Documentation 147
legislation). Managers of funds operated from jurisdictions subject to the EU Savings
Directive (including non-EU countries such as the Isle of Man, BUI and Cayman) may
also currently be re-assessing their forms, so as to ensure that they elicit sufficient infor-
mation to satisfy the relevant residence tests for the purpose of the Directive. In many
cases this may require some work, since the due diligence which is satisfactory for anti-
money laundering purposes may not be to that used for EU Savings Directive purposes;
alignment of the two will be desirable where it is possible, so as to keep administration to
a minimum and reduce the hurdles to investment.
An example of the contents of an application form (which has not been adapted for
EU Savings Directive purposes) is given in Figure 6.1.
Where a prospective investor applies to subscribe by contacting the manager direct,
by letter, telephone, fax or e-mail, and if for some reason no further subscription form
is needed, a registration form will still need to be sent to him by following post so that
the registrar has details of the account name, the holder’s address, and any designation
details.
6.12 Contract note
Promptly following the sale or repurchase of shares/units in a fund, the manager
should issue the investor with a contract note setting out the details of the transac-
tion. In many jurisdictions the regulator will lay down minimum turnaround times
for this.
Contract notes are nowadays of increasing importance as more and more funds
move to non-certificated status (see Section 6.14 below). In effect, the contract note is
now perceived as the main document acknowledging the investor’s subscription or
redemption; although in practice his position is protected by the trustee and/or regis-
trar, whose records provide the definitive evidence of who holds what.
6.13 Cancellation forms
In certain jurisdictions, including the United Kingdom and many countries operating
similar investor protection regimes, private investors are permitted by law to change
their minds about investments they have made, provided they do so within a short
period of submitting their application. These rights are called ‘cancellation’ rights.
Where such regimes are in operation, managers are normally required to send out
notices advising new investors of these rights, immediately on investment and along
with their contract notes. Investors wishing to take advantage of the facility then com-
plete the form and return it to the manager, within a set period (usually limited to
14 days or so).
The cancellation regime is not intended to protect investors from poor investment
timing and/or falls in the markets; only from being sold products which they then real-
ize, on reflection, are not appropriate to their needs or risk profile. For this reason an
investor exercising his rights will receive back the sum he originally invested (i.e. with
initial charges reimbursed), less any shortfall arising from falls in the NAV of the
shares/units.

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