Scope of the two COLL tools
Both instruments belong to a single-priced authorised fund. The Glossary defines a dilution levy as a charge determined by the authorised fund manager of such a fund, and a dilution adjustment as an adjustment to the unit price determined by that manager under COLL 6.3.8R. A dual-priced fund has neither, its protection being the spread between its two published prices. An unauthorised AIF has neither; its equivalent lives in the offering documents under FUND 3.2.
Dilution covers the dealing costs incurred or expected from the change in the fund's cash resources on the issue or cancellation of units, and where an investment has a spread, dealing costs include the indirect cost of that difference.
The prospectus election, and what it must state
COLL 6.3.8R(1) gives the manager three options when arranging to sell, redeem, issue or cancel units: require a levy, make an adjustment, or do neither. Which applies is fixed by the prospectus statements required under COLL 4.2.5R(18), not chosen at the valuation point. COLL 6.3.8R(1A) confines a regulated money market fund to what the Money Market Funds Regulation permits.
Withholding a swing is as much a decision as applying one, and paragraph (5) reaches both.
A prospectus stating only that the manager may apply a levy does not meet the sub-paragraph: the estimated rate must exist, derive from one of the two named kinds of evidence, and be reproducible on request.
The payment route, the notification and the daily record
A levy does not reach the manager. For a scheme that is not a direct dealing scheme, COLL 6.2.13R(1)(a) requires the manager, by close of business on the fourth business day after units are issued, to arrange payment to the depositary of an AUT or ACS, or to the ICVC, of the unit price and any payments required under COLL 6.3.8R. Under COLL 6.3.8R(6) the depositary must be given the amount or rate of any adjustment or levy as soon as practicable after the valuation point.
COLL 6.6.6R(3) requires a daily record, retained six years, of how the manager calculates and estimates dilution and of its policy and method for determining any levy or adjustment, whether or not the tool is used.
COLL 6.6.4R(4) requires the depositary to take reasonable care that the manager considers whether to exercise the COLL 6.3.8R power, takes account of all material and relevant factors, and acts within that rule's restrictions, but gives it no duty over how the discretion is exercised.
The current position and the proposals
COLL 6.3.8R(1)(c) still permits a single-priced authorised fund to adopt neither measure, and a manager that never disclosed the power cannot use it.
Proposed, not law
CP25/38, published 9 December 2025 and closed 23 February 2026 (UK UCITS and NURS), would require anti-dilution tools to be available and amend the COLL dilution definition, prospectus content and availability rules. No policy statement had issued at the last check here. CP26/28 7.26 would extend the guidance to small AIFMs.
EU law
Under article 16(2b) an AIFM of an open-ended AIF must select at least two Annex V tools from points 2 to 8 and may not select swing pricing and dual pricing alone.