3.1. Application

This chapter sets out arrangements that do not amount to a Collective Investment Scheme in specified circumstances and specific categories of arrangements that do not constitute Collective Investment Schemes.

3.2. Exclusions

An arrangement is not a Collective Investment Scheme if it falls within one or more of the circumstances or categories of arrangement specified in this chapter.

3.3. Schemes not operated by way of business

An arrangement is not a Collective Investment Scheme if it is not operated by way of business. Guidance For the purposes of Rule 3.3, a person shall be treated as operating an arrangement by way of business if that person:

1. (a) operates the arrangement in a manner which in itself constitutes the carrying on of a business;
2. (b) holds himself out as willing and able to engage in the business of operating a Collective Investment Scheme; or
3. (c) regularly solicits other persons to engage with him in transactions related to that activity.

3.4. Deposits

An arrangement is not a Collective Investment Scheme if the whole amount of each participant's contribution is a deposit which is accepted by a Person who is licensed to accept deposits.

3.5. Common accounts

An arrangement is not a Collective Investment Scheme if:

1. (a) the rights or interests of each participant in the arrangement are rights or interests in money held in a common account; and
2. (b) the money is held in the account on the understanding that an amount representing the contribution of each participant is to be applied in making payments to him or in satisfaction of sums owed by him or in the acquisition of property for him or the provision of services to him.

Guidance

The exclusion in Rule 3.5 is intended to apply to an arrangement where each participant has a right or interest to an amount of money in a common account. For example, this will apply where a firm has a general client account that receives money from the firm's clients that are is used to pay for services or is set off against amounts owed by those clients.

3.6. Commercial activities unrelated to Regulated Activities

An arrangement is not a Collective Investment Scheme if each of the participants in the arrangement:

• (a) carries on a business which does not involve the carrying on of any Regulated Activity or an activity which would be such an activity were it not for any applicable exclusion; and
• (b) enters into the arrangement for commercial purposes related to that business where that participant carries on that business by virtue of being a participant in the arrangement.

3.7. Group arrangements

1. (a) Subject to (b), an arrangement is not a Collective Investment Scheme if each of the participants is a Body Corporate in the same Group as the Person undertaking the Collective Investment Scheme management function in relation to the arrangement.
2. (b) Prior to setting up the arrangement, the participants may elect to treat the arrangement as a Collective Investment Scheme by notifying the AFSA of their intention to do so.

3.8. Franchise arrangements

An arrangement is not a Collective Investment Scheme if the arrangement is a franchise arrangement.

3.9. Clearing services

An arrangement is not a Collective Investment Scheme if the purpose of the arrangement is the provision of clearing services and the services are operated by an Authorised Market Institution.

3.10. Certificates or Options

An arrangement is not a Collective Investment Scheme if the rights or interests of the participants in the arrangement are Certificates or Options.

3.11. Time‐share and other 'property‐enjoyment' related arrangements

An arrangement is not a Collective Investment Scheme:

• (a) if the rights or interests of each of the participants in the arrangement are time share rights; or
• (b) if:
• (i) the predominant purpose of the arrangement is to enable the participants to share in the use or enjoyment of property or to make its use or enjoyment available gratuitously to others; and
• (ii) the property to which the arrangement relates does not consist of or include Investments of the currency of any country or territory or which would be Investments if not for any applicable exclusion.

3.12. Bodies corporate not undertaking investment management

An arrangement is not a Collective Investment Scheme if the arrangement comprises a closed-ended Body Corporate, unless on reasonable grounds the purpose or effect of such an arrangement appears to be the investment management, in the exercise of discretion for a collective purpose, of investments, for the benefit of the shareholders or partners.

3.13. Debentures and Warrants of a single issuer

(a) An arrangement is not a Collective Investment Scheme if the rights or interests of the participants in the arrangement are represented by a Debenture or Warrant:

1. (i) where the issuer of the Debenture or Warrant is a single issuer, and if that issuer is:

(1) a Body Corporate, it is neither an open‐ended investment company nor a closed‐ended investment company the intent or purpose of which is investment management; or

(2) not a Body Corporate, the rights and interests of the Debenture or Warrant holder are guaranteed by the government of any country or territory; and

1. (ii) which, if it is a convertible Security, the underlying Securities to which the Debenture or Warrant holder is entitled are Shares or Debentures issued, or to be issued, by the same issuer as the issuer of the Debenture or Warrant or single other issuer.

(b) An arrangement that is not a Collective Investment Scheme by virtue of Rule 3.13(a) does not become a Collective Investment Scheme merely because one of the participants in the arrangement is a person:

1. (i) whose ordinary business involves him engaging in an activity that is a Regulated Activity or that would fall within an applicable exclusion from a Regulated Activity; and
2. (ii) whose rights or interests in the arrangement are, or include, rights or interests in a swap arrangement under which he facilitates the making of payments to participants whether in a particular amount or currency or at a particular time or rate of interest or all or any combination of those things in settlement of the rights and interests of the other participants in the arrangement.

3.14. Insurance

An arrangement is not a Collective Investment Scheme if it is a contract of insurance.

3.15. Profit Sharing Investment Accounts (PSIAs)

An arrangement is not a Collective Investment Scheme if it is an account or portfolio which is either an Unrestricted or Restricted Profit Sharing Investment Account offered by an Authorised Firm licensed by the AFSA to manage such PSIAs.

3.16. Discretionary Portfolio Accounts

An arrangement is not a Collective Investment Scheme if it is a portfolio or account managed under a discretionary portfolio management agreement.

3.17. Single Family accounts

1. (a) Subject to (b), an arrangement is not a Collective Investment Scheme if every participant in the arrangement is a member of a Single Family. 
2. (b) Prior to setting up the arrangement, the participants may elect to treat the arrangement as a Collective Investment Scheme by notifying the AFSA of their intention to do so.

3.18. Sukuk

An arrangement is not a Collective Investment Scheme if the rights or interests of the participants are evidenced by sukuk certificates where the holders of the certificates are entitled to rely on the credit worthiness of:

• (a) the issuer of the sukuk certificates; or
• (b) any other Person who has assumed obligations under the sukuk certificates, for obtaining their rights and benefits arising under the certificates.

3.19. Employee reward schemes

An arrangement is not a Collective Investment Scheme if the arrangement is for the purposes of enabling or facilitating the operation of an employee compensation or reward scheme where the arrangement:

1. (a) makes securities available only to:
2. (i) an Employee or former Employee of the Issuer or of another member of the same Group as the issuer of such securities; or
3. (ii) a Close Relative of any such Employee; and
4. (b) is operated by the issuer of the securities or by a member of the same Group as the issuer or by a trustee who, in pursuance of the arrangements, holds the securities issued by the issuer for the benefit of any eligible Persons referred to in Rule 3.19(a)(i) or (ii).

3.20. Carried interest vehicles

An arrangement is not a Collective Investment Scheme if it is a carried interest vehicle which is established solely for the purposes of enabling any officers, directors or employees of a Fund Manager or their related persons, to participate in carried interest or similar profit generated by one or more Collective Investment Schemes or other investment management arrangements.

3.21. Other circumstances

The AFSA may determine that a specific form of arrangements is not a Collective Investment Scheme on the application of any Person with an interest in those arrangements. Any such determination by the AFSA may apply in the case of individual arrangements or generally in respect of arrangements that share similar characteristics.