FAQ about the SP Option Scheme

 Main topics

• SP Option Scheme, Folkeborsen etc

• Marketing of funds in Denmark

• Marketing Fee, Initial Fee etc.

• Cooperation Agreement, Executive Order etc. 

SP Option Scheme, Folkeborsen etc

Q    What do the expected payments amount to when the payments for SP are resumed?

A    Approximately DKK 7 billion corresponding to EUR 1 billion.
 

Q   Which funds may participate at Folkebørsen™ ?

A    Any fund that fulfils the admission requirements may be registered with Folkebørsen™ .

Q    May the individual manager register as many funds as he likes or is there a maximum?

A   There is no maximum. All funds may be registered as long as they fulfil the requirements. The Minister for Employment may, however, limit each investment adviser's number of investment institutions in the SP Option Scheme, cf. section 16(2) in the Executive Order on Investment Undertakings. Please note that the mentioned fees are to be paid per fund.

Q    Will an ethical selection of the funds take place?

A    No. Any fund which fulfils the admission requirements may be registered at Folkebørsen™ . However, please see section 13(3) no. 6 in the agreement (the Investment Fund by its conduct, including investment strategy, is deemed to conflict decisively with public morals).

Q    May investment institutions which make contributions to humanitarian or non-profit organisations participate in the SP Option Scheme?

A    Investment institutions which make contributions to humanitarian or non-profit organisations are subject to existing regulations for investments institutions, including the act regarding investment trusts and special investment institutions and other pooled investment schemes etc. No further demands are made on such investment institutions’ participation in the SP Option Scheme.

Q    When will the individual fund change asset category?
       How will I know if a fund belongs to the category of bonds or to the category of shares?

A    The categorization in relation to the marketing fee is the same as The Federation of Danish Investment Associations' categorization. In a share fund at least 75 per cent of the investments must be in shares. In a bond fund at least 75 per cent of the investments must be in bonds. All other funds are mixed funds. For further information, please visit the website of The Federation of Danish Investment Associations, www.ifr.dk.

Q    How is it decided which funds ATP Invest offers?

A    ATP expects to offer a wide range of funds through ATP Invest. Both funds with equities and bonds will be offered as well as mixed funds and funds covering special themes.

Q    Presentation of the return on investment

A    The funds’ returns on investments will be shown according to Morningstar’s standards which illustrate returns on investments across country borders. Folkebørsen™ will show the marketing fee, which is returned to the customer, in a way which will avoid confusion in case the customers invest in the fund both through Folkebørsen™ and through other distribution channels.

Q    What is the definition of the expression "total costs"?

A    The expression "total costs" is defined in appendix 1 to the co-operation agreement. In relation to international practice the expression is equivalent to FEFSI's (European Federation of Investment Funds and Companies) definition of Total Expense Ratio (TER) which includes all the fund's costs except brokerage and similar expenses.

Q    How is a performance dependent fee presented on Folkebørsen™ ?

A    It has not yet been decided how a performance dependent fee is to be presented on Folkebørsen™ .
The funds will have the opportunity of linking to a website where the funds by choice may include relevant information about the registered funds, including any performance dependent fee.

Q    How will my fund get a more prominent place at Folkebørsen™ ?

A    All funds will be presented objectively at Folkebørsen™. It will not be possible to single out individual funds at the expense of others. It will be possible, however, to advertise on the website of the Copenhagen Stock Exchange wherefrom a link will direct the user to Folkebørsen™.

Q    How can a fund be sure that it will be shown on Folkebørsen?

A    All registered funds will be shown on Folkebørsen™. The funds will be shown on the analysis tools available on Folkebørsen and furthermore, when being traded by the customers. The analysis tools comparing funds will be based on Morningstar's categories.

Customers who wish to opt out of ATP are given two options: 'Co-Choice' and 'Contributing Choice'. If the customer chooses the 'Co-Choice' option, all funds registered on Folkebørsen will be presented to him. If the customer chooses 'Contributing Choice', all funds attached to the governing class (for instance: Global shares, regional shares, short-term bonds (Danish), long-term bonds (Danish), global bonds) will be presented to him. In addition, ATP expects to make a category consisting of other funds enabling as many funds as possible to be shown in 'Contributing Choice'.

However, it may well be that some funds fit poorly into this category which means that they may be excluded from the 'Contributing Choice'.

Q    An investment fund may register only one investment undertaking per ISIN Code; what does this mean, insofar as each share class has its own ISIN code?

A    Some funds have more than one share class connected to the very same ISIN code; e.g. one class targeted at the retail market and another at the professional market. This is not accepted in Denmark because an isin is a unique code, and, thus, each fund can only register one ISIN code per subfund.

Marketing of funds in Denmark

Q    Must the fund be represented in Denmark?

A    No. The fund must, however, have obtained permission to do marketing in Denmark. This permission is granted by the Danish FSA.

Q    We are a foreign investment institute, and we have been marketed indirectly in Denmark in other Unit Link schemes prior to 1 January 2004. Do we still need to obtain permission from the Danish FSA to do marketing in Denmark?

A    According to the new investment trust act all investment institutes must be reported to the Danish FSA by 1 June 2004 at the latest.

The report must contain:

- information about the investment institutes that have been marketed (investment funds etc.) or which departments (sub-funds) that have been marketed
- documentation that the institute (the fund) has been approved and is being supervised in its home country.

It is not a requirement that the report is prepared in Danish – but is should be legible for the Danish FSA.

If a fund which complies with the above regulations also wishes to be enlisted with the SP Option Scheme, it is not – as a starting point – required that the fund is reported according to the new and comprehensive regulations in section 11. This only applies for funds not yet marketed in Denmark prior to 1 January 2004 (or if the foreign investment institute has not reported the fund prior to 1 June 2004) and which wish to market themselves directly or indirectly in Denmark, including in the SP Option Scheme. For further information please contact the Danish FSA.


Q   Which language are we to use when forwarding our application to the Danish FSA for marketing in Denmark?

A   The Danish FSA has decided that from September 2004 foreign investment undertakings covered by the UCITS directive shall file the simplified prospectus and any possible information on taxation regulations in Danish when applying for a marketing authorisation in Denmark, cf. section 11 item 2 of the Act on Investment Trusts and Special-purpose Associations as well as other Collective Investment Schemes. The rest of the documentation as required by the Danish FSA may be submitted in Danish, Swedish, Norwegian or English at the investment undertaking's own choice.

Please note that this rule only applies to investment undertakings covered by the UCITS directive. Other investment undertakings are governed by specific rules laid down by the Danish FSA.

Marketing Fee, Initial Fee etc. 

Q    What is meant by the phrase: "the largest fee for presentation and marketing which the fund manager pays to other intermediaries"? (Enclosure 3, page 1, 4th paragraph)

A    One of the intentions with the change of the ATP Act (the SP Option Scheme) is to give SP's pension savers the benefit of ATP's economies of scale. ATP is a major customer and enjoys discounts when investing in the investment institutes. The intention is implemented in section 12 in the executive order on requirements for investment undertakings included in the SP Option Scheme. Cf. sections 12(2) in the above executive order and section 19 in the executive order on the freedom of choice in the SP Scheme, the marketing fee is distributed to the pension savers pursuant to their shares in the specific investment scheme which the marketing fee relates to. The intention is to ensure that the pension savers receive the best possible conditions including low costs. This is why the requirement for the largest fee for presentation and marketing exists. The requirement is based on the rate applicable for marketing fee as stated by the Investment Undertaking. The rate paid to SP shall not be less than the one paid by the Investment Undertaking to other distributors in respect of marketing in Denmark.

Q    Which kind of profiling will I receive for my 'marketing fee'?

A    Folkebørsen™ has 3.3 million customers and a total investment pool of approximately DKK 43 billion. ATP's objective is that the contents and user-friendliness of Folkebørsen™ appeals to by and large the total adult Danish population

Q    What is the cost of having a fund registered with Folkebørsen™ ?

A    The registration fee is DKK 15,000 which will be charged if the fund lives up to all requirements for joining Folkebørsen™ . The yearly fee is DKK 12,000 which is payable in advance. The yearly fee is payable from 1st January 2005.

Q    Does the mentioned charge apply per manager or per registered fund?

A    The charge applies to each registered fund.

Q    Will the registration fee be payable if the fund does not complete the registration form?

A    Payment of the registration fee will take place once ATP has approved the Investment fund as an eligible Investment Undertaking.

Q    How will Fondsmæglerselskabet be paid?

A    Fondsmæglerselskabet receives brokerage from SP. Furthermore, any underwriting commission is accrued to Fondsmæglerselskabet.

Any profit which Fondsmæglerselskabet will make by trading with funds in the SP Option Scheme may after deduction of reserved amounts for risks be returned fully or in part to SP. It will be used to reduce the costs in the SP Option Scheme, cf. section 8(2) in the Executive Order on Investment Undertakings.

Cooperation Agreement, Executive Order etc.

Q    Why must an agreement be made for each branch/fund?

A    In order to avoid insecurity regarding who ATP's counter-party is in the agreement we have chosen the independent legal entity (branch/fund) as the one being bound to the agreement.

The term 'fund manager' is not an unambiguous legal entity. Naturally, this does not prevent other persons from acting on behalf of the branch/fund, for instance the investment management company. 
 

Q    What is meant by the accountant's declaration regarding sections 2, 5 and 12(3) of the executive order and Clause 7 of the agreement?

A    An accountant's declaration is a signed document from your audit that the fund complies with the provisions in the said sections of the 'Executive Order'.

The Executive Order is part of the Danish legislation governing the SP Scheme. You will find the document here.

Q    Which kind of documentation do you require from persons authorised to bind the company?

A    Depending on the specific situation the fund's usual documentation would be relevant as well as:

• a print of the authorisation from the relevant Commerce and Companies Agency
• the latest confirmed articles for the fund including provisions regulating the powers to bind the company
• a statement from the attorney
• if the fund is represented by proxy, the proxy signed by a person authorised to bind the company as well as one of the above documents to substantiate the authorisation.

Q    We are not able to deliver NAV by 21.00. Is that an obstacle to participating in the SP Option Scheme?

A    We are considering whether the funds can deliver the NAV later than 21.00. If you are able to deliver NAV e.g. by 01.00, please contact ATP in order to discuss this possibility.

Q    Section 9(2) of the executive order states that we have to calculate yield and risk ratios in DKK?

A    You do not make your calculations in DKK; this is taken care of by Morningstar. The yield is calculated on a quarterly basis. You are not required to calculate risk ratios.

Q    The Co-operation Agreement does not mention money laundering.

A    According to the ATP act the SP funds are compulsory taxes collected from all wage earners and recipients of transfer payments etc. in Denmark. The taxes are collected primarily by public authorities, the Danish Customs and Tax Authorities, municipalities and unemployment insurance funds. It is not possible to voluntarily pay to the SP scheme.

Q    Is it sufficient that the management company is GIPS certified or do the GIPS standards not apply to the fund itself?

A    One of the rules in the GIPS standards is that if the management companies are GIPS certified, then the individual portfolios/funds are certified as well.

Q    Has a guideline been prepared for answering Appendix 6 to the Co-operation Agreement?

A    Yes. The auditing firm KPMG has prepared a guideline for answering Appendix 6 of the Co-operation Agreement.
The guideline describes in detail the requirements for the information to be inserted in the individual fields of the appendix. The guideline can be obtained here "Guidance to completion of Appendix 6".

Q    Cf. Appendix 2, section 2.10 to the Co-operation Agreement the maximum trade spread at Double Pricing may not exceed 0.5% which is below our actual transaction costs in some cases.

A    Therefore the maximum trade spread at Double Pricing has been increased to 4.0%. Appendix 2 to the Co-operation Agreement has been updated accordingly.

Q    What will it take for ATP to suspend a fund?

A    If a fund ceases to exist in the SP Option Scheme for whatever reason, the fund will be suspended with regards to the choice of 'new' customers until final withdrawal. Furthermore, in case of a temporary suspension the pension savers will be protected if the fund does not deliver trade prices and/or trade data. Material breach of the agreement will result in termination of the agreement.

Q    How is the value date calculated taking any possible non-trading days in both Denmark and the home country of the fund into consideration?

A    Fondsmæglerskabet will only trade a fund on trading days which the fund itself has specified as being a trading day (cf. the fund's trade directory). The settlement date is the trading day plus maximum 5 value days (cf. the fund's own trade directory).

Q    How does ATP Investment Company determine own portfolio buffer?

A    Trading in the funds based on the pension savers' choises is effected through ATP Investment Company. The Investment Company will keep a portfolio of units from the registered funds in order to facilitate the trading process.

The portfolio in each of the funds is to be determined upon in consideration of the pension savers' trading in the fund in question as well as the costs relating to trading between the fund and ATP Investment Company. Thus, portfolios in funds traded in Fundsettle are expected to be larger than those in funds traded in the Saxess system.

ATP Investment Company anticipates to carry out 70 % - 80 % of all trading through own portfolio. The portfolio will be geared to the interest in the individual fund.

Q    Abusive trading

A    ATP and the Investment Company agree to use all reasonable endeavours to cooperate with the Investment Funds in preventing Abusive Trading, including by way of suspension of further trading where the Investment Fund and/or ATP or the Investment Company consider Abusive Trading has occurred. ATP and the Investment Company, however, are for the time being not under the obligation themselves to and do not monitor Abusive Trading.

Q    Reference to ATP Act

A    We can confirm that the reference to the ATP Act for the time being in practice only refers to section 17 k of the ATP Act.

Contact information

SP-Valg
Nikolaj Plads 6
Postbox 1040
1007 København K

E-mail: spvalg@nasdaqomx.com
Phone: +45 33 77 03 85 / +45 33 77 03 84
Fax: +45 33 12 86 13

Agreement documents

Cooperation Agreement
Clarification for participation
Executive Order ATP
Registration Form
Legal Proceedings Clause
Auditors' Opinion
Guidance to completion of Appendix 6
Cross-border activities