• CIPR Part 5.2 CIPR Part 5.2 Investment managers

    Note
    This Part applies to an authorised firm that carries on investment business in or from the QFC — see rule 5.1.1 (2).

    Derived from QFCRA RM/2019-2 (as from 1st January 2020).

    • CIPR 5.2.1 Initial disclosure document — additional requirements

      (1) After the information required by rule 4.4.2, the initial disclosure document for an authorised firm that proposes to conduct investment management business must set out the following information in the following order:
      (a) whether the firm can act as principal in a transaction with the customer;
      (b) whether the firm charges on the basis of fees or commissions, or a combination of fees and commissions;
      (c) the fees that the firm would charge, or the likely commissions that the firm would earn (or both if relevant), for the investment business that the firm offers to customers;
      (d) how the firm will deal with conflicts of interest and material interests;
      (e) guidance on, and appropriate warnings about, the material risks associated with:
      (i) the investment business that the firm offers; and
      (ii) any investment strategy that the firm follows.
      (2) If the firm charges fees, the initial disclosure document must state how those fees will be calculated, paid and collected, and how frequently they are to be paid.
      (3) If information about the firm's fees is not available when the firm gives a customer the initial disclosure document, the firm must give the customer the information in a separate document in good time before the customer becomes contractually bound in relation to the investment business.

      Guidance

      Information about the relevant fees and commissions cannot be given to the customer on the same date as the customer commits to any contractual obligations.
      Derived from QFCRA RM/2019-2 (as from 1st January 2020).

    • CIPR 5.2.2 Discretionary investment management agreements

      (1) If an authorised firm proposes to manage relevant investments in an account or portfolio for a customer on a discretionary basis, it must first enter into an investment management agreement with the customer, in a durable medium, signed by both parties.
      (2) The agreement must provide for the following:
      (a) portfolio composition and initial value — the initial composition and value of the portfolio and its on-going composition;
      (b) discretion — the extent of the firm's discretion and whether there are any restrictions or limits;
      (c) valuation — the basis on which the assets being managed are to be valued;
      (d) underwriting — whether the firm is permitted to commit the customer to an obligation to underwrite or sub-underwrite an issue or offer of securities and, if so, any restrictions or limits of the extent of the underwriting;
      (e) borrowing — whether the firm is permitted to borrow on the customer's behalf, and, if so:
      (i) the circumstances in which it may borrow;
      (ii) the limits on such borrowing; and
      (iii) the circumstances (if any) in which the limits can be exceeded;
      (f) stock lending — whether or not the firm is permitted to undertake stock lending with or for the customer, and, if so:
      (i) the assets to be lent;
      (ii) the type and value of collateral from the customer; and
      (iii) the method and amount of payment owing to the customer in the lending.
      Derived from QFCRA RM/2019-2 (as from 1st January 2020).

    • CIPR 5.2.3 Discretionary investment management services for retail customers and certain opted-up customers

      (1) This rule applies if an authorised firm enters into, or proposes to enter into, a discretionary investment management agreement with:
      (a) a retail customer; or
      (b) an individual who has been classified as a business customer in reliance on a statement under rule 3.3.3 (2), or who was classified as a business customer under COND in reliance on a statement under rule 2.3.2A (2) of those rules.
      (2) Before the firm enters into the agreement:
      (a) it must take reasonable steps to ensure that it has sufficient personal and financial information about the customer;
      (b) it must take reasonable steps to ensure that the service set out in the agreement is suitable for the customer, taking into account what the customer has told the firm and anything else that the firm knows or reasonably ought to know about the customer;
      (c) it must be satisfied that:
      (i) the service is appropriate for the customer;
      (ii) the customer is likely to continue to be able to meet the financial commitment associated with the service; and
      (iii) the customer is financially able to bear any risks associated with the service; and
      (d) it must give the customer a statement, in a durable medium, of why the firm considers that the service is suitable for the customer.
      (3) If an authorised firm makes an investment decision that applies to the portfolios (or parts of the portfolios) of a number of customers referred to in subrule (1), the firm must take reasonable steps to ensure that the decision is suitable for all of those customers, taking into account each customer's stated investment objectives.
      (4) An authorised firm must periodically assess the portfolio or account of each of its customers referred to in subrule (1) to ensure that the portfolio or account remains suitable, taking into account what the customer has told the firm and anything else that the firm knows or reasonably ought to know about the customer. The minimum frequency of such assessments must be stipulated in the firm's agreement with such a customer.
      Derived from QFCRA RM/2019-2 (as from 1st January 2020).

    • CIPR 5.2.4 Investment management services for retail customers — “know your customer”

      (1) An authorised firm must take reasonable steps to ensure that the information that it has about a retail customer is accurate, complete and up-to-date.
      (2) The information that an authorised firm obtains about a retail customer must include all of the following (to the extent appropriate to the customer's investment experience, the nature and extent of the service to be provided and the type of product or transaction envisaged, including its complexity and the risks involved):
      (a) the customer's financial situation (for example, the source of his or her income, his or her financial commitments, savings, property and investments, loans or mortgages, and pensions);
      (b) the customer's personal situation and plans (for example, his or her marital status, children, security of employment or term of employment contract, and future plans, including retirement plans);
      (c) the customer's investment objectives, investment horizon and attitude to risk;
      (d) the customer's knowledge of, and experience in, the relevant investment field;
      (e) the nature, volume and frequency of the customer's transactions in the investment field and the period over which they have been carried out;
      (f) the customer's level of education and profession or former profession.
      (3) If the firm asks the customer for personal or financial information and the customer refuses to give it, the firm must warn the customer in a durable medium that failure to give the information may adversely affect the quality of the service that the firm provides. The firm must retain a record of the customer's refusal.
      Derived from QFCRA RM/2019-2 (as from 1st January 2020).