IFR 5.2 IFR 5.2 Additional Disclosure Requirements for PSIAs
Authorised Firmmust, prior to Managing a PSIA, provide written notice to the Clientthat the Clientalone will bear any losses arising from the PSIA, which are limited to the amount of his contribution, unless there is negligence, misconduct or breach of contract on the part of the Authorised Firm.
In addition to matters referred to in COB section 3.3, an
Authorised Firmmust ensure that the following information is included in the Client Agreementrelating to a PSIA:(a) how and by whom the funds of the Clientwill be managed and invested including details of its policy on diversification of the portfolio;(b) the basis for the allocation of profit between the Authorised Firmand the Client;(c) confirmation of the Client'sinvestment objectives including details of any restrictions requested by the Client, as agreed between the Clientand the Authorised Firm;(d) a summary of the policies and procedures for valuation of assets or portfolio;(e) a summary of policies and procedures for the transfer of funds to and from the Profit Equalisation Reserveor Investment Risk Reserveaccounts, if applicable;(f) particulars of the management of the PSIAand of any third party to whom the Authorised Firmhas or will delegate or outsource the management of the PSIA, including:(i) the name of the third party;(ii) the regulatory status of the third party; and(iii) details of the arrangement.(g) details of early withdrawal , redemption or other exit arrangement and any costs to a Clientas a result thereof;(h) details of segregation of the funds of the Clientfrom the funds of the Authorised Firmand from any claims by the creditors of the Authorised Firm;(i) details of whether funds from one PSIAwill be commingled with the funds of another PSIA; and(j) details of any applicable charges and the basis upon which such charges will be calculated including, any deductions of fees that may be made by the Authorised Firmfrom the profits of the PSIA.
IFR 5.2.3(1) COB section 6.10 applies to an
Authorised Firmas if the Authorised Firmis an investment manager in respect of those Clientswho are PSIAholders.(2) In addition to the requirements of COB section 6.10, an Authorised Firm must ensure that a periodic statement provided to a Clientcontains the following information:(a) details of the performance of the Client'sinvestment;(b) the allocation of profit between the Authorised Firmand the Client; and (c) where applicable, details of changes to the investment strategies that may affect the Client'saccount or portfolio
Additional Matters to be Included in the Policy and Procedures Manual
IFR 5.2.4 IFR 5.2.4
Authorised Firm Manages a PSIA, its Islamic Financial Businesspolicy and procedures manual must address the following additional matters:(a) the basis upon which a PSIAwill be deemed restricted or unrestricted;(b) the basis for allocation of profit or loss to the PSIA;(c) the basis for allocation of expenses to the PSIA;(d) the manner in which an Authorised Firm'sown funds, funds of restricted PSIAsand funds from unrestricted PSIAsare to be controlled;(e) the manner in which the funds of each type of investment account holder will be managed;(f) the manner in which it will determine priority for investment of own funds and those of holders of unrestricted PSIAs;(g) how provisions and reserves against equity and assets are to be applied; and(h) the manner in which losses incurred as a result of the misconduct or negligence for which the Authorised Firmis responsible will be dealt with.
IFR 5.2.4 Guidance
For the purposes of IFR Rule 5.2.4, the policy and procedures manual should include procedures to ensure that the
Authorised Firmmanages the accounts of Profit Sharing Investment Accountholders in accordance with their instructions.