FG18/3 - Changing customers to post-RDR unit classes (formerly known as FG14/4)

Show FG18/3 (PDF)

This guidance relates to the following rules in our Handbook:

• Collective Investment Schemes sourcebook (COLL) 6.4.8R
• Conduct of Business sourcebook (COBS) 2.1.1R (1), 6.1E and 14.2.1R(7)
• The definition of ‘unitholder’ within the Glossary of definitions in the Handbook

It addresses:

• whether a conversion to a clean unit class should be treated in the same way as a switch of units
• whether conversions can happen in bulk rather than individually
• if conversions can happen without express consent of the relevant unitholder(s)
• whether advice is needed
• the role of advisers in the conversion process, and
• whether a new disclosure document (eg a Key Investor Information Document (KIID) for a UCITS scheme) needs to be issued to each relevant unitholder before conversion

We have set out our approach following queries from stakeholders and some evidence of uncertainty about how to convert investors to the new unit classes.  This version reflects the proposals consulted on in Chapter 4 of CP17/18 (PDF) and the subsequent changes confirmed in Chapter 3 of PS18/8 (PDF).

In summary, the latest version of this Final Guidance simplifies the approach where the investor is directly registered as the holder of units.  Previously, we said the fund manager should get individual consent from each holder before converting them to better-value but otherwise identical classes in the same fund.  Now, if the fund manager has the power to carry out a mandatory conversion, the recast guidance recommends making a simple, one-off notification to each holder at least 60 days ahead of the conversion.

Read a summary of feedback to the original consultation (PDF)

Who this applies to

This guidance is likely to be of most relevance to platforms and nominees, product providers (in particular fund managers) and financial advisers.