Charity Commission consults on regulation of common investment funds

The commission invites comments on changes to its model schemes governing CIFs, brought about by a European Union directive

European Union
European Union

The Charity Commission has launched a consultation on proposed changes to the regulation of common investment funds.

A CIF is a specialist charity investment fund that can register with the Charity Commission as a charity. The commission does not regulate the performance of CIFs but does have responsibility for regulating them as charities.

The commission said that a European Union directive, the Alternative Investment Fund Managers Directive, which came into force in July 2011, means that the regulations governing fund managers of CIFs have to change.  

The proposed changes would give the Financial Conduct Authority responsibility for ensuring that managers of CIFs comply with certain responsibilities.

The commission’s model scheme, which acts like the governing documents of a charity and is used by CIFs  when they register with the regulator, needs to change to reflect the changes imposed by the EU directive, the commission statement said.

The model scheme previously included a provision restricting the investment and borrowing powers of CIFs, based on FCA requirements. As part of the consultation, the commission has proposed two new model schemes – these would remove the requirement for CIFs to obtain consent from the commission before making certain types of investment, such as investing in property that a fund manager might have an interest in.

They would also replace the existing duties and requirements placed on the trustees and manager of a CIF with a requirement to perform their duties in compliance with and subject to any duties and requirements imposed upon them under the directive.

The commission has suggested an alternative approach to reforming CIF regulation, which would keep the restrictions on borrowing and investment powers currently contained in the model scheme. This would subject to the removal of the requirement for the commission to consent to not complying with the limits.

Any CIF that felt the clauses restricting borrowing and investing were too restrictive could change them using section 280 of the Charities Act 2011, the consultation says. "However, no change should be made which results in a particular use of the borrowing or investment powers being subject to the consent of the commission," it says.

The consultation closes on 11 September.

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