COLL 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
(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

Note CIC and CIP are defined in r 1.3.7 and r 1.3.8 respectively.
(d) independent of—
(i) the operator; and
(ii) if the scheme is a CIC or CIP—the scheme; and
(iii) a member (however described) of the governing body of 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 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;
(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.
Amended by QFCRA RM/2014-6 (as from 1st January 2015)