Hoppa yfir valmynd
Ministry of Industries and Innovation

Reglulation No. 792/2003 on undertakings for collective investments in transferable securities (UCITS) and investment funds

CHAPTER I

Scope

Article 1

This Regulation applies to the activities of undertakings for collective investment in transferable securities (UCITS), investment funds, management companies and depositaries in accordance with Act No. 30/2003 on undertakings for collective investment in transferable securities (UCITS) and investment funds.

CHAPTER II

Outsourcing the tasks of a management company

Article 2

The Financial Supervisory Authority shall only approve outsourcing of the functions of a management company pursuant to Article 18 of Act No. 30/2003 provided that

1.    the outsourcing does not, as assessed by the Financial Supervisory Authority, prevent supervision of the management company or prevent a UCITS or an investment fund from being operated with the interests of the holders of units or shares in mind;

2.    the operator who manages the investments of a UCITS or investment fund in accordance with an investment policy pursuant to Article 17 of Act No. 30/2003 is a financial undertaking authorised to engage in portfolio management or an equivalent undertaking established in the European Economic Area;

3.    it is ensured that a financial undertaking which is established outside the European Economic Area and manages the investments of a UCITS or an investment fund is, in the estimation of the Financial Supervisory Authority, subject to equivalent supervision as UCITS and investment funds, and cooperation between the Financial Supervisory Authority and the competent authorities of the home state of the fund is adequately ensured;

4.    measures have been taken that enable the management company to efficiently supervise the operations of the operator at any time;

5.    the management company can at any time provide further instructions to the operator and immediately terminate an outsourcing agreement with the operator, if this serves the interests of the holders of units or shares in the fund;

6.    the operator to whom functions are to be outsourced is qualified to carry out such functions.

CHAPTER III

Redemption

Article 3

Definitions

For the purposes of this Chapter the following meanings shall apply:

1.    The bid price of units or shares: the redemption price of units or shares;

2.    The offer price of units or shares: the selling price of units or shares;

3.    The redemption price of units or shares: the market value of the total assets of a UCITS or an investment fund, net of any liabilities, at the time of redemption pursuant to paragraph 1 of Article 28 of Act No. 30/2003;

4.    Market value: the listed or estimated value of financial instruments in the market at any given time.

Article 4

Asset valuation

The valuation of the assets of a UCITS, investment fund or fund compartment must always reflect their actual value, taking account of market conditions.

Financial instruments owned by a UCITS, investment fund or fund compartment and listed in a regulated securities market shall be valued at their closing prices in that market.

The value of financial instruments owned by a UCITS, investment fund or fund compartment other than those referred to in paragraph 2 shall be subject to the assessment of a management company, under the supervision of a depositary and an auditor, taking account of market conditions at any given time.

The management company shall maintain a record of the valuation of assets pursuant to paragraph 3 at any given time, with an explanation of the premises on which the valuation was made.

Article 5

Loss provisions

Provisions for losses shall be made for each UCITS, investment fund or individual fund compartment regarding the financial instruments referred to in paragraph 3 of Article 4 so that the prices of units or shares reflect as accurately as possible the value of the assets of the relevant fund or compartment at any given time.

Article 6

Information on prices

The bid price, redemption price and offer price of units or shares in a UCITS, investment fund or fund compartment shall be calculated on a daily basis.

Information on the bid price, redemption price and offer price of units or shares in a UCITS, investment fund or fund compartment shall be available at all times, as well as information on the administrative and management costs of the relevant fund or fund compartment, for the holders of units or shares.

CHAPTER IV

Authorised investments

Article 7

Money market funds

A UCITS, investment fund or fund compartment can only trade in money market instruments which are not listed in a regulated securities market, cf. Point 7 of Article 30 of Act No. 30/2003, if the issue or issuer of those instruments is subject to supervision by the competent authorities for the purpose of protecting investors and savings and provided that

1.    the government or regional or local authorities or the central bank of a state within the European Economic Area, the European Central Bank, the European Union or the European Investment Bank, a third state or, in the case of a federal state, one of the states in the federation or a public or international organisation of which one or more member states is a member, issues or guarantees such instruments; or

2.    the instruments are issued by an undertaking whose shares are traded in a regulated securities market; or

3.    an undertaking which is subject to official supervision by competent authorities within the European Economic Area, or equivalent supervision, issues or guarantees the instruments; or

4.    the instruments are issued or guaranteed by other entities recognised by the Financial Supervisory Authority, provided that

a)   investment in such instruments is covered by investor protection which is equivalent to the protection required in a regulated securities market and

b)  the issuer of the financial instruments:

i.   has own funds amounting to at least EUR 10 million;

ii.  publishes its annual accounts in accordance with directives on annual accounts; and

iii. is either a member of a group of one or more listed companies and is dedicated to the financing of the group, or an entity dedicated to securitisation financing on the basis of a loan agreement with a financial undertaking.

Article 8

Derivative trading

Derivative trading must not cause a UCITS, investment fund or fund compartment to deviate from its investment policy as set out in the fund rules and the prospectus.

The use of derivatives must not cause the combined risk of underlying assets to exceed the permitted limits under Article 35 and Point 3 of Article 54 of Act No. 30/2003.

If a security or money market instrument includes an embedded derivative, this shall be taken into account in complying with requirements pursuant to this Article.

Article 9

Index funds

Notwithstanding the provisions of paragraph 2, a UCITS, investment fund or fund compartment pursuant to Article 36 of Act No. 30/2003 must reflect the relevant index in the same proportion as the composition of the index at any given time. This Article does not apply to funds whose aim is to reflect the performance of an index and outperform it.

If changes occur to an index as a result of the addition of new financial instruments and the removal of existing ones, a UCITS, investment fund or individual fund compartment may temporarily deviate from the conditions of the first sentence of paragraph 1 on the grounds of market conditions, i.e. if the liquidity of the financial instrument is low or the cost of trading in the underlying financial instruments is excessive.

A UCITS or investment fund under this Article shall not be bound by the restrictions of paragraph 3 of Article 35 and Point 3 of Article 54 of the Act.

Article 10

Funds of funds

The protection of holders of units or shares in other funds for collective investment pursuant to Point 3 of Article 30 of Act No. 30/2003 shall be comparable to that of UCITS, in particular as regards redemption rights, depositaries, loans, borrowings and short-selling.

Article 11

Secure securities

A UCITS or investment fund which is authorised to invest up to 100% of its assets in securities and money market instruments pursuant to Article 37 of Act No. 30/2003 shall clearly list in the fund rules the states, local authorities or public international bodies issuing or guaranteeing the securities and/or money market instruments in which the fund intends to invest more than 35% of its assets.

CHAPTER V

Marketing outside the home state

Article 12

Scope

This Chapter applies to foreign UCITS which are established pursuant to Directive 85/611/EEC, as subsequently amended (UCITS), and intend to begin marketing their units or shares to members of the public in Iceland.

This Chapter also applies to other foreign funds for collective investment, established within or outside the European Economic Area, which intend to begin the marketing of their units or shares to members of the public in Iceland and meet the following conditions:

1.    the objective of the fund in question is to accept funds from members of the public for collective investment in financial instruments and other assets on the basis of diversifying risk in accordance with a previously stated investment policy;

2.    the fund in question is subject to supervision by the competent authorities under the laws of its home state.

Foreign funds for collective investment other than those referred to in this Article may not be marketed to members of the public in Iceland.

Article 13

Exemption

UCITS and other funds for collective investment which only intend to market their units or shares to a specific limited group of persons, without a general advertisement or presentation, provided that the group comprises no more than 25 persons, or to professional clients, are exempt from the provisions of this Chapter.

For the purposes of this Regulation, marketing shall mean an offer or encouragement, through advertisements or other types of presentation, to purchase units or shares in a UCITS or other fund for collective investment.

Article 14

Undertakings for collective investment in transferable securities (UCITS)

A foreign undertaking for collective investment in transferable securities (UCITS) which is established and authorised in another state within the European Economic Area can begin marketing its units or shares in Iceland two months after the Financial Supervisory Authority has received a notification of the intended activities from the UCITS pursuant to Article 43 of Act No. 30/2003.

The description of the carrying out of the intended marketing of the units or shares of the UCITS pursuant to Point 5 of Article 43 of Act No. 30/2003 shall include information on who will handle sales and be legally authorised to effect redemption on behalf of the UCITS, as well as the anticipated target group of investors.

The information required under Point 6 of Article 43 of Act No. 30/2003 shall include details on the measures planned by the fund to ensure the rights of clients if the fund decides to cease its operations or marketing in Iceland.

Article 15

Other funds for collective investment (Non-UCITS)

Funds for collective investment other than UCITS that intend to begin marketing their units or shares in Iceland shall apply to the Financial Supervisory Authority for authorisation, subject to the exemption in Article 13, and simultaneously submit to the Authority the following:

1.    The rules or Articles of Association of the fund;

2.    a prospectus. The prospectus shall include the information stipulated in item 5 of this Article;

3.    the audited financial statements for the immediately preceding year, if available, and the interim statements for the subsequent half of the year;

4.    a description of the way in which the proposed marketing of its units or shares will be carried out. The description shall include information on who will handle sales and have the legal authorisation to effect redemption on behalf of the fund, as well as the expected target group of investors;

5.    information on the measures planned by the fund to ensure the rights of the holders of units or shares with respect to the distribution of profits, redemption and the information which the fund is obliged to disclose, for instance if the fund intends to cease its operations or marketing in Iceland;

6.    a statement by the competent authority in the fund's home state confirming that the fund and its management company have been established and granted an operating license in accordance with the laws of the home state and are subject to its supervision, including with respect to its operations in Iceland;

7.    a statement by the competent authority in the fund's home state to the effect that it is prepared to grant authorisation to comparable Icelandic funds for marketing in the state in question.  States falling within Zone A in Annex I to Rules No. 530/2003 on the solvency ratio of credit institutions are exempt from the provisions of this item.

The Financial Supervisory Authority shall immediately be notified of any changes to previously reported data.

The Financial Supervisory Authority can refuse to permit a fund to commence marketing in Iceland pursuant to this Article if the fund fails to meet the conditions laid down in this Chapter. The Financial Supervisory Authority shall provide the fund with written reasoning for the refusal before the expiration of the deadline prescribed in paragraph 4.

Funds provided for in this Article are permitted to commence operations or marketing in Iceland two months after the conditions in items 1-7 of paragraph 1 of this Article have been fulfilled.

Article 16

Information in Icelandic

Information submitted to the Financial Supervisory Authority under the provisions of Articles 14 and 15 shall be given in Icelandic, unless special authorisation to the contrary is granted by the Financial Supervisory Authority.

Documents and other information that UCITS and other funds for collective investment are required to make public in their home states shall also be made public in Iceland in Icelandic translation, unless specific authorisation to the contrary is granted by the Financial Supervisory Authority. However, the following information shall always be accessible to investors and available in Icelandic translation:

1.    the returns over the past three years;

2.    the fund's investment policy and portfolio composition;

3.    the fund's expenses relating to management, buying and selling of securities, and transfers between UCITS;

4.    the manner in which the buying and redemption of units and shares is carried out and the time limits for redemption;

5.    distribution of profits.

Article 17

Fund names

UCITS and other funds for collective investment may use the same name that they use in their home state for the purpose of marketing their units and shares in Iceland. However, in the event that the name is misleading or liable to cause confusion, the Financial Supervisory Authority may require that the name of the UCITS or other fund for collective investment should be specially identified for clarification.

Article 18

Cessation of marketing at the demand of the Financial Supervisory Authority

The Financial Supervisory Authority may require a UCITS or other fund for collective investment to cease marketing units or shares in Iceland if

1.    the fund's measures to ensure the rights of clients with respect to the distribution of profits, redemption and required disclosure of information are seen as inadequate;

2.    the fund repeatedly or seriously violates the provisions of law or this Regulation;

3.    the fund fails to follow the plan for the proposed marketing;

4.    the fund's authorisation is revoked or its supervision ceased, cf. item 6 of paragraph 1 of Article 15;

5.    the marketing opportunities of Icelandic funds in the state in question, cf. item 7 of paragraph 1 of Article 15, are altered or cancelled.

CHAPTER VI

Disclosure

Article 19

Financial statements and interim statements

The rules laid down by the Financial Supervisory Authority pursuant to Act No. 161/2002 on financial undertakings apply to itemised information on UCITS, investment funds or any compartment thereof.  

Article 20

Information in the prospectus

A management company shall publish a prospectus for each UCITS, investment fund and fund compartment under its management. The provisions of this Chapter apply to investment funds which issue stocks, as applicable.

A prospectus shall contain the information necessary for investors to assess the advantages of investing in the respective fund.

As a minimum, the prospectus shall include the following information:

Information on a UCITS or investment fund:

  1.  name;

  2.  establishment date;

  3.  whether the fund is divided into compartments;

  4.  where rules and regular reports on the fund's operations may be obtained;

  5.  a brief description of the tax regime and taxation to which units or stocks in the fund are subject, as well as information on costs and other deductions from revenues or profits derived from the financial instruments held by the fund to which the owners of the fund are entitled;

  6.  the date of publication of annual and interim financial reports and the time at which dividends or other profits from the fund's operations will be distributed to owners;

  7.  information on the types and main characteristics of units or shares, including

7.1.  the nature of the rights conferred by units or shares;

7.2.  certificates providing evidence of title to units or shares and/or entries in a record or in an account;

7.3.  the characteristics of units or shares;

7.4.  the voting rights of holders of units or shares if applicable;

7.5.  the circumstances under which the fund may be wound up and the winding-up process, in particular with respect to the rights of its owners;

  8.  where applicable, the regulated securities markets shall be specified where the units or shares are or will be listed or traded;

  9.  the procedures and conditions for the issue and sale of units or shares;

10.  the procedures and conditions for the repurchase or redemption of units or shares and the circumstances under which repurchase or redemption may be suspended;

11.  rules on calculation and distribution of income;

12.  the investment objectives of the UCITS, including the financial objective (i.e. capital growth or income), investment policy (e.g. specialisation based on region or sector), limitations on that investment policy and identification of techniques, and instruments or borrowing powers that may be used in the management of the fund;

13.  rules on the valuation of assets;

14.  determination of the selling or issue price and the repurchase or redemption price of units or shares, including

14.1. the method and frequency of calculating prices;

14.2. information on the charges relating to the sale, issue, repurchase or redemption of units or shares;

14.3. how, where and how often prices are published;

15.  information on the remuneration paid by the fund to a management company, depositary or third parties, if applicable, the nature and amount of that fee, and the fund's repayment of costs to such parties.

Information on a management company:

  1.  name, legal form, registered office and head office;

  2.  establishment date;

  3.  other funds managed by the management company;

  4.  the names and positions of members of the board, alternate board and managing director of the management company. Information on the primary activities of such persons outside the management company, where relevant with respect to the management company;

  5.  the names and addresses of the management company's chartered accountants;

  6.  equity capital and how much has been paid up.

Information on a depositary:

  1.  name and corporate form;

  2.  registered office;

  3.  main activity.

Other information:

  1.  the activities which the management company has been permitted to outsource shall be specified;

  2.  information on parties outside the management company that provide consultation under contract which is paid for out of the assets of the fund;

2.1.  the name of the company or consultant;

2.2.  the provisions of the contract which are material and may concern the owners of the fund, with respect to matters, excluding those relating to remuneration;

2.3.  other relevant activities;

  3.  the approval shall be noted, and mention made, of the states, local authorities and/or public international bodies issuing or guaranteeing securities in which the fund has invested or intends to invest more than 35% of its assets;

  4.  the fund's past performance;

  5.  description of the typical investor for which the fund is intended;

  6.  potential costs, apart from expenses in connection with item 14 of “Information on a UCITS or investment fund,”with a distinction being made between the costs paid by the holders of units or shares and the costs paid out of the fund's assets;

  7.  information pursuant to Article 48 of Act No. 30/2003.

The rules of a UCITS and an investment fund shall form an integral part of the prospectus and be annexed thereto. The information contained in the rules does not need to be specifically noted in the prospectus.  

Article 21

Information in simplified prospectus

A management company shall publish a simplified prospectus for each UCITS, investment fund and fund division it manages.

The simplified prospectus shall highlight the principal features of the prospectus.  The following information shall be included:

Brief presentation of the fund:

  1.  the establishment date of the fund and the member state in which it is registered;

  2.  whether the fund is operated in a single compartment or more;

  3.  the management company;

  4.  the estimated period of existence of the fund, if applicable;

  5.  the depositary;

  6.  the auditors;

  7.  the financial group promoting the fund, e.g. a bank.

Investment information:

  1.  short definition of the fund's objectives;

  2.  investment policy and a brief report detailing the fund's risk profile;

  3.  the fund's past performance and a warning that this is not an indicator of future performance;

  4.  profile of the typical investor that the fund is intended for.

Economic information:

  1.  tax regime;

  2.  buying and selling commissions;

  3.  other possible expenses, with a distinction being made between the costs to be paid by the holders of units or shares and the costs to be paid out of the fund's assets.

Commercial information:

  1.  how units or shares are bought;

  2.  how units or shares are sold;

  3.  in the case of a fund with separate compartments, a description of how clients can transfer from one compartments to another and the charges applicable in such cases;

  4.  when and how dividends on units or shares are distributed, if applicable;

  5.  The frequency, when and how prices are published or made available.

Additional information:

  1.  a note that, on request, the prospectus, annual financial statements and interim statements can be obtained free of charge, before and after the conclusion of a contract;

  2.  the fund's public competent authority;

  3.  indication of a contact from which additional explanations can be obtained if needed;

  4.  the publication date of the prospectus.

Article 22

Form of prospectus

Both the prospectus and the simplified prospectus can be a written document or provided in a durable medium approved by the Financial Supervisory Authority.

Article 23

Presenting and updating a prospectus

The prospectus and the simplified prospectus shall be sent to the Financial Supervisory Authority. In the event of changes to the material contents of the prospectus or the simplified prospectus, such changes shall be sent to the Financial Supervisory Authority and presented to the holders of units or shares in a public manner.

As a rule, the principal elements of the prospectus and simplified prospectus shall be renewed at least once a year.

CHAPTER VIII

Entry into force, etc.

Article 24

This Regulation, which is established on the basis of Articles 18, 28, 46, 47 and 67 of Act No. 30/2003 on undertakings for collective investment in transferable securities (UCITS) and investment funds, is effective immediately. At the same time, Regulation No. 550/1989 on the preservation of the securities of a UCITS, Regulation No. 362/1993 on execution of the calculation of the redemption price of units of a UCITS, as amended, Regulation No. 369/1993 on the operations and marketing of foreign UCITS in Iceland, Rules No. 695/2001 on the annual accounts of UCITS, Rules No. 686/2001 on the prospectuses of UCITS, and Rules No. 331/2003 on index funds are repealed.

UCITS and other funds for collective investment covered by the provisions of this Regulation which already offer their services in Iceland shall comply with the provisions of Chapter V no later than 1 January 2004.

 

Ministry of Business Affairs, 20 October 2003.

For the Minister

Kristján Skarphédinsson.

Benedikt Árnason

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