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Application provision

1.1 Unless otherwise stated, this Part applies to a non-directive friendly society.



Rights in respect of a contract or asset whose effect is that of a derivative must have a value determined in accordance with 9.9.



Subject to 16.4, for the purposes of this Part, a contract has the effect of a derivative if it is a contract (other than a derivative) which provides whether upon the exercise of a right by the firm or otherwise:

  1. (1) for payment (at any time) of amounts which are determined by fluctuations in:
    1. (a) the value of property of any description;
    2. (b) an index of the value of property of any description;
    3. (c) income from property of any description; or
    4. (d) an index of income from property of any description;
  2. (2) for delivery of an asset (other than an asset for the valuation of which provision is made in 11) to or by the firm; or
  3. (3) for the conversion of an asset held by the firm or another party to:
    1. (a) an asset of a different type; or
    2. (b) a different asset of the same type.



Subject to 16.4 for the purposes of this Part an asset has the effect of a derivative if the asset is an asset (other than an approved security or an asset falling within 13.1(1)) and the holding of the asset confers contractual rights or imposes contractual obligations to make or accept payment, delivery or conversion as set out in 16.2.



A contract or asset does not have the effect of a derivative by reason only that:

  1. (1) it provides for the unconditional delivery of assets, or for the payment for unconditional delivery of assets, such delivery or payment to be made within a period not exceeding the period commencing at the date of the contract and extending:
    1. (a) in the case of a listed security or a security admitted to trading, for the usual period for delivery or payment as determined by the rules of the stock exchange or regulated market on which the securities are listed or admitted to trading, or facilities for dealing have been granted; or
    2. (b) in any other case, for 20 working days;
  2. (2) it is a contract of the type described in 4.5(1) in respect of which the conditions set out in 4.5(2) have been satisfied; or
  3. (3) it is a transaction to which 8.1 applies.