What is a CIS?

A collective investment scheme (CIS) is widely known as a ‘Pooled Investment’ in that several people contribute to it.  The ‘pooled’ investments would then be invested by the Fund Manager into assets such as bonds, equities, property with the proceeds (profits) being paid back to the original investors less any fees. 

Legally, a CIS is defined by law under Section 235(1) of The Financial Services and Markets Act 2000 (“FSMA”)  as: Any arrangement with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. 

Collective Investment Schemes are pooled fund structures in which income is shared through collective investment with the investors, having no day-to-day control over the management of the investments.  Equally, should the investors have day to day control, then the investment structure is likely to not be a CIS.

Establishing or operating a CIS is a regulated activity requiring authorisation from the Financial Conduct Authority (FCA), unless you are operating using regulatory umbrella (in which case the FCA principle firm must have the appropriate permissions). Subject to certain exemptions, a CIS cannot be promoted to the general public by an authorised person unless it is authorised or recognised under FSMA.

 

What are the characteristics of a CIS?

Section 235 of the FSMA Act defines a Collective Investment Scheme (CIS) with the following characteristics; 

  • No limitations on the structure;
  • CIS arrangements may consist of contracts, a partnership (including an LLP), a trust or a company which is an open-ended investment company (OEIC);
  • The assets (which need not be investments regulated by the FCA) must be managed as a whole by, or on behalf of the CIS operator;
  • CIS operators must be FCA-authorised;
  • Investor contributions and income paid out of such contributions must be pooled;
  • CIS may be regulated or unregulated (UCIS) – which are not regulated by the FCA.

Regulated or Unregulated CIS?

Regulated CIS

Unregulated CIS

Promoting Regulated Collective Investment Schemes

Promotion of Unregulated Collective Investment Schemes

Alternative Investment Fund Managers Directive (AIFMD) and CISs

If you are looking for further information on Collective Investment Schemes and how we can help - please contact us to arrange a complimentary review.

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