Fractional Association Code of Conduct – Marine

This Code, applicable to marine vessels, which is binding upon all Fractional Association members. It sets out the general principles and expectations of the Fractional Association. Please note that a separate code of conduct is applicable to:

The primary aims of this Code of Conduct are:

  • To ensure that syndicate shareholders receive the best possible service from Fractional Association members.
  • To maintain and enhance the reputation, standing and good name of the Fractional Association and its members

Contents

  1. Before a syndicate is formed
  2. Forming the syndicate
  3. Between Vessel purchase and operation
  4. During the syndicated vessel’s operation
  5. Accidental damage by shareholders
  6. Communications between members and syndicates and the Fractional Association
  7. General conduct
  8. Compliance with this Code of Conduct
  9. Definitions of Terms used in this Code of Conduct & Vessel’s Insurance Compliance Form

This Code of Conduct should be read in conjunction with the following documents, which form an integral part of the Code:

  • Guidance on the Application of the Code of Conduct, which include:
  • The Fractional association syndicate agreement

Further guidance on the application of this Code of Conduct can be obtained from the Fractional Association.

1. Before a syndicate is formed

What is this section about?

It contains the rules relating to marketing to ensure that all interested parties have accurate information on the vessel and the syndicate.

Who does it apply to?

Individuals or parties forming a syndicate and brokers representing or promoting the sale of shares in such syndicates.
Click to read the rules relating to marketing a syndicate

F. A. members shall:

1A) Make every effort to ensure that accurate information is provided to enable potential shareholders to exercise an informed judgement in the syndicate and the vessel.

Syndicate Agreement
1B) Ensure that their syndicate agreement complies with the Fractional Association’s standards and conditions

Communication
1C) Ensure that any communication, written or verbal, between all parties be accurate and transparent.

Advertising
1D) Ensure that no advertising or promotion or any other publication, whether in writing or otherwise, shall contain anything that is likely to mislead the public.

Logo and membership tier (Member – Silver Member – Gold Member – Platinum Member)
1E) Show the current F.A. logo and their membership tier in all advertising, unless this is impracticable, e.g. on Texts, Twitter or where press advertising is in classified run-on form. In these cases “Fractional Association member” should be stated where possible.

Brokerage representation
1F) When appointing a broker ensuring that a formal brokerage agreement is in place which covers:

  • Accuracy of information including the vessel’s specification and the syndicate agreement and its shareholders.
  • Identifies the details of the Fractional Association member and its tier membership.
  • Correct arrangements are in place for security for money paid over and, where relevant, maintenance dues are paid up or proportioned correctly. Where no such security exists this shall be stated in any marketing material.

Speculative syndicate formation
1G) Where a syndicate is intended to be formed based on a speculative purchase of a vessel subject to finding the suitable members, any marketing is to include the proposed commencement date and a specific target vessel is to be identified.

2. Forming the syndicate

What is this section about?

It deals with the formation of the syndicate and ensures that processes in this period are correctly dealt with.

Who does it apply to?

Individuals forming a syndicate and brokers representing a vessel and/or syndicate.

Click to read the rules relating to forming your syndicate

F. A. members shall:

Vessel purchase
2A) Agree the terms for purchase of the vessel, and ensure that the purchase is compliant with all local and international purchasing processes and procedures.

Syndicate Agreement
2B) Ensure that the syndicate agreement is in place.

Survey of vessel
2C) The vessel is to be surveyed by a professional surveyor and each shareholder is to be sent a copy of the survey. The survey must have taken place less than 6 months prior to the formation of the syndicate.

Syndicate agreement
2D) Before syndicate shareholders are asked to pay in full for their share in the vessel to be syndicated, the syndicate agreement must be signed by the shareholder concerned.

Registration of vessel
2E) The registration process of the vessel must be agreed by all shareholders.

3. Between vessel purchase and operation

What is this section about?

It’s about the commissioning process and it ensures that all shareholders are given the correct information and best protection possible.

Who does it apply to?

Individuals forming a syndicate and brokers representing a vessel and/or syndicate.

Click to read the rules relating to the commissioning process

F. A. members shall:

Safety standards
3A) Make every effort to ensure that the vessel is being commissioned to comply with local safety standards required by maritime authorities.

Taxation
3B) Ensure that the correct tax is paid on the vessel and remains compliant with local tax authorities

Financial Protection
3C) Use protected client accounts and other escrow facilities while shareholder funds are being transmitted between shareholders, brokers and vessel owners.

Data Protection
3D) Comply with relevant data protection requirements and ensure that all parties have in place an effective policy for protecting the privacy of shareholders

Syndicate agreement
3E) Ensure that the syndicate agreement is completed and in place prior to funds being transmitted between shareholders, brokers and vessel owners.

Survey findings
3F) Before the vessel is paid up, ensure that any class A rated issues identified in the survey have been corrected or a suitable financial adjustment has been agreed.

Registration of the vessel to be syndicated (MCA or similar)
3G) Before the vessel is paid up, ensure the registration process is underway by either the broker of syndicate itself.

MCA or other registration compliance
3H) Before the vessel is paid up, ensure that any previous owner registration has be cancelled and that the vessel is free to be registered by the syndicate owners.

Finance
3I) Before the vessel is paid up, ensure that the vessel is free of any finance, liens or mortgages.

Insurance – policy
3J) Before the vessel is paid up, ensure that a cover note is in place for the syndicate’s ownership of the vessel to cover any accidental damage or loss in excess of £5000 up to the value of the vessel.

Insurance – suitability
3K) Before the vessel is paid up, ensure that all owners who intend to helm the vessel without a Captain on board have suitable ICC qualification documentation in place.

Insurance – Disclosure
3L) Ensure that owners are aware of the need to comply with the insurance company’s requirements and of their duty to disclose to the insurance company all relevant information, e.g. pre-existing illness.

Insurance – Documentation
3M) Ensure that owners are given, without delay, a document showing the effective start date of cover, the premium paid and the insurance company’s name, address and reference number.

Insurance – Terms of Business
3N) Ensure that payment to the insurance provider is as required under any agreement with them.

Mooring location
3O) Ensure that the mooring location is agreed by all syndicate shareholders.

4. During the syndicated vessel’s operation

What is this section about?

It’s about the operating process and ensuring procedures during this period are correctly dealt with.

Who does it apply to?

Individuals managing the syndicate and its vessel, its finances and any guardinage for the syndicate.

Click to read the rules relating to the operating process

F. A. members shall:

Vessel Manager
4A) Appoint a vessel manager to be the manager of the vessel and its day to day operation, and be primary point of communication between owners and suppliers regarding all the operational aspects of the vessel.

Finance Manager
4B) Appoint a finance manager to be the manager of the finances and it’s day to day expenditure, and be the primary point of communication between owners and supplies regarding all financial aspects of the vessel.

Maintenance
4C) To operate an appropriate maintenance schedule and operational procedures compliant with manufacturers’ recommendations and equipment servicing requirements.

Accounting
4D) To operate a detailed accounting process, and report to all syndicate owners the vessel’s accurate expenses on an annualised basis.

Service intervals
4E) To timetable adequate periods of out of service operation to facilitate the necessary haul out/antifoul needs and other servicing requirements.

Emergency repairs
4F) To have appropriate measures in place to facilitate emergency repairs and some spare capacity for those owners affected by unexpected incidents.

Usage rotation
4G) To continually operate a fair and reasonable usage rotation which is agreeable to all syndicate members.

Communication
4H) To operate a communication mechanism between all syndicate shareholders that does not exclude any party from information relating to the operation or use of the vessel.

Housekeeping
4I) To operate a change-over and cleaning schedule as voted for by a majority of the syndicate shareholders

First Aid
4J) Take all reasonable steps to ensure that adequate First Aid equipment is kept on board and contains up to date medication.

Life preserving equipment & flares
4K) Take all reasonable steps to ensure that adequate life preserving equipment is kept on board and contains up to date flares.

5. Accidental damage by shareholders

What is this section about?

This section deals with the manner in which the syndicate is expected to deal with an unexpected incident or accidents which impair the vessel.

Who does it apply to?

The syndicate member who causes an incident which impacts on the remaining syndicate members’ use of the vessel.

Click to read the rules relating to accidental damage

F. A. members shall:

Reporting accidental damage
5A) The syndicate will have reporting procedures in place notifying shareholders of any incident which is likely to affect the ongoing use of the vessel

Accidental damage responsibilities
5B) The syndicate will have pre-agreed determination of responsibility for any remedial works required as a consequence of a shareholder’s accidental damage in place.

Accidental damage payment
5C) The syndicate will have pre-defined boundaries set for responsibility of expenses between syndicate members and insurance funded repairs, and the treatment of any insurance excess premium payments.

Compensation
5D) Where appropriate, the syndicate will have a policy in place regarding compensation for loss of use as a consequence of another member’s actions.

Contact Numbers for additional assistance
5E) The syndicate is to provide contact details of the boat manager & guardinage service to all shareholders to enable immediate contact where appropriate, and subject to reasonable discretion, provide prompt assistance to when in difficulty.

6. Communications between members and syndicates and the Fractional Association

What is this section about?

It contains the rules relating to the time-scales for responding to correspondence as well as dispute handling and the FA Arbitration Scheme and ensures that complaints are well handled.

Who does it apply to?

Members, shareholders, boat & finance managers, brokers, and the F.A.

Click to read the rules relating to communications

F. A. members shall:

Confidentiality
6A) Treat all transactions and communications with all parties as confidential.

Correspondence with members, shareholders, boat & finance managers, brokers and the F.A.
6B) Deal with all correspondence with one another as promptly as possible and, in any event, within the following time limits:
i) an acknowledgement shall be sent not later than 14 days from the date of receipt of correspondence and
ii) a detailed reply, or a reply containing a detailed explanation for any delay, shall be sent not later than 28 days from the date of receipt of correspondence.

Correspondence with F.A.
6C) Ensure that, where the F.A. requires a response to correspondence within a specified period, such response is sent within that period.

Dealing with Disputes
6D) Make every reasonable effort to reach a speedy solution in the event of a dispute with one another. Members must also deal with a shareholder’s formally appointed representative in the same way.

Brokers’ Responsibilities
6E) If they are a broker, make every reasonable effort to deal with complaints of a minor and general character with a view to avoiding recourse to the syndicate. When complaints are of such a nature that reference to an individual shareholder or member is necessary, they shall use their best endeavours acting as an intermediary to bring about a satisfactory conclusion.

F.A. Arbitration
6F) Allow any dispute arising out of an alleged breach of contract or negligence by them to be referred to the arbitration scheme. It shall be subject to such time, financial and other restrictions as from time to time shall apply.

Rules of F.A. Arbitration
6G) Comply with the terms, rules and regulations of the Arbitration Scheme referred to in clause F above.

7. General Conduct

What is this section about?

The general conduct of Fractional Association Members in areas that are not covered more specifically elsewhere in this Code of Conduct.

Who does it apply to?

Members, shareholders, boat & finance managers, brokers, and the F.A.

Click to read the rules relating to general conduct of Fractional Association members

F. A. members shall:

Standard of Service
7A) Maintain a high standard of service throughout.

Fair Trading and Disrepute
7B) Trade fairly, and responsibly, and not conduct their business in any manner that would bring the F.A. or its Members into disrepute.

Compliance with the Law
7C) Comply with all relevant statutory and regulatory requirements.

Awareness of this Code
7D) Ensure that they and their staff are familiar with the provisions of this Code of Conduct.

Misrepresentation of F.A. Membership
7E) Not, directly or indirectly, represent a non-F.A. member as a Member in any way. Members must also not permit or assist in any way a non-F.A. member to represent itself as a Member.

Public Notices
7F) If they are brokers, to display in a prominent position at each of their offices which is open to the public, the F.A. logo with their relevant membership tier, or certificate of membership.

Ongoing payment of maintenance account debts
7G) Settle all debts due without delay or within any period agreed with all creditors.

Maintenance account cash calls
7H) Give all syndicate shareholders ample notice for all cash calls so as not to jeopardise the reputation of the vessel with its suppliers.

Liability Insurance
7I) If they are brokers, ensure that they obtain liability insurance to cover potential claims made by syndicates.

Good practice reporting
7J) Accurately complete and return any, forms, reports and checklists with the F.A. its members, syndicates or individual shareholders.

8. Compliance with this Code of Conduct

What is this section about?

This section deals with how compliance with this Code of Conduct is enforced.

Who does it apply to?

Members, shareholders, boat & finance managers, brokers, and the F.A.

Click to read the rules relating to compliance with this Code of Conduct

F. A. members shall:

Investigation and Enforcement
8A) Co-operate in any investigation undertaken by F.A. into an alleged breach of this Code of Conduct and follow the following procedures for investigation and enforcement.

Allegations of Infringement
8B) If any infringement of this Code is alleged against a Member, the facts shall be reported to the F.A. for preliminary investigation.

Provision of Information
8C) The Member against whom the allegation has been made shall provide, at the request of F.A. such further information or documents as may be required within such a period as may be specified.

Fixed Penalty Offences
8D) Where F.A., after due investigation, has reason to believe that a Member has committed a fixed penalty offence as set out below, the F.A. may issue the Member with a fixed penalty notice.

The following breaches of this Code by a Member constitute a fixed penalty offence and attract a fine of £500.

1 B, C, E
2 O, Q
3 G, J
5 B, C
6 F, G, H

Apparent breaches of the remaining Clauses of this Code are not fixed penalty offences and therefore shall be referred to the Code of Conduct Committee. The Fractional Association has at all times the discretion to refer directly to the Code of Conduct Committee all alleged breaches of this Code including breaches of this Code which would normally constitute a fixed penalty offence.

Dealing with Fixed Penalty Notices
8E) Where the F.A. issues a fixed penalty notice the Member may:
(a) pay the fine within 14 days as set out in the fixed penalty notice; or
(b) request in writing to the F.A. that the matter be referred to the Code of Conduct Committee.

Reference to the Code of Conduct Committee
8F) Where the Member fails to pay the fine within the specified period, or requests the matter be referred to the Code of Conduct Committee, or fails to respond to the fixed penalty notice, the F.A. shall refer the matter to the Code of Conduct Committee. The F.A. shall not refer the matter to the Code of Conduct Committee until the period specified in the fixed penalty notice has expired. The Code of Conduct Committee has the powers granted in paragraph J below and may impose a penalty higher than the £500 imposed by the fixed penalty notice.

Undertakings
8G) Where the F.A., after due investigation, has reason to believe that the facts alleged against the Member constitute infringement of this Code, the F.A. may, at its discretion, require the Member to give to the F.A. undertakings as to its future conduct. Where the Member refuses to give such undertakings the Secretariat shall refer the matter to the Code of Conduct Committee.

Breach of Undertakings
8H) Where the F.A., after due investigation, has reason to believe that the facts alleged against the Member constitute a breach of an undertaking given by a Member in accordance with Clause 7G above the F.A. shall refer the matter to the Code of Conduct Committee.

Procedure for Reference to the Code of Conduct Committee
8I) Where the F.A., after due investigation, has reason to believe that the facts alleged against the Member constitute infringement of this Code, the facts may be submitted to the Code of Conduct Committee who shall give the Member at least 14 days’ notice in writing of the time and place of hearing of the complaint. The Member shall be entitled to make representations at the hearing either personally (with or without legal representation) or in writing.

Decisions of the Code of Conduct Committee
8J) The Code of Conduct Committee shall have the power to impose a reprimand or a fine or to suspend or terminate membership of the F.A. or to require the Member to provide an undertaking in a form determined by the Code of Conduct Committee. The decision of the Code of Conduct Committee shall be notified to the Member, who shall have the right, exercisable within 14 days after the service of the notice upon him, to appeal to the Appeal Board against such decision.

If the Member does not appeal, then at the expiration of the 14 day period, he shall be liable to sustain the reprimand or pay the fine or his membership of the F.A. shall be suspended or terminated.

Appeals
8K) A member wishing to appeal shall complete the Notice of Appeal and send this to the F.A. along with the required appeal fee.

If the decision appealed against is a fine, the Member shall also enclose payment of the fine. If the appeal is successful the Association shall repay the fine, or any part thereof deemed refundable by the Appeal Board, to the Member together with interest thereon at a rate to be decided from time to time by the Board of Directors.

If the decision appealed against is a reprimand, suspension or termination of membership, the decision shall not take effect unless and to the extent that it is confirmed or varied by the Appeal Board.

The Member will be given at least 14 days’ notice of the date of the appeal hearing. The Appeal Board shall determine the appeal as it sees fit. The decision will be notified to the appellant in writing and will then be communicated to the Board of Directors.

Publication of Decisions
8L) The Board of Directors shall arrange for decisions of the Code of Conduct Committee and the reasons therefore to be published.

9. Definitions

Click to read the definitions used in the Fractional Association Codes of Conduct

F.A.: Fractional Association

Advertising: A means of promoting syndicated vessel by any printed, viewable, audible or other form.

Broker: A member or other person, company or firm when carrying on the business as an agent for a vessel.

Appeal Board: A body established to determine appeals and comprising at least one person from the following categories:

  • A syndicate member
  • A marine professional
  • A vessel owner
  • Articles of Association: The F.A.’s Articles of Association.

Local Regulations: The laws and regulations in the country the vessel is located.

Board of Directors: The F.A.’s Board of Directors.

Marketing material: A communication in any printed, viewable, audible or other form which specifies a vessel or syndicate offered by a member in sufficient detail to allow a shareholder to reliably acquire a share the syndicated vessel, without necessarily obtaining additional information from 3rd parties.

Agent: A person, company or firm acting in a personal or business capacity who is a consumer or prospective consumer of the syndicated vessel offered by a member.

Code of Conduct Committee: A Committee, established by the Board of Directors under Article 11 of the Articles of Association, to exercise its powers of administering or enforcing this Code of Conduct.

Force Majeure: Circumstances where performance and/or prompt performance of the contract is prevented by reasons of unusual and unforeseeable circumstances beyond the control of the member, syndicate or broker, the consequences of which could not have been avoided even if all due care had been exercised. Such circumstances include war or threat of war, riot, civil strife, industrial dispute (as defined below), terrorist activity, natural or nuclear disaster, fire or adverse weather conditions.

Industrial Dispute: A dispute which affects the services to be provided under a Package which the member , syndicate or broker cannot reasonably be expected to overcome by substituting comparable alternative arrangements other than a dispute between the Principal and his employees.

Member: a Member of the F.A.

On-line: Websites (which term shall include individual web pages) and electronic or digital media accessible by consumers, including software, whether or not a live communication link is established.

Syndicate: A combination of at least two shareholders who jointly own a vessel. The number of owners can be up to 64, made up of a combination of individuals, groups, companies or associations. They could comprise any of the following categories:

  • (a) An individual person;
  • b) A existing company;
  • c) An association or other body formed to own a share in a vessel.

Shareholder: A Member or other person, company or firm who enters into a contract with, or who holds himself out as being able to enter into a contract with, the syndicate under which he agrees to own a share of a vessel.

Promotions: Activities designed to stimulate the sale or purchase of a share in a vessel offered by a member by means other than Advertising as defined above.

Vessel: Any marine craft, normally a motor yacht, sailboat, powerboat, rib houseboat, barge or narrowboat.