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Answers about Collective Investment Funds

What is a Collective Investment Fund (CIF)?

A Collective Investment Fund (CIF) is a trust created and administered by a bank or trust company that commingles assets from multiple clients. The Federal securities laws generally require entities that pool securities to register those pooled vehicles (such as mutual funds) with the SEC. However, Congress created exemptions from these registration requirements for CIFs so long as the entity offering these funds is a bank or other authorized entity and so long as participation in the fund is restricted to only those customers covered by the exemption. If these limitations are met, CIFs are exempt from SEC registration and reporting requirements.

How are Collective Investment Funds (CIFs) Regulated?

For national banks, a Collective Investment Fund (CIF) must be established under state trust law and must be operated in compliance with specific banking regulations established by the OCC that are published in Title 12 of the Code of Federal Regulations, section 9.18. OCC regulations require federal savings associations to follow section 9.18. The OCC has also issued a Collective Investment Funds Handbook that explains in greater detail how CIFs are established and sets forth the requirements imposed by the OCC for operating a CIF.

Is a Collective Investment Fund (CIF) like a mutual fund?

A CIF is similar to a mutual fund in that it is a pooled vehicle for investments; but there are a number of important differences. To invest in a mutual fund, an individual merely needs to meet the minimum investment threshold established by the fund. There are no eligibility barriers or restrictions on the type of assets used to invest in one of these funds. By contrast, entry to and exit from a CIF is usually not as easy as investing in or selling shares from a mutual fund. Entry into a CIF is limited to those bank customers who fall within the eligibility criteria set forth in the banking and securities laws.

Is my money guaranteed in a Collective Investment Fund (CIF)?

No. The funds invested in a CIF are not guaranteed either by the bank offering the fund or by the FDIC. The investment risk of the funds is 100% borne by the investor, just like in a mutual fund or other investment account.

Will it cost me less in expenses to invest in a Collective Investment Fund (CIF) rather than a mutual fund with the same investment strategy?

Not necessarily. However, because CIFs may only be offered to eligible persons, they do not incur the expenses associated with service to retail clients. This often allows CIFs to charge lower total expenses than mutual funds that have comparable investment strategies.

Where do I get information on my Collective Investment Fund (CIF)? How do I know what securities are owned by my CIF?

A CIF is established and maintained in accordance with a written plan. The plan contains provisions regarding the operation of the fund including investment powers, fees and expenses, terms for admission and withdrawal, audits, minimum frequency and method of valuations, and any other matters necessary to clearly define the rights of participating accounts. A written or electronic copy of the plan document can be obtained from the sponsor (bank).

An audit and an annual financial report are required every 12 months. The annual financial report lists all the assets owned by the fund and may be obtained by request to the sponsor (bank) or from the employee benefit plan that provides the CIF as an investment option.