REGULATIONS AND ARTICLES OF ASSOCIATION OF A UCI
The Regulations of a UCI is the document that describes the rules to which the UCI must comply.
The document generally indicates the fund's objectives, investment policy, the duration of the investment period and the duration of the fund, the methods for calculating the value of the fund units, the custodian bank, as well as the fund's operating rules.
In particular, Art. 37 of Italian Legislative Decree no. 58 of February 24, 1998 (Consolidated Finance Act, abbreviated as "TUF"), with specific reference to mutual funds, indicates the following:
- "The regulation of each mutual fund defines the characteristics of the fund, governs its operation, indicates the manager and the depositary, defines the distribution of tasks among such persons, regulates the relationships between these parties and the participants in the fund.
- The regulations specifically establish:
a) The name and duration of the fund;
b) the procedures for participating in the fund, the terms and conditions for the issue and termination of the certificates and the subscription and redemption of units as well as the methods for liquidating the fund;
c) the bodies responsible for choosing the investments and the criteria for allocating the investments;
d) the type of assets, financial instruments and other securities in which the fund's assets can be invested;
e) the criteria relating to the determination of operating income and operating results, as well as any methods for allocating and distributing them;
f) expenses charged to the fund and those charged to the asset management company;
g) the measure or criteria for determining the commission due to the asset management company and the costs borne by the participants;
h) the methods of publicizing the value of the participation shares;
i) if the fund is a feeder fund.
The Regulation on collective asset management (adopted with the provision of the Bank of Italy dated January 19, 2015) in TITLE V - CHAPTER I establishes the general criteria and minimum content of the management regulations for mutual funds. The same principles of preparation must also comply with the articles of association of a UCI, in particular, of a SICAF (Investment Company with Fixed Capital) or a SICAV (Investment Company with Variable Capital), which are the other two types of UCIs envisaged in Italy’s legal system jointly with mutual funds. The Articles of Association of a SICAF or a SICAV contain the essential rules governing their corporate organization. The articles of association thus set the rules for the internal organization of the investment company and are the source of duties (of the members of the corporate bodies and of the shareholders) that are linked to said rules. At the same time, in the case of the SICAV and SICAF, it is also the venue for regulating the manager's obligations towards investors such as, for example, the payment of financial commitments by investors, the management of investor defaults, the institution and assignment of functions of committees outside the corporate system (e.g. advisory board), the regulation of crisis situations (suspension of investment activity, early termination of the investment period, replacement of the management team, etc.), limitations of liability and indemnity."
Article 35-quater (Share capital and shares of the SICAV) provides, with reference to the Articles of Association of the SICAV:
5. The articles of association of the SICAV indicate the methods for determining the value of the shares and the issue and redemption price, as well as the frequency with which the shares can be issued and redeemed.
6. The articles of association of the SICAV may include:
limits on the issue of registered shares; particular restrictions on the transferability of registered shares; the existence of multiple investment sub-funds for each of which a particular category of shares may be issued; in this case, the criteria for the allocation of general expenses between the various sub-funds are established; the possibility of issuing fractions of shares, provided that the allocation and exercise of voting rights are in any case subject to holding at least one share, according to the provisions of this chapter. ......”
In reference to the SICAF articles of association, Article 35-quinquies (SICAF capital and shares) provides for the following:
3. The SICAF articles of association indicate the methods for determining the value of the shares and any equity financial instruments issued.
4. The SICAF articles of association may include:
limits on the issue of registered shares; particular restrictions on the transferability of registered shares; the existence of multiple investment sub-funds for each of which a particular category of shares may be issued; in this case, the criteria for the allocation of general expenses between the various sub-funds are established; the possibility of issuing fractions of shares, provided that the allocation and exercise of voting rights are in any case subject to holding at least one share, according to the provisions of this chapter; in the case of reserved SICAFs and subject to the provisions of Article 35-bis, paragraph 4, the possibility of making payments related to the shares subscribed in several installments, following the shareholder's commitment to make the payment at the request of said SICAF based on investment needs. ......”
GLOSSARY for UCIs
To better clarify what the CONSOB Regulation refers to when it quotes UCIs we must observe the basic definitions found in the various letters of Article 1 of Italian Legislative Decree no. 58 of February 24, 1998 (Consolidated Finance Act, abbreviated as "TUF"), of which we submit an excerpt below:
“Art. 1 (Definitions) ……….
i) "investment company with variable capital" (SICAV): the open-end UCI fund established in the form of a joint-stock company with registered capital and general management in Italy having as its sole purpose the collective investment of the assets raised through the offer of equity shares;
i-bis) "investment company with fixed assets" (SICAF): the closed UCI established in the form of a joint-stock company with registered office and general management in Italy having as its exclusive purpose the collective investment of the assets raised through the offer of equity shares and other participative shareholding financial instruments;
j) "mutual investment fund": the UCI established as an autonomous capital, divided into units, set up and managed by a manager;
k) "Collective investment scheme" (UCI): the body established for the provision of the collective asset management services, whose assets are raised among a number of investors through the issue and offer of units or shares, managed upstream in the interest of investors, and independently from them, and invested in financial instruments, and loans, including those paid out of the UCI's assets, equity investments or other tangible or intangible property, based on a pre-determined investment policy;
k-bis) "Open UCI": the UCI whose participants have the right to request the redemption of shares or shares from the assets of the same, according to the procedures and frequency established by the regulations, by the articles of association and by offer documents of the UCI;
k-ter) "Closed UCI": the UCI different from the open one;
l) "Italian UCIs": mutual funds, SICAVs and SICAFs;
n) "collective management of savings": the service that is carried out through the management of UCIs and related risks;
o) "asset management company" (AMC): the public limited company with registered office and general management in Italy authorized to provide the collective asset management service;