Asset Management & Investment Funds: Irish Practice Developments - March 2018

Some approaching compliance deadlines

  • 25 May 2018. GDPR - The General Data Protection Regulation will come into force on 25 May 2018 and will introduce a sweeping new data protection regime.
  • 29 June 2019. CP119 - Deadline for responses to Central Bank Consultation CP119 on amendments to (and consolidation of) the Central Bank UCITS Regulations.
  • 26 June 2018. AML/CTF- ESA joint guidelines on simplified and enhanced due diligence. The Central Bank expects firms to comply with the ESA joint guidelines on simplified and enhanced due diligence by 26 June 2018.
  • 1 July 2018. CP86 - Existing Fund Management Companies (UCITS ManCos, AIFMs, self-managed UCITS and internally managed AIFs) must comply with the new rules which derive from CP86 by 1 July 2018.
  • 21 July 2018. MMF Regulation - The MMF Regulation must be implemented by EU member states by 21 July 2018. The MMF Regulation introduces new requirements for MMFs in particular, portfolio composition, valuation of assets, diversification, liquidity management and credit quality of investment instruments. Existing UCITS and AIF MMFs must comply with the new rules by 21 January 2019.
  • 31 August, 2018. Fund Profile return - The first Central Bank Fund Profile return is to be prepared for the period up to 30 June 2018, with a submission deadline (via ONR) of 31 August 2018. This 30 June 2018 return applies to all sub-funds authorised by the Central Bank at 30 June 2018 whether they are dormant, have assets or have not launched. The Fund Profile return replaces the IF Annual Sub-Fund Profile return.  All sub-funds, regardless of whether the IF Annual Sub-Fund Profile return to 31 December 2017 has already been submitted to the ONR, will be required to submit the new updated return for the period up to 30 June 2018. Subsequent Fund Profile returns are to be prepared for the period to 31 December. These Fund Profile returns will also carry a submission deadline of 28 February. In 2018 alone, in addition to the 30 June 2018 return, a Fund Profile return will be required made up to 31 December 2018. This additional return will have a submission deadline of 28 February 2019. The Central Bank 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 to a Fund’s profile.
  • 1 September 2018. Money Market Funds - Money Market Funds which are availing of a transitional period must submit all documents requiring review to the Central Bank no later than 1 September 2018.
  • 30 November 2018. Filing Annual accounts of Variable Capital Companies in CRO - The Companies (Accounting) Act 2017 obliges UCITS investment companies and AIF investment companies to file annual accounts for financial years commencing on or after 1 January 2017 with the CRO within eleven months of the relevant financial year end. By 30 November 2018 we will see the first such accounts being filed.
  • 1 January 2019. Benchmarks Regulation - Prospectuses of UCITS and of funds which are subject to the Prospectus Directive, which reference a benchmark and which have been approved prior to 1 January 2018, will need to be updated at the next update and in any event by no later than 1 January 2019 to include information on the benchmark.

The above list does not cover tax, FATCA or CRS filings, ad hoc filings (such as regulatory reports) or filings of annual accounts (and related documents which include any annual FDI Return) and semi-annual accounts or other similar returns which deadlines will vary to reflect the particular entity's year end.

Updated Central Bank authorisation requirements for UCITS ManCos, UCITS SMICs, AIFMs and MiFID Firms

The Central Bank of Ireland (Central Bank) updated its authorisation requirements for UCITS ManCos, UCITS SMICs, AIFMs and MiFID Firms with immediate effect. These changes are aimed at ensuring that authorisation processes are aligned with the ESMA Brexit opinions and that the relevant facts underpinning outcomes are formally documented. The following items will need to be documented as part of the Central Bank's authorisation process.

  • Details and rationale for the geographical distribution of planned activities.
  • Objective justification for delegation arrangements in relation to critical functions.
  • Details of due diligence undertaken during the selection process.
  • Information on Business Continuity arrangements.
  • Information on how Legal Risk is assessed.
  • Details on Delegate Remuneration Requirements.
  • Details on how Best Execution obligations continue to be met when dealing with execution venues outside of the EU.

Central Bank Consultation (CP119) on updating the Central Bank UCITS Regulations

The Central Bank issued Consultation (CP119) on amendments to (and consolidation of) the Central Bank UCITS Regulations. Helpfully, the amendments are set out in sections I-IV and the draft amending and consolidating Central Bank UCITS Regulations are set out in an Appendix to CP119.

  • Section I sets out amendments arising from a review of the Central Bank UCITS Regulations
    • Aligning equivalence provisions for third country credit institutions with CRR
    • Clarifying that the requirement for the holding of ancillary liquidity applies in the case of any single credit institution
    • Clarifying that the first annual audited accounts of each UCITS must be prepared within 18 months of the incorporation/ establishment of the UCITS, that this applies at umbrella level and that these accounts must include all sub-funds launched at that date
    • Requirements regarding maintenance of company secretarial materials are being deleted as they are set out in the Companies Act 2014 and do not need to be repeated
    • In addition to the existing requirement to notify the Central Bank of temporary redemption suspensions, requirement that the Central Bank be notified immediately when the temporary suspension is lifted and within 21 days if the suspension remains in place
    • Formalising the requirement to identify a designated e-mail address for each UCITS (or a single e-mail address for a fund management company to cover all Irish UCITS under management)
    • Requiring the second set of accounts in the year for a UCITS management company and a Depositary cover the full 12 months of the year
    • Requiring the second set of accounts in the year for a UCITS management company and a Depositary to be filed within 1 month of year end (rather than 2 months as currently required)
    • Updating the text to clarify that the capital requirements set out in Schedule 9 apply to management companies as well as depositaries
    • Including provisions permitting UCITS which are structured products to charge an annual management fee based on the initial offer price provided certain criteria are met (this was already in place).   
       
  • Section II sets out the following amendments to UCITS Share Class provisions. These will reflect the ESMA Opinion on Share Classes of UCITS
    • that under-hedged positions should not fall below 95% of the NAV of the share class
    • to require stress testing at share class level to be conducted in accordance with Regulation 21 and provision of stress testing results to the Central Bank
    • that administrative costs for the establishment of a share class are to be borne solely by the relevant share class
    • that any risk or administrative costs arising from the use of derivative overlay to hedge the currency risk in a share class is borne solely by the relevant share class
    • to ensure the coverage available to the share class is sufficient to meet all future obligations of that share class
    • that the notional of the derivative transaction should not lead to a payment or delivery value exceeding that of the hedged share class
    • to ensure counterparty exposure is to be assessed at the level of the hedged share class
    • to require inclusion of a list of all share classes of the UCITS, and whether the relevant share class is hedged, in the annual and half-yearly reports.
  • Section III sets out amendments related to UCITS Performance Fee provisions
    • Draft regulation 41 sets out provisions for UCITS performance fees currently contained as website guidance.
    • Draft regulation 75 sets out disclosure obligations in relation to performance fees.
    • Draft regulation 75 also sets out a requirement relating to the minimum frequency for crystallisation of performance fee. This will align the Central Bank’s approach with IOSCO Good Practice on Fees and Expenses. Draft regulation 75 will specify that the minimum period for performance fee crystallisation is once per annum. A transitional period (as yet unspecified) is also being provided for existing UCITS in respect of this requirement.
  • Section IV sets out amendments arising from the EU Money Market Fund Regulation (MMFR). The Central Bank has identified a number of provisions that will be disapplied from 20 July 2018 (for new MMFs) and / or 21 January 2019 (for existing MMFs), as appropriate, in order to remove any overlap with the MMFR. The specific provisions in the Central Bank UCITS Regulations that will no longer remain applicable are the definition of WAM and WAL in Regulation 2, Regulation 6(3)(a), Regulation 24(5)(e), Regulation 81 and Regulation 85 to Regulation 88 inclusive.

    These provisions will continue to apply to MMFs authorised prior to 20 July 2018 up until 21 January 2019 when MMFs will have to comply with the MMFR. Consequential amendments are also being made to Regulation 6(3) and Regulation 24(5)(d) to reflect updated terminology derived from the MMFR.
  • Schedule A sets out the draft Amending and Consolidating Central Bank UCITS Regulations

Improvements to the Loan Originating Qualifying Investor AIF rules

The Central Bank published revised AIF Rulebook and Twenty-Ninth Edition of the AIFMD Q&A. This follows the Central Bank's notice of intention to amend Loan Originating Qualifying Investor AIF (LOQIAIF) rules to broaden the scope of what a LOQIAIF may invest in to include "investment in debt/credit instruments". The AIF Rulebook has been amended to reflect this change. Questions 1079, 1081, 1117 and 1118 of the AIFMD Q&A (all concerning LOQIAIFs) have been deleted and question 1119 has been amended to confirm that a LOQIAIF can structure its lending in a package which includes investing in equity securities issued by group companies. Such investments in equity securities must be related to the LOQIAIF's lending activities.  New question 1128 confirms that a LOQIAIF may not invest in derivatives other than for hedging purposes.

Central Bank Markets Updates

Central Bank of Ireland Markets Update Issue 6 2018 issued on 29 March including (among other things):

Central Bank of Ireland

  • Central Bank Consultation Paper CP119  on amendments to (and consolidation of) the Central Bank UCITS Regulations
    • Section I: Amendments arising from a review of the Central Bank UCITS Regulations
    • Section II: Amendments to UCITS Share Class Provisions to reflect ESMA Opinion
    • Section III: Amendments related to UCITS Performance Fees Provisions
    • Section IV: Amendments arising from the EU Money Market Fund Regulation
    • Schedule A: Draft Amending and Consolidating Central Bank UCITS Regulations

European Securities and Markets Authority (ESMA)

  • ESAs weigh benefits and risks of Big Data
  • ESMA registers SPMW Rating Sp. z o.o. as a CRA
  • High risks persist for European securities markets and investors, ESMA says
  • Steven Maijoor on CMU, Brexit and ESA review – What's next?
  • ESMA clarifies treatment of packages under MiFIR's trading obligation for derivatives
  • ESMA publishes translations for Guidelines on stress tests scenarios under Article 28 of the MMF Regulation
  • ESMA publishes responses to its Consultation on draft RTS under the new Prospectus Regulation
  • ESMA updates Benchmarks Regulation Q&As
  • ESMA consults on requirements for securitisation repositories
  • ESMA updates its market abuse Q&As
  • ESMA updates the CSDR Q&As
  • ESMA updates MiFID/MiFIR investor protection Q&As
  • ESMA clarifies MiFIR quoting obligations for systematic internalisers
  • ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors
  • ESMA updates its Q&A on MiFID II commodity derivatives topics
  • ESMA harmonises position calculation for trade repositories
  • ESMA consults on supplementary guidance under the endorsement regime
  • ESMA updates its MiFID II Q&As on market structures and transparency topics
  • ESMA adds new Q&A on profit forecasts
  • ESMA finalises guidelines on how to report internalised settlement

Central Bank of Ireland Markets Update Issue 5 2018  issued on 14 March and included (among other things):

Central Bank of Ireland

5 new platforms and 51 new funds (including sub-funds) were authorised by the Central Bank in February 2018. 

9 new platforms and 34 new funds (including sub-funds) were authorised by the Central Bank in January 2018. 

For more information please contact a member of the Asset Management & Investment Funds Team.

Date Published: 06 April 2018