• COLL Part 7.7 COLL Part 7.7 Cash, Borrowing, Lending and Other Provisions—QFC Retail Schemes

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

    • COLL 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 is defined in the glossary.
      (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 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.

      Note Constitutional document is defined in r 3.1.1.
      (4) Money may be borrowed under subrule (1) or (2) only from an eligible bank.

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

    • COLL 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.
      Amended by QFCRA RM/2016-1 (as from 19th September 2016)

    • COLL 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).

      Note CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively.
      (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.
      Derived from QFCRA RM/2010-05 (as from 1st January 2011)

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

    • COLL 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
      (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.

      Note Constitutional document is defined in r 3.1.1.
      (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.
      Derived from QFCRA RM/2010-05 (as from 1st January 2011)

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