02.32 – Platforms and other distributors of funds

Fund distributors, which may include:

  • financial advisers,
  • fund platforms,
  • wealth managers,
  • brokers (including execution-only brokers),
  • banks,
  • building societies; and
  • members of an Insurance group, can all fall within the definition of Investment Entity because of their role in distributing a Collective Investment Scheme as defined for the Agreement.

There are two different types of fund distributors:

  • those that act as an intermediary in holding the legal title to the Collective Investment Scheme (such as a nominee); and
  • those that act on an only advisory basis.

Where a customer appears on a Collective Investment Scheme’s register, the responsibility to report on that customer lies with the fund. As shown in the following example, if a customer invests in a fund via a fund platform, the responsibility to report on the customer may lie with the platform.

Example 1

Fund platforms typically hold legal title to Collective Investment Scheme interests on behalf of their customers (the investors) as nominees. The customers access the platform to buy and sell investments and to manage their investment portfolio. The platform will back the customers’ orders with holdings in the Collective Investment Scheme, and possibly other assets. But only the platform will appear on the shareholders’ register of the Collective Investment Scheme. Where this is the case, the platform will be responsible for reporting on its Financial Accounts.

Where financial advisers’ activities do not go beyond the provision of investment advice to their customers and/or acting as an intermediary between the Collective Investment Scheme, or fund platform and the customer, then they will not hold legal title to the assets and therefore are not in the chain of legal ownership of a Collective Investment Scheme. Such financial advisers will not be regarded as the Financial Institution that maintains the Financial Account in respect of the accounts they advise on (see 2.34 below).

A platform may have a ‘mixed business’ i.e. it acts as an adviser or ‘pure intermediary’ between the investor and the underlying Financial Institution (such as a Collective Investment Scheme), on behalf of some customers. In addition, it also holds legal title to interests on behalf of other customers. In the case where legal title is held, the platform will be a Financial Institution with a reporting obligation in respect of those interests.

From the platform’s perspective, it will not be treated as maintaining those accounts where it acts as an adviser or pure intermediary. This is consistent with the treatment of a Central Securities Depository (see 2.38).