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СIF and its interaction with AMC

read time: 5 min

24.05.2022

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Interaction with AMC of the corporate fund begins with the conclusion of an asset management agreement.

According to the current legislation of Ukraine, any collective investment institution (CII) can not operate without an Asset Management Company, moreover, if the CIF exists without an AMC for more than 30 working days – it must be liquidated.

Institutional investor asset management is a professional activity in the capital market that requires a license, professional knowledge and skills of certified asset management professionals.

The asset management company acts on behalf of, in the interests of, the corporate fund on the basis of an asset management agreement of the corporate investment fund, which must meet the requirements of applicable law.

CIF asset management is the activity of AMC, which includes accounting and tax accounting of the corporate fund, support of agreements on the assets of the collective investment institution, financial monitoring of CIF operations, preparation and submission of reports to relevant government agencies, organization and holding of CIF general meetings. organizing and conducting the placement and redemption of CIF securities, advising investors and participants in collective investment institutions on capital markets, representing the interests of the investment fund in relations with third parties, etc.

AMC carries out asset management activities for a fee, the amount of which is determined in accordance with the terms of the asset management agreement.

To take advantage of the corporate fund does not need to create and maintain its own AMC, you can enter into an asset management agreement with an asset management company that already operates in the stock market. This model of cooperation will save you from unnecessary worries, the need to keep the licensee, which is very expensive to maintain, and comply with a large number of legal requirements. In addition, if necessary, CIF owners always have the opportunity to replace the AMC. Read about the nuances of replacing an asset management company in the article “REPLACEMENT OF AMC“.

Under current law, the Asset Management Company has the right to manage the accounts and assets of the CIF, in this regard, the AMC has a number of restrictions.

During the management of the assets of the collective investment institution AMC has no right:

  • to acquire at the expense of the fund’s assets property and securities of those types that are not provided for in the investment declaration of the corporate investment fund;
  • to alienate the assets of the investment fund free of charge;
  • use the assets of the CIF to ensure the fulfillment of obligations to which such a corporate investment fund is not a party;
  • to alienate the property constituting the assets of the respective fund to the assets of the asset management company itself (does not apply to the venture fund);
  • to alienate the property owned by AMC to the fund’s assets;
  • to dispose of the assets constituting the assets of the CIF in favor of another collective investment institution managed by the AMC;
  • to provide loans at the expense of the assets of collective investment institutions (does not apply to venture funds);
  • provide loans from CII assets;
  • take a loan or credit repayable from the assets of the CIF in the amount of more than 10 percent of the net assets of the investment fund for more than three months for purposes other than the use of these funds to repurchase securities of the collective investment institution;
  • to place securities of other issuers, except for securities of mutual investment institutions, the assets of which AMC manages;
  • other restrictions specified in Art. 64 of the Law on Collective Investment Institutions.

The asset management company is liable for violation of the law, the prospectus of the corporate investment fund’s securities issue, the asset management agreement, regulations, investment declaration, and the corporate fund.

Restrictions and requirements for AMC activities protect the interests of CIF participants, but for the peace of mind of “INVEST-TANDEM” AMC applies an additional mechanism to control AMC activities and CIF assets, which has been successfully used by our clients for 10 years, more read more about this in the article “Control of AMC activities“.

In order for the corporate fund’s cooperation with the AMC to be fruitful and effective, it is necessary to choose the AMC carefully and carefully and clearly describe in the asset management agreement the procedure for future interaction between the CIF and the AMC. Our “10 TIPS ON HOW TO CHOOSE AMC” are tips from asset management professionals with years of experience to help you choose AMC for a corporate fund.