CIR 12 CIR 12 Requirements Specific to Exempt Funds
CIR 12.1 CIR 12.1 Meeting the conditions to be Classified as an Exempt Fund
CIR 12.1 Guidance1. Article 16(2) of the Law provides that a
Domestic Fundmay be constituted as an Exempt Fundonly if it satisfies all of the conditions in Article 16(4). Article 16(4) provides that an Exempt Fundmust:a. have its Unitsoffered to persons only by way of a Private Placement;b. have only Unitholderseach of whom meets the criteria to be classified as a Professional Client; andc. have a minimum subscription of at least US$50,000 for a person to become a Unitholderin the Fund,and not satisfy the conditions in Article 16(5) to be a Qualified Investor Fund.2. Under Article 26(1) of the Law, an Exempt Fundis required to have one of the permitted forms, i.e. an Investment Company, Investment Partnershipor an Investment Trust. However, certain types of Exempt Fundswhich belong to a specialist class of Fundsmay be permitted to use only some and not all the permitted forms. See CIR Part 6 for those variations.3. If an Exempt Fundcan no longer meet the relevant conditions to be classified as an Exempt Fund, the Fund Managerof that Fundis required, under Article 34(3), to apply for the winding up of that Fund. Alternatively, the Fund Managermay have that Fundmoved to the classification of a Public Fund, which requires the satisfaction of the requirements and formalities specific to that type of Fund. An Exempt Fundmay also, if it wishes to, convert to a Qualified Investor Fundprovided it meets the conditions applicable to a Qualified Investor Fundin Article 16(5) of the Law.4. In addition to the requirements specific to Exempt Funds, such a Fundmust also meet, except where otherwise provided, the other requirements that are common to all Domestic Funds, which are set out in CIR Part 4 of this module.5. Units of Exempt Fundscan only be Offeredby way of Private Placementand to Professional Clients, but must meet the additional criterion of a minimum subscription test of US$50,000. The definition of Professional Clientis set out in Rule 220.127.116.11. Generally a firm will not be able to undertake mass marketing activities relating to Unitsof Exempt Fundsbecause such marketing would not meet the Private Placementrequirement, and would be likely to amount to a public offer, which can only be made in respect of a Unitof a Public Fund.7. A Fund Managerof an Exempt Fund, which is structured as an Open-ended Fund, is required to comply with the requirements relating to adequate systems and controls to manage, among others, the liquidity risk. See CIR Rule 8.6A.1.
CIR 12.1.1 CIR 12.1.1(1) A
Fundmay be classified as an Exempt Fundonly if it fulfils the criteria in Article 16(4) of the Law at the inception of the Fundand on an on-going basis.(2) A Fund Managermust ensure that a Fundwhich is or is intended to be established and operated as an Exempt Fundmeets the criteria in Article 16(4) both at the inception of the Fundand on an on-going basis.(3) For the purposes of (2), where a Fund Managermakes arrangements with other Authorised Firmsor Personsin other jurisdictions to Offerto issue or sell the Unitsof an Exempt Fund, then it must take reasonable steps to ensure that those Authorised Firmsor other Personsdo not Offerto issue or sell the Unitsin a manner that would result in a breach of the criteria in Article 16(4).(4) As soon as a Fund Managerbecomes aware that an Exempt Fundit manages no longer meets or is likely to not meet the criteria in Article 16(4) of the Law, it must immediately:(a) commence proceedings relating to the winding up of the Fund, or alternatively, take necessary steps to have the Fundregistered as a Public Fund; and(b) notify the DFSAof that fact and the measures it has taken and proposes to take under (a).(5) A Fund Managerof an Exempt Fundwhich is subject to the valuation requirement in CIR Rule 8.4.1(1) must appoint a Fund Administratoror a Personregulated by a Financial Services Regulatoras the Personundertaking the valuation of that Fund.
Fund Managerof an Exempt Fund, when notifying the DFSApursuant to Article 34 of the Law, must also include:(a) a general description of the Fundincluding the nature of its investments and the intended size of the Fundin monetary terms;(b) if it is a Hedge Fundwhich has appointed a prime broker pursuant to CIR Rule 13.6.3:(i) the details relating to the identity of the prime broker and its Regulator; and(ii) a legal certification that all the requirements in CIR Rule 13.6.3 relating to the use of prime brokers have been fully complied with by the Fund Manager;(c) if it is an External Fund, the name of the jurisdiction in which the Fundis established or domiciled; and(d) if it is an External Fund Manager, the name of the jurisdiction in which that Fund Manageris domiciled, and the details of the Appointed Fund Administratoror Trusteeto that Fundfor the purposes of CIR Rule 6.1.3.Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]
CIR 12.2 CIR 12.2 Exempt Fund Prospectus
CIR 12.2 Guidance
The disclosure requirements relating to a
Prospectusthat apply to an Exempt Fundare different from the Prospectusdisclosure required for Public Funds. As Prospectusdisclosure is a matter closely linked to the marketing of Unitsof Funds, Prospectusrequirements relating to the relevant types of Fundsare set out in CIR chapter 14.Derived from RM72/2010 (Made 11th July 2010). [VER13/07-10]