Losing a colleague at short notice is always difficult but if your firm is FSA authorised, and the person you lose is a Compliance Officer, it’s essential to find an Interim Compliance Officer as quickly as possible.  Quite apart from the day-to-day compliance issues, and the risk of running up considerable costs for external advice, the FSA demands that all firms have a Compliance Officer:

“A firm which carries on designated investment business… must allocate to a director or senior manager the function of having responsibility for oversight of the firm’s compliance.”

“An approved person performing a significant influence function must exercise due skill, care and diligence in managing the business of the firm for which he is responsible in his controlled function.”

We can provide an Interim Compliance Officer with the necessary skills to fulfil the FSA’s requirements but, much more importantly, with the experience of working at Board level and capable of quickly understanding your business while playing a full role in the strategic direction of compliance matters.  We can also take responsibility for training up your permanent replacement and will gladly stay on as a mentor or just to give occasional advice on more specialised subjects.

Simon Webber, who will act as Interim Compliance Officer, serves permanently on a number of Boards as Head of Compliance, Director or Non-Executive Director.  If you would like to speak to Simon about any aspect of compliance, please call or e-mail him.

We’ve worked on a number of property development funds recently.  They have all been structured as unregulated collective investment schemes but have taken a variety of approaches in terms of structure, tax and regulation.

Often funds employ a combination of a Limited Partership for individual investors, and an Exempt Property Unity Trust (EPUT) for Capital Gains Tax exempt investors like Self-Invested Personal Pension (SIPP) schemes and Small Self-Administered (SSAS) pension schemes.  Usually, the EPUT is a partner in the Limited Partnership.

This is where it gets slightly more complicated… If the fund invests in property directly, the promotion of the fund may be more tightly restricted than if it invests in the equity of an unquoted company.  Many, in fact, do the latter.  This company may then purchase and develop the property, it may invest in a Special Purpose Vehicle (SPV), or it may make loans to a development company.

Often, where investments or property assets are based overseas, one or more of the companies is too and the limited partnership is usually ‘tax transparent’ so investors are responsible for paying their own tax.

Where the property investment fund is structured as an unregulated collective investment scheme, the promotion of the scheme will be heavily restricted (but often wider than firms think).

If, under the FSA’s rules you qualify as a High Net Worth Individual or a Sophisticated Investor, feel free to download and use one of the certificates (the criteria for eligibility are contained in each certificate):

• Certified High Net Worth Individual – Collective Investment Schemes
• Certified High Net Worth Individual – Financial Promotion
• Self-Certified Sophisticated Investor – Collective Investment Scheme
• Self-Certified Sophisticated Investor – Financial Promotions

Each certificate is valid for 12 months from the date of signature.  We don’t need to see these certificates because we’re not promoting any investments but if the criteria apply and you sign one of these certificates then other firms will be able to promote relevant investments to you.  They will probably ask to see a copy.

The Financial Services Authority (FSA) categorises individual investors in a number of ways and allows certain firms to promote their services, products, investment schemes and funds to different groups.  These categories include:

• Certified High Net Worth Investors
• Certified Sophisticated Investors
• Self-Certified Sophisticated Investors
• Qualified Investors
• Individuals for whom the investment is assesed as ’suitable’
• Individuals assesed as having ‘adequate knowledge & experience’
• Individuals who have invested in ’substantially similar’ funds

An investor may fall into any or all of these categories and may be a ”retail” or “elective professional” investor at the same time – to better understand the various categories of investor and the exemptions that they may be able to fit into, please e-mail or call me so that we can discuss it in more detail. 

(If you are a High Net Worth Individual or a Sophisticated Investor, you can find downloadable copies of the investor certificates here.)

IFAs are not the only route. 
“Unregulated Collective Investment Scheme” (UCIS) is something of a misnomer.  Far from being unregulated, the FSA restrict them them very tightly indeed – for funds structured as a UCIS, there is a simple edict:

“Such schemes cannot be marketed to the general public and are otherwise restricted in their promotion.“

As a result, the promotion of unregulated collective investment schemes, must be carried out very carefully and only to selected groups of investors.  Often the only route considered is through IFAs but in fact any authorised firm, and even unauthorised firms, can promote a UCIS as long as the approach is planned carefully and carried out correctly.

Summary Documents
For the sake of making the fund more attractive to investors, the detail of the information memorandum (IM) needs to be distilled, summarised and presented in a more user-friendly, marketing-led form.  Although secondary to the IM, this document must still meet the stringent demands of the FSA.  We produce summary documents, ensuring compliance, and with marketing expertise on hand, as well as design and print facilities, we can offer a full service if required.

Alternative Routes to Market
For some funds, IFAs may not be the best (or at least the only) route to market and with our assistance, General Partners, Managers, Advisers, Operators and Promoters of such schemes can draw up a marketing plan, draft documents and a produce a set of procedures which allows them to engage with individual investors under specific exemptions to the rules.