COLL S1.4 Debt Issues

(1) An arrangement is not a scheme if it is an arrangement under which the rights or interests of participants in the arrangement are represented by investments of 1, and only 1, of the following kinds:
(a) debt instruments if they are—
(i) issued by—
(A) a single corporation that is not a CIC; or
(B) a single issuer that is not a corporation; and
(ii) for instruments mentioned in subparagraph (i) (B)— issued or guaranteed by—
(A) the government of any jurisdiction; or
(B) a public or local authority of any jurisdiction; and
(iii) not convertible or exchangeable for investments of any other kind;

Note Debt instrument, corporation, jurisdiction and investment are defined in the glossary. CIC is defined in r 1.3.7.
(b) debt instruments if—
(i) they are instruments to which paragraph (a) (other than subparagraph (iii)) applies; and
(ii) they are convertible or exchangeable for shares; and
(iii) the shares are issued by—
(A) the same person that issued the debt instruments; or
(B) a single other issuer;

Note Share is defined in the glossary.
(c) warrants if—
(i) they are issued otherwise than by a CIC; and
(ii) they give rights to investments that—
(A) are issued by the same issuer; and
(B) are debt instruments mentioned in paragraph (a) or (b) or shares.
Note Warrant is defined in the glossary.
(2) An arrangement must not be taken not to be an arrangement to which subrule (1) applies only because 1 or more of the participants is a person (the counterparty)—
(a) whose ordinary business—
(i) involves the person in conducting 1 or more relevant activities; or
(ii) would, apart from any exclusions under the Financial Services Regulations, schedule 3 (Regulated Activities and Permitted Activities), part 2 (Specified Activities), involve the person in conducting 1 or more relevant activities; and
(b) whose rights or interests in the arrangement are or include rights or interests under a swap arrangement.
(3) In this rule:

relevant activities means regulated activities of any of the following kinds:
(a) dealing in investments;
(b) arranging deals in investments;
(c) providing custody services;
(d) arranging the provision of custody services;
(e) managing investments;
(f) advising on investments;
(g) providing credit facilities;
(h) arranging credit facilities;
(i) operating collective investment schemes.

Note Regulated activity and the regulated activities mentioned in para (a) to (i) are defined in the glossary.
swap arrangement means an arrangement—
(a) the purpose of which is to facilitate the making of payments to participants, whether or not of a particular amount, in a particular currency or at a particular time or rate of interest; and
(b) under which the counterparty—
(i) is entitled to receive amounts, whether representing principal or interest, payable in relation to any property subject to the arrangement or amounts worked out by reference to those amounts; and
(ii) makes payments, whether or not of the same amount or in the same currency as amounts mentioned in subparagraph (i), that are worked out in accordance with an agreed formula by reference to those amounts.
Derived from QFCRA RM/2010-05 (as from 1st January 2011)