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Replacement of AMC

read time: 5 min

18.05.2022

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AMC replacement – how fast, how complicated the procedure to consider. These are the questions owners of mutual funds ask when they want to consult about replacing an asset management company.

Having a choice is something that everyone in the modern world strives for, especially as a customer in the field of service. Choosing the best for yourself is just the norm! In a situation when you are the owner of corporate investment fund and are a client of AMC – nothing changes, AMC replacement is what you are entitled to. This possibility is provided by the Law of Ukraine “On collective investment institutions”.

Sometimes, the AMC replacement procedure is greatly complicated by the reluctance of the asset management company to release Clients.

How can the AMC manager interfere?
What punishment will the AMC suffer?
How to protect your CIF from the undesirable consequences of changing the AMC?

Let’s understand these issues.

The asset management company fully supports the activities of the CIF, it maintains the accounting of the corporate investment fund, is responsible for the availability of all primary, statutory documents, agreements, protocols, reports, etc. If the AMC manager, upon termination of the asset management agreement with the corporate fund, does not transfer the database with registers of documents and transactions and returns not all documents, there may be difficulties in further support of the Fund and tax audits.

Unfortunately, the current legislation does not provide penalties for a bad asset management company for incomplete transfer of documents, so the CIF itself must take care of its RIGHT to REPLACE AMC, this requires:

1) To provide in the CIF Charter the possibility on the initiative of the corporate investment fund to terminate the asset management agreement unilaterally;

2) When concluding an agreement on the Fund’s asset management, it is necessary to clearly prescribe the procedure for termination, as well as record the list of documents to be returned by the AMC manager (the list may be drawn up as an appendix to the corporate investment fund’s asset management agreement):

  • Founding documents;
  • Primary documentation;
  • Seal of the fund (if any);
  • All agreements concluded during the period of the Fund’s activity (+ documents related to them, additional agreements, acts, letters, etc.);
  • Register of concluded agreements for the entire period of the Fund’s activity;
  • Registers of securities owners (in paper and electronic form);
  • Minutes of the General Meeting (decision of the sole participant) and meetings of the Supervisory Board of the Fund (+ all documents related to them);
  • Register of protocols;
  • Reporting submitted to the National Commission on Securities and Stock Market, Ukrainian Investment Business Association;
  • Database of fund operations in XML format;
  • Medoc database, or other software through which reporting was submitted to the tax authorities;
  • Certificate of calculation of the value of net assets, balance sheet information with transcripts and reporting (5 forms) as of the date of termination of the asset management agreement.

The above documents during the transfer must be arranged in chronological order, and transferred by the act of transfer. A representative of the Fund and a representative of the AMC with which the contract is terminated must be present during the transfer of documents.

3) Payment of AMC remuneration for the last month of service may be made after the transfer of all documents and database of CIF transactions;

4) Penalties should be provided in case the asset management company has not submitted the documents and database on the corporate fund’s operations in full;

5) An additional agreement to terminate the contract should be signed after receiving all documents and databases from the AMC.

The AMC replacement process should be discussed at the start of the cooperation and documented.

If you have not done so before, you can always sign an additional agreement to the AMC agreement or draw up a separate document that will regulate the procedure for terminating the agreement on asset management of the Fund and the transfer of documents.

We are confident that the professional AMC will not restrict its clients in the right to choose for their own interests, but will provide a high level of service even in the event of termination of the asset management agreement of the corporate investment fund.

In the event of termination of the relationship with the asset management company, the CIF owner must remember that the corporate fund may exist without the AMC for no more than one month. Therefore, we advise you to choose AMC in advance, with which a new agreement on asset management of your fund will be concluded.