Amendment to the Collective Investment Scheme Regime

United Kingdom

On 15 July 2008 an order amending the collective investment schemes (“CIS”) regime came into force.

The CIS regime prohibits persons from establishing, operating or winding up a CIS unless they are authorised by the FSA. The Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (the “Exemption Order”) sets out certain arrangements that are exempt and can therefore be established, operated and wound up without the involvement of an FSA authorised entity.

One of these exemptions (paragraph 9 of the schedule to the Exemption Order) has been revised, in order to clarify some ambiguities in the old wording. These ambiguities were in relation to whether:

  • using special purpose vehicles could cause such arrangements to fall outside of the exemption; and
  • participants who participate in a number of such arrangements could find that they fall outside of the exemption.

The effect of the new exemption is to make it easier to structure joint ownership arrangements in a way that avoids the CIS regime. It therefore offers the potential for simpler structures that are cheaper to set up and operate. While the amendment was initially aimed at residential real estate investment structures, it has general application to commercial real estate and other joint ownership structures.

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