On 20 June 2014 the Financial Services Board issued amended rules for the administration of a collective investment scheme in participation bonds. This updates and amends the rules issued in 2003.
Participation bonds are investment products in underlying commercial property development assets. They are regulated under the Collective Investments Schemes Control Act, 2002.
The amended rules place increased obligations on the manager of the scheme.
The amended rules place increased obligations on the manager of the scheme in relation to the valuation of the bonded property and the screening of the borrower. Specifically, the manager has a duty to ensure that a documented risk management programme is in place before granting a loan.
Another major change relates to the power of the manager to exercise and enforce the rights of participants under participation bonds. The duties of the manager depend on whether or not it reasonably believes that the price fetched represents the realistic open-market value of the property. The changes also limit the conflicts of interest that the manager has in the management of the scheme. The amended rules contain other, less significant changes.