FUNDS 15. FUNDS 15. REQUIREMENTS SPECIFIC TO QUALIFIED INVESTOR FUNDS
FUNDS 15.1 FUNDS 15.1 Meeting the conditions to be classified as a Qualified Investor Fund
Guidance1. Rule 3.3.2 provides that a Domestic Fund may be constituted as a Qualified Investor Fund only if it satisfies all of the conditions in Rule 3.3.4. Rule 3.3.4 provides that a Qualified Investor Fund must:(a) have its Units offered to persons only by way of Private Placement;(b) have only Unitholders each of whom meets the criteria to be classified as a Professional Client; and(c) have an initial subscription to be paid by a person to become a Unitholder in the Fund of at least US$500,000.2. The definition of "Professional Client" is set out in Rule 184.108.40.206. Generally a firm will not be able to undertake mass marketing activities relating to Units of Qualified Investor Funds because such marketing would not meet the Private Placement requirement, and would be likely to amount to a public offer, which can only be made in respect of a Unit of a Public Fund.
FUNDS 15.1.2(1) A Fund may be classified as a Qualified Investor Fund only if it fulfils the conditions in Rule 3.3.4 at the inception of the Fund and on an on-going basis.(2) A Fund Manager must ensure that a Fund which is or is intended to be established and operated as a Qualified Investor Fund meets the conditions in Rule 3.3.4 both at the inception of the Fund and on an on-going basis.(3) For the purposes of (2), where a Fund Manager makes arrangements with other Authorised Persons or Persons in other jurisdictions to Offer to issue or sell the Units of a Qualified Investor Fund, then it must take reasonable steps to ensure that those Authorised Persons or other Persons do not Offer to issue or sell the Units in a manner that would result in a breach of the conditions in Rule 3.3.4.(4) As soon as a Fund Manager becomes aware that a Qualified Investor Fund it manages no longer meets or is likely not to meet the conditions in Rule 3.3.4, it must immediately:(a) commence proceedings relating to the winding up of the Fund, or alternatively, take necessary steps to have the Fund reconstituted as an Exempt Fund or registered as a Public Fund; and(b) notify the Regulator of that fact and the measures it has taken and proposes to take under (a).
FUNDS 15.2 FUNDS 15.2 Responsibilities of a Fund Manager of a Qualified Investor Fund
Guidance1. While a Fund Manager of a Qualified Investor Fund is exempt from many of the detailed requirements applicable to Public Funds and Exempt Funds, it will continue to be subject to most of the main obligations of Fund Managers. Therefore, such a Fund Manager should be mindful that when managing a Qualified Investor Fund, it is subject to some of the overarching obligations applicable to Fund Managers, particularly:(a) Rule 12.2 (Fund Manager and Trustee general duties and functions);(b) GEN Section 2.2 (The Principles for Authorised Persons); and(c) GEN Chapter 3 (Management, Systems and Controls).2. For example, a Fund Manager of a Qualified Investor Fund needs to observe high standards of integrity and fair dealing, and apply due skill, care and diligence, in managing the Fund. Similarly, it must have adequate systems and controls to ensure that the affairs of the Fund are effectively managed, taking into account the nature, scale and complexity of the Fund's operations and the investment objectives and needs of its investors.
FUNDS 15.3 FUNDS 15.3 Custody of Fund Property
FUNDS 15.3.1 FUNDS 15.3.1(1) The Fund Manager of a Qualified Investor Fund that is not an Investment Trust must ensure that the legal title to Fund Property is registered with an Eligible Custodian.(2) The requirement in (1) does not apply in relation to Fund Property where it is impracticable and disproportionate to comply with that Rule given the nature of the Fund and its assets, provided that the Fund Manager has in place effective arrangements which ensure that the Fund Property is not available to creditors in the event of the insolvency of the Fund Manager.
Regardless of who holds title to Fund Property, the Fund Manager must always ensure that, in accordance with Rule 12.2.2(2)(f), Fund Property is clearly identified as such and held separately from property of the Fund Manager and any other Funds.