CITM4050 - Qualifying Investments: Pre-arranged protection against risks

FA02/SCH16/PARA13; ITA/s349

An investment is excluded from being a ‘qualifying investment’ ( CITM4010) under the CITR scheme if arrangements (‘excluded arrangements’) exist whose main purpose (or one of whose main purposes) is to provide a measure of protection to the investor against the risks to which they would otherwise be exposed in relation to that investment.

Excluded arrangements, which may include insurance, indemnities, guarantees or other arrangements, may be part of the terms on which the investment is made, or be made before the investor makes the investment.

The terms ‘arrangements’ has a wide meaning. It includes any scheme, agreement or understanding – whether or not they are legally enforceable.

But note that excluded arrangements do not include arrangements that only provide against protection of risk to the extent that might reasonably be expected to be provided on commercial grounds if the investment had been made during the course of a banking business. For example, an arrangement under which a loan by an investor to a CDFI was secured by means of a charge on a property owned by the CDFI would not be an excluded arrangement.