Asset Management & Investment Funds: Irish Practice Developments - Nov 2021
Asset Management & Investment Funds: Irish Practice Developments - Nov 2021
Some approaching compliance deadlines
14 December 2021 - EU Taxonomy fast-track filing deadline review - Irish regulated AIFs and UCITS are required, by 1 January 2022, under the Sustainable Finance Disclosures Regulation, as amended by the EU Taxonomy Regulation, to make disclosures in relation to the EU Taxonomy's environmental objectives of climate change mitigation and climate change adaptation. This means updating prospectuses and supplements. The CBI announced a fast-track email filing process for UCITS and AIFs to meet this 1 January deadline.
31 December 2021 -UCITS Liquidity Risk Management review - The CBI wrote to all Irish authorised UCITS managers about LRM. The CBI has emphasised how seriously it takes the findings of the CSA, which was co-ordinated by ESMA. All Irish authorised UCITS ManCos and SMICs are required to conduct a specific review of their practices, documentation, systems and controls. This review must be documented and must include details of actions taken to address any of the findings in the ESMA public statement on the CSA and the CBI's letter on the topic. This review has to be completed and an action plan discussed and approved by the board of each UCITS ManCo and SMIC by the end of Q4 2021.
31 December 2021 - Corporate Governance - Completion of reviews of board and individual director performance. Under the Irish Funds Corporate Governance Code, the overall board's performance and that of individual members must be reviewed annually. Once every three years a formal documented review and a review of the chairperson must take place. Length of service and ongoing independence of directors, as well as gender diversity at board level, should be considered in line with the CBI's CP86 expectations. Compliance with procedures for dealing with conflicts of interest and the terms of reference of any board committees should be reviewed at least on an annual basis.
31 December 2021 -Anti-Money Laundering/ Combatting the Financing of Terrorism -Designated Persons (including UCITS ManCos, self-managed UCITS, AIFMs and internally managed AIFs) should be aware of the regulatory expectation to offer training to their boards on the law relating to AML/CFT on an annual basis (and at such other times as may be appropriate). The CBI expects boards to have in place a defined process for the annual review of AML/CFT policies, including AML/CFT business risk assessments. Where the board has adopted a board level AML/CFT policy, it should ensure that it receives appropriate confirmations from relevant persons.
31 December 2021 - Business Plan/Programme of Activity- UCITS ManCos, self-managed UCITS, AIFMs and internally managed AIFs, where they have not already done so, may need to complete their annual performance review on service providers. FMCs delegating functions must maintain adequate oversight and perform ongoing due diligence on delegates. Accordingly, FMCs should review and confirm their delegate due diligence plans, including making preparations for any necessary on-site visits. FMCs should also obtain annual confirmations from service providers and relevant persons in accordance with their business plan/programme of activity, complete onsite visits with service providers (albeit remotely), ensure adoption of valuation policy and make disclosure in respect of connected party transactions.
31 December 2021 - Fitness & Probity- Where they have not already done so, RFSPs will need to obtain their annual certification from persons performing PCFs (e.g. directors) and CFs (e.g. money laundering reporting officer and company secretary) that they are aware of the F&P standards, agree to continue to abide by those standards and will notify the board if they no longer comply. This forms part of ongoing performance monitoring set out in Section 22 of the Guidance on Fitness and Probity Standards.
31 December 2021 - Central Register of Beneficial Ownership of CFVs- The deadline for filing refreshed beneficial ownership information on the CBI's central register of beneficial ownership for CFVs is likely to be 31 December 2021.
1 January 2022 -Taxonomy disclosures - Compliance with Level 1 disclosure requirements under the EU Taxonomy Regulation, subject to any forthcoming communication or guidance from EC / ESMA / CBI. For UCITS and AIFs this will mean taxonomy-related disclosures should be made in fund prospectuses and/or supplements for funds classified under SFDR as Article 8 products promoting environmental characteristics and Article 9 funds with an environmental objective. Website disclosure under Article 10 SFDR should also be updated to reflect updated prospectus / supplement disclosure. Funds classified as neither Article 8 or Article 9 products should include a negative Taxonomy statement in prospectuses.
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 July 2022.
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-SFDR - Target date for compliance with Level 2 SFDR and EU taxonomy-related disclosures which will require updates to prospectuses and/ or supplements for funds classified under SFDR as Article 8 and Article 9 products. This includes template pre-contractual product disclosures as an annex.
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 fast-tracks the EU Taxonomy filing deadline
Irish regulated AIFs and UCITS are required, by 1 January 2022, under the Sustainable Finance Disclosures Regulation (SFDR), as amended by the EU Taxonomy Regulation, to make disclosures in relation to the EU taxonomy's environmental objectives of climate change mitigation and climate change adaptation. This means updating prospectuses and supplements. The Central Bank of Ireland (CBI) announced a fast-track email filing process for UCITS and AIFs to meet this 1 January deadline. Fast-track filings can be made up to 14 December 2021. Read more here
CBI - filing of KIIDs by UCITS which are implementing ESMA’s Performance Fee Guidelines from 31 December 2021
From 29 October 2021, a UCITS with a financial year end of 31 December 2021 which is implementing changes to its performance fee methodology to accord with ESMA’s Performance Fee Guidelines may elect to make either:
two KIID filings, one to reflect changes to the UCITS arising from implementation of ESMA’s Performance Fee Guidelines and one to meet KIID filing obligations arising under Article 23 or
a single filing to meet KIID filing obligations arising under Article 23 by 22 February 2022
A UCITS electing for the second option must ensure that prospective investors are provided with sufficient information in relation to changes to the UCITS arising from implementation of ESMA’s Performance Fee Guidelines in order to help them to reach an informed investment decision.
CBI Consultation on Borrowing Limits and Redemption Provisions in Irish Real Estate funds
The CBI issued Consultation Paper (CP 145) on proposals to introduce borrowing limits and guidance on redemption provisions in regulated real estate funds. This follows detailed analysis of the Irish real estate market and the roll of funds, as set out in CP145. The consultation is open until Friday, 18 February 2022.
The consultation document is only a consultation, however we would expect the CBI to follow through and introduce some borrowing limit and some guidance. We set out some relevant points relating to the proposed borrowing limit and redemption provisions in our commentary here.
The A&L Goodbody Asset Management & Investment Funds team will be submitting a response and working with Irish Funds on their response as well. Responses will be published. Please speak with your usual contact on our team if you would like to contribute.
DAoFI safe- keeping - list of permissible non-financial asset classes updated to include aircraft
As flagged in our October AMIF bulletin, the CBI published its anticipated "Dear CEO" letter on climate and ESG issues. The letter describes the CBI's expectations for regulated financial service providers in relation to climate and broader ESG issues. The letter identifies five areas of focus for its supervisory expectations relating to sustainability:
strategy and business model risk
Importantly, the expectations will apply in a proportionate manner - aligned with the nature, scale and complexity of the Firm. Read more here.
CBI Strategy 2021 and a Macro-Prudential Framework for Non-Banks
The CBI published its new Strategy document which will be effective from January 2022. The strategy’s four connected themes (future-focused, open & engaged, transforming and safeguarding) aim to present a renewal and repositioning.
CBI Governor Makhlouf delivered a speech to the ESRI where he discussed the CBI strategy and forward-looking priorities for the macro-prudential framework in Ireland, referencing Irish domiciled investment funds and the commercial real estate market. In particular, the CBI will publish a consultation paper on potential measures to limit leverage and liquidity mismatches in the property fund sector. These have a macroprudential objective. Read more here.
CBI will be seeking evidence that financial firms robustly internalise climate and transition related risks in their risk measurement and management arrangements. This is because financial firms are materially exposed to financial losses associated with both the physical and transitional risks of climate change.
CBI are seeing significant investor and consumer demand for financial services that are very well aligned with the sustainability imperative.
Demand for climate impact data from the corporate sector is strong and growing.
referenced CBI Feedback Statement on Consultation Paper 136 (on CBI engagement with stakeholders) and flagged more structured arrangements for industry stakeholder engagement including an industry stakeholder forum, and a periodic Financial Services Conference
CBI welcome the intention in the Programme for Government to apply the Lobbying Act to engagements with the CBI
consultation on proposals for new regulatory developments is an integral part of the CBI policy making process, with proposals being submitted to generally a three month consultation period followed by a feedback statement
Effective liquidity risk management is a key area of focus. Further regulatory reform should include a complete macroprudential framework for investment funds and an EU framework to support the availability and deployment of liquidity management tools.
CBI expects to publish findings of its CSA on costs and fees charged by UCITS. Ms Rowland notes the importance of UCITS management companies having structured pricing processes in place to periodically review the level of applicable fees and costs.
CBI intends to scrutinise compliance with SFDR and the Taxonomy Regulation under a thematic review planned for 2022.
CBI AML/ CFT/ FS bulletin on funds and fund management companies and Mairead McGuinness' address to the EU Parliament
The CBI issued its latest Anti-Money Laundering Bulletin (the Bulletin) focussed on fund entities (UCITS, QIAIFs, RIAIFs), including SMICs, UCITS ManCos and AIFMs. It highlights areas where CBI supervisory engagements identified a number of areas where Firms must introduce enhancements in order to ensure they can sufficiently demonstrate compliance with the requirements of the CJA 2010. The CBI identified weaknesses in four key areas:
AML/CFT/FS business risk assessment
outsourced AML/CFT/FS activities
customer due diligence
Firms must introduce "enhancements" in these areas in order to ensure they can "sufficiently demonstrate compliance" with the requirements of the CJA.
Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union, recently delivered a statement to the European Parliament on increased efforts to fight money laundering by the European Commission. Enforcement is a key focus. Notably, the new EU AML supervisory authority (AMLA) is expected to be established in 2023 and to start its activities in 2024.
facilitates the input of the date a beneficial owner ceases to be a beneficial owner of the CFV
broadens the question in respect of PCF roles to include whether the individual held a PCF at any time in this or any other RFSP
simplifies how the nature of interest / control exercised by beneficial owners is recorded
The new template is now available for information purposes on the CBI website, but it will not be possible to return beneficial ownership information using this template until the collection window commences on 3rd December 2021.
Further resubmission of filings to CBI Beneficial Ownership Register of CFV to include PPSNs - likely Q2 2022
A further resubmission of beneficial ownership information will be requested in 2022, to include PPSN information for beneficial owners, for the purpose of verifying the information submitted to the register. Beneficial owners who do not hold a PPS number will be obliged to provide a declaration as to verification of identity.
Irish Funds FAQ on SFDR Level 1 Financial Statements
SFDR applies to periodic reports from 1 January 2022. The Irish Funds reporting working group created a FAQ in relation to Level 1 SFDR. Please speak with your usual contact on the A&L Goodbody Asset Management & Investment Funds team for more information.
The Irish Funds investment risk working group updated the IF liquidity risk management framework (first published February 2021) to take account of the key areas highlighted by both ESMA and the CBI within their CSA UCITS liquidity management results. The working group also published a summary document that highlights the key updates to the framework as broken down across the nine shortcomings highlighted within the CBI’s “Dear Chair” CSA findings letter. Please speak with your usual contact on the A&L Goodbody Asset Management & Investment Funds team for more information.