• COLL 7.3.4 COLL 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.
    (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.

    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.
    (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.

    Note Group is defined in the glossary.
    Derived from QFCRA RM/2010-05 (as from 1st January 2011)

    • COLL 7.3.4 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.

      Derived from QFCRA RM/2010-05 (as from 1st January 2011)