Entire Section

  • CIR 2.1 CIR 2.1 Exclusions

    • CIR 2.1.1

      Pursuant to Article 12 of the Law, the DFSA prescribes that an arrangement which otherwise amounts to a Collective Investment Fund as defined in Article 11 of the Law does not constitute a Collective Investment Fund if it falls within one or more of the exclusions specified in this chapter.

      Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Deposits

      • CIR 2.1.2

        An arrangement does not constitute a Collective Investment Fund if the whole amount of each participant's contribution is a Deposit which is accepted by an Authorised Firm authorised under its Licence to carry on the Financial Service of Accepting Deposits.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Common Accounts

      • CIR 2.1.3

        An arrangement does not constitute a Collective Investment Fund if:

        (a) the rights or interests of each participant in the arrangement are rights or interests in money held in a common account; and
        (b) the money is held in the account on the understanding that an amount representing the contribution of each participant is to be applied in making payments to him or in satisfaction of sums owed by him or in the acquisition of property for him or the provision of services to him.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Commercial Activities Unrelated to Financial Services

      • CIR 2.1.4

        An arrangement does not constitute a Collective Investment Fund if each of the participants in the arrangement:

        (a) carries on a business which does not involve the carrying on of any of the activities specified under GEN Rule 2.2.2(d) to (k) or (n) to (q) or an activity which would be such an activity were it not for any applicable exclusion; and
        (b) enters into the arrangement for commercial purposes related to that business where that participant carries on that business by virtue of being a participant in the arrangement.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Group Arrangements

      • CIR 2.1.5

        An arrangement does not constitute a Collective Investment Fund if each of the participants is a Body Corporate in the same Group as the Person undertaking the fund management function in relation to the arrangement.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Franchise Arrangements

      • CIR 2.1.6

        An arrangement does not constitute a Collective Investment Fund if the arrangement is a franchise arrangement.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Clearing Services

      • CIR 2.1.7

        An arrangement does not constitute a Collective Investment Fund if the purpose of the arrangement is the provision of clearing services and the services are operated by an Authorised Market Institution.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Certificates or Options

      • CIR 2.1.8

        An arrangement does not constitute a Collective Investment Fund if the rights or interests of the participants in the arrangement are Investments of the kind specified under Rule GEN A2.2.1(d) or GEN A2.3.1(a).

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Time-Share and Other 'Property-Enjoyment' Related Arrangements

      • CIR 2.1.9

        An arrangement does not constitute a Collective Investment Fund:

        (a) if the rights or interests of each of the participants in the arrangement are time share rights; or
        (b) if:
        (i) the predominant purpose of the arrangement is to enable the participants to share in the use or enjoyment of property or to make its use or enjoyment available gratuitously to others; and
        (ii) the property to which the arrangement relates does not consist of or include the currency of any country or territory or Investments, as defined in GEN Rule A2.1 or, which would be such Investments if not for any applicable exclusion.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • [Deleted]

      [Deleted] DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18].

      • CIR 2.1.10 [Deleted]

        [Deleted] DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18].

    • Commercial arrangements

      • CIR 2.1.10 CIR 2.1.10 Commercial arrangements

        An arrangement that consists of a company, partnership or trust does not constitute a Collective Investment Fund if the main purpose and effect of the arrangement is the carrying on of a commercial or other business unrelated to financial or investment activities.

        Derived from DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18].

        • CIR 2.1.10 Guidance Common indicators and examples

          1. The DFSA would generally not expect an ordinary company, partnership or trust (an undertaking) that carries on a general commercial business to be a Fund, and therefore regulated. An undertaking would be regarded as carrying on a general commercial business where it pursues a business strategy that involves activities such as:

          a. running a business involving the purchase, sale or exchange of goods and commodities;
          b. supplying services – such as maintenance, cleaning, electrical or plumbing, servicing appliances;
          c. providing non-financial professional services – such as legal or accounting;
          d. conducting media activities/business;
          e. operating an industrial activity, such as the production of goods or construction of property; or
          f. carrying on a combination of the above or similar activities.
          Similarly, an arrangement that pursues a charitable purpose (such as a charitable trust) would not be regarded as a Fund.

          2. Further indicators which can be used to identify if an undertaking is a commercial business include:

          a. the particular structure of the undertaking – i.e. if it is open-ended, then the structure is generally regarded as more suited for collective investment, rather than a commercial operation (because a commercial business does not lend itself to having parts of it sold off to meet redemption rights of investors and, also, investors in commercial businesses do not expect the business to do so);
          b. the distribution mechanism used by the undertaking – if it is closed-ended and has a specified period at the end of which it will be wound up and proceeds from realising assets will be distributed to investors, then generally such an undertaking is an investment vehicle, rather than a commercial undertaking;
          c. how it conducts its business – for example:
          i. if the business has a large number of employees engaging in its business activities, this is a possible indicator it is a commercial business. This is because many investment companies delegate or outsource their investment and administration activities to third party service providers, and have limited staff;
          ii. if the undertaking merely holds the property to take advantage of changing market prices or the income stream, it is an indicator of conducting collective investment business, rather than undertaking any construction or development activities, which are commercial activities;
          iii. if the business is designed to expand any existing commercial business of investors, this is a pointer that it is a commercial business, as opposed to an undertaking which would achieve gains or benefits by realisation of the underlying assets – which is a pointer that it is an investment business; and
          iv. if the business itself creates the property or assets it manages (e.g. by constructing a building), it indicates that such a business is more likely to be a property development business, which is a commercial business, rather than an investment vehicle.
          d. How the undertaking promotes its business to potential investors. For example, if the business promotes itself based on its investment mandate and the investment skills of the person carrying out the investment and risk management function in the business, it is likely to be a Fund rather than a commercial business.

          3. See further Guidance under CIR Rule 3.1.7 about property companies that are not Funds.

          Derived from DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18].

    • Debentures and Warrants of a Single Issuer

      • CIR 2.1.11

        (a) An arrangement does not constitute a Collective Investment Fund if the rights or interests of the participants in the arrangement are represented by a Debenture or Warrant:
        (i) where the issuer of the Debenture or Warrant is a single issuer, and if that issuer is:
        (A) a Body Corporate, it is neither an Open-ended investment company nor a Closed-ended company the intent or purpose of which is investment management as specified in CIR Rule 2.1.10; or
        (B) not a Body Corporate, the rights and interests of the Debenture or Warrant holder are guaranteed by the government of any country or territory; and
        (ii) which, if it is a convertible Security, the underlying Securities to which the Debenture or Warrant holder is entitled are Shares or Debentures issued, or to be issued, by the same issuer as the issuer of the Debenture or Warrant or single other issuer.
        (b) An arrangement that does not constitute a Collective Investment Fund by virtue of CIR Rule 2.1.11(a) does not become a Fund merely because one of the participants in the arrangement is a person:
        (i) whose ordinary business involves him engaging in an activity that is a Financial Services activity as defined in GEN chapter 2 or that would fall within an applicable exclusion from a Financial Services activity; and
        (ii) whose rights or interests in the arrangement are, or include, rights or interests in a swap arrangement under which he facilitates the making of payments to participants whether in a particular amount or currency or at a particular time or rate of interest or all or any combination of those things in settlement of the rights and interests of the other participants in the arrangement.
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
        [Amended] DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18].

    • Insurance

      • CIR 2.1.12

        An arrangement does not constitute a Collective Investment Fund if it is a Contract of Insurance.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Profit Sharing Investment Accounts

      • CIR 2.1.13

        An arrangement does not constitute a Collective Investment Fund if it is an account or portfolio which is a Profit Sharing Investment Account.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Discretionary Portfolio Accounts

      • CIR 2.1.14

        An arrangement does not constitute a Collective Investment Fund if it is a portfolio or account managed under a Discretionary Portfolio Management Agreement.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Close Relative Accounts

      • CIR 2.1.15

        An arrangement does not constitute a Collective Investment Fund if every participant in the arrangement is a Close Relative. For the purposes of this Rule, the defined term "Close Relative" includes grandchildren.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Sukuks

      • CIR 2.1.16

        An arrangement does not constitute a Collective Investment Fund if the rights or interests of the participants are evidenced by sukuk certificates where the holders of the certificates are entitled to rely on the credit worthiness of:

        (a) the issuer of the sukuk certificates; or
        (b) any other Person who has assumed obligations under the sukuk certificates,

        for obtaining their rights and benefits arising under the certificates.

        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Employee Reward Schemes

      • CIR 2.1.17

        An arrangement does not constitute a Collective Investment Fund if the arrangement is for the purposes of enabling or facilitating the operation of an employee compensation or reward scheme where the arrangement:

        (a) makes Securities available only to:
        (i) an Employee or former Employee of the Issuer or of another member of the same Group as the Issuer; or
        (ii) a Close Relative of any such Employee; and
        (b) is operated by the Issuer or by a member of the same Group as the Issuer or by a trustee who, in pursuance of the arrangements, holds the Securities issued by the Issuer for the benefit of any eligible Persons referred to in CIR Rule 2.1.17(a)(i) or (ii).
        Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]

    • Crowdfunding

      • CIR 2.1.18

        An arrangement does not constitute a Collective Investment Fund if all of the following conditions are met:

        (a) the arrangement is entered into using a Property Investment Crowdfunding Platform, operated by a Crowdfunding Operator;
        (b) the arrangement involves multiple investors investing in an individual apartment, house or building that has a single discrete title deed;
        (c) all of the investors are Clients of the Crowdfunding Operator; and
        (d) the total consideration paid by all investors in the apartment, house or building is not more than $5 million or an equivalent amount in another currency.
        Derived from RM255/2019 (Made 26th July 2019). [VER25/07-19]

        • CIR 2.1.18 Guidance

          An Investment made through an Investment Crowdfunding Platform (i.e. a platform that facilitates an investment in a business or a project rather than a property) is likely to fall within the exclusion in CIR Rule 2.1.10.

          Derived from RM255/2019 (Made 26th July 2019). [VER25/07-19]

      • CIR 2.1.19

        An arrangement does not constitute a Collective Investment Fund if all of the following conditions are met:

        (a) the arrangement is entered into using a Loan Crowdfunding Platform, operated by a Crowdfunding Operator;
        (b) the arrangement involves multiple lenders providing a loan to a borrower for a business or project;
        (c) all of the lenders are Clients of the Crowdfunding Operator;
        (d) the amount of the loan, the rate of return and the repayment period are fixed when the loan agreement is entered into; and
        (e) the total funding provided by all lenders to the borrower is not more than $5 million or an equivalent amount in another currency.
        Derived from RM255/2019 (Made 26th July 2019). [VER25/07-19]

    • Employee Money Purchase Scheme

      • CIR 2.1.20

        An arrangement does not constitute a Collective Investment Fund if all of the following conditions are met:

        (a) the arrangement is an Employee Money Purchase Scheme and the DFSA has approved that Scheme under COB Rule 12.2.2;
        (b) the Scheme is operated by an Authorised Firm that is authorised to Operate an Employee Money Purchase Scheme; and
        (c) the Scheme is administered by an Authorised Firm that is authorised to Act as the Administrator of an Employee Money Purchase Scheme.
        Added from RM265/2019 (Made 18th December 2019). [VER27/01-20]