Asset Management & Investment Funds: Irish Practice Developments - Jan 2022
Asset Management & Investment Funds: Irish Practice Developments - Jan 2022
Irish and Domestic
Some approaching compliance deadlines
31 January 2021/ 28 February 2021 - Fitness & Probity- RFSPs will need to submit their annual PCF Confirmation Return to the CBI. The submission due date for the annual PCF Confirmation Return (for the year ending 31/12/21) for UCITS ManCos and for AIFMs is likely 31 January 2022. The submission due date for investment funds will likely be 28 February 2022. The current annual PCF Confirmation Return and associated reporting date and submission deadline for each entity will be detailed on the ONR system.
The annual PCF confirmation return is made via the ONR system and involves a mandatory declaration to confirm that the CEO or equivalent, has confirmed in writing that:
the RFSP has brought the standards to the attention of all PCFs
the RFSP is satisfied, on reasonable grounds, that all PCFs comply with the standards
the written agreement of all PCFs to abide by the standards has been obtained
all necessary due diligence has occurred
the RFSP will investigate any fitness and probity concerns, take appropriate action and notify the CBI of any action taken without delay
RFSPs must obtain an annual certification from the holders of PCFs that they are aware of the F&P standards, will notify the board if they no longer comply with the standards and agree to continue to abide by those standards. The CBI noted in its “Dear CEO” letter dated 17 November 2020 that it expects the on-going due diligence process for the holders of controlled functions to be updated annually and to extend beyond annual self-declarations, which is a minimum requirement.
31 January 2022-UCITS ManCo and AIFM ownership confirmation - UCITS ManCos and AIFMs must file their annual ownership confirmation by 31 January 2022.
2 February 2022 –CBDF - AIF and UCITS marketing communications must comply with ESMA's Guidelines on marketing communications under CBDF by 2 February 2022.
21 February 2022 - UCITS KIID - A UCITS must update its KIID on an annual basis for each sub-fund/ standalone fund within 35 business days of the end of each calendar year. The annual update of the KIID must be filed no later than 21 February 2022 (where required). The submission deadline for each entity will be detailed on the ONR system. Any update to the KIID filed with the CBI must be translated (as necessary) and filed in any other host jurisdictions where the UCITS is registered to market its shares and must then be uploaded on the UCITS' website. AIFs which have issued a PRIIPs KID must review KIDs regularly, when there is a significant change, and at least annually. The KID must be revised as necessary. Unlike the UCITS KIID, there is no annual refresh deadline. UCITS are currently exempt from the obligation to produce a PRIIPs KID until 1 January 2023. Our November bulletin set out CBI requirements for the filing of KIIDs by UCITS which are implementing ESMA’s Performance Fee Guidelines from 31 December 2021.
28 February 2022 - Fund Profile Return - The annual CBI fund profile return is required for all Irish authorised sub-funds. It is to be prepared for the period up to 31 December 2021, with a submission deadline (via the ONR) of 28 February 2022. The CBI does not anticipate that the fund profile will change from year to year, as changes would most probably reflect changes within the fund's offering documents. Therefore, year-to-year updates to the fund profile are expected to be minimal and reflect significant changes. The CBI has issued guidance and a template.
1 July 2022 – PRIIPs KIDs - Every QIAIF or RIAIF which currently publishes a PRIIPS KID (because it is marketed to EEA retail investors) will need to update that PRIIPS KIID to comply with the revised Level 2 measures and publish a revised PRIIPS KID from 1 July 2022.
1 Aug 2022 - UCITS/ AIFMD sustainability disclosures - Requirements under the UCITS Directive and AIFMD to integrate sustainability risks and factors will require updates to fund documentation.
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. The CBI set out the reporting requirements for UCITS management companies and the reporting requirements for AIF management companies.
CBI and fees for non-discretionary investment advisors which provide services to a QIAIF
The CBI clarified its expectations in respect of an arrangement involving a non-discretionary investment advisor that provides services to a QIAIF. The CBI recognises that in the case of private equity QIAIFs or other QIAIFs that invest in illiquid assets, such a non-discretionary investment advisor may provide a range of services to the AIFM in respect of such QIAIFs which are not typically provided for in other investment strategies. The CBI would expect the QIAIF prospectus to incorporate appropriate disclosures on the fees paid to the investment advisor and the services being provided by the non-discretionary investment advisor to provide context for the fees which that entity receives out of the assets of the QIAIF.
The CBI expects that the investment advisor is performing a role that is advisory in nature. The AIFM must be able to evidence this upon request from the CBI. This clarification is likely to be particularly useful to those firms considering launching Investment Limited Partnership vehicles. It is found in the Forty-Fourth Edition of the CBI's AIMD Q&A.
CBI and performance fees in multi-manager UCITS and RIAIFs
should be paid only where positive performance has been accrued during the performance reference period
could be paid in case the fund has overperformed the reference benchmark but had a negative performance
The above also applies in case of delegation by the authorised management company to different delegated portfolio managers. Therefore, in case of a global underperformance of the fund, performance fees should not be paid to those delegated portfolio managers who have over performed.
The CBI expects multi-manager RIAIFs will comply with ESMA's Q&A on the AIFMD (updated July 2021 in respect of performance fees in multi-manager AIFs).
Existing multi-manager RIAIFs must bring their performance fee methodologies into compliance by 1 January 2023.
New multi-manager RIAIFs utilising performance fees must be established in compliance.
The Q&A references Section XV, Question 7 of the ESMA's Q&A on the AIFMD, which mirrors the UCITS Q&A quoted above.
CBI guidance on outsourcing
The CBI published its cross industry guidance on outsourcing with a feedback statement. The CBI confirmed in the feedback statement that “while the guidance will come into effect on the publication date, the supervisory approach to its implementation will be mindful of the adjustments to be made by firms relative to the nature, scale and complexity of the use of outsourcing as an element of their business model". The feedback statement also provides details on timelines and impacted firms regarding the outsourcing register, with a spreadsheet template for the register being made available in Q1.
Crucially, the feedback statement notes that "The Guidance applies to ‘regulated firms’ rather than regulated products. In the case of investment funds, consequently it should be understood that the Guidance will apply in a proportionate manner to the fund service providers associated with the operation of the fund and not to the investment fund itself. Nevertheless, it should be noted that the board of directors of an externally managed investment company should ensure that it supports the ability of the fund management company to comply with all regulatory obligations, including this Guidance."
The CBI's guidance can be broken down in to 7 different sections:
General guidance includes
Assessment of importance of activity/service to be outsourced (firms should have a defined and documented criteria for determining the importance of services that it outsources)
Intragroup arrangements (the same rigour should be applied when conducting risk assessments of intragroup entities as for third party outsourced service provider assessments)
Outsourcing and delegation (CBI consider "delegation" and "outsourcing" to be the same concept).
Governance (list of 15 expectations for boards, RFSPs to have a documented outsourcing strategy in place which is aligned to the regulated firm’s business strategy, business model, risk appetite and risk management framework)
Outsourcing risk assessment & management (outsourcing risk management framework, reflected in the RFSP’s risk register)
Due diligence (appropriate and proportionate due diligence reviews should be conducted)
Contractual arrangements and service level agreements (formal contracts or written agreements, preferably that are legally binding, supported by service level agreements). Access, information and audit rights are vital and these agreements should be reviewed periodically.
Ongoing monitoring and change with three lines of defence. These are: the business and operational functions that have responsibility for day to day engagement with and oversight of the performance of the OSP – the risk owners, the risk management and compliance functions and independent third party reviews
Disaster recovery and business continuity management. Robust disaster recovery and business continuity management are described as critically important.
Board meetings and tax residence - Revenue concession extended
Revenue announced the extension of its COVID-19-related, corporation tax residency concession until 31 January 2022. Revenue has also said that the position will be kept under review and further extended if required.
This means that, where "an employee, director, service provider or agent" was/is restricted from travel between tax jurisdictions because of COVID-19, Revenue will disregard such presence for the purposes of corporation tax where the individual was:
present in the State when they would have otherwise been present in another jurisdiction
present in another jurisdiction when they would otherwise have been present in the State
Extension of COVID-19 interim company law flexibility measures
The 'interim period' of the Companies (Miscellaneous Provisions) (Covid-19) Act 2020 (the Covid Act 2020) has been extended to 30 April 2022. The Covid Act 2020 makes temporary amendments to the Companies Act 2014 to address issues arising as a result of COVID-19. The 'interim period' was previously extended in May of 2021, until 31 December 2021. The extension confirms (amongst other sections) the:
continuation of hybrid and virtual general meetings (Sections 6-9, 18 and 25)
the execution of instruments under seal by counterparts provision (Section 5 of the Covid Act 2020)