Closed-Ended Investment Companies

The definition of a collective investment scheme has been widened to include a limited number of closed-ended investment companies, namely those promoted with the intention of becoming available to the public or any section of it.  This is to provide an improved level of customer protection for the public, and also to comply with the objectives and principles of securities regulation issued by the International Organization of Securities Commissions (‘IOSCO’), which apply equally to closed and open-ended investment companies. 

As per the Collective Investment Schemes (Definitions) Order 2017, a closed-ended investment company is a body corporate – “which seeks to raise capital from participants for the primary purpose of investing that capital in accordance with a defined investment policy” and “in which, under the documents constituting the scheme, the rights of participants, represented by shares or securities of that body corporate, are not redeemable out of funds provided by the closed-ended investment company at the election of the holders of the shares or securities”.
           
A closed-ended investment company will be a collective investment scheme if: it meets the provisions of section 1 of the Collective Investment Schemes 2008; “its units are not listed or admitted to trading on a securities market supervised for the purposes of market abuse by an Ordinary Member of the International Organization of Securities Commissions”; and “its units are promoted by, or on behalf of, its board in such a way that it is intended to be available for participation by the public or any section of it”.

A closed-ended investment company which does not meet the aforementioned description may also elect, by a majority of participants (constituting at least 75% of the total number of votes cast) to be a collective investment scheme in the documents constituting the company.

Such a scheme is to be established as a Regulated Fund - a type of full international fund under Schedule 2, paragraph 2 to the Act. 

For information concerning Regulated Funds please click here.