Regulations for Offers of Collective Investment Schemes (CIS)
What should a prospectus for an offer of a CIS unit contain?
Where a scheme intends to use or invest in financial derivatives, the prospectus should include the following:
a) whether financial derivatives employed in the scheme are used for the purposes of hedging, EPM, optimising returns or a combination of all three objectives;
b) the method used to determine the scheme’s exposure to financial derivatives (i.e. commitment approach, relative VaR or absolute VaR), a description of the method and:
i) if the VaR Approach is used, the expected level of leverage, based on the sum of the notional of the derivatives used, and the possibility of higher leverage levels should be included;
ii) if the relative VaR Approach is used, the reference portfolio (or benchmark) and the rationale for using the reference portfolio (or benchmark) should be included; and
iii) if the absolute VaR Approach is used, the absolute VaR limit and the rationale for the absolute VaR limit should be included; and
c) a statement that the manager will ensure that the risk management and compliance procedures are adequate and has been or will be implemented and that it has the necessary expertise to manage the risk relating to the use of financial derivatives.