Part 5 · Chapters 10, 12 & 12A
Rules Specific to Different Types of Domestic Funds
Governs the three distinct categories of Domestic Fund — Public Funds (Chapter 10), Exempt Funds (Chapter 12), and Qualified Investor Funds (Chapter 12A). Each type has different eligibility conditions, regulatory requirements, oversight arrangements, investor access rules, and investment restriction regimes.
Chapter 10 · §10.1 – 10.5
🔵 Public Fund
The most heavily regulated category — open to retail and professional investors, requires DFSA registration, public prospectus, mandatory oversight function, and full investment restriction regime.
- DFSA registration required before any offering
- Public Prospectus with full disclosure
- Mandatory oversight function (Oversight Committee or Custodian/Trustee)
- Borrowing capped at 20% of NAV
- Derivatives exposure capped at 100% of NAV
- Annual Oversight Report in annual report
- 5-year comparative performance table required
- AGM required annually; ≥2 Governing Body meetings/year
Chapter 12 · §12.1 – 12.2
🟠 Exempt Fund
Mid-tier regulation — restricted to Professional Clients via private placement with a US$50,000 minimum subscription. Notification (not registration) to DFSA. Lighter disclosure and oversight requirements than Public Funds.
- DFSA notification (not registration) required
- Units offered by private placement only
- Only Professional Clients permitted as Unitholders
- Minimum subscription of US$50,000 per investor
- Information Memorandum instead of full Prospectus
- No mandatory Oversight Committee required
- Meetings governed by Constitution and Prospectus
- Must appoint regulated valuer for valuation function
Chapter 12A · §12A.1 – 12A.3
🟢 Qualified Investor Fund
Lightest regulatory touch — restricted to high-net-worth Professional Clients with US$500,000 initial subscription. Notification to DFSA. Very limited Ch. 8 obligations. Significantly reduced disclosure and reporting requirements.
- DFSA notification required before offering
- Units offered by private placement only
- Only Professional Clients permitted as Unitholders
- Initial subscription of US$500,000 per investor
- Very limited Part 4 (Ch. 8) obligations apply
- No interim report required unless material change
- No Oversight Report or comparative table required
- Custody exemptions for PE, Property, VC, Credit Funds
⚖️ Three-Way Regulatory Comparison
| Feature / Requirement | 🔵 Public Fund | 🟠 Exempt Fund | 🟢 QIF |
|---|---|---|---|
| DFSA Process | Registration (active DFSA approval) | Notification to DFSA | Notification to DFSA |
| Investor Eligibility | All eligible investors (including retail) | Professional Clients only | Professional Clients only |
| Offering Method | Public offer permitted | Private Placement only | Private Placement only |
| Minimum Subscription | None specified | US$50,000 per investor | US$500,000 initial per investor |
| Offer Document | Full Prospectus (Chapter 14) | Information Memorandum | Information Memorandum (lighter) |
| Oversight Function | ✔ Mandatory — Oversight Committee or Custodian/Trustee | ✘ Not required | ✘ Not required |
| Annual General Meeting | ✔ Required annually | Per Constitution and Prospectus | ✘ Not required by CIR |
| Governing Body Meetings | ✔ ≥2 per year | As appropriate | As appropriate |
| Annual Report | ✔ Within 4 months of year-end | ✔ Within 4 months | ✔ Within 4 months |
| Interim Report | ✔ Within 2 months of period-end | ✔ Within 2 months | Only if material change during period |
| Oversight Report in Annual Report | ✔ Required | ✘ Not required | ✘ Not required |
| 5-Year Comparative Table | ✔ Required | ✘ Not required | ✘ Not required |
| Borrowing Limit | 20% of NAV (except Property Funds) | Per Constitution and Prospectus | Per Constitution and Prospectus |
| Derivatives Limit | 100% of NAV | Per Constitution and Prospectus | Per Constitution and Prospectus |
| Custody of Fund Property | Eligible Custodian required | Eligible Custodian required (with limited exceptions) | Eligible Custodian required (broader exceptions — PE, Property, VC, Credit) |
| Crypto Token Custody | Eligible Custodian — mandatory, no exceptions | Eligible Custodian — mandatory | Eligible Custodian — mandatory, no exceptions |
| Investment in Other Funds | With due diligence conditions (Rule 10.5.4) | Per Constitution and Prospectus | Per Constitution and Prospectus |
| Valuation Function | Fund Manager (via delegation) | Fund Administrator or FSR-regulated person | Per Fund Manager (lighter requirements) |
| DFSA notification on criteria breach | Must apply for wind-up or re-register | ✔ Immediate notification + wind-up / reclassification | ✔ Immediate notification + wind-up / reclassification |
📊 Decision Tree — Classifying a Domestic Fund Type
flowchart TD
A([New Domestic Fund being structured]) --> B{Will Units be offered to the general public?}
B -->|Yes| PF[🔵 PUBLIC FUND — Chapter 10\nRequires DFSA registration\nFull Prospectus + Oversight function]
B -->|No — private placement only| C{Are all Unitholders Professional Clients?}
C -->|No| PF
C -->|Yes| D{Will initial subscription be ≥ US$500,000?}
D -->|Yes| QIF[🟢 QUALIFIED INVESTOR FUND — Chapter 12A\nNotification to DFSA\nLightest regulatory touch]
D -->|No — between US$50K and US$500K| EF[🟠 EXEMPT FUND — Chapter 12\nNotification to DFSA\nMin sub US$50,000\nInformation Memorandum]
D -->|No — below US$50K| PF
PF --> PF2[Apply for DFSA registration\nAppoint Oversight Function\nPrepare full Prospectus\nApply investment/borrowing limits]
EF --> EF2[Notify DFSA under Article 34\nPrepare Information Memorandum\nAppoint regulated valuer for valuation\nMonitor ongoing conditions]
QIF --> QIF2[Notify DFSA\nPrepare Information Memorandum\nLimited Part 4 obligations\nBroader custody exemptions available]
style PF fill:#1565C0,color:#fff
style QIF fill:#2E7D32,color:#fff
style EF fill:#E65100,color:#fff
🔵 Chapter 10 — Requirements Specific to Public Funds (§10.1–10.5)
📖 Plain-English Overview — Chapter 10
Chapter 10 is the Public Fund rulebook. It covers: the registration process with DFSA (not just notification), the mandatory oversight function that every Public Fund must have, the detailed requirements for oversight providers (suitability, independence, duties, reporting obligations), and Public Fund-specific investment and borrowing restrictions. The Prospectus content requirements for Public Funds are in Part 7 (Chapter 14).
§10.2 — Registration of Public Funds
📋 Registration Requirements (§10.2.1–10.2.3)
| Rule | Obligation | Key Requirement | Risk |
|---|---|---|---|
| 10.2.1 | Application Process | Application under Article 28 of the Law must be made by the Body Corporate that will be the Fund Manager. Investment Trusts: Trustee and Fund Manager must apply jointly. Must submit appropriate AFN forms. | High |
| 10.2.1(3) | Legal Certification Required | Application must be accompanied by certification from the Fund's legal advisers confirming: (a) Constitution complies with Law and Rules; (b) Prospectus complies with Law and Rules; (c) if managed by External Fund Manager, section 6.1 requirements are met. | High |
| 10.2.3 | Registration Conditions (7 conditions) | DFSA will only register if: (a) Fund has permitted form (Investment Company, Partnership or Trust); (b) legal formation formalities completed; (c) licensed Fund Manager (or External FM) appointed; (d) Investment Trust has qualifying Trustee; (e) satisfactory custody and oversight arrangements made; (f) DFSA-Registered Auditor appointed; (g) Fund name is not undesirable/misleading and purpose is reasonably achievable. | Prerequisites |
📌 Registration vs. Notification — Key Distinction
A Public Fund must obtain DFSA registration under Article 28 of the Law before offering any Units — this requires a formal application, legal certification, and DFSA approval. The DFSA actively assesses the application and may make independent enquiries. An Exempt Fund or QIF only needs to notify the DFSA under Article 34 — this is a notification process, not a pre-approval. The distinction is fundamental: a Public Fund cannot launch until registered; an Exempt Fund or QIF can operate after notification.
§10.3 — Oversight Arrangements for Public Funds
📋 Oversight Function — Structure, Duties & Principles
Every Public Fund must have an oversight function — an independent body that monitors the Fund Manager's compliance with the Constitution, Prospectus, and CIR. The oversight function provides a critical investor protection layer, separate from the Fund Manager's own governance.
| Rule | Obligation | Key Requirement | Risk |
|---|---|---|---|
| 10.3.2 | Suitability Criteria + Due Diligence | Each oversight person must be: suitably qualified, fit and proper, and independent per Article 42 of the Law. Fund Manager must perform due diligence on each individual before appointment. Written appointment agreement required, including express commitment to discharge oversight function per Law and Rules. | High |
| 10.3.3 | Replacement Timelines | If oversight person unable to fulfil duties or no longer meets criteria: replace within 21 days. If oversight person resigns/vacates: replace within 60 days. DFSA must be notified of all changes with reasons. | High |
| 10.3.4 | Oversight Duties | Must monitor: (a) Fund Manager compliance with Constitution, Prospectus, licence conditions, and (if EFM) EFM requirements; (b) adequacy of Fund Manager's systems and controls for risk management and compliance. Must report findings to Fund Manager including actual/potential breaches. Must report to DFSA if Fund Manager fails to rectify within 30 days AND the matter could have a materially adverse impact on Unitholders. | High |
| 10.3.6–10.3.10 | Four Principles for Oversight Persons | Principle 1 — Integrity: High standards of integrity and fair dealing; disclose all direct/indirect financial interests that could conflict with oversight duties. Principle 2 — Due Skill, Care and Diligence: Act with due skill, care and diligence. Principle 3 — Market Conduct: Observe proper standards in financial markets. Principle 4 — Relations with DFSA: Open and cooperative with DFSA; proactively disclose information the DFSA would reasonably expect to know. | High |
| 10.3.12 | Quarterly Oversight Reporting | Oversight providers must report to the Fund Manager at least quarterly at a board meeting: whether the Fund Manager's systems and controls relating to the oversight function are operating as intended and remain adequate. | Medium |
| 10.3.13 | Annual Oversight Report | Oversight person must produce an annual Oversight Report for inclusion in the Fund's annual report. Must contain: (a) description of oversight duties and safekeeping responsibilities; (b) statement on whether Units have been issued/redeemed/priced in accordance with Rules and Constitution; and whether investment/borrowing limits have been exceeded. | High |
| 10.3.14–10.3.15 | Co-operation & Record-Keeping | Fund Manager must ensure full co-operation with oversight providers: access to records, no interference, report significant financial matters. Fund Manager must retain records of: due diligence on oversight persons; all matters reported by oversight providers and remedial actions taken. | Medium |
⚠️ DFSA Whistleblowing Trigger — Rule 10.3.4(d)
The oversight function has a direct reporting duty to the DFSA — bypassing the Fund Manager — if: (1) the Fund Manager has failed to take appropriate remedial action within 30 days of being notified of a breach or inadequacy; AND (2) the oversight person believes on reasonable grounds that the matter has had, or is likely to have, a materially adverse impact on Unitholders. This is a powerful regulatory safeguard and oversight persons must be prepared to exercise it.
§10.5 — Investment & Borrowing Requirements for Public Funds
📋 Key Investment & Borrowing Restrictions — §10.5
| Rule | Restriction | Key Requirement | Risk |
|---|---|---|---|
| 10.5.2 | Spread of Risk | Fund Manager must take reasonable steps to ensure Fund Property provides a spread of risk consistent with investment objectives and policy in the Prospectus. Single-asset concentration funds (e.g. single property) must disclose this and associated risks in the Prospectus. | High |
| 10.5.3 | Breach Rectification — Own Expense | Fund Manager must avoid Fund Property being used contrary to this section. On becoming aware of any breach: must take action at its own expense to rectify immediately — except where immediate action would not be in Unitholders' best interests (then as soon as those circumstances cease). Must not postpone action without consent of oversight function. | High |
| 10.5.4 | Investment in Other Funds — 4 Conditions | Before investing in Units of another Fund: must determine the target fund (a) has independent annual audit per IFRS or US GAAP; (b) has redemption mechanisms for Unitholders (if open-ended); (c) is prohibited from having more than 20% of its value in other Fund Units; and (d) has a proper and disclosed basis for asset valuation and unit pricing. | Medium |
| 10.5.5 | Derivatives Exposure Cap | Total Derivatives exposure of a Public Fund must not exceed the net asset value of Fund Property (i.e. 100% of NAV). Fund Manager's systems and controls must include risk management processes to monitor and measure Derivative positions and their contribution to overall fund risk profile as frequently as appropriate. | High |
| 10.5.6 | Stock Lending & Borrowing | Stock lending/borrowing is permitted subject to Constitution and Prospectus. Collateral for stock lending must at all times be at least equal in value to the transferred Securities. | Medium |
| 10.5.7 | Borrowing Cap — 20% of NAV | Fund borrowing (including Derivative arrangements that achieve a temporary money injection) must not exceed 20% of Fund Property NAV on any day — except for Property Funds. Fund Manager must take reasonable care that repayment arrangements are in place to maintain compliance. On breach: must take immediate action. | High |
| 10.5.8–10.5.9 | Real Property Valuation (non-Property Funds) | For Public Funds investing in Real Property that are NOT Property Funds: must appoint an independent Valuer with relevant expertise (meeting Rule 13.4.19) with oversight function approval. Valuer must perform: full valuation with physical inspection (including internal inspection of buildings) at least once a year; review-based valuation at least every 12 months; fresh valuation if any event may materially affect property value. | Medium |
✅ Compliance Checklist — Public Funds (Chapter 10)
- Submit DFSA registration application (via AFN) — include legal counsel certification of Constitution, Prospectus, and (if EFM) section 6.1 compliance
- Confirm all 7 registration conditions in Rule 10.2.3 are met before submitting application
- Appoint oversight arrangement — either Oversight Committee (≥3 qualified, fit and proper, independent individuals) or Eligible Custodian / Trustee
- Conduct and document due diligence on each oversight person/entity before appointment
- Execute written appointment agreements with all oversight persons containing express Rule 10.3.4 compliance commitments
- Build systems and controls giving oversight providers: full information access, ability to report breaches to FM and DFSA if necessary
- If oversight person unable to fulfil duties or fails criteria: replace within 21 days and notify DFSA
- If oversight person resigns or vacates position: replace within 60 days and notify DFSA
- Hold at least 2 Governing Body meetings per year
- Hold at least 1 AGM per year (present annual report at AGM)
- Obtain quarterly oversight reports from oversight providers; present to board
- Include Oversight Report in annual report (Rule 10.3.13)
- Ensure Fund borrowing does not exceed 20% of NAV on any day (except Property Funds)
- Ensure total Derivatives exposure does not exceed 100% of NAV
- For any investment in another Fund: verify the 4 conditions in Rule 10.5.4 before committing Fund Property
- For stock lending: ensure collateral value always equals or exceeds transferred Securities value
- Retain oversight function due diligence records and oversight reports for 6 years
🟠 Chapter 12 — Requirements Specific to Exempt Funds (§12.1–12.2)
📖 Plain-English Overview — Chapter 12
Exempt Funds occupy the middle tier of the DIFC fund taxonomy. They are restricted to Professional Clients only, offered exclusively by private placement, with a minimum subscription of US$50,000. Unlike Public Funds, they do not require DFSA registration — only notification. The key regulatory risk is ongoing eligibility monitoring: if at any point an Exempt Fund no longer meets its classification conditions (e.g. a non-Professional Client becomes a Unitholder, or a subscription falls below US$50,000), the Fund Manager must immediately notify the DFSA and commence reclassification or wind-up proceedings.
📋 Rule Summary Table — Chapter 12 (§12.1–12.2)
| Rule | Obligation | Key Requirement | Risk |
|---|---|---|---|
| 12.1.1(1)–(2) | Ongoing Eligibility — Three Conditions | Exempt Fund status requires satisfaction of Article 16(4) conditions at inception AND on an ongoing basis: (a) Units offered by private placement only; (b) all Unitholders are Professional Clients; (c) minimum subscription of US$50,000. Fund Manager must ensure ongoing compliance. | High |
| 12.1.1(3) | Intermediary Control | Where Fund Manager uses other Authorised Firms or persons in other jurisdictions to offer/sell Exempt Fund Units, must take reasonable steps to ensure those parties do not make offers in breach of Article 16(4) conditions. | High |
| 12.1.1(4) | Immediate Action on Eligibility Breach | As soon as Fund Manager becomes aware the Fund no longer meets or is likely not to meet Exempt Fund conditions: must immediately (a) commence wind-up or take steps to register as Public Fund; AND (b) notify DFSA of that fact and measures taken/proposed. | High |
| 12.1.1(5) | Valuation Appointment | If subject to valuation requirement in Rule 8.4.1(1), must appoint a Fund Administrator or a Person regulated by a Financial Services Regulator to conduct the Fund's valuation. (Different from Public Fund rule — Exempt Funds have this specific alternative.) | Medium |
| 12.1.2 | DFSA Notification Content | Notification to DFSA per Article 34 must include: (a) general Fund description, nature of investments, intended monetary size; (b) if a Hedge Fund with prime broker: prime broker identity/regulator details and legal certification of Rule 13.6.3 compliance; (c) if External Fund: jurisdiction of establishment/domicile; (d) if External Fund Manager: jurisdiction of domicile and details of Appointed Fund Administrator or Trustee. | Medium |
⚠️ The "Falling Below" Trap — Exempt Funds
- If a Non-Professional Client (e.g. a newly-classified Retail Client) holds Units in the Exempt Fund — eligibility condition (b) is breached immediately
- If a new subscription is accepted below US$50,000 — eligibility condition (c) is breached
- If Units are offered via a general advertisement rather than private placement — condition (a) is breached
- On any such breach: the Fund Manager must notify DFSA immediately and commence wind-up or Public Fund reclassification — no grace period is provided
🟢 Chapter 12A — Requirements Specific to Qualified Investor Funds (§12A.1–12A.3)
📖 Plain-English Overview — Chapter 12A
QIFs are the lightest-touch regulated Domestic Fund type — designed for sophisticated, institutional, and ultra-high-net-worth investors. The US$500,000 initial subscription threshold is the key distinguishing feature from Exempt Funds. QIFs have significantly reduced obligations under Part 4: only a small subset of Chapter 8 rules apply. The Fund Manager, however, remains subject to all overarching DFSA obligations under the Law, GEN Principles, and systems and controls requirements. Crucially, QIFs have significantly broader custody exemptions (PE, Property, VC, Credit Funds) — but the absolute prohibition on non-Eligible Custodian holding Crypto Tokens still applies.
📋 Rule Summary Table — Chapter 12A
| Rule | Obligation | Key Requirement | Risk |
|---|---|---|---|
| 12A.1.1(1)–(2) | QIF Conditions — Ongoing Basis | QIF status requires satisfaction of Article 16(5) conditions at inception AND on an ongoing basis: (a) Units offered by private placement only; (b) all Unitholders are Professional Clients; (c) initial subscription of at least US$500,000 per Unitholder. Fund Manager must ensure ongoing compliance. | High |
| 12A.1.1(4) | Immediate Action on Condition Breach | As soon as Fund Manager becomes aware the QIF no longer meets or is likely not to meet Article 16(5) conditions: must immediately (a) commence wind-up or take steps to reconstitute as Exempt Fund or register as Public Fund; AND (b) notify DFSA of that fact and measures proposed. | High |
| 12A.2 | Overarching Fund Manager Obligations Continue | Although QIF Fund Managers are exempt from many detailed requirements, they remain subject to: Article 22 of the Law (general duties); Article 38 + GEN chapter 5 (systems and controls); GEN section 4.2 (DFSA Principles for Authorised Firms). Open-ended QIFs must comply with Rule 8.6A.1 (liquidity risk management). | Foundational |
| 12A.3.1(1) | Custody — Eligible Custodian Required (default) | Fund Manager of a QIF (that is not an Investment Trust) must ensure legal title to Fund Property is registered with an Eligible Custodian. | High |
| 12A.3.1(2) | QIF Custody Exemptions (5 types) | Eligible Custodian requirement does NOT apply to QIF Fund Managers where the Fund is: (a) a Property Fund; (b) a Private Equity Fund; (c) a Venture Capital Fund; (d) a Credit Fund; or (e) a Fund investing in an interest in operation of a Real Property asset (e.g. infrastructure). Where Fund Manager itself holds Fund Property (or ICC holds it), must have effective segregation arrangements ensuring Fund Property is not available to creditors on insolvency. | Medium |
| 12A.3.1(4) | Crypto Token — No Exception | Notwithstanding the custody exemptions in Rule 12A.3.1(2), Fund Property consisting of Crypto Tokens MUST be held by an Eligible Custodian. The exemptions do not apply to Crypto Tokens under any circumstances. | High |
📊 QIF — Limited Chapter 8 Obligations That DO Apply
Per Rule 8.1.1(3), only the following Chapter 8 requirements apply to QIFs:
| Rule | Requirement | Condition |
|---|---|---|
| 8.1A.1 & 8.1A.2 | Corporate Director requirements | All QIFs |
| 8.3.1(2) | Conflict of interest — disclosure to Unitholders | All QIFs |
| 8.3 (full section) | Full conflicts of interest section | QIF that is a Credit Fund only |
| 8.3.1(2) | Conflict disclosure | QIF that is a Venture Capital Fund |
| 8.4.1(1)(a) | Regular valuation of Fund Property | All QIFs |
| 8.6A.1 | Liquidity risk management systems and controls | QIFs that are Open-ended Funds only |
| 8.10.1 | Maintenance of records (6-year retention) | All QIFs |
📌 What QIFs DON'T Need (that Exempt Funds do)
QIFs are not required to: produce interim reports (unless material change); comply with most of the Chapter 8 Fund Manager duties (valuation procedures, issue/redemption obligations, unit registers, meeting requirements, approvals/notifications, most fees rules, delegation review obligations); include an Oversight Report or 5-year comparative table in their annual reports; appoint an Oversight Committee or oversight function; hold an AGM; or apply the Public Fund investment and borrowing limits (no 20% borrowing cap, no 100% derivatives cap).
⚠️ Risk Matrix — Part 5 Key Risks
| Risk Area | Risk Level | Consequence | Mitigation |
|---|---|---|---|
| Public Fund offering Units before DFSA registration is granted | High | Unlawful offering; DFSA enforcement; fund suspension; investor claims | Hard gate: no marketing or offering until DFSA registration confirmation received in writing |
| Oversight person resigns — vacancy not filled within 60 days | High | Breach of Rule 10.3.3; Public Fund operating without required oversight function | Succession plan for all oversight persons; automated 60-day countdown on vacancy notification |
| Oversight persons failing to report Fund Manager breach to DFSA when 30-day rectification window expires | High | Oversight persons in breach of Rule 10.3.4(d); potential individual disciplinary action; DFSA may object to appointments | Written procedure for oversight persons specifying DFSA reporting trigger and escalation path |
| Exempt Fund admitting non-Professional Client or subscription below US$50,000 | High | Immediate breach of classification conditions; Fund Manager must notify DFSA and begin wind-up or reclassification | Robust investor onboarding KYC/classification process; hard-coded subscription minimum in subscription documents |
| QIF accepting initial subscription below US$500,000 | High | Immediate breach of QIF conditions; must notify DFSA and commence reclassification or wind-up | Payment gateway hard stop below US$500,000 for QIF subscriptions; compliance sign-off per subscription |
| Public Fund borrowing exceeding 20% of NAV | High | Breach of Rule 10.5.7; Fund Manager must take immediate action at own expense | Daily borrowing monitoring with automatic alert at 18% NAV; board escalation protocol |
| QIF holding Crypto Tokens outside an Eligible Custodian | High | Breach of Rule 12A.3.1(4) — absolute prohibition regardless of fund type exemptions | Pre-trade check: any Crypto Token acquisition must be paired with confirmed Eligible Custodian appointment |
📊 Part 5 Summary Dashboard
💡 Key Takeaways
- Public Fund = DFSA registration + oversight function + full investment/borrowing limits
- Exempt Fund = DFSA notification + Professional Clients + US$50K minimum subscription
- QIF = DFSA notification + Professional Clients + US$500K initial subscription + lightest touch
- All three types require Eligible Custodian for Crypto Tokens — no exceptions whatsoever
- Oversight persons must report direct to DFSA if Fund Manager fails to rectify breach within 30 days
- QIFs have broad custody exemptions (PE, Property, VC, Credit) but full regulatory duties on FM remain
🪤 Compliance Traps
- Offering Public Fund Units before DFSA registration (not just notification) is formally granted
- Exempt Fund accepting subscriptions below US$50,000 or from non-Professional Clients without immediate DFSA notification
- QIF accepting initial subscription below US$500,000 and failing to notify DFSA immediately
- Assuming QIF custody exemptions extend to Crypto Tokens — they do not
- Oversight persons treating their 30-day DFSA whistleblowing trigger as optional
- Public Fund borrowing via Derivative structures without counting them toward the 20% NAV cap
🚩 Red Flags
- Public Fund without an Oversight Report in its annual report
- Oversight Committee with a member who is also the Fund Manager's executive director
- Exempt Fund marketing via social media, website, or newsletter rather than private placement
- QIF with open-ended structure but no liquidity risk management policy (Rule 8.6A.1 applies)
- Fund Manager "self-custodying" QIF assets without proper segregation arrangements
- Public Fund investing in another Fund that has >20% of its value in other Fund Units (Rule 10.5.4(c))
🏛️ Governance Notes
- Annual due diligence on oversight persons — confirm ongoing suitability, fit and proper, independence
- Board should receive quarterly oversight function reports; formal acknowledgment in minutes
- Fund Manager's Governing Body must have succession plan for all oversight persons in all Public Funds
- Investor Relations: classify all investors against fund type conditions before accepting subscription
- Annual review of all fund type classification — confirm conditions still met for each fund in the portfolio