Asset Management & Investment Funds: Irish Practice Developments – April 2024

Deadlines

  • 14 April 2024 - Cross-border notifications - Commission Implementing Regulation (EU) 2024/913 applies from 14 April 2024 and comprises AIFMD implementing technical standards for notifications of the cross-border activities of AIFMs and the exchange of information between NCAs on cross-border notification letters. Templates are included in the annexes as follows:
    • Model notification letter for the marketing of EU AIFs under Article 31(2) of AIFMD.
    • Model notification letter for the cross-border marketing of EU AIFs under Article 32(2) of AIFMD.
    • Model notification letter to be submitted by an EU AIFM to the competent authority of its home Member State to manage EU AIFs established in other Member States under Article 33(2) of AIFMD or to establish a branch in other Member State under Article 33(3) of AIFMD.
    • Statement on the authorisation of an AIFM under Article 32(3), second subparagraph, of AIFMD.
    • Model notification letter regarding persons responsible for a branch, to be submitted by EU AIFM to the competent authority of its home Member State, intending to establish a branch in other Member States under Article 33(3) (c), of AIFMD.

The Central Bank of Ireland (CBI) is updating its template notification forms. Commission Delegated Regulation (EU) 2024/912 will apply from 25 June 2024 and will update notifications of the cross-border activities of AIFMs. Commission Delegated Regulation (EU) 2024/911 will apply from 25 June 2024 and will update notifications of cross-border activities of UCITS management companies and UCITS. Commission Implementing Regulation (EU) 2024/910 will apply from 14 July 2024 and includes UCITS template notifications.

  • 29 April 2024 - EMIR - When reporting under EMIR REFIT (from 29 April 2024), counterparties and entities responsible for reporting should take also into account the EMIR standards and related ESMA guidelines and guidance (including Q&A, validation rules and so on). A transition period of six months applies in respect of outstanding derivatives.
  • From 1 May 2024 - Financial sanctions - reporting obligations begin to apply to any entity established in the EU which is directly or indirectly owned more than 40% by: a legal person, entity or body established in Russia; a Russian national; or a natural person residing in Russia. Reporting is to the relevant competent authority, on a quarterly basis, in respect of any transfer of “funds” exceeding €100,000 outside of the EU, directly or indirectly, within two weeks of the end of the relevant calendar quarter in which the transfer was effected, whether the transfer was made in one or several operations. See more under EU and International developments.
  • 6 May 2024 - Money market funds - ESMA 2023 guidelines on stress test scenarios - revisions apply from 6 May 2024.
  • 24 May 2024 - Property funds - Irish regulated funds authorised before 24 November 2022 which invest 50% or more directly or indirectly in Irish property assets (existing property funds) and which are not closed ended must comply with mandatory liquidity requirements by 24 May 2024 (following an 18 month implementation period). The CBI allowed a five-year implementation period, ending 24 November 2027, in respect of leverage limits (60% total debt-to-total assets limit). This allows for the gradual and orderly adjustment of leverage in existing property funds, whether open or closed ended or with limited liquidity. The CBI expects that existing property funds will make any necessary changes to their structure and fund documentation at the earliest possible opportunity to make early and steady progress towards lower leverage levels over the five-year implementation period. Existing property funds with leverage levels above the limit would not increase the quantum of their debt during the five-year implementation period. The CBI requires that any de-leveraging must be done on a “gradual and orderly manner” and that such de-leveraging should be “significantly progressed” by the end of year three (i.e. November 2025), You can read more here.
  • 27 May 2024 - Own funds requirements for UCITS ManCos and AIFMs authorised for discretionary portfolio management services - New “own funds” capital requirements (introduced on 27 November 2023) will apply to all Irish fund management companies and AIFMs which were authorised by the CBI on or before 27 November 2023 to provide individual portfolio management permissions. Read more here.
  • 28 May 2024 - T+1 - New rules being implemented by the Securities & Exchange Commission in the US to shorten the standard settlement cycle for most broker-dealer transactions in US securities from T+2 to T+1 take effect, discussed here.
  • 30 June 2024 - SFDR - Fund management companies which are obliged due to their size, or which have opted to report on the principal adverse impacts of investment decisions on sustainability factors under Article 4 of the SFDR must publish a full PAI statement (which for the first time must include historical comparisons against last year’s PAI report) on their website on or before 30 June 2024.
  • 30 June 2024 - Asset valuation frameworks - Irish fund management companies are required to review asset valuation frameworks by end Q2 2024, in line with CBI letter to industry discussed here.
  • 1 July 2024 - Financial sanctions - reporting obligations begin to apply to EU credit institutions and financial institutions in respect of all transfers of funds outside of the EU of a cumulative, amount over that semester, exceeding €100,000 that they initiated, directly or indirectly, for EU legal persons, entities and bodies which are directly or indirectly owned more than 40% by: a legal person, entity or body established in Russia; a Russian national; or a natural person residing in Russia. Reporting is to the relevant competent authority within two weeks of the end of each calendar semester (on a semi-annual basis and whether the transfer was made in one or several operations). See more under EU and International developments.

The above list does not cover:

  • tax, FATCA or CRS filings, director's compliance statement obligations, which apply to listed UCITS VCCs
  • diversity reporting obligations, which may apply to listed AIF and UCITS VCCs
  • ad hoc filings, such as regulatory reports, or filings of annual accounts (and related documents which include annual FDI returns) and semi-annual accounts or other similar returns (which deadlines vary to reflect the particular entity's year-end)

By way of example, the Companies (Accounting) Act 2017 obliges UCITS investment companies and AIF investment companies to file annual accounts with the CRO within eleven months of their financial year-end.

Macroprudential measures for Irish-authorised GBP-denominated LDI funds

The Central Bank of Ireland (CBI) announced the introduction of macroprudential measures for Irish-authorised GBP-denominated Liability Driven Investment (LDI) funds.

This follows the CBI’s recent consultation on Macroprudential measures for GBP Liability Driven Investment funds.

  • The measures require that GBP-denominated LDI funds authorised in Ireland maintain sufficient resilience to be able to withstand sudden and adverse shocks to UK interest rates.
  • The CBI is codifying, and in certain cases augmenting, the yield buffer supervisory expectation set out in its November 2022 letter to industry.
  • Irish authorised GBP-denominated LDI funds must maintain resilience to a minimum of 300 bps increase in UK yields. The 300 bps yield buffer level should be viewed as a minimum, rather than a target.
  • It is the responsibility of fund managers to determine whether GBP-denominated LDI funds they manage are in scope of the measures. The framework document includes additional guidance to assist fund managers in this determination.  
  • Funds in scope are currently required to complete an LDI data reporting template. This will be updated and is moving to monthly reporting. LDI funds will also have to report the monthly average of the yield buffer, the monthly minimum value as well as other data required for ongoing monitoring.
  • The measures will apply to AIFMs of AIFs that are domiciled in Ireland, authorised under domestic legislation. The CBI will also apply the measures to Irish authorised AIFs with non-Irish AIFMs under the relevant domestic funds legislation.
  • The CBI is providing a three-month implementation period for existing funds as of 29 April. It is expected that GBP-denominated LDI funds authorised after 29 April will adhere to the yield buffer limit from inception.
  • These measures are introduced in coordination with the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. The European Securities and Markets Authority (ESMA) issued its advice in support of the proposed measures to the Central Bank of Ireland (CBI) and the Commission de Surveillance du Secteur Financier (CSSF).

Irish Funds review of SFDR Level 2 disclosures in a sample of fund periodic reports.

Irish Funds published a review of SFDR Level 2 disclosures in a sample of fund periodic reports. This review was prepared by the Irish Funds Environmental, Social, Governance Data and Reporting Working Group. The review analyses the EU SFDR Level 2 disclosures included in a sample of 146 periodic reports issued after 1 January 2023 and includes funds with year-end 31 October 2022 to 31 March 2023.

Please speak with your usual contact on the ALG Asset Management & Investment Funds team for more detail on this topic.

CBI’s ESG Risk Management Working Group report

On 10 April 2024, the CBI published a report prepared by the Risk Management Working Group of the Climate Risk and Sustainable Finance Forum. 

The report provides a baseline of knowledge on the approach adopted across the financial industry on climate risk management and includes practical examples of industry-identified good practices on how financial institutions can address risks associated with climate change within their own organisations. The report also outlines some of the significant actions already underway to incorporate climate risk management into financial institutions and explores the climate related challenges and opportunities facing these firms, regardless of their sector.

The report also considers the regulations applicable to different financial services sectors, their strategy, governance and risk management processes, business initiatives, and how they are engaging with clients to support them with their sustainability transition.

Section 5.2 of the report looks at asset management and discusses:

  • role of asset managers in relation to climate risk
  • what steps asset managers can take in relation to the products they offer
  • considerations in relation to greenwashing risks and net zero commitments
  • looking at climate risk measurement, management, monitoring, and stress testing in asset management
  • key role that advocacy plays in climate risk management
  • how asset management companies can incorporate climate sustainability risks into their governance

Section 5.2 also discusses key aspects of industry identified emerging good practice which relate to:

  • portfolio alignment and engagement
  • ongoing climate risk monitoring
  • scenario analysis and stress testing

For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.

Date published: 30 April 2024