CIR 6A CIR 6A Using a Fund Platform
CIR 6A Guidance
Overview1. The DIFC Incorporated Cell Company (ICC) Regulations (‘the ICC Regulations’) provide for the establishment of an Incorporated Cell Company and its Incorporated Cells. The Incorporated Cells are stand-alone companies distinct from each other and from the ICC itself, of which they are cells. The ICC Regulations permit such companies to be used to conduct Fund business or Insurance Business.2. The ICC contains the infrastructure (e.g. systems and controls) for the exclusive use by the Fund Manager to manage Funds established as Incorporated Cells of the ICC. The ICC is the ‘core’ and each Incorporated Cell of the ICC is a Fund on the ICC. Under the ICC Regulations, an ICC cannot itself be constituted as a Fund or act as a Fund Manager.3. A Fund Manager with an endorsement to use a Fund Platform (see GEN 2.2.7A) can incorporate an Incorporated Cell Company to assist it to manage any type or specialist classes of Fund, in accordance with the applicable requirements in the Law and these Rules and in the DIFC Companies Law and ICC Regulations. However, a Fund Manager cannot use the Fund Platform to create, or provide services to, a type of Fund if it is contrary to its authorisation. For example, a Fund Manager permitted under its Licence to manage only QIFs cannot use the Fund Platform to establish or manage Exempt or Public Funds.4. A Fund Manager may use the infrastructure available in the ICC (the core) to provide a range of services relating to the Funds on the ICC. These services include implementing the Fund’s investment mandate (e.g. investment selection), carrying out administrative functions such as issuing, transferring and redeeming Fund Units, valuing Fund assets, account keeping, financial reporting and carrying out compliance and oversight functions, in relation to each Fund constituted as an Incorporated Cell.5. The activities which the Incorporated Cell Company carries out for the Funds are not those of a third party service provider appointed by the Fund Manager, however the Fund Manager remains legally responsible to Unitholders in the Funds for acts or omissions of the Incorporated Cell Company (see Rule 6A.1.3).
Incorporated Cell Companies and Protected Cell Companies6. While both Incorporated Cell Companies (ICCs) and Protected Cell Companies (PCCs) have a similar structure as both have a ‘core’ containing the infrastructure to manage their ‘cells’, there is a significant difference between an ICC and a PCC. Unlike a cell of a PCC, each Incorporated Cell of an ICC is a separate legal entity operating under its own name and with its own directors and Articles of Association. Under the ICC Regulations, an Incorporated Cell is not a subsidiary of the ICC. By contrast, a PCC and its cells form a single Fund, with each cell being a Sub-Fund of the PCC.7. A Fund Manager wishing to offer different investment strategies within a Single Fund (e.g. an Umbrella Fund) and different asset classes within its Sub-Funds to investors who can freely switch their investment strategies, can use the PCC structure. A Fund Manager wishing to manage different types or specialist classes of Funds, which are separate legal entities, using the infrastructure available in the core, can only do so by establishing an ICC.
Funds constituted as Incorporated Cells8. Each Incorporated Cell of an ICC that is established as a Fund will need to be registered with, or notified to, the DFSA as a separate Fund (as it is a separate legal entity). Unless specified otherwise, the requirements in the Law and these Rules apply to an Incorporated Cell that is a Fund in the same way that the requirements apply to other Funds that use a company structure. This includes, for example, general requirements for the management or operation of Funds and requirements that apply according to whether the Fund is a Public Fund, Exempt Fund or QIF and relevant requirements for specialist classes of Funds.9. An ICC is incorporated under the DIFC Companies Law, and so each Incorporated Cell of that ICC that is used to conduct Fund business is a Domestic Fund as defined in the Law (see Article 26(2) of the Law).10. An External Fund Manager is not permitted to use a Fund Platform (see Rule 6.1.4).11. A Fund Manager that uses the ICC structure to establish and manage Funds is not prevented from also managing other Funds outside that structure. However, the Fund Manager cannot use the infrastructure available in the Incorporated Cell Company to provide services to Funds that are not Incorporated Cells of the ICC (see Rule 6A.1.4(c)).12. This chapter sets out various requirements that apply to a Fund Manager that uses a Fund Platform to manage Funds constituted as Incorporate Cells of that ICC. These requirements should be read in conjunction with the other obligations, particularly under the ICC Regulations.
Application of chapter
This chapter applies to a Fund Manager that uses a Fund Platform.
General application of CIR to Incorporated Cell Companies
CIR 6A.1.2 CIR 6A.1.2
Except as otherwise provided in these Rules, the requirements in CIR that apply:(a) to a Fund Manager, apply to a Fund Manager when it uses an Incorporated Cell Company (ICC) to provide infrastructure to a Fund; and(b) in relation to a Fund that is a Company, apply in relation to a Fund that is an Incorporated Cell of an ICC.
CIR 6A.1.2 Guidance
Because each Fund (i.e. an Incorporated Cell) is a stand-alone Fund, the Fund Manager using a Fund Platform needs to comply with all the applicable requirements in respect of each such Fund, although it is a Fund on a Fund Platform.
Fund Manager responsible for acts of Fund Platform
A Fund Manager using a Fund Platform remains responsible for any acts or omissions of the ICC as if they were the acts or omissions of the Fund Manager.
The Fund Manager’s obligations when using a Fund Platform
CIR 6A.1.4 CIR 6A.1.4
Without limiting any other obligations of the Fund Manager under the Law or these Rules, a Fund Manager using a Fund Platform must ensure that the ICC:(a) maintains adequate infrastructure to provide services to Funds on the Fund Platform, taking into account the type or specialist class of each particular Fund;(b) does not carry on any activity in relation to a Fund on the Fund Platform, other than the activities which the Fund Manager is authorised and permitted to undertake in respect of the relevant Fund;(c) does not provide any service to a Fund that is not an Incorporated Cell of the ICC; and(d) maintains procedures and up-to-date records to demonstrate to the DFSA:(i) the activities that the ICC undertakes in relation to each Fund on the Fund Platform; and(ii) that all applicable requirements have been met in respect of each Fund on the Fund Platform, taking into account the type or specialist class of the relevant Fund.
CIR 6A.1.4 Guidance
Guidance1. Under Rule 6A.1.4(b), a Fund Manager using a Fund Platform cannot establish on its Fund Platform any Funds other than a QIF if its authorisation is limited to managing QIFs. What type of Funds a Fund Manager can manage is reflected in the fees applicable to Fund Managers under FER.2. Rule 6A.1.4(c) does not prevent a Fund Manager from being able to share resources available to it (such as its IT systems and staff) between a Fund Platform and other Funds the Fund Manager manages on a stand-alone basis. However, a Fund Manager allocating its resources between the Fund Platform and such a Fund should be able to demonstrate (for example, through its written records) effective functional separation.
Directors of the Fund Platform and its Funds
A Fund Manager using a Fund Platform must ensure that if the ICC or an Incorporated Cell of the ICC has any Directors other than the Directors of the Fund Manager, that the Fund Manager exercises control over the board of the ICC or Incorporated Cell, as the case may be, either by having:(a) a majority of its Directors on the board of the ICC or the Incorporated Cell; or(b) the power to veto decisions of that board, if the Fund Manager reasonably believes that the decision will have an adverse impact on the ICC or the Incorporated Cell.
A Fund Manager using a Fund Platform must not allow a Fund that is an Incorporated Cell of the Incorporated Cell Company to have a Corporate Director.