• PRIV 5 PRIV 5 Investor Relations

    • Part 5.1 Part 5.1 Transactions with Affected Persons

      • PRIV 5.1.1 Who is an Affected Person for a Scheme?

        An affected person for a scheme is any of the following:

        (a) the operator;
        (b) a member (however described) of the governing body of the operator or, for a CIC or CIP, the scheme;
        (c) any investment adviser for the scheme;
        (d) a person to whom functions of the operator in relation to the scheme are outsourced;
        (e) the auditor of the scheme;
        (f) any associated person for any person mentioned in paragraphs (a) to (e);
        (g) a unitholder with 5% or more in value of all the units then in issue.

        Note Governing body, investment adviser, function and associated person are defined in the glossary. CIC and CIP are defined in r 1.2.12 and r 1.2.13 respectively. Outsourcing is defined in r 6.5.1.
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.1.2 Transactions with Affected Persons — General Rule

        (1) This rule applies to a transaction by the operator of a 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 1 Constitutional document is defined in r 3.1.1. Breach and latest filed prospectus are defined in the glossary.

        Note 2 See also sch 1 (Constitutional document content), r S1.27 (Conflicts of interest with affected persons).
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.1.3 Transactions with Affected Persons — Prior Notice to Unitholders

        (1) This rule applies to a proposed transaction by the operator of a 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
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.1.4 Transactions with Affected Persons — Details Required for Scheme's Annual Reports

        (1) If the operator of a 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 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
        (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.
        (2) If the operator of a 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 for the period must include a statement to that effect.
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

    • Part 5.2 Part 5.2 Prospectus Requirements

      • PRIV 5.2.1 Prospectus to be Drawn Up

        The operator of a scheme must ensure that a prospectus is drawn up for the scheme in accordance with these rules.

        Note Prospectus is defined in the glossary.

        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.2.2 Prospectus etc to be Made Available

        The operator of a 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.

        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.2.3 General Information Requirements for Prospectus

        (1) The operator of a 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 scheme by schedule 2 (Prospectus content).
        (4) If the scheme is a closed-ended scheme, this rule ceases to apply to the scheme on the final closing of the scheme in accordance with the constitutional document.

        Note Closed-ended scheme is defined in r 1.2.7 (2).
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.2.4 Other General Requirements for Prospectus

        (1) The operator of a scheme must ensure that any prospectus for the scheme—
        (a) is in English; and
        (b) presents information about the scheme clearly and fairly; and
        (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.
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.2.5 Prospectus, Checklist and Any Translations to be Filed with Registration Application

        (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.
        (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

        See examples to rule 4.1.4 (2) on the meaning of 'within 1 business day'.
        (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.
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.2.6 Revisions of Prospectus etc

        (1) The operator of a scheme must keep the latest filed prospectus under review.

        Note For the application of this rule to a closed-ended scheme, see r (12).
        (2) If the operator becomes aware of the happening of any materially significant 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.

        Example of materially significant change

        a change in the scheme's investment objectives, strategies or policy
        (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) Subrule (3) does not apply in relation to a period of at least 12 months if the operator does not issue, or offer to issue, units in the scheme at any time during the period.
        (5) 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.
        (6) 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.
        (7) 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.
        (8) 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.
        (9) 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.
        (10) The certificate of a person under subrule (9) must state, in English, the person's—
        (a) full name and address; and
        (b) qualifications for making the translation.
        (11) 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

        See examples to rule 4.1.4 (2) on the meaning of 'within 1 business day'.
        (12) If the scheme is a closed-ended scheme, this rule ceases to apply to the scheme on the final closing of the scheme in accordance with the constitutional document.

        Note Closed-ended scheme is defined in r 1.2.7 (2).
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

    • Part 5.3 Part 5.3 Prospectus Responsibility

      • PRIV 5.3.1 Persons Responsible for Prospectus

        (1) Each of the following persons is responsible for a scheme's prospectus:
        (a) the operator;
        (b) each member (however described) of the governing body of the operator;

        Note Governing body is defined in the glossary.
        (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) 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).
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.3.2 Responsibility for Expert Statements in Prospectus

        (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 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.
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.3.3 Liability for Prospectus

        (1) A person responsible under rule 5.3.1 (Persons responsible for prospectus) 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.
        (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.
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • PRIV 5.3.4 Exceptions from Liability for Prospectus

        (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 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;
        (iii) before the units were acquired, the person had al 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 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), 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;
        (iii) before the units were acquired, the first person had al 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 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.
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

    • Part 5.4 Part 5.4 Unitholder Meetings

      • PRIV 5.4.1 Unitholder Meetings

        (1) The constitutional document of a scheme must set out details of the procedures for—
        (a) calling and conducting unitholder meetings; and
        (b) resolutions at unitholder meetings.
        (2) The procedures must be reasonable and fair as between the parties.
        Derived from QFCRA RM/2010-06 (as from 1st January 2011)

    • Part 5.5 Part 5.5 Reports, Accounts and Auditors

      • Division 5.5.A Division 5.5.A Accounting Standards and Auditors

        • PRIV 5.5.1 Accounting Standards

          (1) Unless subrule (2) or (3) applies, the operator of a scheme must prepare and keep all financial accounts and statements in accordance with—
          (a) US GAAP; or
          (b) UK GAAP or IFRS, as supplemented, if appropriate, by the Statement of Recommended Practice issued from time to time by—
          (i) if the scheme is an open-ended scheme — the United Kingdom Investment Management Association; or
          (ii) if the scheme a closed-ended scheme — the United Kingdom Association of Investment Companies.

          Note US GAAP, UK GAAP and IFRS are defined in r (4). Open-ended scheme and closed-ended scheme are defined in r 1.2.7.
          (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 1.2.9. 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 1.2.8.

          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.

          UK GAAP means generally accepted accounting principles in the United Kingdom of Great Britain and Northern Ireland.

          US GAAP means generally accepted accounting principles in the United States of America.
          Derived from QFCRA RM/2010-06 (as from 1st January 2011)

        • PRIV 5.5.2 Appointment and Removal of Auditors etc

          (1) The operator of a 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 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 power under subrule (4) has effect despite anything in any agreement between the auditor and the operator, the scheme or both.
          (6) GENE, section 9.7 (Auditors) applies to the appointment and removal of the auditor of the scheme as if the scheme were an authorised firm.

          Note Authorised firm is defined in the glossary.
          (7) In this rule:

          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.
          Derived from QFCRA RM/2010-06 (as from 1st January 2011)

      • Division 5.5.B Division 5.5.B Reports and Accounts

        • PRIV 5.5.3 Reports and Accounts Generally

          (1) The operator of a 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 defined in the glossary.
          (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 5.5.4 (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 5.5.4 (2) for the scheme as a whole if the unitholder or other person asks for it.
          Derived from QFCRA RM/2010-06 (as from 1st January 2011)

        • PRIV 5.5.4 Contents of Annual Reports

          (1) An annual report for a 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 5.5.6 (Operator's reports);
          (c) the auditor's report for the period in accordance with rule 5.5.7 (Auditor's reports).

          Note See also r 5.1.4 (Transactions with affected persons — details required for scheme's annual reports).
          (2) An annual report for 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 5.5.6;
          (b) an aggregation of all the accounts required by paragraph (a);
          (c) the auditor's report for the scheme for the period in accordance with rule 5.5.7.
          (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.
          (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 accordance with rule 5.5.6;
          (c) the auditor's report for the scheme for the period in accordance with rule 5.5.7.
          (5) The operator of a 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.
          Derived from QFCRA RM/2010-06 (as from 1st January 2011)

        • PRIV 5.5.5 Contents of Half-Yearly Reports

          (1) A half-yearly report for a scheme, or a subscheme of 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 5.5.6.
          (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, for each individual subscheme, or both.
          Derived from QFCRA RM/2010-06 (as from 1st January 2011)

        • PRIV 5.5.6 Operator's Reports

          A report of the operator of a 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.
          Derived from QFCRA RM/2010-06 (as from 1st January 2011)

        • PRIV 5.5.7 Auditor's Reports

          The operator of a 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.
          Derived from QFCRA RM/2010-06 (as from 1st January 2011)