(1) Rights under a linked long-term contract are a stakeholder product where the insurer ensures that the fund held in respect of that contract ("the underlying fund") -
(a) has the characteristics and complies with the conditions set out in regulation 7; and
(b) where the investment returns are smoothed, complies with the conditions set out in regulation 8.
(2) For the purposes of this regulation and regulations 8 and 9, investment returns are smoothed when the insurer offers the product on the basis that the amount in respect of the investment returns earned from time to time by the underlying funds to be attributed under the contract to the policyholder will be managed and attributed with a view to reducing the volatility of such returns over given periods, and "smoothing", "smoothed" and "unsmoothed" are to be construed accordingly.