

scheme property that are not attributable to any particular

subscheme;

(e) what charges (if any) may be made on exchanging units in

a subscheme for units in another subscheme;

(f) for each subscheme—the currency in which the scheme

property attributed to it must be valued, and the price of

units calculated and payments made, if this currency is not

the base currency of the umbrella scheme;

(g) for an umbrella scheme constituted by a CIC—that the

subschemes are not ‘ring-fenced’ and, if the umbrella

scheme cannot meet liabilities attributable to any particular

subscheme out of the assets attributable to that subscheme,

the remaining liabilities may have to be met out of the assets

attributable to other subschemes.

S3.22 Application of prospectus contents to umbrella scheme

For an umbrella scheme, information, statements and provisions

required must be provided—

(a) for each subscheme if the information, statements or

provisions for any subscheme differ from those for any

other; and


Rule S3.22


(b) for the umbrella scheme as a whole, but only if the

information, statements or provisions are relevant to the

umbrella scheme as a whole.

Prospectus content—QFC retail schemes Schedule 4

Rule S4.1


Schedule 4 Prospectus content—QFC retail schemes

(see r 5.2.3)


A statement that the document is the prospectus of the QFC retail

scheme as at a particular date.



(a) the name of the scheme;

(b) that the scheme is registered as a retail scheme under the

Collective Investment Schemes Rules 2010;

(c) the registration number given to the scheme by the


(d) the legal form of the scheme;

(e) whether the scheme is a UCITS type scheme or a property

fund;

(ea) if the scheme (or a subscheme) is a property fund—whether

the scheme (or subscheme) is closed-ended or open-ended;

(f) if the scheme (or a subscheme) is an Islamic fund—that the

scheme (or subscheme) is an Islamic fund;

(g) if the scheme (or subscheme) is a money-market fund—that

the scheme (or subscheme) is a money-market fund;

(h) that the unitholders are not liable for—

(i) the debts and other liabilities of the scheme; or

(ii) acts or omissions of the operator or independent entity;


Rule S4.2A


(i) if the scheme has not started to operate—when the scheme

is expected to start to operate;

(j) whether it is a listed scheme or intended to become a listed

scheme;

(k) if the duration of the scheme is limited—a statement to that

effect, an indication of the duration of the scheme and, if

appropriate, of any conditions for extending the duration of

the scheme;

(l) the base currency of the scheme;

(m) if the scheme is a CIC—its capital structure, including the


(n) if applicable, any minimum initial investment;

(o) that any notice or other document may be served on the




(p) the circumstances in which the scheme may be wound up

and a summary of the procedure for, and the rights of the


(q) the governing law for the scheme.

S4.2A Additional information—QFC retail property funds

If the scheme is a QFC retail property fund, the following

information and statements:

(a) the nature of the commitment that participants will enter

into;

(b) details of any transactions entered into, or proposed to be

entered into, with affected persons;


Rule S4.3


(c) full particulars of the nature and extent of the interest (if


proposed to be acquired, by the fund;

(d) details of significant participants and the number or


them;

(e) a statement to explain the standards according to which

property valuations are made;

(f) the insurance arrangement for the fund;

(g) a statement of any material policy regarding immovables;

(h) any other matter that the Regulatory Authority directs the

operator to include in the prospectus.

S4.3 Islamic funds

If the scheme (or a subscheme) is an Islamic fund, the following

information:

(a) that all operations of the scheme (or subscheme) must be

conducted in accordance with Shari’a;




(d) the disclosure required by AAOIFI FSA 14.

Note Shari’a Supervisory Board and AAOIFI are defined in the glossary.


Rule S4.4



The following information in relation to the scheme’s investment

objectives, strategies and policy:

(a) the scheme’s investment objectives (including its financial

objectives) and, in particular—

(i) the types of investments in which it (and, if applicable




(b) the scheme’s policy for achieving its investment objectives,

including—


specialisation; and

(ii) the policy for the spreading of risk in the scheme

property; and

(iii) the policy in relation to the exercise of borrowing

powers;

(c) an indication of any limits on the investment policy;

(d) the types of assets that the capital property may consist of;

(e) the proportion of the capital property that may consist of an

asset of any description;

(ea) if the scheme is a QFC retail property fund:

(i) a list of the jurisdictions where immovables in which

the fund may invest are located; and

(ii) if investment in an immovable has been, or is to be,

made through an intermediate holding vehicle or

vehicles—a statement disclosing the existence of the

intermediate holding vehicle or vehicles and


Rule S4.4


confirming that the purpose of each vehicle is to

enable the fund to hold immovables;

(f) the kind of transactions that may be effected for the scheme

and an indication of any techniques and instruments or

borrowing powers that may be used in the scheme’s

management;

(g) for rule 7.1.7 (1) (b) (What is an eligible market?), a list of

the markets through which the scheme may invest or deal in

investments in accordance with these rules;

(h) any restrictions in the assets in which scheme property may

be invested, including restrictions in the extent to which the

scheme may invest in any type of asset and an indication of

whether the restrictions are more onerous than those

otherwise applying under these rules;

(i) the borrowing restrictions applying to the scheme;

(j) if the scheme may invest in other schemes—the extent to

which the scheme property may be invested in units in

schemes that are managed by the operator or any associate

of the operator;

(k) if the scheme is a feeder fund that (in relation to investment

in units in schemes) is dedicated to units in a single

scheme—details of the master scheme and the minimum

(and, if relevant, maximum) investment that the feeder fund

may make in it;

(l) if the scheme invests mainly in units in schemes, deposits or

derivatives, or replicates an index—a prominent statement

about this investment policy;

(m) if derivatives transactions may be used in the scheme—a

prominent statement about whether the transactions are for

the purpose of efficient portfolio management (including

hedging) or meeting the investment objectives (or both), and


Rule S4.5


the possible outcome of the use of derivatives on the

scheme’s risk profile;

(n) the profile of the typical investor for whom the scheme is

designed;

(o) the historical performance (if any) of the scheme;

(p) if the scheme invests a substantial part of the scheme

property in other schemes—a statement of the maximum

level of management fees that may be charged to the scheme

and to the schemes in which it invests;

(q) if the scheme’s net asset value is likely to have high

volatility because of its portfolio composition or the

portfolio management techniques that may be used—a

prominent statement to that effect;

(r) if the scheme may invest substantially in deposits or money-

market instruments—a risk warning drawing attention to the

difference between the nature of a deposit and the nature of

an investment in the scheme, with particular reference to the

risk that the principal invested in the scheme may fluctuate;

(s) a statement that any unitholder may obtain on request the

information listed in COLL, rule 5.2.2 (2) (Prospectus etc

to be made available).

S4.5 Distributions, accounting and reporting dates etc

(1) Information about reporting, accounting and distribution,

including the following:

(a) the accounting and distribution dates;

(b) a description of procedures—

(i) for calculating and applying income (including how

any distributable income must be paid); and

(ii) relating to unclaimed distributions; and


Rule S4.6


(iii) if relevant, for calculating, paying and accounting for

income equalisation;

(c) the accounting reference date and when annual and half-

yearly long reports must be published;

(d) when annual and half-yearly short reports must be sent to

unitholders.

(2) Details of the main taxes levied on the scheme’s income and


unitholders.

S4.6 Characteristics of units in the scheme





other classes;


these are;

(c) if mandatory redemption or conversion of units from a class

to another class may be required—in what circumstances

that may be required;

(d) for CIT—the fact that the nature of the right represented by

units is that of a beneficial interest under a trust;

(e) documents evidencing title to units.

S4.7 Operator

The following information about the operator;

(a) its name;



Rule S4.8










(h) a summary of its functions under these rules in relation to

the scheme;






(j) a summary of any outsourcings entered into by it under

these rules in relation to the scheme;


in the scheme.



(a) its name;





office in the QFC;


Rule S4.8






(iii) the regulatory authorisations (however described) held

by it;







or not done by it in relation to the scheme;




and the jurisdiction where the parent company is

incorporated;





(j) a summary of its functions under these rules in relation to

the scheme;







Rule S4.9



(m) a summary of any outsourcings entered into by it under

these rules in relation to the scheme.






S4.9 Investment adviser and independent valuer


the scheme:

(a) the adviser’s name;

(b) whether the adviser is an authorised firm;


services to the scheme as an investment adviser—what the



which the adviser is a party in relation to the scheme that

may be relevant to unitholders, including provisions (if any)



(2) If the scheme has a standing independent valuer:

(a) the valuer’s name; and


which the valuer is a party in relation to the scheme that may

be relevant to unitholders, including provisions (if any)




Rule S4.10


S4.10 Auditor

The name and address of the auditor of the scheme.

S4.11 Relationships with other parties

The relevant details of the following:

(a) the names of each member (however described) of the

governing body of the operator, the independent entity or,

for a CIC or CIP, the CIC or CIP;

(b) the business activities of each person named under

paragraph (a) if these activities are of significance to the

scheme’s business;

(c) if any person named under paragraph (a) is a corporation in

a group of which any other corporation member (however

described) of the governing body is a member—that fact;

(d) if an investment adviser retained in relation to the business

of the scheme is a corporation in a group of which any

corporation member (however described) of the governing

body of the operator, the independent entity or, for a CIC or

CIP, the CIC or CIP is also a member—that fact;

(e) if an investment adviser retained in relation to the business

of the scheme has the operator’s authority to make decisions

for the operator—that fact and a description of the matters

in relation to which it has authority;

(f) what functions (if any) the operator or independent entity

has outsourced and to whom;

(g) in what capacity (if any) the operator acts in relation to any

other schemes and the name of each of those schemes.


Rule S4.12






(2) For a QFC scheme that is listed in the Qatar Stock Exchange or

in any other regulated exchange, how and when unitholders can

obtain information about their holdings of the listed units and

substantial holders of such units.


(1) In relation to each type of payment from the scheme property,

details of the following:

(a) who the payment is made to;

(b) what the payment is for;

(c) if available, the rate or amount;

(d) if the rate or amount is not available—how it must be

calculated and accrued;

(e) when must it be paid;

(f) if a performance fee is taken—a plain English statement of

the maximum amount or percentage of the scheme property

that the performance fee might represent in an annual

accounting period together with examples of the operation

of the performance fee.

(2) How notice must be given to unitholders of the operator’s

intention to do any of the following:

(a) introduce a new category of remuneration for its services;

(b) increase the basis of any current charge;

(c) change the basis of the treatment of a payment from the

capital property.


Rule S4.13





Table S4.13 Charges and expenses for the scheme




This is the maximum that might be taken out of your money [insert as applicable before

it is invested or before the proceeds of your investment are paid out].

Charges taken from the fund over a year


Charges taken from the fund under certain specific conditions

Performance fees [insert percentage]% a year of any returns the

fund achieves above [insert name of benchmark].





Ongoing charges excludes—




investment scheme.






Rule S4.14


S4.14 Allocation of payments

If, in accordance with these rules, any income expense payments

may be treated as a capital expense—

(a) that fact; and

(b) the operator’s policy for treating any income expense as a

capital expense; and

(c) a statement that this policy may result in capital erosion or

constrain capital growth.








which units in the scheme may be issued or redeemed, and

a description of any circumstances in which the scheme

property may be specially valued;



(c) how the price of units in each class must be calculated;

(d) where, and at what frequency, the most recent prices must

be published.

S4.16 Dealing



operator must receive instructions to issue or redeem units;


Rule S4.16


(b) the procedures for—

(i) the issue and redemption of units; and


(c) for a prospectus available during the initial offer period—

(i) the initial offer period; and

(ii) the initial price of a unit (in the base currency); and

(iii) the arrangements for issuing units during the initial

offer period, including the operator’s intentions on

investing the subscriptions received during the initial

offer period; and

(iv) the circumstances when the initial offer must end; and

(v) whether units may be issued in a currency other than

the base currency; and

(vi) any other relevant details of the initial offer;

(d) the steps that must to be taken by a unitholder in redeeming

units before the unitholder can receive the proceeds of the

redemption, including any relevant notice periods and the

circumstances in which, and periods for which, a payment

may be deferred;

(e) the circumstances in which the redemption of units may be

deferred or suspended and how unitholders must be notified

if this happens;

(f) how unitholders must be notified when the redemption of

units is no longer deferred or suspended;

(g) details of the minimum number, percentage or value of each

class of unit in the scheme that—



Rule S4.17


(ii) may be the subject of any single transaction of issue or

sale;

(h) whether certificates may be issued in relation to registered

units;

(i) if relevant, the circumstances in which the operator may

arrange for, and the procedure for, the issue or redemption

of units otherwise than for cash;

(j) the investment exchanges (if any) on which units in the

scheme are or will be listed or dealt.

S4.17 Dilution

Details of what is meant by dilution, including—

(a) a statement explaining—

(i) that is not possible to predict accurately whether

dilution is likely to happen; and

(ii) that a dilution adjustment is required to reduce the

effect of dilution; and

(iii) the operator’s policy in relation to requiring a dilution

levy together with an explanation of how this policy

may affect the future growth of the scheme; and

(b) a statement of the following:

(i) the operator’s policy in deciding when to require a

dilution levy, including the operator’s policy on large

deals;

(ii) the estimated rate or amount of any dilution levy or

dilution adjustment based either on historical data or

future projections;

(iii) the likelihood that the operator may require a dilution

levy or make a dilution adjustment and the basis


Rule S4.18


(historical or projected) on which the statement is

made.

S4.18 Issue charges

If relevant, a statement authorising the operator to make an issue

charge and specifying the basis for, and current amount or rate

of, the charge.

S4.19 Redemption charges

If relevant—

(a) a statement authorising the operator to deduct a redemption

charge out of the proceeds of redemption; and

(b) if the operator makes a redemption charge—

(i) the current amount of the charge or, if it is variable, the

rate or method of calculating it; and

(ii) if the amount, rate or method has been changed—that

details of any previous amount, rate or method may be

obtained from the operator on request; and

(iii) the order in which the units acquired at different times

by a unitholder are taken to be redeemed for the

imposition of the redemption charge.

S4.20 Meeting of unitholders




(c) voting rights of unitholders;


(e) for a CIC—whether annual general meetings must be held.


Rule S4.21




(a) the scheme’s accounting standard;

(b) the address in the QFC where copies of the constitutional

document, any amending or supplemental instrument, and


inspected and copies may be obtained;

(c) how any notice or other document must or may be served

on unitholders;

(d) the extent to which and the circumstances in which—

(i) the scheme is liable to pay or incur tax on any

appreciation in the value of the scheme property or on

the income derived from the scheme property; and

(ii) deductions by way of withholding tax may be made

from distributions of income to unitholders and

payments made to unitholders on the redemption of

units;

(e) any possible fees or expenses not otherwise mentioned in

this schedule, distinguishing between those to be paid by a

unitholder and those to be paid out of the scheme property;

(f) if applicable, the names and addresses of any banker,

lawyer, registrar, and any other person, conducting any

significant activities in relation to the scheme.







Authority) as a retail scheme.


Rule S4.23










documents.

Returns from units go down as well as up and you may also lose

all or part of your investment.

Past performance of units is not a reliable indicator of future

performance.



financial advice before deciding to invest in the scheme.’

S4.23 Additional information for feeder funds

For a feeder fund, the following information:




(b) details of the fees arising at the level of the feeder fund itself

and the scheme (or subscheme) to which its investments are

dedicated.

S4.24 Additional information for fund of funds

For a fund of funds, the following information:





Rule S4.25


(b) details of the fees arising at the level of the fund of funds

itself and, to the extent known, the schemes (and

subschemes of umbrella schemes) to which its investments

are dedicated.

S4.25 Information on umbrella schemes

For an umbrella scheme, the following information:

(a) that a unitholder may exchange units in a subscheme for

units in any other subscheme;

(b) that an exchange of units in a subscheme for units in another

subscheme is treated as a redemption and issue;

(c) that a unitholder who exchanges units in a subscheme for

units in any other subscheme does not have the right to

withdraw from or cancel the transaction;

(d) the policy for allocating between subschemes any assets of,

or costs, charges and expenses payable out of, scheme

property that are not attributable to any particular

subscheme;

(e) what charges (if any) may be made on exchanging units in

a subscheme for units in another subscheme;

(f) for each subscheme—the currency in which the scheme

property allocated to it must be valued, and the price of units

calculated and payments made, if this currency is not the

base currency of the umbrella scheme;

(g) for an umbrella scheme constituted by a CIC—that the

subschemes are not ‘ring-fenced’ and, if the umbrella

scheme cannot meet liabilities attributable to any particular

subscheme out of the assets attributable to that subscheme,

the remaining liabilities may have to be met out of the assets

attributable to other subschemes.


Rule S4.26


S4.26 Application of prospectus contents to umbrella scheme

For an umbrella scheme, information, statements and provisions

required must be provided—

(a) in relation to each subscheme if the information, statements

or provisions for any subscheme differ from those for any

other; and

(b) for the umbrella scheme as a whole, but only if the

information, statements or provisions are relevant to the

umbrella scheme as a whole.

S4.27 Additional information

The following information:

(a) if there is any arrangement intended to result in a particular

capital or income return from a holding of units in the

scheme or any investment objective of giving protection to

the capital value of, or income return from, such a holding—

(i) details of the arrangement or protection; and

(ii) for any related guarantee—sufficient details of the

guarantor and the guarantee to enable a fair assessment

of the value of the guarantee; and

(iii) a description of the risks that could affect achieving the

return or protection; and

(iv) details of the arrangements by which the operator must

give the unitholders notice of any action required by

the unitholders to obtain the benefit of any related

guarantee;

(b) whether notice has been given to unitholders of the

operator’s intention to propose a change to the scheme and,

if so, particulars of the notice.


Rule S4.27


Prospectus content—REITs Schedule 5

Rule S5.1


Schedule 5 Prospectus content—REITs (see rule 5.2.3)


A statement that the document is the prospectus of the REIT as

at a particular date.



(a) the name of the REIT;

(b) that the REIT is a real estate investment trust and is

registered as a REIT under the Collective Investment

Schemes Rules 2010;

(c) the registration number given to the REIT by the Regulatory

Authority;

(d) whether the REIT is a collective investment company or a

collective investment trust;

(e) the exchange where the REIT is listed;

(f) the nature of the commitment that participants will enter

into;

(g) details of any transactions entered into, or proposed to be

entered into, with affected persons;

Note For the meaning of affected person, see rule 5.1.1.

(h) full particulars of the nature and extent of the interest (if


proposed to be acquired, by the REIT;

(i) details of significant participants and the number or


them;

Schedule 5 Prospectus content—REITs

Rule S5.2


(j) a statement to explain the standards according to which

property valuations are made;

(k) the insurance arrangement for the REIT;

(l) a statement of any material policy regarding immovables;

(m) the percentage (at least 80%) of its audited annual net

income (adjusted to exclude any fair value capital gains)

that the REIT intends to distribute to unitholders;

(n) the maximum percentage of the REIT’s gross asset value at

any time that may consist of property-related assets that are

not traded or dealt in on the markets specified in the


(o) the maximum percentage of the REIT’s gross asset value at

any time that may consist of immovables that are

unoccupied and non-income-producing, or are in the course

of substantial development, redevelopment or

refurbishment;

(p) the maximum percentage of the REIT’s gross asset value at

any time that may be invested in immovables that are

subject to a security interest held otherwise than by the

independent entity or its nominee or delegate;

(q) if the REIT is an Islamic fund—that the REIT is an Islamic

fund;

(r) that the unitholders are not liable for:

(i) the debts and other liabilities of the REIT; or

(ii) acts or omissions of the operator or independent

entity;

(s) if the REIT has not started to operate—when it is expected

to start to operate;


Rule S5.3


(t) if the duration of the REIT is limited—a statement to that

effect, an indication of the duration and, if appropriate, of

any conditions for extending the duration;

(u) the base currency of the REIT;

(v) if the REIT is a CIC—its capital structure, including the


(w) if applicable, any minimum initial investment;

(x) that any notice or other document may be served on the




(y) the circumstances in which the REIT may be wound up, and

a summary of the procedure for, and the rights of the


(z) the governing law for the REIT.

S5.3 Islamic funds

If the REIT is an Islamic fund, the following information:

(a) that all operations of the REIT must be conducted in

accordance with Shari’a;





Rule S5.4


(d) the disclosure required by AAOIFI FSA 14.


The following information in relation to the REIT’s investment

objectives, strategies and policy:

(a) the REIT’s investment objectives (including its financial

objectives) and, in particular:

(i) the types of investments in which it may invest; and

(ii) the REIT’s investment strategies, including its


(b) the REIT’s policy for achieving its investment objectives,

including:


specialisation;

(ii) the policy for the spreading of risk in the scheme

property; and

(iii) the policy in relation to the exercise of borrowing

powers;

(c) a list of the jurisdictions where immovables in which the

REIT may invest are located;

(d) if investment in an immovable has been, or is to be, made

through an intermediate holding vehicle or vehicles—a

statement disclosing the existence of the vehicle or vehicles

and confirming that the purpose of each vehicle is to enable

the REIT to hold immovables;

(e) an indication of any limits on the investment policy;

(f) the types of assets that the scheme property may consist of;

(g) the proportion of the scheme property that may consist of an

asset of any description;


Rule S5.4


(h) the kind of transactions that may be effected for the REIT

and an indication of any techniques and instruments or

borrowing powers that may be used in the REIT’s

management;

(i) for rule 7.1.7 (1) (b) (What is an eligible market?), a list of

the markets through which the REIT may invest or deal in

investments;

(j) any restrictions on the assets in which scheme property may

be invested, including restrictions on the extent to which the

REIT may invest in any type of asset and an indication of

whether the restrictions are more onerous than those

otherwise applying under COLL;

(k) the borrowing restrictions applying to the REIT;

(l) if the REIT may invest in other schemes—the extent to

which the scheme property may be invested in units in

schemes that are managed by the operator or any associate

of the operator;

(m) the profile of the typical investor for whom the REIT is

designed;

(n) the historical performance (if any) of the REIT;

(o) if the REIT’s net asset value is likely to have high volatility

because of its portfolio composition or the portfolio

management techniques that may be used—a prominent

statement to that effect;

(p) a statement that any unitholder may obtain on request the

information listed in COLL, rule 5.2.2 (2) (Prospectus etc

to be made available).


Rule S5.5


S5.5 Distributions, accounting and reporting dates etc

(1) Information about reporting, accounting and distribution,

including the following:

(a) the accounting and distribution dates;

(b) a description of procedures:

(i) for calculating and applying income (including how

any distributable income must be paid);

(ii) relating to unclaimed distributions; and

(iii) if relevant, for calculating, paying and accounting for

income equalisation;

(c) the accounting reference date and when annual and half-

yearly long reports must be published;

(d) when annual and half-yearly short reports must be sent to

unitholders.

(2) Details of the main taxes levied on the REIT’s income and


unitholders.

S5.6 Characteristics of units in the REIT





other classes;


these are;

(c) if mandatory conversion of units from a class to another

class may be required—in what circumstances that may be

required;


Rule S5.7


(d) for a REIT that is a CIT—the fact that the nature of the right

represented by units is that of a beneficial interest under a

trust;

(e) documents evidencing title to units.

S5.7 Operator

The following information about the operator:

(a) its name;










(h) a summary of its functions under COLL in relation to the

REIT;


which it is a party in relation to the REIT that may be




(j) a summary of any outsourcings it has entered into in relation

to the REIT;


in the REIT.


Rule S5.8




(a) its name;





office in the QFC;





(iii) the regulatory authorisations (however described)

held by it;







or not done by it in relation to the REIT;




and the jurisdiction where the parent company is

incorporated;




Rule S5.9




(j) a summary of its functions under COLL in relation to the

REIT;


which it is a party in relation to the REIT that may be





(m) a summary of any outsourcings it has entered into in relation

to the REIT.






S5.9 Investment adviser and independent valuer


the REIT:

(a) the adviser’s name;

(b) whether the adviser is an authorised firm;


services to the REIT as an investment adviser—what the



which the adviser is a party in relation to the REIT that may



Rule S5.10




(2) The following information about the standing independent

valuer:

(a) the valuer’s name;


which the valuer is a party in relation to the REIT that may




S5.10 Auditor

The name and address of the auditor of the REIT.

S5.11 Relationships with other parties

The relevant details of the following:

(a) the names of each member (however described) of the

governing body of the operator, the independent entity or,

for a CIC, the CIC;

(b) the business activities of each person named under

paragraph (a) if these activities are of significance to the

REIT’s business;

(c) if any person named under paragraph (a) is a corporation in

a group of which any other corporation member (however

described) of the governing body is a member—that fact;

(d) if an investment adviser retained in relation to the REIT’s

business is a corporation in a group of which any

corporation member (however described) of the governing

body of the operator, the independent entity or, for a CIC,

the CIC is also a member—that fact;

(e) if an investment adviser retained in relation to the business

of the REIT has the operator’s authority to make decisions


Rule S5.12


for the operator—that fact and a description of the matters

in relation to which it has authority;

(f) what functions (if any) the operator or independent entity

has outsourced and to whom;

(g) in what capacity (if any) the operator acts in relation to any

other schemes and the name of each of those schemes.





(2) How and when unitholders can obtain information about their

holdings of units and substantial holders of units.


(1) In relation to each type of payment from the scheme property,

details of the following:

(a) who the payment is made to;

(b) what the payment is for;

(c) if available, the rate or amount;

(d) if the rate or amount is not available—how it must be

calculated and accrued;

(e) when must it be paid;

(f) if a performance fee is taken—a plain English statement of

the maximum amount or percentage of the scheme property

that the performance fee might represent in an annual

accounting period together with examples of the operation

of the performance fee.


Rule S5.13


(2) How notice must be given to unitholders of the operator’s

intention to do any of the following:

(a) introduce a new category of remuneration for its services;

(b) increase the basis of any current charge;

(c) change the basis of the treatment of a payment from the

capital property.




Table S5.13 Charges and expenses for the REIT




This is the maximum that might be taken out of your money [insert as

applicable before it is invested or before the proceeds of your investment are

paid out].

Charges taken from the REIT over a year


Charges taken from the REIT under certain specific conditions

Performance fees [insert percentage]% a year of any returns the REIT

achieves above [insert name of benchmark].





Ongoing charges excludes:




investment scheme.


Rule S5.14






(4) For a REIT that holds an immovable through an intermediate

holding vehicle or vehicles—a warning that the timing of

distributions of income may depend on the law of the jurisdiction

where the vehicle or vehicles are established.

S5.14 Allocation of payments

If, in accordance with COLL, any income expense payments may

be treated as a capital expense:

(a) that fact;

(b) the operator’s policy for treating any income expense as a

capital expense; and

(c) a statement that this policy may result in capital erosion or

constrain capital growth.








which units in the REIT may be issued, and a description of

any circumstances in which the scheme property may be

specially valued;



(c) how the price of units in each class must be calculated;


Rule S5.16


(d) where, and at what frequency, the most recent prices must

be published.

S5.16 Dealing



operator must receive instructions to issue units;

(b) the procedures for:

(i) the issue of units; and


(c) for a prospectus available during the initial offer period:

(i) the initial offer period;

(ii) the initial price of a unit (in the base currency);

(iii) the arrangements for issuing units during the initial

offer period, including the operator’s intentions on

investing the subscriptions received during the initial

offer period;

(iv) the circumstances when the initial offer must end;

(v) whether units may be issued in a currency other than

the base currency; and

(vi) any other relevant details of the initial offer;

(d) details of the minimum number, percentage or value of each

class of unit in the REIT that:


(ii) may be the subject of any single transaction of issue

or sale;

(e) whether certificates may be issued in relation to registered

units;


Rule S5.17


(f) if relevant, the circumstances in which the operator may

arrange for, and the procedure for, the issue of units

otherwise than for cash;

(g) the exchange or exchanges on which units in the REIT are

or will be listed or dealt.

S5.17 Disclosure about transactions with affected persons

The following information about any transaction with an affected

person:

(a) any beneficial interests of the affected person, and any

changes to those interests, in the REIT;

(b) any conflict of interest involving the affected person;

(c) the measures to identify, manage and monitor conflicts of

interest involving the affected person.

Note If the operator operates more than 1 scheme and a transaction

involves 2 or more of them, the transaction is taken to be a

transaction with an affected person for each scheme, see rule 12.6.10

(5).

S5.18 Disclosure about competing business of affected persons

(1) If an affected person has an interest in a business that competes,

or is likely to compete, with the REIT (whether directly or

indirectly), the following information and statements:

(a) the business and its management;

(b) the nature, scope and size of the business;

(c) how the business competes, or is likely to compete, with the

REIT.

(2) If relevant, the following must be included in the disclosure:

(a) a statement from the affected person that:


Rule S5.19


(i) it is capable of performing its duty to the REIT

independently of the business; and

(ii) it will perform its duty independently and in the best

interests of the REIT and the unitholders;

(b) a statement that the REIT may acquire any of the business

or assets of the affected person.

Note For the obligation of the operator to notify unitholders of any

significant change to the information required to be disclosed under

this rule, see rule 12.6.12.

S5.19 Disclosure about sale of immovable by affected persons

If an affected person has, for the purpose of the establishment of

the REIT, agreed to sell an immovable to the REIT, the following

information and statements:

(a) the results of the valuation made by an independent valuer;

(b) the price to be paid for the immovable;

(c) the terms of the transaction.

S5.20 Disclosure about custodianship by operator and transactions of operator with affected persons

(1) If the operator itself acts as custodian of an immovable, the

following information and statements:

(a) a statement that the operator acts as custodian of the

immovable;

(b) a description of the risks that may arise as a result of it acting

as custodian;

(c) a description of the systems and controls that it has in place

to ensure that the immovable is properly segregated and

protected.


Rule S5.21


(2) If the operator has approval to enter into transactions with

affected persons for the acquisition or sale of immovables in

Qatar without obtaining prior unitholder approval in each case, a

statement of that fact.

S5.21 Dilution

Details of what is meant by dilution, including:

(a) a statement explaining:

(i) that is not possible to predict accurately whether

dilution is likely to happen;

(ii) that a dilution adjustment is required to reduce the

effect of dilution; and

(iii) the operator’s policy in relation to requiring a dilution

levy together with an explanation of how this policy

may affect the future growth of the REIT; and

(b) a statement of the following:

(i) the operator’s policy in deciding when to require a

dilution levy, including the operator’s policy on large

deals;

(ii) the estimated rate or amount of any dilution levy or

dilution adjustment based on historical data or future

projections;

(iii) the likelihood that the operator may require a dilution

levy or make a dilution adjustment and the basis

(historical or projected) on which the statement is

made.

S5.22 Issue charges

If relevant, a statement authorising the operator to make an issue

charge and specifying the basis for, and current amount or rate

of, the charge.


Rule S5.23


S5.23 Meeting of unitholders




(c) voting rights of unitholders;


(e) for a CIC—whether annual general meetings must be held.



(a) the REIT’s accounting standard;

(b) the address in the QFC where copies of the constitutional

document, any amending or supplemental instrument, and


inspected and copies may be obtained;

(c) how any notice or other document must or may be served

on unitholders;

(d) the extent to which and the circumstances in which:

(i) the REIT is liable to pay or incur tax on any

appreciation in the value of the scheme property or on

the income derived from the scheme property; and

(ii) deductions by way of withholding tax may be made

from distributions of income to unitholders;

(e) any possible fees or expenses not otherwise mentioned in

this Schedule, distinguishing between those to be paid by a

unitholder and those to be paid out of the scheme property;

(f) if applicable, the names and addresses of any banker,

lawyer, registrar, and any other person, conducting any

significant activities in relation to the REIT.


Rule S5.25








Authority) as a real estate investment trust.









documents.

Returns from units go down as well as up and you may also lose

all or part of your investment.

Past performance of units is not a reliable indicator of future

performance.



financial advice before deciding to invest in the scheme.’

S5.26 Other additional information

The following information:

(a) if there is any arrangement intended to result in a particular

capital or income return from a holding of units in the REIT

or any investment objective of giving protection to the

capital value of, or income return from, such a holding:

(i) details of the arrangement or protection;


Rule S5.26


(ii) for any related guarantee—sufficient details of the

guarantor and the guarantee to enable a fair

assessment of the value of the guarantee;

(iii) a description of the risks that could affect achieving

the return or protection; and

(iv) details of the arrangements by which the operator must

give the unitholders notice of any action required by

the unitholders to obtain the benefit of any related

guarantee;

(b) whether notice has been given to unitholders of the

operator’s intention to propose a change to the REIT and, if

so, particulars of the notice;

(c) any other matter that the Regulatory Authority directs the

operator to state in the prospectus.

Glossary


Glossary (see r 1.1.4)

AAOIFI means the Accounting and Auditing Organisation for

Islamic Financial Institutions.

accounting reference date, for a QFC scheme, means the date stated

in the scheme’s latest filed prospectus as the date when the scheme’s

annual accounting period ends.

Note Latest filed prospectus and annual accounting period are defined in this

glossary.

accumulation unit means a unit in a QFC retail scheme in relation to

which income is credited periodically to capital property under rule

8.8.2 (Income allocation and distribution—all QFC schemes).

Note Capital property is defined in this glossary.

advising on investments means the regulated activity described in the

Financial Services Regulations, schedule 3, part 2, paragraph 11.

Note Regulated activity is defined in this glossary.

affected person, for a QFC scheme, has the meaning given by

rule 5.1.1.

annual accounting period, for a QFC scheme, means an annual

accounting period of the scheme under these rules.

annual income allocation date, for a QFC scheme, means the date in

any year stated in the scheme’s latest filed prospectus as the date on

or before which an allocation of income is to be made in relation to

each annual accounting period.

Note Year, latest filed prospectus and annual accounting period are defined

in this glossary.

another permitted form of QFC scheme has the meaning given by

rule 1.3.10.

Glossary


approved derivative has the meaning given by rule 7.1.8.

approved money-market instrument has the meaning given by

rule 7.1.5.

approved security has the meaning given by rule 7.1.9.

arranging credit facilities means the regulated activity described in

the Financial Services Regulations, schedule 3, part 2, paragraph 7.


arranging deals in investments means the regulated activity

described in the Financial Services Regulations, schedule 3, part 2,

paragraph 5.


arranging the provision of custody services means the regulated

activity described in the Financial Services Regulations, schedule 3,

part 2, paragraph 9.


articles of association, for a CIC, means the CIC’s articles of

association as amended from time to time.

Note CIC is defined in r 1.3.7 and in this glossary.

associate, for a legal person (A), means any legal person in the same

group as A.

Note Legal person and group are defined in this glossary.

associated person, for a person (A), means any of the following:

(a) if A is a legal person—a legal person in the same group as A;


(b) any other person whose business or domestic relationship with

A might reasonably be expected to give rise to a community of

interest between them that may involve a conflict of interest in

dealing with third parties.

Glossary


Note Legal person, group and person are defined in this glossary.

authorisation means an authorisation granted under the Financial

Services Regulations, part 5.

authorised firm means a person that has an authorisation.

Note Person and authorisation are defined in this glossary.

back-to-back borrowing means a borrowing under which a QFC

scheme, or the independent entity of a QFC scheme on the operator’s

instructions—

(a) borrows an amount of currency from an eligible bank; and

(b) keeps an amount in another currency, at least equal to that

borrowing for the time being, on deposit with the eligible bank

(or its agent or nominee).

Note Borrowing and eligible bank is defined in this glossary.

BANK means the Banking Business Prudential Rules 2014.

base currency, for a QFC scheme, means the currency stated in the

constitutional document as the base currency of the scheme.


borrowing, for a scheme, includes any arrangement (including a

combination of derivatives) designed to achieve a temporary injection

of money into the scheme property in the expectation that the amount

will be repaid.

Note Derivative is defined in this glossary.

breach includes fail or refuse to comply with.

business customer has the same meaning as in CIPR.

business day means a day that is not a Friday, Saturday, or a public

or bank holiday in Qatar.

Glossary


capital property, for a QFC scheme, means the scheme property,

other than income property and any amount in the distribution

account.

Note Scheme property is defined in r 1.2.3. Income property and distribution

account are defined in this glossary.

CIC means a QFC collective investment company.

Note QFC collective investment company is defined in r 1.3.7.

CIP means a QFC collective investment partnership.

Note QFC collective investment partnership is defined in r 1.3.8.

CIPR means Customer and Investor Protection Rules 2019.

CIT means a QFC collective investment trust.

Note QFC collective investment trust is defined in r 1.3.9.

class, for a QFC scheme, means—

(a) a particular class of units in the scheme; or

(b) if the scheme is an umbrella scheme—

(i) all the units relating to a single subscheme of the scheme;

or

(ii) a particular class of units relating to single subscheme of

the scheme.

Note Unit is defined in r 1.2.4. Umbrella scheme and subscheme are defined

in r 1.2.11.

closed-ended scheme has the meaning given by rule 1.2.10 (2).

close out a transaction (the original transaction) means enter into a

further transaction under which the obligation to deliver or receive

property that arises (or, at the option of the other party to the

transaction, may arise) under the original transaction is offset by an

equivalent and opposite obligation or right to receive or deliver

property.

Note Property is defined this glossary.

Glossary


COLL means these rules.

collateral—

(a) in relation to a stock lending arrangement, repo agreement or

derivative transaction, means—

(i) a transfer of assets (otherwise than by way of a sale) subject

to a right of the transferor to have transferred back to it the

same, or equivalent, assets; or

(ii) a letter of credit;

if the assets are transferred, or the letter of credit is issued, to

secure the performance of a party to the transaction; and

(b) in any other case—means any form of security, guarantee or

indemnity provided by way of security for the discharge of any

liability arising from a transaction.

Note Stock lending arrangement, repo agreement and derivative are defined

in this glossary.

collective investment scheme has the meaning given by rule 1.2.1.

commodity means a physical asset (other than a financial instrument

or cash) that is capable of delivery.

complying disclaimer, for a non-QFC scheme, has the meaning given

by rule 10.2.1.

constitutional document, for a QFC scheme, has the meaning given

by rule 3.1.1.

contract for differences means the specified product described in the


Note Specified product is defined in this glossary.

contract of insurance means the specified product described in the



Glossary


controlled function has the meaning given by the Financial Services

Regulations, article 41 (2).

Note See CTRL, ch 3, for the functions that are controlled functions.

corporation—to remove any doubt, a corporation includes, but is not

limited to—

(a) a company; and

(b) a limited partnership; and

(c) a limited liability partnership.

covered bond means a bond that—

(a) is issued by an eligible bank; and

(b) is subject by law to special public supervision designed to

protect bondholders, and in particular protection under which

amounts deriving from the issue of the bond must be invested in

accordance with the law in assets—

(i) that, during the entire period of the bond, can cover claims

attaching to the bond; and

(ii) that, if the issuer fails, would be used on a priority basis for

the reimbursement of the principal and payment of the

accrued interest.

Note Eligible bank is defined in this glossary.

CTRL means the Governance and Controlled Functions Rules 2012.

currency class unit, for a QFC retail scheme, means a class of unit

denominated in a currency that is not the base currency or, if allowed

under rule 3.2.7 (3) (Currency class units—QFC retail schemes),

denominated in the base currency.

Note Base currency is defined in this glossary.

customer means a person to whom an authorised firm provides, has

provided or offers to provide a service or product.

Glossary


day means a period of 24 hours starting at midnight.

deal—

(a) for units in a QFC scheme—means issue or redeem the units; or

Note Issue and redemption are defined in this glossary.

(b) for any other investment or other property—means buy, sell,

otherwise acquire, subscribe for or underwrite the investment or

other property or offer or agree to do so, either as principal or

agent, and includes, for an investment that is a contract of

insurance, carry out the contract.

Note Investment and contract of insurance are defined in this glossary.

dealing day, for a QFC scheme, means the period in a business day

during which, in accordance with the latest filed prospectus, the

operator must receive instructions to issue or redeem units in the

scheme.

Note Business day, latest filed prospectus, issue and redemption are defined

in this glossary.

dealing in investments means the regulated activity described in the



dealing period, for a QFC scheme, means the period between a

valuation point and the next.

Note Valuation point is defined in this glossary.

debt instrument means the specified product described in the



dedicated, for investments of a scheme, means intended that the

unitholders of units in the scheme should participate or receive—

(a) profits or income arising from the acquisition, holding,

management or disposal of investments of that kind; or

Glossary


(b) amounts paid out of profits or income mentioned in

paragraph (a).

Note Investment is defined in this glossary.

deposit means the specified product described in the Financial

Services Regulations, schedule 3, part 3, paragraph 11.


deposit taking means the regulated activity described in the Financial



derivative means a future, option or contract for differences.

Note Future, option and contract for differences are defined in this glossary.

dilution, for a QFC scheme, means the amount of costs for dealing in

investments incurred, or expected to be incurred, by the operator to

the extent that these costs may reasonably be expected to result, or

have resulted, from the acquisition, holding, management or disposal

of investments by the operator as a consequence (whether or not

immediate) of the increase or decrease of the cash resources of the

scheme resulting from the issue or redemption of units over a period,

including—

(a) the costs of dealing in investments, and professional fees

incurred, or expected to be incurred, in relation to the acquisition

or disposal of an immovable; and

(b) if there is a spread between the buying and selling prices of the

investment—the indirect cost resulting from the difference

between the prices.

Note Investment, issue and redemption are defined in this glossary.

dilution adjustment, for a QFC scheme, means an adjustment to the

price of a unit required under these rules for the purpose of reducing

the effect of dilution.

Note Price and dilution are defined in this glossary.

Glossary


dilution levy, for a QFC scheme, means a charge at the rate, or of the

amount, required by the operator under these rules for the purpose of

reducing the effect of dilution.

Note Dilution is defined in this glossary.

director, for an entity, includes any person named as director of the

entity and any person in accordance with whose instructions the entity

is accustomed to act.

Note Entity and person are defined in this glossary.

distribution account, for a QFC scheme, means the account (if any)

to which the income property must be transferred as at the end of each

annual accounting period.

Note Income property and annual accounting period are defined in this

glossary.

document means a record of information in any form (including

electronic form), and includes, for example—

(a) anything in writing or on which there is writing; and

(b) anything on which there are figures, marks, numbers,

perforations, symbols or anything else having a meaning for

individuals qualified to interpret them; and

(c) a drawing, map, photograph or plan; and

(d) any other item or matter (in whatever form) that is, or could

reasonably be considered to be, a record of information.

Note Writing is defined in this glossary.

document evidencing title means any means of evidencing title,

whether or not in documentary form.

efficient portfolio management, for a scheme, means the use of

techniques and instruments that—

(a) relate to transferable securities and money-market instruments;

and

Glossary


(b) are economically appropriate in that they are realised in a cost-

effective way; and

(c) are entered into for 1 or more of the following specific aims:

(i) reduction of risk;

(ii) reduction of costs;

(iii) generation of additional capital or income for the scheme

with a risk level consistent with the risk profile of the

scheme and the risk diversification required by these rules.

Note Transferable security is defined in r 7.1.6.

eligible bank means—

(a) an eligible bank as defined in INAP, glossary; or

(b) a person that would be an eligible bank as so defined if it

accepted deposits.

eligible exchange means a regulated exchange for which the

Regulatory Authority has not, by notice published on an approved

website, declared that this definition does not apply to the jurisdiction

in which the exchange is incorporated or established.

Note Regulated exchange is defined in this glossary.

eligible market has the meaning given by rule 7.1.7.

eligible money-market fund means—

(a) a QFC scheme that is a money-market fund; or


(b) a non-QFC scheme with investment objectives and powers that

are the same as, or the same in all significant respects as, the

investment objectives and powers of a QFC scheme that is a

money-market fund.

Glossary


employee, of a person (A), means an individual—

(a) who is employed or appointed by A, whether under a contract of

service or services or otherwise; or

(b) whose services are, under an arrangement between A and a third

party, placed at the disposal and under the control of A.

entity means any kind of entity, and includes, for example, any

person.

Note Person is defined in this glossary.

execute a transaction means carry into effect or perform the

transaction, whether as principal or agent, and includes instructing

another person to effect or perform the transaction.

exercise a function means exercise or perform the function.

Note Function is defined in this glossary.

feeder fund means a scheme dedicated to investments in a single

other scheme.

Note Dedicated and investment are defined in this glossary.

financial promotion means a communication made using any

medium (for example, brochures, telephone calls, the internet, emails

and presentations) if the purpose or effect of the communication is—

(a) to promote or advertise—

(i) a specified product; or

(ii) a regulated activity (or any activity that would be a

regulated activity if it were conducted in or from the QFC);

or

(b) to invite or induce any person—

(i) to enter into an agreement with any person in relation to a

specified product; or

Glossary


(ii) to engage in a regulated activity (or an activity that would

be a regulated activity if it were conducted in or from the

QFC).

Note Specified product, regulated activity and person are defined in the

glossary.

forward price, for units in a QFC scheme, means a price calculated

by reference to the next valuation point after the operator receives

instructions to issue or redeem the units.

Note Issue, redemption, price and valuation point are defined in this glossary.

function means any function, authority, duty or power.

fund of funds means a scheme dedicated to investments in 2 or more

of the following:

(a) schemes;

(b) subschemes of umbrella schemes.


future means the specified product described in the Financial



GENE means the General Rules 2005.

governing body, of an entity, means its board of directors, committee

of management or other governing body (whatever it is called).

Note Entity is defined in this glossary.

government or public security means a debt instrument issued by or

for—

(a) a jurisdiction; or

(b) a public, regional or local authority of a jurisdiction.

Note Debt instrument and jurisdiction are defined in this glossary.

Glossary


group means the following:

(a) a legal person (A);

(b) any parent entity of A;

(c) any subsidiary (direct or indirect) of A or of any parent entity of

A.

Note Legal person, parent entity and subsidiary are defined in this glossary.

half-yearly accounting period, for a QFC scheme, means a half-

yearly accounting period of the scheme under these rules.

INAP means the Interpretation and Application Rules 2005.

income equalisation, for a QFC scheme, means a capital amount that,

in accordance with a power in the constitutional document, is

included in an allocation of income for a unit issued during the

accounting period in relation to which the income allocation is made.

Note Constitutional document is defined in r 3.1.1. Issue is defined in this

glossary.

income property, for a QFC scheme, means all amounts considered

by the operator, after consultation with the scheme’s auditor, to be of

the nature of income received or receivable in relation to the scheme

property, other than any amount in the distribution account.

Note Scheme property is defined in r 1.2.3. Distribution account is defined in

this glossary.

independent entity, of a scheme, has the meaning given by rule 1.2.9.

initial offer means—

(a) for a QFC scheme—an offer for the issue of units in the scheme

if all or part of the consideration paid to the scheme for the units

is to be used to acquire the initial scheme property; and

(b) for a subscheme of a QFC umbrella scheme—an offer for the

issue of units in the subscheme if all or part of the consideration

Glossary


paid to the subscheme for the units is to be used to acquire the

initial scheme property to be attributable to the subscheme.

Note Scheme property is defined in r 1.2.3. Umbrella scheme and subscheme

are defined in r 1.2.11. Issue is defined in this glossary.

initial outlay, for a QFC scheme, means the amount that the scheme

is required to provide to obtain rights in a transaction in derivatives,

excluding any payment or transfer on exercise of rights.

Note Derivative is defined in this glossary.

initial price, of a unit in any class in a QFC retail scheme, means the

price to be paid during the initial offer period.

Note Class and initial offer are defined in this glossary.

instrument means an instrument of any kind, and includes, for

example, any writing or other document.

Note Writing and document are defined in this glossary.

interim accounting period, for a QFC scheme, means a period in an

annual accounting period of the scheme in relation to which an

allocation of income is to be made.

Note Annual accounting period is defined in this glossary.

interim income allocation date, for a QFC scheme, means any date

stated in the scheme’s latest filed prospectus as the date on or before

which an allocation of income is to be made.

Note Latest filed prospectus is defined in this glossary.

intermediate holding vehicle, for a QFC scheme, means an entity

(other than a scheme) if the purpose of the entity is to enable the

holding of immovables for the scheme.

investment means any investment, including any asset, right or

interest.

Glossary


investment adviser, for a QFC scheme, means a person who is

retained by the operator, under a commercial arrangement that is not

a contract of service, to provide the operator with advice about—

(a) the merits of investment opportunities for the scheme; or

(b) information relevant to the making of judgments about the

merits of investment opportunities for the scheme.

ISFI means the Islamic Finance Rules 2005.

Islamic fund has the meaning given by rule 1.3.11.

issue, of a unit in a QFC scheme, means the issue of a new unit in the

scheme by the operator on behalf of the scheme.

issue charge, for a QFC scheme, means an amount levied by the

operator under these rules on the issue of units.

Note Issue is defined in this glossary.

joint ownership arrangement, in relation to an immovable, means an

arrangement for the joint ownership of the immovable under

rule 12.3.2.

jurisdiction means any kind of legal jurisdiction, and includes, for

example—

(a) the State; and

(b) a foreign country (whether or not an independent sovereign

jurisdiction), or a state, province or other territory of such a

foreign country; and

(c) the Qatar Financial Centre or a similar jurisdiction.

Note The State is defined in this glossary.

Glossary


large deal, for a QFC scheme, means a transaction (or series of

transactions in a single dealing period) by any person for the issue or

redemption of units in the scheme if—

(a) the transaction (or series of transactions) is executed for the

purpose of—

(i) a dilution adjustment; or

(ii) a dilution levy; and

(b) the transaction (or series of transactions) is a large deal under


Note Series of transactions, issue, dealing period, dilution levy, dilution

adjustment, redemption and latest filed prospectus are defined in this

glossary.

larger denomination share has the meaning given by rule 3.2.2 (2).

latest filed prospectus, of a QFC scheme, means the prospectus

(including any revised or supplementary prospectus) of the scheme

most recently filed with the Regulatory Authority under these rules.

Note Prospectus is defined in this glossary.

latest filed translation, of a prospectus of a QFC scheme in relation

to a language, means the translation of the prospectus in that language

most recently filed with the Regulatory Authority under these rules.

Note Prospectus is defined in this glossary.

legal person means an entity (other than an individual) on which the

legal system of a jurisdiction confers rights and imposes duties, and

includes, for example, any entity that can own, deal with or dispose

of property.

Examples

1 a company

2 any other corporation

3 a partnership, whether or not incorporated

Glossary


4 an association or other undertaking, whether or not incorporated

Note Entity, jurisdiction and property are defined in this glossary.

limited issue arrangements, for a QFC qualified investor scheme,

means arrangements for the issue of units in the scheme under which

the operator limits the issue of units in the scheme in accordance with


Note Issue and latest filed prospectus are defined in this glossary.

limited redemption arrangements, for a QFC qualified investor

scheme, means arrangements for the redemption of units in the

scheme under which the operator redeems units in the scheme less

frequently than twice in the month.

Note Redemption and month are defined in this glossary.

listed unit means a unit that is listed in the Qatar Stock Exchange or

in any other regulated exchange.

long term insurance contract means a contract of insurance of the

type described in the Financial Services Regulations, schedule 3, part

3, paragraph 10.4.

Note Contract of insurance is defined in this glossary.

managing investments means the regulated activity described in the



margin means cash or other property—

(a) paid, transferred or deposited under the terms of a derivative; or

(b) required to be paid, transferred or deposited in relation to a

derivative to comply with a requirement imposed by a market

on which it is made or traded.

Note Property and derivative are defined in this glossary.

money means any form of money, including cheques and other

payable orders.

Glossary


money-market fund has the meaning given by rule 1.3.12.

month means calendar month.

near cash means any of the following:

(a) money that is deposited with an eligible bank in—

(i) a current account; or

(ii) a deposit account, if the money can be withdrawn

immediately and without payment of a penalty exceeding

7 days interest calculated at ordinary commercial rates;

(b) certificates of deposit issued by an eligible bank, if immediately

redeemable at the holder’s option;

(c) government or public securities, if redeemable at the holder’s

option or bound to be redeemed within 2 years;

(d) bills of exchange that are government or public securities.

Note Money, eligible bank and government or public security are defined in

this glossary.

net asset value, of a QFC scheme at any time, means the value of the

assets (including current assets) of the scheme at that time after

deducting—

(a) the current liabilities (including accrued expenses) of the

scheme at that time; and

(b) the longer-term liabilities of the scheme.

net asset value per unit, for a QFC scheme at any time, means the net

asset value of the scheme at that time divided by the number of units

in issue at that time.

Note Net asset value is defined in this glossary. Unit is defined in r 1.2.4.

non-QFC qualified client scheme means a non-QFC scheme that is

a qualified client scheme.

Note Qualified client scheme is defined in r 1.4.2.

Glossary


non-QFC retail customer scheme means a non-QFC scheme that is

a retail customer scheme.

Note Retail customer scheme is defined in r 1.4.1.

non-QFC scheme has the meaning given by rule 1.2.7.

notional principal, for a contract for differences, means—

(a) if the contract is an index derivative that resembles a future—

the current mark-to-market valuation of the derivative; or

(b) if the contact is an index derivative that resembles an option—

the exercise value of the derivative; or

(c) in any other case—the notional lot size of the contract.

Note Contract for differences, derivative, future and option are defined in this

glossary.

office includes position.

open-ended scheme has the meaning given by rule 1.2.10 (1).

operating collective investment schemes means the regulated activity

described in the Financial Services Regulations, schedule 3, part 2,

paragraph 12 as Operating a Collective Investment Fund.


operator, of a scheme, has the meaning given by rule 1.2.8.

option means the specified product described in the Financial



ordinary resolution, for a QFC scheme or a class of units in a QFC

scheme, means a resolution passed at a general meeting of the scheme

or a separate meeting of unitholders of that class of units if—

(a) notice indicating the intention to propose the resolution was

properly given; and

Glossary


(b) the resolution passed by a simple majority of the votes validly

cast (whether as a show of hands or on a poll) for or against the

resolution at the meeting.

Note Class is defined in this glossary.

OTC derivative means a derivative traded solely in transactions over

the counter.

Note Derivative and over the counter are defined in this glossary.

outsourcing has the meaning given by rule 8.5.1.

over the counter, for a transaction, means

(a) not effected by means of the facilities and services of an

exchange; and

(b) not governed by the rules of an exchange.

own account transaction, for an authorised firm, means a transaction

executed by the firm for its own benefit or the benefit of an associate.

Note Execute and associate are defined in this glossary.

parent entity, for a legal person (A), means any of the following:

(a) a legal person that holds a majority of the voting power in A;

(b) a legal person that is a member of A (whether direct or indirect,

or though legal or beneficial entitlement) and alone, or together

with 1 or more legal persons in the same group, holds a majority

of the voting power in A;

(c) a parent entity of any legal person that is a parent entity of A.


participant in a scheme has the meaning given by rule 1.2.2.

partnership agreement, for a CIP, means the CIP’s partnership

agreement as amended from time to time.

Note CIP is defined in r 1.3.8 and this glossary.

Glossary


person means—

(a) an individual (including an individual occupying an office from

time to time); or

(b) a legal person.

Note Office and legal person are defined in this glossary.

personal data means any information relating to an individual who

can be identified, directly or indirectly, in particular by reference to

an identification number or to 1 or more factors specific to the

individual’s physical, physiological, mental, economic, cultural or

social identity.

price, of a unit in a QFC scheme, means the price of the unit

calculated in accordance with these rules.

Note Unit is defined in r 1.2.4.

principal, in relation to an option, future or forward contract,

means—

(a) if the contract is an option on a future—the amount or value of

the property that must be delivered to satisfy settlement of the

future; or

(b) in any other case—the amount or value of the property that must

be delivered to satisfy settlement of the contract.

Note Option, future, and property are defined in this glossary.

property means any estate or interest (whether present or future,

vested or contingent, or tangible or intangible) in immovables or

property of any other kind, and includes, for example—

(a) money of any currency; and

(b) bonds, securities, shares, and other negotiable or non-negotiable

instruments of any kind; and

Glossary


(c) any right to interest, dividends, or other income, on or accruing

from or generated by immovables or property of any other kind;

and

(d) any other things in action; and

(e) any other charge, claim, demand, easement, encumbrance, lien,

power, privilege, right, or title, recognised or protected by the

law of any jurisdiction over, or in relation to, immovables or

property of any other kind; and

(f) any other documents evidencing title to, or to any interest in,

immovables or property of any other kind.

Note Money, jurisdiction and document are defined in this glossary.

property fund—a QFC scheme, or a subscheme of a QFC umbrella

scheme, is a property fund if the scheme or subscheme is dedicated

to investments in immovables and in securities issued by corporations

whose main activities are investing in, dealing in, developing or

redeveloping immovables.

property-related assets means any of the following:

(a) shares, debt instruments or warrants issued by an entity if a

substantial activity of the entity relates to investment in

immovables;

(b) securities receipts that give rights in relation to an investment

mentioned in paragraph (a).

Note Share, debt instrument, warrant, entity, investment and securities

receipt are defined in this glossary.

prospectus, of a scheme, means a document (whatever called)

containing information about the scheme, and includes a revised or

supplementary prospectus.

Note Document is defined in this glossary.

Glossary


providing credit services means the regulated activity described in the



providing custody services means the regulated activity described in

the Financial Services Regulations, schedule 3, part 2, paragraph 8.


providing scheme administration means providing 1 or more of the

following services in relation to a scheme:

(a) processing dealing instructions, including effecting issues,

redemptions and stock transfers, and arranging settlements;

(b) portfolio accounting;

(c) valuing assets and performing net asset value, and net asset

value per unit, calculations;

(d) unit pricing;

(e) dividend calculation and distribution;

(f) keeping the register of unitholders and unitholder registration

details;

(g) performing any regulatory requirements;

Examples of requirements

anti-money laundering or combating terrorist financing requirements

(h) undertaking transaction monitoring and reconciliation

functions;

(i) producing financial statements, otherwise than as the scheme’s

auditor;

(j) communicating with, and providing information to, the

participants, the scheme, the operator, the independent entity,

the Regulatory Authority and other persons in relation to the

scheme.

Glossary


QCSD means the Qatar Central Securities Depository.

QFC means the Qatar Financial Centre.

QFC approved auditor means a person:

(a) who is approved by the QFC Authority to act as an auditor; and

(b) whose name is entered in the register of auditors maintained by

the QFC Companies Registration Office.

QFC collective investment company (or CIC) has the meaning given

by rule 1.3.7.

QFC collective investment partnership (or CIP) has the meaning

given rule 1.3.8.

QFC collective investment trust (or CIT) has the meaning given by

rule 1.3.9.

QFC Court means the Qatar Financial Centre Civil and Commercial

Court.

QFC Law means Law No. (7) of 2005 of the State.

Note The State is defined in this glossary.

QFC licensed firm means an entity that has a licence granted by the

QFC Authority.

QFC qualified investor scheme means a QFC scheme that is a


Note Qualified investor scheme is defined in r 1.3.2.

QFC retail property fund means a QFC retail scheme that is a

property fund.

QFC retail scheme means a QFC scheme that is a retail scheme.

Note Retail scheme is defined in r 1.3.3.

QFC scheme has the meaning given by rule 1.2.6.

Glossary


QFC UCITS type scheme means a QFC retail scheme that is a UCITS

type scheme.

Note Retail scheme is defined in r 1.3.3. UCITS type scheme is defined in

r 1.3.5.

QFC umbrella scheme means a QFC scheme that is an umbrella

scheme.

Note Umbrella scheme is defined in r 1.2.11.

qualified client scheme has the meaning given by rule 1.4.2 (What is

a non-QFC qualified client scheme?).

qualified investor has the meaning given by rule 1.2.12.

qualified investor scheme has the meaning given by rule 1.3.2 (What

is a QFC qualified investor scheme?).

readily realisable investment means any of the following:

(a) a government or public security denominated in the currency of

the jurisdiction of its issuer;

(b) any other security that is admitted to official listing on, or

regularly traded on or under the rules of, a regulated exchange;

(c) a newly issued security that can reasonably be expected to fall

within paragraph (b) when trading in it starts.

Note Government or public security, jurisdiction, security and regulated

exchange are defined in this glossary.

real estate investment trust (or REIT) has the meaning given by

rule 12.6.2 (2).

redemption, of a unit in a QFC scheme, means the redemption of an

existing unit in the scheme by the operator on behalf of the scheme.

redemption charge, for a QFC scheme, means an amount levied by

the operator under these rules on the redemption of units.

Note Redemption is defined in this glossary.

Glossary


regulated activity means an activity that is a regulated activity under

the Financial Services Regulations.

regulated exchange means an exchange that is—

(a) incorporated or otherwise established in a jurisdiction outside

the QFC; and

(b) regulated as an exchange by a regulatory or governmental entity

in that jurisdiction.

Note Jurisdiction, QFC and entity are defined in this glossary.

regulated financial institution means a person that is not an

authorised firm but is authorised or licensed (however described) to

conduct any financial service by a regulatory or governmental

authority, body or agency in a jurisdiction other than the QFC.

Note Authorised firm and jurisdiction are defined in this glossary.

Regulatory Authority means the Regulatory Authority of the QFC.

Regulatory Tribunal means the QFC Regulatory Tribunal.

REIT means real estate investment trust.

related person—a person (A) is a related person for another person

(B) if—

(a) A and B are legal persons and members of the same group; or


(b) A is a director or officer of B or of a member of the same group

as B; or

Note Director is defined in this glossary.

(c) A is an individual, B is a legal person and A is able to exercise

significant influence over B; or

(d) A is a spouse or minor child of an individual (C) and C is a

related person for B under paragraph (b) or (c).

Glossary


relevant investment activities means all or any of the following

regulated activities:



(c) advising on investments.

Note Regulated activity and the regulated activities mentioned in this

definition are defined in this glossary.

relevant requirement—a person breaches a relevant requirement in

the circumstances described in the Financial Services Regulations,

article 84.

Note Breach is defined in this glossary.

remuneration means any form of remuneration, and includes benefits

of any kind.

repo agreement means an agreement—

(a) between a seller and buyer for the sale of securities, under which

the seller agrees to repurchase the securities, or equivalent

securities, from the buyer on an agreed date and, usually, for a

stated price; or

(b) between a buyer and seller for the purchase of securities, under

which the buyer agrees to resell the securities, or equivalent

securities, to the seller on an agreed date and, usually, for a

stated price.

Note Security is defined in this glossary.

retail customer has the meaning given by rule 1.2.12.

retail customer scheme has the meaning given by rule 1.4.1 (What is

a non-QFC retail customer scheme?).

Glossary


retail scheme has the meaning given by rule 1.3.3 (What is a QFC

retail scheme?).

scheme means a collective investment scheme.

Note Collective investment scheme (or scheme) is defined in r 1.2.1.

scheme of arrangement means an arrangement relating to a QFC

scheme (the transferor scheme), or to a subscheme of a QFC

umbrella scheme (the transferor subscheme), under which—

(a) either—

(i) all or part of the property of the transferor scheme, or all or

part of the property attributed to the transferor subscheme,

is to become property of 1 or more schemes registered in

the QFC (the transferee scheme or transferee schemes);

or

(ii) all or part of the property attributed to the transferor

subscheme is to become property attributed to 1 or more

other subschemes of the same umbrella scheme registered

in the QFC (the transferee subscheme or transferee

subschemes); and

(b) holders of units in the transferor scheme or transferor subscheme

are to receive, in exchange for their respective interests in the

property being transferred or reattributed, either—

(i) units in the transferee scheme, or 1 or more of the

transferee schemes, to which the property is transferred; or

(ii) units in the transferee subscheme, or 1 or more of the

transferee subschemes, to which the property is

reattributed.

Note Property is defined in this glossary.

scheme property, of a scheme, has the meaning given by rule 1.2.3.

Glossary


securities receipt means the specified product described in the



security means any of the following:

(a) a share;

(b) a debt instrument;

(c) a warrant;

(d) a securities receipt;

(e) a unit in a collective investment scheme.

Note Share, debt instrument, warrant and securities receipt are defined in this

glossary.

sell an investment means sell the investment in any way, and includes

the following:

(a) dispose of the investment for valuable consideration;

(b) for an investment consisting of rights under a contract—

(i) surrender, assign or convert the rights for valuable

consideration;

(ii) assume the corresponding rights under the contract for

valuable consideration;

(c) for an investment consisting of rights under an arrangement—

assume the corresponding liabilities under the arrangement for

valuable consideration;

(d) for any other investment—issue or create the investment or

grant the rights or interests of which it consists.

Note Investment is defined in this glossary.

senior manager, of the operator or independent entity of a QFC

scheme, means an individual employed by the operator or

Glossary


independent entity, or by a member of the operator’s or independent

entity’s group, who has responsibility either alone or with others for

the management or supervision of 1 or more elements of the

operator’s or independent entity’s business relevant to its functions in

relation to the scheme.

Note Group and function are defined in this glossary.

series of transactions means a series of transactions executed to

achieve a single investment decision or objective.

Note Execute is defined in this glossary.

share means the specified product described in the Financial Services

Regulations, schedule 3, part 3, paragraph 1.


Shari’a Supervisory Board, of an Islamic fund, means the board

constituted for the Islamic fund under rule 8.10.1.

Note Islamic fund is defined in r 1.3.11.

smaller denomination share has the meaning given by rule 3.2.2 (2).

special resolution, for a QFC scheme or a class of units in a QFC

scheme, means a resolution passed at a general meeting of the scheme

or a separate meeting of unitholders of that class of units if—

(a) notice indicating the intention to propose the resolution as a

special resolution was properly given; and

(b) the resolution was passed by a majority of at least 75% of the

votes validly cast (whether as a show of hands or on a poll) for

or against the resolution at the meeting.

Note Class is defined in this glossary.

specified product means an investment or other type of product that

is a specified product under the Financial Services Regulations.

standing independent valuer, of a QFC scheme, means the person

who is appointed under these rules as the standing independent valuer

for the scheme.

Glossary


stock lending arrangement means an arrangement between a person

(the borrower) and another person (the lender) under which—

(a) the lender transfers securities to the borrower otherwise than by

way of sale; and

(b) a requirement is imposed on the borrower to transfer back to the

lender, otherwise than by way of sale, securities in the same

quantity, with the same rights, and of the same type and nominal

value, as the transferred securities (or, if agreed between the

borrower and lender, assets into which the transferred securities

have been transformed following a stock split, consolidation,

conversion, merger, takeover, redemption or similar event).

Note Security is defined in this glossary.

subscheme, of an umbrella scheme, has the meaning given by

rule 1.2.11 (2).

subsidiary—a legal person (A) is a subsidiary of another legal person

(B) if B is a parent entity of A.

Note Legal person and parent entity are defined in this glossary.

the State means the State of Qatar.

transferable security has the meaning given by rule 7.1.6.

trust instrument, for a CIT, means the CIT’s trust instrument as

amended from time to time, and includes any instrument expressed to

be supplemental to it (as amended from time to time).

Note CIT is defined in r 1.3.9 and this glossary. Instrument is defined in this

glossary.

UCITS type scheme has the meaning given by rule 1.3.5.

umbrella scheme has the meaning given by rule 1.2.11 (1).

unit in a scheme has the meaning given by rule 1.2.4.

Glossary


unitholder, of a unit in a scheme, has the meaning given by rule 1.2.5.

Note Unitholder has a special meaning in div 5.5.B (Unitholder meetings—

QFC retail schemes) (see r 5.5.2).

unitholder register, for a QFC scheme, means the register of

unitholders kept under these rules for the scheme.

unitisation means arrangements for a newly formed CIT under

which—

(a) all or part of the property of a corporation or scheme becomes

the first property to be held on the trusts of the CIT; and

(b) the holders of shares in the corporation, or units in the scheme,

become the first unitholders in the CIT.

Note CIT is defined in r 1.3.9. Property and corporation are defined in this

glossary.

valuation point, for a QFC scheme, means a valuation point fixed by

the operator in accordance with these rules and stated in the latest

filed prospectus.

Note Latest filed prospectus is defined in this glossary.

warrant means the specified product described in the Financial



writing means any form of writing, and includes, for example, any

way of representing or reproducing words, numbers, symbols or

anything else in legible form (for example, by printing or

photocopying).

year means calendar year.

Endnotes


Endnotes

1 Abbreviation key

a = after ins = inserted/added

am = amended om = omitted/repealed

amdt = amendment orig = original

app = appendix par = paragraph/subparagraph

art = article prev = previously

att = attachment pt = part

b = before r = rule/subrule

ch = chapter renum = renumbered

def = definition reloc = relocated

div = division s = section

g = guidance sch = schedule

glos = glossary

sdiv = subdivision

hdg = heading sub = substituted

2 Rules history

Collective Investment Schemes Rules 2010

made by

Collective Investment Schemes Rules 2010 (QFCRA Rules 2010-5) Made 5 December 2010 Commenced 1 January 2011 Version No. 1

as amended by

Insurance Mediation Business (Consequential Amendments) Rules 2011 (QFCRA Rules 2011-4 sch 1, pt 1.2) Made 20 June 2011 Commenced 1 July 2011 Version No. 2 Islamic Finance Amendments Rules 2012 (QFCRA Rules 2012-3 sch 2, pt 2.1) Made 19 December 2012 Commenced 1 February 2013 Version No. 3

Endnotes


Governance and Controlled Functions (Consequential and Miscellaneous) Amendment Rules 2012 (QFCRA Rules 2012-5 sch 4, pt 4.2) Made 19 December 2012 Commenced 1 July 2013 Version No. 4 PIIB, PRIN and ASET Repeal and Consequential Amendments Rules 2014 (QFCRA Rules 2014-3 sch 1, pt 1.2 and sch 2, pt 2.1) Made 17 December 2014 Commenced 1 January 2015 and Individuals (Assessment, Training and Competency) (Consequential) and Miscellaneous Amendments Rules 2014 (QFCRA Rules 2014-6, sch 2, pt 2.1) Made 7 December 2014 Commenced 1 January 2015 Version No. 5

Collective Investment Schemes (Property Funds and Miscellaneous) Amendments Rules 2016 (QFCRA Rules 2016-1, sch 1) Made 6 September 2016 Commenced 19 September 2016 Version No. 6

Collective Investments Amendments Rules 2019 (QFCRA Rules 2019-5,

sch 1) Made 26 Jun 2019 Commenced 1 July 2019 Version No. 7

COND Repeal and Miscellaneous Amendments Rules 2019 (QFCRA Rules

20194, sch 2, part 2.7) Made 26 March 2019 Commenced 1 January 2020 Version No. 8

Endnotes


3 Amendment history

Who is the unitholder? r 1.2.5 Rules am 2016-1

Who is the independent entity? r 1.2.9 am Rules 2016-1

What are open-ended and closed-ended schemes? r 1.2.10 am Rules 2016-1

Who is a qualified investor or retail customer? r 1.2.12 sub Rules 2019-4

Types of QFC retail schemes? r 1.3.4 sub Rules 2016-1

What is a QFC retail property fund? r 1.3.5A ins Rules 2016-1

What is a QFC collective investment company (or CIC)? r 1.3.7 sub Rules 2016-1

Prohibited amendments of constitutional document—QFC UCITS type schemes r 3.1.6 am Rules 2016-1

Bearer certificates must not be issued—all QFC schemes r 3.2.3, hdg am Rules 2016-1 r 3.2.3 am Rules 2016-1

Functions of operator generally—all QFC schemes r 4.1.3 am Rules 2016-1

Duty of operator to report certain breaches of law—all QFC schemes r 4.1.4 am Rules 2019-5

Register of unitholders—all QFC schemes r 4.1.6 am Rules 2016-1

Requirements for independent entity—all QFC schemes r 4.2.1 am 2014-6

Property safeguarding functions of independent entity—all QFC schemes r 4.2.6 am Rules 2016-1

Non-QFC independent entities—annual compliance certificate r 4.2.10 am Rules 2016-1

Who is an affected person for a QFC scheme? r 5.1.1 am Rules 2016-1

Endnotes


Transactions with affected persons—prior notice to unitholders of QFC schemes r 5.1.3 am Rules 2016-1

Transactions with affected persons—transactions involving 5% or more of QFC scheme’s net asset value r 5.1.4 am Rules 2016-1

Transactions with affected persons—details required for QFC scheme’s annual reports r 5.1.5 am Rules 2016-1

General information requirements for prospectus—all QFC schemes r 5.2.3 am Rules 2016-1

Revisions of prospectus etc—all QFC schemes r 5.2.6 am Rules 2016-1

Changes requiring unitholder approval or notice—QFC qualified investor schemes r 5.4.1 am Rules 2016-1

Accounting standards—all QFC schemes r 5.6.1 am Rules 2016-1

Appointment and removal of auditors etc—all QFC schemes r 5.6.2 am Rules 2016-1

Preparation of long and short reports—QFC retail schemes r 5.6.9 am Rules 2016-1

Permissible investments generally—QFC qualified investor schemes r 6.1.3 am Rules 2019-4

Requirements for making investments in immovables—QFC qualified investor schemes r 6.2.7 am Rules 2016-1

Additional requirements for immovables—QFC qualified investor schemes r 6.2.9 am Rules 2016-1

Appointment of standing independent valuer—QFC qualified investor schemes r 6.2.14 am Rules 2016-1

Removal of standing independent valuer—QFC qualified investor schemes r 6.2.16 am Rules 2016-1

Permissible investments generally—QFC retail schemes r 7.2.2 am Rules 2016-1

Spread for certain transferable securities and money-market instruments—QFC retail schemes r 7.3.2 am Rules 2016-1

Endnotes


Spread for OTC derivatives—QFC retail schemes r 7.3.7 am Rules 2014-3

Derivatives and forward transactions—QFC retails schemes Div 7.4.E, hdg sub Rules 2012-5

Permitted transactions in derivatives and forward transactions—QFC retail schemes r 7.4.9 am Rules 2016-1

Exposure for derivatives and forward transactions—QFC retail schemes Pt 7.5, hdg sub Rules 2012-5

Borrowing limits—QFC retail schemes r 7.7.3 am Rules 2016-1

Controls over issue and redemption of units—QFC retail schemes r 8.1.13 am Rules 2012-5; Rules 2014-3

Valuation—QFC qualified investor schemes r 8.2.2 am Rules 2016-1

General rules for valuation of scheme property—QFC retail schemes r 8.2.8 am Rules 2016-1

Unitholder register requirements—all QFC schemes r 8.3.1 am Rules 2016-1

Transfer of units by act of parties—all QFC schemes r 8.3.2 am Rules 2016-1

Certificates for units—all QFC schemes r 8.3.3 am Rules 2016-1

Outsourcing by operator—all QFC schemes r 8.5.2 am Rules 2012-5

Outsourcing by independent entity—all QFC schemes r 8.5.3 am Rules 2012-5

Prohibition of promotional payments—QFC retail schemes r 8.6.8 am Rules 2019-4

Accounting periods—all QFC schemes r 8.7.1 am Rules 2014-3

Suspension and restart of dealings—QFC schemes Pt 9.1, hdg am Rules 2016-1

Suspension and restart of dealings—all QFC schemes r 9.1.1 am Rules 2016-1

Certain financial promotions only to qualified investors etc—QFC qualified investor schemes r 10.1.2 am Rules 2019-4

Endnotes


Certain financial promotions only to qualified investors etc—non-QFC qualified client schemes r 10.1.3 am Rules 2019-4

Pt 10.1 additional to CIPR r 10.1.4 sub Rules 2019-4

Prospectus and disclaimer must be provided etc—all non-QFC schemes r 10.2.3 sub Rules 2019-4

Complying disclaimer must be given with other documents under CIPR—all non-QFC schemes r 10.2.4 sub Rules 2019-4

Authorised firms must pass on documents etc—all non-QFC schemes r 10.2.5 sub Rules 2019-4

Quarterly returns for financial promotions etc—all non-QFC schemes r 10.2.6 am Rules 2019-4

Recordkeeping by authorised firms—all non-QFC schemes r 10.2.7 sub Rules 2019-4

Part 10.2 additional to CIPR r 10.2.8 sub Rules 2019-4

Application—pt 10.3 r 10.3.1 am Rules 2016-1

QFC retail property funds Ch 12 sub Rules 2016-1

Other provisions continue to apply to QFC retail property funds that are not REITs r 12.1.6 am Rules 2019-4

Real estate investment trusts or REITs r 12.6.2 am Rules 2019-5

Other provisions continue to apply to REITs r 12.6.4 am Rules 2019-4

Profit sharing investment accounts r S1.16 am Rules 2012-3; Rules 2014-3

Other statements and provisions for CIC S2.18 am Rules 2016-1

Register of unitholders S3.11 sub Rules 2016-1

Description of scheme etc S4.2 am Rules 2016-1

Endnotes


Additional information—QFC retail property funds S4.2A ins Rules 2016-1

Investment objectives and policy etc S4.4 am Rules 2016-1

Investment adviser and independent valuer S4.9 sub Rules 2016-1

Register of unitholders S4.12 sub Rules 2016-1

Prospectus content—REITs Sch 5 ins Rules 2016-1

Glossary

def BANK ins Rules 2014-3 def business customer ins Rules 2019-4 def CIPR ins Rules 2019-4

def COND sub Rules 2014-6 om Rules 2019-4

def controlled function am Rules 2012-5

def CTRL sub Rules 2012-5 def customer ins Rules 2019-4 def eligible exchange ins Rules 2019-4

def GENE sub Rules 2014-3

def INAP sub Rules 2014-3

def INDI sub Rules 2012-5 om Rules 2014-6

def intermediate holding vehicle sub Rules 2016-1

def ISFI sub Rules 2014-3

Endnotes


def joint ownership arrangement ins Rules 2016-1

def listed unit ins Rules 2016-1

def PIIB sub Rules 2011-4 om Rules 2014-3

def PRIN om Rules 2014-3

def property fund sub Rules 2016-1

def providing custody services am Rules 2014-3

def QCSD ins Rules 2016-1

def QFC approved auditor ins Rules 2016-1

def QFC retail property fund ins Rules 2016-1

def real estate investment trust ins Rules 2016-1

def REIT ins Rules 2016-1

def standing independent valuer sub Rules 2016-1

Collective Investment Schemes Rules 2010...5.5.2 Special meaning of unitholder in div 5.5.B—QFC...

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